<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 1, 1998
REGISTRATION NOS. 333-47925
333-47925-01
333-47925-02
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
YORKSHIRE POWER GROUP YORKSHIRE POWER FINANCE YORKSHIRE CAPITAL TRUST
LIMITED LIMITED I
(EXACT NAME OF (EXACT NAME OF (EXACT NAME OF
REGISTRANT AS SPECIFIED REGISTRANT AS SPECIFIED REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER) IN TRUST AGREEMENT)
ENGLAND AND WALES CAYMAN ISLANDS DELAWARE
(STATE OR OTHER (STATE OR OTHER (STATE OR OTHER
JURISDICTION OF JURISDICTION OF JURISDICTION OF
INCORPORATION OR INCORPORATION OR INCORPORATION OR
ORGANIZATION) ORGANIZATION) ORGANIZATION)
4911 4911 4911
(PRIMARY STANDARD (PRIMARY STANDARD (PRIMARY STANDARD
INDUSTRIAL INDUSTRIAL INDUSTRIAL
CLASSIFICATION CODE CLASSIFICATION CODE CLASSIFICATION CODE
NUMBER) NUMBER) NUMBER)
NOT APPLICABLE NOT APPLICABLE TO BE APPLIED FOR
(I.R.S EMPLOYER (I.R.S. EMPLOYER (I.R.S. EMPLOYER
IDENTIFICATION NUMBER) IDENTIFICATION NUMBER) IDENTIFICATION NUMBER)
WETHERBY ROAD, SCARCROFT WETHERBY ROAD, SCARCROFT 1 RIVERSIDE PLAZA
LEEDS LS14 3HS, ENGLAND LEEDS LS14 3HS ENGLAND COLUMBUS, OHIO 43215
011-44-113-289-2123 011-44-113-289-2123 614-223-1000
(ADDRESS, INCLUDING ZIP (ADDRESS, INCLUDING ZIP (ADDRESS, INCLUDING ZIP
CODE, AND TELEPHONE CODE, AND TELEPHONE CODE, AND TELEPHONE
NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA NUMBER, INCLUDING AREA
CODE, OF REGISTRANT'S CODE, OF REGISTRANT'S CODE, OF REGISTRANT'S
PRINCIPAL EXECUTIVE PRINCIPAL EXECUTIVE PRINCIPAL EXECUTIVE
OFFICES) OFFICES) OFFICES)
--------------
ARMANDO A. PENA RICHARD C. KELLY
SENIOR VICE PRESIDENT, TREASURER AND EXECUTIVE VICE PRESIDENT, FINANCE
CHIEF FINANCIAL OFFICER AND SUPPORT SERVICES
AMERICAN ELECTRIC POWER SERVICE AND CHIEF FINANCIAL OFFICER
CORPORATION NEW CENTURY ENERGIES, INC.
1 RIVERSIDE PLAZA 1225 SEVENTEENTH STREET
COLUMBUS, OHIO 43215 DENVER, COLORADO 80502
614-223-2850 303-294-8989
(NAMES, ADDRESSES, INCLUDING ZIP CODES, AND TELEPHONE NUMBERS, INCLUDING AREA
CODES, OF AGENTS FOR SERVICE)
It is respectfully requested that the Commission send copies of all notices,
orders and communications to:
E. N. ELLIS, IV, ESQ. ROGER DICKINSON, L.L.B.
DEWEY BALLANTINE LLP YORKSHIRE ELECTRICITY GROUP PLC
1301 AVENUE OF THE AMERICAS WETHERBY ROAD, SCARCROFT
NEW YORK, NEW YORK 10019 LEEDS LS14 3HS, ENGLAND
212-259-8000 011-44-113-289-5055
TODD W. ECKLAND, ESQ.
MARK WELLING, ESQ. WINTHROP, STIMSON, PUTNAM & ROBERTS
ALLEN & OVERY ONE BATTERY PARK PLAZA
ONE NEW CHANGE NEW YORK, NEW YORK 10004
LONDON EC4M 9QQ, ENGLAND 212-858-1000
011-44-171-330-3000
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of the Registration Statement.
--------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
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. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
SUBJECT TO COMPLETION, DATED MAY 1, 1998
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PRELIMINARY PROSPECTUS SHALL NOT CONSTITUTE AN OFFER +
+TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF +
+THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR +
+SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE +
+SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
11,000,000 % TRUST SECURITIES
YORKSHIRE CAPITAL TRUST I
(LIQUIDATION AMOUNT $25 PER TRUST SECURITY)
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
YORKSHIRE POWER GROUP LIMITED
-----------
The % Trust Securities (the "Trust Securities") offered hereby represent
undivided beneficial interests in the assets of Yorkshire Capital Trust I, a
statutory business trust created under the laws of the State of Delaware (the
"Trust"). The Trust was created for the sole purpose of issuing the Trust
Securities and investing the proceeds thereof in an equivalent amount of %
Junior Subordinated Deferrable Interest Debentures, Series A due , 2038 (the
"Junior Subordinated Debentures"), to be issued by Yorkshire Power Finance
Limited, a private company with limited liability incorporated under the laws
of the Cayman Islands ("Yorkshire Finance"). The Junior Subordinated Debentures
will be redeemable, at the option of Yorkshire Finance, as described herein.
Yorkshire Power Group Limited, a private company with limited liability
incorporated under the laws of England and Wales ("Yorkshire Group") and parent
of Yorkshire Finance, will fully and unconditionally guarantee, as set forth
herein, all payments on the Trust Securities (the "Trust Securities
Guarantee"). Yorkshire Group will irrevocably and unconditionally guarantee all
payments on the Junior Subordinated Debentures when due and payable (the
"Debentures Guarantee").
(Continued on next page)
-----------
SEE "RISK FACTORS" BEGINNING ON PAGE 20 HEREOF FOR CERTAIN INFORMATION
RELEVANT TO AN INVESTMENT IN THE TRUST SECURITIES.
Application has been made to list the Trust Securities on the New York Stock
Exchange (the "NYSE"). If accepted, trading on the NYSE would commence within
the 30-day period after the initial delivery of the Trust Securities. See
"Underwriting".
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE COMMISSION(1) THE TRUST(2)(3)
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<S> <C> <C> <C>
Per Trust Security............................. $25.00 (2) $25.00
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Total.......................................... $275,000,000 (2) $275,000,000
</TABLE>
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(1) Yorkshire Finance and Yorkshire Group have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(2) In view of the fact that the proceeds from the sale of the Trust Securities
will be used to purchase the Junior Subordinated Debentures from Yorkshire
Finance, the Underwriting Agreement provides that Yorkshire Finance will
pay to the Underwriters, as compensation ("Underwriters' Compensation") for
arranging the investment therein of such proceeds, $ per Trust Security
(or $ in the aggregate); provided that such compensation will be $
per Trust Security for sales of 10,000 or more Trust Securities to a single
purchaser. Therefore, to the extent of such sales, the actual amount of
Underwriters' Compensation will be less than the aggregate amount specified
in the preceding sentence. See "Underwriting".
(3) Expenses of the offering, which are payable pursuant to the Agreement as to
Expenses and Liabilities, are estimated to be $ .
-----------
The Trust Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Trust Securities will be only in book-entry form
through the facilities of The Depository Trust Company ("DTC"), on or about
, 1998, against payment therefor in immediately available funds.
-----------
MERRILL LYNCH & CO.
-----------
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE TRUST
SECURITIES, INCLUDING BY ENTERING STABILIZING BIDS, PURCHASING TRUST
SECURITIES TO COVER SYNDICATE SHORT POSITIONS, AND IMPOSING PENALTY BIDS. FOR
A DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING".
---------------
(Continued from previous page)
Holders of the Trust Securities will be entitled to receive, to the extent
of funds held by the Trust and available therefor, periodic cash distributions
accumulating from the date of original issuance and payable quarterly in
arrears on March 31, June 30, September 30 and December 31 of each year,
commencing , 1998, at the rate of % per annum of the liquidation amount of
$25 per Trust Security (the "Distributions"). So long as no Event of Default
(as defined under "Description of the Junior Subordinated Debentures--
Indenture Event of Defaults") under the Indenture (as defined under "Summary--
The Offering") has occurred and is continuing, Yorkshire Finance has the right
to defer the payment of interest ("Interest Payments") on the Junior
Subordinated Debentures at any time or from time to time, for up to 20
consecutive quarters (each an "Extension Period"). An Extension Period,
however, cannot extend beyond the Stated Maturity (as defined below) of the
Junior Subordinated Debentures. If Interest Payments on the Junior
Subordinated Debentures are so deferred, Distributions on the Trust Securities
will also be deferred. Until all deferred Interest Payments and interest
thereon have been paid in full, Interest Payments on the Junior Subordinated
Debentures will continue to accrue (and the Trust Securities will accumulate
additional Distributions thereon) at the rate of % per annum, compounded
quarterly. During any Extension Period, holders of Trust Securities will be
required to accrue deferred interest as original issue discount ("OID"), and
to include such OID in their gross income for US Federal income tax purposes
in advance of the receipt of the cash distributions with respect to such
deferred Interest Payments. There could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures.
During an Extension Period, neither Yorkshire Finance nor Yorkshire Group will
be permitted, subject to certain exceptions set forth herein, to (i) declare
or pay any cash distributions with respect to its capital stock, (ii) make any
payments on its debt securities that rank pari passu with or junior to the
Junior Subordinated Debentures or the Debentures Guarantee, respectively,
(iii) make any payments with respect to any guarantee that ranks pari passu
with or junior to the Junior Subordinated Debentures or the Debentures
Guarantee, respectively, or (iv) make any payments on its debt securities held
by, make any loans or advances to, or make payments with respect to any
guarantee of the debt of, any affiliate. See "Description of the Junior
Subordinated Debentures--Option to Defer Payment of Interest". During an
Extension Period, Yorkshire Group's obligations to make payments under the
Trust Securities Guarantee and the Debentures Guarantee will be suspended.
Pursuant to the Trust Securities Guarantee, Yorkshire Group will guarantee
the payment of Distributions and payments on liquidation of the Trust or
redemption of the Trust Securities, but only in each case to the extent of
sufficient funds held by the Trust and available therefor. If Yorkshire
Finance does not make payments of principal of or interest on the Junior
Subordinated Debentures or Yorkshire Group does not make payments pursuant to
the Debentures Guarantee, the Trust will have insufficient funds to pay
Distributions on the Trust Securities or amounts payable on redemption thereof
or otherwise. The Trust Securities Guarantee does not cover payment of
Distributions or amounts when the Trust does not have sufficient funds
available to pay such amounts. See "Description of the Trust Securities
Guarantee". In such event, the remedy of a holder of Trust Securities will be
to enforce its rights under the Debentures Guarantee. See "Description of the
Junior Subordinated Debentures" and "Description of the Debentures Guarantee".
The Junior Subordinated Debentures will be unsecured and subordinate
obligations and junior in right of payment to all Senior Debt (as defined
under "Description of the Junior Subordinated Debentures--Subordination") of
Yorkshire Finance. The Trust Securities Guarantee and the Debentures Guarantee
will be unsecured and subordinate obligations and junior in right of payment
to all Senior Debt of Yorkshire Group and the Trust Securities Guarantee will
rank pari passu (equal in priority) with the most senior preferred stock of
Yorkshire Group. As of December 31, 1997, Yorkshire Group had (i)
approximately (Pounds)1,034 million ($1,699 million) of Senior Debt
outstanding, a portion of which will be repaid with proceeds of this offering
and (ii) no senior preferred stock outstanding with which the Trust Securities
Guarantee would rank pari passu. The terms of the Junior Subordinated
Debentures and the Trust Securities Guarantee and the Debentures Guarantee
will not place any limitation on the amount of Senior Debt that may be
incurred by Yorkshire Finance and Yorkshire Group, respectively. In addition,
Yorkshire Group's obligations under the Debentures Guarantee and the Trust
Securities Guarantee will be effectively subordinated to all existing and
future
2
<PAGE>
indebtedness and liabilities of its subsidiaries, including Yorkshire
Electricity Group plc ("Yorkshire"). At December 31, 1997, the direct and
indirect subsidiaries of Yorkshire Group had total indebtedness (excluding
indebtedness owed to Yorkshire Group) of approximately (Pounds)476 million
($782 million). See "Risk Factors", "Description of the Junior Subordinated
Debentures--Subordination", "Description of the Debentures Guarantee" and
"Description of the Trust Securities Guarantee".
AEP Resources, Inc., an Ohio corporation ("AEP Resources"), and New Century
International, Inc., a Delaware corporation ("New Century International" and,
with AEP Resources, collectively, the "US Affiliates"), will unconditionally
guarantee certain expenses and liabilities of the Trust (other than
obligations of the Trust to pay the holders of the Trust Securities the
amounts due such holders pursuant to the terms of the Trust Securities)
pursuant to the Agreement as to Expenses and Liabilities (as defined under
"Description of the Trust Securities Guarantee--The Agreement as to Expenses
and Liabilities"). See "Description of the Trust Securities Guarantee--The
Agreement as to Expenses and Liabilities". The Trust Securities Guarantee, the
Debentures Guarantee, the Indenture, the Junior Subordinated Debentures, the
Trust Agreement (as defined under "Summary--The Offering") and the Agreement
as to Expenses and Liabilities when taken together, will effectively provide a
full and unconditional guarantee, on a subordinated basis, of the Trust's
obligations under the Trust Securities. See "Relationship Among the Trust
Securities, the Junior Subordinated Debentures, the Trust Securities Guarantee
and the Debentures Guarantee".
The Trust Securities are subject to mandatory redemption, in whole or in
part, upon redemption of the Junior Subordinated Debentures in an amount equal
to the aggregate principal amount of Junior Subordinated Debentures being
redeemed at a price equal to the aggregate liquidation amount of such Trust
Securities plus accumulated and unpaid Distributions thereon to the date fixed
for redemption (the "Redemption Price"). The Trust Securities will also be
redeemed in whole at the Redemption Price at the Stated Maturity of the Junior
Subordinated Debentures. See "Description of the Trust Securities--
Redemptions". The Junior Subordinated Debentures will mature on , 2038
(the "Stated Maturity"). The Junior Subordinated Debentures are redeemable at
the option of Yorkshire Finance (i) on or after , 2003, in whole at any
time or in part from time to time, at a price equal to the accrued and unpaid
interest on the Junior Subordinated Debentures so redeemed to the date fixed
for redemption plus 100% of the aggregate principal amount thereof (the
"Debenture Redemption Price"), (ii) at any time, in whole (but not in part),
upon the occurrence and continuation of a Special Event (as defined under
"Description of the Trust Securities--Redemptions"), at the Debenture
Redemption Price or (iii) at any time, in whole (but not in part), if
Yorkshire Finance or Yorkshire Group has or will become obligated to pay
Additional Amounts (as defined under "Summary--The Offering"), as provided
under "Description of the Junior Subordinated Debentures--Optional Tax
Redemption", at the Debenture Redemption Price.
At any time, Yorkshire Group will have the right to dissolve the Trust and,
after satisfaction of liabilities to creditors of the Trust, if any, as
provided by applicable law, cause a Like Amount (as defined under "Description
of the Trust Securities--Redemptions") of Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust. See "Description of the Trust Securities--Distribution of Junior
Subordinated Debentures".
In the event of the dissolution and liquidation of the Trust, after
satisfaction of liabilities to creditors of the Trust, if any, as provided by
applicable law, the holders of the Trust Securities will receive a Like Amount
of Junior Subordinated Debentures unless, in certain circumstances, such
distribution is determined not to be practical, in which event holders will be
entitled to receive a liquidation amount of $25 per Trust Security plus
accumulated and unpaid Distributions thereon to the date of payment. See
"Description of the Trust Securities--Liquidation Distribution upon
Dissolution".
In addition to applying to list the Trust Securities on the NYSE,
application will be made to list the Junior Subordinated Debentures on the
Luxembourg Stock Exchange. If the Junior Subordinated Debentures are
distributed to the holders of the Trust Securities upon the liquidation of the
Trust, Yorkshire Finance will use its best efforts to also list the Junior
Subordinated Debentures on the NYSE or such other stock exchanges or other
organizations, if any, on which the Trust Securities are then listed.
The Trust Securities will be represented by global certificates registered
in the name of a nominee of DTC. Beneficial interests in the Trust Securities
will be shown on, and transfers thereof will be effected only through, records
maintained by Participants (as defined under "Description of the Trust
Securities--Book-Entry Issuance") in DTC. Except as described under
"Description of the Trust Securities--Book-Entry Issuance", Trust Securities
in definitive form registered in the names of the beneficial owners thereof
will not be issued in exchange for the global certificates.
3
<PAGE>
AVAILABLE INFORMATION
Following this offering, Yorkshire Group will be subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith will file reports and other
information with the Securities and Exchange Commission (the "Commission").
Such reports and other information may be inspected and copied at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commission's regional offices
at 7 World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and
Suite 1400, Citicorp Center, 500 West Madison Street, Chicago, Illinois 60661.
Copies of such material may also be obtained by mail from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission (http://www.sec.gov).
Yorkshire Group, Yorkshire Finance and the Trust, collectively, have filed
with the Commission a registration statement on Form S-1 (herein, together
with all amendments and exhibits thereto, referred to as the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"). This Prospectus does not contain all of the information set forth in
the Registration Statement, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information,
reference is hereby made to the Registration Statement.
No separate financial statements of Yorkshire Finance or the Trust have been
included herein. Yorkshire Group does not consider that such financial
statements would be material to holders of the Trust Securities because
Yorkshire Finance and the Trust are newly formed special purpose entities,
have no operating history or independent operations and are not engaged in and
do not propose to engage in any activity other than acting as financing
subsidiaries of Yorkshire Group and its affiliates. See "Summary", "Yorkshire
Capital Trust I", "Description of the Trust Securities", "Description of the
Junior Subordinated Debentures", "Description of the Trust Securities
Guarantee" and "Description of the Debentures Guarantee". In addition,
Yorkshire Group does not expect that the Trust or Yorkshire Finance will file
reports, proxy statements and other information under the Exchange Act with
the Commission.
ENFORCEABILITY OF CIVIL LIABILITIES
Yorkshire Group is a private company with limited liability incorporated
under the laws of England and Wales. Yorkshire Finance is a limited liability
company incorporated under the laws of the Cayman Islands. Substantially all
the assets of Yorkshire Group and Yorkshire Finance are located outside the
United States of America (the "US"). As a result, it may not be possible for
investors to effect service of process within the US upon Yorkshire Group and
Yorkshire Finance or to enforce against it judgments of US courts predicated
upon civil liabilities under US Federal securities laws. There is doubt as to
the enforceability in England and the Cayman Islands, in original actions or
in actions for enforcement of judgments of US courts, of civil liabilities
predicated upon US Federal securities laws.
The Trust Agreement and the Trust Securities will be governed by, and
construed in accordance with, the laws of the State of Delaware. The Trust
Securities Guarantee, the Debentures Guarantee, the Indenture and the Junior
Subordinated Debentures will be governed by, and will be construed in
accordance with, the laws of the State of New York. Yorkshire Group and
Yorkshire Finance have submitted to the non-exclusive jurisdiction of the
Supreme Court of New York, New York County and the United States District
Court for the Southern District of New York and any appellate court from
either thereof for any legal suit, action or proceeding against Yorkshire
Group and Yorkshire Finance or their properties, assets or revenues with
respect to their obligations, liabilities or any other matter arising out of
or in connection with the Trust Securities Guarantee, the Debentures
Guarantee, the Indenture and the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--Governing Law; Submission
to Jurisdiction".
4
<PAGE>
PRESENTATION OF CERTAIN INFORMATION AND EXCHANGE RATES
Yorkshire Group will publish its consolidated financial statements in pounds
sterling. In this Prospectus, references to "pounds sterling," "pence" or
"(Pounds)" are to currency of the United Kingdom ("UK") and references to "US
dollars", "US$" or "$" are to US currency. As used herein, "US GAAP" means US
generally accepted accounting principles. References to "Lv" are to low volts,
"MW" are to megawatts, "kW" are to kilowatts, "kWh" are to kilowatt hours,
"kV" are to kilovolts, "GWh" are to gigawatt hours and "km" are to kilometers.
All references herein to "Fiscal Year" mean a year ended March 31.
For the convenience of the reader, this Prospectus contains translations of
certain pounds sterling amounts into US dollars at specified rates, or, if not
so specified, the noon buying rate in New York City for cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve Bank
of New York (the "Noon Buying Rate") on December 31, 1997 of $1.64 =
(Pounds)1. No representation is made that the pounds sterling amounts have
been, could have been or could be converted into US dollars at the rates
indicated or at any other rates.
The following table sets out, for the periods indicated, certain information
concerning the exchange rates between UK Pounds sterling and US dollars based
on the Noon Buying Rates:
<TABLE>
<CAPTION>
FISCAL YEAR PERIOD END AVERAGE(1) HIGH LOW
----------- -------------------- ---------- ---- ----
($ PER (Pounds)1.00)
<S> <C> <C> <C> <C>
1993.............................. 1.50 1.68 2.00 1.42
1994.............................. 1.49 1.50 1.59 1.46
1995.............................. 1.62 1.56 1.65 1.49
1996.............................. 1.53 1.56 1.62 1.50
1997.............................. 1.65 1.60 1.71 1.50
1998 through December 31, 1997.... 1.64 1.64 1.70 1.58
==== ==== ==== ====
</TABLE>
- --------
(1) The average of the Noon Buying Rates in effect on the last business day of
each month during the relevant period.
On , 1998, the Noon Buying Rate was $ = (Pounds)1.
UK SELLING RESTRICTIONS
There are restrictions on the offer and sale of the Trust Securities in the
UK. All applicable provisions of the Financial Services Act 1986 and the
Public Offers of Securities Regulations 1995 with respect to anything done by
any person in relation to the Trust Securities, in, from or otherwise
involving the UK must be complied with. See "Underwriting".
5
<PAGE>
FORWARD LOOKING STATEMENTS
Certain statements in this Prospectus under the captions "Summary", "Risk
Factors", "Management's Discussion and Analysis of Financial Condition and
Results of Operations", "Business", "The Electric Utility Industry in Great
Britain" and elsewhere constitute forward looking statements. Such forward
looking statements involve known and unknown risks, uncertainties and other
important factors that could cause the actual results, performance or
achievements of the Yorkshire Group or any of its subsidiaries or industry
results, to differ materially from any future results, performance or
achievements expressed or implied by such forward looking statements. Such
risks, uncertainties and other important factors include, among others:
general economic and business conditions in the UK, the Franchise Area (as
defined under "Summary--Yorkshire Electricity Group plc") and elsewhere;
currency fluctuations; governmental, statutory, regulatory or administrative
initiatives affecting Yorkshire Group, Yorkshire or the UK electric and gas
utilities industries; general industry trends; competition; the cost and
availability of electricity, gas and other alternative energy sources; hedging
costs; changes in business strategy, development plans or vendor
relationships; availability, terms and deployment of capital; availability of
qualified personnel; increased rates of taxes or other changes in tax law;
changes in, or the failure or inability to comply with, governmental
regulation, including, without limitation, environmental regulations; and
other factors referenced in this Prospectus. These forward looking statements
speak only as of the date of this Prospectus.
6
<PAGE>
SUMMARY
The following summary is qualified in its entirety by, and should be read in
conjunction with, the more detailed financial and other information contained
elsewhere in this Prospectus.
YORKSHIRE POWER GROUP LIMITED
Yorkshire Group was incorporated as a private company with limited liability
under the laws of England and Wales in July 1996 and is indirectly owned by
American Electric Power Company, Inc. ("AEP") and New Century Energies, Inc.
("NCE" and, together with AEP, the "US Parents"). Each of the US Parents
indirectly owns 50% of the outstanding shares of the Yorkshire Group. In 1997,
Yorkshire Group was utilized in connection with the joint acquisition of
Yorkshire by the US Parents for approximately (Pounds)1.5 billion (the
"Acquisition"). Yorkshire Group holds all the outstanding shares of Yorkshire
Holdings plc ("Yorkshire Holdings"), which is its primary asset. Yorkshire
Holdings, in turn, beneficially owns all the outstanding shares of Yorkshire.
See "Yorkshire Group and the US Parents".
YORKSHIRE POWER FINANCE LIMITED
Yorkshire Finance, a subsidiary of Yorkshire Group, was incorporated as a
company with limited liability under the laws of the Cayman Islands in August
1997. Yorkshire Finance exists solely for the purpose of operating as a
financing vehicle for Yorkshire Group and its affiliates. See "Yorkshire Group
and the US Parents".
YORKSHIRE ELECTRICITY GROUP PLC
Yorkshire is one of twelve regional electricity companies ("RECs") in England
and Wales licensed to distribute, supply and, to a limited extent, generate
electricity. Yorkshire's two principal businesses are the "distribution
business" and the "supply business". Yorkshire's distribution business consists
of the distribution of electricity to approximately two million residential,
commercial and industrial customers in its Franchise Area. Substantially all of
the distribution business is a regulated monopoly. Yorkshire's supply business
consists of the purchase and supply of electricity primarily to customers
within the Franchise Area.
Yorkshire generated total operating income of (Pounds)52 million ($85
million) in Fiscal Year 1997. During Fiscal Year 1997, however, Yorkshire
recorded a (Pounds)78 million ($128 million) provision for uneconomic gas and
electricity contracts and a (Pounds)50 million ($82 million) charge for
information system development costs to prepare for the opening of the
competitive electricity market in 1998 for Franchise Supply Customers (as
defined below). Excluding these charges, total operating income would have been
(Pounds)180 million ($295 million) in Fiscal Year 1997, including (Pounds)140
million ($230 million) (78% of total) associated with the core distribution
business and (Pounds)29 million ($48 million) (16% of total) associated with
the supply business. As discussed below under "Business--Business
Restructuring", beginning in 1998, Yorkshire will operate the distribution and
supply businesses as self-sufficient businesses.
Yorkshire is authorized under its Public Electricity Supply License (the "PES
License") to distribute and supply electricity in an area covering
approximately 10,000 square km (3,860 square miles), which encompasses the
counties of West Yorkshire, East Yorkshire and almost all of South Yorkshire,
together with parts of North Yorkshire, Derbyshire, Nottinghamshire,
Lincolnshire and Lancashire (the "Franchise Area"). The resident population of
the Franchise Area served by Yorkshire is approximately 4.4 million. The
regional economy is diverse, including traditional heavy industries such as
iron, steel and coal mining, as well as growing service
7
<PAGE>
sector activities such as finance, retailing and leisure. Centrally located in
the UK, the region is also well served by roads, railways, airports and ports
which provide access to other European markets.
Pursuant to its PES License, Yorkshire owns, manages and operates the
electricity distribution network within the Franchise Area. The primary
activity of the distribution business is the receipt of electricity from the
national grid transmission system and its distribution to end users connected
to Yorkshire's distribution network. Since the distribution business is
substantially a regulated monopoly, virtually all electricity supplied (whether
by Yorkshire's supply business or by any other suppliers) to consumers within
the Franchise Area is transported through Yorkshire's distribution network.
Yorkshire Group believes that economic, environmental and regulatory factors
are likely to prevent competitors from entering the distribution business in
the Franchise Area. See "Business--Distribution Business" and "--Business
Restructuring".
Yorkshire's supply business consists of selling electricity to end users and
purchasing such electricity and arranging for its distribution to those end
users. Within the Franchise Area, Yorkshire has an exclusive right to supply
electricity to consumers who, within the most recent twelve-month period, have
had an average peak demand ("Peak Demand") of not more than 100 kW in the three
months of highest maximum demand during such period ("Franchise Supply
Customers"). This exclusive right will continue until September 1998 when the
supply market for these customers is currently scheduled to become competitive
over a six-month phase-in period. The supply of electricity to Non-Franchise
Supply Customers (as defined below) is currently open to competition and
Yorkshire is able to competitively bid or negotiate to supply electricity to
such customers. By purchasing electricity at competitive rates from most of the
major power generators in the UK and providing high quality customer service,
Yorkshire has been able to sustain its position as one of the largest national
suppliers of electricity. "Non-Franchise Customers" are consumers, both inside
and outside of Yorkshire's Franchise Area, who, within the most recent twelve
month period, have had an average Peak Demand of more than 100 kW in the three
months of highest maximum demand during such period. See "Business--Supply
Business" and "--Business Restructuring".
The operations of Yorkshire are regulated under its PES License, pursuant to
which income generated by Yorkshire's distribution business and income derived
from Franchise Supply Customers are subject to a price cap regulatory framework
providing economic incentives to operate in a cost-effective manner, and, to a
limited extent, to increase the volume of electricity distributed. See "The
Electric Utility Industry in Great Britain".
Yorkshire also conducts ancillary business activities apart from the
distribution and supply businesses that are not subject to price regulation,
such as owning an interest in an off-shore gas field, supplying gas in the
competitive market and holding interests in power generation. See "Business--
Affiliate Businesses and Other Investments" and "--Business Restructuring".
YORKSHIRE CAPITAL TRUST I
The Trust is a statutory business trust created under the Delaware Business
Trust Act (the "Delaware Act") pursuant to the filing of a certificate of trust
with the Delaware Secretary of State on February 4, 1998. The Trust exists for
the exclusive purposes of (i) issuing and selling the Trust Securities
representing undivided beneficial interests in the assets of the Trust, (ii)
investing the gross proceeds of the Trust Securities in the Junior Subordinated
Debentures and (iii) engaging in only those other activities necessary,
appropriate, convenient or incidental thereto. See "Yorkshire Capital Trust I".
8
<PAGE>
THE OFFERING
As used herein, (i) the term "Indenture" means the Subordinated Indenture, as
the same may be amended and supplemented from time to time, among Yorkshire
Finance, Yorkshire Group, The Bank of New York, as Indenture Trustee, principal
paying agent, registrar and transfer agent (the "Indenture Trustee"), and
Banque Generale du Luxembourg, as paying agent and transfer agent, pursuant to
which the Junior Subordinated Debentures and the Debentures Guarantee will be
issued, and (ii) the term "Trust Agreement" means the Amended and Restated
Trust Agreement, among AEP Resources, Inc., as depositor, Yorkshire Group, as
holder of the Control Certificate (as defined herein), The Bank of New York
(Delaware), as Delaware Trustee, The Bank of New York, as Property Trustee, the
administrative trustees named therein and the holders, from time to time, of
undivided beneficial interests in the assets of the Trust. Each of the other
capitalized terms used in this Prospectus and not otherwise defined has the
meaning set forth in the Indenture or the Trust Agreement, as the case may be.
Securities Offered ......... % Trust Securities (Liquidation Amount $25 Per
Trust Security).
Offering Price ............. $25 per Trust Security.
Distribution Dates ......... March 31, June 30, September 30 and December 31
of each year, commencing , 1998.
Record Date.................
The record date for each Distribution Date (as
defined under "Description of the Trust
Securities--Distributions") will be the close of
business on the 15th calendar day prior to such
Distribution Date.
Ratings..................... The Trust Securities are expected to be assigned
ratings of BBB by Standard & Poor's Ratings
Services ("S&P"), BBB by Duff & Phelps Credit
Rating Company ("DCR") and "baa3" by Moody's
Investors Service, Inc. ("Moody's"). These
ratings will have been obtained with the
understanding that S&P, DCR and Moody's will
continue to monitor the credit rating of the
registrants and will make future adjustments to
the extent warranted. A rating reflects only the
views of S&P, DCR or Moody's, as the case may be,
and is not a recommendation to buy, sell or hold
the Trust Securities. There is no assurance that
any such rating will be retained for any given
period of time or that it will not be revised
downward or withdrawn entirely by S&P, DCR or
Moody's, as the case may be, if, in their
respective judgments, circumstances so warrant.
Deferral of Interest So long as no Event of Default under the
Payments.................... Indenture has occurred and is continuing,
Yorkshire Finance has the right to defer Interest
Payments on the Junior Subordinated Debentures,
at any time or from time to time, for up to 20
consecutive quarters; provided, however,
Yorkshire Finance cannot defer Interest Payments
beyond the Stated Maturity of the Junior
Subordinated Debentures. If Interest Payments on
the Junior Subordinated Debentures are so
deferred, Distributions on the Trust Securities
will also be deferred. During an Extension
Period, Yorkshire Group's obligations to make
payments under the Trust Securities Guarantee and
the Debentures Guarantee will be suspended. See
"Description of the Junior Subordinated
Debentures--Option to Defer Payment of Interest".
9
<PAGE>
Ranking of Junior
Subordinated Debentures and
Debentures Guarantee........
The Junior Subordinated Debentures and the
Debentures Guarantee will be unsecured and
subordinated obligations of Yorkshire Finance and
Yorkshire Group, respectively, and will be junior
in right of payment to all Senior Debt of
Yorkshire Finance and Yorkshire Group,
respectively, to the extent and in the manner set
forth in the Indenture. At December 31, 1997,
Senior Debt of Yorkshire Group aggregated
approximately (Pounds)1,034 million ($1,699
million), a portion of which will be repaid with
proceeds of this offering. Because Yorkshire
Group is a holding company, Yorkshire Group's
obligations under the Debentures Guarantee will
be effectively subordinated to all existing and
future indebtedness and liabilities of Yorkshire
Group, including Yorkshire. At December 31, 1997,
the direct and indirect subsidiaries of Yorkshire
Group had total indebtedness (excluding
indebtedness owed to Yorkshire Group) of
approximately (Pounds)476 million ($782 million).
See "Risk Factors--Factors Relating to the Trust
Securities and the Junior Subordinated
Debentures--Subordination of and Rights under the
Debentures Guarantee", "Description of the Junior
Subordinated Debentures--Subordination" and
"Description of the Debentures Guarantee".
Trust Securities Guarantee
and Debentures Guarantee....
The payment of Distributions and payments on
liquidation of the Trust or redemption of the
Trust Securities are guaranteed by Yorkshire
Group under the Trust Securities Guarantee, but
only to the extent of sufficient funds held by
the Trust and available therefor. The Trust
Securities Guarantee will be an unsecured and
subordinate obligation and junior in right of
payment to all Senior Debt of Yorkshire Group and
will rank pari passu with the most senior
preferred stock of Yorkshire Group. At December
31, 1997, Yorkshire Group had no senior preferred
stock outstanding with which the Trust Securities
Guarantee would rank pari passu. See "Risk
Factors--Factors Relating to the Trust Securities
and the Junior Subordinated Debentures--
Subordination of and Limitation of Funds
Available to Trust under the Trust Securities
Guarantee".
If Yorkshire Finance does not make payments of
principal of or interest on the Junior
Subordinated Debentures or Yorkshire Group does
not make payments pursuant to the Debentures
Guarantee, the Trust will not have sufficient
funds to pay Distributions on the Trust
Securities or amounts payable on redemption
thereof or otherwise. In such event, the Trust
Securities Guarantee will not apply to such
Distributions of such amounts until the Trust has
sufficient funds available therefor. The remedy
of a holder of Trust Securities, accordingly,
will be to enforce its rights under the
Debentures Guarantee.
Pursuant to the Debentures Guarantee, Yorkshire
Group will irrevocably and unconditionally
guarantee all payments on the Junior Subordinated
Debentures when and as the same shall become
10
<PAGE>
due and payable, whether at Stated Maturity, upon
redemption or otherwise. See "Description of the
Debentures Guarantee".
During an Extension Period, Yorkshire Group's
obligations to make payments under the Trust
Securities Guarantee and the Debentures Guarantee
will be suspended. See "Description of the Junior
Subordinated Debentures--Option to Defer Payment
of Interest".
The Trust Securities Guarantee, the Debentures
Guarantee, the Indenture, the Junior Subordinated
Debentures, the Trust Agreement and the Agreement
as to Expenses and Liabilities, when taken
together, will effectively provide a full and
unconditional guarantee, on a subordinated basis,
of the Trust's obligations under the Trust
Securities.
Redemption.................. The Trust Securities are subject to mandatory
redemption, (i) in whole or in part, upon
redemption of the Junior Subordinated Debentures
in an amount equal to the aggregate principal
amount of Junior Subordinated Debentures being
redeemed and (ii) in whole, at the Stated
Maturity of the Junior Subordinated Debentures,
in each case at the Redemption Price. The Junior
Subordinated Debentures are redeemable at the
option of Yorkshire Finance (i) on or after
, 2003, in whole at any time or in part from time
to time, (ii) at any time, in whole (but not in
part), upon the occurrence and continuation of a
Special Event or (iii) at any time, in whole (but
not in part), if Yorkshire Finance or Yorkshire
Group has or will become obligated to pay
Additional Amounts, as provided under
"Description of the Junior Subordinated
Debentures--Optional Tax Redemption", in each
case at the Debenture Redemption Price. See
"Description of the Trust Securities--
Redemptions--Mandatory Redemption", "--Optional
Redemption of Junior Subordinated Debentures" and
"--Special Event Redemption of Junior
Subordinated Debentures".
Distribution of Junior
Subordinated Debentures..... Yorkshire Group will have the right at any time
to dissolve the Trust and, after satisfaction of
liabilities to creditors of the Trust, if any,
cause a Like Amount of Junior Subordinated
Debentures to be distributed to the holders of
the Trust Securities in liquidation of the Trust.
See "Description of the Trust Securities--
Distribution of Junior Subordinated Debentures".
Additional Amounts..........
Subject to certain exceptions as set forth under
"Description of the Junior Subordinated
Debentures--Additional Amounts", all payments in
respect of the Junior Subordinated Debentures and
the Debentures Guarantee and, therefore, the
Trust Securities will be made free and clear of,
and without withholding or deductions for or on
account of, any Gross-Up Taxes (as defined under
"Description of the Junior Subordinated
Debentures--Additional Amounts"), unless such
withholding or deduction is required by law. In
the event of any such withholding or deduction,
subject to certain exceptions, Yorkshire Finance
or Yorkshire Group will pay such additional
amounts (the "Additional Amounts") as will result
11
<PAGE>
in receipt by the holder of the Junior
Subordinated Debentures and, therefore, the
holders of the Trust Securities, of such amounts
as would have been received by it had no such
withholding or deduction been required. See
"Description of the Junior Subordinated
Debentures--Additional Amounts". Any reference in
this Prospectus to any payments with respect to
the Junior Subordinated Debentures or any
payments pursuant to the Debentures Guarantee
shall be deemed to include any such Additional
Amounts payable in connection therewith.
Listing.....................
Application has been made to list the Trust
Securities on the NYSE and to list the Junior
Subordinated Debentures on the Luxembourg Stock
Exchange. If the Junior Subordinated Debentures
are distributed to the holders of the Trust
Securities upon the liquidation of the Trust,
Yorkshire Finance will use its best efforts to
also list the Junior Subordinated Debentures on
the NYSE, or such other stock exchanges or other
organizations, if any, on which the Trust
Securities are then listed.
Use of Proceeds ............ The proceeds to the Trust from the sale of the
Trust Securities will be invested by the Trust in
the Junior Subordinated Debentures to be issued
by Yorkshire Finance to the Trust. In turn,
Yorkshire Finance intends to loan the net
proceeds from such issuance to Yorkshire Group
and certain of its affiliates with such loans to
be evidenced by promissory notes issued by
Yorkshire Group and such affiliates (collectively
the "Intercompany Notes"). The proceeds therefrom
will be used for the working capital of such
affiliates and for the repayment of certain
indebtedness of Yorkshire Group. See "Use of
Proceeds" and "Capitalization".
Governing Law .............. The Trust Agreement and the Trust Securities will
be governed by, and construed in accordance with,
the laws of the State of Delaware. The Trust
Securities Guarantee, the Debentures Guarantee,
the Indenture and the Junior Subordinated
Debentures will be governed by, and construed in
accordance with, the laws of the State of New
York.
The Trustees................ The Bank of New York will act as property trustee
(the "Property Trustee") of the Trust. Four
employees of the US Parents also will act as
trustees (the "Administrative Trustees") of the
Trust. The Bank of New York (Delaware) will be an
additional trustee (the "Delaware Trustee") of
the Trust. The Property Trustee, the
Administrative Trustees and the Delaware Trustee
are herein, collectively, referred to as the
"Securities Trustees". The Bank of New York will
also act as Indenture Trustee under the Indenture
pursuant to which the Junior Subordinated
Debentures and the Debentures Guarantee will be
issued and will act as trustee under the Trust
Securities Guarantee (the "Guarantee Trustee").
12
<PAGE>
Yorkshire Group generally will retain the voting
Control of the Trust........ control and appointment power with respect to the
Trust by virtue of Yorkshire Group's possession
of the Trust's control certificate (the "Control
Certificate"). The Control Certificate shall not
provide any economic interest in the Trust to
Yorkshire Group. See "Yorkshire Capital Trust I".
Expenses of the Trust.......
Pursuant to the Agreement as to Expenses and
Liabilities, the US Affiliates will irrevocably
and unconditionally guarantee to each person or
entity to whom the Trust becomes indebted or
liable the full payment of any indebtedness,
expenses or liabilities of the Trust (other than
obligations of the Trust to pay to the holders of
the Trust Securities the amounts due such holders
pursuant to the terms of the Trust Securities).
13
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following table sets forth summary consolidated financial data for
Yorkshire Power Group Limited after March 31, 1997 ("Yorkshire Group" or the
"Successor Company") and Yorkshire Electricity Group plc ("Yorkshire" or the
"Predecessor Company") for each of the five Fiscal Years ended March 31, 1997
prepared in accordance with US GAAP. For a description of the financial
statements and records from which the following financial data have been
derived, see "Selected Consolidated Financial Data". This information should be
read in conjunction with "Capitalization", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the consolidated
financial statements and notes thereto of the Successor Company and the
Predecessor Company included elsewhere in this Prospectus.
The summary unaudited pro forma consolidated income statement data for the
Successor Company for Fiscal Year 1997 presented below reflect the Acquisition
as if it had occurred as of April 1, 1996. Such data have been prepared by the
Successor Company based upon assumptions deemed proper in accordance with the
purchase method of accounting for business combinations and have been adjusted
to reflect (i) interest expense of (Pounds)74 million incurred as a result of
the financing of the Acquisition, (ii) amortization of (Pounds)24 million
related to goodwill recorded in connection with the Acquisition, (iii)
additional depreciation expense of (Pounds)6 million as a result of the
revaluation of certain fixed assets in connection with the Acquisition and (iv)
removal of the effect of recording the provision of (Pounds)78 million of
certain uneconomic gas and electricity contracts, the loss of (Pounds)7 million
on certain interest rate swap agreements and the write-down of (Pounds)6
million relating to non-operational property. Such data are shown for
illustrative purposes only and are not necessarily indicative of the future
results of operations of the Successor Company or of the results of operations
of the Successor Company that would have actually occurred had the Acquisition
occurred at the beginning of the period presented. Such data should be read in
conjunction with the unaudited pro forma consolidated statement of income and
notes thereto of the Successor Company included elsewhere in this Prospectus.
14
<PAGE>
PREDECESSOR COMPANY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DA-
TA:
Operating revenues.............. 1,325 1,308 1,464 1,431 1,331
Operating income (1)............ 146 156 215 214 52
Other income (loss), net (2).... 15 (8) 16 313 20
Interest expense, net........... (7) (5) (12) (20) (33)
Provision for income taxes (3).. (54) (50) (78) (114) (13)
----- ----- ----- ----- -----
Net income...................... 100 93 141 393 26
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets.................... 613 701 747 769 796
Total assets.................... 1,214 1,241 1,367 1,408 1,375
Total shareholders' equity...... 561 612 517 399 359
Long-term debt.................. 104 126 305 424 419
Short-term debt and current por-
tion of long-term debt......... 217 99 91 90 87
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT (4)........................ 161 148 231 527 72
EBITDA (4)...................... 193 182 272 569 122
Cash flow from operations....... 187 237 201 222 96
Cash used in investing activi-
ties........................... (137) (201) (101) (8) (51)
Cash provided by (used in) fi-
nancing activities............. 129 (139) (67) (114) (76)
Ratio of earnings to fixed
charges (5).................... 6.6 6.8 10.5 12.0 1.8
</TABLE>
15
<PAGE>
SUCCESSOR COMPANY
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Operating revenues............. 1,331 2,183 974 909 1,493
Operating income (1)........... 106 174 120 123 202
Other income, net (2).......... 20 33 17 2 3
Interest expense, net.......... (100) (164) (20) (78) (128)
Provision for income taxes..... (17) (28) (40) (5) (8)
----- ----- --- ------ ------
Income before extraordinary
item.......................... 9 15 77 42 69
Extraordinary item (7)......... -- -- -- (134) (220)
----- ----- --- ------ ------
Net income (loss).............. 9 15 77 (92) (151)
===== ===== === ====== ======
<CAPTION>
SUCCESSOR SUCCESSOR
APRIL 1, DECEMBER 31,
1997 1997
-------------- ---------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets................... 939 1,540 1,001 1,644
Total assets................... 2,591 4,249 2,522 4,143
Total shareholders' equity..... -- -- 330 542
Long-term debt................. 433 710 429 705
Accrued liability to purchase
Yorkshire..................... 1,496 2,453 -- --
Short-term debt and current
portion of long-term debt..... 87 143 1,081 1,776
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT before extraordinary item
(4)(7)........................ 126 207 137 125 205
EBITDA before extraordinary
item (4)(7)................... 206 338 169 183 300
Cash flow from operations...... 149 63 103
Cash used in investing
activities.................... (99) (1,575) (2,586)
Cash provided by (used in)
financing activities.......... (49) 1,409 2,314
Ratio of earnings to fixed
charges (5)................... 1.2 4.6 1.5
</TABLE>
16
<PAGE>
PREDECESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution.................... 332 348 362 334 308
Supply.......................... 1,206 1,220 1,343 1,309 1,178
Other........................... 182 162 162 163 172
Intrabusiness eliminations (8).. (395) (422) (403) (375) (327)
----- ----- ----- ----- -----
1,325 1,308 1,464 1,431 1,331
===== ===== ===== ===== =====
OPERATING INCOME (LOSS):
Distribution.................... 135 133 176 164 127
Supply (1)...................... 10 14 23 30 (132)
Other........................... 1 9 16 20 10
Intrabusiness eliminations
(1)(8)......................... -- -- -- -- 47
----- ----- ----- ----- -----
146 156 215 214 52
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution.................... 476 513 556 589 643
Supply.......................... 177 161 198 212 178
Other and unallocated........... 561 567 613 607 554
----- ----- ----- ----- -----
1,214 1,241 1,367 1,408 1,375
===== ===== ===== ===== =====
</TABLE>
17
<PAGE>
SUCCESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ --------------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ ---------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution............... 308 505 225 224 368
Supply..................... 1,178 1,932 868 799 1,312
Other...................... 172 282 136 141 232
Intrabusiness eliminations
(8)....................... (327) (536) (255) (255) (419)
----- ----- ---- -------- --------
1,331 2,183 974 909 1,493
===== ===== ==== ======== ========
OPERATING INCOME (LOSS):
Distribution............... 97 159 99 89 146
Supply (1)................. (7) (11) 1 14 23
Other...................... 16 26 20 20 33
----- ----- ---- -------- --------
106 174 120 123 202
===== ===== ==== ======== ========
<CAPTION>
SUCCESSOR SUCCESSOR
APRIL 1, 1997 DECEMBER 31, 1997
-------------- --------------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- ---------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution............... 1,802 2,955 1,754 2,881
Supply..................... 187 307 180 296
Other and unallocated...... 602 987 588 966
----- ----- -------- --------
2,591 4,249 2,522 4,143
===== ===== ======== ========
</TABLE>
18
<PAGE>
(1) Notable operating expenses include:
Fiscal Year 1997--(i) a provision of (Pounds)78 million for uneconomic gas
and electricity contracts (the effect of which is removed from the
Successor Company's unaudited pro forma consolidated statement of income
for Fiscal Year 1997), which resulted in a charge of (Pounds)125 million to
the supply business offset by an intrabusiness elimination of (Pounds)47
million and (ii) a charge of (Pounds)50 million for information system
development costs to prepare for the opening of the competitive electricity
market in 1998 for Franchise Supply Customers, of which (Pounds)37 million
was charged to the supply business and (Pounds)13 million was charged to
the distribution business.
Fiscal Years 1993, 1994 and 1995--reorganization costs of (Pounds)18
million, (Pounds)44 million and (Pounds)8 million, respectively.
(2) Other income (loss) principally represents income from Yorkshire's
investment in National Grid Group plc ("NGG") and, in Fiscal Year 1996, a
gain resulting from the NGG Transaction (as defined herein) and earnings
and losses from Yorkshire's investments in joint ventures and minority
holdings. Notable items include:
Fiscal Year 1997--gain on sale of Yorkshire's investment in Torch Telecom
of (Pounds)15 million.
Fiscal Year 1996--income from investment in NGG and gain in respect of the
NGG Transaction as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Introduction--NGG
Transaction".
Fiscal Year 1995--one-time termination payment received from Stockholm
Stadhus AB of (Pounds)17 million.
Fiscal Year 1994--loss on sale of Yorkshire's investment in Homepower
Retail Limited of (Pounds)18 million.
(3) Fiscal Year 1996 includes a tax charge of (Pounds)38 million relating to
the NGG Transaction.
(4) EBIT represents income before the sum of interest expense and income taxes.
EBITDA represents income before the sum of interest expense, income taxes,
depreciation and amortization. EBIT and EBITDA are provided for
informational purposes only and such measures should not be construed as
alternatives to operating income (as determined in accordance with US GAAP)
as indicators of operating performance, or as alternatives to cash flows
from operating activities (as determined in accordance with US GAAP) as
measures of liquidity. EBIT and EBITDA are widely accepted financial
indicators of a company's ability to incur and service debt. However, the
measures of EBIT and EBITDA presented herein may not be comparable to
similar measures presented by other companies.
(5) The ratio of earnings to fixed charges is computed as the sum of pre-tax
income (before extraordinary item), plus fixed charges divided by fixed
charges. Fixed charges consist of interest expense and amortization of debt
expense.
(6) Solely for the convenience of the reader, pounds sterling amounts have been
translated into US dollar amounts at the Noon Buying Rate on December 31,
1997 of $1.64 = (Pounds)1. See "Presentation of Certain Information and
Exchange Rates".
(7) Represents the windfall tax imposed by the UK government, which was not
deductible for UK corporation tax purposes.
(8) Intrabusiness eliminations consist primarily of intracompany transactions
between the distribution business and the supply business and interbusiness
transactions between ancillary businesses. Pursuant to the UK regulatory
framework, charges by the distribution business for electricity in respect
of supply customers in the Franchise Area are billed to the supply
business, which in turn incorporates the distribution charge into the bill
sent to the final end user.
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RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Trust Securities.
FACTORS RELATING TO YORKSHIRE'S BUSINESS
Substantial Leverage
Upon completion of this offering, Yorkshire Group will continue to have
substantial indebtedness. At December 31, 1997 (after the effect of the
windfall tax on shareholder's equity), on a pro forma basis after giving
effect to the Senior Notes and the Guaranteed Eurobonds (each as defined under
"Capitalization"), both issued in February 1998, and the issuance of the Trust
Securities offered hereby, the ratio of Yorkshire Group's consolidated debt to
total capitalization was approximately 73%. See "Capitalization". The degree
to which Yorkshire Group is leveraged could affect its ability to service its
indebtedness, to make capital investments, to take advantage of certain
business opportunities, to respond to competitive pressures or to obtain
additional financing. Yorkshire Group believes that, following this offering,
it will be able to make payments on its obligations (including its obligations
under the Trust Securities Guarantee and the Debentures Guarantee) with those
funds subsequently being made available to make payments of principal of and
interest on the Junior Subordinated Debentures and the Trust Securities, as
applicable, from funds derived from the operations of Yorkshire and its
subsidiaries. The ability of Yorkshire Finance to pay amounts due on the
Junior Subordinated Debentures is solely dependent upon Yorkshire Group making
payments to Yorkshire Finance as and when required.
Unexpected declines in Yorkshire's future business, especially in light of
the increasingly competitive environment in the UK electric and gas utility
industries, increases in operating or capital costs, or the inability to
borrow additional funds, could impair Yorkshire Group's ability to meet its
debt service obligations, and, therefore, could adversely affect Yorkshire
Finance's ability to make payments of principal of and interest on the Junior
Subordinated Debentures and, ultimately, the Trust's ability to make payments
on the Trust Securities. No assurance can be given that additional financing
will be available when needed, or, if available, will be obtainable on terms
that are favorable to Yorkshire Group or Yorkshire Finance.
Price Regulation of the Distribution Business
The distribution business of Yorkshire is regulated under its PES License
pursuant to which charges by the distribution business to its customers are
controlled by the Distribution Price Control Formula (as defined under "The
Electric Utility Industry in Great Britain--Distribution of Electricity"). The
Distribution Price Control Formula determines the maximum allowable average
price per unit of electricity (expressed in kWh, a "unit") that a PES License
holder may charge in any year. The elements used in the Distribution Price
Control Formula (which includes the UK Retail Price Index) are established for
a five year period and are subject to review by the Director General of
Electricity Supply for the UK (the "Regulator") at the end of each five year
period and at other times at the discretion of the Regulator. At each review,
the Regulator can adjust the value of certain elements in the Distribution
Price Control Formula.
Following a review by the Regulator in July 1994, a 14% below inflation
price reduction was set for Yorkshire's allowed distribution revenues
effective April 1, 1995. Such adjustment was the principal reason for the
reduction of Yorkshire's distribution operating revenues to (Pounds)334
million ($548 million) for Fiscal Year 1996 from (Pounds)362 million ($594
million) for Fiscal Year 1995. In July 1995, a further review of distribution
prices was concluded by the Regulator for Fiscal Years 1997 to 2000. As a
result of this further review of Yorkshire's distribution prices, a further
13% below inflation reduction became effective April l, 1996 with a further 3%
below inflation reduction effective in each of the three following years. This
review was the principal reason for the reduction in distribution operating
revenues for Fiscal Year 1997 to (Pounds)308 million ($505 million). There can
be no assurance that any future review by the Regulator, the next of which is
scheduled for 2000, will not adversely affect Yorkshire. See "The Electric
Utility Industry in Great Britain--Distribution of Electricity--Price
Control".
Competition in and Price Regulation of the Supply Business
Each PES License holder currently has an exclusive right, subject to price
cap regulation, to supply Franchise Supply Customers in its franchise area.
However, the supply market is being progressively opened to
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full competition. The market for customers with a Peak Demand above 1 MW has
been open to competition for suppliers of electricity since privatization in
1990 while, for Non-Franchise Supply Customers, the market became competitive
in April 1994. The final stage of this process is currently scheduled to occur
over a period of six months commencing September 1998, when competition in the
supply of Franchise Supply Customers will be fully phased in and the exclusive
right to supply Franchise Supply Customers is scheduled to end. Yorkshire's
strategy to meet expanded competition in its supply business will focus on
active marketing and customer service to protect and sustain its position in
the electricity market in its Franchise Area. Furthermore, Yorkshire will seek
to expand market share outside its Franchise Area to the extent that such
business is profitable. There can be no assurance that this strategy will be
successful in avoiding loss of existing customers, or achieving gains of new
customers of Yorkshire's supply business. See "Business--Supply Business" and
"--Business Restructuring".
In October 1997, the Regulator published proposals for new transitional
supply price restraints to apply from April 1, 1998 to residential and small
business customers for an initial period of two years and until an adequate
level of competition is established. Yorkshire subsequently indicated its
acceptance of such proposals. The proposals (when taken together with the
reduction in the Fossil Fuel Levy (as defined under "The Electric Utility
Industry in Great Britain--Fossil Fuel Levy"), which became effective on April
1, 1998) resulted in the implementation of small reductions, also effective
April 1, 1998, in the tariffs for Yorkshire's residential and small business
customers in its Franchise Area compared to the corresponding tariffs in
effect in August 1997. The proposals also require an additional 3% below
inflation reduction effective April 1, 1999. See "The Electric Utility
Industry in Great Britain--Supply of Electricity--Price Regulation".
The license modifications that have been implemented to effect the new
controls also discontinued the automatic pass-through of all costs currently
passed through to residential and small business customers, consisting
primarily of purchased power costs. This change will increase the importance
to Yorkshire of effective power purchasing and hedging activities. See "--Pool
Purchase Price Volatility; Hedging Activities", "The Electric Utility Industry
in Great Britain--Supply or Electricity--Price Regulation" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations".
The transition to competition in supply with respect to Franchise Supply
Customers requires each REC to provide additional data management services to
all suppliers. Assuming that such competition starts as currently scheduled in
September 1998 for Franchise Supply Customers, Yorkshire Group presently
estimates that costs totalling (Pounds)75 million will have been incurred for
re-engineering and information technology work. Of such amount, approximately
(Pounds)19 million was expensed in Fiscal Year 1997. The Regulator has made
proposals (which have been accepted by Yorkshire) to allow Yorkshire recovery
of (Pounds)23 million over a five year period ending March 31, 2003. A further
(Pounds)7 million is expected to be recovered through Pool cost recovery and
other national mechanisms and (Pounds)8 million is expected to be capitalized
as such amount is expected to provide future benefits to the supply business.
As a result of the above, the residual amount of approximately (Pounds)18
million, which will not be recovered or capitalized, will be expensed in
Fiscal Years 1998 and 1999 as incurred.
The Regulator has also made proposals (which have been accepted by
Yorkshire) to provide an annual allowance of (Pounds)3 million for the period
1998 through 2000 to cover operating costs. This allowance will be reviewed at
the time of the Distribution Price Control Formula review in 2000.
The October 1997 proposals therefore will allow Yorkshire to recover up to
50% of its forecasted set-up and operating costs over a five year period. The
shortfall could be higher if: (i) operating costs are higher than anticipated
(e.g., there is a higher level of customer activity); (ii) recovery of
operating costs is disallowed or reduced when the Distribution Price Control
Formula is reviewed for the period beginning April 1, 2000; or (iii) the
integrated national systems do not work as contemplated or require substantial
redevelopment.
The Regulator's proposals also provide that a REC should be penalized (i)
where it starts to open its market more than three months after the market
opening by the first REC; (ii) where it opens successive tranches of its
market more than three months after the opening of the corresponding tranche
by the first REC; and (iii) where the market opening of the first REC has been
delayed beyond April 1, 1998. The penalties will be calculated at
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1% of the operating revenues of the supply business per month of delay,
weighted by the proportion of customers affected and applied as a reduction in
allowed distribution business income. If Yorkshire did not open its market for
Franchise Supply Customers to competition until after April 1, 1999, it would
incur a penalty of approximately (Pounds)6 million. It is now apparent that
some penalty will be incurred due to the delay in the opening of the
competitive market for Franchise Supply Customers until September 1998.
Yorkshire Group expects that Yorkshire will be prepared to open its Franchise
Area to competition in September 1998.
Regulatory Policies Affecting Yorkshire Group
Certain modifications to Yorkshire's PES License following Yorkshire Group's
acquisition of Yorkshire imposed certain conditions designed to assure the
continued financial soundness of Yorkshire, including undertakings which
Yorkshire was required to obtain from AEP and NCE that they will refrain, and
cause their subsidiaries to refrain, from taking any action that would likely
result in Yorkshire breaching its obligations under its PES License and the
Electricity Act 1989 (the "Electricity Act") and an undertaking by Yorkshire
to use reasonable endeavors to maintain an investment grade rating of its debt
securities. Such conditions could have an effect on Yorkshire's dividend
payments which will constitute the principal source of funds for payment of
principal of and interest on the Junior Subordinated Debentures.
On February 24, 1998, following publication of the Monopolies and Mergers
Commission's (the "MMC") report in connection with the proposed
PacificCorp/The Energy Group merger, the Regulator issued a consultation paper
proposing modifications to licenses of public electricity suppliers ("PESs")
which had been subject to takeovers.
The main proposals are:
(1) to allow for a PES generation business to be carried on in an affiliate
which is not a subsidiary and in such cases for the generation business
to be conducted outside the scope of the modifications to the PES
license which have been brought into effect to ensure that the Regulator
can regulate a company effectively after it has been taken over and to
help ensure the financial stability of the PES (the "Ring-Fencing
Conditions");
(2) to restrict further the provisions of existing PES licenses allowing
PESs to carry out certain otherwise restricted activities provided they
do not exceed 5 percent of the revenues of the supply, second-tier
supply and distribution businesses, by introducing an additional test
based on cumulative investment;
(3) to extend to all PESs that have been acquired the condition contained in
the licenses of London Electricity plc, Northern Electric plc and
Yorkshire to use reasonable endeavours to maintain an investment grade
rating of corporate debt;
(4) to prohibit PESs from accepting "cross-default" provisions in borrowing
agreements; and
(5) to make the payment of dividends and other distributions by a PES
expressly conditional on compliance with the Ring-Fencing Conditions in
the license.
Comments were due with respect to the proposals in the consultation paper by
March 27, 1998. Yorkshire provided comments on the consultation paper on March
25, 1998. In its response, Yorkshire indicated that it did not consider the
proposed modifications described in paragraphs (1), (4) and (5) immediately
above to be necessary. Further proposals are expected to be made by the
Regulator in the light of this consultation paper that may result in further
modifications to PES licenses. There can be no assurance that any such
modifications to Yorkshire's PES License that result from such proposals will
not have a material adverse effect on Yorkshire. See "The Electric Utility
Industry in Great Britain--Regulation under the Electricity Act--Modifications
to Licenses".
The ability of AEP or NCE to contribute additional equity capital to
Yorkshire Group is currently subject to regulation of the Commission under the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act"). The
Commission limits the aggregate amount that either AEP or NCE may invest in
foreign utility companies and exempt wholesale generators to specified
percentages of average consolidated retained earnings at the time an
investment is made. This regulation could delay or limit the making of loans
or the contributions of equity by AEP or NCE to Yorkshire Group to enable
Yorkshire Group to meet its obligations or to contribute additional equity
capital to Yorkshire.
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Governmental Review of Utility Regulation
On June 30, 1997, the new Labour government announced a comprehensive review
of the regulation of the electric, gas, water and telecommunications
industries to be directed by the Department of Trade and Industry. Generally,
the review has focused on whether the current system of regulation in the
utility industries is designed to ensure open and predictable regulation,
fairness to consumers and shareholders and the promotion of a competitive
environment. Particularly, the review has examined whether the current system
of price regulation delivers, over time, the greatest benefits to consumers
while maintaining proper incentives for innovation and investment and an
adequate return to shareholders.
The review culminated, in March 1998, with the publication by the Government
of a Green Paper entitled "A Fair Deal for Consumers: Modernising the
Framework for Utility Regulation" (the "March Green Paper"). The March Green
Paper sets forth a number of proposals of the UK Government designed to
reexamine utility regulation in the UK. Among the main proposals contained
within the March Green Paper are the retention of "RPI-X" as the fundamental
basis for price regulation; increased transparency and consistency of
regulation; the merger of the Office of Electricity Regulation ("OFFER") and
the Office of Gas Regulation ("OFGAS"); the separate licensing of the
distribution and supply businesses of the PESs; amendment of the statutory
duties of utility regulators to provide a new primary duty to exercise their
functions in the manner best calculated to protect the interests of consumers
in the short and long term, wherever possible through promoting competition;
and adopting price regulation to distinguish between income earned through
companies' own efforts and income which results from other factors. Some of
these proposals would require primary legislation. Responses to the March
Green Paper by interested parties have been requested by May 31, 1998.
In October 1997, the UK government invited the Regulator to consider
parameters for a review of electricity trading arrangements. Such a review
would focus on the wholesale trading market for electricity within England and
Wales (the "Pool"), trading arrangements outside the Pool and price setting
mechanisms. The review was launched in January 1998 with an announcement that
the Regulator and an independent panel had been asked to report to the Energy
Minister by July 1998. In December 1997, the UK government announced a review
of energy sources for power generation, including fuel diversity, sustainable
development and the role of coal. Representations of interested parties were
submitted in mid-February 1998. While the review is underway, the Secretary of
State has deferred decisions on most outstanding or new applications for the
construction of generating stations. An Energy Select Committee Report on the
Coal Industry issued in April 1998 recommended that such deferral, as it
relates to gas-fired generation, be lifted as soon as possible. The Trade and
Industry Select Committee is undertaking an inquiry into a number of aspects
of UK energy policy. Yorkshire Group cannot predict the results of any of
these reviews or the ultimate effects on Yorkshire or Yorkshire Group. See
"The Electric Utility Industry in Great Britain--Regulation under the
Electricity Act--The Regulator".
Pool Purchase Price Volatility; Hedging Activities
Yorkshire's supply business to Non-Franchise Supply Customers generally
involves entering into fixed price contracts to supply electricity to its
customers. Yorkshire obtains the electricity to satisfy its obligations under
such contracts primarily by purchases from the Pool. See "The Electric Utility
Industry in Great Britain". Because the price of electricity purchased from
the Pool can be volatile (due to the fact the price is set every half hour),
to the extent that Yorkshire purchases electricity from the Pool, Yorkshire is
exposed to risk arising from differences between the fixed price at which it
sells and the fluctuating prices at which it purchases electricity unless it
can effectively hedge such exposure. Although Yorkshire is currently party to
a series of contracts for differences ("CFDs") (most with terms of twelve
months) that limit such exposure, Yorkshire's ability to manage such risk at
acceptable levels will depend, in part, on the specific terms of the supply
contracts that Yorkshire enters into, Yorkshire's ability to implement and
manage an appropriate hedging strategy and the continued availability of
appropriate hedging instruments. No assurance can be given that this risk will
be effectively mitigated. In addition, under the supply price restraint
proposal published by the Regulator in October 1997 (and accepted by
Yorkshire), costs of power purchases from the Pool and related hedging
activities which
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are currently passed through to residential and small business customers will
no longer be automatically passed through to such customers. See "Business--
Supply Business".
Currency Risks; Hedging Transactions
Yorkshire Group's revenues generated by Yorkshire will be primarily in
pounds sterling while the interest and principal payment obligations with
respect to Junior Subordinated Debentures and the Trust Securities will be
payable in US dollars. As a result, any change in the currency exchange rate
that reduces the amount in pounds sterling obtained upon conversion of the US
dollar-based net proceeds of the Junior Subordinated Debentures and the Trust
Securities or that increases the effective principal and interest payment
obligations represented by the Junior Subordinated Debentures and the Trust
Securities upon conversion of pounds sterling-based revenues into US dollars
may, if not appropriately hedged, have a material adverse effect on Yorkshire
Group, Yorkshire Finance and the Trust or on their ability to make payments on
the Trust Securities. See "Presentation of Certain Information and Exchange
Rates" for certain information concerning the Noon Buying Rate for pounds
sterling expressed in US dollars. Although Yorkshire Group has entered into
certain transactions to hedge risks associated with exchange rate
fluctuations, there can be no assurance that any such transactions will be
successful in reducing such risks.
Working Capital Deficiency
Yorkshire Group had a working capital deficiency at December 31, 1997 of
(Pounds)1,099 million ($1,805 million), primarily as a result of the initial
financing structure of the Acquisition. This deficiency was largely
attributable to the 1997 Credit Facility (as defined under "Use of Proceeds")
which matures on July 30, 1998. For a discussion of the 1997 Credit Facility,
see Note 11, "Acquisition", to Yorkshire Group's consolidated balance sheet as
of April 1, 1997 included elsewhere in this Prospectus. Yorkshire Group has
partly refinanced the 1997 Credit Facility through the February 1998 issuances
of (Pounds)200 million of Guaranteed Eurobonds due in 2028, (Pounds)213
million of Senior Notes due 2003 and (Pounds)183 million of Senior Notes due
in 2008. It is proposed that the balance of the 1997 Credit Facility be
refinanced through the issuance of (Pounds)168 million of the Trust Securities
offered hereby, the potential issuance of additional senior notes, the
entering into of additional credit facilities, if available and on terms
acceptable to Yorkshire Group, and from the proceeds of the currently
contemplated transfer of Yorkshire Group's generation assets to an entity or
entities other than Yorkshire Group or its subsidiaries. Yorkshire Group is
currently in negotiations with respect to the replacement of the 1997 Credit
Facility. There can be no assurance that the balance of the 1997 Credit
Facility can be refinanced as planned. It is also possible that the terms
under which the balance of the 1997 Credit Facility is refinanced could result
in an increase in Yorkshire Group's financing costs.
FACTORS RELATING TO THE TRUST SECURITIES AND THE JUNIOR SUBORDINATED
DEBENTURES
Subordination of and Rights under the Debentures Guarantee
Yorkshire Group is a non-operating holding company, conducting substantially
all of its business through Yorkshire and its subsidiaries. Except to the
extent that Yorkshire Group may receive funds from the US Parents in the
future, Yorkshire Group will rely on dividends, indirectly, from Yorkshire to
meet its corporate expenses and outstanding obligations, including any
payments necessary pursuant to the Debentures Guarantee. Furthermore,
Yorkshire Group's obligations under the Debentures Guarantee will effectively
be subordinated to all existing and future indebtedness and liabilities of the
subsidiaries of Yorkshire Group, including Yorkshire. As a result, the rights
of holders of the Trust Securities, as beneficiaries of the Debentures
Guarantee, in respect of claims on the assets of each of Yorkshire Group's
subsidiaries upon any liquidation or administration are structurally
subordinated to, and therefore will be subject to the prior claims of, the
creditors of Yorkshire and its subsidiaries (including trade creditors),
except to the extent that Yorkshire Group may itself be a creditor with
recognized claims against Yorkshire and its subsidiaries. At December 31,
1997, the direct and indirect subsidiaries of Yorkshire Group had total
indebtedness (excluding indebtedness owed to Yorkshire Group) of approximately
(Pounds)476 million ($782 million).
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Yorkshire Finance exists solely for the purpose of operating as a finance
vehicle for Yorkshire Group and its affiliates. Accordingly, Yorkshire Finance
will rely on funds from Yorkshire Group and its affiliates to meet its
corporate expenses and outstanding obligations, including payments on the
Junior Subordinated Debentures. If Yorkshire Finance does not receive such
funds from Yorkshire Group or its affiliates and Yorkshire Group does not make
payments pursuant to the Debentures Guarantee, there will not be sufficient
funds to make payments on the Junior Subordinated Debentures. If the Trust, as
holder of the Junior Subordinated Debentures, does not receive such funds, the
Trust will not have sufficient funds to pay Distributions on the Trust
Securities or amounts payable on redemption thereof or otherwise. The Trust
Securities Guarantee does not cover payment of Distributions or any such
amounts when the Trust does not have sufficient funds available to pay such
Distributions. In such event, the remedy of a holder of Trust Securities will
be to enforce its rights under the Debentures Guarantee. The Debentures
Guarantee will be an unsecured and subordinate obligation and junior in right
of payment to all present and future Senior Debt of Yorkshire Group, to the
extent and in the manner set forth in the Indenture. As of December 31, 1997,
Yorkshire Group had approximately (Pounds)1,034 million ($1,699 million)
principal amount of Senior Debt outstanding, a portion of which will be repaid
with proceeds of this offering.
There are no terms of the Trust Securities, the Trust Agreement, the
Indenture, the Junior Subordinated Debentures, the Trust Securities Guarantee
or the Debentures Guarantee that limit Yorkshire Finance's or Yorkshire
Group's ability to incur additional indebtedness, including Senior Debt. See
"Description of the Trust Securities", "Description of the Trust Securities
Guarantee", "Description of the Junior Subordinated Debentures--Subordination"
and "Description of the Debentures Guarantee".
Subordination of and Limitation of Funds Available to Trust under the Trust
Securities Guarantee
The Trust Securities Guarantee will be an unsecured and subordinate
obligation and junior in right of payment to all Senior Debt of Yorkshire
Group and will rank pari passu with the most senior preferred stock issued by
Yorkshire Group. If Yorkshire Finance does not make Interest Payments or other
payments with respect to the Junior Subordinated Debentures or Yorkshire Group
does not make payments pursuant to the Debentures Guarantee, the Trust will
have insufficient funds available to pay Distributions or amounts payable on
redemption thereof or otherwise. In such event, holders of the Trust
Securities would not be able to rely upon the Trust Securities Guarantee for
payment of such amounts. See "Description of the Trust Securities Guarantee".
Option to Defer Payment of Interest; Potential Market Volatility During
Extension Period; Tax Consequences of Deferral
So long as no Event of Default under the Indenture has occurred and is
continuing, Yorkshire Finance has the right under the Indenture to defer
Interest Payments on the Junior Subordinated Debentures, at any time or from
time to time, for up to 20 consecutive quarters; provided, however, Yorkshire
Finance cannot defer Interest Payments beyond the Stated Maturity of the
Junior Subordinated Debentures. During such Extension Period, quarterly
Distributions on the Trust Securities would also be deferred (but would
continue to accumulate additional Distributions thereon) at the rate of %
per annum, compounded quarterly, by the Trust until all deferred Interest
Payments, together with interest thereon, have been paid in full. Further,
during an Extension Period, Yorkshire Group's obligations to make payments
under the Trust Securities Guarantee and the Debentures Guarantee will be
suspended.
During an Extension Period, neither Yorkshire Finance nor Yorkshire Group
will be permitted, subject to certain exceptions set forth herein, to (i)
declare or pay any cash distributions with respect to its capital stock, (ii)
make any payments on its debt securities that rank pari passu with or junior
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior to the Junior Subordinated Debentures or the
Debentures Guarantee, respectively, or (iv) make any payments on its debt
securities held by, make any loans or advances to, or make payments with
respect to any guarantee of the debt of, any affiliate. Prior to the
termination of any such Extension Period, Yorkshire Finance may further extend
the interest payment period; provided that, such
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Extension Period, together with all such previous and further extensions
within such Extension Period, may not exceed 20 consecutive quarters or the
Stated Maturity of the Junior Subordinated Debentures. Upon the termination of
any Extension Period and the payment of all amounts then due, Yorkshire
Finance may commence a new Extension Period, subject to the above
requirements. As a result, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures. See
"Description of the Trust Securities--Distributions" and "Description of the
Junior Subordinated Debentures--Option to Defer Payment of Interest".
In the event Yorkshire Finance exercises its right to defer Interest
Payments on the Junior Subordinated Debentures, the market price of the Trust
Securities is likely to be affected. A holder that disposes of its Trust
Securities during such a deferral, therefore, might not receive the same
return on its investment as a holder that continues to hold its Trust
Securities. In addition, the market price of the Trust Securities may be more
volatile than the market prices of other securities that are not subject to
such deferrals.
In the event Yorkshire Finance exercises its rights to defer Interest
Payments on the Junior Subordinated Debentures, each holder of Trust
Securities will be required to include income in the form of OID in its gross
income for US Federal income tax purposes in respect of the deferred interest
(including interest thereon) allocable to its Trust Securities. As a result, a
holder of Trust Securities will recognize income for US Federal income tax
purposes in advance of the receipt of cash. Such holder will not receive the
cash from the Trust related to such income if such holder disposes of its
Trust Securities prior to the record date for the date on which Distributions
of such amounts are made. Such holder will increase its adjusted basis in its
Trust Securities by the amount of OID so included in income in respect of such
deferral and, to the extent that the adjusted tax basis exceeds the amount
realized on the sale or other disposition of such holder's Trust Securities,
recognize a capital loss. If the holder disposes of a Trust Security prior to
the occurrence of an Extension Period, any portion of the amount received from
the purchaser that is attributable to accrued interest will be treated as
interest income to the holder (that will only be includible as income to the
extent it previously has not been included in the holder's taxable income) and
will not be treated as part of the amount realized for purposes of determining
gain or loss on the disposition of the Trust Security. Subject to certain
limitations, capital losses cannot be applied to offset ordinary income for US
Federal income tax purposes. See "Material Income Tax Considerations--US
Federal Income Tax Considerations--Original Issue Discount" and "--Disposition
of Trust Securities.". INVESTORS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS
WITH RESPECT TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE TRUST SECURITIES.
Yorkshire Finance currently has no intention of exercising its right to
defer Interest Payments on the Junior Subordinated Debentures. Moreover,
because of the consequences of exercising such right, including a prohibition
on the payment of cash distributions by Yorkshire Finance and Yorkshire Group
with respect to their capital stock, Yorkshire Finance believes the likelihood
of such exercise is remote.
Special Event Redemption; Distribution of Junior Subordinated Debentures
Upon the occurrence and continuation of a Special Event, as described under
"Description of the Trust Securities--Redemptions--Special Event Redemption of
Junior Subordinated Debentures", Yorkshire Finance has the right to redeem the
Junior Subordinated Debentures in whole (but not in part) at the Debenture
Redemption Price, and thereby cause a mandatory redemption of the Trust
Securities, at the Redemption Price, within 90 days following the occurrence
of such Special Event.
In addition, at any time, Yorkshire Group will have the right to dissolve
the Trust and, after satisfaction of liabilities to creditors, if any, of the
Trust as provided by applicable law, cause a Like Amount of Junior
Subordinated Debentures to be distributed to the holders of the Trust
Securities in liquidation of the Trust. See "Description of the Trust
Securities--Distribution of Junior Subordinated Debentures".
Under current US Federal income tax law, a distribution of Junior
Subordinated Debentures upon a liquidation of the Trust would not be a taxable
event to holders of the Trust Securities. If, however, the Trust
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were characterized for US Federal income tax purposes as an association
taxable as a corporation at the time of such liquidation, the distribution of
the Junior Subordinated Debentures would be a taxable event to holders of
Trust Securities. Under current US Federal income tax law, the redemption of
the Junior Subordinated Debentures upon occurrence of a Special Event or a
liquidation of the Trust in which holders of the Trust Securities receive cash
would be a taxable event to such holders. See "Material Income Tax
Considerations--US Federal Income Tax Considerations--Receipt of Junior
Subordinated Debentures or Cash in Certain Circumstances".
There can be no assurance as to the market prices for the Junior
Subordinated Debentures that may be distributed in exchange for the Trust
Securities if a liquidation of the Trust were to occur. Accordingly, the
Junior Subordinated Debentures that a holder of the Trust Securities may
receive upon liquidation of the Trust could trade at a discount to the price
that the investor paid to purchase the Trust Securities offered hereby.
Because holders of the Trust Securities may receive the Junior Subordinated
Debentures, if Yorkshire Group exercises its right to dissolve the Trust,
prospective purchasers of the Trust Securities are also making an investment
decision with regard to the Junior Subordinated Debentures and the Debentures
Guarantee and should carefully review all the information regarding the Junior
Subordinated Debentures and the Debentures Guarantee contained herein. See
"Description of the Junior Subordinated Debentures--Distribution of the Junior
Subordinated Debentures" and "Description of the Debentures Guarantee".
No Protection in the Event of a Change in Control, etc.
Neither holders of the Junior Subordinated Debentures nor holders of the
Trust Securities are afforded protection in the event of a highly leveraged
transaction, a change in control or other similar transactions involving
Yorkshire Finance or Yorkshire Group that may adversely affect such holders.
See "Description of the Junior Subordinated Debentures--Consolidation, Merger,
Sale of Assets and Other Transactions".
No Prior Market for the Trust Securities
The Trust Securities constitute a new issue of securities with no
established trading market. Application has been made to list the Trust
Securities on the NYSE. Assuming approval for listing by the NYSE, however,
there can be no assurance that an active market for the Trust Securities will
develop or be sustained in the future. Although the Underwriters have
indicated that they intend to make a market in the Trust Securities, as
permitted by applicable laws and regulations, they are not obligated to do so
and may discontinue any such market making at any time without notice.
Accordingly, no assurance can be given as to the liquidity of the trading
market for the Trust Securities.
27
<PAGE>
YORKSHIRE GROUP AND THE US PARENTS
YORKSHIRE GROUP
Yorkshire Group was incorporated as a private company with limited liability
under the laws of England and Wales in July 1996. In 1997, Yorkshire Group was
utilized in connection with the Acquisition by the US Parents of Yorkshire,
one of the twelve RECs in England and Wales. Yorkshire Group gained effective
control of Yorkshire on April 1, 1997. Yorkshire Group's primary asset is the
outstanding shares of Yorkshire Holdings, a public limited company
incorporated under the laws of England and Wales, which in turn beneficially
owns all of the outstanding shares of Yorkshire. Yorkshire Holdings was
organized as a wholly-owned subsidiary of Yorkshire Group solely for holding
the share capital of Yorkshire and has no other significant operations.
Each of the US Parents holds an indirect 50% interest in Yorkshire Group.
AEP holds such interest through its wholly-owned subsidiary, AEP Resources.
NCE holds its 50% indirect interest in Yorkshire Group through its wholly-
owned subsidiary, Public Service Company of Colorado, a Colorado corporation,
which in turn wholly-owns New Century International.
YORKSHIRE FINANCE
Yorkshire Finance was incorporated under the laws of the Cayman Islands in
August 1997. Yorkshire Finance exists solely for the purpose of operating as a
financing vehicle for Yorkshire Group and its affiliates. Yorkshire Finance
does not, and does not expect to, prepare or publish any financial statements.
The registered office of Yorkshire Finance is P.O. Box 309, George Town, Grand
Cayman Island, British West Indies. The principal executive offices of
Yorkshire Finance are located at Wetherby Road, Scarcroft, Leeds LS14 3HS,
England, telephone number 011-44-113-289-2123.
YORKSHIRE
Yorkshire's principal businesses are the distribution of electricity to
approximately two million customers in its Franchise Area and the supply of
electricity primarily within its Franchise Area. Yorkshire generated total
operating income of (Pounds)52 million ($85 million) in Fiscal Year 1997.
During Fiscal Year 1997, however, Yorkshire recorded a (Pounds)78 million
($128 million) provision for uneconomic gas and electricity contracts and a
(Pounds)50 million ($82 million) charge for information system development
costs to prepare for the opening of the competitive electricity market in 1998
for Franchise Supply Customers (as defined herein). Excluding these charges,
total operating income would have been (Pounds)180 million ($295 million) in
Fiscal Year 1997, including (Pounds)140 million ($230 million) (78% of total)
associated with the core distribution business and (Pounds)29 million ($48
million) (16% of total) associated with the supply business. As discussed
below under "Business--Business Restructuring", beginning in 1998, Yorkshire
will operate the distribution and supply businesses as self-sufficient
businesses.
The registered office and principal executive offices of Yorkshire Group and
Yorkshire are located at Wetherby Road, Scarcroft, Leeds LS14 3HS, England,
telephone number 011-44-113-289-2123.
THE US PARENTS
AEP
AEP is an electric utility holding company registered under the 1935 Act.
AEP owns all of the outstanding common stock of AEP Generating Company,
Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan
Power Company, Kentucky Power Company, Kingsport Power Company, Ohio Power
Company and Wheeling Power Company. These eight utility subsidiaries are
engaged in the generation, purchase, transmission, distribution and sale of
electricity to over 2.9 million retail customers in portions of the states of
Indiana, Kentucky, Michigan, Ohio, Tennessee, Virginia and West Virginia. AEP
also owns all the outstanding common stock of AEP Resources and AEP Resources
International, Limited whose primary
28
<PAGE>
businesses are the development of, and investment in, exempt wholesale
generators, foreign utility companies, qualifying cogeneration facilities and
other power projects. In the year ended December 31, 1997, AEP generated
consolidated operating revenues of $6.2 billion and had consolidated assets of
approximately $16.6 billion.
On December 22, 1997, AEP announced the signing of a merger agreement with
Central and South West Corporation, a Dallas, Texas based electric utility
holding company that is registered under the 1935 Act ("CSW"). CSW owns four
electric operating subsidiaries serving 1.7 million customers in Texas,
Oklahoma, Louisiana and Arkansas. CSW also owns SEEBOARD plc, a REC which
serves the southeast coast of England. Under the merger agreement, each share
of CSW common stock will be converted into 0.6 share of AEP common stock.
Based on the price of AEP's common stock on December 19, 1997, the transaction
would be valued at $6.6 billion. The combined company will be named American
Electric Power Company, Inc. and will be based in Columbus, Ohio. The merger
is conditioned upon, among other things, the approvals of the shareholders of
AEP and CSW and various state and federal regulatory agencies. Assuming the
receipt of all required approvals, the merger is currently expected to be
consummated within twelve to eighteen months of its announcement.
NCE
NCE is also an electric utility holding company registered under the 1935
Act. NCE owns all the outstanding common stock of Public Service Company of
Colorado, Cheyenne Light, Fuel and Power Company and Southwestern Public
Service Company, which serve approximately 1.6 million retail electric
customers in portions of the states of Colorado, Texas, New Mexico, Oklahoma,
Kansas and Wyoming and approximately 1 million retail gas customers in
portions of the states of Colorado and Wyoming. These three electric and gas
utility subsidiaries are principally engaged in the generation, purchase,
transmission, distribution and sale of electricity and in the purchase,
transmission, distribution, sale and transportation of natural gas. In the
year ended December 31, 1997, NCE generated consolidated operating revenues of
$3.3 billion and had consolidated assets of approximately $7.3 billion.
29
<PAGE>
The following organizational chart illustrates the ownership structure of
Yorkshire, Yorkshire Group, Yorkshire Finance and the Trust:
New Century
Energies, Inc.
("NCE")
American Electric Public Service
Power Company, Inc. Company of Colorado
("AEP")
AEP Resources, Inc. New Century
("AEP Resources") International, Inc.
50% 50%
Yorkshire Power Group Limited
("Yorkshire Group") Trust
Securities
ARROW UP Guarantee
Control Debentures
Certificate Guarantee
Yorkshire Holdings Yorkshire Power
plc Finance Limited
("Yorkshire Holdings") ("Yorkshire Finance")
ARROW UP
$
ARROW DOWN
Yorkshire Electricity Junior
Group plc Subordinated
("Yorkshire") Debentures
ARROW DOWN
Yorkshire Capital Trust I
(the "Trust")
ARROW UP
$ ARROW DOWN
ARROW DOWN
Holders Trust
Securities
30
<PAGE>
YORKSHIRE CAPITAL TRUST I
The Trust is a statutory business trust created under Delaware law pursuant
to the filing of a certificate of trust with the Delaware Secretary of State
on February 4, 1998. The Trust's business is defined in a trust agreement,
executed by AEP Resources, as Depositor, The Bank of New York, as Property
Trustee, The Bank of New York (Delaware), as Delaware trustee, and Stephan T.
Haynes, as initial Administrative Trustee thereunder. This trust agreement
will be amended and restated in its entirety prior to the issuance of the
Trust Securities. The Trust exists for the exclusive purposes of (i) issuing
and selling the Trust Securities representing undivided beneficial interests
in the assets of the Trust, (ii) investing the gross proceeds of the Trust
Securities in the Junior Subordinated Debentures and (iii) engaging in only
those other activities necessary, appropriate, convenient or incidental
thereto. The Trust will terminate on , 2043, but may dissolve earlier, as
provided in the Trust Agreement.
Promptly after its creation, the Trust will issue the Control Certificate to
AEP Resources for a nominal amount. AEP Resources, in turn, will immediately
transfer such Control Certificate to Yorkshire Group. By holding the Control
Certificate, Yorkshire Group generally will retain voting control and
appointment power with respect to the Trust. In certain circumstances, the
holders of a majority in liquidation amount of the Trust Securities will be
entitled to appoint a substitute Property Trustee. See "Description of the
Trust Securities--Voting Rights; Amendment of Trust Agreement".
The Trust's business and affairs will be conducted by the Securities
Trustees. Four employees of the US Parents initially will serve as
Administrative Trustees. The Bank of New York will serve as Property Trustee.
The Bank of New York (Delaware) will serve as Delaware Trustee.
The Property Trustee will hold the Book-Entry Interests (as defined under
"Description of the Junior Subordinated Debentures--Form, Book-Entry
Procedures and Transfer"), representing a 100% beneficial interest in the
Junior Subordinated Debentures, for the benefit of the Trust and the holders
of the Trust Securities and accordingly will have the power to exercise all
rights, powers and privileges under the Deposit Agreement (as defined under
"Description of the Junior Subordinated Debentures--Form, Book-Entry
Procedures and Transfer") and, indirectly, under the Indenture. The Property
Trustee will make payments of Distributions and payments on liquidation,
redemption and otherwise to the holders of the Trust Securities. Subject to
the right of the holders of the Trust Securities to appoint a substitute
Property Trustee in certain instances Yorkshire Group, as the holder of the
Control Certificate, will have the right to appoint, remove or replace all the
Securities Trustees.
The Junior Subordinated Debentures will constitute substantially all of the
assets of the Trust. Other assets that may constitute property of the Trust
include any cash on deposit in, or owing to, the payment account as
established under the Trust Agreement, as well as any other property or assets
held by the Property Trustee pursuant to the Trust Agreement. In addition, the
Trust may, from time to time, receive cash pursuant to the Agreement as to
Expenses and Liabilities.
The rights of the holders of the Trust Securities, including economic
rights, rights to information and voting rights, are as set forth in the Trust
Agreement, the Delaware Business Trust Act and the Trust Indenture Act of
1939, as amended (the "1939 Act"). See "Description of the Trust Securities".
The principal place of business of the Trust is c/o American Electric Power
Service Corporation, 1 Riverside Plaza, Columbus, Ohio 43215, telephone 614-
223-1000, Attn: Corporate Finance Director.
US ACCOUNTING TREATMENT
For US financial reporting purposes, the Trust will be treated as a
subsidiary of Yorkshire Group and, accordingly, the accounts of the Trust will
be included in the consolidated financial statements of Yorkshire Group. The
Trust Securities will be presented as a separate line item in the consolidated
balance sheet of Yorkshire Group entitled "Company-Obligated Mandatorily
Redeemable Trust Securities of Subsidiary Holding Solely Junior Subordinated
Deferrable Interest Debentures" and appropriate disclosures about the Trust
Securities, the Trust Securities Guarantee, the Debentures Guarantee and the
Junior Subordinated Debentures will be included in the notes to the
consolidated financial statements. For financial reporting purposes, Yorkshire
Group will record Distributions payable on the Trust Securities as an expense.
31
<PAGE>
USE OF PROCEEDS
All of the proceeds from the sale of the Trust Securities will be invested
by the Trust in the Junior Subordinated Debentures issued by Yorkshire Finance
to the Trust. In turn, Yorkshire Finance will loan the net proceeds to
Yorkshire Group and certain of its affiliates with such loans to be evidenced
by the Intercompany Notes. Such proceeds will be used for the working capital
of certain affiliates, and for the repayment of a portion of Yorkshire Group's
indebtedness under the Credit Facility, dated July 31, 1997, between Yorkshire
Group and Union Bank of Switzerland (the "1997 Credit Facility"), which, at
December 31, 1997, had an outstanding balance of (Pounds)1,034 million ($1,699
million) and bore interest at rates between 7.49% and 7.57%. See
"Capitalization" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations".
CAPITALIZATION
The following table sets forth, at December 31, 1997 (i) the actual
consolidated capitalization of Yorkshire Group and (ii) the consolidated
capitalization of Yorkshire Group adjusted to reflect (A) the issuance of the
Trust Securities offered hereby and the application of the net proceeds
thereof, as described under "Use of Proceeds", (B) the issuance in February
1998 of (Pounds)200 million ($328 million) aggregate principal amount of
Yorkshire Finance's 7.25% Guaranteed Bonds due 2028 (the "Guaranteed
Eurobonds"), unconditionally and irrevocably guaranteed by Yorkshire Group,
and the application of the net proceeds thereof to reduce amounts outstanding
under the 1997 Credit Facility and (C) the issuance in February 1998 of
$350,000,000 aggregate principal amount of Yorkshire Finance's 6.154% Senior
Notes due 2003 (the "2003 Notes") and $300,000,000 aggregate principal amount
of Yorkshire Finance's 6.496% Senior Notes due 2008 (the "2008 Notes" and,
together with the 2003 Notes, the "Senior Notes"), each series unconditionally
and irrevocably guaranteed by Yorkshire Group, and the application of the net
proceeds thereof to reduce amounts outstanding under the 1997 Credit Facility.
This table should be read in conjunction with "Selected Consolidated Financial
Data", "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------
ACTUAL AS ADJUSTED
------------------------ ------------------------
((Pounds)) $(1) % ((Pounds)) $(1) %
(AMOUNTS IN MILLIONS, EXCEPT %)
<S> <C> <C> <C> <C> <C> <C>
Capitalization:
1997 Credit Facility....... (Pounds)1,034 $1,699 56% (Pounds) 278 $ 457 15%
Other short-term debt...... 47 77 2 47 77 3
Long-term debt:
European Investment
Bank.................... 69 113 4 69 113 4
Eurobonds................ 359 590 20 359 590 19
Senior Notes............. -- -- -- 396 650 21
Guaranteed Eurobonds..... -- -- -- 200 328 11
Other debt............... 1 2 * 1 2 *
Company-obligated
Mandatorily Redeemable
Trust Securities of
Subsidiary Holding Solely
Junior Subordinated
Deferrable Interest
Debentures(2)............. -- -- -- 168 275 9
Total shareholders'
equity.................... 330 542 18 330 542 18
------------- ------ --- ------------- ------ ---
Total capitalization....... (Pounds)1,840 $3,023 100% (Pounds)1,848 $3,034 100%
============= ====== === ============= ====== ===
</TABLE>
- --------
(1) Solely for convenience of the reader, UK pounds sterling amounts have
been translated into US dollars at the Noon Buying Rate on December 31,
1997 of $1.64 = (Pounds) 1. See "Presentation of Certain Information and
Exchange Rates".
(2) As described under "Yorkshire Capital Trust I", substantially all of the
Trust's assets will consist of $275,000,000 aggregate principal amount of
Yorkshire Finance's % Junior Subordinated Deferrable Interest
Debentures, Series A due , 2038.
* Less than 1%.
32
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated income statement data, other consolidated data and certain
business segment data of the Predecessor Company for each of the five Fiscal
Years ended March 31, 1997 and the consolidated balance sheet data and certain
business segment data of the Predecessor Company at the end of each such
Fiscal Year presented below have been derived from the audited consolidated
financial statements of the Predecessor Company. The consolidated balance
sheet data and certain business segment data of the Successor Company as of
April 1, 1997 presented below have been derived from the audited consolidated
balance sheet of the Successor Company. The consolidated income statement
data, other consolidated data and certain business segment data for the nine
months ended December 31, 1997 and 1996 of the Successor Company and the
Predecessor Company presented below have been derived from the condensed
unaudited consolidated financial statements of the Successor Company and the
Predecessor Company, respectively. The consolidated balance sheet data and
certain business segment data at December 31, 1997 of the Successor Company
presented below have been derived from the condensed unaudited consolidated
financial statements of the Successor Company. In the opinion of the
management of Yorkshire Group, all adjustments (consisting of only normal
recurring adjustments) considered necessary for a fair presentation of the
condensed unaudited consolidated financial statements have been included and
the accompanying condensed unaudited consolidated financial statements present
fairly the financial position and the results of operations for the interim
periods presented. The selected consolidated financial data presented below
that were derived from the audited consolidated financial statements of the
Predecessor Company and the Successor Company have been prepared in accordance
with US GAAP and audited by Deloitte & Touche. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and the
consolidated financial statements and notes thereto of the Predecessor Company
and the Successor Company included elsewhere in this Prospectus.
The unaudited pro forma consolidated income statement data for the Successor
Company for Fiscal Year 1997 presented below reflect the Acquisition as if it
had occurred as of April 1, 1996. Such data have been prepared by the
Successor Company based upon assumptions deemed proper in accordance with the
purchase method of accounting for business combinations and have been adjusted
to reflect (i) interest expense of (Pounds)74 million incurred as a result of
the financing of the Acquisition, (ii) amortization of (Pounds)24 million
related to goodwill recorded in connection with the Acquisition, (iii)
additional depreciation expense of (Pounds)6 million as a result of the
revaluation of certain fixed assets in connection with the Acquisition and
(iv) removal of the effect of recording the provision of (Pounds)78 million
for certain uneconomic gas and electricity contracts, the loss of (Pounds)7
million on certain interest rate swap agreements and the write-down of
(Pounds)6 million relating to non-operational property. Such data are shown
for illustrative purposes only and are not necessarily indicative of the
future results of operations of the Successor Company or of the results of
operations of the Successor Company that would have actually occurred had the
Acquisition occurred at the beginning of the period presented. Such data
should be read in conjunction with the unaudited pro forma consolidated
statement of income and notes thereto of the Successor Company included
elsewhere in this Prospectus.
33
<PAGE>
PREDECESSOR COMPANY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DA-
TA:
Operating revenues.............. 1,325 1,308 1,464 1,431 1,331
Operating income (1)............ 146 156 215 214 52
Other income (loss), net (2).... 15 (8) 16 313 20
Interest expense, net........... (7) (5) (12) (20) (33)
Provision for income taxes (3).. (54) (50) (78) (114) (13)
----- ----- ----- ----- -----
Net income...................... 100 93 141 393 26
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets.................... 613 701 747 769 796
Total assets.................... 1,214 1,241 1,367 1,408 1,375
Total shareholders' equity...... 561 612 517 399 359
Long-term debt.................. 104 126 305 424 419
Short-term debt and current por-
tion of long-term debt......... 217 99 91 90 87
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
-------- -------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT (4)........................ 161 148 231 527 72
EBITDA (4)...................... 193 182 272 569 122
Cash flow from operations....... 187 237 201 222 96
Cash used in investing activi-
ties........................... (137) (201) (101) (8) (51)
Cash provided by (used in) fi-
nancing activities............. 129 (139) (67) (114) (76)
Ratio of earnings to fixed
charges (5).................... 6.6 6.8 10.5 12.0 1.8
</TABLE>
34
<PAGE>
SUCCESSOR COMPANY
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT
DATA:
Operating revenues............. 1,331 2,183 974 909 1,493
Operating income (1)........... 106 174 120 123 202
Other income, net (2).......... 20 33 17 2 3
Interest expense, net.......... (100) (164) (20) (78) (128)
Provision for income taxes..... (17) (28) (40) (5) (8)
----- ----- --- ------ ------
Income before extraordinary
item.......................... 9 15 77 42 69
Extraordinary item (7)......... -- -- -- (134) (220)
----- ----- --- ------ ------
Net income (loss).............. 9 15 77 (92) (151)
===== ===== === ====== ======
<CAPTION>
SUCCESSOR SUCCESSOR
APRIL 1, DECEMBER 31,
1997 1997
-------------- ---------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- -------- ------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Fixed assets................... 939 1,540 1,001 1,644
Total assets................... 2,591 4,249 2,522 4,143
Total shareholders' equity..... -- -- 330 542
Long-term debt................. 433 710 429 705
Accrued liability to purchase
Yorkshire..................... 1,496 2,453 -- --
Short-term debt and current
portion of long-term debt..... 87 143 1,081 1,776
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ ---------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- ------
(AMOUNTS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C>
OTHER CONSOLIDATED DATA:
EBIT before extraordinary item
(4)(7)........................ 126 207 137 125 205
EBITDA before extraordinary
item (4)(7)................... 206 338 169 183 300
Cash flow from operations...... 149 63 103
Cash used in investing activi-
ties.......................... (99) (1,575) (2,586)
Cash provided by (used in) fi-
nancing activities............ (49) 1,409 2,314
Ratio of earnings to fixed
charges (5)................... 1.2 4.6 1.5
</TABLE>
35
<PAGE>
PREDECESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution.................... 332 348 362 334 308
Supply.......................... 1,206 1,220 1,343 1,309 1,178
Other........................... 182 162 162 163 172
Intrabusiness eliminations (8).. (395) (422) (403) (375) (327)
----- ----- ----- ----- -----
1,325 1,308 1,464 1,431 1,331
===== ===== ===== ===== =====
OPERATING INCOME (LOSS):
Distribution.................... 135 133 176 164 127
Supply (1)...................... 10 14 23 30 (132)
Other........................... 1 9 16 20 10
Intrabusiness eliminations
(1)(8)......................... -- -- -- -- 47
----- ----- ----- ----- -----
146 156 215 214 52
===== ===== ===== ===== =====
<CAPTION>
MARCH 31,
--------------------------------------------
1993 1994 1995 1996 1997
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
-------- -------- -------- -------- --------
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution.................... 476 513 556 589 643
Supply.......................... 177 161 198 212 178
Other and unallocated........... 561 567 613 607 554
----- ----- ----- ----- -----
1,214 1,241 1,367 1,408 1,375
===== ===== ===== ===== =====
</TABLE>
36
<PAGE>
SUCCESSOR COMPANY
BUSINESS SEGMENTS
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
SUCCESSOR NINE MONTHS NINE MONTHS
PRO FORMA ENDED ENDED
FISCAL YEAR DECEMBER 31, DECEMBER 31,
1997 1996 1997
-------------- ------------ --------------
(Pounds) $(6) (Pounds) (Pounds) $(6)
-------- ----- ------------ -------- -----
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Distribution..................... 308 505 225 224 368
Supply........................... 1,178 1,932 868 799 1,312
Other............................ 172 282 136 141 232
Intrabusiness eliminations(8).... (327) (536) (255) (255) (419)
----- ----- ---- ----- -----
1,331 2,183 974 909 1,493
===== ===== ==== ===== =====
OPERATING INCOME (LOSS):
Distribution..................... 97 159 99 89 146
Supply(1)........................ (7) (11) 1 14 23
Other............................ 16 26 20 20 33
----- ----- ---- ----- -----
106 174 120 123 202
===== ===== ==== ===== =====
<CAPTION>
SUCCESSOR
SUCCESSOR DECEMBER 31,
APRIL 1, 1997 1997
-------------- --------------
(Pounds) $(6) (Pounds) $(6)
-------- ----- -------- -----
(AMOUNTS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
TOTAL ASSETS:
Distribution..................... 1,802 2,955 1,754 2,881
Supply........................... 187 307 180 296
Other and unallocated............ 602 987 588 966
----- ----- ----- -----
2,591 4,249 2,522 4,143
===== ===== ===== =====
</TABLE>
37
<PAGE>
(1)Notable operating expenses include:
Fiscal Year 1997--(i) a provision of (Pounds)78 million for uneconomic gas
and electricity contracts (the effect of which is removed from the
Successor Company's unaudited pro forma consolidated statement of income
for Fiscal Year 1997), which resulted in a charge of (Pounds)125 million to
the supply business offset by an intrabusiness elimination of (Pounds)47
million and (ii) a charge of (Pounds)50 million for information system
development costs to prepare for the opening of the competitive electricity
market in 1998 for Franchise Supply Customers, of which (Pounds)37 million
was charged to the supply business and (Pounds)13 million was charged to
the distribution business.
Fiscal Years 1993, 1994 and 1995--reorganization costs of (Pounds)18
million, (Pounds)44 million and (Pounds)8 million, respectively.
(2) Other income (loss) principally represents income from Yorkshire's
investment in NGG and, in Fiscal Year 1996, a gain resulting from the NGG
Transaction and earnings and losses from Yorkshire's investments in joint
ventures and minority holdings. Notable items include:
Fiscal Year 1997--gain on sale of Yorkshire's investment in Torch Telecom
of (Pounds)15 million.
Fiscal Year 1996--income from investment in NGG and gain in respect of the
NGG Transaction as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Introduction--NGG
Transaction".
Fiscal Year 1995--one-time termination payment received from Stockholm
Stadhus AB of (Pounds)17 million.
Fiscal Year 1994--loss on sale of Yorkshire's investment in Homepower
Retail Limited of (Pounds)18 million.
(3) Fiscal Year 1996 includes a tax charge of (Pounds)38 million relating to
the NGG Transaction.
(4) EBIT represents income before the sum of interest expense and income
taxes. EBITDA represents income before the sum of interest expense, income
taxes, depreciation and amortization. EBIT and EBITDA are provided for
informational purposes only and such measures should not be construed as
alternatives to operating income (as determined in accordance with US
GAAP) as indicators of operating performance, or as alternatives to cash
flows from operating activities (as determined in accordance with US GAAP)
as measures of liquidity. EBIT and EBITDA are widely accepted financial
indicators of a company's ability to incur and service debt. However, the
measures of EBIT and EBITDA presented herein may not be comparable to
similar measures presented by other companies.
(5) The ratio of earnings to fixed charges is computed as the sum of pre-tax
income (before extraordinary item), plus fixed charges divided by fixed
charges. Fixed charges consist of interest expense and amortization of
debt expense.
(6) Solely for the convenience of the reader, pounds sterling amounts have
been translated into US dollar amounts at the Noon Buying Rate on December
31, 1997 of $1.64 = (Pounds)1. See "Presentation of Certain Information
and Exchange Rates".
(7) Represents the windfall tax imposed by the UK government, which was not
deductible for UK corporation tax purposes.
(8) Intrabusiness eliminations consist primarily of intracompany transactions
between the distribution business and the supply business and
interbusiness transactions between ancillary businesses. Pursuant to the
UK regulatory framework, charges by the distribution business for
electricity in respect of supply customers in the Franchise Area are
billed to the supply business, which in turn incorporates the distribution
charge into the bill sent to the final end user.
38
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
and condensed consolidated financial statements and the notes thereto of the
Successor Company and with the consolidated and condensed financial statements
and the notes thereto of the Predecessor Company and "Selected Consolidated
Financial Data" included elsewhere in this Prospectus. The consolidated and
condensed financial statements of the Successor Company and the Predecessor
Company discussed herein are presented in accordance with US GAAP.
INTRODUCTION
Background
Yorkshire Group is indirectly equally owned by AEP and NCE. Yorkshire Group
was incorporated as a limited company under the laws of England and Wales in
July 1996. Effective April 1, 1997, Yorkshire Group, through its wholly owned
subsidiary Yorkshire Holdings, gained effective control of Yorkshire.
Yorkshire Group's primary asset is the stock of Yorkshire Holdings. Yorkshire
Holdings, which owns all the outstanding stock of Yorkshire, has no
significant operations outside of its investment in Yorkshire.
Financing the Acquisition
Yorkshire Group indirectly acquired ownership of Yorkshire by means of a
cash offer commenced on February 24, 1997 and declared wholly unconditional on
April 1, 1997. The Acquisition was completed through the payment of cash
consideration of (Pounds)1,457 million and the issuance of loan notes in the
amount of (Pounds)22 million. The total consideration, including acquisition
costs, was (Pounds)1,496 million. The Acquisition was financed by cash
contributions of (Pounds)220 million from each of AEP and NCE and from
borrowings under a (Pounds)1,140 million five year term loan and revolving
facility agreement dated February 24, 1997. On July 31, 1997, this term loan
and revolving facility agreement was replaced by the 1997 Credit Facility.
Accounting for the Acquisition
The recorded assets and liabilities of Yorkshire at March 31, 1997 were
(Pounds)1,375 million and (Pounds)1,016 million, respectively. In accordance
with the purchase method of accounting, the assets and liabilities acquired
have been recorded based on an allocation of the purchase price. The final
purchase price allocation report has not yet been completed. However, the
Successor Company does not anticipate any material changes based on currently
available information. Effective April 1, 1997, Yorkshire's assets were
increased by (Pounds)222 million to their fair value of (Pounds)1,597 million,
reflecting principally: (a) an increase of (Pounds)138 million in the value of
Yorkshire's distribution network in excess of its depreciated cost basis; (b)
an increase in the pension asset for the defined benefit pension plan of
(Pounds)55 million; and (c) an increase in the value of an equity investment
in Ionica Group plc ("Ionica") of (Pounds)23 million. Yorkshire's liabilities
were increased by (Pounds)79 million to their fair value of (Pounds)1,095
million, reflecting principally: (a) an increase in the deferred tax liability
of (Pounds)67 million; and (b) an increase of (Pounds)14 million in the market
value of long-term borrowings. The excess of the purchase price plus
Acquisition costs, totalling (Pounds)1,496 million, over the fair value of
assets acquired net of liabilities assumed, totalling (Pounds)502 million,
resulted in goodwill of (Pounds)994 million which is being amortized over a 40
year period. The consolidated financial statements of the Predecessor Company
discussed below do not reflect the foregoing adjustments.
NGG Transaction
During Fiscal Year 1996, Yorkshire, together with the other 11 RECs in the
UK, distributed the majority of its shares in NGG to its shareholders. This
transaction, together with certain related transactions (collectively, the
"NGG Transaction"), had a material impact on Yorkshire's financial results for
that year. The related transactions included: (a) Yorkshire's receipt of
special and ordinary dividends; (b) the receipt by each Yorkshire residential
customer of a one-time discount pursuant to an agreement among the
shareholders of NGG; and
39
<PAGE>
(c) Yorkshire's receipt of an in-kind dividend of approximately 9.2% of the
shares of PSB Holdings Limited ("PSB"), the holding company of First Hydro
Limited, which shares were subsequently converted to cash upon PSB's
liquidation.
SIGNIFICANT FACTORS AND KNOWN TRENDS
Competition and Industry Challenges
On April 1, 1995 and 1996, certain reductions in allowed distribution
revenues were made by the Regulator. Yorkshire's allowed distribution revenues
were impacted by a 14% below inflation reduction and a 13% below inflation
reduction on April 1, 1995 and 1996, respectively, following reviews by the
Regulator. On April 1, 1997 and April 1, 1998, Yorkshire's allowed
distribution revenues were decreased by an additional 3% below inflation
reduction, and there will be a further 3% below inflation reduction on April
1, 1999.
The potential exists for additional distribution price reductions based upon
further review by the Regulator. The next scheduled Distribution Price Control
Formula review will be in 2000. Future cost efficiency initiatives may not
result in sufficient savings to offset price reductions. Price reductions are
mitigated by the inclusion of the UK Retail Price Index in the determination
of the Distribution Price Control Formula. Because the maximum average price
in any year is based in part on the maximum average price in the preceding
year, a price reduction in any given year has an ongoing effect on the maximum
average price for all subsequent years. See "The Electric Utility Industry in
Great Britain--Distribution of Electricity--Price Control".
Yorkshire currently has an exclusive right to supply electricity to its
Franchise Supply Customers. Competition in supply to such customers was
scheduled to be phased in over a six month period commencing on April 1, 1998.
In October 1997, the Regulator published proposals for new transitional supply
price restraints to apply from April 1, 1998 to residential and small business
customers for an initial period of two years and until an adequate level of
competition is established. Yorkshire subsequently indicated its acceptance of
such proposals. The proposals (when taken together with the reduction in the
Fossil Fuel Levy, which became effective on April 1, 1998) resulted in the
implementation of small reductions, effective April 1, 1998, in the tariffs
for Yorkshire's residential and small business customers in its Franchise Area
compared to the corresponding tariffs in effect in August 1997. The proposals
also require an additional 3% below inflation reduction effective April 1,
1999. See "The Electric Utility Industry in Great Britain--Supply of
Electricity--Price Regulation".
Following an announcement in January 1998 by the Regulator, competition in
supply to Franchise Supply Customers has been delayed until September 1998.
Assuming that such competition starts as currently scheduled in September 1998
for Franchise Supply Customers, Yorkshire Group presently estimates that costs
totalling (Pounds)75 million will have been incurred for re-engineering and
information technology work. Of such amount, approximately (Pounds)19 million
was expensed in Fiscal Year 1997. The Regulator has made proposals (which have
been accepted by Yorkshire) to allow Yorkshire recovery of (Pounds)23 million
over a five year period ending March 31, 2003. A further (Pounds)7 million is
expected to be recovered through Pool cost recovery and other national
mechanisms and (Pounds)8 million is expected to be capitalized as such amount
is expected to provide future benefits to the supply business. As a result of
the above, the residual amount of approximately (Pounds)18 million, which will
not be recovered or capitalized, will be expensed in Fiscal Years 1998 and
1999 as incurred.
The Regulator has also made proposals (which have been accepted by
Yorkshire) to provide an annual allowance of (Pounds)3 million for the period
1998 through 2000 to cover operating costs. The allowance will be reviewed at
the time of the Distribution Price Formula Control review in 2000.
The October 1997 proposals therefore will allow Yorkshire to recover up to
50% of its forecasted set-up and operating costs over a five year period. The
shortfall could be higher if: (i) operating costs are higher than anticipated
(e.g., there is a higher level of customer activity); (ii) recovery of
operating costs is disallowed or reduced when the Distribution Price Control
Formula is reviewed for the period beginning April 1, 2000; or (iii) the
integrated national systems do not work as contemplated or require substantial
redevelopment.
40
<PAGE>
The Regulator's proposals also provided that a REC should be penalized: (i)
where it starts to open its market more than three months after the market
opening by the first REC; (ii) where it opens successive tranches of its
market more than three months after the opening of the corresponding tranche
by the first REC; and (iii) where the market opening of the first REC has been
delayed beyond April 1, 1998. The penalties will be calculated at 1% of the
operating revenues of the supply business for Franchise Supply Customers per
month of delay, weighted by the proportion of customers affected and applied
as a reduction in allowed distribution business income. If Yorkshire does not
open its market for Franchise Supply Customers to competition until after
April 1, 1999, it would incur a penalty of approximately (Pounds)6 million. It
is now apparent that some penalty will be incurred due to the delay in the
opening of the competitive market for Franchise Supply Customers until
September 1998. Yorkshire Group expects that Yorkshire will be prepared to
open its Franchise Area to such competition in September 1998.
Factors Affecting Revenues
Two principal factors determine the amount of revenues produced by the
distribution business: the unit price of electricity distributed (which is
controlled by the Distribution Price Control Formula) and the number of
electricity units distributed (which depends upon customer demands as
influenced in part by economic activity and weather conditions).
Two principal factors determine the amount of revenues produced by the
supply business: the unit price of the electricity supplied (which, in the
case of the Franchise Supply Customers, is controlled by the Supply Price
Control Formula) and the number of electricity units supplied. Yorkshire is
currently expected to have the exclusive right to supply all Franchise Supply
Customers in its Franchise Area until September 1998.
UK Tax Law Changes
On July 2, 1997, the UK government enacted certain changes in tax law,
including a one-time windfall tax on privatized industries and a reduction in
rates of corporation tax on income from 33% to 31%. The windfall tax on
Yorkshire is (Pounds)134 million and will not be deductible for UK corporation
tax purposes. The windfall tax has been recorded as an extraordinary charge in
the nine month period ended December 31, 1997. The tax is payable in two equal
installments on December 1, 1997 and 1998. During the nine month period ended
December 31, 1997, Yorkshire Group estimated the impact of the reduction in
corporation tax rates, which resulted in a one-time reduction in deferred
income tax liabilities and a corresponding reduction in income tax expense of
approximately (Pounds)12 million.
Business Restructuring
In December 1997, Yorkshire announced a planned business restructuring
intended to enable it to meet increased competition and react to potential
regulatory developments in the energy markets in the UK. The restructuring
will result in the distribution and supply businesses becoming self-sufficient
businesses. As part of the restructuring, an alternative ownership structure
will be pursued for the generation business. Yorkshire currently contemplates
transferring such assets to an entity or entities other than Yorkshire Group
or its subsidiaries. It is expected that proceeds from the transfer of these
assets will be used to reduce debt of Yorkshire Group. See "Certain
Relationships and Related Transactions".
Total assets less current liabilities employed by the generation business at
December 31, 1997 were (Pounds)168 million. Operating income attributable to
the generation business in the nine months ended December 31, 1997 was
(Pounds)12 million.
As a result of this restructuring, approximately 160 positions will be
eliminated. A provision of approximately (Pounds)10 million was recorded in
the nine month period ended December 31, 1997 to reflect the cost of these
workforce reductions.
41
<PAGE>
Investment in Ionica
Yorkshire has an equity investment in Ionica, a telecommunications company.
The holding in Ionica was initially included in Yorkshire Group's consolidated
balance sheet at its fair value at acquisition on April 1, 1997 of (Pounds)54
million, plus a subsequent additional investment of (Pounds)1 million.
Following an announcement in November 1997 by Ionica of a temporary delay in
its roll out program due to problems in upgrading software, the fair value of
Yorkshire Group's investment in Ionica decreased to (Pounds)30 million at
December 31, 1997. At April 30, 1998, the fair value of Yorkshire Group's
investment in Ionica was valued at (Pounds)19 million ($31 million). This
reduction below the recorded book value has not been included as a charge
against earnings in Yorkshire Group's consolidated financial statements as the
diminution in value is not considered permanent.
Derivative Financial Instruments and Interest Rates
Derivative financial instruments are used by Yorkshire on a limited basis
and are utilized only to mitigate business risks and not for speculative
purposes.
Yorkshire Group maintains its cash balances in pounds sterling. However,
Yorkshire Group's obligations related to the issuance of the Senior Notes will
be payable in US dollars. Yorkshire Group is not currently engaged in any
hedging of currency risks, although it expects to utilize derivative financial
instruments to hedge a portion of the currency risks associated with this
exposure.
Changes in interest rates have not had a significant impact on Yorkshire in
the last three years. However, Yorkshire has entered into debt facilities
which bear interest at variable rates. As part of its risk management policy
and to mitigate the effects of interest rate changes, Yorkshire Group enters
into interest rate swap agreements under which counterparties have agreed to
pay amounts to Yorkshire Group equal to variable interest obligations in
consideration of amounts payable by Yorkshire Group equivalent to fixed rates
of interest. If the counterparty to the interest rate swap was to default on
contractual payments, Yorkshire Group could be exposed to increased costs
related to replacing the original agreement. See Note 7, "Financial
Instruments", to Yorkshire's consolidated financial statements for the three
years ended March 31, 1997 and Note 6, "Interest Rate Swaps", to Yorkshire
Group's condensed consolidated financial statements for the nine months ended
December 31, 1997 included elsewhere in this Prospectus for additional
information on such agreements.
Environmental Factors
Yorkshire's businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The principal laws which have
environmental implications for Yorkshire are the Electricity Act, the
Environmental Protection Act 1990, the New Road and Street Works Act 1991 and
the Environment Act 1995. Yorkshire believes that it has taken, and intends to
continue taking, measures to comply with the applicable law and government
regulations for the protection of the environment. There are no material legal
or administrative proceedings pending against Yorkshire with respect to any
environmental matter.
Inflation
Inflation neither has had a significant impact on Yorkshire in the last
three years, nor is expected to do so in the foreseeable future. Yorkshire's
revenues from regulated activities are adjusted based on factors which include
an index for inflation in costs of operations.
Year 2000 Issues
Yorkshire Group is currently evaluating its business systems and processes
to determine the extent to which modifications are required to prevent
problems related to the year 2000, and the resources which will be required to
make such modifications. Yorkshire Group has established a dedicated team to
coordinate and control all date conformity work within a structured program
framework. Yorkshire Group estimates that the costs associated with year 2000
modifications will be approximately (Pounds)26 million, of which (Pounds)17
million will be expensed as incurred, and (Pounds)9 million will be
capitalized.
42
<PAGE>
RESULTS OF OPERATIONS
Nine Months Ended December 31, 1997 for the Successor Company Compared with
Nine Months Ended December 31, 1996 for the Predecessor Company
Earnings
Income from operations increased by (Pounds)3 million (3%) from (Pounds)120
million for the nine months ended December 31, 1996 to (Pounds)123 million for
the nine months ended December 31, 1997. This increase was principally due to
a decrease in net periodic pension costs of (Pounds)9 million, due to an
increase in the market value of the pension fund, other cost savings, and a
(Pounds)24 million charge in the nine months ended December 31, 1996 relating
to the replacement of billing and debt collection systems partially offset by
a provision of (Pounds)10 million for restructuring costs, amortization of
goodwill of (Pounds)18 million and additional depreciation of (Pounds)5
million arising from the revaluation of distribution network assets in
connection with the Acquisition.
Income from operations by segments for the nine months ended December 31,
1997 was (Pounds)89 million, (Pounds)14 million and (Pounds)20 million for the
distribution, supply and other segments, respectively. Income from those
segments in the nine months ended December 31, 1996 was (Pounds)99 million,
(Pounds)1 million and (Pounds)20 million, respectively.
Net interest expense rose from (Pounds)20 million for the nine months ended
December 31, 1996 to (Pounds)78 million for the nine months ended December 31,
1997 principally as a result of the financing costs associated with the
increased amount of debt incurred in connection with the Acquisition.
Net income decreased by (Pounds)169 million, from (Pounds)77 million in the
nine months ended December 31, 1996 due to a loss of (Pounds)92 million in the
nine months ended December 31, 1997. In addition to the variances discussed
above, the net loss for the nine months ended December 31, 1997 includes an
extraordinary charge of (Pounds)134 million for the windfall tax enacted by
the UK government in July 1997. The windfall tax is not deductible for UK
corporation tax purposes. Net income before this extraordinary charge for the
nine months ended December 31, 1997 was (Pounds)42 million.
Revenues
Operating revenues decreased by (Pounds)65 million (7%) from (Pounds)974
million in the nine months ended December 31, 1996 to (Pounds)909 million
during the nine months ended December 31, 1997 as follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
INCREASE (DECREASE)
FROM NINE MONTHS ENDED
DECEMBER 31, 1996
TO NINE MONTHS ENDED
DECEMBER 31, 1997
----------------------
(Pounds) MILLIONS
<S> <C>
Distribution........................................ (1)
Supply.............................................. (69)
Other............................................... 5
---
Total operating revenues.......................... (65)
===
</TABLE>
Revenues from the distribution business decreased by (Pounds)1 million from
(Pounds)225 million for the nine months ended December 31, 1996 to (Pounds)224
million for the nine months ended December 31, 1997 due to a decrease in the
maximum allowable average price of units distributed as a result of the
application of the revised Distribution Price Control Formula. Units
distributed increased by 1% in the nine months ended December 31, 1997
partially offsetting such decrease.
Franchise Supply Customers, who are generally residential and small
commercial customers, comprised 51% of total sales volume for the nine months
ended December 31, 1997. The volume of unit sales of electricity
43
<PAGE>
for Franchise Supply Customers is influenced largely by the number of
customers in the Franchise Area, weather conditions and prevailing economic
conditions. Unit sales to Non-Franchise Supply Customers, who are typically
large commercial and industrial businesses, constituted 49% of total sales
volume for the nine months ended December 31, 1997. Sales to Non-Franchise
Supply Customers are determined primarily by the success of the supply
business in contracting to supply electricity to customers who are located
both inside and outside the Franchise Area.
During the nine months ended December 31, 1997, the number of electricity
units supplied decreased by 4% and total revenues produced by the supply
business decreased by (Pounds)69 million (8%) to (Pounds)799 million from
(Pounds)868 million for the nine months ended December 31, 1996. Revenues
decreased partly due to a reduction of 10% in sales to Non-Franchise Supply
Customers as a result of increased competition and partly due to reduced
purchase of electricity costs, the benefits of which are passed on to
customers.
Cost of Sales
Cost of sales decreased by (Pounds)63 million (9%) from (Pounds)681 million
in the nine months ended December 31, 1996 to (Pounds)618 million in the nine
months ended December 31, 1997. This decrease was due principally to the
reduction in units supplied. Additionally, electricity purchase costs
decreased due primarily to reductions in the Fossil Fuel Levy.
Operating Expenses
Operating expenses decreased by (Pounds)5 million (3%) from (Pounds)173
million in the nine months ended December 31, 1996 to (Pounds)168 million in
the nine months ended December 31, 1997. This decrease was principally due to
a reduction in pension costs of (Pounds)9 million, other cost savings and the
recording of a (Pounds)24 million charge relating to the replacement of
billing and debt collection systems in the nine months ended December 31, 1996
partially offset by a provision of (Pounds)10 million for restructuring and an
increase of (Pounds)23 million relating to increased depreciation and
amortization of goodwill due to the Acquisition.
Net Interest Expense
Net interest expense increased by (Pounds)58 million from (Pounds)20 million
during the nine months ended December 31, 1996 to (Pounds)78 million in the
nine months ended December 31, 1997, principally as a result of the financing
costs associated with the 1997 Credit Facility entered into to finance the
Acquisition.
Income Taxes
Yorkshire Group's effective income tax rate, excluding the windfall tax,
decreased from 34% for the nine months ended December 31, 1996 to 11% for the
nine months ended December 31, 1997. The effective rate in the 1997 period was
affected by the (Pounds)12 million favorable impact of the reduction in the UK
corporation tax rate from 33% to 31% as discussed above, partially offset by
the amortization of goodwill, which is not deductible for UK income tax
purposes.
Windfall Tax
Yorkshire Group recorded a one-time extraordinary charge of (Pounds)134
million during the nine months ended December 31, 1997 for the windfall tax
enacted by the UK government in July 1997. This windfall tax is not deductible
for UK corporation tax purposes.
Fiscal Year 1997 Compared with Fiscal Year 1996
Earnings
Income from operations was (Pounds)52 million in Fiscal Year 1997, a
decrease of (Pounds)162 million from (Pounds)214 million in Fiscal Year 1996.
The following items reduced Fiscal Year 1997 income from operations: (i) a
(Pounds)78 million provision for uneconomic gas and electricity contracts,
which resulted in a charge of (Pounds)125 million to the supply
44
<PAGE>
business offset by an intrabusiness elimination of (Pounds)47 million; (ii) a
(Pounds)50 million charge for information system development costs to prepare
for the opening of the competitive electricity market in 1998 for Franchise
Supply Customers, of which (Pounds)37 million was charged to the supply
business and (Pounds)13 million was charged to the distribution business;
(iii) a (Pounds)26 million decrease in distribution revenues as a consequence
of price reductions imposed by the Regulator; (iv) a (Pounds)8 million charge
incurred for advisers' fees in respect of the Acquisition; and (v) a (Pounds)6
million write-down of the value of non-operational property.
Income (loss) from operations by segments for Fiscal Year 1997 were
(Pounds)127 million, (Pounds)(132) million and (Pounds)10 million for the
distribution, supply and other segments, respectively. Income from operations
from those segments in Fiscal Year 1996 were (Pounds)164 million, (Pounds)30
million and (Pounds)20 million, respectively.
Net income was (Pounds)26 million in Fiscal Year 1997, a decrease of
(Pounds)367 million from (Pounds)393 million in Fiscal Year 1996, principally
due to the NGG Transaction in Fiscal Year 1996 and the charges recorded in
Fiscal Year 1997 discussed above.
Revenues
Operating revenues decreased by (Pounds)100 million (7%) from (Pounds)1,431
million in Fiscal Year 1996 to (Pounds)1,331 million in Fiscal Year 1997 as
follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
INCREASE (DECREASE)
FROM FISCAL YEAR 1996
TO FISCAL YEAR 1997
---------------------
(Pounds) MILLIONS
<S> <C>
Distribution......................................... (26)
Supply............................................... (131)
Other................................................ 9
Intrabusiness........................................ 48
----
Total operating revenues........................... (100)
====
</TABLE>
Revenues from the distribution business decreased by (Pounds)26 million (8%)
from (Pounds)334 million for Fiscal Year 1996 to (Pounds)308 million for
Fiscal Year 1997, principally due to a decrease in the maximum allowable
average price of units distributed as a result of the application of the
revised Distribution Price Control Formula. Units distributed increased by
0.5% in Fiscal Year 1997 partially offsetting such decrease.
During Fiscal Year 1997, the number of electricity units supplied decreased
by 6% while total revenues produced by the supply business decreased by
(Pounds)131 million (10%) to (Pounds)1,178 million from (Pounds)1,309 million
for Fiscal Year 1996. The reduction was partly due to a decrease of 12% in
units supplied to Non-Franchise Supply Customers, which was largely offset by
a corresponding reduction in cost of sale, and partly due to reduced charges
from the distribution business, the benefits of which are passed on to
customers, resulting in lower average unit prices. Franchise Supply Customers
and Non-Franchise Supply Customers each comprised 50% of total sales volume in
Fiscal Year 1997.
Cost of Sales
Cost of sales decreased by (Pounds)81 million (8%) from (Pounds)1,013
million in Fiscal Year 1996 to (Pounds)932 million in Fiscal Year 1997. This
reduction was the result of a decrease in supply business sales volumes and
reduced charges from the distribution business.
Operating Expenses
Operating expenses increased by (Pounds)143 million (70%) from (Pounds)204
million in Fiscal Year 1996 to (Pounds)347 million in Fiscal Year 1997.
Operating costs in Fiscal Year 1997 included: (i) a (Pounds)78 million
provision for uneconomic
45
<PAGE>
gas and electricity contracts made for the net present value of expected
future payments in excess of anticipated recoverable amounts, reflecting
expectations of market prices for electricity following the opening of the
competitive electricity market in 1998 for Franchise Supply Customers and
future gas prices; (ii) a (Pounds)50 million charge for information system
development costs, including (Pounds)19 million relating to the opening of the
competitive electricity market in 1998 for Franchise Supply Customers and a
(Pounds)31 million charge relating to the replacement of billing and debt
collection systems; (iii) a (Pounds)8 million charge incurred for advisers'
fees in respect of the Acquisition; and (iv) a (Pounds)6 million write-down of
the value of non-operational property.
Other Income
Other income was (Pounds)20 million in Fiscal Year 1997, a decrease of
(Pounds)293 million from (Pounds)313 million in Fiscal Year 1996. Other income
in Fiscal Year 1996 included the NGG Transaction, totalling (Pounds)300
million as described under "--Fiscal Year 1996 Compared with Fiscal Year
1995--Other Income". Following the NGG Transaction, ordinary dividends
received from NGG decreased from (Pounds)21 million in Fiscal Year 1996 to
(Pounds)2 million in Fiscal Year 1997. Other income for Fiscal Year 1997 also
includes the effect of the (Pounds)15 million gain on disposal by Yorkshire of
its share of a joint venture investment.
Net Interest Expense
Net interest expense increased by (Pounds)13 million from (Pounds)20 million
in Fiscal Year 1996 to (Pounds)33 million in Fiscal Year 1997, including a
(Pounds)7 million charge in relation to the termination of interest rate swap
agreements. Increased financing costs arising from the payment of a special
dividend of (Pounds)185 million in January 1996 were partly mitigated by the
effects of asset sales.
Income Taxes
The effective income tax rate of 22% in Fiscal Year 1996 increased to 33%
for Fiscal Year 1997. The effective income tax rate in Fiscal Year 1996 was
reduced principally due to the lower tax rate on gains arising from the NGG
Transaction. See Note 6, "Income Taxes", to Yorkshire's consolidated financial
statements for the three years ended March 31, 1997 included elsewhere in this
Prospectus for additional information.
Fiscal Year 1996 Compared with Fiscal Year 1995
Earnings
Income from operations was (Pounds)214 million in Fiscal Year 1996, a
decrease of (Pounds)1 million from Fiscal Year 1995. Distribution revenues
decreased by (Pounds)28 million, principally due to a reduction in the maximum
allowable average price of units distributed as a result of the application of
the revised Distribution Price Control Formula. This decrease was largely
offset by cost savings.
Income from operations by segments for Fiscal Year 1996 were (Pounds)164
million, (Pounds)30 million, and (Pounds)20 million for the distribution,
supply and other segments, respectively. Income from operations from those
segments in Fiscal Year 1995 were (Pounds)176 million, (Pounds)23 million, and
(Pounds)16 million, respectively.
Other income was (Pounds)313 million in Fiscal Year 1996, an increase of
(Pounds)297 million from (Pounds)16 million in Fiscal Year 1995 due to the NGG
Transaction totalling (Pounds)300 million which are described in detail below.
Income taxes increased by (Pounds)36 million, from (Pounds)78 million in
Fiscal Year 1995 to (Pounds)114 million in Fiscal Year 1996, including taxes
relating to the NGG Transaction.
Net income increased by (Pounds)252 million from (Pounds)141 million in
Fiscal Year 1995 to (Pounds)393 million in Fiscal Year 1996, principally due
to increased other income as a result of the NGG Transaction offset by the
income taxes discussed above.
46
<PAGE>
Revenues
Operating revenues decreased by (Pounds)33 million (2%) from (Pounds)1,464
million in Fiscal Year 1995 to (Pounds)1,431 million in Fiscal Year 1996 as
follows:
<TABLE>
<CAPTION>
OPERATING REVENUES
INCREASE (DECREASE)
FROM FISCAL YEAR 1995
TO FISCAL YEAR 1996
---------------------
(Pounds) MILLIONS
<S> <C>
Distribution......................................... (28)
Supply............................................... (34)
Other................................................ 1
Intrabusiness........................................ 28
---
Total operating revenues........................... (33)
===
</TABLE>
Revenues from the distribution business decreased by (Pounds)28 million (8%)
from (Pounds)362 million for Fiscal Year 1995 to (Pounds)334 million for
Fiscal Year 1996, principally due to a decrease in the maximum allowable
average price of units distributed as a result of the application of the
revised Distribution Price Control Formula. A 3% increase in sales volume
partially offset the average price decrease.
Revenues from the supply business decreased by (Pounds)34 million (3%) from
(Pounds)1,343 million in Fiscal Year 1995 to (Pounds)1,309 million in Fiscal
Year 1996 as a result of lower average unit prices, principally due to reduced
charges from the distribution business, the benefits of which are passed on to
customers, and a decrease in units sold of 1%. Franchise Supply Customers
comprised 46% of total sales volume in Fiscal Year 1996 and Non-Franchise
Supply Customers comprised 54%.
Cost of Sales
Cost of sales decreased by (Pounds)12 million (1%) from (Pounds)1,025
million in Fiscal Year 1995 to (Pounds)1,013 million in Fiscal Year 1996 as a
result of the decrease in units sold.
Operating Expenses
Operating expenses decreased by (Pounds)20 million (9%) from (Pounds)224
million in Fiscal Year 1995 to (Pounds)204 million in Fiscal Year 1996 as a
result of cost savings, principally due to a reduction in the number of
employees from 4,567 at the end of Fiscal Year 1995 to 3,907 at the end of
Fiscal Year 1996.
Other Income
Other income increased by (Pounds)297 million from (Pounds)16 million in
Fiscal Year 1995 to (Pounds)313 million in Fiscal Year 1996. During Fiscal
Year 1996, Yorkshire, together with the other 11 RECs in the UK, distributed
the majority of its shares in NGG to its shareholders in connection with the
NGG Transaction. The NGG Transaction had a material impact on Yorkshire's
financial results for that year. The NGG Transaction included the following:
(a) Yorkshire received special dividends totalling (Pounds)118 million.
(b) At April 1, 1995, Yorkshire held 9.2% of the issued share capital of
NGG, which was recorded on its balance sheet at (Pounds)72 million.
Additional share capital of NGG, totalling (Pounds)16 million, was
subscribed for by Yorkshire during Fiscal Year 1996. In December 1995, when
NGG became a company listed on the London Stock Exchange, Yorkshire
revalued its interest in NGG to its market value of (Pounds)321 million.
Also in December 1995, Yorkshire made a distribution in-kind to its
shareholders of approximately 90% of its interest in NGG. A further 2%,
approximately, was distributed to Yorkshire's optionholders. The aggregate
gain arising from these distributions totalled (Pounds)215 million.
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<PAGE>
(c) Each Yorkshire residential customer received a one-time discount as
part of an agreement among the shareholders of NGG, which stipulated that
each REC would provide such discount. The net cost of such discount was
(Pounds)85 million.
(d) Yorkshire received an in-kind dividend of approximately 9.2% of the
shares of PSB, which shares were subsequently converted to cash upon PSB's
liquidation, resulting in a gain of (Pounds)56 million.
(e) Legal and other expenses relating to these transactions totalled
(Pounds)4 million.
Other income in Fiscal Year 1995 also included a one-time termination
payment of (Pounds)17 million received from Stockholm Stadshus AB and a one-
time loss of (Pounds)18 million following the disposal of the business and
certain of the assets of Homepower Retail Limited, Yorkshire's retailing joint
venture.
Net Interest Expense
Net interest expense increased by (Pounds)8 million from (Pounds)12 million
in Fiscal Year 1995 to (Pounds)20 million in Fiscal Year 1996, principally as
a result of substantially more long-term debt outstanding during Fiscal Year
1996 than during Fiscal Year 1995 due to the payment of a special dividend of
(Pounds)188 million in January 1995.
Income Taxes
The effective income tax rate decreased from 36% to 22% from Fiscal Year
1995 to Fiscal Year 1996, principally due to a lower effective income tax rate
on the NGG Transaction. See Note 6, "Income Taxes", to Yorkshire's
consolidated financial statements for the three years ended March 31, 1997
included elsewhere in this Prospectus for additional information.
LIQUIDITY AND CAPITAL RESOURCES
Yorkshire Group's sole investment and only significant asset is the entire
share capital of Yorkshire Holdings, which, in turn, owns the entire share
capital of Yorkshire. Yorkshire Group is therefore dependent upon dividends
from Yorkshire for its cash flow.
At December 31, 1997, in addition to cash flow from Yorkshire's operations
available for distribution indirectly to Yorkshire Group, Yorkshire Group had
(Pounds)300 million available under existing bank facilities, including
(Pounds)50 million under the 1997 Credit Facility, as its primary source of
liquidity.
Yorkshire Group will be required to refinance the 1997 Credit Facility,
which matures on July 30, 1998. For a discussion of the 1997 Credit Facility,
see Note 11, "Acquisition", to Yorkshire Group's consolidated balance sheet as
of April 1, 1997 included elsewhere in this Prospectus. Yorkshire Group
currently expects to refinance the 1997 Credit Facility through a series of
transactions, including the February 1998 issuance of (Pounds)200 million of
the Guaranteed Eurobonds, the February 1998 issuance of (Pounds)396 million of
the Senior Notes, the issuance of (Pounds)168 million of the Trust Securities
offered hereby, the potential issuance of additional senior notes, the
entering into of additional credit facilities, if available and on terms
acceptable to Yorkshire Group, and from the proceeds of the currently
contemplated transfer of Yorkshire Group's generation assets to an entity or
entities other than Yorkshire Group or its subsidiaries. Yorkshire Group is
currently in negotiations with respect to the replacement of the 1997 Credit
Facility.
Yorkshire Group also will be required to fund its ongoing capital
expenditures, fund its debt service (including with respect to the Trust
Securities) and the final windfall tax payment and cover its seasonal working
capital needs. Yorkshire Group expects to fund these ongoing cash requirements
through a combination of available cash flow from Yorkshire's operations and
amounts available under the committed bank facilities of (Pounds)300 million.
The principal sources of funds of the Successor Company during the nine
months ended December 31, 1997 were (Pounds)63 million from operations, which
reflects interest paid of (Pounds)66 million and tax paid of (Pounds)71
million, including the first installment of the windfall tax of (Pounds)67
million. Yorkshire Group raised (Pounds)1,034 million from
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the 1997 Credit Facility and (Pounds)440 million in equity. During this
period, Yorkshire Group utilized (Pounds)1,474 million to acquire Yorkshire,
(Pounds)129 million for capital expenditures and (Pounds)61 million to repay
short-term loans.
The principal sources of funds of Yorkshire during Fiscal Year 1997 were
(Pounds)96 million from operations, which reflects interest paid of (Pounds)42
million and tax paid of (Pounds)30 million. During Fiscal Year 1997, Yorkshire
invested (Pounds)121 million in capital expenditures and long-term investments
and paid dividends of (Pounds)71 million. Proceeds from asset sales totalled
(Pounds)73 million.
The principal sources of funds of Yorkshire during Fiscal Year 1996 were
(Pounds)222 million from operations, which reflects interest paid of
(Pounds)46 million and tax paid of (Pounds)98 million. During Fiscal Year
1996, Yorkshire invested (Pounds)126 million in capital expenditures and long-
term investments and paid dividends of (Pounds)243 million, including a
special dividend of (Pounds)185 million. Proceeds from asset sales, including
PSB, totalled (Pounds)119 million. Yorkshire raised (Pounds)150 million from
the issuance of Eurobonds.
At December 31, 1997, the Successor Company had net current liabilities of
(Pounds)1,099 million, primarily as a result of the initial financing
structure of the Acquisition. To meet short-term cash needs, the Successor
Company had (Pounds)118 million of cash and cash equivalents at December 31,
1997.
Yorkshire's capital expenditures are primarily related to the distribution
business and include expenditures for load-related, non-load-related and non-
operational capital assets. Load-related capital expenditures are largely
required by new business growth. Customer contributions are normally received
where capital expenditures are made to extend or upgrade service to customers
(except to the extent that such capital expenditures are made to enhance
Yorkshire's distribution network generally). Non-load-related capital
expenditures include asset replacement which is expected to continue until at
least the next decade. Other non-load-related expenditures include system
upgrade work that provides for load growth and has the additional benefit of
improving network security and reliability. Non-operational capital
expenditures are for assets such as fixtures and equipment. For Fiscal Years
1996 and 1997 capital expenditures, net of customer contributions, were
(Pounds)91 million and (Pounds)126 million, respectively. Yorkshire is
required to file five year projections with the Regulator for gross capital
expenditures related to its regulated distribution network and updates of such
projections annually. The most recent projection was for the five year period
ended March 31, 2000 and was filed in July 1997. This filing indicated
Yorkshire's current projection of approximately (Pounds)575 million in capital
expenditures for the five year period. Approximately (Pounds)180 million has
already been spent in Fiscal Year 1996 and Fiscal Year 1997 related to this
five year projection.
To reduce the impact of interest rate changes, Yorkshire Group has entered
into several interest rate swap agreements with total notional amount of
(Pounds)650 million currently outstanding and with maturity dates ranging from
January 2008 to February 2008. The interest rate swaps are from a LIBOR
variable rate to an average fixed rate of approximately 7.3%. See Note 6,
"Interest Rate Swaps", to Yorkshire Group's condensed consolidated financial
statements for the nine months ended December 31, 1997 included elsewhere in
this Prospectus for further information on such agreements.
Yorkshire Group does not have any foreign currency hedging contracts in
place; however, to the extent that it becomes economically desirable, it may
swap some or all of any US dollar liabilities associated with security
issuances back to pounds sterling to hedge the currency risk associated
therewith.
Demand for electricity in the UK, including the Franchise Area, is seasonal,
with demand being higher in the winter months and lower in the summer months.
Yorkshire bills the majority of its Franchise Supply Customers on a staggered
quarterly basis while it is generally required to pay related expenses
(principally the cost of purchased electricity) on 28-day terms. However,
approximately 50% of the Franchise Supply Customers settle their accounts
using regular payment plans based on prepayment or spreading of the cost of
their annual bill evenly throughout the year. A majority of Yorkshire's supply
revenues are based on a fixed price per unit. The cost of supply to Yorkshire
from the Pool, if not covered by hedging mechanisms, varies throughout the
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<PAGE>
year, generally being higher in winter months and lower in summer months.
Yorkshire balances the effect of these influences on its working capital needs
with drawings under its available credit facilities.
Yorkshire's supply business to Non-Franchise Supply Customers generally
involves entering into fixed price contracts to supply electricity to its
customers. The electricity is obtained primarily by purchases from the Pool.
Because the price of electricity purchased from the Pool can be volatile due
to the fact that the price is set every half hour, Yorkshire is exposed to
risk arising from differences between the fixed price at which it sells
electricity and the fluctuating prices at which it purchases electricity
unless it can effectively hedge such exposure. To mitigate its exposure to
volatility, Yorkshire utilizes CFDs and power purchase contracts with major UK
power generators to stabilize the price of electricity. Yorkshire had entered
into CFDs and power purchase contracts for 17,882 GWh of electricity for the
nine months ended December 31, 1997. Yorkshire's electricity sales volumes
were 22,391 GWh and 21,116 GWh for Fiscal Year 1996 and Fiscal Year 1997,
respectively.
Management believes that cash flow from operations, together with its
existing sources of credit and the proceeds from the Offering and the
refinancing of the 1997 Credit Facility, will provide sufficient financial
resources to meet Yorkshire Group's projected capital needs and other
expenditure requirements for the foreseeable future. Following the
Acquisition, Yorkshire agreed to an amendment to its PES License to the effect
that it will use all reasonable endeavours to ensure that it maintains an
investment grade credit rating on its long-term debt.
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<PAGE>
BUSINESS
INTRODUCTION
Yorkshire's principal businesses are the distribution of electricity and the
supply of electricity to approximately two million customers. Yorkshire also
conducts ancillary business activities apart from the distribution and supply
businesses that are not subject to price regulation, such as owning an
interest in an off-shore gas field, supplying gas in the competitive market
and holding interests in power generation. See "--Business Restructuring".
DISTRIBUTION BUSINESS
Yorkshire's distribution business consists of the ownership, management and
operation of the electricity distribution network within Yorkshire's Franchise
Area. The primary activity of the distribution business is the receipt of
electricity from the national grid transmission system (the "Grid") and the
distribution of electricity to end users connected to Yorkshire's power lines.
Because Yorkshire's distribution business is substantially a regulated
monopoly, virtually all electricity supplied (whether by Yorkshire's supply
business or by other suppliers) to consumers in the Franchise Area is
transported through its distribution network, thus providing Yorkshire with a
stable distribution volume unaffected by customer choice of supplier. As a
holder of a PES License, Yorkshire is subject to a price cap regulatory
framework providing economic incentives to operate in a cost effective manner
and, to a limited extent, to increase the volume of electricity distributed.
See "The Electric Utility Industry in Great Britain".
Distribution Business Customers, Units Distributed, Revenues and Operating
Profit
Yorkshire's Franchise Area covers approximately 10,000 square km (3,860
square miles) from the Pennine uplands in the west, and the cities of Leeds,
Bradford and Sheffield, to the City of Hull, the ports of the Humber estuary
and the eastern coastline. It encompasses the counties of West Yorkshire, East
Yorkshire and almost all of South Yorkshire, together with parts of North
Yorkshire, Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The
regional economy is diverse. The traditional heavy industries of iron and
steel, coal mining, textiles and engineering continue to contribute to the
regional economy, but their overall significance has declined, particularly in
the last decade. During this period, other industries, such as chemicals and
food and drink, have expanded, as have service sector activities such as
finance, retailing and leisure. The region is well served by road and rail
networks, has three regional airports, and the ports of the Humber estuary
provide access to European markets.
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The following table sets out details of Yorkshire's distribution customers
and the volume of electricity distributed, as well as distribution operating
revenues and operating income at the dates and for the periods presented:
<TABLE>
<CAPTION>
AT MARCH 31,
-----------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
NUMBER OF CUSTOMERS CONNECTED
Residential.............................. 1,879,944 1,896,470 1,910,752
Commercial............................... 125,350 125,827 126,003
Industrial............................... 22,151 21,924 21,889
----------- ----------- -----------
Total.................................. 2,027,445 2,044,221 2,058,644
=========== =========== ===========
<CAPTION>
FISCAL YEAR
-----------------------------------
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
ELECTRICITY DISTRIBUTED (GWH)
Residential.............................. 6,806 7,110 7,196
Commercial............................... 5,207 5,383 5,580
Industrial............................... 10,618 10,729 10,566
----------- ----------- -----------
Total.................................. 22,631 23,222 23,342
=========== =========== ===========
<CAPTION>
(IN MILLIONS)
-----------------------------------
<S> <C> <C> <C>
Distribution operating revenues.......... (Pounds)362 (Pounds)334 (Pounds)308
Distribution operating income............ (Pounds)176 (Pounds)164 (Pounds)127
</TABLE>
Competition in the Distribution Business
Yorkshire has not experienced significant competition in its distribution
business. Yorkshire believes that the cost of providing a duplicate
distribution network connected to the Grid would be prohibitive. To the extent
a customer may invest in its own on-site electric generating plants, however,
such customer would no longer require distribution and related services from
Yorkshire except for standby connection to the Grid. The distribution business
is subject to marginal loss of income from related services, such as metering.
For a discussion of certain recently announced proposals impacting metering,
see "The Electric Utility Industry in Great Britain--Distribution of
Electricity--Price Control".
Strategy for the Distribution Business
Yorkshire's distribution strategy consists of maintaining a reliable and
safe distribution system which meets customer expectations while maximizing
its operating efficiencies and fulfilling its regulatory obligations.
To implement its strategy, Yorkshire is taking a number of steps. Yorkshire
intends to maintain a sufficient level of investment in the distribution
system to ensure its continued reliability and safety. In Fiscal Year 1997,
Yorkshire invested (Pounds)169 million in the distribution system, of which
(Pounds)96 million represented capital improvements in new substations, cables
and overhead lines and (Pounds)73 million represented expenditures related to
the operation, repair and maintenance of the distribution system. Yorkshire is
currently investing in a Distribution Asset Management System ("DAMS") that
centralizes information currently stored in over sixty computerized and paper-
based systems into one integrated computerized system. The centralization of
such information is intended to improve both access to and quality of
information which is vital to the operation of an efficient distribution
system.
Yorkshire is also concentrating on maintaining and improving its responses
to system faults. In Fiscal Year 1997, Yorkshire restored services to 95% of
all customers affected by faults within three hours and on average a
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Yorkshire customer was without power for only 59.7 minutes. Furthermore,
Yorkshire has introduced a new toll-free phone number available for customers
who have lost power. Such direct access is intended to permit Yorkshire to
respond more effectively and rapidly to power loss situations. Finally,
Yorkshire publishes a Quality of Supply Report which details the manner in
which Yorkshire intends to improve both the availability and quality of
electricity supply in its region in order to inform both its customers and
OFFER as to its plans for the period to April 2000.
Distribution Facilities
Electricity is transported across the Grid at 400 kV or 275 kV to 21 grid
supply points within Yorkshire's distribution network, where the National Grid
Company transforms the voltage to 132 kV, 66 kV and 33 kV for entry into
Yorkshire's distribution system.
At March 31, 1997, Yorkshire's distribution system consisted of:
<TABLE>
<CAPTION>
LV 11 KV ABOVE 11 KV
--------- --------- -----------
<S> <C> <C> <C>
Number of metered supplies................... 2,057,173 1,455 16
Total length of circuits..................... 30,350 km 18,011 km 4,676 km
Percentage underground....................... 92% 50% 28%
</TABLE>
The primary distribution system consists of 21 grid supply points from the
Grid, an additional 68 supply points and 357 primary substations. At March 31,
1997, the installed transformer capacity with a secondary voltage higher than
650 v at these substations was 20,527,000 kVA. Remote control facilities
enable the real time monitoring and operation of most of these larger
substations from one central control room.
Yorkshire's distribution substations amount to 12,849 indoor substations,
2,774 outdoor substations and 16,618 pole mounted substations. At March 31,
1997, the installed transformer capacity with a secondary voltage less than
650 v was 9,251,220 kVA.
SUPPLY BUSINESS
Yorkshire's supply business consists of selling electricity to end users,
purchasing such electricity and arranging for its distribution to those end
users. Under its PES License, Yorkshire has an exclusive right to supply
electricity to Franchise Supply Customers. This exclusive right is currently
scheduled to continue until September 1998. The supply business to Non-
Franchise Supply Customers, both inside and outside Yorkshire's Franchise
Area, is open to competition.
The following table sets forth the volume of electricity sold, by Non-
Franchise Supply Customer and Franchise Supply Customer, as well as supply
operating revenues and operating income (loss):
<TABLE>
<CAPTION>
FISCAL YEAR
-----------------------------------------
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Volume (GWh):
Non-Franchise Supply
Customers.................... 12,572 12,046 10,627
Franchise Supply Customers.... 10,148 10,345 10,489
------------- ------------- -------------
Total....................... 22,720 22,391 21,116
============= ============= =============
<CAPTION>
(IN MILLIONS)
-----------------------------------------
<S> <C> <C> <C>
Supply operating revenues....... (Pounds)1,343 (Pounds)1,309 (Pounds)1,178
Supply operating income (loss).. (Pounds) 23 (Pounds) 30 (Pounds) (132)
</TABLE>
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<PAGE>
Competition in the Supply Business
The supply business is currently divided between Franchise Supply Customers
within the Franchise Area, and Non-Franchise Supply Customers, inside and
outside the Franchise Area. The non-franchise threshold was lowered to 100 kW
in April 1994 allowing competition in supply for these customers while
Franchise Supply Customers remained subject to regulation. Competition in
supply to Franchise Supply Customers is currently scheduled to be phased in
over a six-month period commencing in September 1998, at which time the
exclusive right of Yorkshire to supply the Franchise Area will cease. The
Regulator, however, proposed transitional price regulation for smaller
consumption Franchise Supply Customers for an initial period of two years
until an adequate level of competition is established. Yorkshire subsequently
indicated its acceptance of such proposals. The proposals (when taken together
with the reduction in the Fossil Fuel Levy which became effective on April 1,
1998) resulted in the implementation of small reductions, effective April 1,
1998, in the tariffs for Yorkshire's residential and small business customers
in its Franchise Area compared to the corresponding tariffs in effect in
August 1997. The proposals also require an additional 3% below inflation
reduction effective April 1, 1999. See "The Electric Utility Industry in Great
Britain--Industry Structure" and "--Supply of Electricity".
Strategy for the Supply Business
Yorkshire's supply strategy consists of (i) protecting and sustaining
Yorkshire's electricity market position within the Franchise Area, (ii) cross-
selling gas to its existing customer base, (iii) securing market share for gas
and electricity supply outside the Franchise Area to the extent that such
contracts are profitable and (iv) seeking marketing and strategic alliances in
the supply business.
To implement its strategy, Yorkshire is taking a number of steps. Yorkshire
is endeavoring to retain its existing Non-Franchise Supply Customers in the
Franchise Area by purchasing electricity at competitive rates from power
generators in the UK and providing high quality customer service. In doing so,
in Fiscal Year 1997, Yorkshire maintained a significant portion of its
existing business. Yorkshire has also applied this strategy to Non-Franchise
Supply Customers outside of its Franchise Area and to gas customers. For
example, in Fiscal Year 1997, Yorkshire was awarded new contracts with such
entities as East Midlands Airport, Lancashire County Council, South
Staffordshire Water and a number of Ministry of Defense sites. Furthermore, in
addition to marketing gas and electricity under the Yorkshire brand name,
Yorkshire intends to enter into "channel partnerships" with various business
and commercial entities (a "channel partner") whereby Yorkshire markets energy
to customers outside of its Franchise Area under the name of the channel
partner or in the joint name of Yorkshire and the channel partner. Yorkshire
is currently negotiating to establish a "channel partnership" with a chain of
retail appliance stores. Yorkshire expects to maintain this strategy for all
business customers and potential business customers after competition
commences for both gas and electricity and to extend this approach to the
residential market. There is no assurance that Yorkshire will be able to enter
into such "channel partnerships" and, if it does, that they will be
successful.
As discussed under "--Affiliate Businesses and Other Investments--Gas
Sourcing and Supply", Yorkshire has taken significant steps toward developing
its gas supply capabilities. Currently, gas may be sold to residential
customers in selected regional markets that have been opened to competition.
By retaining its existing customer base and, eventually, expanding into new
markets which will be open to competition, Yorkshire intends to be in a
position to offer those customers both electricity and gas. In offering such
flexibility, Yorkshire intends to solidify its relationship with these
customers and provide an established market base for its developing gas supply
business.
In a joint statement issued in January 1998, the Regulator and OFGAS asked
each of the RECs and BG Centrica plc (the former supply business of British
Gas plc) ("Centrica") to give undertakings to stop "dual fuel" offers to
supply gas and electricity. In addition, OFGAS asked the RECs to undertake not
to market gas to residential customers in areas where their respective markets
are not open to competition except where contracts have already been signed.
The regulators also made proposals concerning competition in meter reading.
Following discussions with the regulators, it was announced that the RECs had
agreed only to provide additional dual fuel benefits to customers once their
individual franchise area is opened to electricity competition and that OFGAS
had agreed that RECs' gas supply businesses should be permitted to continue to
compete in the gas
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<PAGE>
market both within and outside their franchise areas on the basis that there
are no undue restrictions or distortions in the gas market in those areas. The
RECs also agreed to work with the Regulator and OFGAS to ensure measures to
limit distortion of the meter reading market.
AFFILIATE BUSINESSES AND OTHER INVESTMENTS
Yorkshire's ancillary business activities have primarily included, among
other things, gas sourcing and supply and holding interests in power
generation.
Gas Sourcing and Supply
Recognizing the long-term opportunities in the competitive gas supply
market, in April 1994, Yorkshire acquired a 6.97% equity stake in the Armada
off-shore gas field (the "Armada Field") for approximately (Pounds)27.8
million. As of December 31, 1997, the Armada Field, which has a production
life of approximately 15 years, had proven resources of approximately 1.2
trillion cubic feet (84 billion cubic feet net to Yorkshire) of gas and 68
million barrels of oil and oil equivalents (4.8 million barrels net to
Yorkshire). Delivery of such gas from the Armada Field to Yorkshire began, on
schedule, in October 1997. The development costs associated with the Armada
Field have been lower than originally anticipated. As of December 31, 1997,
Yorkshire had invested (Pounds)62 million in the Armada Field.
Yorkshire markets gas to industrial and commercial customers and, with the
gradual removal of the residential franchise of Centrica, has recently started
marketing gas to residential customers. By the end of March 1998, Yorkshire
had entered into contracts for the supply of gas to more than 200,000
residential customers. Gas is sourced from Yorkshire's interest in the Armada
Field and through swing contracts and purchases on the spot markets which are
designed to give Yorkshire a balanced purchase portfolio. Yorkshire utilizes
risk management methods, in relation to gas purchasing and supply, similar to
electricity purchasing and supply, which are designed to maximize its return
consistent with an acceptable level of risk.
The Regulator and OFGAS recently proposed to restrict the ability of the
RECs, including Yorkshire, to provide "dual fuel" offers to supply gas and
electricity to residential customers in areas which are not open to
competition. See "--Supply Business--Strategy for the Supply Business".
Power Generation
Through its wholly-owned subsidiary, Yorkshire Electric Power Limited
("YEPL"), Yorkshire has invested in various power generation projects.
Yorkshire's PES License currently enables it and its affiliates to make
investments of up to 800 MW of electricity generation. Currently, Yorkshire
and its subsidiaries own, or have committed to, investments in 519 MW of power
generation assets. See "--Business Restructuring" for a discussion of the
proposed transfer of Yorkshire's current ownership interests in generation
assets.
The centerpiece of Yorkshire's generation activities is a 272 MW combined
cycle gas turbine ("CCGT") generating station at Brigg in north Lincolnshire
developed and operated by Regional Power Generators Limited ("RPG"). YEPL owns
a 75% interest in RPG with IVO Energy Limited holding the remaining 25%.
Yorkshire holds a power purchase agreement for 100% of the output of the
station.
Yorkshire CoGen Limited ("YCL"), a YEPL subsidiary, constructed and
currently operates combined heat and power ("CHP") plants at St. James's
Hospital, Leeds (4.5 MW), A. H. Marks, a chemical company based in Bradford
(4.5 MW) and Queen's Medical Centre, Nottingham (4.9 MW). YCL is also
constructing a 56 MW CHP plant at the premises of Hays Chemicals, a Cheshire
based company, and is nearing completion of a 50 MW CCGT plant at Thornhill.
YCL also owns and operates 52.6 MW of diesel fired peaking plants. YCL has
submitted an application to the UK's Department of Trade and Industry to
construct a 56 MW CHP plant at the premises of Hickson and Welch Chemicals in
Yorkshire. Further small scale (50 MW) embedded plants (including cogeneration
plants) are also planned. All of the above plants provide an opportunity for
Yorkshire's
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<PAGE>
electricity supply business to purchase the power offtake and a partial
strategic hedge in the event that electricity prices rise and reduce profit
margins of Yorkshire's supply business.
In addition, YEPL owns a 50% interest in a company which owns two windfarms
at Ovenden Moor (9.2 MW) and at Royd Moor (6.5 MW). All of the output from
these windfarms is sold to The Non-Fossil Fuel Purchasing Agency under an
agreement which expires on December 31, 1998.
YCL's generation portfolio has concentrated on smaller scale projects which
export less than 50 MW, principally because in doing so YCL is not required to
obtain a generation license and such smaller scale projects are not required
to trade in the Pool. Trading outside the Pool means that the export power has
a higher value and provides YCL with increased operational flexibility.
CUSTOMER SERVICE
As part of Yorkshire's commitment to delivering high levels of customer
service, Yorkshire launched its Customer Service Initiative in 1995. Virtually
all of its employees have attended training sessions aimed at developing a
company culture consistent with Yorkshire's corporate mission to be a leader
in the market of electricity distribution and electricity and gas supply,
while consistently providing high levels of customer service. These employees
have been trained in the values and behavior which need to be adopted to
achieve this corporate mission.
Improvements to customer service which have been implemented as a result of
this initiative include the provision of a toll-free service for account
inquiries and fault reporting, as described under "--Distribution Business--
Strategy for Distribution Business", and an increase in the number of bill
payment outlets for the convenience of customers.
Yorkshire continues to seek to improve the service it provides to its
customers and, to do so, continues to train employees further. A customer
service tracking system has been put in place to ensure that directors and
managers of Yorkshire gain regular feedback from customers on the service they
receive.
RISK MANAGEMENT
Yorkshire's risk management efforts are primarily focused on the supply
business and intended to hedge the risks associated with the purchase and sale
of electricity resulting from Pool price volatility. Virtually all electricity
generated in England and Wales is sold by generators and bought by suppliers
through the Pool. The most common contracts for supply to Non-Franchise Supply
Customers are for twelve-month terms and contain fixed rates. Yorkshire is
exposed to purchase price risk (the risk associated with fluctuations in the
cost of purchased electricity relative to the price received from the supply
customer) to the extent that it has not hedged such risk. Yorkshire
substantially hedges purchasing price risk by employing a variety of risk
management tools, including management of its supply contract portfolio,
hedging contracts and other means which mitigate the risk of Pool price
volatility. Yorkshire employs risk management methods to maximize its return
consistent with an acceptable level of risk.
Until March 31, 1998, regulations governing the franchise supply market
permitted the pass-through to customers of prudent purchase costs which
included the cost of arrangements such as CFDs to hedge against Pool price
volatility. Under the supply price restraint proposals published by the
Regulator in October 1997, and accepted by Yorkshire, effective April 1, 1998,
such purchase costs are no longer automatically passed through to such
customers. CFDs are contracts predominantly between generators and suppliers
which fix the major elements of the price of electricity for a contracted
quantity of electricity over a specific time period. Differences between the
actual price set by the Pool and the agreed prices give rise to difference
payments between the parties to the particular CFD. At the present time,
Yorkshire expects its supply demand for the calendar year 1998 to be
substantially hedged through various types of agreements, including CFDs.
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Yorkshire's ability to manage its purchase price risk depends, in part, on
the continuing availability of properly priced risk management mechanisms such
as CFDs. No assurance can be given that an adequate, transparent market for
such products will in fact be available.
BUSINESS RESTRUCTURING
In December 1997, Yorkshire announced a planned business restructuring
intended to enable it to meet increased competition and react to potential
regulatory developments in the energy markets in the UK. The restructuring
will result in the distribution and supply businesses of Yorkshire becoming
self-sufficient businesses. As part of the restructuring, an alternative
ownership structure will be pursued for the generation business. Yorkshire
currently contemplates transferring such assets to an entity or entities other
than Yorkshire Group or its subsidiaries. It is expected that proceeds from
the transfer of these assets will be used to reduce debt of Yorkshire Group.
See "Certain Relationships and Related Transactions".
Total assets less current liabilities employed by the generation business at
December 31, 1997 were (Pounds)168 million. Operating income attributable to
the generation business in the nine months ended December 31, 1997 was
(Pounds)12 million.
As a result of this restructuring, approximately 160 positions will be
eliminated. A provision of approximately (Pounds)10 million was recorded in
the nine months ended December 31, 1997 to reflect the cost of these work
force reductions.
UK ENVIRONMENTAL REGULATION
Yorkshire's businesses are subject to numerous regulatory requirements with
respect to the protection of the environment. The principal laws which have
environmental implications for Yorkshire are the Electricity Act, the
Environmental Protection Act 1990, the New Road and Street Works Act 1991 and
the Environment Act 1995.
The Electricity Act requires Yorkshire to consider the preservation of
natural beauty and the conservation of natural and man-made features of
particular interest when it formulates proposals for development in connection
with certain of its activities. Environmental assessments are required to be
carried out in certain cases including overhead line constructions at higher
voltages and generating station developments. Yorkshire has produced a
Corporate Environmental Policy Statement and an Electricity Act Schedule 9
Statement which sets out the manner in which it intends to comply with its
environmental obligations.
Possible adverse effects of electro-magnetic fields ("EMFs") from various
sources, including transmission and distribution lines, have been the subject
of a number of studies and increasing public discussion. The current
scientific research is inconclusive as to whether EMFs may cause adverse
health effects. There is the possibility that the passage of legislation and
changing regulatory standards would require measures to mitigate EMFs, with
resulting increases in capital and operational costs. In addition, the
potential exists for public liability with respect to lawsuits brought by
plaintiffs alleging damages caused by EMFs. The only UK standards for exposure
to power frequency EMFs are those promulgated by the National Radiological
Protection Board and relate to the levels above which physiological effects
have been observed. Yorkshire fully complies with these standards.
Yorkshire believes that it has taken, and intends to continue taking,
measures to comply with the applicable law and government regulations for the
protection of the environment. There are no material legal or administrative
proceedings pending against Yorkshire with respect to any environmental
matter. Yorkshire estimates (Pounds)7 million was spent on environmental
compliance in Fiscal Year 1998, approximately half of which was of a capital
nature. This level of expenditures is expected to continue in future Fiscal
Years.
UK AND EU COMPETITION LAW
Yorkshire's businesses are subject to the competition rules of both the UK
and the European Community.
The UK Restrictive Trade Practices Act 1976 stipulates that failure to
furnish to the Office of Fair Trading an agreement that is registrable under
such Act renders unenforceable certain restrictions contained in such
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agreement. Briefly stated, the Fair Trading Act 1973 and the Competition Act
1980 both regulate the activities of companies with market power. UK
competition law, particularly the law relating to restrictive agreements, is
in the process of reform and is likely to follow the approach of European
Community law.
The Treaty of Rome contains provisions which prohibit anti-competitive
agreements and practices, including the abuse of a dominant position within
the European Union ("EU") or a substantial part of it. Penalties for violation
of these provisions include fines, third party damages and infringing
contractual provisions being unenforceable.
In January 1993, the UK implemented the EU Utilities Directive on the
procedures to be followed for the award of supply and works contracts by
utility companies, including electricity utilities. This directive was
replaced by EU Directive 93/36, which was implemented by the UK in December
1996 and which covers service contracts as well as supply and work contracts.
Those contracts that exceed the relevant financial thresholds have to be
advertised in the Official Journal of the European Communities. Suppliers and
contractors who believe they have suffered harm from failure to implement the
correct procedure in awarding the contract are able to institute proceedings
in the English High Court. The European Commission also has the power to
intervene prior to the award of a contract. Yorkshire Group believes that
Yorkshire has complied with any obligations it may have under those
regulations but the interpretation and application of those regulations and of
the European Union directives which they implement is not free from doubt and
no assurance can be given that any claim for damages against Yorkshire for
breach of the rules would be unsuccessful.
EMPLOYEES
Yorkshire had approximately 4,000 employees (approximately 3,800 full-time
equivalent) at the end of Fiscal Year 1997. Yorkshire Group has no employees
because it is a holding company with no operations. Approximately 62% of
Yorkshire's employees are represented by labor unions. All Yorkshire employees
who are not party to a personal employment contract are subject to a
collective bargaining agreement called The Electricity Business Agreement.
This Agreement may be amended by agreement between Yorkshire and the unions
and is terminable with 12 months' notice by either side. Yorkshire believes
that its relations with its employees are favorable. See "--Business
Restructuring" for a discussion of planned staffing reductions.
PROPERTY
Yorkshire owns the freehold of its principal offices north of Leeds.
Yorkshire has both network and non-network land and buildings.
Network Land and Buildings
At March 31, 1997, Yorkshire had interests in approximately 15,000 network
properties, comprising principally sub-station sites.
Non-Network Land and Buildings
At March 31, 1997, Yorkshire had freehold and leasehold interests in non-
network properties comprising chiefly offices, depots, warehouses, workshops
and a number of former retail outlets. The net book value of total non-network
land and buildings at March 31, 1997 was (Pounds)52 million.
LEGAL PROCEEDINGS
Yorkshire is routinely a party to legal proceedings arising in the ordinary
course of business which are not material, either individually or in the
aggregate. Yorkshire currently is not a party to any material legal
proceedings nor is it aware of any threatened material legal proceedings.
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Litigation is ongoing with respect to another corporation's use of actuarial
surpluses declared in the Electricity Supply Pension Scheme ("ESPS"). The
Pension Ombudsman (a UK arbitrator appointed by statute) has issued a "final
determination" in favor of complaints made by members of the ESPS relating to
another corporation's use of the ESPS surplus to offset such corporation's
additional costs of early payment of pensions as a result of reorganization or
redundancy, together with additional contributions required after a valuation.
Under that determination, the Pension Ombudsman directed such corporation to
pay into ESPS the amount of that use of the surplus plus interest. The Pension
Ombudsman's final determination has been successfully challenged in the
courts. At the same time, the courts also considered other areas of
uncertainty relating to the uses made of actuarial surpluses arising in the
ESPS, including the ability to reduce or suspend standard employer
contributions to reduce such surpluses. The courts ruled that such reductions
were permissible. The final decisions of the courts are subject to appeal. If
any of the decisions are reversed on appeal they may have an adverse effect on
Yorkshire, which has made similar use of its actuarial surplus, but no
assurance can be given as to the extent of that effect.
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THE ELECTRIC UTILITY INDUSTRY IN GREAT BRITAIN
The information set forth below relating to the electric utility industry in
Great Britain has been derived from publicly available sources.
SUMMARY
The following summarizes the general structure of the electric utility
industry in England and Wales as it has developed since the privatization of
the industry in 1990. The electric utility industry in England and Wales is
divided into various functions, with different companies participating in the
respective functions. This is in contrast to the US utility industry, in which
vertically integrated companies generally participate in all functions.
<TABLE>
<CAPTION>
FUNCTION DESCRIPTION OF ELECTRICITY MAJOR PARTICIPANTS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Generation Power station production of electricity National Power plc, PowerGen, plc
British Energy plc, The Energy Group
plc, First Hydro Company
- -----------------------------------------------------------------------------------------------------------------------
Wholesale Trading The Pool is a single market for a bulk trading All generators and suppliers of electricity.
(buying and selling) of virtually all the
electricity generated in England and Wales.
- -----------------------------------------------------------------------------------------------------------------------
Transmission Bulk transfer of electricity across the Grid, The National Grid Company ("NGC")
which is a high voltage open-acccess system
from generators to RECs.
- -----------------------------------------------------------------------------------------------------------------------
Distribution A REC's transfer of electricity from NGC's high Yorkshire and the 11 other RECs
voltage transmission system across the REC's
low voltage distribution system to end-user
consumers.
Each REC has a substantially regulated
monopoly for distribution of electricity in
its franchise area. Accordingly, a REC is
the exclusive distributor of electricity
within its franchise area regardless of
the identity of the generator or supplier
actually selling the electricity at retail
to the end-user. This regulated monopoly
in the distribution business can be
distinguished from the efforts to introduce
competition in the supply business.
- -----------------------------------------------------------------------------------------------------------------------
Supply The retail sale of electricity to end-user Yorkshire, the 11 other RECs and a
consumers. It is generally similar to power- variety of other companies holding
marketing in the US. End-user consumers are supply licenses issued by the Regulator.
divided into two groups: Other companies include the generators
and other energy providers
(i) Franchise Supply Customers. Currently
they must buy their electricity from their
local REC. Starting in September 1998, they
will be allowed to buy from any licensed
supplier. However, the local REC will still
distribute their electricity.
(ii) Non-Franchise Supply Customers.
Currently, they can purchase their electricity
from any licensed supplier although it is
distributed by the local REC.
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
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INDUSTRY STRUCTURE
Great Britain has two separate but connected electricity markets, each with
a different commercial framework. In England and Wales electricity is produced
by generators, the largest of which are National Power plc ("National Power"),
PowerGen plc ("PowerGen") and Nuclear Electric plc, a subsidiary of British
Energy plc ("British Energy"). Electricity is transmitted through the Grid by
NGC and distributed by the twelve RECs in their respective franchise areas.
Most customers are currently supplied with electricity by their local REC,
although there are other suppliers holding second-tier supply licenses,
including other generators and RECs, who can compete to supply customers with
higher Peak Demand in such REC's franchise area.
In Scotland there are two vertically integrated companies, Scottish Power
plc ("Scottish Power") and Scottish Hydro Electric plc ("Hydro Electric"),
each generating, transmitting, distributing and supplying electricity within
their respective franchise areas as well as competing to supply electricity
elsewhere. Scottish Nuclear, another subsidiary of British Energy, sells all
the electricity it generates to Scottish Power and Hydro Electric.
The interconnection between the two transmission systems, owned by Scottish
Power and NGC, is capable of transferring electricity between Scotland and
England. There is also an interconnection with France, owned by NGC and
Electricite de France, through which electricity can be transferred between
France and England and Wales.
Virtually all electricity generated in England and Wales is sold by
generators and bought by suppliers through the Pool. A generator which is also
a licensed supplier must nevertheless sell all the electricity it generates
into the Pool and purchase all the electricity which it supplies from the
Pool. Because Pool prices fluctuate, generators and suppliers may enter into
bilateral arrangements, such as CFDs, to provide a degree of protection
against such fluctuations. See "Business--Risk Management".
There is no equivalent to the Pool in Scotland, but Scottish Power and Hydro
Electric are obligated by their licenses to offer electricity for sale to
second-tier suppliers. They are also required to provide access to their
transmission and distribution systems on a non-discriminatory basis to
competing suppliers and generators.
INDUSTRY BACKGROUND
The industry structure described above was put in place in March 1990 in
order to introduce competition into the generation and supply of electricity.
At the same time, a licensing regime was introduced for the electricity
industry both in England and Wales as well as in Scotland.
The RECs, which at that time collectively owned NGG, NGC's holding company,
were privatized in December 1990. National Power and PowerGen were partly
privatized in March 1991 (with the balance of the UK government's holdings
being sold to investors in March 1995). Scottish Power and Hydro Electric were
privatized in June 1991 and British Energy was privatized in July 1996. By
December 1995, most of the RECs ownership of NGG had been publicly sold, and
NGG was listed on the London Stock Exchange. Since the summer of 1995, 11 of
the RECs have been acquired by other companies. Yorkshire was indirectly
acquired by Yorkshire Group in April 1997.
In 1990, the vast majority of generating capacity in England and Wales was
owned by three generators. However, since that time competition in generation
has increased as RECs and other new entrant generators have constructed new
plants and as imports through the interconnections with Scotland and France
have grown. In addition, pursuant to undertakings given to the Regulator,
National Power and PowerGen have disposed of an aggregate of 6,000 MW of
generating capacity to The Energy Group plc ("Energy Group").
Competition in supply has been progressively introduced both in England and
Wales and in Scotland. The RECs in England and Wales, and Scottish Power and
Hydro Electric in Scotland, are subject to competition from second-tier
suppliers for the supply of electricity to larger customers in their
respective franchise areas. In April
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1990, electricity users with a Peak Demand in excess of 1 MW became Non-
Franchise Customers of a REC and therefore were allowed to choose their
electricity supplier. In April 1994, the Non-Franchise Customer class was
expanded to include users with a Peak Demand in excess of 100 kW. Currently,
all electricity customers in Great Britain are scheduled to be able to choose
their electricity supplier over a six month phase in the period beginning in
September 1998, according to customers' designated postal codes.
DISTRIBUTION OF ELECTRICITY
Accessibility Requirements
Each of the RECs is required to offer terms for connection to its
distribution system to any person, for use of its distribution system to any
authorized electricity operator and for the provision of supplemental and
backup supplies to any person. In providing use of its distribution system, a
REC must not discriminate between its own supply business and that of any
other authorized electricity operator, or between those of other authorized
electricity operators; nor may its charges differ except where justified by
differences in cost. Similar principles apply to the provision of supplemental
and backup supplies of electricity, and in the carrying out of connection
works. Disputes over the terms of offers may be determined by the Regulator.
Price Control
Revenue from the distribution business is controlled by a formula
principally based on P x (1+(RPI-Xd)) where Xd is currently 3% (the
"Distribution Price Control Formula"). P is the previous year's maximum
average price per unit of electricity distributed. Because the maximum average
price in any year is therefore based in part on the maximum average price in
the preceding year, a price reduction in any given year has an ongoing effect
on the maximum average price for all subsequent years. RPI is a measure of
inflation, and equals the percentage change in the UK Retail Price Index
between the six month period of July to December of the two previous years.
Because RPI is based on a weighted average of the prices of goods and services
purchased by a typical household, which bear little resemblance to the inputs
contributing to Yorkshire's business costs, the RPI calculation may not
accurately reflect the price changes affecting Yorkshire. The Xd factor is
established by the Regulator following review. This formula determines the
maximum average price per unit of electricity distributed (in pence per
kilowatt hour) which a REC is entitled to charge. This price, when multiplied
by the expected number of units to be distributed, determines the expected
distribution revenues of the REC for the relevant year. The current
Distribution Price Control Formula permits RECs to partially retain additional
revenues due to increased distributions of units and allows for a pound for
pound increase in operating profit for efficient operations and reduction of
expenses within a review period. However, during the next Distribution Price
Control Formula review, the Regulator may reduce any such increase in
operating profit to the extent he determines it not to be a function of
efficiency savings or, if genuine efficiency savings have been made, he
determines that customers should benefit through lower prices in the future.
Upon privatization, the Regulator set different Xd factors for each of the
RECs to permit annual price increases by the RECs of between 0% and 2.5% (1.3%
for Yorkshire) greater than RPI for the five year period ending on March 31,
1995. Following a scheduled distribution price review by the Regulator of all
twelve RECs in August 1994, the Regulator required an overall real reduction
in regulated distribution prices for Fiscal Year 1996 of between 11% and 17%
(14% for Yorkshire) from the previous year, and set the Xd factor for the
subsequent four year period ending on March 31, 2000 to subtract 2% from RPI
in each such year. Also in connection with the August 1994 distribution price
review, the Regulator, (i) halved from 100% to 50% the extent to which
distribution revenues would be allowed to vary with the number of units of
electricity distributed and (ii) determined numbers of Franchise Area
customers based on REC forecasts for each year through and including Fiscal
Year 2000, allowing distribution revenues to vary by 50% of the predetermined
annual change in such forecast numbers. The stated intention of the Regulator
in introducing this change was "to remove any artificial incentive on the
companies to sell more electricity, while retaining a general incentive for
companies to seek out and meet the needs of their customers". In light of
information concerning the financial position of the RECs that emerged during
the unsuccessful bid by Trafalgar House plc for Northern Electric plc (one of
the
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RECs) and representations by Consumers' Committees and others, the Regulator
conducted an unscheduled distribution price review of all twelve RECs in July
1995. As a result of this unscheduled review, the Regulator revised regulated
distribution prices for the four year period ending on March 31, 2000,
requiring an overall real reduction in regulated distribution prices for
Fiscal Year 1997 of between 10% and 13% (13% for Yorkshire) from the previous
year, and resetting the Xd factor for the remaining three year period ending
on March 31, 2000 to subtract 3% from RPI in each such year.
The Distribution Price Control Formula is expected to be further reviewed
with effect from April 1, 2000. Following the review, the Regulator will make
a proposal for a revised formula to apply from that date. If a REC does not
agree with the proposal the Regulator may refer the proposal to the MMC and,
following the publication of the report of the MMC, the Regulator may make
appropriate modifications to the REC's PES License.
In setting the distribution charges each year, each REC must project the
permitted maximum average charge per unit to be distributed in that year. The
projection will have to take account of forecasts of units distributed,
distribution line losses, the actual change in RPI and NGC exit charges.
Failure to forecast accurately may result in overcharging or undercharging,
which is taken into account in the following year through a correction factor
in the Distribution Price Control Formula. If a REC has overcharged in the
previous year, the maximum average charge per unit distributed is reduced by
an amount to reflect the excess income received, to which is added interest.
In the event of undercharging, the Distribution Price Control Formula allows
the licensee to recover the shortfall in income plus interest.
In certain instances, however, overcharging or undercharging by a REC above
specific percentage thresholds may result in adjustments by the Regulator. If,
in any year, the average charge per unit distributed exceeds the permitted
maximum average charge per unit distributed by more than 3%, then, in the next
following year, the REC may not increase distribution charges unless it has
satisfied the Regulator that the average charge per unit in that next
following year is not likely to exceed the permitted maximum average charge.
If, with respect to any two successive years, the sum of the amounts by which
the average charge per unit distributed has exceeded the permitted maximum
average charge per unit distributed in the second of those years is more than
4% of that permitted maximum average charge, then, in the next following year,
the REC may be required by the Regulator to adjust its charges so that they
fall within the maximum permitted average charge. If, with respect to two
successive years, the licensee undercharges by more than 10% of the maximum
average charge, the Regulator may, by directions to the licensee, limit the
amount by which such undercharging may be recovered.
Since April 1995, the Distribution Price Control Formula has been notionally
divided into metering and non-metering components, with the metering component
equal to about 10% of each REC's allowed revenue. However, the Regulator
indicated when making these proposals that there should be no presumption that
this sum would be assigned to a metering business.
Operations related to the metering of network connections to non half-hourly
metered customers (generally residential and other small customers) are
subject to the metering component of the Distribution Price Control Formula.
Such price controls are scheduled to be disapplied from April 1, 2000, at
which time competitive market pricing is scheduled to be introduced. In a
joint statement issued in January 1998, the Regulator and OFGAS made proposals
concerning competition in meter reading. See "Business--Supply Business--
Strategy for the Supply Business". Competitive market pricing already exists
for operations related to the metering of network connections to half-hourly
metered customers.
Connection charges are levied when a customer first connects to a REC's
distribution system or makes a material change in electricity supply
requirements. These charges are excluded from the Distribution Price Control
Formula. In the August 1994 distribution review, the Regulator introduced the
concept of competition in providing connections to new customers and limited
the extent to which, and the circumstances in which, customers wishing to be
connected would be required to pay for the costs of reinforcement of the
distribution system.
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Data Management Services
Beginning in September 1998, the electricity supply market for Franchise
Supply Customers is currently scheduled to be opened to competition and
customers will be able to select the supplier of their choice. Significant
additional costs have been, and will be, incurred by the distribution business
to develop new systems to facilitate competition. The new services, termed
"data management services" include meter operation, data retrieval, processing
and aggregation, meter point administration and distribution use of system
billing.
Assuming that competition in supply starts as currently scheduled in
September 1998 for Franchise Supply Customers, Yorkshire Group presently
estimates that costs totalling (Pounds)75 million will have been incurred for
re-engineering and information technology work. Of such amount, approximately
(Pounds)19 million was expensed in Fiscal Year 1997. The Regulator has made
proposals (which have been accepted by Yorkshire) to allow Yorkshire recovery
of (Pounds)23 million over a five year period ending March 31, 2003. A further
(Pounds)7 million is expected to be recovered through Pool cost recovery and
other national mechanisms and (Pounds)8 million is expected to be capitalized
as such amount is expected to provide future benefits to the supply business.
As a result of the above, the residual amount of approximately (Pounds)18
million, which will not be recovered or capitalized, will be expensed in
Fiscal Years 1998 and 1999 as incurred.
The Regulator has also made proposals (which have been accepted by
Yorkshire) to provide an annual allowance of (Pounds)3 million for the period
1998 through 2000 to cover operating costs. This allowance will be reviewed at
the time of the Distribution Price Control Formula Review in 2000.
Such proposals therefore will allow Yorkshire to recover up to 50% of its
forecasted set-up and operating costs over a five year period. The shortfall
could be higher if: (i) operating costs are higher than anticipated (e.g.,
there is a higher level of customer activity); (ii) recovery of operating
costs is disallowed or reduced when the Distribution Price Control Formula is
reviewed for the period beginning April 1, 2000; or (iii) the integrated
national systems do not work as contemplated or require substantial
redevelopment.
SUPPLY OF ELECTRICITY
Licensed Suppliers
Subject to minor exceptions, all electricity customers in Great Britain must
be supplied by a licensed supplier. Licensed suppliers purchase electricity
and make open access use of the transmission and distribution networks to
achieve delivery to customers' premises.
There are two types of licensed suppliers: public electricity (or first-
tier) suppliers, also known as PESs, and second-tier suppliers. PESs include
the RECs, Scottish Power and Hydro Electric each supplying in its respective
franchise area. Second-tier suppliers include National Power, PowerGen,
Nuclear Electric, Scottish Power, Hydro Electric and other PESs (including
RECs supplying outside their respective franchise areas) and a number of
independent second-tier suppliers.
At present, a Franchise Supply Customer can only buy electricity from the
REC authorized to supply the relevant franchise area. Franchise Supply
Customers typically include residential and small commercial and industrial
customers. Non-Franchise Supply Customers are not limited to buying
electricity from the local REC and can choose to buy from a second-tier
supplier. Such customers are typically larger commercial and industrial
electricity users. Second-tier suppliers compete with one another and with the
local REC to supply customers in this competitive (or "non-franchise") sector
of the market.
Price Regulation
The supply of electricity to Franchise Supply Customers currently remains
subject to price control. The maximum average charge per unit of electricity
supplied (in pence per kilowatt hour) was controlled by a formula principally
based upon (P X (1 + (RPI-Xs)) + Y) (the "Supply Price Control Formula") where
Xs was
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2%. The initial value of Xs was set at 0 for all the RECs on March 31, 1990.
The Supply Price Control Formula was reviewed by the Regulator with effect
from April 1, 1994, when the Xs factor was set at 2% for all the RECs. This
applied until March 31, 1998. P was the previous year's maximum average price
per unit of electricity supplied (in pence per kilowatt hour) that relates to
the REC supply business's own costs and margin. RPI was a measure of
inflation, equaling the percentage change in the UK Retail Price Index between
the six month period of July to December of the two previous years. Because
RPI is based on a weighted average of the prices of goods and services
purchased by a typical household, which bear little resemblance to the inputs
contributing to Yorkshire's business costs, the RPI calculation may not
accurately reflect the price changes affecting Yorkshire. The Y factor was a
pass-through of certain costs which are either largely outside the management
control of the REC or have been regulated elsewhere. The Y factor thus covered
the REC's electricity purchase costs, including both direct Pool purchase
costs and costs of hedging, transmission charges made by NGC, REC distribution
charges and the Fossil Fuel Levy (described below) or amounts equivalent
thereto in respect of the purchase of non-leviable electricity which are
attributable to Franchise Supply Customers. The Supply Price Control Formula
was therefore designed to focus downward pressure on costs and working
capital, which are viewed as being within suppliers' direct control.
As with the Distribution Price Control Formula, there was a correction
factor in the Supply Price Control Formula in the event of overcharging or
undercharging. If a REC had overcharged in the previous year, the maximum
average charge per unit supplied was reduced by an amount to reflect the
excess income received, to which was added interest. In the event of
undercharging, the Supply Price Control Formula allowed the licensee to
recover the shortfall in income plus interest.
Under the current licensing regime, over a six-month period currently
scheduled to commence in September 1998 all customers, including those who are
currently Franchise Supply Customers, will be permitted to choose their
electricity supplier. The Regulator indicated in his supply price restraint
proposals published in October 1997, which proposals Yorkshire accepted, that
price regulation for supply to all residential and smaller business customers
within Yorkshire's former Franchise Area, whose annual consumption is under
12,000 kWh, would be extended beyond March 31, 1998 until an adequate level of
competition is established, and, at least, until March 31, 2000. The Regulator
has indicated that the nature and extent of possible restraints after that
date will be reviewed in the light of experience and prospects and that such
review would take place concurrently with the ongoing review of the
Distribution Price Control Formula.
The license modifications that have been implemented to effect the new
controls take the form of a series of price caps on the tariffs applicable to
residential and small business customers. The new controls (when taken
together with the reduction in the Fossil Fuel Levy which became effective on
April 1, 1998) have resulted in the implementation of small reductions,
effective April 1, 1998, in the tariffs for Yorkshire's residential and small
business customers compared to the corresponding tariffs in effect in August
1997. See "Fossil Fuel Levy". The new controls also require an additional 3%
below inflation reduction effective April 1, 1999. The license modifications
also discontinued the automatic pass-through of costs currently passed through
to residential and small business customers, consisting primarily of purchased
power costs.
In addition, the license modifications provide for an allowable charge to
cover the additional cost of providing data management services that will be
required to be provided by each REC. For a discussion of the costs associated
with these data management services, see"--Distribution of Electricity--Data
Management Services". The duration and level of the allowances for operating
costs are likely to be reviewed at the time of the next Distribution Price
Control Formula review. The license modifications also provide for restraints
on pre-payment meter charges.
Further, the license modifications stipulated that a REC should be
penalized: (i) where it starts to open its market more than three months after
the market opening by the first REC; (ii) where it opens successive tranches
of its market more than three months after the opening of the corresponding
tranche by the first REC; and (iii) where the market opening of the first REC
has been delayed beyond April 1998. The penalties will be calculated
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at 1% of the operating revenues of the supply business for Franchise Supply
Customers per month of delay, weighted by the proportion of customers affected
and applied as a reduction is allowed for distribution business income. If
Yorkshire does not open its market to competition until after April 1999, it
would incur a penalty of approximately (Pounds)6 million. It is now apparent
that some penalty will be incurred due to the delay in the opening of the
competitive market for Franchise Supply Customers until September 1998.
Yorkshire Group expects that Yorkshire will be prepared to open its Franchise
Area to such competition in September 1998.
THE POOL
The Pool was established in April 1990 for bulk trading of electricity in
England and Wales between generators and suppliers. The Pool reflects two
principal characteristics of the physical generation and supply of electricity
from a particular generator to a particular supplier. First, it is not
possible to trace electricity from a particular generator to a particular
supplier. Second, it is not practicable to store electricity in significant
quantities, creating the need for a constant matching of supply and demand.
Subject to certain exceptions, all electricity generated in England and Wales
must be sold and purchased through the Pool. All licensed generators and
suppliers must become signatories to the Pooling and Settlement Agreement,
which governs the constitution and operation of the Pool and the calculation
of payments due to and from generators and suppliers. The Pool also provides
centralized settlement of accounts and clearing. The Pool does not itself buy
or sell electricity.
Prices for electricity are set by the Pool daily for each half hour of the
following day based on the bids of the generators and a complex set of
calculations matching supply and demand and taking account of system
stability, security and other costs. Each day, generators inform NGC of the
amount of electricity which each of their generating units will be able to
provide the next day and the price at which they are willing to operate each
such unit. NGC uses this information to construct a "merit order" which ranks
each generating unit in order of increasing price. NGC then schedules the
stations to operate according to such merit order, calling into service the
least expensive generating units first and continuing to call generating units
into service until enough are operating to meet the demand of all suppliers.
Factors which may constrain NGC's ability to order stations into operation in
strict observance of the merit order include transmission system constraints
and the inflexibility of some generating units. A computerized system (the
settlement system) is used to calculate prices and to process metered,
operational and other data and to carry out the other procedures necessary to
calculate the payments due under the Pool trading arrangements. The settlement
system is administered on a day to day basis by NGC Settlements Limited, a
subsidiary of NGC, as settlement system administrator.
The UK government recently invited the Regulator to review these electricity
wholesale trading arrangements, trading arrangements outside the Pool and
price setting mechanisms. The review was launched in January 1998 with an
announcement that the Regulator and an independent panel had been asked to
report to the Energy Minister by July 1998.
FOSSIL FUEL LEVY
All the RECs are obligated to obtain a specified amount of generating
capacity from non-fossil fuel sources (the "NFFOs"). Because electricity
generated from non-fossil fuel plants is generally more expensive than
electricity from fossil fuel plants, a levy system (the "Fossil Fuel Levy")
has been instituted to reimburse the generators and the RECs for the extra
costs involved. The Regulator sets the rate of the Fossil Fuel Levy annually.
The current Fossil Fuel Levy is 0.9% of the value of sales of electricity made
in England and Wales and 0.8% of the value of sales of electricity made in
Scotland.
REGULATION UNDER THE ELECTRICITY ACT
The Regulator
The principal legislation governing the structure and regulation of the
electricity industry in Great Britain is the Electricity Act. The Electricity
Act established the industry structure described above so as to enable
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privatization to take place. The Electricity Act also created the
institutional framework under which the industry is currently regulated,
including the office of the Regulator, who is appointed by the Secretary of
State. The present Regulator, Professor Stephen Littlechild, was appointed for
a five year term commencing September 1, 1989 and he was reappointed in 1994
for a further five year term ending on August 31, 1999. Professor Littlechild
holds the formal title of Director General of Electricity Supply and is head
of OFFER.
The Regulator's functions under the Electricity Act include granting
licenses to generate, transmit or supply electricity (a function which he
exercises under a general authority from the Secretary of State); proposing
modifications to licenses and, in case of non-acceptance of such proposals by
licensees, making license modification references to the MMC; enforcing
compliance with license conditions; advising the Secretary of State in respect
of the setting of each NFFO round; calculating the Fossil Fuel Levy rate and
collecting the levy; determining certain disputes between electricity
licensees and customers; and setting standards of performance for electricity
licensees. The term "supply" as used in the context of the Electricity Act and
the PES License covers both distribution and supply activities.
The Regulator exercises concurrently with the Director General of Fair
Trading certain functions relating to monopoly situations under the Fair
Trading Act 1973 and certain functions relating to courses of conduct which
have, or are intended or likely to have, the effect of restricting, distorting
or preventing competition in the generation, transmission or supply of
electricity under the Competition Act 1980.
The Electricity Act requires the Regulator and the Secretary of State to
exercise their functions in the manner each considers is best calculated to
ensure that all reasonable demands for electricity are satisfied, secure that
license holders are able to finance their licensed activities and promote
competition in the generation and supply of electricity.
Subject to these duties, the Secretary of State and the Regulator are
required to exercise their functions in the manner which each considers is
best calculated: to protect the interests of consumers of electricity supplied
by licensed suppliers in respect of price, continuity of supply, and the
quality of electricity supply services; to promote efficiency and economy on
the part of licensed electricity suppliers and the efficient use of
electricity supplied to consumers; to promote research and development by
persons authorized by license to generate, transmit or supply electricity; to
protect the public from the dangers arising from the generation, transmission
or supply of electricity; and to secure the establishment and maintenance of
machinery for promoting the health and safety of workers in the electricity
industry. The Secretary of State and the Regulator also have a duty to take
into account the effect on the physical environment of activities connected
with the generation, transmission or supply of electricity.
In performing their duties to protect the interests of consumers in respect
of prices and other terms of supply, the Secretary of State and the Regulator
are required to take into account in particular the interests of consumers in
rural areas. In performing their duties to protect the interests of consumers
in respect of the quality of electricity supply services, they are required to
take into account in particular the interests of those who are disabled or of
pensionable age.
On June 30, 1997, the UK government announced its intention to conduct a
comprehensive review of the regulatory framework governing the electricity
distribution and supply businesses in England and Wales, as well as the
regulatory framework applicable to other privatized utilities. The review
culminated in the March Green Paper which sets forth a number of proposals of
the UK Government designed to reexamine utility regulation in the UK. Among
the main proposals contained within the March Green Paper are the retention of
"RPI-X" as the fundamental basis for price regulation; increased transparency
and consistency of regulation; the merger of OFFER and OFGAS; the separate
licensing of the distribution and supply businesses of the PESs; amendment of
the statutory duties of utility regulators to provide a new primary duty to
exercise their functions in the manner best calculated to protect the
interests of the consumers in the short and long term, wherever possible
through promoting competition; and adopting price regulation to distinguish
between income earned through companies' own efforts and income which results
from other factors. Some of these proposals would require primary legislation.
Responses to the March Green Paper by interested parties have been requested
by May 31, 1998. See "Risk Factors--Factors Relating to Yorkshire's Business--
Governmental Review of Utility Regulation".
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In October 1997, the UK government invited the Regulator to consider
parameters for a review of electricity trading arrangements. Such a review
would focus on the wholesale electricity market in England and Wales and would
likely cover existing trading within the Pool, trading arrangements outside
the Pool and price setting mechanisms. The impact on, and possible need for
change to, the framework of regulatory controls could also be considered,
including Pool governance, regulation of and access to the Grid, licenses, the
Electricity Act and the implications of European Union law. A review of
certain of these issues was launched in January 1998 with an announcement that
the Regulator and an independent panel had been asked to report to the Energy
Minister by July 1998.
In December 1997, the UK government announced a review of energy sources for
power generation, including fuel diversity, sustainable development and the
role of coal. Representations of interested parties were to be submitted by
mid-February 1998. While the review is underway, the Secretary of State has
deferred decisions on most outstanding or new applications for the
construction of generating stations. An Energy Select Committee Report on the
Coal Industry issued in April 1998 recommended that such deferral, as it
relates to the construction of gas fired generating stations, be lifted as
soon as possible. The Trade and Industry Select Committee is also undertaking
an inquiry into a number of aspects of UK energy policy.
CONSUMERS' COMMITTEE
The Regulator is required under the Electricity Act to establish a
consumers' committee for the franchise area of each PES License holder (or, if
the Secretary of State so determines, for the franchise areas of two or more
such suppliers). Each committee comprises a chairman appointed by the
Regulator after consultation with the Secretary of State and between 10 and 20
other members appointed by the Regulator after consultation with the committee
chairman. The duties of each committee are to make representations to, and
consult with, their allocated PES License holders about matters affecting the
interests of customers or potential customers of such supplier(s), to review
matters affecting the interests of electricity consumers in such committee's
area, and to advise the Regulator on any other matter which warrants
discussion or which is referred to them by the Regulator.
LICENSES
Generation Licenses
Unless covered by an exemption, all electricity generators engaging in the
construction, expansion or operation of a power station in Great Britain are
required to have a generation license. There are currently 51 generation
license holders, including RPG, in Great Britain. Although generation is not
subject to price control, generators are not permitted to discriminate between
customers or cross subsidize their licensed activities. The conditions
attached to a generation license in England and Wales require the holder,
among other things, to comply with the Grid Code, to comply with any REC's
distribution code to the extent applicable, to be a member of the Pool and to
submit relevant generating sets for central dispatch. The conditions attached
to a generation license in Scotland require the holder, among other things, to
comply with the Scottish Grid Code. Failure to comply with any of the
generation license conditions may subject the licensee to a variety of
sanctions, including enforcement orders by the Regulator or license revocation
if the license holder is not in compliance with an enforcement order.
PES Licenses
Each of the RECs, Scottish Power and Scottish Hydro Electric has a PES
License for its Franchise Area and is required, under the Electricity Act, to
supply electricity upon request to any premises in that area, except in
specified circumstances. Each PES is also required not to discriminate between
its own supply business and other users of its distribution system and the PES
License prohibits cross subsidy between the various regulated businesses. As
described above, PESs are subject to separate price controls on the amounts
they may charge for the use of their distribution system by all customers in
their Franchise Area and for the supply of electricity to Franchise Supply
Customers. The PES Licenses also require the licensee to procure electricity
at the best price reasonably obtainable having regard to the sources
available.
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As part of his continued monitoring of the electric utility industry, the
Regulator published on August 15, 1996 comparative information relating to the
RECs' economic purchasing performance. The publication entitled "Yardstick of
Electricity Purchase Costs", compared in yardstick value terms, the generation
costs which RECs passed through to Franchise Supply Customers in Fiscal Years
1995 and 1996 under the Supply Price Control Formula. The Regulator has
reviewed the supply price controls applicable to PES License holders and
published in October 1997 proposals for new controls to take effect on April
1, 1998. He issued a consultation paper on this matter on September 5, 1996
entitled "The Competitive Electricity Market from 1998: Price Restraints". He
subsequently issued four further consultation papers in January, May, July and
August, 1997. The October 1997 proposals were for maximum price restraints in
respect of supply to residential and small business customers for a period of
at least two years beginning April 1, 1998, which would eliminate the pass-
through of costs to such customers, consisting primarily of purchased power
costs. Yorkshire accepted these proposals. See "--Supply of Electricity--Price
Regulation".
In England and Wales, each PES License limits the extent of the generation
capacity in which the relevant REC may hold an interest without the prior
consent of the Regulator ("own-generation limits"). These own-generation
limits, expressed in megawatts, currently restrict the participation of a REC
in generation to a level of approximately 15% of the simultaneous maximum
electricity consumption in that REC's franchise area at the time of
privatization. In the case of Yorkshire, the own-generation limit is fixed at
800 MW.
The Regulator has stated that it would be reasonable to consider a REC's
request to increase its own- generation limit on the condition that it
accepted explicit restrictions on the contracts it signed with its supply
business, and that at a minimum the REC would be prohibited from entering into
additional own-generation contracts in its franchise market. The Regulator
considers that an increase in own-generation limits subject to such
restrictions could allow a REC to contribute more fully to the development of
competition in generation without the allegation that it was exploiting its
captive market and local monopoly position. In June 1996, the Regulator stated
that he had indicated to Energy Group, in the context of its acquisition of
6,000 MW of generating capacity from National Power and PowerGen, that he
would be favorably inclined to relax the own-generation limits of Energy Group
subject to the Regulator and Energy Group agreeing to license modifications as
set out in a consultation paper which he had published in August 1995.
The Regulator has made modifications to 14 PES Licenses in connection with
the introduction of competition for Franchise Supply Customers currently
scheduled to begin in September 1998. These modifications comprise a number of
new obligations to offer services to all competing suppliers. These services
are generally known as data management services, including registration, data
collection and aggregation, meter operation and provision of prepayment meter
infrastructure. The Regulator has issued full modifications to the first-tier
and second-tier licenses to encompass the changes. In response to respective
individual requirements, the PESs are providing collectively a data transfer
service. Preparations are being made to provide these services as part of a
program of work and in October 1997 the Regulator made final proposals for the
recovery of the costs of this program which were accepted by Yorkshire in
November 1997.
The RECs are also contributing to a program of work by the Pool to adopt
settlement arrangements for the competitive market in 1998. It has been agreed
that these costs, subject to a cap above which recovery would be partial, will
be recovered from charges to be made to suppliers by the Pool over a five year
period.
Second-Tier Supply Licenses
Other than a PES in its Franchise Area and subject to certain other
exceptions, a supplier of electricity to premises in Great Britain must
possess a second-tier supply license. Subject to the restrictions described in
"--Supply of Electricity" above, second-tier licensees may compete for the
supply of electricity with one another and with the PES for the relevant area.
There are currently 40 second-tier supply license holders for England and
Wales, including Yorkshire, and 27 for Scotland.
Transmission Licenses
In England and Wales, NGC is the only transmission license holder. The
transmission license imposes on NGC the obligation to operate the merit order
system for the central dispatch of generating units and gives NGC
responsibility for the economic purchasing of ancillary services from
generators and suppliers. The transmission
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license requires NGC to offer terms on a nondiscriminatory basis for the
carrying out of works for connection to, and use of, the transmission system.
Modifications to Licenses
Subject to a power of veto by the Secretary of State, the Regulator may
modify license conditions with the agreement of the license holder. He must
first publish the proposed modifications and consider representations or
objections made. If the Regulator fails to agree to modifications with a
license holder, he may refer a matter relating to generation, transmission or
supply of electricity under a license to the MMC. If the MMC finds that the
matter referred to it has, or may be expected to have, specified effects
adverse to the public interest which could be remedied or prevented by a
license modification, the Regulator is required to make modifications that
appear to him requisite for the purpose of remedying or preventing the adverse
effects identified by the MMC. Modifications to License conditions may also be
made by the Secretary of State as a consequence of monopoly, merger or other
competition references under general UK competition law.
Following the acquisition of Yorkshire by Yorkshire Group, the Regulator
proposed that Yorkshire's PES License be modified, by agreement, to take into
account the fact that the PES License is now held by a subsidiary company. In
particular, the Regulator proposed that the license be modified to provide
that, with few exceptions, the only business activities which Yorkshire is
permitted to undertake directly are its franchise and second-tier supply
businesses and its distribution business. The license modifications also
require Yorkshire to ensure that it has sufficient management resources and
financial resources and facilities to conduct its supply and distribution
businesses and to comply with its statutory and license obligations. Yorkshire
is required to provide an annual certificate to the Regulator approved by the
Yorkshire Board of Directors and signed by a Director to that effect and in
the interim to notify the Regulator immediately of any changes threatening the
validity of such certificates. Additionally, the license modifications require
Yorkshire to obtain from AEP and NCE legally enforceable undertakings in favor
of Yorkshire that they and their subsidiaries will refrain from any action
which would be likely to cause Yorkshire to breach any of its obligations
under the Electricity Act or the PES License. Further, the consent of the
Regulator is required for Yorkshire to create security over its assets, to
incur indebtedness or to give guarantees, unless the transaction is on normal
commercial and arm's length terms and for a "permitted purpose" (which refers
to the supply, distribution or generation business, or any business conducted
by Yorkshire or its affiliates or subsidiaries on March 31, 1997) or the
transaction involves any businesses whose aggregate revenues in any financial
year do not exceed 5% of the aggregate turnover of the supply, second-tier
supply and distribution businesses in the previous financial year. The consent
of the Regulator also is required before Yorkshire may transfer assets or make
loans to affiliates or subsidiaries except for certain specified purposes,
including payment of dividends out of distributable reserves, repayments of
capital, and payments on normal commercial and arm's length terms for goods,
services or assets supplied. These provisions are subject to an overriding
provision in the PES License which prevents any REC from disposing of (which
would include creating a security interest in) distribution assets without the
Regulator's express prior consent. Additionally, the license modifications
require Yorkshire to use reasonable efforts to maintain the investment grade
credit ratings of its debt. Finally, because Yorkshire is now owned by
Yorkshire Group, the Regulator required Yorkshire to obtain from AEP and NCE
legally enforceable undertakings to provide information to Yorkshire, as
licensee, in order to comply with requirements of the Regulator. These
modifications to the PES License have been agreed to by Yorkshire and took
effect on December 15, 1997 and the required undertakings were also provided
on December 15, 1997. In February 1998, the Regulator issued, for public
consultation, proposals for further modifications to the licenses of PESs that
have been subject to takeovers. Further proposals are expected to be made by
the Regulator in light of this consultation paper that may result in further
modifications to PES licenses. See "Risk Factors--Factors Relating to
Yorkshire's Business--Regulatory Policies Affecting Yorkshire Group".
TERM AND REVOCATION OF LICENSES
Yorkshire's PES License will continue in effect until at least 2025 unless
revoked. Under ordinary circumstances, the license may not be revoked except
on 25 years' prior notice, which notice may not be given until 2000.
Otherwise, the Secretary of State may revoke a PES License by not less than 30
days' notice in writing to the licensee in certain specified circumstances
including any failure to comply with a final order of the Regulator requiring
the license holder to comply with its license conditions or requirements, or
the insolvency of the licensee.
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MANAGEMENT
MANAGEMENT OF YORKSHIRE GROUP
The following table sets forth certain information with respect to the
officers and directors of Yorkshire Group as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- ------------------------------------
<S> <C> <C>
Dr. E. Linn Draper, Jr............ 55 Chairman and Director
Donald M. Clements, Jr............ 48 Director
Armando A. Pena................... 52 Chief Financial Officer and Director
Wayne H. Brunetti................. 55 Director
Richard C. Kelly.................. 51 Director
Teresa S. Madden.................. 41 Director
</TABLE>
Dr. E. Linn Draper, Jr. Has been a Director and Chairman of Yorkshire Group
since February 1997. Since April 1993 has been Chairman of the Board of
Directors of AEP and all of its major subsidiaries. In March 1992, appointed
President of AEP and President and Chief Operating Officer of American
Electric Power Service Corporation. Serves as a Director of BCP Management,
Inc. and Cell Net Data Systems.
Donald M. Clements, Jr. Has been a Director of Yorkshire Group since
February 1997. Since October 1995, has been President of AEP Resources, Inc.
Joined AEP in September 1994 as Senior Vice President. From 1978 to 1994, was
employed with Gulf States Utility Company.
Armando A. Pena. Since February 1997, has been a Director, and, since July
1997, has been Chief Financial Officer of Yorkshire Group. Since January 1998,
has been Chief Financial Officer, and, since March 1996, Senior Vice President
and Treasurer of American Electric Power Service Corporation. Since November
1995, has been Treasurer of all of AEP's major subsidiaries. From 1989 to
March 1996, was Vice President-Finance of American Electric Power Service
Corporation.
Wayne H. Brunetti. Has been a Director of Yorkshire Group since February
1997. Since August 1997, has been President and Chief Executive Officer of
NCE. Since January 1996, has been the President and Chief Executive Officer of
Public Service Company of Colorado. Joined Public Service Company of Colorado
in July 1994 as President and Chief Operating Officer. From 1991 to July 1994,
was President and Chief Executive Officer of Management Systems International,
a management consulting firm. Serves as a Director of e prime and YGSC Natural
Fuels.
Richard C. Kelly. Has been a Director of Yorkshire Group since February
1997. Since August 1997, has been Executive Vice President, Finance and
Support Services and Chief Financial Officer of NCE. From 1990 to August 1997,
was Chief Financial Officer of Public Service Company of Colorado.
Teresa S. Madden. Has been a Director of Yorkshire Group since February
1997. Since September 1997, has been Controller and Secretary of NCE. From
1990 to August 1997, was Director of Corporate Accounting and Assistant
Secretary of Public Service Company of Colorado.
MANAGEMENT COMPENSATION OF YORKSHIRE GROUP
The officers and directors of Yorkshire Group listed above (each an "AEP/NCE
Officer or Director", as applicable) receive no cash or non-cash compensation
as a result of their services performed for Yorkshire Group. The salaries of
all AEP/NCE Officers and Directors are paid by either AEP or NCE, as
applicable, solely for the services performed by them for either AEP or NCE,
as applicable.
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MANAGEMENT OF YORKSHIRE FINANCE
The following table sets forth certain information with respect to the Board
of Directors of Yorkshire Finance as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Graham J. Hall................................................ 54 Director
Roger Dickinson............................................... 51 Director
Andrew G. Donnelly............................................ 42 Director
</TABLE>
Graham J. Hall. Has been a Director of Yorkshire Finance since August 1997.
Since January 1998, has been the Chief Executive of Yorkshire. From April 1997
to December 1997, was the Group Operations Director of Yorkshire. From 1990
through 1997, was the Group Executive Director, Distribution of Yorkshire.
Roger Dickinson. Has been a Director of Yorkshire Finance since August 1997.
Since 1989, has been Group Company Secretary and Solicitor of Yorkshire.
Andrew G. Donnelly. Has been a Director of Yorkshire Finance since December
1997. Since January 1998, has been Finance Director of Yorkshire. From January
1996 through December 1997, was Group Financial Controller of Yorkshire. From
1993 to 1996, was Financial Controller, System Division of Yorkshire.
MANAGEMENT COMPENSATION OF YORKSHIRE FINANCE
The directors of Yorkshire Finance listed immediately above receive no cash
or non-cash compensation as a result of their services performed for Yorkshire
Finance. The salaries of all directors listed immediately above are paid by
Yorkshire solely for their services performed for Yorkshire.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described under "Business--Business Restructuring", an alternative
ownership structure is being pursued for the generation business. Yorkshire
currently contemplates that such assets may be transferred to a new entity or
to new entities that will be an indirect subsidiary or will be indirect
subsidiaries of the US Parents. It is expected that proceeds from the transfer
of these assets will be used to reduce debt of the Guarantor.
Total assets less current liabilities employed by the generation business at
December 31, 1997 were (Pounds)168 million. Operating income attributable to
the generation business in the nine months ended December 31, 1997 was
(Pounds)12 million. See "Business--Business Restructuring".
SECURITY OWNERSHIP
Yorkshire Group is wholly owned indirectly by AEP and NCE. Yorkshire Finance
is wholly owned by Yorkshire Group. The following table shows the number of
shares of common stock of AEP and NCE, respectively, owned by the directors
and executive officers of Yorkshire Group and Yorkshire Finance as of December
31, 1997:
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TITLE OF SECURITY BENEFICIALLY OWNED(1)
- ---- ----------------- ---------------------
<S> <C> <C>
Dr. E. Linn Draper, Jr................. AEP Common Stock 7,373(2)(3)(4)
Donald M. Clements, Jr................. AEP Common Stock 907(2)
Armando A. Pena........................ AEP Common Stock 7,761(2)
Wayne H. Brunetti...................... NCE Common Stock 370,802(5)(6)
Richard C. Kelly....................... NCE Common Stock 143,515(5)
Teresa S. Madden....................... NCE Common Stock 28,938(5)
Directors of Yorkshire Finance and
Yorkshire Group as a group
(6 persons)........................... AEP Common Stock 16,041
NCE Common Stock 543,255
</TABLE>
- --------
(1) "Beneficial ownership" means the sole or shared power to vote, or to
direct the voting of, a security and/or investment power with respect to a
security.
(2) Includes shares of AEP common stock held in the AEP Savings Plan as
follows: Dr. Draper 2,717 shares, Mr. Clements 907 shares and Mr. Pena
3,222 shares.
(3) Includes 2,200 shares of AEP common stock held in joint tenancy with Dr.
Draper's wife.
(4) Includes 2,050 shares of AEP common stock held in the AEP Performance
Share Incentive Plan.
(5) Includes shares of NCE common stock in the form of unexercised stock
options awarded pursuant to the Omnibus Incentive Plan as follows: Mr.
Brunetti 352,334, Mr. Kelly 141,050 and Ms. Madden 28,550 shares.
(6) Includes 18,468 shares of NCE common stock held in joint tenancy.
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DESCRIPTION OF THE TRUST SECURITIES
The Trust Securities will be issued pursuant to the terms of the Trust
Agreement. The Trust Agreement will be qualified as an indenture under the
1939 Act. The Property Trustee will act as the indenture trustee with respect
to the Trust, as well as the Trust Securities Guarantee, for purposes of
compliance with the provisions of the 1939 Act. The terms of the Trust
Securities will include those stated in the Trust Agreement, the Delaware
Business Trust Act, and those made part of the Trust Agreement by the 1939
Act. The following summary of the material terms and provisions of the Trust
Securities is subject to, and qualified in its entirety by reference to, the
Trust Agreement, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus is a part, as well as the 1939 Act.
GENERAL
The Trust Agreement authorizes the Administrative Trustees, on behalf of the
Trust, to issue the Trust Securities, which represent undivided beneficial
interests in the assets of the Trust. The Trust Agreement does not permit the
issuance by the Trust of any securities other than the Trust Securities and
the Control Certificate or the incurrence of any indebtedness by the Trust.
Pursuant to the Trust Agreement and the Deposit Agreement, the Property
Trustee will own Book-Entry Interests representing a 100% beneficial interest
in the Junior Subordinated Debentures for the benefit of the Trust and the
holders of the Trust Securities.
Pursuant to the Trust Securities Guarantee, Yorkshire Group will guarantee
the payment of Distributions and payments upon redemption of the Trust
Securities or liquidation of the Trust, but only in each case to the extent of
sufficient funds held by the Trust and available therefor. See "Description of
the Trust Securities Guarantee". The Trust Securities Guarantee does not cover
payment of Distributions on the Trust Securities or amounts payable on
redemption or otherwise when the Trust does not have sufficient funds
available to make such payments. In such event, a remedy of a holder of Trust
Securities is to direct the Property Trustee to enforce its rights under the
Junior Subordinated Debentures and the Debentures Guarantee. In addition, if
Interest Payments or any other payments are due but have not been made on the
Junior Subordinated Debentures, pursuant to the terms of the Debentures
Guarantee, a holder of Trust Securities may institute a legal proceeding
directly against Yorkshire Group without first instituting a legal proceeding
against or requesting or directing that action be taken by the Property
Trustee or any other person or entity for enforcement of payment to such
holder under the Debentures Guarantee in respect of Interest Payments or any
other payments due on the Junior Subordinated Debentures having a principal
amount equal to the aggregate Liquidation Amount of the Trust Securities of
such holder on or after the due dates specified in the Junior Subordinated
Debentures. See "Description of the Trust Securities Guarantee", "Description
of the Debentures Guarantee" and "Relationship Among the Trust Securities, the
Junior Subordinated Debentures, the Trust Securities Guarantee and the
Debentures Guarantee". The above mechanisms and obligations, together with the
US Affiliates' obligations under the Agreement as to Expenses and Liabilities,
constitute a full and unconditional guarantee of the Trust's obligations under
the Trust Securities.
DISTRIBUTIONS
Distributions on each Trust Security shall be fixed at the rate of % per
annum of the stated Liquidation Amount of $25, payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year. Distributions
that are in arrears for more than one quarter will accumulate additional
Distributions thereon at the rate of % per annum thereof, compounded
quarterly ("Additional Distributions"). The term "Distributions" as used
herein includes any Additional Distributions, Additional Amounts or Additional
Interest (as defined herein). Distributions will accumulate from the date of
original issuance of the Trust Securities. The first Distribution Date for the
Trust Securities will be , 1998. The amount of Distributions payable for
any full period will be computed on the basis of a 360-day year of twelve 30-
day months and for any partial period shall be computed on the basis of the
number of days elapsed in a 360-day year of twelve 30-day months.
So long as no Event of Default under the Indenture has occurred and is
continuing, Yorkshire Finance has the right under the Indenture to defer the
payment of interest on the Junior Subordinated Debentures, at any time and
from time to time, for up to 20 consecutive quarters; provided, however,
Yorkshire Finance cannot defer
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Interest Payments beyond the Stated Maturity of the Junior Subordinated
Debentures. During such an Extension Period, quarterly Distributions on the
Trust Securities would also be deferred (but would continue to accumulate
Additional Distributions thereon at the rate of % per annum, compounded
quarterly) by the Trust. Until all deferred Interest Payments, together with
interest thereon, have been paid in full, neither Yorkshire Finance nor
Yorkshire Group may, directly or indirectly, (i) declare or pay any cash
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock, (ii) make any
payments on or repay, repurchase or redeem, any of its debt securities
(including other Indenture Securities or other junior subordinated securities
issued by Yorkshire Finance) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior to the Junior Subordinated Debentures or the
Debentures Guarantee, respectively, or (iv) make any payments on, or repay,
repurchase or redeem, any of its debt securities held by, make any loans or
advances to, or make any payments with respect to any guarantee of the debt
of, any affiliate, in each case other than (a) dividends or distributions in
shares of, or options, warrants or rights to subscribe for or purchase shares
of, the common stock of Yorkshire Finance or Yorkshire Group and exchanges or
conversions of common stock of one class for common stock of another class,
(b) payments by Yorkshire Group under the Trust Securities Guarantee (or any
other guarantee by Yorkshire Group with respect to any securities issued by
its direct or indirect subsidiaries, provided that the proceeds from the
issuance of such securities were used to purchase other Indenture Securities
or other junior subordinated securities issued by Yorkshire Finance), (c)
payments by Yorkshire Group under the Debentures Guarantee, (d) any dividend
or payment by Yorkshire Group which is applied, directly or indirectly, to any
Tax Payments (as defined below), (e) payments by Yorkshire Group, directly or
indirectly, on the Intercompany Notes or any other promissory notes held by
Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary of
Yorkshire Group) evidencing loans made with the proceeds from the issuance by
Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary of
Yorkshire Group) of securities guaranteed by Yorkshire Group or (f) the
reinvestment of any proceeds received under clause (e) above by Yorkshire
Finance (or any other direct or indirect wholly-owned subsidiary of Yorkshire
Group) in additional debt securities of Yorkshire Group or any of its other
direct or indirect wholly-owned subsidiaries. "Tax Payments" shall mean any
direct or indirect payment by Yorkshire Group to governmental authorities in
respect of UK, US or Cayman Islands taxes arising from the operations of
Yorkshire Group, Yorkshire Finance, the Trust or Yorkshire as and when such
taxes become due and payable. Prior to the termination of any such Extension
Period, Yorkshire Finance may further extend the interest payment period;
provided that, such Extension Period, together with all such previous and
further extensions within such Extension Period, may not exceed 20 consecutive
quarters or the Stated Maturity of the Junior Subordinated Debentures. Upon
the termination of any Extension Period and the payment of all amounts then
due, Yorkshire Finance may commence a new Extension Period, subject to the
above requirements. As a result, there could be multiple Extension Periods of
varying lengths throughout the term of the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--Option to Defer Payment of
Interest".
Yorkshire Finance currently has no intention of exercising its right to
defer Interest Payments on the Junior Subordinated Debentures. Moreover,
because of the consequences of exercising such right, including a prohibition
on the payment of cash distributions by Yorkshire Finance and Yorkshire Group
with respect to their capital stock, Yorkshire Finance believes that the
likelihood of such exercise is remote.
In the event that a Distribution Date is not a Business Day (as defined
below), payment of the Distributions payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day is in
the next succeeding calendar year, payment of such Distributions shall be made
on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date (each date on which Distributions are
payable in accordance with the foregoing, a "Distribution Date"). A "Business
Day" shall mean any day other than a Saturday or a Sunday, or a day on which
banking institutions in The City of New York are authorized or required by law
or executive order to remain closed, or a day on which the corporate trust
office of the Property Trustee or the Indenture Trustee is closed for
business.
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Distributions on the Trust Securities must be paid and shall be deemed
payable on the Distribution Date only to the extent that the Trust has
sufficient funds available therefor. The payment of Distributions (if and to
the extent the Trust has sufficient funds available for the payment of such
Distributions) is guaranteed by Yorkshire Group as set forth herein under
"Description of the Trust Securities Guarantee". It is anticipated that the
revenue of the Trust available for Distributions on the Trust Securities will
be limited to payments under the Junior Subordinated Debentures or the
Debentures Guarantee. See "Description of the Junior Subordinated Debentures"
and "Description of the Debentures Guarantee". If Yorkshire Finance does not
make payments of principal of or interest on the Junior Subordinated Debentures
or if Yorkshire Group does not make payments with respect to the Debentures
Guarantee, the Trust will not have sufficient funds available to pay
Distributions on the Trust Securities or amounts payable on redemption thereof
or otherwise.
Distributions on the Trust Securities will be payable to the holders of
record as they appear on the register of the Trust on the relevant record
dates, which, as long as the Trust Securities remain in book-entry form, will
be one Business Day prior to the relevant Distribution Date. In the event that
any Trust Securities are not in book-entry form, the relevant record date for
such Trust Securities shall be the date 15 calendar days prior to the relevant
Distribution Date.
REDEMPTIONS
Mandatory Redemption. Upon the repayment of the Junior Subordinated
Debentures at Stated Maturity or upon the redemption, in whole or in part, of
the Junior Subordinated Debentures (as described below and in "Description of
the Junior Subordinated Debentures--Redemption"), the proceeds from such
repayment or redemption will be applied to redeem a Like Amount of Trust
Securities, upon not less than 30 nor more than 60 days' notice to each holder
of Trust Securities at its registered address, at the Redemption Price.
Optional Redemption of Junior Subordinated Debentures. Yorkshire Finance will
have the right to redeem the Junior Subordinated Debentures on or after ,
2003, in whole at any time or in part from time to time, at the Debenture
Redemption Price and thereby cause a mandatory redemption of a Like Amount of
Trust Securities at the Redemption Price. See "Description of the Junior
Subordinated Debentures--Redemption".
Yorkshire Finance will also have the right to redeem the Junior Subordinated
Debentures in whole (but not in part), at the Debenture Redemption Price, if
Yorkshire Finance or Yorkshire Group has or will become obligated to pay
Additional Amounts as provided under "Description of the Junior Subordinated
Debentures--Optional Tax Redemption", and thereby cause a mandatory redemption
of the Trust Securities in whole (but not in part) at the Redemption Price.
Special Event Redemption of Junior Subordinated Debentures. Upon the
occurrence and continuation of a Special Event, Yorkshire Finance shall have
the right, at any time, to redeem the Junior Subordinated Debentures in whole
(but not in part) at the Debenture Redemption Price and thereby cause a
mandatory redemption of the Trust Securities in whole (but not in part) at the
Redemption Price within 90 days following the occurrence of such Special Event.
If a Special Event occurs and Yorkshire Finance does not elect to redeem the
Junior Subordinated Debentures or to dissolve the Trust, the Trust Securities
will remain outstanding and, if such Special Event is a Tax Event, Additional
Interest (as described under "Description of the Junior Subordinated
Debentures--Certain Covenants") may be payable on the Junior Subordinated
Debentures.
"Tax Event" means the receipt by Yorkshire Finance or Yorkshire Group of an
opinion of independent counsel (which may be counsel to Yorkshire Group or its
affiliates) experienced in such matters to the effect that there has been (a)
any amendment to, or change (including any announced prospective change) in,
the laws (or any regulations thereunder) of any supranational federation to
which the UK belongs or the jurisdiction (or any political subdivision or
taxing authority thereof or therein) in which Yorkshire Finance or Yorkshire
Group is incorporated or created, as applicable, or in which Yorkshire Finance
or Yorkshire Group is managed and controlled or has a place of business (each,
a "Taxing Jurisdiction"), (b) any official administrative pronouncement or
judicial decision interpreting, clarifying or applying such laws or regulations
or (c) a
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threatened challenge asserted by a government or taxing authority with respect
to Yorkshire Group or any of its subsidiaries, or a threatened challenge
asserted in writing by a government or taxing authority against any other
taxpayer that has raised capital through the issuance of securities that are
substantially similar to the Junior Subordinated Debentures or the Trust
Securities, which amendment or change is effective or which pronouncement,
clarification, challenge or decision is announced on or after the date of this
Prospectus, and that results in there being more than an insubstantial risk
that (i) Yorkshire Finance is, or will be within 90 days of the date thereof,
subject to income tax within a Taxing Jurisdiction (other than the UK
corporation income tax) with respect to interest accrued or received on the
Intercompany Notes, (ii) Yorkshire Finance is, or will be within 90 days of
the date thereof, subject to more than a de minimis amount of other tax,
duties or other governmental charges, (iii) Interest Payments on the Junior
Subordinated Debentures are not, or within 90 days of the date thereof will
not be, deductible, in whole or in part for (as appropriate) US Federal or UK
corporation income tax purposes, as they accrue by Yorkshire Finance or by a
member of any tax group to which Yorkshire Group belongs or (iv) interest
payable with respect to the Intercompany Notes by Yorkshire Group or its
affiliates is not, or within 90 days of the date thereof will not be,
deductible, in whole or in part, for (as appropriate) US Federal or UK
corporation income tax purposes, as it accrues by one of (as appropriate)
Yorkshire Group, its shareholders or a member of any tax group to which
Yorkshire Group belongs.
"Investment Company Act Event" means that Yorkshire Group or Yorkshire
Finance shall have received an opinion of independent counsel (which may be
counsel to Yorkshire Group or its affiliates) experienced in such matters to
the effect that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation
by any legislative body, court, governmental agency or regulatory authority
(an "Investment Company Act Change"), there is more than an insubstantial risk
that Yorkshire Finance or Yorkshire Group is or will be considered an
"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended (the "Investment Company Act"), which
Investment Company Act Change becomes effective on or after the date of this
Prospectus.
"Special Event" means the occurrence of a Tax Event or an Investment Company
Act Event.
"Like Amount" means (i) with respect to a repayment or redemption of any
Trust Securities, Trust Securities having a Liquidation Amount equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously repaid or redeemed and the proceeds of which will be used to
pay the Redemption Price of such Trust Securities, and (ii) with respect to a
distribution of Junior Subordinated Debentures to holders of the Trust
Securities in connection with a dissolution and liquidation of the Trust or a
payment of any Additional Amounts or Additional Interest on the Trust
Securities, Junior Subordinated Debentures having a principal amount equal to
the Liquidation Amount of the Trust Securities of the holder to whom such
Junior Subordinated Debentures are distributed or such payment is being made.
"Liquidation Amount" means the stated liquidation amount of $25 per Trust
Security.
REDEMPTION PROCEDURES
Trust Securities redeemed on each Redemption Date shall be redeemed at the
Redemption Price with the applicable proceeds from the contemporaneous
repayment or redemption of the Junior Subordinated Debentures. Redemptions of
the Trust Securities shall be made, and the Redemption Price shall be deemed
payable, on each Redemption Date only to the extent that the Trust has
sufficient funds available for the payment of such Redemption Price.
If the Property Trustee gives a notice of redemption in respect of any Trust
Securities, then, by 12:00 noon, New York City time, on the Redemption Date,
subject to the immediately preceding paragraph, the Property Trustee will
deposit irrevocably with DTC, so long as the Trust Securities are in book-
entry only form, funds sufficient to pay the applicable Redemption Price and
will give DTC irrevocable instructions and authority to pay the Redemption
Price to the holders of such Trust Securities. See "--Book-Entry Issuance". If
the Trust Securities are no longer in book-entry form, the Property Trustee,
subject to the immediately preceding paragraph, will irrevocably deposit with
the paying agent for the Trust Securities funds sufficient to pay the
applicable Redemption Price and will give such paying agent irrevocable
instructions and authority to pay the
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Redemption Price to the holders thereof upon surrender of their certificates
evidencing such Trust Securities. Notwithstanding the foregoing, Distributions
payable on or prior to the Redemption Date for any Trust Securities called for
redemption shall be payable to the holders of such Trust Securities as of the
relevant record dates for the related Distribution Dates. If notice of
redemption shall have been given and funds deposited as required, then upon
the date of such deposit, all rights of the holders of such Trust Securities
so called for redemption will cease, except the right of the holders of such
Trust Securities to receive the Redemption Price, but without interest on such
Redemption Price, and such Trust Securities will cease to be outstanding. In
the event that any date fixed for redemption of Trust Securities is not a
Business Day, then payment of the Redemption Price payable on such date will
be made on the next succeeding day which is a Business Day (and without any
interest or other payment in respect of any such delay), except that, if such
Business Day falls in the next succeeding calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date. In the event that payment of the
Redemption Price in respect of Trust Securities called for redemption is
improperly withheld or refused and not paid either by the Trust or by
Yorkshire Group pursuant to the Trust Securities Guarantee or the Debentures
Guarantee, Distributions on such Trust Securities will continue to accumulate
at the then applicable rate from the Redemption Date originally established by
the Trust for such Trust Securities to the date such Redemption Price is
actually paid, in which case the actual payment date will be the date fixed
for redemption for purposes of calculating the Redemption Price.
Subject to applicable law (including, without limitation, Rule 14e-1 under
the Exchange Act and any other applicable US Federal securities law),
Yorkshire Group, Yorkshire Finance, the US Affiliates or their affiliates may
at any time and from time to time purchase outstanding Trust Securities by
tender, in the open market or by private agreement.
Payment of the Redemption Price on the Trust Securities and any distribution
of Junior Subordinated Debentures to holders of Trust Securities shall be made
to the holders of record as they appear on the register of the Property
Trustee as of the relevant record date, which, as long as the Trust Securities
remain in book-entry form, will be one Business Day prior to the relevant
Redemption Date or liquidation date, as applicable; provided, however, that in
the event that the Trust Securities are not in book-entry form, the relevant
record date for the Trust Securities shall be the date 15 calendar days prior
to the Redemption Date or liquidation date, as applicable.
If less than all of the Trust Securities are to be redeemed on a Redemption
Date, the particular Trust Securities to be redeemed shall be selected on a
pro rata basis not more than 60 days prior to the Redemption Date by the
Property Trustee from the outstanding Trust Securities not previously called
for redemption, by such method as the Property Trustee shall deem fair and
appropriate, which shall provide for the selection for redemption of portions
(equal to $25 or an integral multiple of $25 in excess thereof) of the
Liquidation Amount of Trust Securities of a denomination larger than $25. The
Property Trustee shall promptly notify the transfer agent and registrar in
writing of the Trust Securities selected for redemption and, in the case of
any Trust Securities selected for partial redemption, the aggregate
Liquidation Amount thereof to be redeemed.
DISTRIBUTION OF JUNIOR SUBORDINATED DEBENTURES
Yorkshire Group has the right, at any time, to dissolve the Trust and, after
satisfaction of liabilities to creditors of the Trust, if any, as provided by
applicable law, to cause a Like Amount of Junior Subordinated Debentures to be
distributed to the holders of the Trust Securities in liquidation of the
Trust. Under current US Federal income tax law, provided the Trust is treated
as a grantor trust at the time of such distribution, such distribution would
not be a taxable event to holders of the Trust Securities. See "Description of
the Junior Subordinated Debentures--Distribution of the Junior Subordinated
Debentures" and "Material Income Tax Considerations--US Federal Income Tax
Considerations--Receipt of Junior Subordinated Debentures or Cash in Certain
Circumstances".
After the date fixed for any distribution of Junior Subordinated Debentures
upon liquidation of the Trust (i) the Trust Securities will no longer be
deemed to be outstanding and the Trust Securities Guarantee will be
discharged, (ii) DTC or its nominee, as the record holder of the Trust
Securities, will receive Global Book-Entry
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Interests (as defined herein) representing a 100% beneficial interest in the
Junior Subordinated Debentures to be delivered upon such distribution, or, if
any Trust Securities are not held by DTC or its nominee, the certificates
representing the Trust Securities will be deemed to represent Book-Entry
Interests representing the Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of the Trust Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on the Trust Securities until such certificates are presented to
Yorkshire Finance or its agent for transfer or reissuance and (iii) Yorkshire
Finance will use its reasonable efforts to list the Junior Subordinated
Debentures on the NYSE or such other exchanges or other organizations, if any,
on which the Trust Securities are then listed or traded.
There can be no assurance as to the market price for the Junior Subordinated
Debentures that may be distributed if a dissolution and liquidation of the
Trust were to occur. Accordingly, the Junior Subordinated Debentures that an
investor may receive upon a dissolution and liquidation of the Trust may trade
at a discount to the price that such investor paid to purchase its Trust
Securities offered hereby.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
Pursuant to the Trust Agreement, the Trust shall dissolve upon the first to
occur of: (i) , 2043, (ii) the delivery of written direction to the
Property Trustee by Yorkshire Group at any time to dissolve the Trust (which
direction is optional and wholly within the discretion of Yorkshire Group) and
to distribute the Junior Subordinated Debentures to the holders of the Trust
Securities in liquidation of the Trust (see "--Distribution of Junior
Subordinated Debentures"), (iii) the occurrence of a Bankruptcy Event (as
defined in the Trust Agreement) in respect of Yorkshire Finance, dissolution
or liquidation of Yorkshire Finance, or the dissolution of the Trust pursuant
to a judicial decree or (iv) the payment at Stated Maturity or redemption of
all of the Junior Subordinated Debentures and the consequent redemption of all
of the Trust Securities.
If an early dissolution occurs as described in clause (ii) or (iii) above,
the Trust shall be liquidated, and the Property Trustee shall distribute to
each holder of Trust Securities a Like Amount of Junior Subordinated
Debentures, unless, in the case of an event described in clause (iii), such
distribution is determined by the Administrative Trustees not to be practical,
in which event such holders will be entitled to receive, out of the assets of
the Trust available for distribution to holders after satisfaction of
liabilities to creditors, an amount equal to the aggregate of the Liquidation
Amount plus accumulated and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Trust on the Trust
Securities shall be paid on a pro rata basis in proportion to the full
Liquidation Distribution for which the Trust Securities would be entitled.
MERGERS, CONVERSIONS, CONSOLIDATIONS, AMALGAMATIONS OR REPLACEMENTS
The Trust may not merge with or into, convert into, consolidate, amalgamate,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other person, except as
described below or as otherwise described in the Trust Agreement. The Trust
may, at the request of Yorkshire Group, with the consent of the Administrative
Trustees and without the consent of the holders of the Trust Securities, merge
with or into, convert into, consolidate, amalgamate, be replaced by or convey,
transfer or lease its properties and assets substantially as an entirety to a
trust organized as such under the laws of any jurisdiction; provided that (i)
such successor entity either (a) expressly assumes all of the obligations of
the Trust with respect to the Trust Securities or (b) substitutes for the
Trust Securities other securities having substantially the same terms as the
Trust Securities (the "Successor Securities") so long as the Successor
Securities rank the same as the Trust Securities rank in priority with respect
to distributions and payments upon liquidation, redemption and otherwise, (ii)
such successor entity transfers to Yorkshire Group, directly or indirectly, a
control certificate (or similar instrument) or common securities relating to
such successor entity, (iii) Yorkshire Group expressly appoints a trustee of
such successor entity possessing the same powers and duties as the Property
Trustee as the holder, directly or indirectly, of the Junior Subordinated
Debentures, (iv) the Trust Securities or the Successor Securities are listed
or traded, or any Successor Securities will be listed or traded upon
notification of issuance, on any national securities exchange or other
organization on which the Trust Securities are then listed, if any, (v) such
merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not
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cause the Trust Securities (including any Successor Securities) to be
downgraded by any nationally recognized statistical rating organization, (vi)
such merger, conversion, consolidation, amalgamation, replacement, conveyance,
transfer or lease does not adversely affect the rights, preferences and
privileges of the holders of the Trust Securities (including any Successor
Securities) in any material respect, (vii) such successor entity has a purpose
substantially identical to that of the Trust, (viii) prior to such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, Yorkshire Group has received an opinion from independent counsel
experienced in such matters to the effect that (a) such merger, conversion,
consolidation, amalgamation, replacement, conveyance, transfer or lease does
not adversely affect the rights, preferences and privileges of the holders of
the Trust Securities (including any Successor Securities) in any material
respect, and (b) following such merger, conversion, consolidation,
amalgamation, replacement, conveyance, transfer or lease, neither the Trust,
Yorkshire Group, Yorkshire Finance nor such successor entity will be required
to register as an "investment company" under the Investment Company Act and
(ix) Yorkshire Group or any permitted successor or assignee guarantees the
obligations of such successor entity under the Successor Securities at least
to the extent provided by the Trust Securities Guarantee. Notwithstanding the
foregoing, the Trust shall not, except with the consent of holders of 100% of
the Liquidation Amount of the Trust Securities, consolidate, amalgamate, merge
with or into, convert into, or be replaced by or convey, transfer or lease its
properties and assets substantially as an entirety to any other entity or
permit any other entity to consolidate, amalgamate, merge with or into,
convert into or replace it, if such consolidation, amalgamation, merger,
conversion or replacement would cause (i) the Trust or the successor entity to
be classified as other than a grantor trust for US Federal income tax
purposes, (ii) the Trust or the successor entity to be classified as a company
or as a trust which does not fall within the provisions of Section 60 UK
Taxation of Chargeable Gains Act of 1992 ("Section 60"), in either case, for
purposes of UK tax law, (iii) Yorkshire Group, Yorkshire Finance, the Trust or
the successor entity to be required to register as an "investment company"
under the Investment Company Act or (iv) Yorkshire Finance to be classified as
an association or a publicly traded partnership taxable as a corporation for
US Federal income tax purposes.
VOTING RIGHTS; AMENDMENT OF TRUST AGREEMENT
Except as provided below, under "--Events of Default" and under "Description
of the Trust Securities Guarantee--Amendments and Assignment" and as otherwise
required by law and the Trust Agreement, the holders of the Trust Securities
will have no voting rights.
The Trust Agreement may be amended from time to time by the Securities
Trustees, Yorkshire Group, as holder of the Control Certificate, and AEP
Resources, as depositor, without the consent of the holders of the Trust
Securities: (i) to cure any ambiguity, to correct or supplement any provisions
in the Trust Agreement that may be inconsistent with any other provision
therein, or to make any other provisions with respect to matters or questions
arising under the Trust Agreement that shall not be inconsistent with the
other provisions of the Trust Agreement; (ii) to modify, eliminate or add to
any provisions of the Trust Agreement to such extent as shall be necessary to
ensure that (a) the Trust will be classified for US Federal income tax
purposes as a grantor trust at all times that any of the Trust Securities are
outstanding, (b) the Trust will fall within the provisions of Section 60 and
will not be classified as a company, in either case, for purposes of UK tax
law, (c) neither the Trust, Yorkshire Finance nor Yorkshire Group will be
required to register as an "investment company" under the Investment Company
Act or (d) Yorkshire Finance will not be classified as an association or a
publicly traded partnership taxable as a corporation for US Federal income tax
purposes; or (iii) to effect the acceptance of appointment by a successor
Property Trustee, provided, however, that, except in the case of clause (ii),
such action shall not adversely affect in any material respect the interests
of any holder of Trust Securities, and, in the case of clause (i), any such
amendment of the Trust Agreement shall become effective when notice thereof is
given to the holders of Trust Securities. Except as provided in the next
succeeding paragraph, other amendments to the Trust Agreement may be made (i)
with the consent of the holders of not less than 66 2/3% in aggregate
Liquidation Amount of the Trust Securities then outstanding and (ii) upon
receipt by the Securities Trustees of an opinion of independent counsel
experienced in such matters to the effect that such amendment or the exercise
of any power granted by the Securities Trustees in accordance with such
amendment will not (A) affect the Trust's status as a grantor trust
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for US Federal income tax purposes, (B) affect the Trust's or Yorkshire
Finance's exemption from the Investment Company Act (C) cause the Trust to be
treated as a company for purposes of UK tax law or as a trust which does not
fall within the provisions of Section 60, in either case, for purposes of UK
tax law or (D) affect Yorkshire Finance's status as a partnership for US
Federal income tax purposes.
Notwithstanding the foregoing, no amendment or modification may be made to
the Trust Agreement if such amendment or modification would cause (i) the
Trust to be classified as other than a grantor trust for US Federal income tax
purposes, (ii) the Trust to be classified as a company or as a trust which
does not fall within the provisions of Section 60, in either case, for
purposes of UK tax law, (iii) the Trust, Yorkshire Finance or Yorkshire Group
to be required to register as an "investment company" under the Investment
Company Act or (iv) Yorkshire Finance to be classified as an association or a
publicly traded partnership taxable as a corporation for US Federal income tax
purposes.
Notwithstanding the foregoing, without the consent of each affected holder
of Trust Securities, the Trust Agreement may not be amended to (i) change the
amount or timing of any Distribution on the Trust Securities or otherwise
adversely affect the amount of any Distribution required to be made in respect
of the Trust Securities as of a specified date, (ii) restrict the right of a
holder of Trust Securities to institute suit for the enforcement of any such
payment on or after such date or (iii) change the consent required to amend
the Trust Agreement.
So long as any Junior Subordinated Debentures are held by or for the benefit
of the Property Trustee, the Securities Trustees shall not (i) direct the
time, method and place of conducting any proceeding for any remedy available
to the Indenture Trustee, or executing any trust or power conferred on the
Indenture Trustee with respect to such Junior Subordinated Debentures or the
Debentures Guarantee, (ii) waive any past default that is waivable under the
applicable provisions of the Indenture, (iii) exercise any right to rescind or
annul a declaration that any Interest Payment or other payment with respect to
the Junior Subordinated Debentures or the Debentures Guarantee shall be due
and payable or (iv) consent to any amendment, modification or termination of
the Indenture or the Junior Subordinated Debentures, where such consent shall
be required, or take any other action under the Indenture without, in each
case, obtaining the prior approval of the holders of a majority in aggregate
Liquidation Amount of all outstanding Trust Securities; provided, however,
that where a consent under the Indenture would require the consent of each
holder of Junior Subordinated Debentures affected thereby, no such consent
shall be given by the Securities Trustees without the prior written consent of
each holder of the Trust Securities. The Securities Trustees shall not revoke
any action previously authorized or approved by a vote of the Trust Securities
except by subsequent vote of the holders of the Trust Securities. The Property
Trustee shall notify all holders of Trust Securities of any notice of default
with respect to the Junior Subordinated Debentures. In addition to obtaining
the foregoing approvals of the holders of the Trust Securities, prior to
taking any of the foregoing actions, the Securities Trustees shall obtain an
opinion of independent counsel experienced in such matters to the effect that
(i) the Trust will not be classified as other than a grantor trust for US
Federal income tax purposes on account of such action, (ii) the Trust will
fall within the provisions of Section 60 and will not be classified as a
company for purposes of UK tax law on account of such action, (iii) neither
the Trust, Yorkshire Finance nor Yorkshire Group will be required to register
as an "investment company" under the Investment Company Act on account of such
action and (iv) Yorkshire Finance will not be classified as an association or
a publicly traded partnership taxable as a corporation for US Federal income
tax purposes.
Any required approval of holders of Trust Securities may be given at a
meeting of holders of Trust Securities convened for such purpose or pursuant
to written consent. The Administrative Trustees will cause a notice of any
meeting at which holders of Trust Securities are entitled to vote, or of any
matter upon which action by written consent of such holders is to be taken, to
be given to each holder of record of Trust Securities in the manner set forth
in the Trust Agreement.
No vote or consent of the holders of Trust Securities will be required for
the Trust to redeem and cancel the Trust Securities in accordance with the
Trust Agreement.
Notwithstanding that holders of Trust Securities are entitled to vote or
consent under any of the circumstances described above, any of the Trust
Securities that are owned by Yorkshire Group, or any of its affiliates, shall,
for purposes of such vote or consent, be treated as if they were not
outstanding.
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EVENTS OF DEFAULT
Any one of the following events constitutes an "Event of Default" under the
Trust Agreement (a "Trust Agreement Event of Default") with respect to the
Trust Securities issued thereunder (whatever the reason for such Trust
Agreement Event of Default, and whether it shall be voluntary or involuntary
or be effected by operation of law or pursuant to any judgment, decree or
order of any court or any order, rule or regulation of any administrative or
governmental body):
(i) the occurrence of an Event of Default under the Indenture (see
"Description of the Junior Subordinated Debentures--Indenture Events of
Default"); or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable (subject to an Extension Period) and the
continuation of such default for a period of 60 days; or
(iii) default by the Trust in the payment of any Redemption Price of any
Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, of any covenant or warranty
of the Securities Trustees in the Trust Agreement (other than a covenant or
warranty a default in the performance of which is covered by clause (ii) or
(iii) above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to such
Securities Trustees by the holders of at least 33% in aggregate Liquidation
Amount of the outstanding Trust Securities a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a "Notice of Default" under the Trust Agreement; or
(v) the occurrence of certain events of bankruptcy or insolvency with
respect to the Trust.
Within 90 days after the occurrence of any Trust Agreement Event of Default,
the Property Trustee shall transmit notice of any default known to the
Property Trustee to the holders of Trust Securities, Yorkshire Group and
Yorkshire Finance, unless such Trust Agreement Event of Default shall have
been cured or waived.
If a Trust Agreement Event of Default occurs and is continuing, then,
pursuant to the Trust Agreement, holders of a majority in aggregate
Liquidation Amount of Trust Securities have the right to direct the time,
method and place of conducting any proceeding for remedy available to the
Property Trustee or to direct the exercise of any trust or power conferred
upon the Property Trustee under the Trust Agreement, including the right to
direct the Property Trustee under the Trust Agreement to exercise the remedies
available to it as indirect holder of the Junior Subordinated Debentures and
as direct beneficiary of the Debentures Guarantee. Furthermore, if the
Property Trustee fails to enforce its rights under the Debentures Guarantee, a
holder of Trust Securities may, to the fullest extent permitted by applicable
law, institute a legal proceeding directly against Yorkshire Group to enforce
the Property Trustee's rights with respect to the Debentures Guarantee without
first instituting any legal proceeding against or requesting or directing that
action be taken by the Property Trustee or the Trust. Notwithstanding the
foregoing, a holder of Trust Securities may institute a legal proceeding
directly against Yorkshire Group without first instituting a legal proceeding
against the Property Trustee or any other person or entity for enforcement of
payment to such holder under the Debentures Guarantee in respect of Interest
Payments or any other payments due on the Junior Subordinated Debentures
having an aggregate principal amount equal to the aggregate Liquidation Amount
of the Trust Securities of such holder on or after the due dates specified in
the Junior Subordinated Debentures. See "Relationship Among the Trust
Securities, the Junior Subordinated Debentures, the Trust Securities Guarantee
and the Debentures Guarantee".
Unless an Event of Default under the Indenture shall have occurred and be
continuing, any Securities Trustee may be removed at any time by act of the
holder of the Control Certificate. If an Event of Default under the Indenture
has occurred and is continuing, the Property Trustee and the Delaware Trustee
may be removed at such time by act of the holders of a majority in aggregate
Liquidation Amount of the Trust Securities. In no event will the holders of
the Trust Securities have the right to vote, appoint, remove or replace the
Administrative Trustees, which rights are vested exclusively with Yorkshire
Group, as holder of the Control Certificate. No resignation or removal of any
Securities Trustee and no appointment of a successor shall be effective until
the acceptance of appointment by the successor trustee in accordance with the
requirements of the Trust Agreement.
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PAYMENT AND PAYING AGENCY
Payments in respect of Trust Securities held by DTC or its nominee shall be
made as described under "--Book-Entry Issuance". If any Trust Securities are
not held by DTC or its nominee, such payments shall be made by check mailed to
the address of the holder entitled thereto as such address shall appear on the
register of the Trust. The paying agent shall initially be The Bank of New
York in New York, New York.
BOOK-ENTRY ISSUANCE
DTC will act as initial securities depositary for the Trust Securities. The
Trust Securities will be issued as fully-registered global securities in book-
entry form registered in the name of Cede & Co. (DTC's partnership nominee).
One or more fully-registered global certificates in book-entry form will be
issued for the Trust Securities representing the aggregate total number of the
Trust Securities and will be deposited with DTC or its custodian.
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities that its participants ("Participants") deposit with DTC. DTC
also facilitates the settlement among Participants of securities transactions,
such as transfers and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts, thereby eliminating
the need for physical movement of securities certificates. Direct Participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations ("Direct Participants"). DTC is
owned by a number of its Direct Participants and by the NYSE, the American
Stock Exchange, Inc. and the National Association of Securities Dealers, Inc.
Access to the DTC system is also available to others such as securities
brokers and dealers, banks and trust companies that clear through or maintain
a custodial relationship with Direct Participants, either directly or
indirectly ("Indirect Participants"). The rules applicable to DTC and its
Participants are on file with the Commission.
Purchases of Trust Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Trust
Securities on DTC's records. The ownership interest of each actual purchaser
of each Trust Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the
Direct or Indirect Participants through which the Beneficial Owners purchased
Trust Securities. Transfers of ownership interests in the Trust Securities are
to be accomplished by entries made on the books of Participants acting on
behalf of Beneficial Owners. Beneficial Owners will not receive certificates
representing their ownership interests in Trust Securities, except in the
event that use of the book-entry system for the Trust Securities is
discontinued.
To facilitate subsequent transfers, all of the Trust Securities deposited by
Participants with DTC are registered in the name of DTC's partnership nominee,
Cede & Co. The deposit of Trust Securities with DTC and their registration in
the name of Cede & Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Trust Securities; DTC's
records reflect only the identity of the Direct Participants to whose accounts
such Trust Securities are credited, which may or may not be the Beneficial
Owners. The Participants will remain responsible for keeping account of their
holdings on behalf of their customers.
Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or regulatory
requirements as may be in effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the Trust
Securities are being redeemed, DTC will determine the amount of the interest
of each Direct Participant to be redeemed in accordance with its current
procedures.
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Neither DTC nor Cede & Co. will consent or vote with respect to Trust
Securities. Under its usual procedures, DTC mails an omnibus proxy (the
"Omnibus Proxy") to the Property Trustee as soon as possible after the record
date. The Omnibus Proxy assigns Cede & Co.'s consenting or voting rights to
those Direct Participants to whose accounts such Trust Securities are credited
on the record date (identified in a listing attached to the Omnibus Proxy).
Distribution payments on the Trust Securities will be made to DTC in
immediately available funds. DTC's current practice, upon receipt of any
payment in respect of securities such as the Trust Securities, is to credit
Direct Participants' accounts on the relevant payment date in accordance with
their respective holdings shown on DTC's records unless DTC has reason to
believe that it will not receive payment on such payment date. Payments by
Participants to Beneficial Owners will be governed by standing instructions
and customary practices and will be the responsibility of such Participant and
not of DTC, the Trust, Yorkshire Group or Yorkshire Finance, subject to any
statutory or regulatory requirements as may be in effect from time to time.
Payment of Distributions to DTC is the responsibility of the Property Trustee,
disbursement of such payments to Direct Participants is the responsibility of
DTC, and disbursements of such payments to the Beneficial Owners is the
responsibility of Direct and Indirect Participants.
If (i) DTC discontinues providing its services as securities depositary with
respect to the Trust Securities at any time by giving reasonable notice to the
Trust or Yorkshire Finance, (ii) the Trust or Yorkshire Finance decides to
discontinue use of the system of book-entry transfers through DTC (or a
successor depositary) and a successor securities depositary is not obtained or
(iii) the Trust fails to pay any amounts due and payable in respect of the
Trust Securities or Yorkshire Group fails to pay any amounts payable in
respect of the Trust Securities Guarantee, as required by their respective
terms, definitive Trust Securities certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that the Trust and Yorkshire Finance believe to
be accurate, but the Trust and Yorkshire Finance assume no responsibility for
the accuracy thereof. Neither the Trust nor Yorkshire Finance has any
responsibility for the performance by DTC or its Participants of their
respective obligations as described herein or under the rules and procedures
governing their respective operations.
REGISTRAR AND TRANSFER AGENT
The Bank of New York will act as registrar and transfer agent for the Trust
Securities.
Registration of transfers of Trust Securities will be effected without
charge by or on behalf of the Trust, but upon payment of any tax or other
governmental charges that may be imposed in connection with any transfer or
exchange. The Trust will not be required to register or cause to be registered
the transfer of Trust Securities after the date such Trust Securities have
been called for redemption.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the Trust in such a way that (i) neither Yorkshire
Group, Yorkshire Finance nor the Trust will be deemed to be an "investment
company" required to be registered under the Investment Company Act, (ii) the
Trust will not be classified other than as a grantor trust for US Federal
income tax purposes, (iii) the Trust will be classified as a trust falling
within the provisions of Section 60 and not as a company for purposes of UK
tax law, (iv) Yorkshire Finance will not be classified as an association or a
publicly traded partnership taxable as a corporation for US Federal income tax
purposes and (v) the Junior Subordinated Debentures will be treated as
indebtedness for US Federal income tax purposes. In this connection, Yorkshire
Group and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the certificate of trust or the Trust
Agreement, that the Administrative Trustees determine in their discretion
consider to be necessary or desirable for such purposes, as long as such
action does not materially and adversely affect the interests of the holders
of the Trust Securities.
The Trust and the holders of Trust Securities (by acceptance of a beneficial
interest in a Trust Security) will agree to treat the Junior Subordinated
Debentures as indebtedness of Yorkshire Finance for all US Federal income tax
purposes.
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DESCRIPTION OF THE TRUST SECURITIES GUARANTEE
The Trust Securities Guarantee will be executed and delivered by Yorkshire
Group (concurrently with the issuance by the Trust of the Trust Securities)
for the benefit of the holders from time to time of the Trust Securities. The
Bank of New York will act as indenture trustee (the "Guarantee Trustee") under
the Trust Securities Guarantee for the purposes of compliance with the 1939
Act. The Trust Securities Guarantee will be qualified as an indenture under
the 1939 Act. This summary of material provisions of the Trust Securities
Guarantee is subject to, and qualified in its entirety by reference to, all of
the provisions of the Trust Securities Guarantee and the 1939 Act. The form of
the Trust Securities Guarantee has been filed as an exhibit to the
Registration Statement of which this Prospectus forms a part. The Guarantee
Trustee will hold the Trust Securities Guarantee for the benefit of the
holders of the Trust Securities.
GENERAL
Yorkshire Group will irrevocably agree to pay in full on a subordinated
basis, to the extent set forth herein, the Guarantee Payments (as defined
below), to the extent not paid by, or on behalf of, the Trust to the holders
of the Trust Securities, as and when due, regardless of any defense, right of
set-off or counterclaim that the Trust may have or assert other than the
defense of payment. The following payments with respect to the Trust
Securities, to the extent not paid by or on behalf of the Trust, will be
subject to the Trust Securities Guarantee (without duplication): (i) any
accumulated and unpaid Distributions required to be paid on the Trust
Securities, to the extent that the Trust has sufficient funds available
therefor, (ii) the Redemption Price with respect to any Trust Securities
called for redemption to the extent that the Trust has sufficient funds
available therefor or (iii) upon a voluntary or involuntary dissolution,
winding-up or liquidation of the Trust (unless the Junior Subordinated
Debentures are distributed to holders of the Trust Securities), the lesser of
(a) the aggregate of the Liquidation Amount and all accumulated and unpaid
Distributions on the Trust Securities to the date of payment, to the extent
sufficient funds held are available therefor, and (b) the amount of assets of
the Trust remaining available for distribution to holders of the Trust
Securities (the "Guarantee Payments"). Yorkshire Group's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts
by Yorkshire Group to the holders of the Trust Securities or by causing the
Trust to pay such amounts to such holders.
The Trust Securities Guarantee will be an irrevocable guarantee on a
subordinated basis of the Trust's obligations under the Trust Securities, but
will apply only to the extent that the Trust has sufficient funds available to
make such payments.
If Yorkshire Finance does not make payments of principal of or interest on
the Junior Subordinated Debentures or Yorkshire Group does not make payments
pursuant to the Debentures Guarantee, it is expected that the Trust will not
pay Distributions on the Trust Securities and will not have sufficient funds
available therefor.
The Trust Securities Guarantee, the Debentures Guarantee, the Indenture, the
Junior Subordinated Debentures, the Trust Agreement and the Agreement as to
Expenses and Liabilities, when taken together, will effectively provide a full
and unconditional guarantee, on a subordinated basis, of the Trust's
obligations under the Trust Securities. No single document standing alone or
operating in conjunction with fewer than all of the other documents
constitutes such a guarantee. It is only the combined operation of these
documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Securities.
See "Relationship Among the Trust Securities, the Junior Subordinated
Debentures, the Trust Securities Guarantee and the Debentures Guarantee".
During an Extension Period, Yorkshire Group's obligations to make payments
under the Trust Securities Guarantee will be suspended. See "Description of
the Junior Subordinated Debentures--Option to Defer Payment of Interest".
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STATUS OF THE TRUST SECURITIES GUARANTEE
Yorkshire Group's obligations under the Trust Securities Guarantee to make
the Guarantee Payments will constitute an unsecured obligation of Yorkshire
Group and will rank (i) subordinate and junior in right of payment to all
Senior Debt of Yorkshire Group (which excludes those obligations or
liabilities made pari passu or subordinate by their terms), (ii) pari passu
with the most senior preferred or preference stock now or hereafter issued by
Yorkshire Group and with any guarantee now or hereafter entered into by
Yorkshire Group in respect of any preferred or preference securities of any
affiliate of Yorkshire Group, and (iii) senior to all common stock of
Yorkshire Group. The terms of the Trust Securities will provide that each
holder of Trust Securities by acceptance thereof agrees to the subordination
provisions and other terms of the Trust Securities Guarantee.
The Trust Securities Guarantee will constitute a guarantee of payment and
not of collection (that is, the guaranteed party may institute a legal
proceeding directly against Yorkshire Group to enforce its rights under the
guarantee without first instituting a legal proceeding against any other
person or entity).
The Trust Securities Guarantee will not be discharged except by payment of
the Guarantee Payments in full to the extent not paid by or on behalf of the
Trust or upon distribution to the holders of the Trust Securities of the
Junior Subordinated Debentures. The Trust Securities Guarantee does not place
a limitation on the amount of additional Senior Debt that may be incurred by
Yorkshire Group. Yorkshire Group expects from time to time to incur additional
indebtedness constituting Senior Debt.
AMENDMENTS AND ASSIGNMENT
Except with respect to any changes that do not materially adversely affect
the rights of holders of the Trust Securities (in which case no vote will be
required), the Trust Securities Guarantee may not be amended without the prior
approval of the holders of a majority of the aggregate Liquidation Amount of
the outstanding Trust Securities. The manner of obtaining any such approval is
set forth under "Description of the Trust Securities--Voting Rights; Amendment
of Trust Agreement". All guarantees and agreements contained in the Trust
Securities Guarantee shall bind the successors, assigns, receivers, trustees
and representatives of the Yorkshire Group and shall inure to the benefit of
the holders of the Trust Securities then outstanding.
EVENTS OF DEFAULT
An event of default under the Trust Securities Guarantee will occur upon the
failure of Yorkshire Group to perform any of its payment obligations
thereunder. The holders of a majority in aggregate Liquidation Amount of the
Trust Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Guarantee Trustee in
respect of the Trust Securities Guarantee or to direct the exercise of any
trust or power conferred upon the Guarantee Trustee under the Trust Securities
Guarantee.
Any holder of the Trust Securities may institute a legal proceeding directly
against Yorkshire Group to enforce its rights under the Trust Securities
Guarantee without first instituting a legal proceeding against the Trust, the
Guarantee Trustee or any other person or entity.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, other than prior to the occurrence and after the
curing of a default by the Yorkshire Group in performance of the Trust
Securities Guarantee, undertakes to perform only such duties as are
specifically set forth in the Trust Securities Guarantee and, after default
with respect to the Trust Securities Guarantee, must exercise the same degree
of care and skill as a prudent person would exercise or use in the conduct of
his or her own affairs. Notwithstanding this provision, the Guarantee Trustee
is under no obligation to exercise any of the powers vested in it by the Trust
Securities Guarantee at the request of any holder of the Trust Securities
unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred thereby.
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The Bank of New York, the Guarantee Trustee, also serves as the Property
Trustee and the Indenture Trustee. Yorkshire Group and certain of its
affiliates maintain banking relationships with The Bank of New York.
TERMINATION OF THE TRUST SECURITIES GUARANTEE
The Trust Securities Guarantee will terminate and be of no further force and
effect upon full payment of the Redemption Price of the Trust Securities, upon
full payment of the amounts payable upon liquidation of the Trust or upon
distribution of the Junior Subordinated Debentures to the holders of the Trust
Securities. The Trust Securities Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of the Trust
Securities must restore payment of any sums paid under the Trust Securities or
the Trust Securities Guarantee.
GOVERNING LAW
The Trust Securities Guarantee will be governed by and construed in
accordance with the laws of the State of New York.
THE AGREEMENT AS TO EXPENSES AND LIABILITIES
Pursuant to an expense agreement ( the "Agreement as to Expenses and
Liabilities"), the US Affiliates will irrevocably and unconditionally
guarantee to each person or entity to whom the Trust becomes indebted or
liable the full payment of any indebtedness, expenses or liabilities of the
Trust, other than obligations of the Trust to pay to the holders of the Trust
Securities or other similar interests in the Trust, the amounts due such
holders pursuant to the terms of the Trust Securities or such other similar
interests, as the case may be.
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DESCRIPTION OF THE JUNIOR SUBORDINATED DEBENTURES
The Junior Subordinated Debentures are to be issued under the Indenture with
terms corresponding to the terms of the Trust Securities. This summary of
material terms and provisions of the Junior Subordinated Debentures and the
Indenture is subject to, and is qualified in its entirety by reference to, the
Indenture, the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus forms a part, and the 1939 Act.
GENERAL
Concurrently with the issuance of the Trust Securities, the Trust will
invest the proceeds thereof in the Junior Subordinated Debentures issued by
Yorkshire Finance. The Junior Subordinated Debentures will be unsecured and
will rank junior and be subordinate in right of payment to all Senior Debt of
Yorkshire Finance and will rank pari passu with any other series of Indenture
Securities (as defined below) issued by Yorkshire Finance. Additional series
of securities (together with the Junior Subordinated Debentures, the
"Indenture Securities") may be issued, without limitation as to amount, under
the Indenture and the Indenture does not limit the incurrence or issuance of
other secured or unsecured securities of Yorkshire Finance, whether under the
Indenture, any other indenture that Yorkshire Finance may enter into in the
future or otherwise. See "--Subordination". Application will be made to list
the Junior Subordinated Debentures on the Luxembourg Stock Exchange.
The entire principal amount of the Junior Subordinated Debentures will
mature and become due and payable, together with any accrued and unpaid
interest thereon, on , 2038.
INTEREST
The Junior Subordinated Debentures will bear interest at the rate of % per
annum of the principal amount thereof, payable quarterly in arrears on March
31, June 30, September 30 and December 31 of each year (each, an "Interest
Payment Date"), commencing , 1998, initially, through a Paying Agent to
the Book-Entry Depositary (as defined under "--Form, Book-Entry Procedures and
Transfer"), as the holder of the Global Debentures (as defined under "--Form,
Book-Entry Procedures and Transfer"), and, otherwise, as described under "--
Form, Book-Entry Procedures and Transfer--Payments on the Junior Subordinated
Debentures". The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any
date on which an Interest Payment is payable on the Junior Subordinated
Debentures is not a Business Day, then the Interest Payment payable on such
date will be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on the date such payment was
originally payable. Interest Payments that are in arrears for more than one
quarter will accrue additional interest (to the extent permitted by law) at
the rate of % per annum thereof, compounded quarterly. The term "interest" as
used herein shall include quarterly Interest Payments, interest on quarterly
Interest Payments in arrears, Additional Amounts and Additional Interest, as
applicable.
OPTION TO DEFER PAYMENT OF INTEREST
So long as no Event of Default under the Indenture has occurred and is
continuing, Yorkshire Finance has the right under the Indenture during the
term of the Junior Subordinated Debentures to defer Interest Payments, at any
time or from time to time, for up to 20 consecutive quarters; provided,
however, that Yorkshire Finance cannot defer Interest Payments beyond the
Stated Maturity of the Junior Subordinated Debentures. Until all deferred
Interest Payments together with interest thereon have been paid in full,
interest will continue to accrue, together with interest thereon at the stated
rate of interest on the Junior Subordinated Debentures, to the extent
permitted by law.
In the event that Yorkshire Finance exercises this right, until all deferred
Interest Payments together with interest thereon have been paid in full,
neither Yorkshire Finance nor Yorkshire Group may, directly or indirectly, (i)
declare or pay any cash dividends or distributions on, or redeem, purchase,
acquire, or make a
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liquidation payment with respect to, any of its capital stock, (ii) make any
payments on, or repay, repurchase or redeem, any of its debt securities
(including other Indenture Securities or other junior subordinated securities
issued by Yorkshire Finance) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior in interest to the Junior Subordinated Debentures or
the Debentures Guarantee, respectively, or (iv) make any payments on, or
repay, repurchase or redeem, any of its debt securities held by, make any
loans or advances to, or make any payments with respect to any guarantee of
the debt of, any affiliate, in each case other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, common stock of Yorkshire Finance or Yorkshire Group and
exchanges or conversions of common stock of one class for common stock of
another class, (b) payments by Yorkshire Group under the Trust Securities
Guarantee (or any other guarantee by Yorkshire Group with respect to any
securities of any issued by its direct or indirect subsidiaries, provided that
the proceeds from the issuance of such securities were used to purchase other
Indenture Securities or other junior subordinated securities issued by
Yorkshire Finance), (c) payments by Yorkshire Group under the Debentures
Guarantee, (d) any dividend or payment by Yorkshire Group which is applied,
directly or indirectly, to any Tax Payments, (e) payments by Yorkshire Group,
directly or indirectly, on the Intercompany Notes or any other promissory
notes held by Yorkshire Finance (or any other direct or indirect wholly-owned
subsidiary of Yorkshire Group) evidencing loans made with the proceeds from
the issuance by Yorkshire Finance (or any other direct or indirect wholly-
owned subsidiary of Yorkshire Group) of securities guaranteed by Yorkshire
Group or (f) the reinvestment of any proceeds received under clause (e) above
by Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary
of Yorkshire Group) in additional debt securities of Yorkshire Group or any of
its other direct or indirect wholly-owned subsidiaries.
Prior to the termination of any such Extension Period, Yorkshire Finance may
further extend the interest payment period; provided that, such Extension
Period, together with all such previous and further extensions within such
Extension Period, may not exceed 20 consecutive quarters or the Stated
Maturity of the Junior Subordinated Debentures. Upon the termination of any
Extension Period and the payment of all amounts then due, Yorkshire Finance
may commence a new Extension Period, subject to the above requirements. As a
result, there could be multiple Extension Periods of varying lengths
throughout the term of the Junior Subordinated Debentures.
Yorkshire Finance must give the Property Trustee and the Indenture Trustee
notice of its intention to defer Interest Payments at least one Business Day
prior to the earlier of (i) the next succeeding Interest Payment Date and (ii)
the date Yorkshire Finance is required to give notice to the NYSE or other
applicable self-regulatory organization or to holders of the Junior
Subordinated Debentures of the record date or Interest Payment Date, but in
any event not less than one Business Day prior to such record date. The
Property Trustee shall give notice of Yorkshire Finance's intention to defer
Interest Payments to the holders of the Trust Securities within five Business
Days of the receipt of notice thereof.
REDEMPTION
The Junior Subordinated Debentures are redeemable prior to maturity at the
option of Yorkshire Finance (i) on or after , 2003, in whole at any time or
in part from time to time, (ii) at any time, in whole (but not in part) within
90 days following the occurrence of a Special Event or (iii) at any time, in
whole (but not in part), if Yorkshire Finance or Yorkshire Group has or will
become obligated to pay Additional Amounts, as provided under "--Optional Tax
Redemption", in each case, at the Debenture Redemption Price.
The proceeds of any such redemption will be used by the Trust to redeem the
Trust Securities in accordance with their terms. Yorkshire Finance may not
redeem less than all of the Junior Subordinated Debentures unless all accrued
and unpaid interest, if any, has been paid in full on all outstanding Junior
Subordinated Debentures for all interest periods terminating on or prior to
the Redemption Date.
Notice of any redemption will be mailed at least 30 days but not more than
60 days before the Redemption Date to each holder of Junior Subordinated
Debentures to be redeemed at such holder's registered address. Unless
Yorkshire Finance defaults in payment of the Debenture Redemption Price, on
and after the Redemption Date interest shall cease to accrue on the Junior
Subordinated Debentures or portions thereof called for redemption.
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ADDITIONAL AMOUNTS
All payments in respect of the Junior Subordinated Debentures and all
payments made pursuant to the Debentures Guarantee shall be made free and
clear of, and without withholding or deduction for or on account of, any
present or future taxes, duties, assessments or governmental charges of
whatever nature imposed, levied, collected, withheld or assessed by or within
a Taxing Jurisdiction or by or within any political subdivision thereof or any
authority therein or thereof having power to tax ("Gross-Up Taxes"), unless
such withholding or deduction is required by law. In the event of any such
withholding or deduction, Yorkshire Finance or Yorkshire Group, as the case
may be, shall pay to the relevant holder of Junior Subordinated Debentures the
amount that would otherwise have been due to such holder in the absence of
such withholding or deduction, except that no Additional Amounts shall be
payable:
(a) to, or to a person on behalf of, a holder who is liable for such
Gross-Up Taxes in respect of the Junior Subordinated Debentures or the
Debentures Guarantee by reason of such holder having some connection with
the relevant Taxing Jurisdiction (including being a citizen or resident or
national of, or carrying on a business or maintaining a permanent
establishment in, or being physically present in, such Taxing Jurisdiction)
other than the mere holding of a Junior Subordinated Debenture or the
receipt of any payment in respect thereof or in respect of the Debentures
Guarantee;
(b) to, or to a person on behalf of, a holder who presents a Junior
Subordinated Debenture (whenever presentation is required) for payment more
than 30 days after the Relevant Date (as defined below) except to the
extent that such holder would have been entitled to such Additional Amounts
on presenting such Junior Subordinated Debenture for payment on the last
day of such period of 30 days;
(c) to, or to a person on behalf of, a holder who presents a Junior
Subordinated Debenture (where presentation is required) in the UK or Cayman
Islands;
(d) to, or to a person on behalf of, a holder who would not be liable or
subject to the withholding or deduction by making a declaration of non-
residence or similar claim for exemption to the relevant tax authority; or
(e) to, or to a person on behalf of, a holder of a Definitive Registered
Debenture (as defined under "--Form, Book-Entry Procedures and Transfer")
issued pursuant to an Optional Definitive Security Request (as defined
under "--Form, Book-Entry Procedures and Transfer").
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Junior Subordinated Debentures (or any interest therein) been the
holder of the Junior Subordinated Debentures, he would not have been entitled
to payment of Additional Amounts by reason of any one or more of the clauses
(a) through (e) above. If Yorkshire Group or Yorkshire Finance, as applicable,
shall determine that Additional Amounts will not be payable because of the
immediately preceding sentence, Yorkshire Group or Yorkshire Finance, as
applicable, will inform such holder promptly after making such determination
setting forth the reason(s) therefor.
"Relevant Date" means whichever is the later of (i) the date on which such
payment first becomes due and (ii) if the full amount payable has not been
received in The City of New York by the Book-Entry Depositary (as defined
herein) or the Indenture Trustee on or prior to such due date, the date on
which, the full amount having been so received, notice to that effect shall
have been given to the holders in accordance with the Indenture.
Any reference in this Prospectus to any payments with respect to the Junior
Subordinated Debentures or pursuant to the Debentures Guarantee shall be
deemed to include any such Additional Amounts payable in connection therewith.
OPTIONAL TAX REDEMPTION
If (a) Yorkshire Group or Yorkshire Finance satisfies the Indenture Trustee
prior to the giving of a notice as provided below that it has or will become
obligated to pay Additional Amounts with respect to the Junior Subordinated
Debentures or the Debentures Guarantee as a result of either (x) any change
in, or amendment to, the laws or regulations of a Taxing Jurisdiction or any
political subdivision or any authority or agency thereof or therein having
power to tax or levy duties, or any change in the application or
interpretation of such laws or regulations, which change or amendment becomes
effective on or after the date of this Prospectus or (y) the issuance of
Definitive Registered Debentures pursuant to an Optional Definitive Security
Request or clause (i) or
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(ii) of the second sentence of "--Form, Book-Entry Procedures and Transfer--
Definitive Registered Debentures" and (b) such obligation cannot be avoided by
Yorkshire Group or Yorkshire Finance taking reasonable measures available to
it, Yorkshire Finance may, at its option, on giving not more than 60 nor less
than 30 days' notice to the holders, redeem, as a whole but not in part, the
Junior Subordinated Debentures at the Debenture Redemption Price provided that
no such notice of redemption shall be given earlier than 90 days prior to the
earliest date on which Yorkshire Group or Yorkshire Finance would be obligated
to pay such Additional Amounts were a payment in respect of the Junior
Subordinated Debentures then due. Prior to the publication of any notice of
redemption pursuant to this paragraph, Yorkshire Finance shall deliver to the
Indenture Trustee a certificate signed by a director of Yorkshire Finance
stating that the obligation referred to in clause (a) above cannot be avoided
by Yorkshire Group or Yorkshire Finance taking reasonable measures available
to it, and the Indenture Trustee shall accept such certificate as sufficient
evidence of the condition precedent set forth in clause (b) above, in which
event it shall be conclusive and binding on the holders.
In the event that the Global Debentures are redeemed in whole or in part
pursuant to this provision or "--Redemption" above, the Book-Entry Depositary
will redeem, from the amount received by it in respect of the redemption of
the Global Debentures an equal amount of the related Book-Entry Interests
initially held by the Property Trustee. The redemption price payable in
connection with the redemption of such Book-Entry Interests will be equal to
the amount received by the Book-Entry Depositary in connection with the
redemption of the Global Debentures.
DISTRIBUTION OF THE JUNIOR SUBORDINATED DEBENTURES
At any time, Yorkshire Group has the right at any time to dissolve the
Trust, and, in such event, cause a Like Amount of Junior Subordinated
Debentures to be distributed to the holders of the Trust Securities in
liquidation of the Trust after satisfaction of liabilities to creditors of the
Trust, if any, as provided by applicable law. See "Description of the Trust
Securities--Distribution of Junior Subordinated Debentures". If distributed to
holders of the Trust Securities in liquidation of the Trust, the Junior
Subordinated Debentures will initially be issued as described under "--Form,
Book-Entry Procedures and Transfer". If the Junior Subordinated Debentures are
distributed to the holders of the Trust Securities upon the dissolution and
liquidation of the Trust, Yorkshire Finance will use its best efforts to list
the Junior Subordinated Debentures on the NYSE or such other stock exchanges
or other organizations, if any, on which the Trust Securities are then listed.
There can be no assurance as to the market price of the Junior Subordinated
Debentures that may be distributed to the holders of the Trust Securities.
INDENTURE EVENTS OF DEFAULT
The Indenture provides that any one or more of the following described
events with respect to a series of Indenture Securities that has occurred and
is continuing constitutes an "Event of Default" with respect to such series of
Indenture Securities:
(i) failure for 60 days to pay any interest or similar payment on such
series of Indenture Securities when due and payable (subject to Yorkshire
Finance's right to defer such payment); or
(ii) failure to pay principal of or premium, if any, on such series of
Indenture Securities when due and payable; or
(iii) failure to perform, or breach of, any covenant or warranty of
Yorkshire Finance or Yorkshire Group contained in the Indenture for 60 days
after written notice to Yorkshire Finance or Yorkshire Group from the
Indenture Trustee or to Yorkshire Finance or Yorkshire Group and the
Indenture Trustee by the holders of at least 33% in aggregate principal
amount of such series of outstanding Indenture Securities as provided in
the Indenture; or
(iv) certain events in bankruptcy, insolvency or reorganization of
Yorkshire Finance or Yorkshire Group; or
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(v) the Debentures Guarantee shall be held in a judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force
and effect; or
(vi) any other Event of Default specified with respect to such series of
Indenture Securities.
If an Event of Default due to the default in payment of principal of, or
interest or similar payment on, any series of Indenture Securities or due to
the default in the performance or breach of any other covenant or warranty of
Yorkshire Finance or Yorkshire Group applicable to the Indenture Securities of
such series but not applicable to all series occurs and is continuing, then
either the Indenture Trustee or the holders of not less than 33% in aggregate
principal amount of the outstanding Indenture Securities of such series may
declare the principal of all of the Indenture Securities of such series and
interest or other amounts accrued or accumulated thereon to be due and payable
immediately (subject to the subordination provisions of the Indenture) and, in
the case of the Junior Subordinated Debentures, should the Indenture Trustee
or such holders of such Junior Subordinated Debentures fail to make such
declaration, the holders of at least 33% in aggregate Liquidation Amount of
the Trust Securities shall have such right. If an Event of Default due to the
default in the performance of any covenants or agreements in the Indenture
applicable to all outstanding Indenture Securities or due to certain events of
bankruptcy, insolvency or reorganization of Yorkshire Finance has occurred and
is continuing, either the Indenture Trustee or the holders of not less than
33% in aggregate principal amount of all outstanding Indenture Securities (or
Trust Securities, as described above), considered as one class, and not the
holders of the Indenture Securities (or Trust Securities) of any one of such
series, may make such declaration of acceleration (subject to the
subordination provisions of the Indenture).
At any time after such a declaration of acceleration with respect to the
Indenture Securities of any series has been made and before a judgment or
decree for payment of the money due has been obtained, the Event or Events of
Default giving rise to such declaration of acceleration will, without further
act, be deemed to have been waived, and such declaration and its consequences
will, without further act, be deemed to have been rescinded and annulled, if
(a) Yorkshire Finance or Yorkshire Group has paid or deposited with the
Indenture Trustee a sum sufficient to pay
(1) all overdue interest and similar payments on all Indenture
Securities of such series;
(2) the principal of and premium, if any, on any Indenture Securities
of such series which have become due otherwise than by such declaration
of acceleration and interest or other amounts thereon at the rate or
rates prescribed therefor in such Indenture Securities;
(3) interest upon overdue interest or other amounts at the rate or
rates prescribed therefor in such Indenture Securities, to the extent
that payment of such interest or other amounts is lawful; and
(4) all amounts due to the Indenture Trustee under the Indenture; and
(b) any other Event or Events of Default with respect to Indenture
Securities of such series, other than the nonpayment of the principal of
the Indenture Securities of such series which has become due solely by such
declaration of acceleration, have been cured or waived as provided in the
Indenture.
The holders of a majority in aggregate principal amount of the Indenture
Securities of all series then outstanding may waive compliance by Yorkshire
Finance or Yorkshire Group with certain restrictive provisions of the
Indenture. The holders of a majority in principal amount of the outstanding
Indenture Securities of any series may, on behalf of the holders of all the
Indenture Securities of such series, waive any past default under the
Indenture with respect to such series, except a default in the payment of
principal of or premium, if any, or interest or other amounts (unless such
default has been cured and a sum sufficient to pay all matured installments of
interest, principal and such other amounts due otherwise than by declaration
of acceleration has been deposited with the Indenture Trustee) or a default in
respect to a covenant or provision which under the Indenture cannot be
modified or amended without the consent of the holder of each outstanding
Indenture Security of such series affected. With respect to the Junior
Subordinated Debentures, the Trust may not waive compliance by Yorkshire
Finance or Yorkshire Group with certain restrictive provisions of the
Indenture or waive any past defaults
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thereunder without the consent of a majority in aggregate Liquidation Amount
of the outstanding Trust Securities.
In case an Event of Default shall occur and be continuing as to the Junior
Subordinated Debentures, the Property Trustee will have the right to declare
the principal of and the interest on the Junior Subordinated Debentures and
any other amounts payable under the Indenture to be immediately due and
payable and to enforce its other rights as a creditor with respect to the
Junior Subordinated Debentures. Furthermore, a holder of Trust Securities may
institute a proceeding directly against Yorkshire Group for enforcement of
payment to such holder under the Debentures Guarantee in respect of Interest
Payments or any other payments due on the Junior Subordinated Debentures
having a principal amount equal to the aggregate Liquidation Amount of the
Trust Securities of such holder on or after the due dates specified in the
Junior Subordinated Debentures. See "Description of the Trust Securities--
Voting Rights; Amendment of Trust Agreement" and "Description of the Trust
Securities Guarantee".
MODIFICATION OF INDENTURE
Without the consent of any holder of Indenture Securities, Yorkshire Group,
Yorkshire Finance and the Indenture Trustee may enter into one or more
supplemental indentures for any of the following purposes: (a) to evidence the
assumption by any permitted successor to Yorkshire Finance or Yorkshire Group
of the covenants of Yorkshire Finance or Yorkshire Group, respectively, in the
Indenture and in the Indenture Securities; (b) to add one or more covenants of
Yorkshire Finance or Yorkshire Group or other provisions for the benefit of
the holders of outstanding Indenture Securities or to surrender any right or
power conferred upon Yorkshire Finance or Yorkshire Group by the Indenture;
(c) to add any additional Events of Default under the Indenture with respect
to outstanding Indenture Securities; (d) to modify, eliminate or add
provisions to the Indenture to such extent as shall be necessary to ensure
that (1) Yorkshire Finance will not be classified as an association or a
publicly traded partnership taxable as a corporation for U.S. Federal income
tax purposes or (2) Yorkshire Finance or Yorkshire Group will not be required
to register as an "investment company" under the Investment Company Act; (e)
to change or eliminate any provision of the Indenture or to add any new
provision to the Indenture, provided that if such change, elimination or
addition will adversely affect the interests of the holders of any series of
Indenture Securities in any material respect, such change, elimination or
addition will become effective with respect to such series only (1) when the
consent of the holders of Indenture Securities of such series has been
obtained in accordance with the Indenture, or (2) when no Indenture Securities
of such series remain outstanding under the Indenture; (f) to provide
collateral security for the Indenture Securities; (g) to establish the form or
terms of Indenture Securities of any other series as permitted by the
Indenture; (h) to provide for the authentication and delivery of bearer
securities and coupons appertaining thereto representing interest, if any,
thereon and for the procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the solicitation of the vote or
consent of, the holders thereof, and for any and all other matters incidental
thereto; (i) to evidence and provide for the acceptance of appointment of a
separate or successor Indenture Trustee under the Indenture with respect to
the Indenture Securities of one or more series and to add to or change any of
the provisions of the Indenture as shall be necessary to provide for or to
facilitate the administration of the trusts under the Indenture by more than
one trustee; (j) to provide for the procedures required to permit the
utilization of a noncertificated system of registration for the Indenture
Securities of all or any series; (k) to change any place where (1) the
principal of and premium, if any, and interest or other payments, if any, on
all or any series of Indenture Securities shall be payable, (2) all or any
series of Indenture Securities may be surrendered for registration of transfer
or exchange and (3) notices and demands to or upon Yorkshire Finance or
Yorkshire Group in respect to Indenture Securities and the Indenture may be
served; or (l) to cure any ambiguity or inconsistency or to add or change any
other provisions with respect to matters and questions arising under the
Indenture, provided that, except in the case of clause (d) above, such changes
or additions shall not adversely affect the interests of the holders of
Indenture Securities of any series in any material respect.
The Indenture contains provisions permitting Yorkshire Finance and Yorkshire
Group, with the consent of the holders of a majority in principal amount of
each outstanding series of Indenture Securities affected, to modify the
Indenture in a manner affecting the rights of the holders of such series of
the Indenture Securities;
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provided, that no such modification may (i) change the maturity, if any, of
any series of Indenture Securities, or reduce the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon (except such
extension as is contemplated thereby), (ii) reduce the percentage of principal
amount of Indenture Securities of any series, the holders of which are
required to consent to any such modification of the Indenture, (iii) reduce
any amount payable under, delay or defer the required time of payment under,
or impair the right to institute suit to enforce any payment under the
Debentures Guarantee, (iv) modify the provisions of the Indenture with respect
to the subordination of the Indenture Securities or the Debentures Guarantee
or (v) modify certain of the provisions of the Indenture relating to
supplemental indentures, waivers of certain covenants and waivers of past
defaults with respect to the Indenture Securities of any series, without the
consent of the holder of each outstanding Indenture Security affected thereby,
provided, that in the case of the Junior Subordinated Debentures, so long as
any of the Trust Securities remain outstanding, no such modification may be
made that adversely affects the holders of the Trust Securities, and no
termination of the Indenture may occur, and no waiver of any Event of Default
under the Indenture or compliance with any covenant under the Indenture may be
effective, without the prior consent of the holders of a majority of the
aggregate Liquidation Amount of such Trust Securities unless and until the
principal of the Junior Subordinated Debentures and all accrued and unpaid
interest or other amounts thereon have been paid in full and certain other
conditions are satisfied.
Notwithstanding the foregoing, no amendment or modification may be made to
the Indenture if such amendment or modification would cause (i) Yorkshire
Finance to be classified as an association or publicly traded partnership
taxable as a corporation for US Federal income tax purposes or (ii) Yorkshire
Finance or Yorkshire Group to be required to register as an "investment
company" under the Investment Company Act.
DEBENTURES GUARANTEE
Pursuant to the Indenture, Yorkshire Group will irrevocably and
unconditionally guarantee the Junior Subordinated Debentures as described
under "Description of the Debentures Guarantee".
CERTAIN COVENANTS
Each of Yorkshire Finance and Yorkshire Group will covenant in the Indenture
that it will not, directly or indirectly, (i) declare or pay any cash
dividends or distributions on, or redeem, purchase, acquire, or make a
liquidation payment with respect to, any of its capital stock, (ii) make any
payments on, or repay, repurchase or redeem, any of its debt securities
(including other Indenture Securities or other junior subordinated securities
issued by Yorkshire Finance) that rank pari passu with or junior in interest
to the Junior Subordinated Debentures or the Debentures Guarantee,
respectively, (iii) make any payments with respect to any guarantee that ranks
pari passu with or junior in interest to the Junior Subordinated Debentures or
the Debentures Guarantee, respectively, or (iv) make any payments on, or
repay, repurchase or redeem, any of its debt securities held by, make any
loans or advances to, or make any payments with respect to any guarantee of
the debt of, any affiliate, in each case other than (a) dividends or
distributions in shares of, or options, warrants or rights to subscribe for or
purchase shares of, the common stock of Yorkshire Finance or Yorkshire Group
and exchanges or conversions of common stock of one class for common stock of
another class, (b) payments by Yorkshire Group under the Trust Securities
Guarantee (or any other guarantee by Yorkshire Group with respect to any
securities of any of its direct or indirect subsidiaries, provided that the
proceeds from the issuance of such securities were used to purchase other
Indenture Securities or other junior subordinated securities issued by
Yorkshire Finance), (c) payments by Yorkshire Group under the Debentures
Guarantee, (d) any dividend or payment by Yorkshire Group which is applied,
directly or indirectly, to any Tax Payments, (e) payments by Yorkshire Group,
directly or indirectly, on the Intercompany Notes or any other promissory
notes held by Yorkshire Finance (or any other direct or indirect wholly-owned
subsidiary of Yorkshire Group) evidencing loans made with the proceeds from
the issuance by Yorkshire Finance (or any other direct or indirect wholly-
owned subsidiary of Yorkshire Group) of securities guaranteed by Yorkshire
Group or (f) the reinvestment of any proceeds received under clause (e) above
by Yorkshire Finance (or any other direct or indirect wholly-owned subsidiary
of Yorkshire Group) in additional debt securities of Yorkshire Group or any of
its other direct or indirect wholly-owned subsidiaries, if at such time (i)
there shall have occurred and be continuing a payment default (whether before
or after expiration
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of any period of grace) or an Event of Default with respect to any series of
Indenture Securities, (ii) Yorkshire Group shall be in default with respect to
its payment of any obligations under the Trust Securities Guarantee or the
Debentures Guarantee or any other such guarantee as described above or (iii)
Yorkshire Finance shall have given notice of its intention to defer payment of
interest or other amounts as provided in the Indenture with respect to any
series of Indenture Securities, shall not have rescinded such notice and such
deferral shall be continuing until all deferred interest or similar payments
together with interest thereon have been paid in full.
Yorkshire Finance and Yorkshire Group also will covenant that so long as any
Trust Securities remain outstanding, if the Trust shall be required to pay,
with respect to its income derived from payments of principal of or interest
on the Junior Subordinated Debentures or pursuant to the Debentures Guarantee,
any amounts for or on account of any taxes, duties, assessments or
governmental charges of whatever nature imposed by a Taxing Jurisdiction or
any other taxing authority, then, in any such case, Yorkshire Finance or
Yorkshire Group will pay as interest on the Junior Subordinated Debentures
such amounts as may be necessary in order that the net amounts received and
retained by the Trust after the payment of such taxes, duties, assessments or
governmental charges shall result in the Trust having such funds as it would
have had in the absence of the payment of such taxes, duties, assessments or
governmental charges ("Additional Interest"). Furthermore, Yorkshire Finance
and Yorkshire Group will covenant, so long as the Trust Securities remain
outstanding, to keep effective and comply with the terms and conditions of the
Demand Share Issue and Purchase Agreement, dated February 24, 1998, between
Yorkshire Finance and Yorkshire Group.
Yorkshire Group will also covenant to (i) retain the Control Certificate,
provided that certain successors which are permitted pursuant to the Indenture
may succeed to the ownership of the Control Certificate, (ii) use its
reasonable efforts, consistent with the terms and provisions of the Trust
Agreement, to cause (a) the Trust to not be classified as anything other than
a grantor trust for US Federal income tax purposes, (b) the Trust to remain a
trust falling within the provisions of Section 60 and not to be treated as a
company for purposes of UK tax law, (c) each of Yorkshire Group, Yorkshire
Finance and the Trust not to be required to register as an "investment
company" under the Investment Company Act, (d) Yorkshire Finance to not be
classified as an association or a publicly traded partnership taxable as a
corporation for US Federal income tax purposes and (e) Yorkshire Finance not,
at any time, to be engaged in a US trade or business for US Federal income tax
purposes. Furthermore, Yorkshire Group and Yorkshire Finance will covenant to
treat the Junior Subordinated Debentures as indebtedness of Yorkshire Finance
for all US Federal income tax purposes.
CONSOLIDATION, MERGER, SALE OF ASSETS AND OTHER TRANSACTIONS
The Indenture provides that Yorkshire Group shall not consolidate with or
merge into any other corporation or convey, transfer or lease its properties
and assets substantially as an entirety to any person, unless (i) in case
Yorkshire Group consolidates with or merges into another corporation or
conveys or transfers its properties and assets substantially as an entirety to
any person, the successor corporation expressly assumes the obligations of
Yorkshire Group under the Debentures Guarantee; (ii) immediately after giving
effect thereto, no Event of Default under the Indenture, and no event which,
after notice or lapse of time or both, would become an Event of Default under
the Indenture, shall have occurred and be continuing; and (iii) certain other
conditions as prescribed in the Indenture are met.
Yorkshire Finance may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. Yorkshire Finance may, without the consent of the holders of
the Junior Subordinated Debentures, consolidate, amalgamate, merge with or
into, or be replaced by a limited partnership, limited liability company or
trust organized under the laws of any state of the US; provided, that (i) such
successor entity either (a) expressly assumes all of the obligations of
Yorkshire Finance under the Junior Subordinated Debentures or (b) substitutes
for the Junior Subordinated Debentures other securities having substantially
the same terms as the Junior Subordinated Debentures (the "Successor
Debentures"), so long as the Successor Debentures are not junior to any other
equity securities of the successor entity with respect to participation in the
profits and distributions, and in the assets, of the successor entity, (ii) if
the Junior Subordinated Debentures are then so
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listed, the Junior Subordinated Debentures continue to be listed, or any
Successor Debentures are or will be listed upon notification of issuance, on
any national securities exchange or with another organization on which the
Junior Subordinated Debentures are then listed or quoted, (iii) such merger,
consolidation, amalgamation or replacement does not cause the Trust Securities
(or, in the event that the Trust is liquidated, the Junior Subordinated
Debentures (including any Successor Debentures)) to be downgraded by any
nationally recognized statistical securities rating organization, (iv) such
merger, consolidation, amalgamation or replacement does not adversely affect
the powers, preferences and other special rights of the holders of the Trust
Securities or Junior Subordinated Debentures (including any Successor
Debentures) in any material respect (other than, in the case of Junior
Subordinated Debentures or Successor Debentures, with respect to any dilution
of the holders' interest in the new resulting entity), (v) such successor
entity has a purpose substantially identical to that of Yorkshire Finance,
(vi) Yorkshire Group guarantees the obligations of such successor entity under
the Successor Debentures to the same extent as provided by the Debentures
Guarantee and (vii) prior to such merger, consolidation, amalgamation or
replacement, Yorkshire Group and Yorkshire Finance have received an Opinion of
Counsel experienced in such matters to the effect that: (A) such successor
entity will be treated as a partnership and not as an association or publicly
traded partnership taxable as a corporation for US Federal income tax
purposes, (B) such merger, consolidation, amalgamation or replacement will not
adversely affect the limited liability of the holders of the Junior
Subordinated Debentures (or the Successor Debentures), (C) following such
merger, consolidation, amalgamation or replacement, neither Yorkshire Group,
Yorkshire Finance nor such successor entity will be required to register as an
"investment company" under the Investment Company Act and (D) such merger,
consolidation, amalgamation or replacement would not cause the Trust to be
classified as (x) other than as a grantor trust for US Federal income tax
purposes and (y) other than as a trust falling within the provisions of
Section 60 for purposes of UK tax law.
In the event that any such successor entity is organized under the laws of a
country located outside of the Taxing Jurisdiction and withholding or
deduction is required by law for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed,
levied, collected, withheld or assessed by or within such country in which the
successor entity is organized or by or within any political subdivision
thereof or any authority therein or thereof having power to tax, the successor
entity shall pay to the relevant holder of the Global Debentures or to the
relevant holders of the Definitive Registered Debentures or to the relevant
holder or holders of the Successor Debentures, as the case may be, such
additional amounts, under the same circumstances and subject to the same
limitations as are specified for "Gross-Up Taxes", as is set forth under "--
Additional Amounts" above, but substituting for the applicable Taxing
Jurisdiction in each place the name of the country under the laws of which
such successor entity is organized. In addition, such successor entity shall
be entitled to effect an optional tax redemption of the Junior Subordinated
Debentures under the same circumstances and subject to the same limitations as
are set forth under "--Optional Tax Redemption" above, but substituting for
the applicable Taxing Jurisdiction in each place the name of the country under
the laws of which such successor entity is organized.
The general provisions of the Indenture do not afford holders of the Junior
Subordinated Debentures protection in the event of a highly leveraged
transaction, a change in control or other transaction involving Yorkshire
Finance or Yorkshire Group that may adversely affect holders of the Junior
Subordinated Debentures.
SATISFACTION AND DISCHARGE
The principal amount of Junior Subordinated Debentures will be deemed to
have been paid for purposes of the Indenture and the entire indebtedness of
Yorkshire Finance in respect thereof will be deemed to have been satisfied and
discharged, if there shall have been irrevocably deposited with the Indenture
Trustee or any Paying Agent, in trust: (a) money in an amount which will be
sufficient, or (b) Government Obligations (as defined herein), which do not
contain provisions permitting the redemption or other prepayment thereof at
the option of the issuer thereof, the principal of and the interest on which
when due, without any regard to reinvestment thereof, will provide moneys
which, together with the money, if any, deposited with or held by the
Indenture Trustee, will be sufficient, or (c) a combination of (a) and (b)
which will be sufficient, to pay when due the principal of and premium, if
any, or interest or other amounts, if any, due and to become due on the Junior
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Subordinated Debentures (including any Additional Amounts then known) that are
outstanding. For this purpose, Government Obligations include direct
obligations of, or obligations unconditionally guaranteed by, the US entitled
to the benefit of the full faith and credit thereof and certificates,
depository receipts or other instruments which evidence a direct ownership
interest in such obligations or in any specific interest or principal payments
due in respect thereof.
SUBORDINATION
In the Indenture, Yorkshire Finance has covenanted and agreed that any
Indenture Securities issued thereunder will be subordinate and junior in right
of payment to all Senior Debt of Yorkshire Finance to the extent provided in
the Indenture. Upon any payment or distribution of assets to creditors upon
any liquidation, dissolution, winding-up, reorganization, assignment for the
benefit of creditors, marshaling of assets or any bankruptcy, insolvency, debt
restructuring or similar proceedings in connection with any insolvency or
bankruptcy proceeding of Yorkshire Finance, the holders of Senior Debt of
Yorkshire Finance will first be entitled to receive payment in full of
principal of, premium, if any, and interest, if any, on such Senior Debt of
Yorkshire Finance before the holders of Indenture Securities will be entitled
to receive or retain any payment in respect of the principal of, premium, if
any, or interest or other amounts, if any, on the Indenture Securities.
In the event of the declaration of acceleration of any Indenture Securities,
the holders of all Senior Debt of Yorkshire Finance outstanding at the time of
such declaration will be entitled to receive payment in full of all amounts
due thereon (including any amounts due upon such declaration) before the
holders of Indenture Securities will be entitled to receive any payment upon
the principal of, premium, if any, or interest, if any, on the Indenture
Securities.
No payments on account of principal, premium, if any, or interest or other
amounts, if any, in respect of any Indenture Securities may be made if there
shall have occurred and be continuing a default in any payment with respect to
Senior Debt of Yorkshire Finance or an event of default remaining uncured with
respect to any Senior Debt resulting in the acceleration of the maturity
thereof.
The term "Senior Debt" means, with respect to any person, (i) any payment
due in respect of indebtedness of such person, whether outstanding at the date
of execution of the Indenture or thereafter incurred, created or assumed, (a)
in respect of money borrowed (including any financial derivative, hedging or
futures contract or similar instrument) and (b) evidenced by securities,
debentures, bonds, notes or other similar instruments issued by such person
that, by their terms, are senior or senior subordinated debt securities; (ii)
all capital lease obligations; (iii) all obligations issued or assumed as the
deferred purchase price of property, all conditional sale obligations and all
obligations of such person under any title retention agreement (but excluding
trade accounts payable arising in the ordinary course of business and long-
term purchase obligations); (iv) all obligations for the reimbursement of any
letter of credit, banker's acceptance, security purchase facility or similar
credit transaction; (v) all obligations of the type referred to in clauses (i)
through (iv) above of other persons the payment of which such person is
responsible or liable as obligor, guarantor or otherwise; and (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of such person (whether
or not such obligation is assumed by such person); provided, however, that
Senior Debt shall not include (1) any such indebtedness that is by its terms
subordinated to or pari passu with the Indenture Securities and (2) any
unsecured indebtedness between or among such person and its affiliates. Such
Senior Debt shall continue to be Senior Debt and be entitled to the benefits
of the subordination provisions contained in the Indenture irrespective of any
amendment, modification or waiver of any term of such Senior Debt.
The Indenture places no limitation on the amount of additional Senior Debt
that may be incurred by Yorkshire Finance or Yorkshire Group. Yorkshire
Finance and Yorkshire Group expect from time to time to incur additional
indebtedness constituting Senior Debt.
FORM, BOOK-ENTRY PROCEDURES AND TRANSFER
General
The Junior Subordinated Debentures will be issued initially only as a Global
Debenture in bearer form (the "Global Debenture") and will be payable only in
US dollars. Title to such Global Debentures will pass by
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delivery. The Global Debentures will be deposited on issue with The Bank of
New York in New York, New York, as book-entry depositary (the "Book-Entry
Depositary"), which will hold the Global Debentures for the benefit of the
Trust pursuant to the terms of the deposit agreement (the "Deposit Agreement")
dated as of May , 1998 among Yorkshire Finance, the Book-Entry Depositary and
the holders and beneficial owners from time to time of interests in the Book-
Entry Interests. Pursuant to the Deposit Agreement, the Book-Entry Depositary
will issue one or more certificateless depository interests (the "Book-Entry
Interests"), which together will represent a 100% beneficial interest in the
Global Debentures. Such Book-Entry Interests will initially be issued to the
Property Trustee.
If Book-Entry Interests are distributed to holders of Trust Securities in
liquidation of such holders' interests in the Trust, the Global Debentures
held by the Book-Entry Depositary and representing all of the Junior
Subordinated Debentures will cease to be held for the benefit of the Trust and
will, for all purposes under the Indenture and the Deposit Agreement, be held
by the Book-Entry Depositary for the benefit of DTC and its Participants, and
all of the Book-Entry Interests in the Global Debentures will be transferred
by the Property Trustee to DTC, which will operate a book-entry system for
interests in the Book-Entry Interests in global form (the "Global Book-Entry
Interests"). DTC will initially credit Direct Participants holding Trust
Securities with interests in the Global Book-Entry Interests (pro rata to
their holding of Trust Securities) registered in the name of DTC or its
nominee. Unless and until the Global Debentures are exchanged in whole for
Definitive Registered Debentures, Global Book-Entry Interests held by DTC may
not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee
to a successor of DTC or a nominee of such successor. For a description of DTC
and its book-entry system, see "Description of the Trust Securities--Book
Entry Issuance". As of the date of this Prospectus, the description herein of
DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Trust Securities will
apply in all material respects to any Global Book-Entry Interests registered
in the name of and held by DTC or its nominee. Yorkshire Finance may appoint a
successor to DTC or any successor depositary in the event DTC or such
successor depositary is unable or unwilling to continue as depositary for the
Global Book-Entry Interests.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such Global Book Entry
Interests.
So long as the Book-Entry Depositary, or its nominee, is the holder of the
Global Debentures, the Book-Entry Depositary or such nominee, as the case may
be, will be considered the sole holder of the Global Debentures (and the
Junior Subordinated Debentures) for all purposes under the Indenture. Except
as set forth below with respect to the issuance of Definitive Registered
Perpetual Securities, if the Junior Subordinated Debentures (represented by
Global Book-Entry Interests) are held through the facilities of DTC, Direct
Participants or Indirect Participants will not be entitled to have Junior
Subordinated Debentures registered in their names, will not receive or be
entitled to receive physical delivery of Junior Subordinated Debentures in
definitive bearer or registered form and will not be considered the owners or
holders thereof under the Indenture or the Deposit Agreement. Accordingly, if
the Junior Subordinated Debentures (represented by Global Book-Entry
Interests) are held through the facilities of DTC, each person owning an
interest in the Global Book-Entry Interests must rely on the procedures of the
Book-Entry Depositary and DTC and, if such person is not a Direct Participant
in DTC, on the procedures of the Direct Participant through which such person
owns its interest, to exercise any rights and obligations of a holder under
the Indenture or the Deposit Agreement.
In addition to a Paying Agent in the Borough of Manhattan, The City of New
York, Yorkshire Finance will, so long as Junior Subordinated Debentures are
listed on the Luxembourg Stock Exchange and the rules of such stock exchange
so require, maintain a Paying Agent in Luxembourg.
Neither Yorkshire Finance, Yorkshire Group nor any agent of Yorkshire
Finance or Yorkshire Group will have any responsibility or liability for any
aspect relating to payments made or to be made by the Book-Entry Depositary to
the persons entitled thereto in respect of the Junior Subordinated Debentures
or the Book-Entry Interests. None of Yorkshire Finance, Yorkshire Group, the
Indenture Trustee, the Book-Entry Depositary or any
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agent of any of the foregoing will have any responsibility or liability for
any aspect relating to payments made or to be made by DTC on account of a
Direct Participant's or Indirect Participant's ownership of an interest in the
Global Book-Entry Interests or for maintaining, supervising or reviewing any
records relating to a Direct Participant's or Indirect Participant's interests
in the Global Book-Entry Interests.
Payments on the Junior Subordinated Debentures
Payments of any amounts in respect of the Global Debenture will be made
through a Paying Agent to the Book-Entry Depositary, as the holder thereof.
Such payments shall be considered paid on the date they are due if the Paying
Agent holds at 11:00 a.m. New York City time on that date money deposited by
or on behalf of Yorkshire Group or Yorkshire Finance in immediately available
funds, designated for and sufficient to pay the amount due in full. The Book-
Entry Depositary will pay an amount equal to each such payment to the Property
Trustee as the initial holder of the Book-Entry Interests, which will
distribute such payments to DTC. If the Global Book-Entry Interests
representing the Junior Subordinated Debentures are held through the
facilities of DTC, such payments will be made by the Book-Entry Depository to
DTC, as holder of the Global Book-Entry Interests, which will distribute such
payments to its Direct Participants.
If any Definitive Registered Debentures have been issued, the interest
payable on such Definitive Registered Debenture other than at maturity will be
paid to the holder in whose name such Definitive Registered Debenture is
registered at the close of business on the fifteenth day (whether or not a
Business Day) immediately preceding the relevant Interest Payment Date (each a
"Record Date"). The principal amount of a Definitive Registered Debenture will
be payable to the person in whose name such Definitive Registered Debenture is
registered at the close of business on the immediately preceding Record Date
upon surrendering such Definitive Registered Debenture at the Indenture
Trustee's office in New York City. Interest payable at maturity will be
payable to the person to whom principal is payable.
If any Definitive Registered Debentures have been issued, Interest Payments
on such Definitive Registered Debentures to be paid other than at maturity
will be made by check to the person entitled thereto at such person's address
appearing on the Security Register. Interest Payments on the Definitive
Registered Debentures may also be made, in the case of a holder of at least US
$1,000,000 aggregate principal amount of Junior Subordinated Debentures by
wire transfer to a US Dollar account maintained by the payee with a bank in
the US; provided that such holder elects payment by wire transfer by giving
written notice to the Indenture Trustee or a Paying Agent to such effect
designating such account no later than 15 days immediately preceding the
relevant due date for payment (or such other date as the Indenture Trustee may
accept in its discretion).
Any monies paid by Yorkshire Finance or Yorkshire Group to the Indenture
Trustee or any Paying Agent, or held by Yorkshire Finance or Yorkshire Group
in trust, or the payments of the principal of or any interest or Additional
Amounts on any Junior Subordinated Debentures and remaining unclaimed at the
end of two years after such principal, interest or Additional Amounts become
due and payable will be paid to the US Affiliates, or released from the trust,
upon its written request, and upon such payment or release all liability of
Yorkshire Finance, Yorkshire Group, the Indenture Trustee and such Paying
Agent with respect thereto will cease.
All payments to the Book-Entry Depositary in respect of the Global
Debenture, and all payments to the holders of the Definitive Registered
Debentures, if issued, will be made without deduction or withholding for any
Gross-Up Taxes or other governmental charges, or if any such deduction or
withholding is required to be made under the provisions of any applicable law
or regulation, except as described under "--Additional Amounts", such
Additional Amounts will be paid as may be necessary in order that the net
amounts received by any holder of the Global Debenture or of any Definitive
Registered Debenture, after such deduction or withholding, will equal the
amounts that such holder would have otherwise received in respect of the
Global Debentures or of such Definitive Registered Debentures absent such
deduction or withholding. If Definitive Registered Debentures are issued
pursuant to an Optional Definitive Security Request, neither Yorkshire Finance
nor Yorkshire Group will be obligated to pay Additional Amounts in respect of
such Definitive Registered Debentures.
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If the due date for any interest in respect of the Junior Subordinated
Debentures is not a Business Day, the holder thereof will not be entitled to
payment of the amount due until the next succeeding Business Day and will not
be entitled to any further interest or other payment in respect of any such
delay.
Redemption
In the event the Global Debenture (or a portion thereof) is redeemed, the
Book-Entry Depositary will deliver all amounts received by it in respect to
the redemption of the Global Debenture to the persons entitled thereto and (in
the case of redemption in full) surrender the Global Debenture to the
Indenture Trustee for cancellation. The redemption price payable in connection
with the redemption of interests in a Book-Entry Interest will be equal to the
amount received by the Book-Entry Depositary in connection with the redemption
of the Global Debentures (or a portion thereof). For any redemption of the
Global Debenture in part, if the Junior Subordinated Debentures are held
through the facilities of DTC, selection of interests in the related Global
Book-Entry Interest to be redeemed will be made in accordance with the
procedures of DTC. Once redeemed in part, a new Global Debenture in the
principal amount equal to the unredeemed portion thereof will be issued and
delivered to the Book-Entry Depositary.
Action by Holders of Junior Subordinated Debentures
As soon as practicable after receipt by the Book-Entry Depositary of notice
of any solicitation of consents or request for a waiver or other action by the
holders of Junior Subordinated Debentures, the Book-Entry Depositary will mail
to the Property Trustee (or, if the Global Book-Entry Interests representing
the Junior Subordinated Debentures are then held through the facilities of
DTC, to DTC) a notice containing (a) such information as is contained in such
notice, (b) a statement that at the close of business on a specified record
date the Property Trustee (or DTC, as applicable) will be entitled, subject to
the provisions of the Indenture, to instruct the Book-Entry Depositary as to
the consent, waiver or other action, if any, pertaining to the Junior
Subordinated Debentures and (c) a statement as to the manner in which such
instructions may be given. Upon the written request of the Property Trustee
(or DTC, as applicable), the Book-Entry Depositary shall endeavor insofar as
practicable to take such action regarding the requested consent, waiver or
other action in respect of the Junior Subordinated Debentures in accordance
with any instructions set forth in such request. DTC is expected to follow
procedures described under "Description of the Trust Securities--Book-Entry
Issuance" with respect to soliciting instructions from Participants. The Book-
Entry Depositary will not exercise any discretion in the granting of consents
or waivers or the taking of any other action relating to the Deposit Agreement
or the Indenture.
Meetings of Holders of Junior Subordinated Debentures
A meeting of the holders of Junior Subordinated Debentures may be called at
any time from time to time pursuant to the Indenture to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or other
action provided by the Indenture to be made given or taken by holders of the
Junior Subordinated Debentures.
To be entitled to vote at any meeting of holders of Junior Subordinated
Debentures, a person shall be (a) a holder of Junior Subordinated Debentures
or (b) a person appointed by an instrument in writing as proxy for a holder or
holders of Junior Subordinated Debentures by such holder or holders. The only
persons who shall be entitled to attend any meeting of holders of Junior
Subordinated Debentures shall be the persons so entitled to vote at such
meeting and their counsel, any representatives of the Indenture Trustee and
its counsel, and any representatives of Yorkshire Finance and its counsel.
At any meeting of holders of Junior Subordinated Debentures, the persons
holding or representing Junior Subordinated Debentures in an aggregate
principal amount sufficient under the appropriate provision of the Indenture
to take action upon the business for the transaction of which such meeting was
called shall constitute a quorum. No action at a meeting of holders shall be
effective unless approved by persons holding or representing Junior
Subordinated Debentures in the aggregate principal amount required by the
provision of the Indenture pursuant to which such action is being taken. At
any meeting of holders, each holder or proxy shall be entitled to one vote for
each $1 principal amount of outstanding Junior Subordinated Debentures held or
represented.
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Until such time as written instruments shall have been delivered to the
Indenture Trustee evidencing the taking of any action at a meeting of holders
by the holders of the percentage in aggregate principal amount of the Junior
Subordinated Debentures specified in the Indenture in connection with such
action, any holder of a Junior Subordinated Debenture the serial number of
which is included in the Junior Subordinated Debentures the holders of which
have consented to such action may, by filing written notice with the Indenture
Trustee at its principal corporate trust office and upon proof of holding as
provided in the Indenture, revoke such consent so far as concerns such Junior
Subordinated Debentures. Except as aforesaid any such consent given by the
holder of any Junior Subordinated Debentures shall be conclusive and binding
upon such holder and upon all future holders and owners of such Junior
Subordinated Debentures and of any securities issued in exchange therefor, in
lieu thereof or upon transfer thereof, irrespective of whether or not any
notation in regard thereto is made upon such securities. Any action taken by
the holders of the percentage in aggregate principal amount of the holders
specified in the Indenture in connection with such action shall be
conclusively binding upon Yorkshire Finance, the Indenture Trustee and the
holders of all the Junior Subordinated Debentures.
Reports and Notices
So long as the Junior Subordinated Debentures are listed on the Luxembourg
Stock Exchange and the rules of such Stock Exchange so require, notice to
holders of the Junior Subordinated Debentures will be published in a leading
newspaper having general circulation in Luxembourg (which is expected to be
the Luxemburger Wort) in addition to notifying the Book-Entry Depositary. If
any Junior Subordinated Debentures have been distributed to holders of Trust
Securities, the Book-Entry Depositary will immediately send to DTC a copy of
any notices, reports and other communications received by it relating to
Yorkshire Finance, Yorkshire Group or the Junior Subordinated Debentures. In
the case of Definitive Registered Debentures, all notices regarding the Junior
Subordinated Debentures will, in addition to publication as referred to above,
be mailed to holders by first-class mail at their respective addresses as they
appear on the registration books of the registrar.
Amendment and Termination of the Deposit Agreement
The Deposit Agreement may be amended by agreement between Yorkshire Finance
and the Book-Entry Depositary, and the consent of DTC shall not be required in
connection with any amendment to the Deposit Agreement (i) to cure any formal
defect, omission, inconsistency or ambiguity in the Deposit Agreement, (ii) to
add to the covenants and agreements of Yorkshire Finance or the Book-Entry
Depositary, (iii) to effect the assignment of the Book-Entry Depositary's
rights and duties to a qualified successor, (iv) to comply with the Securities
Act, the Exchange Act, the 1939 Act or the Investment Company Act, or any
other applicable securities laws, (v) to modify the Deposit Agreement in
connection with an amendment of the Indenture that does not require the
consent of the holders of Junior Subordinated Debentures or (vi) to modify,
alter, amend or supplement the Deposit Agreement in any other respect not
inconsistent with such agreement which, in the opinion of counsel acceptable
to Yorkshire Finance, is not materially adverse to the Property Trustee or DTC
(if any Junior Subordinated Debentures (represented by Global Book-Entry
Interests) are then held through the facilities of DTC) or the beneficial
owners of the interests in the Book-Entry Interests. Except as provided in the
preceding sentence, no amendment that materially adversely affects any holder
or beneficial owner of an interest in the Book-Entry Interests may be made to
the Deposit Agreement without the consent of such holder or beneficial owner.
If Definitive Registered Debentures are issued by Yorkshire Finance in
exchange for the entire Global Debenture, the Book-Entry Depositary, as holder
of the Global Debenture, will surrender the Global Debenture against receipt
of the Definitive Registered Debentures and distribute the Definitive
Registered Debentures to the holders of Book-Entry Interests (or such other
persons as the Book-Entry Depositary becomes aware are entitled thereto),
whereupon the Deposit Agreement will terminate. The Deposit Agreement may also
be terminated upon the resignation of the Book-Entry Depositary if no
successor has been appointed within 120 days.
Resignation of Book-Entry Depositary
The Book-Entry Depositary may at any time resign as Book-Entry Depositary
with respect to the Global Debenture. If a successor depository meeting the
requirements specified in the Deposit Agreement has agreed to
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enter into arrangements with the same effect as the Deposit Agreement, the
Book-Entry Depositary shall deliver the Global Debenture to that successor. If
no such successor has so agreed within 120 days, the terms of the Deposit
Agreement provide that the Property Trustee or DTC (if any Junior Subordinated
Debentures (represented by Global Book-Entry Interests) are held through the
facilities of DTC) may request Yorkshire Finance to issue Definitive
Registered Debentures with respect to the Global Debenture. On receipt of such
Definitive Registered Debentures, the Book-Entry Depositary will surrender the
Global Debenture and distribute such Definitive Registered Debentures to the
persons entitled thereto. The Deposit Agreement will then terminate.
Obligation of Book-Entry Depositary
The Book-Entry Depositary will assume no obligation or liability under the
Deposit Agreement other than to act in good faith without negligence or
willful misconduct in the performance of its duties thereunder.
Definitive Registered Debentures
Beneficial owners of the Book-Entry Interests shall be entitled to receive
definitive Junior Subordinated Debentures in registered form ("Definitive
Registered Debentures") only in the limited circumstances set forth in this
paragraph. The Book-Entry Depositary will promptly notify the Indenture
Trustee and request in writing that Yorkshire Finance issue and the Indenture
Trustee authenticate and deliver Definitive Registered Debentures in exchange
for the Global Debenture, as a whole but not in part, in such names and
authorized denominations as DTC shall specify, if: (i) DTC notifies Yorkshire
Finance and the Book-Entry Depositary that it is unwilling or unable to
continue to hold the Global Book-Entry Interests related to the Global
Debenture or DTC at any time ceases to be a "clearing agency" registered as
such under the Exchange Act and, in either case, a successor is not appointed
by Yorkshire Finance within 120 days; (ii) the Book-Entry Depositary notifies
Yorkshire Finance that it is unwilling or unable to continue as Book-Entry
Depositary with respect to the Global Debenture and no successor Book-Entry
Depositary is appointed within 120 days; or (iii) Yorkshire Finance, in its
sole discretion, executes and delivers to the Indenture Trustee an officers'
certificate providing that the Global Debentures of such series shall be so
exchangeable. In addition, if an Event of Default shall have occurred and be
continuing with respect to the Junior Subordinated Debentures, any beneficial
owner of interests in Book-Entry Interests in the Global Debenture shall, upon
written request, be entitled to receive Definitive Registered Debentures in
exchange for such interests (an "Optional Definitive Security Request"). In no
event will an owner of beneficial interests in the Book-Entry Interests be
entitled to receive definitive Junior Subordinated Debentures in bearer form
on account of such ownership.
Definitive Registered Debentures so issued will be issued only in minimum
denominations of $25 and integral multiples thereof and will be issued in
registered form only, without coupons, and shall have the same interest rate,
terms and the same aggregate principal amount as the Global Debenture for
which they are exchanged. Such Definitive Registered Debentures shall be
registered in the name or names of such persons as the Book-Entry Depositary
shall notify the Trustee based on the instructions of DTC. It is expected that
such instructions may be based upon directions received by DTC from its
Participants with respect to ownership of beneficial interests in the Book-
Entry Interests.
PARTICIPANTS AND INDIRECT PARTICIPANTS SHOULD BE AWARE THAT, UNDER CURRENT
UK TAX LAW, UPON THE ISSUANCE TO SUCH PARTICIPANTS AND INDIRECT PARTICIPANTS
OF DEFINITIVE REGISTERED DEBENTURES, SUCH PARTICIPANTS AND INDIRECT
PARTICIPANTS, AS HOLDERS OF DEFINITIVE REGISTERED DEBENTURES, WILL BECOME
SUBJECT TO UK INCOME TAX (CURRENTLY AT THE RATE OF 20%) THAT MUST BE WITHHELD
ON ANY PAYMENTS OF INTEREST ON THE JUNIOR SUBORDINATED DEBENTURES AS SET FORTH
UNDER "MATERIAL INCOME TAX CONSIDERATIONS--UK INCOME TAX CONSIDERATIONS". IF
SUCH DEFINITIVE REGISTERED DEBENTURES ARE ISSUED FOLLOWING AN EVENT OF DEFAULT
WITH RESPECT TO JUNIOR SUBORDINATED DEBENTURES PURSUANT TO THE REQUEST OF
BENEFICIAL OWNERS OF INTERESTS IN THE
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BOOK-ENTRY INTERESTS IN ALL OF THE GLOBAL DEBENTURES, NEITHER YORKSHIRE
FINANCE NOR YORKSHIRE GROUP WILL BE OBLIGATED TO PAY ANY ADDITIONAL AMOUNTS IN
RESPECT OF SUCH DEFINITIVE REGISTERED DEBENTURES.
However, holders of Definitive Registered Debentures may be entitled to
receive a refund of withheld amounts from the UK Inland Revenue in certain
circumstances. See "Material Income Tax Considerations--UK Tax
Considerations". In addition, if an owner of a beneficial interest in a Book-
Entry Interest receives Definitive Registered Debentures other than pursuant
to its request, such owner will be entitled to receive Additional Amounts with
respect to such Definitive Registered Debentures. See "--Additional Amounts".
Transfer and Exchange of Definitive Registered Debentures
In the event that Definitive Registered Debentures are issued, a holder may
transfer or exchange the Definitive Registered Debentures in accordance with
the Indenture. Yorkshire Finance and the transfer agent and registrar may
require a holder, among other things, to furnish appropriate endorsements and
transfer documents, and may require a holder to pay a sum sufficient to cover
any taxes, other governmental charges and fees required by law or permitted by
the Indenture. Yorkshire Finance is not required to issue, register the
transfer of or exchange Definitive Registered Debentures of any series during
a period beginning at the opening of business 15 days before the day of the
mailing of a notice of redemption as required by the Indenture and ending at
the close of business on the day of such mailing, or to register the transfer
of or exchange any Definitive Registered Debentures so selected for redemption
in whole or in part, except that Yorkshire Finance shall be required to
register the transfer of or exchange the unredeemed portion of any Definitive
Registered Debentures being redeemed in part. Upon the issuance of Definitive
Registered Debentures, holders will be able to transfer and exchange
Definitive Registered Debentures at the offices of the transfer agent and
registrar; provided that all transfers and exchanges must be effected in
accordance with the terms of the Indenture and, among other things, be
recorded in the Security Register maintained by the transfer agent and
registrar.
GOVERNING LAW; SUBMISSION TO JURISDICTION
The Indenture, the Junior Subordinated Debentures and the Debentures
Guarantee will be governed by and construed in accordance with the laws of the
State of New York. Any legal suit, action or proceeding against Yorkshire
Finance or Yorkshire Group or the properties, assets or revenues with respect
to their respective obligations, liabilities or any other matter relating to
Yorkshire Finance or Yorkshire Group arising out of or in connection with the
Indenture, a Junior Subordinated Debenture or the Debentures Guarantee may be
brought in the Supreme Court of New York, New York County or in the United
States District Court for the Southern District of New York and any appellate
court from either thereof. Yorkshire Finance and Yorkshire Group have
submitted to the non-exclusive jurisdiction of such courts for the purposes of
any such proceeding and have irrevocably waived, to the fullest extent that
they may effectively do so, any objection to the laying of venue of any such
proceeding in any such court and the defense of an inconvenient forum.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee shall have, and shall be subject to, all the duties
and responsibilities specified with respect to an indenture trustee under the
1939 Act. Subject to such provisions, the Indenture Trustee is under no
obligation to exercise any of the powers vested in it by the Indenture at the
request of any holder of Junior Subordinated Debentures, unless offered
reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The Indenture Trustee is not
required to expend or risk its own funds or otherwise incur personal financial
liability in the performance of its duties if the Indenture Trustee reasonably
believes that repayment or adequate indemnity is not reasonably assured to it.
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DESCRIPTION OF THE DEBENTURES GUARANTEE
Pursuant to the Indenture, Yorkshire Group will irrevocably and
unconditionally guarantee all payments on the Junior Subordinated Debentures
when and as the same shall become due and payable, whether at maturity, upon
redemption or otherwise. The Debentures Guarantee will be a direct and
unsecured obligation of Yorkshire Group and will rank subordinate and junior
to all Senior Debt that may be issued by Yorkshire Group. As of December 31,
1997, Senior Debt of Yorkshire Group aggregated approximately (Pounds)1,034
million ($1,699 million), a portion of which will be repaid with proceeds of
this offering. Yorkshire Group is a non-operating holding company, conducting
substantially all of its business through Yorkshire and its subsidiaries.
Except to the extent that Yorkshire Group receives funds from the US Parents
in the future, Yorkshire Group will rely on dividends, indirectly, from
Yorkshire to meet its obligations for payment of its outstanding obligations,
including any payments necessary pursuant to the Debentures Guarantee, and
corporate expenses. Furthermore, Yorkshire Group's obligations under the
Debentures Guarantee will effectively be subordinated to all existing and
future indebtedness and liabilities of the subsidiaries of Yorkshire Group,
including Yorkshire. As a result, the rights of holders of the Trust
Securities in respect of claims on the assets of each of the Yorkshire Group's
subsidiaries upon any liquidation or administration are structurally
subordinated to, and therefore will be subject to the prior claims of, the
creditors of Yorkshire and its subsidiaries (including trade creditors),
except to the extent that Yorkshire Group may itself be a creditor with
recognized claims against Yorkshire and its subsidiaries. At December 31,
1997, the direct and indirect subsidiaries of Yorkshire Group had total
indebtedness (excluding indebtedness owed to Yorkshire Group) of approximately
(Pounds)476 million ($782 million) and such subsidiaries may incur additional
indebtedness in the future.
During an Extension Period, Yorkshire Group's obligations to make payments
under the Debentures Guarantee will be suspended. See "Description of the
Junior Subordinated Debentures--Option to Defer Payment of Interest".
Under the terms of the Indenture and the Debentures Guarantee, if the
Property Trustee fails to enforce the Trust's rights with respect to the
Debentures Guarantee, a holder of Trust Securities may institute a legal
proceeding directly against Yorkshire Group to enforce the Trust's rights with
respect to the Debentures Guarantee to the fullest extent permitted by law,
without first instituting any legal proceeding against the Property Trustee or
the Trust. Notwithstanding the foregoing, a holder of Trust Securities may
institute a legal proceeding directly against Yorkshire Group for enforcement
of payment to such holder under the Debentures Guarantee in respect of
principal of or interest on the Junior Subordinated Debentures having a
principal amount equal to the aggregate Liquidation Amount of the Trust
Securities of such holder on or after the due dates specified in the Junior
Subordinated Debentures, without first instituting any legal proceeding
against the Property Trustee or any other person.
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RELATIONSHIP AMONG THE TRUST SECURITIES,
THE JUNIOR SUBORDINATED DEBENTURES,
THE TRUST SECURITIES GUARANTEE AND
THE DEBENTURES GUARANTEE
As long as Interest Payments and other payments are made when due on the
Junior Subordinated Debentures, such payments will be sufficient to cover
Distributions and other payments due on the Trust Securities, primarily
because (i) the aggregate principal amount of the Junior Subordinated
Debentures will be equal to the sum of the aggregate Liquidation Amount of the
Trust Securities, (ii) the interest rate and Interest Payment Dates on the
Junior Subordinated Debentures will match the Distribution rate and
Distribution Dates and other payment dates for the Trust Securities; (iii) the
Agreement as to Expenses and Liabilities provides that the US Affiliates shall
pay for all and any costs, expenses and liabilities of the Trust (except the
obligations of the Trust to pay holders of the Trust Securities the amounts
due such holders pursuant to the terms of the Trust Securities); and (iv) the
Trust Agreement further provides that the Trust will not engage in any
activity that is not consistent with the limited purposes of the Trust.
Payments of Distributions and other amounts due on the Trust Securities (to
the extent the Trust has sufficient funds available for the payment of such
Distributions) are irrevocably guaranteed by Yorkshire Group as and to the
extent set forth under "Description of the Trust Securities Guarantee". If and
to the extent that Yorkshire Finance does not make payments on the Junior
Subordinated Debentures or Yorkshire Group does not make payments pursuant to
the Debentures Guarantee, the Trust will not pay Distributions or other
amounts due on the Trust Securities. The Trust Securities Guarantee does not
cover payment of Distributions when the Trust does not have sufficient funds
available to pay such Distributions.
If the Trust has sufficient funds available to make Distribution payments,
but does not make such payments and Yorkshire Group fails to make payments
under the Trust Securities Guarantee, the Trust Securities Guarantee provides
a mechanism whereby the holders of the Trust Securities may direct the
Guarantee Trustee to enforce its rights thereunder. In addition, any holder of
Trust Securities may institute a legal proceeding directly against Yorkshire
Group to enforce the Guarantee Trustee's rights under the Trust Securities
Guarantee without first instituting a legal proceeding against the Guarantee
Trustee or any other person or entity.
Furthermore, if Yorkshire Finance fails to make Interest Payments or other
payments which are due on the Junior Subordinated Debentures or Yorkshire
Group does not make payments which are due pursuant to the Debentures
Guarantee, the Trust Agreement provides a mechanism whereby the holders of the
Trust Securities may direct the Property Trustee to enforce its rights under
the Junior Subordinated Debentures and the Debentures Guarantee, including
proceeding directly against Yorkshire Finance to enforce the Junior
Subordinated Debentures and proceeding directly against Yorkshire Group to
enforce the Debentures Guarantee. If the Property Trustee fails to enforce its
rights under the Debentures Guarantee, to the fullest extent permitted by
applicable law, any holder of Trust Securities may institute a legal
proceeding directly against Yorkshire Group to enforce the Property Trustee's
rights under the Debentures Guarantee without first instituting any legal
proceeding against the Property Trustee or any other person or entity.
Notwithstanding the foregoing, a holder of Trust Securities may institute a
legal proceeding directly against Yorkshire Group, without first instituting a
legal proceeding against the Property Trustee or any other person or entity,
for enforcement of payment to such holder under the Debentures Guarantee in
respect of Interest Payments or any other payments due on the Junior
Subordinated Debentures having an aggregate principal amount equal to the
aggregate Liquidation Amount of the Trust Securities of such holder on or
after the due dates specified in the Junior Subordinated Debentures.
The Debentures Guarantee, the Trust Securities Guarantee, the Indenture, the
Junior Subordinated Debentures, the Trust Agreement and the Agreement as to
Expenses and Liabilities, when taken together, effectively provide a full and
unconditional guarantee, on a subordinated basis, of the Trust's obligations
under the Trust Securities. No single document standing alone or operating in
conjunction with fewer than all of the
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other documents constitutes such guarantee. It is only the combined operation
of these documents that has the effect of providing a full, irrevocable and
unconditional guarantee of the Trust's obligations under the Trust Securities.
Notwithstanding anything to the contrary in the Indenture and the Debentures
Guarantee, Yorkshire Group has the right to set-off any payment it is
otherwise required to make under the Debentures Guarantee with and to the
extent Yorkshire Finance has theretofore made, or is concurrently on the date
of such payment making, a payment under the Indenture.
Upon any voluntary or involuntary dissolution, winding-up or liquidation of
the Trust not involving the distribution of the Junior Subordinated
Debentures, after satisfaction of creditors of the Trust, if any, as provided
by the Delaware Act, the holders of Trust Securities will be entitled to
receive, out of assets held by the Trust, the Liquidation Distribution in
cash. See "Description of the Trust Securities--Liquidation Distribution upon
Dissolution". Upon any voluntary or involuntary liquidation or bankruptcy of
Yorkshire Finance, the Property Trustee, as beneficial owner of the Junior
Subordinated Debentures, would be a subordinated creditor of Yorkshire
Finance, subordinated in right of payment to all Senior Debt, but entitled to
receive all payments in full due on the Junior Subordinated Debentures, before
any stockholders of Yorkshire Finance receive payments or distributions.
Because Yorkshire Group is the guarantor under the Debentures Guarantee and
the Trust Securities Guarantee, the positions of a holder of Trust Securities
and a holder of Junior Subordinated Debentures relative to other creditors and
to stockholders of Yorkshire Group in the event of liquidation or bankruptcy
of Yorkshire Group would be substantially the same.
A default or event of default under any Senior Debt would not constitute a
default or Event of Default with respect to the Junior Subordinated
Debentures. However, in the event of payment defaults under, or acceleration
of, Senior Debt, the subordination provisions of the Indenture provide that no
payments may be made in respect of the Junior Subordinated Debentures until
such Senior Debt has been paid in full or any payment default thereunder has
been cured or waived. Failure to make required payments on any Junior
Subordinated Debentures would constitute an Event of Default under the
Indenture.
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MATERIAL INCOME TAX CONSIDERATIONS
PROSPECTIVE PURCHASERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO
THEIR PARTICULAR CIRCUMSTANCES AND THE EFFECT OF STATE, LOCAL OR FOREIGN LAWS,
INCLUDING UK TAX LAWS, TO WHICH THEY MAY BE SUBJECT.
UK TAX CONSIDERATIONS
The comments below are based on UK law and UK Inland Revenue practice as of
the date of this Prospectus and represent the opinion of Allen & Overy, UK
counsel to Yorkshire Group, Yorkshire Finance and the Trust, so far as such
comments relate to matters of law or legal conclusions. They relate only to
holders of Junior Subordinated Debentures who are the absolute beneficial
owners thereof and related interest and may not apply to certain classes of
persons, including persons who do not hold such securities as capital assets
and special classes of investors such as dealers in securities. The UK
inheritance tax is not discussed. The UK tax position of a holder of the Trust
Securities is not addressed because the Trust is not a UK entity and is not
intended to be resident in the UK for UK tax purposes and the Trust Securities
will not be offered to UK-resident persons. Moreover, these comments do not
address the tax position of UK-resident holders of Junior Subordinated
Debentures (or of holders of such Junior Subordinated Debentures who carry on
a trade profession or vocation in the UK through a branch or agency to which
the holding of such Junior Subordinated Debentures is attributable). Any
prospective holders of Junior Subordinated Debentures or Trust Securities who
are in any doubt as to their tax position should consult their professional
advisers.
Payments on the Junior Subordinated Debentures
For UK tax purposes, provided that the Junior Subordinated Debentures (i)
remain represented by the Global Debenture, (ii) are in bearer form and (iii)
continue to be listed on the Luxembourg Stock Exchange or some other stock
exchange recognized under Section 841 UK Income and Corporation Taxes Act 1988
by the UK Inland Revenue, Interest Payments by Yorkshire Finance to the Trust
or any other holder of the Junior Subordinated Debentures may be made without
withholding or deduction for or on account of UK income tax for so long as the
paying agent of Yorkshire Finance, the Book-Entry Depositary, and the Trust is
not in the UK. In the event that Yorkshire Finance becomes liable to make any
withholding or deduction in respect of Interest Payments on the Junior
Subordinated Debentures, Additional Amounts will become payable to the extent
set out above under "Description of the Junior Subordinated Debentures--
Additional Amounts".
In other cases (subject to any direction to the contrary by the UK Inland
Revenue under an applicable double-taxation treaty), and in particular if
Definitive Registered Debentures are issued, Interest Payments will be made
after deduction of UK income tax (currently at the rate of 20%). A US-resident
holder of Junior Subordinated Debentures may be eligible to recover in full
any UK tax withheld from Interest Payments to which such holder is
beneficially entitled by making a claim under the US/UK- Double Tax Treaty on
the appropriate form. Alternatively, a claim may be made by such a US holder
in advance of an Interest Payment. If the claim is accepted by the UK Inland
Revenue, they will usually authorize subsequent payments to that US holder to
be made without withholding of UK income tax. Claims for repayment of UK tax
withheld must be made within six years of the end of the UK year of assessment
(generally April 5 in each year) to which the Interest Payments relate and
must be accompanied by the original statement provided by Yorkshire Finance
when the Interest Payment was made showing the amount of UK income tax
deducted. Because a claim is not considered made until the UK tax authorities
receive the appropriate form from the Internal Revenue Service (the "IRS"),
forms should be sent to the IRS, in the case of an advance claim, well before
the relevant Interest Payment Date or, in the case of a claim for the
repayment of the tax, well before the end of the appropriate limitation
period.
Where a person in the UK acts as a collecting agent, i.e. either:
(i) acts as custodian of the Junior Subordinated Debentures and receives
Interest Payments on the Junior Subordinated Debentures or directs that
Interest Payments on the Junior Subordinated Debentures be paid to another
person, or consents to such payment; or
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(ii) collects or secures payment of, arranges to secure or collect
payment of or receives Interest Payments on, the Junior Subordinated
Debentures for a holder (except by means of clearing a cheque or arranging
for the clearing of a cheque),
the collecting agent will be required to withhold on account of UK income tax
at the lower rate (currently 20%) unless the person who is the beneficial
owner of the Junior Subordinated Debentures and beneficially entitled to the
interest is not resident in the UK, and a declaration to that effect in the
required form has been given to the collecting agent, or the Inland Revenue
has issued a notice to the collecting agent, or one of the other exceptions to
the withholding obligation applies and, in each case, the conditions imposed
by regulations which need to be satisfed for the exemption from withholding to
apply have been complied with.
The above collecting agent rules apply to the Trust Securities as they apply
to the Junior Subordinated Debentures. The Trust does not intend to appoint a
UK collecting agent in respect of Interest Payments on the Junior Subordinated
Debentures. The above section may become relevant in relation to the Junior
Subordinated Debentures if they are distributed to the holders of the Trust
Securities in a liquidation of the Trust.
In the event that the Junior Subordinated Debentures are distributed to the
holders of the Trust Securities in a liquidation of the Trust, holders of
Junior Subordinated Debentures in other jurisdictions may be entitled to a
refund of all or part of any UK income tax deducted or withheld or to make a
claim for interest on the Junior Subordinated Debentures to be paid without,
or subject to a reduced rate of, deduction or withholding under the provisions
of an applicable double tax treaty.
A credit in respect of all or part of any UK income tax deducted or withheld
may, depending on individual circumstances, be available to a holder of Junior
Subordinated Debentures who is resident in the UK or who carries on a trade,
profession or vocation in the UK through a branch or agency to which the
Junior Subordinated Debentures are attributable.
Holders of Trust Securities should be aware that under current UK tax law
upon the issuance of Definitive Registered Debentures, the Interest Payments
on such Definitive Registered Debentures will (subject to any entitlement to
make a claim under the provisions of an applicable double tax treaty as
described above) become subject to UK withholding tax, currently at the rate
of 20%. Holders of Definitive Registered Debentures (including the Trust) will
be entitled to the payment of Additional Amounts in respect of the tax
withheld, except as set forth under "Description of the Junior Subordinated
Debentures--Additional Amounts" and under "Description of the Junior
Subordinated Debentures--Form, Book-Entry Procedures and Transfer--Definitive
Registered Debentures", and then subject to the right of Yorkshire Finance in
certain circumstances to redeem the Junior Subordinated Debentures. See
"Description of the Junior Subordinated Debentures--Optional Tax Redemption".
Interest Payments on the Junior Subordinated Debentures constitute UK-source
income and, as such, may be subject to UK income tax by direct assessment even
where paid without deduction or withholding. However, UK tax chargeable on
such income from a UK source beneficially owned by persons not regarded as
resident in the UK for tax purposes will normally be limited to the tax, if
any, deducted at source on payment of such income. This limitation on the UK
tax charge will not apply if such income is beneficially owned by a person who
is not resident for tax purposes in the UK if that person carries on a trade,
profession or vocation in the UK through a UK branch or agency in connection
with which the income is received or to which the Junior Subordinated
Debentures are attributable. There are in any case exemptions for certain
types of income received by certain categories of UK agent (such as some
brokers and investment managers) on behalf of non-UK resident persons.
Where the Junior Subordinated Debentures are held by the Trust and any
holder of Trust Securities is a UK resident, special considerations apply.
Section 128(5) Finance Act 1995 provides "This section [i.e. the section
providing the limitation on the UK tax charge referred to in the second
sentence of the previous paragraph above] shall NOT apply to the income tax
chargeable for any year of assessment on the income of trustees NOT resident
in the United Kingdom if there is a relevant beneficiary of the trust who is
either: (a) an individual ordinarily resident in the United Kingdom; or (b) a
company resident in the United Kingdom". It is not entirely clear, as a
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matter of law, whether Section 128(5) applies where the trust in question is
one under the terms of which the beneficiaries are entitled to the underlying
income of the trust as and when it arises. However, as a matter of practice,
it is understood that the UK Inland Revenue does not currently seek to apply
Section 128(5) to such trusts. Consequently, if the holders of Trust
Securities are entitled to the underlying income of the Trust as and when it
arises, it is not anticipated that the UK Inland Revenue will seek to assess
the Trust directly even if any holder of Trust Securities is UK-resident.
No stamp duty or stamp duty reserve tax ("SDRT") will be payable on the
issue or transfer by delivery of the Junior Subordinated Debentures.
US FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Dewey Ballantine LLP, counsel to Yorkshire Group,
Yorkshire Finance and the Trust ("Tax Counsel"), the following describes the
material US Federal income tax consequences of the acquisition, ownership and
disposition of the Trust Securities by purchasers upon original issuance that
are US citizens or residents, corporations, partnerships or other entities
created or organized in or under the laws of the US or any state thereof, an
estate, the income of which is subject to US Federal income taxation
regardless of its source or a trust, the administration of which is subject to
the primary supervision of a US court and for which one or more US persons
have the authority to control all substantial decisions, in each case that are
resident in the US and not resident in the UK for purposes of the current
double taxation convention between the US and the UK ("US Holders") and that
hold their beneficial interest in the Trust Securities as capital assets. This
opinion so far as it relates to matters of law or legal conclusions and is
based upon the provisions of the US Internal Revenue Code of 1986, as amended
(the "Code"), the Treasury regulations promulgated thereunder and
administrative and judicial interpretations thereof now in effect, all of
which are subject to change, possibly with retroactive effect. This opinion
does not discuss all aspects of US Federal income taxation (for example,
alternative minimum tax consequences) that may be relevant to particular
investors in light of their particular investment circumstances, nor does it
discuss any aspects of state, local or foreign tax laws or any estate or gift
tax considerations. This opinion does not deal with certain classes of US
persons subject to special treatment under the US Federal income tax laws (for
example, dealers in securities, banks, regulated investment companies, life
insurance companies, tax exempt organizations or persons whose functional
currency is not the US dollar).
The Trust Securities are not being marketed to persons that would not
constitute US Holders ("non-United States Persons") and, consequently, the
following discussion does not discuss the tax consequences that might be
relevant to non-United States Persons. NON-UNITED STATES PERSONS SHOULD
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC US FEDERAL INCOME TAX
CONSEQUENCES OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF TRUST SECURITIES.
Tax Counsel has advised that there is no authority directly on point dealing
with securities such as the Trust Securities or transactions of the type
described herein and that the opinions expressed herein are not binding on the
Internal Revenue Service ("IRS") or the courts, either of which could take a
contrary position. No rulings have been or will be sought from the IRS.
Accordingly, there can be no assurance that the IRS will not challenge the
opinions expressed herein or that a court would not sustain such a challenge.
PROSPECTIVE PURCHASERS OF TRUST SECURITIES SHOULD CONSULT, AND SHOULD RELY
UPON, THEIR TAX ADVISORS WITH RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE
PURCHASE, OWNERSHIP AND DISPOSITION OF THE TRUST SECURITIES, INCLUDING THE TAX
CONSEQUENCES UNDER STATE, LOCAL, FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN US FEDERAL OR OTHER TAX LAWS. FOR A DISCUSSION OF THE
POSSIBLE REDEMPTION OF THE TRUST SECURITIES OR REDEMPTION OF THE JUNIOR
SUBORDINATED DEBENTURES UPON THE OCCURRENCE OF CERTAIN TAX EVENTS, SEE
"DESCRIPTION OF THE TRUST SECURITIES--REDEMPTIONS" AND "DESCRIPTION OF THE
JUNIOR SUBORDINATED DEBENTURES--OPTIONAL TAX REDEMPTION", RESPECTIVELY.
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Classification of the Trust
Tax Counsel is of the opinion that, under current law, and assuming full
compliance with the terms of the Indenture and the Trust Agreement, the Trust
will be classified as a grantor trust for US Federal income tax purposes and
not as an association or a publicly traded partnership taxable as a
corporation. Accordingly, for US Federal income tax purposes, each US Holder
will be considered the beneficial owner of a pro rata undivided interest in
the Junior Subordinated Debentures held by the Trust, and each US Holder will
be required to include in its gross income its allocable share of the entire
income attributable to the Junior Subordinated Debentures. Each US Holder
generally will determine its net income or loss with respect to the Trust in
accordance with its own method of accounting, although income arising from
OID, if any, must be taken into account under the accrual method of accounting
even if the US Holder otherwise would use the cash receipts and disbursements
method.
Classification of the Junior Subordinated Debentures
Yorkshire Group, Yorkshire Finance, the Trust and the holders of Trust
Securities (by acceptance of a beneficial interest in a Trust Security) will
agree to treat the Junior Subordinated Debentures as indebtedness of Yorkshire
Finance for all US Federal income tax purposes. Tax Counsel is of the opinion
that, under current law, and assuming full compliance with the terms of the
Indenture, the Junior Subordinated Debentures will be classified as
indebtedness of Yorkshire Finance for US Federal income tax purposes.
Original Issue Discount
Under Treasury regulations applicable to debt instruments issued on or after
August 13, 1996 (the "Regulations"), Yorkshire Finance believes the Junior
Subordinated Debentures will not be treated as issued with OID.
The terms of the Junior Subordinated Debentures permit Yorkshire Finance to
defer the payment of interest on the Junior Subordinated Debentures at any
time and from time to time for up to 20 consecutive quarters with respect to
each Extension Period; provided, however, that no Extension Period may extend
beyond the Stated Maturity of the Junior Subordinated Debentures. Under the
Regulations, a "remote" contingency that stated interest will not be timely
paid will be ignored in determining whether a debt instrument is issued with
OID. Yorkshire Finance believes that the likelihood of its exercising its
option to defer Interest Payments is "remote" since exercising that option
would prevent Yorkshire Finance and Yorkshire Group from declaring dividends
on any class of its equity securities. Accordingly, Yorkshire Finance intends
to take the position, based on the opinion of Tax Counsel, that interest on
the Junior Subordinated Debentures generally will be taxable to a US Holder as
ordinary income at the time it is paid or accrued in accordance with such
holder's method of accounting. It should be noted that the Regulations have
not yet been addressed in any rulings or other interpretations by the IRS.
Accordingly, it is possible that the IRS could take a position contrary to the
interpretations described herein.
Under the Regulations, if Yorkshire Finance were to exercise its option to
defer Interest Payments, the Junior Subordinated Debentures would at that time
be treated as reissued with OID, and all stated interest on the Junior
Subordinated Debentures would thereafter be treated as OID as long as the
Junior Subordinated Debentures remain outstanding. In such event, all of a US
Holder's taxable interest income with respect to the Junior Subordinated
Debentures would thereafter be accounted for on an economic accrual basis
regardless of such holder's method of tax accounting, and actual distributions
of stated interest would not be reported as taxable income. Consequently, a US
Holder would be required to include in gross income OID even though Yorkshire
Finance would not make actual cash payments during an Extension Period.
Moreover, under the Regulations, if the option to defer Interest Payments was
determined not to be "remote," the Junior Subordinated Debentures would be
treated as having been originally issued with OID. In such event, all of a US
Holder's taxable interest income with respect to the Junior Subordinated
Debentures would be accounted for on
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an economic accrual basis regardless of such holder's method of tax
accounting, and actual distributions of stated interest would not be reported
as taxable income.
The Regulations have not yet been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to Tax Counsel's interpretation herein.
Because income on the Trust Securities will constitute interest or OID,
corporate holders of the Trust Securities will not be entitled to a dividends-
received deduction with respect to any income recognized with respect to the
Trust Securities. In the case of a US Holder other than a corporation, such
income in general will also constitute "investment income" for purposes of
determining the deduction allowable for investment interest expense.
A US Holder, subject to certain limitations, may be eligible to claim as a
credit or deduction for purposes of computing its US Federal income tax
liability UK taxes withheld (if any). For that purpose, interest income and
Additional Amounts will generally be treated as foreign source passive income
or, if income were subject to a foreign withholding tax of five percent or
more, high withholding tax interest (or, in the case of certain US Holders,
financial services income). The rules relating to foreign tax credits are
extremely complex, and US Holders should consult with their own tax advisors
with regard to the availability of a foreign tax credit and the application of
the foreign tax credit rules to their particular situation.
Market Discount
A US Holder of a Trust Security at a discount from face (or the adjusted
issue price if the Trust Security bears OID) of such purchaser's pro rata
share of the Junior Subordinated Debentures acquires such Trust Security with
"market discount." However, market discount with respect to a Trust Security
will be considered to be zero if it is de minimis. Market discount will be de
minimis with respect to a Trust Security if it is less than the product of (i)
0.25% of the adjusted issue price of the purchaser's pro rata share of the
Junior Subordinated Debentures multiplied by (ii) the number of complete years
to maturity of such Junior Subordinated Debentures after the date of purchase.
The purchaser of a Trust Security with more than a de minimis amount of market
discount generally will be required to treat any gain on the sale, exchange,
redemption or other disposition of all or part of the Trust Securities (or
related Junior Subordinated Debentures) as ordinary income to the extent of
accrued (but not previously taxed) market discount. Market discount generally
will accrue ratably during the period from the date of purchase of such Trust
Security to the maturity date of the Junior Subordinated Debentures, unless
the US Holder irrevocably elects to accrue such market discount on the basis
of a constant interest rate.
A US Holder who has acquired a Trust Security at a market discount generally
will be required to defer any deductions of interest expense attributable to
any indebtedness incurred or continued to purchase or carry the Trust
Security, to the extent such interest expense exceeds the related interest
income. Any such deferred interest expense generally will be allowable as a
deduction not later than the year in which the related market discount income
is recognized. As an alternative to the inclusion of market discount in income
upon disposition of all or a portion of a Trust Security or the related Junior
Subordinated Debentures (including redemptions thereof), a US Holder may make
an election (which may not be revoked without the IRS's consent) to include
market discount income as it accrues on all market discount instruments
acquired by the US Holder during or after the taxable year for which the
election is made. In that case, the preceding deferral rule for interest
expense will not apply.
Disposition of Trust Securities
A US Holder will recognize capital gain or loss on a sale, exchange or other
disposition of Trust Securities, including a redemption for cash, equal to the
difference between the amount realized and the US Holder's adjusted tax basis
in the Trust Securities. Gain or loss recognized by a US Holder on the sale,
exchange or other disposition of Trust Securities held for more than one year
will generally be taxable as long-term capital gain or loss, except to the
extent of any accrued market discount. See "--Market Discount". The maximum
effective
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US Federal income tax rate applicable to gains resulting from the sale of
capital assets held by individuals for more than one year but not more than 18
months is 28%. The maximum effective tax rate on long-term capital gain will
decrease to 20% if the Trust Securities are held for more than 18 months.
A US Holder that sells, exchanges or otherwise disposes of Trust Securities
during a period of deferral of Interest Payments on the Junior Subordinated
Debentures, and prior to the record date for the date on which Distributions
of such amounts are made, will increase its adjusted tax basis in its Trust
Securities by the amount of OID included in income in respect of such deferral
and, to the extent that the adjusted tax basis exceeds the amount realized on
the sale or other disposition of such holder's Trust Securities, recognize a
capital loss. If the US Holder disposes of a Trust Security prior to the
occurrence of an Extension Period, any portion of the amount received from the
purchaser that is attributable to accrued interest will be treated as interest
income to the US Holder (that will only be includible as income to the extent
it previously has not been included in the US Holder's taxable income) and
will not be treated as part of the amount realized for purposes of determining
gain or loss on the disposition of the Trust Security. Subject to certain
limited exceptions, capital losses cannot be applied to offset ordinary income
for US Federal income tax purposes.
For foreign tax credit limitation purposes, gain realized on the sale,
exchange or other disposition of a Trust Security generally will be US source
income. At this time, the source of loss is uncertain because the US Treasury
Department has not yet issued final regulations with respect to the allocation
between foreign and US source income of losses from the sale, exchange or
other disposition of securities such as the Trust Securities.
A US Holder's tax basis in its Trust Securities generally will be equal to
(i) the amount paid by such holder for its Trust Securities, increased by (ii)
the amount includible in income by such holder with respect to its Trust
Securities, including any related accrued OID and market discount included in
taxable income by the US Holder, and reduced by (iii) the amount of cash or
other property distributed to such holder with respect to amounts included in
the holder's tax basis pursuant to clause (ii) hereof. A US Holder that
acquires Trust Securities at different prices may be required to maintain a
single aggregate adjusted tax basis in all of its Trust Securities and, upon
sale or other disposition of some of such Trust Securities, to allocate a pro
rata portion of such aggregate tax basis to the Trust Securities sold or
disposed of (rather than maintaining a separate tax basis in each Trust
Security for purposes of computing gain or loss upon a sale or other
disposition of that Trust Security).
Receipt of Junior Subordinated Debentures or Cash In Certain Circumstances
Yorkshire Finance has the right, at any time, to dissolve the Trust and to
cause Junior Subordinated Debentures to be distributed to the US Holders in
liquidation of the Trust. Such liquidating distribution will generally be tax-
free to each US Holder and will result in each US Holder receiving an
aggregate tax basis in its Junior Subordinated Debentures equal to such
holder's aggregate tax basis in its Trust Securities. A US Holder's holding
period in the Junior Subordinated Debentures will include the holding period
for which the US Holder held the related Trust Securities. If a liquidation of
the Trust occurs following a determination that the Trust is subject to US
Federal income tax with respect to the amounts received on the Junior
Subordinated Debentures, then such liquidation will be taxable to the US
Holders. In that event, gain or loss would be recognized in the amount
measured by the difference between the fair market value of the Junior
Subordinated Debentures received in the liquidation and the US Holder's
aggregate tax basis in its Trust Securities. In such a case, the holding
period for the Junior Subordinated Debentures received in the liquidation
would not include the period during which the Trust Securities were held.
The Junior Subordinated Debentures may be redeemed for cash and the proceeds
of such redemption distributed to US Holders in redemption of their Trust
Securities. Such redemption of the Trust Securities would, for US Federal
income tax purposes, constitute a taxable disposition of the redeemed Trust
Securities, and a US Holder would recognize gain or loss as if it had sold
such redeemed Trust Securities for an amount of cash equal to the proceeds
received upon the redemption. See "--Disposition of Trust Securities".
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The redemption of only part of a Trust Security will require an allocation
of the US Holder's tax basis in the related Junior Subordinated Debentures
between the portion of the Junior Subordinated Debentures redeemed and the
portion retained by the US Holder in order to determine gain or loss.
Information Reporting and Backup Withholding
Income on the Trust Securities will be reported to US Holders on IRS Form
1099, which should be mailed to US Holders by January 31 following each
calendar year. Payments made on and proceeds from the sale of Trust Securities
may be subject to a "backup withholding" tax of 31% unless the US Holder
complies with certain identification requirements. Any withheld amount
generally will be allowed as a credit against the US Holder's US Federal
income tax, provided the required information is timely filed with the IRS. In
addition, recently adopted US Treasury regulations, which generally are
effective for payments made after December 31, 1998, subject to certain
transition rules, modify in certain respects the backup withholding and
information reporting rules. In general, the new regulations do not
significantly alter the substantive requirements of these rules, but unify
current procedures and forms and clarify reliance standards. Prospective
purchasers are urged to consult their own tax advisors regarding the new
regulations.
CAYMAN ISLANDS TAXATION
It is the opinion of Maples and Calder, Cayman Islands counsel for Yorkshire
Finance, that, under existing Cayman Islands laws:
(i) payments in respect of the Junior Subordinated Debentures will not be
subject to taxation in the Cayman Islands and no withholding will be
required on such payments to any holder of the Junior Subordinated
Debentures and gains derived from the sale of the Junior Subordinated
Debentures, if distributed, will not be subject to Cayman Islands income or
corporation tax. The Cayman Islands currently has no income tax or taxation
in the nature of a withholding tax, corporate or capital tax and no estate
duty, inheritance tax or gift tax; and
(ii) the holder of a Junior Subordinated Debenture in bearer form (or the
legal personal representative of such holder) whose Junior Subordinated
Debenture in bearer form is brought into the Cayman Islands in original
form may be liable to pay stamp duty imposed under the laws of the Cayman
Islands in respect of such Junior Subordinated Debenture in bearer form
(currently up to CI $250 (U.S. $305) per Junior Subordinated Debenture in
bearer form (unless duty of CI$500 is paid in respect of the series of such
Junior Subordinated Debentures)). Definitive Registered Debentures and any
Global Debentures which are evidence of entitlement only and title to which
passes by entry in the relevant register, will not be subject to Cayman
Islands stamp duty. Any instrument transferring title to any Junior
Subordinated Debenture in registered form may be subject to Cayman Islands
stamp duty of CI$100 if brought to or executed in the Cayman Islands.
Yorkshire Finance has been incorporated under the laws of the Cayman Islands
as an exempted company and, as such, has obtained an undertaking dated
September 9, 1997 from the Governor-in-Council of the Cayman Islands that, for
a period of twenty years from the date of the undertaking, no law enacted in
the Cayman Island imposing any tax to be levied on profits, income, gains or
appreciations shall apply to Yorkshire Finance or its operations and, in
addition, that no tax to be levied on profits, income, gains, or appreciations
or which is in the nature of estate duty or inheritance tax shall be payable
by Yorkshire Finance on or in respect of the shares, debentures or other
obligations of Yorkshire Finance or by way of the withholding in whole or in
part of any relevant payments (as defined in Section 6(3) of the Tax
Concessions Law (1995 Revisions)).
113
<PAGE>
ERISA CONSIDERATIONS
A fiduciary of a pension, profit-sharing or other employee benefit plan
subject to ERISA (an "ERISA Plan") should consider the fiduciary standards of
ERISA in the context of the ERISA Plan's particular circumstances before
authorizing an investment in the Trust Securities. Among other factors, the
fiduciary should consider whether such an investment is in accordance with the
documents governing the ERISA Plan and whether the investment is appropriate
for the ERISA Plan in view of its overall investment policy and
diversification of its portfolio.
Certain provisions of ERISA and the Code prohibit ERISA Plans, as well as
individual retirement accounts and Keogh plans subject to section 4975 of the
Code (collectively, "Plans"), from engaging in certain transactions involving
"plan assets" with parties that are "parties in interest" under ERISA or
"disqualified persons" under the Code with respect to the Plan. The U.S.
Department of Labor has issued a final regulation (the "Regulation") with
regard to whether the underlying assets of an entity in which employee benefit
plans acquire equity interests are deemed to be plan assets.
Under such Regulation, for purposes of ERISA and section 4975 of the Code,
the assets of the Trust would be deemed to be "plan assets" of a Plan whose
assets were used to purchase Trust Securities if the Trust Securities were
considered to be equity interests in the Trust and no exception to plan asset
status were applicable under the Regulation.
If the assets of the Trust were deemed to be plan assets of Plans that are
holders of the Trust Securities, a Plan's investment in the Trust Securities
might be deemed to constitute a delegation under ERISA of the duty to manage
plan assets by a fiduciary investing in Trust Securities. In addition,
Yorkshire Group might be considered a "party in interest" or "disqualified
person" with respect to Plans whose assets were used to purchase Trust
Securities. If this were the case, an investment in Trust Securities by a Plan
might constitute or, in the course of the operation of the Trust, give rise to
a prohibited transaction under ERISA or the Code. In particular, it is likely
that, under such circumstances, a prohibited "extension of credit" to
Yorkshire Group would be considered to occur under ERISA and the Code.
Because of the possibility that the assets of the Trust would be considered
plan assets of Plans whose assets were invested in the Trust Securities, and
the likelihood that under such circumstances a prohibited extension of credit
would occur, the Trust Securities may be not purchased or held by any Plan or
any person investing "plan assets" of any Plan, unless such purchaser or
holder is eligible for the exemptive relief available under PTCE 96-23 (for
certain transactions determined by in-house asset managers), PTCE 95-60 (for
certain transactions involving insurance company general accounts), PTCE 91-38
(for certain transactions involving bank collective investment funds), PTCE
90-1 (for certain transactions involving insurance company separate accounts),
or PTCE 84-14 (for certain transactions determined by independent qualified
asset managers). Any purchaser or holder of the Trust Securities or any
interest therein will be deemed to have represented by its purchase and
holding thereof that it either (a) is not a Plan and is not purchasing such
securities on behalf of or with "plan assets" of any Plan or (b) is eligible
for the exemptive relief available under PTCE 96-23, 95-60, 91-38, 90-1 or 84-
14.
Due to the complexity of these rules and the penalties imposed upon persons
involved in prohibited transactions, it is important that any person
considering the purchase of Trust Securities with Plan assets consult with its
counsel regarding the consequences under ERISA and the Code of the acquisition
and ownership of Trust Securities and the availability of exemptive relief
under the class exemptions listed above. In John Hancock Mutual Life Insurance
Co. v. Harris Trust and Savings Bank, 114 S. Ct. 517 (1993), the Supreme Court
ruled that assets held in an insurance company's general account may be deemed
to be "plan assets" for ERISA purposes under certain circumstances. Employee
benefit plans which are governmental plans (as defined in Section 3(32) of
ERISA) and certain church plans (as defined in Section 3(33) of ERISA)
generally are not subject to ERISA requirements.
114
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement (the
"Underwriting Agreement"), the Trust has agreed to sell to each of the
Underwriters named below (the "Underwriters"), and each of the Underwriters,
for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as
representative (the "Representative"), has severally agreed to purchase from
the Trust, the number of Trust Securities set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
TRUST
UNDERWRITER SECURITIES
----------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................
----------
Total.................................................... 11,000,000
==========
</TABLE>
Subject to the terms and conditions set forth in the Underwriting Agreement,
the Underwriters are committed to take and pay for all such Trust Securities
offered hereby, if any are taken. Default by one Underwriter would not relieve
any non-defaulting Underwriter from its several obligation, and in the event
of such a default, the non-defaulting Underwriters may be required by the
Trust to purchase the Trust Securities that they have severally agreed to
purchase and, in addition, to purchase the Trust Securities that the
defaulting Underwriter or Underwriters shall have failed to purchase up to an
amount equal to one-ninth of the Trust Securities that such non-defaulting
Underwriter or Underwriters have otherwise agreed to purchase.
The Trust has been advised by the Representative that the Underwriters
propose to offer the Trust Securities in part directly to the public at the
initial public offering price set forth on the cover page of this Prospectus,
and in part to certain securities dealers at such price less a concession of
not to exceed $ per Trust Security. The Underwriters may allow, and such
dealers may reallow, a concession of not to exceed $ per Trust Security to
certain brokers and dealers. After the Trust Securities are released for sale
to the public, the offering price and other selling terms may from time to
time be varied by the Underwriters.
In view of the fact that the proceeds from the sale of the Trust Securities
will be used to purchase the Junior Subordinated Debentures, the Underwriting
Agreement provides that Yorkshire Finance will pay as Underwriters'
Compensation for the Underwriters arranging the investment therein of such
proceeds an amount of $ per Trust Security (or $ in the aggregate);
provided that such compensation for sales of 10,000 or more Trust Securities
to a single purchaser will be $ per Trust Security. Therefore, to the
extent of such sales, the actual amount of Underwriters' Compensation will be
less than the aggregate amount specified in the preceding sentence.
Prior to this offering, there has been no public market for the Trust
Securities. Application has been made to list the Trust Securities on the
NYSE. In order to meet one of the requirements for listing the Trust
Securities on the NYSE, the Underwriters will undertake to sell lots to a
minimum of 400 beneficial holders. If accepted, trading of the Trust
Securities on the NYSE would commence within the 30-day period after the
initial delivery of the Trust Securities. The Underwriters have advised
Yorkshire Group that they intend to make a market in the Trust Securities
prior to commencement of trading on the NYSE, but are not obligated to do so
and may discontinue market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for the Trust Securities.
In connection with the sale of the Trust Securities, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price
of the Trust Securities. Specifically, the Underwriters may bid
115
<PAGE>
for, and purchase, the Trust Securities in the open market to cover syndicate
short positions or to stabilize the price of the Trust Securities, and in
connection therewith impose a penalty bid on certain Underwriters and selling
group members. This means that if the Underwriters purchase Trust Securities in
the open market to reduce any short position or to stabilize the price of the
Trust Securities, they may reclaim the amount of the selling concession from
the Underwriter or Underwriters and selling group members who sold those Trust
Securities as part of this offering. Any of these activities may stabilize or
maintain the market price of the Trust Securities above independent market
levels. The Underwriters will not be required to engage in these activities and
may end any of these activities at any time.
Yorkshire Group, Yorkshire Finance and the Trust have agreed, during the
period of 30 days from the date of the Underwriting Agreement, not to sell,
offer to sell, grant any option for the sale of, or otherwise dispose of any
Trust Securities, any security convertible into or exchangeable into or
exercisable for Trust Securities or the Junior Subordinated Debentures or debt
securities substantially similar to the Junior Subordinated Debentures or
equity securities substantially similar to the Trust Securities (except for the
Junior Subordinated Debentures and the Trust Securities issued pursuant to the
Underwriting Agreement), without the prior written consent of the
Representative.
Each Underwriter has also agreed that (a) it has not offered or sold and,
prior to the date six months after the date of issuance of the Trust
Securities, will not offer or sell any Trust Securities to persons in the UK
except to persons whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for the purposes
of their businesses or otherwise in circumstances which have not resulted and
will not result in an offer to the public in the UK within the meaning of the
Public Offers of Securities Regulations 1995, (b) it has complied, and will
comply with all applicable provisions of the Financial Services Act 1986 of
Great Britain with respect to anything done by it in relation to the Trust
Securities in, from or otherwise involving the UK, and (c) it has only issued
or passed on, and will only issue or pass on, in the UK any document received
by it in connection with the issuance of the Trust Securities to a person who
is of a kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 (as amended) or is a person
to whom such document may otherwise lawfully be issued or passed on.
Each of the Underwriters has severally represented and agreed that it has not
and will not make any invitation to the public in the Cayman Islands to
purchase any Junior Subordinated Debentures or any Trust Securities, whether
directly or indirectly.
Yorkshire Group and Yorkshire Finance have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to Yorkshire Group and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
116
<PAGE>
LEGAL OPINIONS
Certain matters of Delaware law will be passed upon by Richards, Layton &
Finger, P.A., special Delaware counsel to Yorkshire Group, Yorkshire Finance
and the Trust. Certain matters of English law will be passed upon by Allen &
Overy, London, England, special UK counsel to Yorkshire Group, Yorkshire
Finance and the Trust. Certain matters of New York and US Federal law
including US Federal income tax considerations, will be passed upon by Dewey
Ballantine LLP, New York, New York, special US counsel to Yorkshire Group,
Yorkshire Finance and the Trust. Certain matters of Cayman Islands law will be
passed upon by Maples and Calder, special Cayman Islands counsel for Yorkshire
Finance. Certain matters of New York and US Federal law will be passed upon by
Winthrop, Stimson, Putnam & Roberts, New York, New York, counsel for the
Underwriters.
Dewey Ballantine LLP and Winthrop, Stimson, Putnam & Roberts may rely,
without independent investigation, upon Allen & Overy with respect to matters
relating to English law and upon Maples and Calder with respect to matters
relating to Cayman Islands law.
EXPERTS
The consolidated balance sheets of Yorkshire Electricity Group plc as of
March 31, 1996 and 1997, consolidated statements of income, cash flows and
changes in shareholders' equity for the three years ended March 31, 1995, 1996
and 1997 and the consolidated balance sheet or Yorkshire Power Group Limited
as of April, 1 1997 included in this Prospectus have been audited by Deloitte
& Touche, independent chartered accountants, as stated in their reports
appearing herein.
NATURE OF FINANCIAL INFORMATION
The financial information in respect of the Successor Company and the
Predecessor Company set forth in "Summary--Summary Financial Information",
"Capitalization", "Selected Consolidated Financial Data" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
herein does not constitute statutory accounts under Section 240 of the
Companies Act 1985. Statutory accounts for the Fiscal Year 1997 to which such
financial information relates have been delivered to the Registrar of
Companies in England and Wales. The auditors of the Successor Company and the
Predecessor Company have made a report under Section 236 of the Companies Act
1985 on the statutory accounts for such Fiscal Year which was not qualified
within the meaning of Section 262 of the Companies Act 1985 and did not
contain a statement made under Section 237(2) or 237(3) of that Act.
117
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
Independent Auditors' Report............................................. F-2
Consolidated Statements of Income........................................ F-3
Consolidated Balance Sheets.............................................. F-4
Consolidated Statements of Changes in Shareholders' Equity............... F-6
Consolidated Statements of Cash Flows.................................... F-7
Notes to the Consolidated Financial Statements........................... F-8
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
Unaudited Pro Forma Consolidated Statement of Income..................... F-20
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
Independent Auditors' Report............................................. F-21
Consolidated Balance Sheet............................................... F-22
Notes to the Consolidated Balance Sheet.................................. F-24
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
Independent Accountants' Review Report................................... F-33
Condensed Consolidated Statements of Income.............................. F-34
Condensed Consolidated Balance Sheets.................................... F-35
Condensed Consolidated Statement of Changes in Shareholders' Equity...... F-36
Condensed Consolidated Statements of Cash Flows.......................... F-37
Notes to the Condensed Consolidated Financial Statements................. F-38
</TABLE>
F-1
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To the Shareholder and Board of Directors
of Yorkshire Electricity Group plc
We have audited the accompanying consolidated balance sheets of Yorkshire
Electricity Group plc and its subsidiaries (the "Company") as of March 31,
1997 and 1996, and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in the period
ended March 31, 1997 (all expressed in pounds sterling). These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Yorkshire Electricity Group
plc and its subsidiaries as of March 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the
period ended March 31, 1997 in conformity with generally accepted accounting
principles in the United States of America.
Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
(December 31, 1997 as to Note 14)
F-2
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
OPERATING REVENUES................................. 1,331 1,431 1,464
COST OF SALES...................................... 932 1,013 1,025
GROSS MARGIN....................................... 399 418 439
OPERATING EXPENSES
Maintenance........................................ 76 77 64
Depreciation....................................... 50 42 41
Provision for uneconomic gas and electricity
contracts......................................... 78 -- --
Selling, general and administrative................ 93 85 111
Systems development costs (Note 9)................. 50 -- --
Restructuring charges.............................. -- -- 8
----- ----- -----
Income from operations............................. 52 214 215
----- ----- -----
OTHER INCOME (EXPENSE)
National Grid transaction (Note 12):
Realized gain on sale of National Grid Group
plc............................................. 1 215 --
Realized gain on sale of PSB Holdings Limited.... 6 56 --
Special dividend................................. -- 118 --
Customer discounts awarded....................... -- (85) --
Administrative costs............................. -- (4) --
Dividend income.................................... 2 21 18
Equity in loss of associates....................... (4) (6) (19)
Gain on sale of associate.......................... 15 -- --
Loss on sale of subsidiary......................... -- (2) --
Compensation payment-Stockholm Stadhus AB.......... -- -- 17
----- ----- -----
Total other income, net............................ 20 313 16
----- ----- -----
Interest expense................................... (55) (46) (23)
Interest income.................................... 22 26 11
----- ----- -----
Net interest expense............................... (33) (20) (12)
----- ----- -----
INCOME BEFORE INCOME TAXES......................... 39 507 219
PROVISION FOR INCOME TAXES......................... 13 114 78
----- ----- -----
NET INCOME......................................... 26 393 141
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
ASSETS -------- --------
(Pounds) (Pounds)
<S> <C> <C>
FIXED ASSETS
Property, plant and equipment, net of accumulated
depreciation of (Pounds)500 and (Pounds)458................ 765 735
Construction work in progress............................... 31 34
----- -----
Total fixed assets........................................ 796 769
----- -----
OTHER ASSETS
Investments, long-term...................................... 109 103
Long-term receivables....................................... -- 15
Prepaid pension asset....................................... 6 4
----- -----
Total other assets........................................ 115 122
----- -----
CURRENT ASSETS
Cash and cash equivalents................................... 221 252
Investments................................................. 29 37
Customer receivables, less provision for uncollectible
accounts of (Pounds)6 and (Pounds)7........................ 90 89
Unbilled revenue............................................ 84 99
Other receivables........................................... 21 26
Other....................................................... 19 14
----- -----
Total current assets...................................... 464 517
----- -----
Total assets.............................................. 1,375 1,408
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY
Share capital, 68 2/11 pence par value common shares,
220,000,000 shares, authorized, 159,131,326 in 1997 and
158,555,100 in 1996 issued and outstanding.................. 108 108
Additional paid-in capital................................... 92 89
Unrealized gain on available-for-sale investments............ 13 14
Retained earnings............................................ 146 188
----- -----
Total shareholders' equity................................. 359 399
----- -----
LONG-TERM DEBT............................................... 419 424
OTHER NON-CURRENT LIABILITIES
Deferred income taxes........................................ 136 158
Provision for uneconomic gas and electricity contracts....... 78 --
Other........................................................ 15 23
----- -----
Total other non-current liabilities........................ 229 181
----- -----
CURRENT LIABILITIES
Current portion of long-term debt............................ 5 5
Short-term debt.............................................. 82 85
Accounts payable............................................. 15 17
Electricity purchases payable................................ 64 75
Payments received in advance................................. 14 55
Accrued liabilities and deferred income...................... 69 52
Income taxes payable......................................... 51 45
Other current liabilities.................................... 68 70
----- -----
Total current liabilities.................................. 368 404
----- -----
Total liabilities.......................................... 1,016 1,009
----- -----
COMMITMENTS AND CONTINGENCIES (NOTE 4)
Total shareholders' equity and liabilities................. 1,375 1,408
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN MILLIONS, EXCEPT SHARES AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
UNREALIZED
GAIN ON
SHARE CAPITAL ADDITIONAL AVAILABLE
--------------------- PAID-IN RETAINED FOR SALE
SHARES AMOUNT CAPITAL EARNINGS INVESTMENTS TOTAL
----------- -------- ---------- -------- ----------- --------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
Balance, April 1, 1994.. 207,865,920 104 74 434 -- 612
Common shares issued.... 1,141,446 -- 3 -- -- 3
Reduction in shares from
reverse shares
split(1)............... (25,109,191) -- -- -- -- --
Net income.............. -- -- -- 141 -- 141
Dividends declared...... -- -- -- (239) -- (239)
----------- --- --- ---- ---- ----
Balance, March 31,
1995................... 183,898,175 104 77 336 -- 517
Common shares issued.... 5,537,644 4 12 -- -- 16
Reduction in shares from
reverse shares
split(2)............... (30,880,719) -- -- -- -- --
Revaluation of NGG
shares to fair market
value.................. -- -- -- -- 233 233
Realization of gain on
distribution of NGG
shares................. -- -- -- -- (215) (215)
Deferred tax on
revaluation of NGG
shares................. -- -- -- -- (4) (4)
Revaluation of PSB
shares to fair market
value.................. -- -- -- -- 56 56
Realization of gain on
sale of PSB............ -- -- -- -- (56) (56)
Net income.............. -- -- -- 393 -- 393
NGG special dividend.... -- -- -- (298) -- (298)
Dividends declared...... -- -- -- (243) -- (243)
----------- --- --- ---- ---- ----
Balance, March 31,
1996................... 158,555,100 108 89 188 14 399
Common shares issued.... 576,226 -- 3 -- -- 3
Gain on sale of NGG
shares................. -- -- -- -- (1) (1)
Revaluation of PSB
shares to fair market
value.................. -- -- -- -- 6 6
Realization of gain on
sale of PSB............ -- -- -- -- (6) (6)
Net income.............. -- -- -- 26 -- 26
Dividends declared...... -- -- -- (68) -- (68)
----------- --- --- ---- ---- ----
Balance, March 31,
1997................... 159,131,326 108 92 146 13 359
=========== === === ==== ==== ====
</TABLE>
(1) In January 1995 the share capital was consolidated on the basis of 22 new
56 9/11 pence ordinary shares for every 25 existing 50 pence ordinary
shares.
(2) In January 1996 the share capital was consolidated on the basis of 5 new 68
2/11 pence ordinary shares for every 6 existing 56 9/11 pence shares.
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED MARCH 31, 1997, 1996 AND 1995
(IN MILLIONS)
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... 26 393 141
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation....................................... 50 42 41
Write off of capitalized system costs.............. 22 -- --
Deferred income taxes.............................. (24) 23 23
Gain on disposal of investments.................... (7) (271) --
Equity in loss of associates....................... 4 6 19
Gain on sale of associate.......................... (15) -- --
Changes in assets and liabilities:
Receivables........................................ 14 21 (44)
Provision for uneconomic gas and electricity
contracts......................................... 78 -- --
Electricity purchases.............................. (11) 15 6
Payments received in advance....................... (41) 25 (26)
Other.............................................. -- (32) 41
---- ---- ----
Net cash provided by operating activities.......... 96 222 201
---- ---- ----
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures............................... (103) (101) (89)
Proceeds from sale of fixed assets................. 29 33 3
Proceeds from sale of subsidiary................... -- 33 --
Purchases of associates............................ -- -- (11)
Proceeds from sale of associate.................... 26 -- --
Loans (advanced to) repaid by associate............ (3) 2 (24)
Purchases of long-term investments................. (18) (25) (30)
Proceeds from sale of PSB.......................... 10 53 --
Sales (purchases) of short-term investments........ 8 (3) 50
---- ---- ----
Net cash used in investing activities.............. (51) (8) (101)
---- ---- ----
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt........... -- 163 196
Proceeds from issuance of common stock............. 3 11 3
Repayments of long-term debt....................... (5) (47) (17)
Net change in short-term debt...................... (3) 2 (10)
Dividends paid..................................... (71) (243) (239)
---- ---- ----
Net cash used in financing activities.............. (76) (114) (67)
---- ---- ----
(Decrease) increase in cash and cash equivalents... (31) 100 33
Beginning of period cash and cash equivalents...... 252 152 119
---- ---- ----
End of period cash and cash equivalents............ 221 252 152
==== ==== ====
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest............................. 42 46 19
==== ==== ====
Cash paid for income taxes......................... 30 98 23
==== ==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Yorkshire Electricity Group plc ("YEG" or the "Company") is one of the
twelve regional electricity companies ("RECs") in England and Wales licensed
to supply, distribute, and to a limited extent, generate electricity. The RECs
were created as a result of the privatization of the UK electricity industry
in 1990 after the state owned low voltage distribution networks were allocated
to the then existing twelve regional boards. The Company's main business, the
distribution and supply of electricity to customers in its franchise area (the
"Franchise Area") in the North of England, is regulated under the terms of a
Public Electricity Supply License ("PES License") by the Office of Electricity
Regulation ("OFFER").
The Company operates primarily in its Franchise Area in Northern England.
The Franchise Area covers approximately 10,000 square kilometers, encompassing
parts of the counties of West Yorkshire, Humberside, South Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The Franchise Area
has a resident population of approximately 4.4 million.
The Company purchases power primarily from the wholesale trading market for
electricity in England and Wales (the "Pool"). The Pool monitors supply and
demand between generators and suppliers, sets prices for generation and
provides for centralized settlement of accounts due between generators and
suppliers.
BASIS OF PRESENTATION
The consolidated financial statements of the Company are presented in pounds
sterling ((Pounds)) and in conformity with accounting principles generally
accepted in the United States of America. The Company is not subject to rate
regulation but rather, is subject to price cap regulation and, therefore, the
provisions of Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation" do not apply.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned and majority-owned subsidiaries and have been prepared
from records maintained by the Company in the UK. Significant intercompany
items are eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
UNBILLED REVENUE
The Company records revenue net of value added tax ("VAT") and accrues
revenues for service provided but unbilled at the end of each reporting
period.
RECOVERY OF REGULATED INCOME
Charges for distribution of electricity and for supply to customers with a
maximum demand under 100 kW are subject to a price control formula set out in
the Company's PES License which allows a maximum charge per unit of
electricity. Differences in the charges, or in the purchase cost of
electricity, can result in the under or overrecovery of revenues in a
particular period.
F-8
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Where there is an overrecovery of supply or distribution business revenues
against the regulated maximum allowable amount, revenues are deferred in an
amount equivalent to the overrecorded amount. The deferred amount is deducted
from operating revenues and included in other current liabilities.
FINANCIAL INSTRUMENTS
The Company enters into contracts for differences ("CFDs") primarily to
hedge its supply business against the price risk of electricity purchases from
the Pool. Use of these CFDs is carried out within the framework of the
Company's purchasing strategy and hedging guidelines. CFDs are accounted for
as hedges and, consequently, gains and losses are deferred and recognized over
the same period as the item hedged. The Company recognizes gains (losses) on
CFDs when settlement is made, which is generally monthly. Gains (losses) on
CFDs are recognized as a decrease (increase) to cost of sales based upon the
difference between fixed prices in the CFD compared to variable prices paid to
the Pool for the period. Gains (losses) based upon the difference between
fixed prices in the CFD compared to variable prices paid to the Pool for
future electricity purchases are not recognized until the period of such
settlements.
The Company enters into interest rate swaps as a part of its overall risk
management strategy and does not hold or issue material amounts of derivative
financial instruments for trading purposes. The Company accounts for its
interest rate swaps in accordance with Statement of Financial Accounting
Standards No. 80, "Accounting for Futures Contracts" and various Emerging
Issues Task Force pronouncements. If the interest rate swaps were to be sold
or terminated, any gain or loss would be deferred and amortized over the
remaining life of the debt instrument being hedged by the interest rate swap.
If the debt instrument being hedged by the interest rate swap were to be
extinguished, any gain or loss attributable to the swap would be recognized in
the period of the transaction.
The Company considers the carrying amounts of financial instruments
classified as current assets and current liabilities to be a reasonable
estimate of their fair value because of the short maturity of these
instruments.
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at original cost, which includes
materials, labor and appropriate overhead costs, and the estimated cost of
borrowed funds used during construction. The cost of maintenance, repairs and
replacement of minor items of property is charged to maintenance expense.
The Company records book depreciation expense on a straight-line basis,
except for distribution network assets which are charged at 3% for 20 years
and 2% for the remaining 20 years. Assets are depreciated using the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Distribution network................................................ 40
Generation.......................................................... 20
Buildings........................................................... Up to 60
Fixtures and equipment.............................................. Up to 10
Vehicles and mobile plant........................................... Up to 10
</TABLE>
F-9
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
INVESTMENTS
The Company accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115,
"Investments in Certain Debt and Equity Securities" ("SFAS 115"). The
Company's investments are classified as available-for-sale under SFAS 115.
Securities whose fair market values are readily determinable are reported at
fair value. Securities whose fair market values are not readily determinable
are recorded at the lower of cost or net realizable value.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
standard requires that deferred income taxes be recorded for temporary
differences between the financial statement basis and the tax basis of assets
and liabilities and loss carryforwards and that deferred tax balances be based
on enacted tax laws at rates that are expected to be in effect when the
temporary differences reverse.
2. RETIREMENT BENEFITS
PENSION PLANS
The Company operates two schemes, one based on defined contributions and a
second based on defined benefits.
DEFINED CONTRIBUTION
The defined contribution plan was established on December 1, 1991. From
April 1, 1995 new employees are only eligible to join this plan. The assets of
the defined contribution plan are held and administered by an independent
trustee. The cost recognized for this plan was less than (Pounds)1 million for
each of the three fiscal years ended March 31, 1997.
DEFINED BENEFITS
The Company participates in the Electricity Supply Pension Scheme, which
provides pension and other related defined benefits, based on final
pensionable pay, to substantially all employees throughout the electricity
supply industry in the UK.
The Company uses the projected unit credit actuarial method for accounting
purposes. Amounts funded to the pension are primarily invested in equity and
fixed income securities.
Statement of Financial Accounting Standards No. 87 "Employers' Accounting
For Pensions" ("SFAS 87") was effective for fiscal years beginning after
December 15, 1988. The provisions of SFAS No. 87 were initially adopted by the
Company on April 1, 1992. The amount of the unrecognized net transition
obligation on April 1, 1992 was (Pounds)51 million.
F-10
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table sets forth the plan's funded status and amounts
recognized in the Company's consolidated balance sheet (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Accumulated benefit obligation:
Vested benefits.......................................... 590 570
Nonvested benefits....................................... 35 40
---- ----
625 610
---- ----
Fair value of plan assets.................................. 725 666
Projected benefit obligation............................... (664) (648)
---- ----
Assets in excess of projected benefit obligation........... 61 18
Unrecognized net transition obligation..................... 37 40
Unrecognized prior service cost............................ 10 10
Other unrecognized net gain................................ (102) (64)
---- ----
Prepaid pension asset...................................... 6 4
==== ====
</TABLE>
The weighted average rates assumed in the actuarial calculations as of the
following dates were:
<TABLE>
<CAPTION>
MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
% % %
<S> <C> <C> <C>
Discount rate................................... 8.0 8.5 7.5
Annual salary rate increase..................... 6.0 6.5 5.5
Long-term rate of return on plan assets......... 9.0 9.0 9.0
The components of the plan's net periodic pension cost during the periods
are shown below (in millions):
<CAPTION>
MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Service cost (benefits earned during the
period)........................................ 10 9 11
Interest cost on projected benefit obligation... 52 49 45
Actual return on plan assets.................... (89) (113) 1
Net amortization and deferral................... 33 65 (52)
--- ---- ---
Net periodic pension cost....................... 6 10 5
=== ==== ===
</TABLE>
3. REGULATORY MATTERS
The distribution business of the Company is regulated under its PES License,
pursuant to which revenue of the distribution business is controlled by the
Distribution Price Control Formula (the "DPCF"). The DPCF determines the
maximum average price per unit of electricity (expressed in kilowatt hours)
that the Company can charge. The DPCF is usually set for a five-year period,
subject to more frequent adjustments as determined necessary by the Director
General of Electricity Supply (the "Regulator"). At each review, the Regulator
can adjust the value of certain elements in the DPCF. The Company's allowed
distribution revenues were reduced by a 14% below inflation reduction and a
13% below inflation reduction on April 1, 1995 and 1996, respectively,
following a review by the Regulator. On April 1, 1997 and April 1, 1998, the
Company's allowed distribution revenues were decreased by an additional 3%
below inflation reduction and there will be a further annual 3% below
inflation reduction on April 1, 1999.
F-11
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's supply business is also regulated by the Regulator, and prices
are established based upon the Supply Price Control Formula which is similar
to the DPCF; however, it currently allows full pass through for all properly
incurred costs.
The non-franchise supply market, which typically includes larger commercial
and industrial customers was opened to competition for all customers with
usage above 1MW upon privatization of the industry in 1990. The non-franchise
supply markets of 100 kW or more were opened to full competition in April
1994.
Currently, the Company, under its PES License, has the exclusive right to
supply residential and small commercial and industrial customers within its
Franchise Area. However, it is anticipated that the supply market will become
fully competitive over a several month period beginning September 1998.
4. COMMITMENTS AND CONTINGENCIES
ELECTRICITY AND GAS PURCHASE AGREEMENTS
The Company and its subsidiaries have entered into contracts for purchases
of electricity and gas for a period of up to 2009. A provision of (Pounds)78
million has been made for the net present value of expected future payments in
excess of anticipated recoverable amounts, reflecting management's current
expectations of market prices for electricity following the opening of the
competitive market for franchise supply customers and future gas prices. The
actual net costs are highly sensitive to movements in future prices. The
Company's provision includes amounts in respect of contracts with a non
wholly-owned subsidiary.
The Company has additional contracts with unaffiliated parties relating to
the purchase of gas which expire by October 2005, the terms of which are
immaterial with respect to quantity and price, both annually and in the
aggregate.
LEGAL PROCEEDINGS
The Company is a party to legal proceedings arising in the ordinary course
of business which are not material, either individually or in the aggregate,
nor is it currently aware of any threatened material legal proceedings.
OPERATING LEASES
The Company has commitments under operating leases with various terms and
expiration dates. At March 31, 1997 estimated minimum rental commitments for
noncancelable operating leases were (Pounds)2 million and (Pounds)1 million
for the fiscal years ending March 31, 1998 and 1999, respectively. Rental
expenses incurred for operating leases were (Pounds)4 million, (Pounds)5
million, and (Pounds)8 million during fiscal years 1997, 1996 and 1995,
respectively.
LABOR SUBJECT TO COLLECTIVE BARGAINING AGREEMENTS
The majority of the Company's employees are subject to one of three
collective bargaining agreements. Such agreements are ongoing in nature, and
the Company's employees' participation level is consistent with that of the
electric utility industry in the UK.
5. SEGMENT REPORTING
The Company is primarily engaged in two electric industry segments;
distribution, which involves the transmission of electricity across its
network to its customers, and supply, which involves bulk purchase of
electricity from the Pool for delivery to the distribution networks. Included
in "Other" are insignificant operating
F-12
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
subsidiaries of the Company as well as various corporate activities, and non-
allocated corporate assets. Intersegment sales primarily represent sales from
distribution to supply for use of the distribution networks. A summary of
information about the Company's operations by segments follows (in millions):
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 308 1,178 172 (327) 1,331
Operating income
(loss)................. 127 (132) 10 47 52
Depreciation............ 30 1 19 -- 50
Total assets employed at
period end............. 643 178 554 -- 1,375
Capital expenditures.... 87 8 31 -- 126
<CAPTION>
MARCH 31, 1996
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 334 1,309 163 (375) 1,431
Operating income........ 164 30 20 -- 214
Depreciation............ 28 1 13 -- 42
Total assets employed at
period end............. 589 212 607 -- 1,408
Capital expenditures.... 70 8 13 -- 91
<CAPTION>
MARCH 31, 1995
--------------------------------------------------------
DISTRIBUTION SUPPLY OTHER ELIMINATIONS CONSOLIDATED
------------ -------- -------- ------------ ------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
Operating revenues...... 362 1,343 162 (403) 1,464
Operating income........ 176 23 16 -- 215
Depreciation............ 25 1 15 -- 41
Total assets employed at
period end............. 556 198 613 -- 1,367
Capital expenditures.... 55 11 25 -- 91
</TABLE>
6. INCOME TAXES
The Company's income tax expense consists of the following (in millions):
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Current........................................... 37 91 55
Deferred.......................................... (24) 23 23
--- --- ---
Total............................................. 13 114 78
=== === ===
</TABLE>
F-13
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following is a reconciliation of the difference between the amount of
income taxes computed by multiplying book income before income taxes by the
statutory rate, and the amount of income taxes reported (in millions):
<TABLE>
<CAPTION>
YEAR ENDED
MARCH 31,
--------------------------
1997 1996 1995
-------- -------- --------
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Pre-tax income....................................... 39 507 219
--- --- ---
Income taxes computed at statutory rate.............. 13 167 72
National Grid transactions:
Gain on sale of PSB excluded from taxable income... (2) (19) --
Effect of difference between statutory rate (33%)
and rate on dividends received (20%).............. -- (21) (3)
Permanent differences................................ 6 (11) 8
Other................................................ (4) (2) 1
--- --- ---
Total income tax expense............................. 13 114 78
=== === ===
</TABLE>
The tax effect of temporary differences between the carrying amounts of
assets and liabilities in the consolidated balance sheets and their respective
tax bases, which give rise to deferred tax assets and liabilities are as
follows (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Deferred tax liabilities:
Property related
temporary differences.. 172 164
Provision for uneconomic
gas and electricity
contracts.............. (26) --
Other................... (6) --
--- ---
Net deferred tax
liability................ 140 164
Portion included in
current liabilities...... (4) (6)
--- ---
Long-term deferred tax
liability................ 136 158
=== ===
</TABLE>
The tax years since fiscal year 1993 are currently under review by the
Inland Revenue in the UK. In the opinion of management, the final settlement
of open years will not have a material effect on the financial position or
results of operations.
7. FINANCIAL INSTRUMENTS
The Company utilizes contracts for differences ("CFDs") to mitigate its
exposure to volatility in the prices of electricity purchased through the
Pool. Such contracts allow the Company to effectively convert the majority of
its anticipated Pool purchases from market prices to fixed prices. CFDs are in
place to hedge a portion of electricity purchases on approximately 30,662 GWh
through the year 2009. Accordingly, the gains and losses on such contracts are
deferred and recognized as electricity is purchased. Management's estimate of
the fair value of CFDs outstanding at March 31, 1997 is a net liability of
(Pounds)22 million. This estimate is based on management's projections of
future prices of electricity. The net liability will be recovered through
electricity costs passed through to franchise customers during the fiscal year
ended March 31, 1998.
F-14
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company is exposed to losses in the event of non-performance by
counterparties to its CFDs. To manage this credit risk, the Company selects
counterparties based on their credit ratings, limits its exposure to any one
counterparty under defined guidelines, and monitors the market position of the
programs and its relative market position with each counterparty.
As part of its risk management policy, the Company enters into interest rate
swap agreements under which counterparties have agreed to pay amounts to the
Company equal to variable interest obligations in consideration of amounts
payable by the Company equivalent to fixed rates of interest. If the
counterparty to the interest rate swap was to default on contractual payments,
the Company could be exposed to increased costs related to replacing the
original agreement. At March 31, 1996, the Company was party to interest rate
swap agreements with a notional value of (Pounds)89 million which were at
fixed interest rates varying between 6.64% and 10.98%. During the fiscal year
ended March 31, 1997, the Company terminated these agreements at a cost of
(Pounds)7 million.
The estimated fair value of the Company's financial instruments are as
follows (in millions):
<TABLE>
<CAPTION>
MARCH 31, 1997 MARCH 31, 1996
----------------- -----------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Long-term debt........................... 424 438 429 421
Interest rate swap agreements............ -- -- -- (9)
</TABLE>
The fair value of long-term debt is estimated based on quoted market prices
for the same or similar issues or the current rates offered to the Company for
debt of the same maturities. The fair values of interest rate swap agreements
are estimated by obtaining quotes from brokers.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, consisted of the following (in
millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Distribution network....................................... 1,163 1,073
Generation................................................. 132 128
Non-network land and buildings............................. 72 93
Other...................................................... 154 128
Consumer contributions..................................... (256) (229)
----- -----
1,265 1,193
Accumulated depreciation................................... (500) (458)
----- -----
Property, plant and equipment, net......................... 765 735
===== =====
</TABLE>
Arrangements have been put in place to entitle the British Government to a
proportion of any property gain (above certain thresholds) accruing as a
result of disposals, or events treated as disposals for these purposes,
occurring after March 31, 1990 in relation to land in which the Company had an
interest at that date (and, in certain circumstances, land in which the
Company acquires an interest thereafter from other members of the electricity
industry) and any buildings on that land. These arrangements will last until
March 31, 2000.
F-15
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
A provision in respect of these property disposals is made only to the extent
that it is probable that a liability will be incurred.
9. SYSTEMS DEVELOPMENT COSTS
During the year ended March 31, 1997, a (Pounds)50 million charge to earnings
was recorded for costs incurred related to information systems development
costs pertaining to the opening up of the competitive electricity market in
1998. It is management's opinion that, at this stage in the development of the
future commercial and regulatory environment, it would not be prudent to
capitalize these costs.
10. LONG-TERM DEBT
Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
8.625% Eurobonds, due 2005................................. 149 149
9.25% Eurobonds, due 2020.................................. 197 197
European Investment Bank:
7.52% credit facility, due 1999-2002..................... 15 15
6.55% credit facility, due 1997-2000..................... 15 15
8.05% amortizing term loan, due 2009..................... 48 50
Unsecured loan stock, LIBOR minus .5%, due 2007............ -- 3
--- ---
Total...................................................... 424 429
Less current maturities.................................... (5) (5)
--- ---
Long-term debt, net of current maturities.................. 419 424
=== ===
</TABLE>
Long-term debt outstanding at March 31, 1997 is payable as follows (in
millions):
<TABLE>
<CAPTION>
(Pounds)
--------
<S> <C>
For the fiscal years ended March 31
1998.............................................................. 5
1999.............................................................. 6
2000.............................................................. 11
2001.............................................................. 12
2002.............................................................. 7
Thereafter........................................................ 383
---
Total........................................................... 424
===
</TABLE>
11. SHORT-TERM DEBT
Short-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
MARCH 31,
-----------------
1997 1996
-------- --------
(Pounds) (Pounds)
<S> <C> <C>
Commercial paper........................................... 81 77
Bank loans and overdrafts.................................. 1 8
--- ---
Total...................................................... 82 85
=== ===
Year-end weighted average interest rate.................... 6.2% 6.1%
</TABLE>
F-16
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
At March 31, 1997 and 1996 unused committed bank facilities were available
to the Company in the amount of (Pounds)250 million. Commitment fees of
approximately 1/10 of 1% of the unused committed bank facilities are required
to maintain the facilities which have expiration dates between 2000 and 2002.
In addition, the Company has commercial paper programs (denominated in US
dollars) which provide for the issuance of up to $550 million in commercial
paper with short-term maturities (up to 364 days) issued at a discount to face
value.
12. DISTRIBUTION OF NATIONAL GRID INVESTMENT
At April 1, 1995, the Company's investment in the issued share capital of
National Grid Group plc ("NGG"), formerly National Grid Holdings plc, was
recorded at (Pounds)72 million, the estimated fair value at privatization.
During December 1995 the following transactions relating to the Company's NGG
investment occurred:
a) Special dividends of (Pounds)118 million (pre-tax) were paid by NGG to
the Company and recognized in other income. The Company reinvested
(Pounds)16 million of this dividend in additional NGG shares.
b) NGG became listed on the London Stock Exchange and therefore, the
Company revalued its investment in NGG to its fair market value of
(Pounds)321 million.
c) The Company distributed, in kind, approximately 90% of its NGG shares
to its shareholders and recognized a gain of (Pounds)210 million within
other income.
d) A (Pounds)50 discount to each of the Company's residential customers
was provided. The net effect of the customer discount in the amount of
(Pounds)85 million has been recorded as other expense during the year ended
March 31, 1996.
In November 1995, NGG also distributed to the RECs its ownership shares in
PSB Holdings Limited ("PSB") based on their respective ownership percentages
of NGG. The PSB shares were revalued at their estimated market value of
(Pounds)56 million. In December 1995 this investment was sold and a gain on
sale of (Pounds)56 million was recognized. In the year to March 31, 1997
further consideration of (Pounds)6 million was received.
In order that holders of options in the Company's shares were not
disadvantaged by the NGG transactions, the Company's Directors established a
new employee share trust. The Company contributed (Pounds)9 million to the
trust which was used to purchase NGG shares from the Company. This
contribution was recorded as a dividend. A corresponding gain of (Pounds)5
million was recognized upon distribution of NGG shares from the trust to
option holders during the year ended March 31, 1996.
13. EMPLOYEE OPTION AND SHARE PLANS
The Company operates various employee option and share plans. During the
fiscal year 1995, an Executive Long Term Share Incentive Scheme for certain
eligible Executive Directors was introduced. Under the scheme amounts (as
determined by the earnings per share and market value growth of YEG) were paid
to a trust to be utilized to purchase Company shares. After the final
determination of the amounts in the first cycle of 1998, the shares were to
have been released to participants. Amounts transferred were expensed. 54,025
shares and 23,951 shares were held in trust at March 31, 1997 and 1996,
respectively.
On July 1, 1996 a trust related to the Company's Profit Sharing Scheme
purchased 243,356 ordinary shares of the Company for (Pounds)1,769,198 or
(Pounds)7.27 per share. 64 shares were allocated to each eligible employee.
The net cost of acquiring the shares and maintaining the trust was borne by
the Company.
F-17
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In connection with the acquisition (note 14), all shares held in the above
trusts were transferred to employees in accordance with the provisions of the
schemes.
The Company had two option plans, the Executive Share Option Scheme and the
Savings-Related Share Option Scheme. The Executive Share Option Scheme
provides for the granting of stock options to purchase ordinary shares to
certain key executives of the Company at the discretion of the Renumeration
Committee of the Company. The options vest three years from the date of grant
and expire ten years after the date of grant. Options to purchase ordinary
shares of the Company have been granted to employees under the Savings-Related
Share Option Schemes adopted in 1996 and 1997. The options vest five years
from date of grant and expire five and a half years after the date of grant.
The following table summarizes the transactions of the share option scheme
for the three year period ended March 31, 1997:
<TABLE>
<CAPTION>
WEIGHTED
NUMBER AVERAGE
OF EXERCISE
SHARES PRICE
--------- --------
(Pounds)
<S> <C> <C>
Unexercised options outstanding-March 31, 1994............ 7,853,647 2.26
Granted................................................... 45,636 7.82
Exercised................................................. 1,141,446 2.58
Forfeited................................................. 313,686 1.75
--------- ----
Unexercised options outstanding-March 31, 1995............ 6,444,151 2.26
Granted................................................... 1,650,259 5.58
Exercised................................................. 5,536,659 1.99
Forfeited................................................. 105,934 1.75
--------- ----
Unexercised options outstanding-March 31, 1996............ 2,451,817 5.13
Granted................................................... 1,059,218 5.97
Exercised................................................. 576,226 4.05
Forfeited................................................. 118,865 4.01
Expired................................................... 642 1.75
--------- ----
Unexercised options outstanding-March 31, 1997............ 2,815,302 5.72
========= ====
Exercisable options-March 31, 1997........................ 129,781 4.78
========= ====
Exercisable options-March 31, 1996........................ 590,379 4.64
========= ====
</TABLE>
In connection with the acquisition, holders of any outstanding options were
given the opportunity to exercise their options and sell their shares to
Yorkshire Holdings plc at a price of (Pounds)9.27 per share. If the holders of
the options did not exercise their options, such options were cash cancelled
and the holders were paid (Pounds)9.27 per share less the option's exercise
price.
The Company accounts for its share-based compensation schemes in accordance
with Accounting Principles Board Opinion No. 25, " Accounting for Stock Issued
to Employees". Compensation expense of (Pounds)1 million was recognized in
1997, 1996 and 1995. Because of the change in control of the Company and the
immaterial impact on net income of applying the fair value method, the
disclosures required by Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation", have not been presented.
F-18
<PAGE>
YORKSHIRE ELECTRICITY GROUP PLC AND SUBSIDIARIES
(PREDECESSOR COMPANY)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. SUBSEQUENT EVENTS
On February 24, 1997 the Boards of American Electric Power Company, Inc.
("AEP") and Public Service Company of Colorado ("PS Colorado") announced the
terms of a cash offer for Yorkshire Electricity Group plc to be made by
Yorkshire Holdings plc, a subsidiary of Yorkshire Power Group Limited. The
offer was declared wholly unconditional on April 1, 1997. On April 16, 1997
notices were issued by Yorkshire Holdings plc in accordance with section 429
of the Companies Act 1985 to acquire all those Yorkshire Electricity Group plc
shares outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares of YEG during
April and May 1997 through payment of cash consideration of (Pounds)1.457
billion and the issuance of loan notes to former YEG shareholders in the
amount of (Pounds)22 million.
WINDFALL TAX
On July 2, 1997 the British Government announced a "windfall tax" to be
applied at that date to companies privatized by flotation and regulated by
relevant privatization statutes. A decrease in the UK statutory income tax
rate from 33% to 31% was also included in the legislation. The Company will
record a charge to income of (Pounds)134 million for the windfall tax and an
income tax benefit as a result of the change in the UK statutory income tax
rate of approximately (Pounds)12 million during the quarter ending September
30, 1997. The windfall tax is not deductible for UK income tax purposes and is
payable in two equal installments on or before December 1, 1997 and 1998.
BUSINESS RESTRUCTURING
On December 4, 1997 a planned business restructuring was announced. The
restructuring will result in the Company's main divisions (electricity
distribution and energy supply) becoming self sufficient businesses within the
group structure. A separate ownership structure will be pursued for the
generation business. As a result of the restructuring approximately 160
positions will no longer be required. The estimated cost of this restructuring
is (Pounds)10 million.
IONICA
Following a profits warning issued by Ionica Group plc ("Ionica") in
November 1997, the fair value of the Company's investment in Ionica decreased
from (Pounds)54 million at April 1, 1997 to (Pounds)30 million at December 31,
1997. The reduction is not regarded by management as a permanent diminution in
value.
F-19
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED MARCH
31, 1997
The following unaudited pro forma consolidated statement of income is based
upon the consolidated statement of income for the year ended March 31, 1997 of
Yorkshire Electricity Group plc (the "Predecessor Company") adjusted to
reflect the items described in notes (1) through (4) below as if the indirect
acquisition of the Predecessor Company (the "Acquisition") by Yorkshire Power
Group Limited (the "Successor Company") had occurred at April 1, 1996.
<TABLE>
<CAPTION>
(IN MILLIONS)
-----------------------------------------------------
PREDECESSOR PERIOD PRO FORMA FOR
APRIL 1, 1996 TO THE YEAR ENDED
MARCH 31, 1997 ADJUSTMENTS MARCH 31, 1997
------------------ ------------------ --------------
(Pounds) (1) (2) (3) (4) (Pounds) $(5)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues...... 1,331 -- -- -- -- 1,331 2,183
----- --- --- --- --- ----- -----
Income from operations.. 52 -- (24) (6) 84 106 174
----- --- --- --- --- ----- -----
Other income
Gain on sale of
associate............. 15 -- -- -- -- 15 25
Other.................. 5 -- -- -- -- 5 8
----- --- --- --- --- ----- -----
Total other income..... 20 -- -- -- -- 20 33
----- --- --- --- --- ----- -----
Interest expense........ (55) (74) -- -- 7 (122) (200)
Interest income......... 22 -- -- -- -- 22 36
----- --- --- --- --- ----- -----
Net interest expense.... (33) (74) -- -- 7 (100) (164)
----- --- --- --- --- ----- -----
Income before income
taxes.................. 39 (74) (24) (6) 91 26 43
Provision for income
taxes.................. (13) 24 -- 2 (30) (17) (28)
----- --- --- --- --- ----- -----
Net income.............. 26 (50) (24) (4) 61 9 15
===== === === === === ===== =====
</TABLE>
- --------
(1) To reflect the interest expense recorded in connection with the
Acquisition financed by (Pounds)22 million loan notes issued by Yorkshire
Holdings plc ("Yorkshire Holdings") and (Pounds)1,034 million in short-
term debt incurred by the Successor Company and share capitalization of
(Pounds)440 million. The loan notes issued by Yorkshire Holdings are
redeemable at the option of the bond holder until 2000. An interest rate
of 7% has been assumed for both types of debt. The impact of a 1/8% change
in the assumed interest rate would affect net income by (Pounds)1 million.
(2) Amortization of goodwill recorded in connection with the Acquisition.
(3) Additional depreciation expense that would have been recorded in
connection with the Acquisition.
(4) To remove the effect of recording the provision for uneconomic gas and
electricity contracts ((Pounds)78 million), loss on interest rate swap
agreements ((Pounds)7 million) and write-down of non-operational
properties ((Pounds)6 million). If the Acquisition had occurred on April
1, 1996, these items would have been accounted for as fair value
adjustments at that date.
(5) Solely for convenience of the reader, UK pound sterling amounts have been
translated into US dollars at the Noon Buying Rate on December 31, 1997 of
$1.64=(Pounds)1. See "Presentation of Certain Information and Exchange
Rates" in this Offering Memorandum.
During the pro forma fiscal year ended March 31, 1997, the Predecessor
Company incurred expenses of (Pounds)8.0 million relating to the Acquisition.
F-20
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Yorkshire Power Group Limited
We have audited the accompanying consolidated balance sheet of Yorkshire
Power Group Limited and its subsidiaries (the "Company") as of April 1, 1997
(expressed in pounds sterling). This financial statement is the responsibility
of the Company's management. Our responsibility is to express an opinion on
this financial statement based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
consolidated balance sheet is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the consolidated balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated balance sheet presentation. We
believe that our audit of the consolidated balance sheet provides a reasonable
basis for our opinion.
In our opinion, such consolidated balance sheet presents fairly, in all
material respects, the consolidated financial position of Yorkshire Power
Group Limited and its subsidiaries as of April 1, 1997 in conformity with
generally accepted accounting principles in the United States of America.
Our audit also comprehended the translation of the pounds sterling amounts
into US dollar amounts and, in our opinion, such translation has been made in
conformity with the basis stated in Note 1. The translation of the financial
statement amounts into US dollars has been made solely for the convenience of
readers in the United States of America.
Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
(December 31, 1997 as to Note 13)
F-21
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Pounds) $
-------- ------------
(SEE NOTE 1)
<S> <C> <C>
ASSETS
FIXED ASSETS
Property, plant and equipment........................... 908 1,489
Construction work in progress........................... 31 51
----- -----
Total fixed assets.................................... 939 1,540
----- -----
OTHER ASSETS
Goodwill (Note 11)...................................... 994 1,630
Investments, long-term.................................. 133 218
Other non-current assets................................ 61 100
----- -----
Total other assets.................................... 1,188 1,948
----- -----
CURRENT ASSETS
Cash and cash equivalents............................... 221 362
Investments............................................. 29 47
Customer receivables, less provision for uncollectibles
of (Pounds)6........................................... 90 148
Unbilled revenue........................................ 84 138
Other................................................... 40 66
----- -----
Total current assets.................................. 464 761
----- -----
Total assets.......................................... 2,591 4,249
===== =====
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-22
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
CONSOLIDATED BALANCE SHEET
(IN MILLIONS, EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
(Pounds) $
-------- ------------
(SEE NOTE 1)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
SHAREHOLDERS' EQUITY (NOTE 11)
Share capital, (Pounds)1 par value common shares,
436,000,100 shares authorized, 2 issued and
outstanding............................................. -- --
Share capital subscribed but not yet issued.............. -- --
Retained earnings........................................ -- --
----- -----
Total shareholders' equity............................. -- --
----- -----
LONG-TERM DEBT........................................... 433 710
OTHER NON-CURRENT LIABILITIES
Deferred income taxes.................................... 204 335
Provision for electricity and gas contracts.............. 78 128
Other.................................................... 13 21
----- -----
Total other non-current liabilities.................... 295 484
----- -----
CURRENT LIABILITIES
Current portion of long-term debt........................ 5 8
Short-term debt.......................................... 82 134
Accounts payable......................................... 15 25
Electricity purchases payable............................ 64 105
Payments received in advance............................. 14 23
Accrued liabilities and deferred income.................. 69 113
Income taxes payable..................................... 51 84
Accrued liability to purchase Yorkshire Electricity Group
plc (Note 11)........................................... 1,496 2,453
Other current liabilities................................ 67 110
----- -----
Total current liabilities.............................. 1,863 3,055
----- -----
Total liabilities...................................... 2,591 4,249
----- -----
COMMITMENTS AND CONTINGENCIES (NOTE 4)
Total shareholders' equity and liabilities............. 2,591 4,249
===== =====
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
F-23
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Yorkshire Power Group Limited ("YPG" or the "Company") is a joint venture
formed by subsidiaries of American Electric Power Company, Inc. and Public
Service Company of Colorado for the purpose of acquiring the entire issued
share capital of Yorkshire Electricity Group plc ("YEG"). The acquisition of
YEG was made effective as of April 1, 1997 by Yorkshire Holdings plc, a
wholly-owned subsidiary of YPG.
YEG is one of the twelve regional electricity companies ("RECs") in England
and Wales licensed to supply, distribute, and to a limited extent, generate
electricity. The RECs were created as a result of the privatization of the UK
electricity industry in 1990 after the state owned low voltage distribution
networks were allocated to the then existing twelve regional boards. YEG's
main business, the distribution and supply of electricity to customers in its
franchise area (the "Franchise Area"), is regulated under the terms of YEG's
Public Electricity Supply License ("PES License") by the Office of Electricity
Regulation ("OFFER").
YEG operates primarily in its Franchise Area in Northern England. YEG's
Franchise Area covers approximately 10,000 square kilometers, encompassing
parts of the counties of West Yorkshire, Humberside, South Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The Franchise Area
has a resident population of approximately 4.4 million.
The Company purchases power primarily from the wholesale trading market for
electricity in England and Wales (the "Pool"). The Pool monitors supply and
demand between generators and suppliers, sets prices for generation and
provides for centralized settlement of accounts due between generators and
suppliers.
BASIS OF PRESENTATION
On February 24, 1997, the joint venture partners of the Company announced
the terms of a cash tender offer for Yorkshire Electricity Group plc to be
made by Yorkshire Holdings plc, a subsidiary of the Company. The offer was
declared wholly unconditional on April 1, 1997. On April 16, 1997 notices were
issued by Yorkshire Holdings plc in accordance with section 429 of the
Companies Act 1985 to acquire all YEG shares outstanding at the end of the
requisite notice period.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Accounting for
Business Combinations" ("APB 16"). The purchase price of YEG has been
allocated to the underlying assets and liabilities based on preliminary
estimated fair values at the acquisition date (April 1, 1997). The final
purchase price allocation report has not yet been completed; however, the
Company does not anticipate any material changes based on currently available
information.
The consolidated balance sheet of the Company is presented in pounds
sterling ((Pounds)) and in conformity with accounting principles generally
accepted in the United States of America. The Company is not subject to rate
regulation but rather, is subject to price cap regulation and, therefore, the
provisions of Statement of Financial Accounting Standards No. 71, "Accounting
for the Effects of Certain Types of Regulation" ("SFAS 71") do not apply.
The consolidated balance sheet and certain information in the notes to the
consolidated balance sheet are presented in pounds sterling ((Pounds)) and in
US dollars ($) solely for the convenience of the reader, at the exchange rate
of (Pounds)1= $1.6427, 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, 1997. This presentation has not been
translated in accordance with Statement of Financial Accounting Standards No.
52, "Foreign Currency Translation". No representation is made that the pounds
sterling amounts have been, could have been, or could be converted into US
dollars at that or any other rate of exchange.
F-24
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
PRINCIPLES OF CONSOLIDATION
The consolidated balance sheet includes the accounts of the Company and its
wholly-owned and majority-owned subsidiaries and has been prepared from
records maintained by the Company in the UK. Significant intercompany items
are eliminated in consolidation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
UNBILLED REVENUE
The Company records revenue net of value added tax ("VAT") and accrues
revenues for service provided but unbilled at the end of each reporting
period.
RECOVERY OF REGULATED INCOME
Charges for distribution of electricity and for supply to customers with a
maximum demand under 100kW are subject to a price control formula set out in
YEG's PES license which allows a maximum charge per unit of electricity.
Differences in the charges, or in the purchase cost of electricity, can result
in the under or over recovery of revenues in a particular period.
Where there is an overrecovery of supply or distribution business revenues
against the regulated maximum allowable amount, revenues are deferred in an
amount equivalent to the overrecorded amount and included in other current
liabilities.
FINANCIAL INSTRUMENTS
YEG enters into contracts for differences ("CFDs") primarily to hedge its
supply business against the price risk of electricity purchases from the Pool.
Use of these CFDs is carried out within the framework of YEG's purchasing
strategy and hedging guidelines. CFDs are accounted for as hedges and,
consequently, gains and losses are deferred and recognized over the same
period as the item hedged. The Company recognizes gains (losses) on CFDs when
settlement is made, which is generally monthly. Gains (losses) on CFDs are
recognized as a decrease (increase) to cost of sales based upon the difference
between fixed prices in the CFD compared to variable prices paid to the Pool
for the period. Gains (losses) based upon the difference between fixed prices
in the CFD compared to variable prices paid to the Pool for future electricity
purchases are not recognized until the period of such settlements.
The Company enters into interest rate swaps as a part of its overall risk
management strategy and does not hold or issue material amounts of derivative
financial instruments for trading purposes. The Company accounts for its
interest rate swaps in accordance with Statement of Financial Accounting
Standards No. 80, "Accounting for Futures Contracts" and various Emerging
Issues Task Force pronouncements. If the interest rate swaps were to be sold
or terminated, any gain or loss would be deferred and amortized over the
remaining life of the debt instrument being hedged by the interest rate swap.
If the debt instrument being hedged by the interest rate swaps were to be
extinguished, any gain or loss attributable to the swap would be recognized in
the period of the transaction.
The Company considers the carrying amounts of financial instruments
classified as current assets and liabilities to be a reasonable estimate of
their fair value because of the short maturity of these instruments.
F-25
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at fair market value as adjusted
at the acquisition date in accordance with APB 16. Items capitalized
subsequent to the acquisition will be recorded at original cost, which
includes materials, labor and appropriate overhead costs, and the estimated
cost of borrowed funds used during construction.
The Company's policy is to record depreciation on a straight-line basis,
except for distribution network assets which are charged at 3% for 20 years
and 2% for the remaining 20 years. Assets are depreciated using the following
estimated useful lives:
<TABLE>
<CAPTION>
YEARS
--------
<S> <C>
Distribution network................................................ 40
Generation.......................................................... 20
Buildings........................................................... Up to 60
Fixtures and equipment.............................................. Up to 10
Vehicles and mobile plant........................................... Up to 10
</TABLE>
GOODWILL
The Company's policy is to amortize costs in excess of fair value of net
assets of the business acquired using the straight-line method over a period
of 40 years. Recoverability (evaluated on the basis of undiscounted operating
cash flow analysis) is reviewed annually or sooner if events or changes in
circumstances indicate that the carrying amount may exceed fair value, in
accordance with the provisions of Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of". Goodwill shown in the accompanying
consolidated balance sheet relates to the acquisition of YEG (Note 11).
INVESTMENTS
The Company accounts for investments in debt and equity securities in
accordance with Statement of Financial Accounting Standards No. 115,
"Investments in Certain Debt and Equity Securities" ("SFAS 115"). The
Company's investments are classified as available-for-sale under SFAS 115.
Securities whose fair market values are readily determinable are reported at
fair value. Securities whose fair market values are not readily determinable
are recorded at the lower of cost or net realizable value.
INCOME TAXES
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes". This
standard requires that deferred income taxes be recorded for temporary
differences between the financial statement basis and the tax basis of assets
and liabilities and loss carryforwards and that deferred tax balances be based
on enacted tax laws at rates that are expected to be in effect when the
temporary differences reverse.
2. RETIREMENT BENEFITS
PENSION PLANS
The Company operates two schemes, one based on defined contributions and a
second based on defined benefits.
F-26
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
DEFINED CONTRIBUTION
The defined contribution plan was established on December 1, 1991. From
April 1, 1995 new employees are only eligible to join this plan. The assets of
the defined contribution plan are held and administered by an independent
trustee.
DEFINED BENEFITS
The Company participates in the Electricity Supply Pension Scheme, which
provides pension and other related defined benefits, based on final
pensionable pay, to substantially all employees throughout the electricity
supply industry in the UK.
The Company uses the projected unit credit actuarial method for accounting
purposes. Amounts funded to the pension are primarily invested in equity and
fixed income securities.
The following table sets forth the plan's funded status and amounts
recognized in the Company's balance sheet at April 1, 1997 (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT OBLIGATION:
Accumulated benefit obligation, including vested benefits of
(Pounds)590 ($968)......................................... 625 1,025
==== ======
Fair value of plan assets................................... 725 1,189
Projected benefit obligation for service rendered to date... (664) (1,089)
---- ------
Prepaid pension asset....................................... 61 100
==== ======
</TABLE>
The weighted average discount rate, expected rate of increase in future
compensation, and the expected long-term rate of return on plan assets used to
determine the plan's funded status were, 8.0%, 6.0% and 9.0%, respectively.
3. REGULATORY MATTERS
The distribution business of YEG is regulated under its PES License,
pursuant to which revenue of the distribution business is controlled by the
Distribution Price Control Formula ("DPCF"). The DPCF determines the maximum
average price per unit of electricity (expressed in kilowatt hours) that YEG
can charge. The DPCF is usually set for a five-year period, subject to more
frequent adjustments as determined necessary by the Director General of
Electricity Supply (the "Regulator"). At each review, the Regulator can adjust
the value of certain elements in the DPCF. YEG's allowed distribution revenues
were reduced by a 14% below inflation reduction and a 13% below inflation
reduction on April 1, 1995 and 1996, respectively, following a review by the
Regulator. On April 1, 1997 and April 1, 1998, YEG's allowed distribution
revenues were decreased by an additional 3% below inflation reduction, and
there will be a further annual 3% below inflation reduction on April 1, 1999.
The supply business of YEG is also regulated by the Regulator, and prices
are established based upon the Supply Price Control Formula which is similar
to the DPCF; however, it currently allows full pass through for all properly
incurred costs.
The non-franchise supply market, which typically includes larger commercial
and industrial customers was opened to competition for all customers with
usage above 1 MW upon privatization of the industry in 1990. The non-franchise
supply markets of 100 kW or more were opened to full competition in April
1994.
F-27
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
Currently, YEG, under its PES License has the exclusive right to supply
residential and small commercial and industrial customers within its Franchise
Area. However, it is anticipated that the supply market will become fully
competitive over a several month period beginning September 1998.
4. COMMITMENTS AND CONTINGENCIES
ELECTRICITY AND GAS PURCHASE AGREEMENTS
The Company and its subsidiaries have entered into contracts for purchases
of electricity and gas for a period of up to 2009. A provision of (Pounds)78
million ($128 million) has been made for the net present value of expected
future payments in excess of anticipated recoverable amounts, reflecting
management's current expectations of market prices for electricity following
the opening of the competitive market to franchise supply customers and future
gas prices. The actual net costs are highly sensitive to movements in future
prices. The Company's provision includes amounts in respect of contracts with
a non wholly-owned subsidiary.
The Company has additional contracts with unaffiliated parties relating to
the purchase of gas which expire by October 2005, the terms of which are
immaterial with respect to quantity and price, both annually and in the
aggregate.
LEGAL PROCEEDINGS
The Company is a party to legal proceedings arising in the ordinary course
of business which are not material, either individually or in the aggregate,
nor is it currently aware of any threatened material legal proceedings.
OPERATING LEASES
The Company has commitments under operating leases with various terms and
expiration dates. At April 1, 1997 estimated minimum rental commitments for
noncancelable operating leases were (Pounds)2 million ($3 million) and
(Pounds)1 million ($2 million) for the fiscal years ending March 31, 1998 and
1999, respectively.
LABOR SUBJECT TO COLLECTIVE BARGAINING AGREEMENTS
A majority of the Company's employees are subject to one of three collective
bargaining agreements. Such agreements are ongoing in nature, and the
Company's employees participation level is consistent with that of the
electric utility industry in the UK.
5. SEGMENT REPORTING
The Company is primarily engaged in two electric industry segments;
distribution, which involves the transmission of electricity across its
network to its customers, and supply, which involves bulk purchase of
electricity from the Pool for delivery to the distribution networks. Included
in "Other" are insignificant operating subsidiaries of the Company as well as
various corporate activities, and non-allocated corporate assets. The
Company's assets in these individual segments as of April 1, 1997 are as
follows (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- -----
<S> <C> <C>
Distribution.................................................. 1,802 2,955
Supply........................................................ 187 307
Other......................................................... 602 987
----- -----
Total......................................................... 2,591 4,249
===== =====
</TABLE>
F-28
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
6. INCOME TAXES
The tax effect of temporary differences between the carrying amounts of
assets and liabilities in the consolidated balance sheet and their respective
tax bases, which give rise to deferred tax assets and liabilities, at April 1,
1997 are as follows (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
Deferred tax liabilities:
Property related temporary differences....................... 217 356
Pension...................................................... 20 33
Provision for electricity and gas contracts.................. (26) (43)
Other........................................................ (3) (5)
--- ---
Net deferred tax liability..................................... 208 341
Portion included in current liabilities........................ (4) (6)
--- ---
Long-term deferred tax liability............................... 204 335
=== ===
</TABLE>
The tax years since 1993 are currently under review by the Inland Revenue in
the UK. In the opinion of management, the final settlement of open years will
not have a material effect on financial position.
7. FINANCIAL INSTRUMENTS
YEG utilizes contracts for differences ("CFDs") to mitigate its exposure to
volatility in the prices of electricity purchased through the Pool. Such
contracts allow YEG to effectively convert the majority of its anticipated
Pool purchases from market prices to fixed prices. CFDs are in place to hedge
a portion of electricity purchases on approximately 30,662 GWh through the
year 2009. Accordingly, the gains and losses on such contracts are deferred
and recognized as electricity is purchased. Management's estimate of the fair
value of CFDs outstanding at March 31, 1997 is a net liability of (Pounds)22
million. This estimate is based on management's projections of future prices
of electricity. The net liability will be recovered through electricity costs
passed through to franchise customers during the fiscal year ended March 31,
1998.
YEG is exposed to losses in the event of non-performance by counterparties
to its CFDs. To manage this credit risk, YEG selects counterparties based on
their credit ratings, limits its exposure to any one counterparty under
defined guidelines, and monitors the market position of the programs and its
relative market position with each counterparty.
8. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at April 1, 1997 consisted of the following
(in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- -----
<S> <C> <C>
Distribution network......................................... 882 1,446
Generation................................................... 112 184
Non-network land and buildings............................... 57 93
Other........................................................ 57 93
Consumer contributions....................................... (200) (327)
---- -----
Total........................................................ 908 1,489
==== =====
</TABLE>
Arrangements have been put in place to entitle the British Government to a
proportion of any property gain (above certain thresholds) accruing as a
result of disposals, or events treated as disposals for clawback purposes,
F-29
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
occurring after March 31, 1990 in relation to land in which YEG had an
interest at that date (and, in certain circumstances, land in which YEG
acquires an interest thereafter from other members of the electricity
industry) and any buildings on that land. These arrangements will last until
March 31, 2000.
A provision for clawback in respect of property disposals is made only to
the extent that it is probable that a liability will be incurred.
9. LONG-TERM DEBT
Long-term debt at April 1, 1997 consisted of the following (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
8.625% Eurobonds, due 2005..................................... 152 249
9.25% Eurobonds, due 2020...................................... 208 340
European Investment Bank:
7.52% credit facility, due 1999-2002......................... 15 25
6.55% credit facility, due 1997-2000......................... 15 25
8.05% amortizing term loan, due 2009......................... 48 79
--- ---
Total.......................................................... 438 718
Less current maturities........................................ (5) (8)
--- ---
Long-term debt, net of current maturities...................... 433 710
=== ===
</TABLE>
Long-term debt outstanding at April 1, 1997 is payable as follows (in
millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
For the fiscal years ending March 31
1998.......................................................... 5 8
1999.......................................................... 6 10
2000.......................................................... 11 18
2001.......................................................... 12 20
2002.......................................................... 7 11
Thereafter.................................................... 397 651
--- ---
Total........................................................... 438 718
=== ===
</TABLE>
10. SHORT-TERM DEBT
Short-term debt at April 1, 1997 consisted of the following (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ---
<S> <C> <C>
Commercial paper................................................ 81 132
Bank loans and overdrafts....................................... 1 2
--- ---
Total........................................................... 82 134
=== ===
</TABLE>
The weighted average interest rate on short-term debt instruments was 6.2%
at April 1, 1997.
At April 1, 1997 unused committed bank facilities were available to YEG in
the amount of (Pounds)250 million ($410 million). Commitment fees of
approximately 1/10 of 1% of the unused committed bank facilities are
F-30
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
required to maintain the facilities which have expiration dates between 2000
and 2002. In addition, YEG has commercial paper programs (denominated in US
dollars) which provide for the issuance of up to $550 million in commercial
paper with short-term maturities (up to 364 days) issued at a discount to face
value.
11. ACQUISITION
On February 24, 1997 the joint venture partners of the Company announced the
terms of a cash offer for YEG to be made by Yorkshire Holdings plc, a
subsidiary of the Company. The offer was declared wholly unconditional on
April 1, 1997. On April 16, 1997 notices were issued by Yorkshire Holdings plc
in accordance with section 429 of the Companies Act 1985 to acquire all those
YEG shares outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares of YEG during
April and May 1997 through payment of cash consideration of (Pounds)1.457
billion ($2.393 billion) and the issuance of loan notes to former YEG
shareholders in the amount of (Pounds)22 million ($36 million).
The acquisition was financed by cash contributions of (Pounds)220 million
($361 million) from each of the joint venture partners, against which shares
in the Company were subsequently allotted, and borrowings under a
(Pounds)1.140 billion ($1.873 billion) term loan and revolving facility
agreement. The term loan and revolving facility agreement provided for a
revolving credit facility of (Pounds)50 million ($82 million) and a term loan
facility in the aggregate amount of (Pounds)1.090 billion ($1.790 billion).
Effective July 31, 1997 the term loan and revolving credit facility
agreement was replaced with a (Pounds)1.085 billion ($1.782 billion) credit
facility. This credit facility consists of two parts which are Facility A
(term loan facility) for (Pounds)1.034 billion ($1.699 billion) and Facility B
(revolving credit facility) for (Pounds)50 million ($82 million). Facility A
is repayable on July 30, 1998. The interest rates on the facilities are based
on LIBOR plus a margin which ranges from 0.125% to 0.5% dependent on the time
elapsed since the Facility became available, plus a defined margin which is
based on a bank cost of funds. The Facilities contain certain restrictive
covenants which include a maximum consolidated net debt to capitalization
ratio and minimum earnings to interest ratio. The Company intends to partly
repay Facility A, in 1998, through issue, by subsidiaries of the Company, of
bonds and preferred securities, the proceeds of which will be loaned to the
Company.
The acquisition was accounted for using the purchase method of accounting in
accordance with APB 16. The purchase price of YEG has been allocated to the
underlying assets and liabilities based on preliminary estimated fair values
at the acquisition date. The final purchase price allocation report has not
yet been completed; however, the Company does not anticipate any material
changes based on currently available information. The acquisition cost
exceeded the fair market value of net assets acquired, including (Pounds)17
million ($28 million) of acquisition related costs, by (Pounds)994 million
($1.630 billion) and is considered goodwill.
The net purchase price of (Pounds)1.496 billion ($2.453 billion) was
allocated as follows at April 1, 1997 (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
Property, plant and equipment............................... 939 1,540
Prepaid pension asset....................................... 61 100
Current assets.............................................. 464 761
Investments................................................. 133 218
Goodwill.................................................... 994 1,630
Current liabilities......................................... (367) (602)
Other liabilities........................................... (728) (1,194)
----- ------
Purchase price.............................................. 1,496 2,453
===== ======
</TABLE>
F-31
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
APRIL 1, 1997
NOTES TO THE CONSOLIDATED BALANCE SHEET--(CONTINUED)
12. EMPLOYEE OPTION AND SHARE PLANS
Prior to the acquisition of YEG by the Company, employees of YEG were
eligible to participate in the 1997 and 1996 Savings-Related Share Option
Schemes, Executive Share Option Scheme, Profit Sharing Scheme, and/or the Long
Term Incentive Scheme. In connection with the acquisition, employees were
given the opportunity to exercise their options granted under the Savings-
Related Share Option Schemes and the Executive Share Option Scheme and sell
their shares to Yorkshire Holdings plc at a price of (Pounds)9.27 ($15.20) per
share. If the holders of the options did not exercise their options, such
options were cash cancelled and the holders were paid (Pounds)9.27 ($15.20)
per share less the option's exercise price. There were 2,815,302 options
outstanding, which were all exercised or cash cancelled subsequent to April 1,
1997.
Prior to April 1, 1997, the following shares of stock were held in trust on
behalf of employees:
<TABLE>
<CAPTION>
SHARES
-------
<S> <C>
Profit Sharing Scheme................................................ 236,525
Long-Term Incentive Scheme........................................... 54,025
</TABLE>
In connection with the acquisition, all shares of YEG issued under the
Profit Sharing Scheme, Long-Term Incentive Scheme, as well as the NGG shares
held in trust for the benefit of certain option holders, were transferred to
employees in accordance with vesting rights as previously established and the
related schemes and trusts were terminated.
13. SUBSEQUENT EVENTS
On July 2, 1997 the British Government announced a "windfall tax" to be
applied at that date to companies privatized by flotation and regulated by
relevant privatization statutes. A decrease in the UK statutory income tax
rate, from 33% to 31% was also included in the legislation. The Company will
record a charge to income of (Pounds)134 million ($220 million) for the
windfall tax and an income tax benefit as a result of the change in the UK
statutory income tax rate of approximately (Pounds)12 million ($20 million)
during the quarter ending September 30, 1997. The windfall tax is not
deductible for UK income tax purposes and is payable in two equal installments
on or before December 1, 1997 and 1998.
On December 4, 1997 a planned business restructuring was announced. The
restructuring will result in the Company's main divisions (electricity
distribution and energy supply) becoming self-sufficient businesses within the
group structure. A separate ownership structure will be pursued for the
generation business. As a result of the restructuring approximately 160
positions will no longer be required. The estimated cost of this restructuring
is (Pounds)10 million ($16 million).
Following a profits warning issued by Ionica Group plc ("Ionica") in
November 1997, the fair value of the Company's investment in Ionica decreased
from (Pounds)54 million ($89 million) at April 1, 1997 to (Pounds)30 million
($49 million) at December 31, 1997. The reduction is not regarded by
management as a permanent diminution in value.
F-32
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Shareholders and Board of Directors
of Yorkshire Power Group Limited
We have reviewed the accompanying condensed consolidated balance sheet of
Yorkshire Power Group Limited and subsidiaries (the "Company") as of December
31, 1997 and the related condensed consolidated statements of income, changes
in shareholders' equity and cash flows (all expressed in pounds sterling) for
the nine-month period then ended. These financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and of making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit
conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles in the United
States of America.
Deloitte & Touche
Leeds, United Kingdom
April 30, 1998
F-33
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
(SEE NOTE 1)
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996
------------ ------------ ------------
(Pounds) $ (Pounds)
------------ ------------ ------------
(SEE NOTE 2) (SEE NOTE 2)
<S> <C> <C> <C>
Operating revenues..................................................................... 909 1,493 974
Cost of sales.......................................................................... 618 1,015 681
Operating expenses..................................................................... 168 276 173
--- ----- ---
Income from operations................................................................. 123 202 120
Other income .......................................................................... 2 3 17
Net interest expense................................................................... 78 128 20
--- ----- ---
Income before income taxes............................................................. 47 77 117
Provision for income taxes............................................................. 5 8 40
--- ----- ---
Income before extraordinary item....................................................... 42 69 77
Extraordinary loss-UK windfall tax..................................................... 134 220 --
--- ----- ---
Net (loss) income...................................................................... (92) (151) 77
- --------------------------------------------------
=== ===== ===
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-34
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER DECEMBER APRIL
31, 1997 31, 1997 1, 1997
-------- -------- --------
(Pounds) $ (Pounds)
-------- -------- --------
(SEE NOTE 2)
<S> <C> <C> <C>
ASSETS
Fixed Assets, net.................................. 1,001 1,644 939
Goodwill, net of accumulated amortization of
(Pounds)18, $30 and (Pounds)0..................... 976 1,603 994
Investments........................................ 90 148 133
Other non-current assets........................... 88 145 61
Current assets:
Cash and cash equivalents........................ 118 194 221
Customer receivables and unbilled revenue........ 168 276 174
Other current assets............................. 81 133 69
----- ----- -----
Total assets................................... 2,522 4,143 2,591
===== ===== =====
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' Equity:
Share capital.................................... 440 723 --
Retained earnings................................ (92) (151) --
Unrealized loss on available-for-sale
investments..................................... (18) (30) --
----- ----- -----
Total shareholders' equity..................... 330 542 --
----- ----- -----
Liabilities:
Current liabilities:
Liability to purchase Yorkshire Electricity
Group plc...................................... -- -- 1,496
Other........................................... 385 632 280
Short-term debt and current portion of long-term
debt............................................ 1,081 1,776 87
Long-term debt................................... 429 705 433
Long-term deferred income taxes.................. 203 334 204
Other non-current liabilities.................... 94 154 91
----- ----- -----
Total liabilities.............................. 2,192 3,601 2,591
----- ----- -----
Total shareholders' equity and liabilities..... 2,522 4,143 2,591
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-35
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(IN MILLIONS, EXCEPT SHARES)
(UNAUDITED)
<TABLE>
<CAPTION>
UNREALIZED
LOSS ON
AVAILABLE-
RETAINED FOR-SALE
SHARE CAPITAL EARNINGS INVESTMENTS TOTAL
-------------------- -------- ----------- --------
SHARES (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
BALANCE, APRIL 1, 1997..... 2 -- -- -- --
Net income................. -- -- (92) -- (92)
Issuance of ordinary
shares.................... 440,000,000 440 -- -- 440
Market value adjustments on
investments............... -- -- -- (18) (18)
----------- --- --- --- ---
BALANCE, DECEMBER 31,
1997...................... 440,000,002 440 (92) (18) 330
=========== === === === ===
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-36
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR
(SEE NOTE 1)
NINE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1997 1996
------------ ------------ ------------
(Pounds) $ (Pounds)
------------ ------------ ------------
(SEE NOTE 2) (SEE NOTE 2)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES...
Net (loss) income.................... (92) (151) 77
Depreciation......................... 40 65 31
Deferred income taxes................ (7) (11) 8
Equity in (profit) loss of
associates.......................... (1) (2) 1
Gain on sale of associate............ -- -- (15)
Goodwill amortization................ 18 30 --
Change in assets and liabilities:
Receivables.......................... 6 10 21
Electricity Purchases................ 33 54 6
Income tax payable................... 64 105 31
Other................................ 2 3 (11)
------ ------ ---
Net cash provided by operating
activities............................ 63 103 149
------ ------ ---
INVESTING ACTIVITIES:
Capital expenditures................. (129) (212) (72)
Loans repaid by (advanced to)
associates.......................... 1 2 (4)
Proceeds from property, plant and
equipment sales..................... 20 33 28
Proceeds from sale of associate...... -- -- 26
Purchases of long-term investments... (8) (13) (7)
Proceeds from sale of long-term
investments......................... 25 41 6
Purchase of Yorkshire Electricity
Group plc........................... (1,474) (2,421) --
Purchase of short-term investments... (10) (16) (76)
------ ------ ---
Net cash used in investing activities.. (1,575) (2,586) (99)
------ ------ ---
FINANCING ACTIVITIES:
Issuance of common stock............. 440 723 2
Repayment of long-term debt.......... (4) (7) (4)
Change in short-term debt............ 973 1,598 (1)
Dividends paid....................... -- -- (46)
------ ------ ---
Net cash provided by (used in)
financing activities.................. 1,409 2,314 (49)
------ ------ ---
Net (decrease) increase in cash and
cash equivalents...................... (103) (169) 1
Cash and cash equivalents, beginning of
period................................ 221 363 252
Cash and cash equivalents, end of
period................................ 118 194 253
====== ====== ===
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for interest............... 66 108 12
Cash paid for income taxes........... 71 117 --
</TABLE>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company issued (Pounds)22 million ($36 million) of loan notes, during
the nine months ended December 31, 1997, to former YEG shareholders (see Note
3).
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-37
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. DESCRIPTION OF BUSINESS
Yorkshire Power Group Limited and Subsidiaries ("YPG" or "the Company") is a
joint venture formed by subsidiaries of American Electric Power Company, Inc.
and New Century Energies, Inc. for the purpose of acquiring Yorkshire
Electricity Group plc ("YEG" or the "Predecessor"). The acquisition of YEG was
made effective as of April 1, 1997 by Yorkshire Holdings plc, a wholly-owned
subsidiary of YPG.
YEG is one of the twelve regional electricity companies ("RECs") in England
and Wales licensed to supply, distribute, and to a limited extent, generate
electricity. The RECs were created as a result of the privatization of the UK
electricity industry in 1990 after the state owned low voltage distribution
networks were allocated to the then existing twelve regional boards. YEG's
main business, the distribution and supply of electricity to customers in its
Franchise Area, is regulated under the terms of YEG's Public Electricity
Supply License by the Office of Electricity Regulation ("OFFER").
YEG operates primarily in its Franchise Area in Northern England. YEG's
Franchise Area covers approximately 10,000 square kilometers, encompassing
parts of the counties of West Yorkshire, Humberside, South Yorkshire,
Derbyshire, Nottinghamshire, Lincolnshire and Lancashire. The Franchise Area
has a resident population of approximately 4.4 million.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The condensed consolidated balance sheet of the Company is presented in
pounds sterling ((Pounds)) and in conformity with accounting principles
generally accepted in the United States of America.
The condensed consolidated financial statements and certain information in
the notes to the condensed consolidated financial statements are presented in
pounds sterling ((Pounds)) and in US dollars ($), solely for the convenience
of the reader, at the exchange rate of (Pounds)1=$1.6427, 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, 1997.
This presentation has not been translated in accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation". No
representation is made that the pounds sterling amounts have been, could have
been, or could be converted into US dollars at that or any other rate of
exchange.
PRINCIPLES OF CONSOLIDATION
The unaudited condensed consolidated financial statements include the
accounts of the Company and its wholly-owned and majority-owned subsidiaries
and has been prepared from records maintained by the Company in the UK. All
significant intercompany accounts and transactions have been eliminated in
consolidation. In the opinion of the management of the Company, the condensed
consolidated financial statements reflect all adjustments (consisting of
normal recurring adjustments) considered necessary for the fair presentation
of the financial position and results of operations for the periods presented.
Such unaudited interim financial statements should be read in conjunction with
the audited balance sheet of the Company and financial statements of YEG
contained elsewhere in this Offering Memorandum.
PREDECESSOR COMPANY FINANCIAL STATEMENTS
The Predecessor company unaudited condensed financial statements for the
nine month period ended December 31, 1996 are presented for comparison
purposes only. Those financial statements do not reflect any of the effects of
the purchase accounting adjustments and financing transactions described in
Note 3. Those effects
F-38
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
consist primarily of the amortization of goodwill, depreciation of fixed
assets valued at a historical cost which is less than the fair value recorded
by the Successor company and interest expense on the borrowings incurred to
finance the acquisition.
3. ACQUISITION
On February 24, 1997 the joint venture partners of the Company announced the
terms of a cash offer for YEG to be made by Yorkshire Holdings plc, a
subsidiary of the Company. The offer was declared wholly unconditional on
April 1, 1997. On April 16, 1997 notices were issued by Yorkshire Holdings plc
in accordance with section 429 of the Companies Act 1985 to acquire all YEG
shares outstanding at the end of the requisite notice period.
Yorkshire Holdings plc completed its purchase of the shares of YEG during
April and May 1997 through payment of cash consideration of (Pounds)1.457
billion ($2.393 billion) and the issuance of loan notes to former YEG
shareholders in the amount of (Pounds)22 million ($36 million).
The acquisition was financed by cash contributions of (Pounds)220 million
($361 million) from each of the joint venture partners, against which shares
in the Company were subsequently allotted, and borrowings under a
(Pounds)1.140 billion ($1.873 billion) term loan and revolving facility
agreement. The term loan and revolving facility agreement provided for a
revolving credit facility of (Pounds)50 million ($82 million) and a term loan
facility in the aggregate amount of (Pounds)1.090 billion ($1.790 billion).
Effective July 31, 1997 the term loan and revolving credit facility
agreement was replaced with a (Pounds)1.085 billion ($1.782 billion) credit
facility. This credit facility consists of two parts which are Facility A
(term loan facility) for (Pounds)1.034 billion ($1.699 billion) and Facility B
(revolving credit facility) for (Pounds)50 million ($82 million). Facility A
is repayable on July 30, 1998. The interest rates on the facilities are based
on LIBOR plus a margin which ranges from 0.125% to 0.5% dependent on the time
elapsed since the facility became available, plus a defined margin which is
based on a bank cost of funds. The facilities contain certain restrictive
covenants which include a maximum consolidated net debt to capitalization
ratio and minimum earnings to interest ratio. The Company intends to partly
repay Facility A, in 1998, through issue, by subsidiaries of the Company, of
bonds and preferred securities, the proceeds of which will be loaned to the
Company.
The acquisition was accounted for using the purchase method of accounting in
accordance with Accounting Principles Board Opinion No. 16, "Accounting for
Business Combinations". The purchase price of YEG has been allocated to the
underlying assets and liabilities based on estimated fair values at the
acquisition date. The acquisition cost exceeded the fair market value of net
assets acquired by (Pounds)994 million ($1.630 billion), including (Pounds)17
million ($28 million) of acquisition related costs, and is considered
goodwill.
The net purchase price of (Pounds)1.496 billion ($2.453 billion) was
allocated as follows at April 1, 1997 (in millions):
<TABLE>
<CAPTION>
(Pounds) $
-------- ------
<S> <C> <C>
Property, plant and equipment............................... 939 1,540
Prepaid pension asset....................................... 61 100
Current assets.............................................. 464 761
Investments................................................. 133 218
Goodwill.................................................... 994 1,630
Current liabilities......................................... (367) (602)
Other liabilities........................................... (728) (1,194)
----- ------
Purchase price.............................................. 1,496 2,453
===== ======
</TABLE>
F-39
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
4. BUSINESS RESTRUCTURING SWAPS
On December 4, 1997, a planned business restructuring was announced. The
restructuring will result in the Company's main divisions (electricity
distribution and energy supply) becoming self-sufficient businesses. A
separate ownership structure will be pursued for the generation business. As a
result of the restructuring, approximately 160 positions within the head
office and corporate services division will no longer be required. The
estimated cost of this restructuring charged to operating expenses is
(Pounds)10 million ($16 million). As at December 31, 1997, the actual amount
of termination benefits paid was (Pounds)1 million ($2 million) relating to 4
employees.
5. SYSTEM DEVELOPMENT COSTS
During the nine month period ended December 31, 1996, a (Pounds)24 million
($39 million) charge to earnings was recorded for costs incurred related to
information systems development costs pertaining to the opening up of the
competitive electricity market in 1998. It is management's opinion that, at
this stage in the development of the future commercial and regulatory
environment, it would not be prudent to capitalize these costs.
6. INTEREST RATE SWAPS
As part of its risk management policy, the Company enters into interest rate
swap agreements under which counterparties have agreed to pay amounts to the
Company equal to variable interest obligations in consideration of amounts
payable by the Company equivalent to fixed rates of interest. If the
counterparty to the interest rate swap was to default on contractual payments,
the Company could be exposed to increased costs related to replacing the
original agreement. At December 31, 1997, the Company was party to interest
rate swap agreements with a notional value of (Pounds)650 million ($1.068
billion) which were at fixed interest rates varying between 7.13% and 7.50%.
Had the Company terminated its interest rate swap agreements on December 31,
1997, it would have incurred a loss of (Pounds)31 million ($51 million).
In January 1998, the Company issued (Pounds)200 million ($329 million) of
7.25% Eurobonds which are due in 2028 and paid (Pounds)14 million ($23
million) to terminate interest rate swaps with a notional value of (Pounds)200
million ($329 million). The termination payments will be deferred and
amortized over the remaining life of the debt instruments being hedged.
In February 1998, the Company issued $350 million aggregate principal amount
of 6.154% Senior Notes due 2003 and $300 million aggregate principal amount of
6.496% Senior Notes due 2008. Upon issuance of these notes, (Pounds)300
million of the above mentioned swaps and (Pounds)100 million new swap
agreements were consolidated with cross currency swaps to hedge the currency
exposure related to having sterling cash flows and dollar interest payments.
7. EXTRAORDINARY LOSS--WINDFALL TAX
In July 1997, the British Government announced a "windfall tax" to be
applied at that date to companies privatized by floatation and regulated by
relevant privatization statutes. A decrease in the UK statutory income tax
rate from 33% to 31% was also included in the legislation. The Company
recorded an extraordinary loss of (Pounds)134 million ($220 million) for the
windfall tax and an income tax benefit as a result of the change in the UK
statutory income tax rate of approximately (Pounds)12 million ($20 million)
during the quarter ended September 1997. The windfall tax is not deductible
for UK corporation tax purposes and is payable in two equal instalments on or
before December 1, 1997 and 1998.
F-40
<PAGE>
YORKSHIRE POWER GROUP LIMITED AND SUBSIDIARIES
(SUCCESSOR COMPANY)
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
8. SUBSEQUENT EVENTS
Following a profits warning issued by Ionica Group plc ("Ionica") in
November 1997, the fair value of the Company's investment in Ionica decreased
from (Pounds)54 million ($89 million) at April 1, 1997 to (Pounds)30 million
($49 million) at December 31, 1997 and an unrealized loss of (Pounds)18
million ($30 million), net of tax has been recorded. At April 30, 1998, the
fair value of the Company's investment in Ionica is valued at (Pounds)19
million ($31 million). This reduction of the fair value has not been included
as a charge against earnings as it is not considered that the diminution in
value is permanent.
F-41
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE TRUST, YORKSHIRE FINANCE, YORKSHIRE GROUP OR THE UNDER-
WRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE TRUST, YORKSHIRE FINANCE OR YORKSHIRE GROUP SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION
BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AU-
THORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUAL-
IFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SO-
LICITATION.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 4
Enforceability of Civil Liabilities....................................... 4
Presentation of Certain Information and Exchange Rates.................... 5
UK Selling Restrictions................................................... 5
Forward Looking Statements................................................ 6
Summary................................................................... 7
Risk Factors.............................................................. 20
Yorkshire Group and the US Parents........................................ 28
Yorkshire Capital Trust I................................................. 31
US Accounting Treatment................................................... 31
Use of Proceeds........................................................... 32
Capitalization............................................................ 32
Selected Consolidated Financial Data...................................... 33
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 39
Business.................................................................. 51
The Electric Utility Industry in Great Britain............................ 60
Management................................................................ 71
Certain Relationships and Related Transactions............................ 73
Security Ownership........................................................ 73
Description of the Trust Securities....................................... 74
Description of the Trust Securities Guarantee............................. 85
Description of the Junior Subordinated Debentures......................... 88
Description of the Debentures Guarantee................................... 104
Relationship Among the Trust Securities, the Junior Subordinated
Debentures, the Trust Securities Guarantee and the Debentures Guarantee.. 105
Material Income Tax Considerations........................................ 107
ERISA Considerations...................................................... 114
Underwriting.............................................................. 115
Legal Opinions............................................................ 117
Experts................................................................... 117
Nature of Financial Information........................................... 117
Index to Financial Statements............................................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
11,000,000
% TRUST SECURITIES
YORKSHIRE CAPITAL TRUST I
LIQUIDATION AMOUNT $25 PER
TRUST SECURITY
FULLY AND UNCONDITIONALLY GUARANTEED, AS SET FORTH HEREIN, BY
YORKSHIRE POWER
GROUP LIMITED
----------------
PROSPECTUS
----------------
MERRILL LYNCH & CO.
, 1998
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<CAPTION>
<S> <C>
Filing Fees--Securities and Exchange Commission............... $ 81,130.00
*Rating Agencies' fees........................................ 105,000.00
*Trustee's fees............................................... 25,000.00
*Fees of Company Counsel...................................... 800,000.00
*Fees of NYSE................................................. 75,300.00
*Accounting fees.............................................. 50,000.00
*Printing and engraving costs................................. 100,000.00
*Miscellaneous expenses (including Blue-Sky expenses)......... 13,570.00
-------------
*Total Expenses............................................. $1,250,000.00
=============
</TABLE>
- --------
*Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under English law there is a general rule that any provision (whether
contained in a company's articles or in any other arrangement with the
company) exempting an officer of the company from, or indemnifying him
against, any liability for negligence, default, breach of duty or breach of
trust in relation to the company is void (this would include liability for
fraud or dishonesty). As an exception to this rule, a company may indemnify an
officer against a liability incurred by him in defending any proceedings
(whether civil or criminal), in which judgment is given in his favor or in
which he is acquitted. A company may also give an indemnity where, in any
proceedings against a director, the court relieves him from liability for
negligence, default, or breach of duty or breach of trust where he has acted
honestly and reasonably and having regard to all the circumstances, ought
fairly to be excused from liability. An indemnity is permitted where a
director acts within his powers and is not guilty of negligence or other
breach of duty. A company is also permitted to purchase insurance against any
such liability.
Subject to the general rule set out above, the Articles of Association of
Yorkshire Group provide that every director, other officer or auditor of
Yorkshire Group shall be indemnified out of the assets of Yorkshire Group
against any liability incurred by him in the actual or purported execution or
discharge of his duties or the exercise or purported exercise of his powers or
otherwise in relation to or in connection with his duties, powers or office.
This indemnity (i) shall not apply to any liability to the extent that it is
recovered from any other person and (ii) is subject to such officer or auditor
taking all reasonable steps to effect such recovery, so that the indemnity
shall not apply to the extent that an alternative right of recovery is capable
of being enforced.
Pursuant to the Memorandum and Articles of Association of Yorkshire Finance,
the directors and officers for the time being of Yorkshire Finance and any
trustee for the time being acting in relation to any of the affairs of
Yorkshire Finance and their heirs, executors, administrators and personal
representatives respectively shall be indemnified out of the assets of
Yorkshire Finance from and against all actions, proceedings, costs, charges,
losses, damages and expenses which they or any of them shall or may incur or
sustain by reason of any act done or omitted in or about the execution of
their duty in their respective offices or trusts, except such (if any) as they
shall incur or sustain by or through their own wilful neglect or default
respectively and no such director, officer or trustee shall be answerable for
the acts, receipts, neglects or defaults of any other director, officer or
trustee or for joining in any receipt for the sake of conformity or for the
solvency or honesty of any banker or other persons with whom any monies or
effects belonging to Yorkshire Finance may be lodged or deposited for safe
custody or for any insufficiency of any security upon which any monies of
Yorkshire Finance may be invested or for any other loss or damage due to any
such cause as aforesaid or which may happen in or about the execution of his
II-1
<PAGE>
office or trust unless the same shall happen through the wilful neglect or
default of such director, officer or trustee.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Yorkshire Finance issued:
(i) (Pounds)200 million ($338 million) aggregate principal amount of its
7.25% Guaranteed Bonds due 2028 (the "Guaranteed Eurobonds") which were
subscribed by Merrill Lynch International and UBS Limited (the "Managers").
The Managers agreed to subscribe for the Guaranteed Eurobonds at 7.25% of
their principal amount. Yorkshire Finance has agreed to pay the Managers a
selling commission of 0.25% of the principal amount of the Guaranteed
Eurobonds and a combined management and underwriting fee of 0.375% of such
principal amount. The Guaranteed Eurobonds are not to be offered or sold
within the US or to, or for the account or benefit of, US persons except in
accordance with Regulation S or in certain transactions exempt from the
registration requirements of the Securities Act.
(ii) $350,000,000 aggregate principal amount of its 6.154% Senior Notes
due 2003 and $300,000,000 aggregate principal amount of its 6.496% Senior
Notes due 2008 to a group of initial purchasers led by Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Brothers Inc, J.P. Morgan
Securities Inc., Morgan Stanley & Co. Incorporated and UBS Securities LLC
(the "Initial Purchasers"). The net proceeds of such sale were $645,950,000
, after deduction of the Initial Purchasers' discount (which was
$4,050,000). The sale by Yorkshire Finance of such Notes to the Initial
Purchasers was exempt from registration under the Securities Act of 1933
pursuant to Section 4(2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
(A) EXHIBITS
------------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Memorandum and Articles of Association of Yorkshire Power
Group Limited
3.2 Certificate of Incorporation of Yorkshire Power Group
Limited
3.3 Memorandum and Articles of Incorporation of Yorkshire Power
Finance Limited
3.4 Certificate of Incorporation of Yorkshire Power Finance
Limited
4.1 Form of Subordinated Debenture Indenture of Yorkshire Power
Group Limited, Yorkshire Power Finance Limited, Banque
Generale du Luxembourg, as paying agent and transfer
agent, and the Indenture Trustee relating to the Junior
Subordinated Debentures
4.2 Form of First Supplemental Indenture to Subordinated
Debenture Indenture of Yorkshire Power Group Limited,
Yorkshire Power Finance Limited, Banque Generale du
Luxembourg, as paying agent and transfer agent, and the
Indenture Trustee relating to the Junior Subordinated
Debentures
4.3 Forms of Certificate of Junior Subordinated Debentures
(included as Exhibits A and B to Exhibit 4.2)
4.4 Certificate of Trust of Yorkshire Capital Trust I
4.5 Trust Agreement of Yorkshire Capital Trust I
4.6 Form of Amended and Restated Trust Agreement of Yorkshire
Capital Trust I
4.7 Form of Trust Security Certificate for Yorkshire Capital
Trust I (included as Exhibit E to Exhibit 4.6)
4.8 Form of Trust Securities Guarantee Agreement between
Yorkshire Power Group Limited and the Guarantee Trustee
relating to the Trust Securities
4.9 Form of Agreement as to Expenses and Liabilities (included
as Exhibit D to Exhibit 4.6)
4.10 Control Certificate of Yorkshire Capital Trust I
4.11 Form of Deposit Agreement between Yorkshire Power Finance
Limited and to Book-Entry Depositary
5.1 Opinion of Richards, Layton & Finger, P.A., special
Delaware counsel, as to the validity of the Trust
Securities to be issued by Yorkshire Capital Trust I
5.2 Opinion of Dewey Ballantine LLP, US counsel to Yorkshire
Power Group Limited, as to enforceability of the Trust
Securities Guarantee and the Debentures Guarantee to be
issued by Yorkshire Power Group Limited
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
(A) EXHIBITS
------------
<C> <S> <C>
5.3 Opinion of Maples and Calder, Cayman Islands counsel to
Yorkshire Power Finance Limited, as to the validity of the
Junior Subordinated Debentures to be issued by Yorkshire
Power Finance Limited
8.1 Opinion of Dewey Ballantine LLP, special tax counsel, as to
certain United States federal income tax matters
8.2 Opinion of Allen & Overy, special tax counsel, as to
certain United Kingdom tax matters
8.3 Opinion of Maples and Calder, special tax counsel, as to
certain Cayman Islands tax matters
10.1* Yorkshire Electricity Group plc Public Electricity Supply
License dated March 26, 1990 as modified by modifications
dated March 30, 1994, March 31, 1995, September 25, 1995,
December 11, 1997, December 30, 1997 and March 31, 1998.
10.2* Second Tier License to Supply Electricity for England and
Wales for Yorkshire Electricity Group plc dated June 8,
1990.
10.3* Modifications to Yorkshire Electricity Group plc Second
Tier License to Supply Electricity for England and Wales
dated October 24, 1990, April 22, 1992, March 11, 1994,
April 29, 1994 and January 19, 1998.
10.4* Second Tier License to Supply Electricity for Scotland for
Yorkshire Electricity Group plc dated March 25, 1991.
10.5* Modifications to Yorkshire Electricity Group plc Second
Tier License to Supply Electricity for Scotland dated June
15, 1992, June 30, 1993, March 11, 1994 and January 20,
1998.
10.6* Pooling and Settlement Agreement dated March 30, 1990 among
Yorkshire Electricity Group plc, National Grid Company plc
and other parties.
10.7* Master Connection and Use of System Agreement dated as of
March 30, 1990 among The National Grid Company plc, and
its users (including Yorkshire Electricity Group plc).
10.8* Master Agreement dated as of October 25, 1995 among The
National Grid Holding plc, The
National Grid Company plc, Yorkshire Electricity Group plc
and the other REC's.
10.9* Memorandum of Understanding among The National Grid Group
plc, Yorkshire Electricity Group plc and the other REC's,
dated November 17, 1995.
10.10* Agreement for (Pounds)1,085,000,000 Credit Facility for
Yorkshire Power Group Limited between Yorkshire Power
Group Limited and Union Bank of Switzerland.
12.1 Computation of ratios of earnings to fixed charges
15.1 Letter from Deloitte & Touche relating to unaudited interim
financial information
21.1 List of Subsidiaries of Yorkshire Power Group Limited
23.1 Consent of Deloitte & Touche
23.2 Consent of Richards, Layton & Finger, P.A. (included in
Exhibit 5.1)
23.3 Consent of Dewey Ballantine LLP (included in Exhibit 5.2)
23.4 Consent of Maples & Calder (included in Exhibit 5.3)
23.5 Consent of Allen & Overy (included in Exhibit 8.2)
24.1** Power of Attorney of certain officers and directors of
Yorkshire Power Group Limited
24.2** Power of Attorney of certain officers and directors of
Yorkshire Power Finance Limited
25.1 Statement of Eligibility under the 1939 Act of The Bank of
New York, as Indenture Trustee under the Subordinated
Indenture
25.2 Statement of Eligibility under the 1939 Act of The Bank of
New York, as Guarantee Trustee under the Trust Securities
Guarantee Agreement of Yorkshire Power Group Limited
25.3 Statement of Eligibility under the 1939 Act of The Bank of
New York, as Property Trustee under the Amended and
Restated Trust Agreement of Yorkshire Capital Trust I
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
**Previously filed
II-3
<PAGE>
(b) Financial Statement Schedules
The following financial statement schedule is filed as part of this
Registration Statement:
Schedule II--Valuation and Qualifying Accounts.
ITEM 17. UNDERTAKINGS.
The undersigned registrants hereby undertake:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrants pursuant to Rule
424(b) (1) or (4) under the Securities Act of 1933 shall be deemed to be
part of this registration statement as of the time it was declared
effective.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered herein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To provide to the underwriters at the closing specified in the
underwriting agreement certificates in such denominations and registered in
such names as required by the underwriters to permit prompt delivery to
each purchaser.
(4) That, insofar as indemnification for liabilities arising under the
Securities Act of 1933, may be permitted to directors, officers and
controlling persons of the registrants pursuant to the foregoing
provisions, or otherwise, the registrants have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrants of
expenses incurred or paid by a director, officer or controlling person of
the registrants 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 registrants will,
unless in the opinion of their counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by them is against public policy as
expressed in the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT, YORKSHIRE POWER GROUP LIMITED, CERTIFIES THAT IT HAS DULY CAUSED
THIS AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE
OF OHIO, ON THE 1ST DAY OF MAY, 1998.
Yorkshire Power Group Limited
/s/ Armando A. Pena
By: _________________________________
DIRECTOR AND CHIEF FINANCIAL
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Dr. E. Linn Draper, Jr. Chairman and
- ------------------------------------- Director (Principal May 1, 1998
DR. E. LINN DRAPER, JR. Executive Officer)
/s/ Donald M. Clements, Jr. Director
- ------------------------------------- May 1, 1998
DONALD M. CLEMENTS, JR.
/s/ Armando A. Pena Director, Chief
- ------------------------------------- Financial Officer May 1, 1998
ARMANDO A. PENA (Principal
Financial Officer
and Principal
Accounting Officer)
/s/ Wayne H. Brunetti Director
- ------------------------------------- May 1, 1998
WAYNE H. BRUNETTI
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Richard C. Kelly Director
- ------------------------------------- May 1, 1998
RICHARD C. KELLY
/s/ Teresa S. Madden Director
- ------------------------------------- May 1, 1998
TERESA S. MADDEN
/s/ Armando A. Pena Authorized
- ------------------------------------- Representative in May 1, 1998
ARMANDO A. PENA the United States
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT, YORKSHIRE POWER FINANCE LIMITED, CERTIFIES THAT IT HAS DULY CAUSED
THIS AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED, HEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE
OF OHIO, ON THE 1ST DAY OF MAY, 1998.
Yorkshire Power Finance Limited
/s/ Armando A. Pena
By: _________________________________
Name: Armando A. Pena
Title: Attorney-in-Fact
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT NO.1 TO THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
DIRECTORS AND OFFICERS OF YORKSHIRE POWER FINANCE LIMITED IN THE CAPACITIES
AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
/s/ Graham J. Hall Director (Principal
By: _________________________________ Executive Officer) May 1, 1998
GRAHAM J. HALL
/s/ Roger Dickinson Director
By: _________________________________ May 1, 1998
ROGER DICKINSON
/s/ Andrew G. Donnelly Director (Principal
By: _________________________________ Financial Officer, May 1, 1998
ANDREW G. DONNELLY Principal
Accounting Officer)
/s/ Armando A. Pena Authorized
By: _________________________________ Representative in May 1, 1998
ARMANDO A. PENA the United States
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THE
REGISTRANT, YORKSHIRE CAPITAL TRUST I, CERTIFIES THAT IT HAS DULY CAUSED THIS
AMENDMENT NO. 1 TO THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY
THE UNDERSIGNED, HEREUNTO DULY AUTHORIZED, IN THE CITY OF COLUMBUS, STATE OF
OHIO, ON THE 1ST DAY OF MAY, 1998.
Yorkshire Capital Trust I
AEP Resources, Inc., as Depositor
By: _________________________________
/s/ Jeffrey D. Cross
By: _________________________________
Name: Jeffrey D. Cross
Title: Vice President and General
Counsel
II-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Shareholders and Board of Directors
of Yorkshire Electricity Group plc and Subsidiaries
We have audited the consolidated financial statements of Yorkshire
Electricity Group plc and its subsidiaries (the "Company") as of March 31,
1997 and 1996, for each of the three years in the period ended March 31, 1997,
and have issued our report thereon dated July 15, 1997. Our audits also
included the financial statement schedule of the Company, listed in Item 16.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly in all material respect the information set forth therein.
Deloitte & Touche
Leeds
United Kingdom
July 15, 1997
II-8
<PAGE>
YORKSHIRE ELECTRICITY GROUP LIMITED
YORKSHIRE ELECTRICITY GROUP PLC
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(IN MILLIONS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ------------ --------------------- ---------- --------------
ADDITIONS
---------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING OF COSTS AND OTHER BALANCE AT END
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
----------- ------------ ---------- ---------- ---------- --------------
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C>
DEDUCTED FROM ASSETS:
Accumulated Provision
for Uncollectible
Accounts............. 7 5 6(c) 6
Investment Provision.. 2 2
--- --- --- --- ---
YEAR ENDED MARCH 31,
1997................... 7 7 6 9
=== === === === ===
Accumulated Provision
for Uncollectible
Accounts............. 10 4 7(c) 7
Investment Provision.. 9 (8)(b) 1(d)
--- --- --- --- ---
YEAR ENDED MARCH 31,
1996................... 19 4 (8) 8 7
=== === === === ===
Accumulated Provision
for Uncollectible
Accounts............. 9 9 8(c) 10
Investment Provision.. 17 7 (2)(a) 13(d) 9
--- --- --- --- ---
YEAR ENDED MARCH 31,
1995................... 26 16 (2) 21 19
=== === === === ===
</TABLE>
- --------
(a) Provision reclassified due to repayment of loan by associate
(b) Provision transferred to a liability account for liabilities assumed in
connection with the sale of retailing joint venture
(c) Uncollectible accounts written-off
(d) Write-off investment
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement
3.1 Memorandum and Articles of Association of Yorkshire Power Group
Limited
3.2 Certificate of Incorporation of Yorkshire Power Group Limited
3.3 Memorandum and Articles of Incorporation of Yorkshire Power
Finance Limited
3.4 Certificate of Incorporation of Yorkshire Power Finance Limited
4.1 Form of Subordinated Indenture of Yorkshire Power Group Limited,
Yorkshire Power Finance Limited, Banque Generale du Luxembourg,
as paying agent and transfer agent, and the Indenture Trustee
relating to the Junior Subordinated Debentures
4.2 Form of First Supplemental Indenture to Subordinated Indenture
of Yorkshire Power Group Limited, Yorkshire Power Finance
Limited, Banque Generale du Luxembourg, as paying agent and
transfer agent, and the Indenture Trustee relating to the
Junior Subordinated Debentures
4.3 Forms of Certificate of Junior Subordinated Debentures (included
as Exhibits A and B to Exhibit 4.2)
4.4 Certificate of Trust of Yorkshire Capital Trust I
4.5 Trust Agreement of Yorkshire Capital Trust I
4.6 Form of Amended and Restated Trust Agreement of Yorkshire
Capital Trust I
4.7 Form of Trust Security Certificate for Yorkshire Capital Trust I
(included as Exhibit E to Exhibit 4.6)
4.8 Form of Trust Securities Guarantee Agreement between Yorkshire
Power Group Limited and the Guarantee Trustee relating to the
Trust Securities
4.9 Form of Agreement as to Expenses and Liabilities (included as
Exhibit D to Exhibit 4.6)
4.10 Control Certificate of Yorkshire Capital Trust I
4.11 Form of Deposit Agreement between Yorkshire Power Finance
Limited and the Book-Entry Depositary
5.1 Opinion of Richards, Layton & Finger, P.A., special Delaware
counsel, as to the validity of the Trust Securities to be
issued by Yorkshire Capital Trust I
5.2 Opinion of Dewey Ballantine LLP, US counsel to Yorkshire Power
Group Limited, as to enforceability of the Trust Securities
Guarantee and the Debentures Guarantee to be issued by
Yorkshire Power Group Limited
5.3 Opinion of Maples and Calder, Cayman Islands counsel to
Yorkshire Power Finance Limited, as to the validity of the
Junior Subordinated Debentures to be issued by Yorkshire Power
Finance Limited
8.1 Opinion of Dewey Ballantine LLP, special tax counsel, as to
certain United States federal income tax matters (included in
Exhibit 5.2)
8.2 Opinion of Allen & Overy, special tax counsel, as to certain
United Kingdom tax matters
8.3 Opinion of Maples and Calder, special tax counsel, as to certain
Cayman Island tax matters
10.1* Yorkshire Electricity Group plc Public Electricity Supply
License dated March 26, 1990, as modified by modifications
dated March 30, 1994, March 31, 1995, September 25, 1995,
December 11, 1997, December 30, 1997 and March 31, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.2* Second Tier License to Supply Electricity for England and Wales for
Yorkshire Electricity Group plc dated June 8, 1990.
10.3* Modifications to Yorkshire Electricity Group plc Second Tier License
to Supply Electricity for England and Wales dated October 24, 1990,
April 22, 1992, March 11, 1994, April 29, 1994 and January 19, 1998.
10.4* Second Tier License to Supply Electricity for Scotland for Yorkshire
Electricity Group plc dated March 25, 1991.
10.5* Modifications to Yorkshire Electricity Group plc Second Tier License
to Supply Electricity for Scotland dated June 15, 1992, June 30,1993,
March 11, 1994 and January 20, 1998.
10.6* Pooling and Settlement Agreement dated March 30, 1990 among Yorkshire
Electricity Group plc, National Grid Company plc and other parties.
10.7* Master Connection and Use of System Agreement dated as of March 30,
1990 among The National Grid Company plc, and its users (including
Yorkshire Electricity Group plc).
10.8* Master Agreement dated as of October 25, 1995 among The National Grid
Holding plc, The
National Grid Company plc, Yorkshire Electricity Group plc and the
other REC's.
10.9* Memorandum of Understanding among The National Grid Group plc,
Yorkshire Electricity Group plc and the other REC's, dated November
17, 1995.
10.10* Agreement for (Pounds)1,085,000,000 Credit Facility for Yorkshire
Power Group Limited between Yorkshire Power Group Limited and Union
Bank of Switzerland.
12.1 Computation of ratios of earnings to fixed charges
15.1 Letter from Deloitte & Touche relating to unaudited interim financial
information
21.1 List of Subsidiaries of Yorkshire Power Group Limited
23.1 Consent of Deloitte & Touche
23.2 Consent of Richards, Layton & Finger, P.A. (included in Exhibit 5.1)
23.3 Consent of Dewey Ballantine LLP (included in Exhibit 5.2)
23.4 Consent of Maples & Calder (included in Exhibit 5.3)
23.5 Consent of Allen & Overy (included in Exhibit 8.2)
24.1** Power of Attorney of certain officers and directors of Yorkshire Power
Group Limited
24.2** Power of Attorney of certain officers and directors of Yorkshire Power
Finance Limited
25.1 Statement of Eligibility under the 1939 Act of The Bank of New York,
as Indenture Trustee under the Subordinated Indenture
25.2 Statement of Eligibility under the 1939 Act of The Bank of New York,
as Guarantee Trustee under the Trust Securities Guarantee Agreement
of Yorkshire Power Group Limited
25.3 Statement of Eligibility under the 1939 Act of The Bank of New York,
as Property Trustee under the Amended and Restated Trust Agreement of
Yorkshire Capital Trust I
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment
** Previously filed
<PAGE>
Exhibit 1.1
YORKSHIRE CAPITAL TRUST I
(a Delaware Statutory Business Trust)
11,000,000
____% Trust Securities
(Liquidation Amount $25 Per Trust Security)
UNDERWRITING AGREEMENT
----------------------
_________, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
[Co-Managers]
As representatives of the several
Underwriters named in Schedule I hereto
c/o Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1209
Ladies and Gentlemen:
Yorkshire Capital Trust I (the "Trust"), a statutory business trust created
under the Business Trust Act of the State of Delaware (Chapter 38, Title 12 of
the Delaware Code, 12 Del. C. ((S)) 3801 et seq.) (the "Delaware Act"),
Yorkshire Power Finance Limited, a private company with limited liability
incorporated under the laws of the Cayman Islands ("Yorkshire Finance"), and
Yorkshire Power Group Limited, a private company with limited liability
incorporated under the laws of England and Wales ("Yorkshire Group" and,
together with the Trust and Yorkshire Finance, the "Offerors"), confirm their
agreement (this "Agreement") with respect to the issue and sale by the Trust and
the purchase by the underwriters named in Schedule I hereto (the
"Underwriters"), acting severally and not jointly, for whom you are acting as
representatives (in such capacity, you shall hereinafter be referred to as the
"Representatives"), of the number of ___% Trust Securities (Liquidation Amount
$25 Per Trust Security) of the Trust (the "Trust Securities") as set forth next
to each Underwriter's name in Schedule I hereto. The Trust Securities will be
fully and unconditionally guaranteed by Yorkshire Group with respect to
distributions and payments upon liquidation, redemption and otherwise (the
"Trust Securities Guarantee") pursuant to, and to the extent set forth in the
Trust Securities Guarantee Agreement (the "Trust Securities Guarantee
Agreement") dated as of _______ 1, 1998 between Yorkshire Group and The Bank of
New York, as guarantee trustee (the "Guarantee Trustee"). The Trust Securities
and the Trust Securities Guarantee are referred to herein as the "Securities."
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The Offerors have been advised by the Representatives that the Underwriters
propose to make a public offering of the Trust Securities at the initial public
offering price set forth in Schedule II hereto as soon as in their judgment the
Representatives deem advisable after this Agreement has been executed and
delivered.
The entire proceeds from the sale of the Trust Securities will be used by
the Trust to purchase $275,000,000 aggregate principal amount of __% Junior
Subordinated Deferrable Interest Deferrable Interest Debentures, Series A due
______, 2038 (the "Junior Subordinated Debentures") to be issued by Yorkshire
Finance. The Junior Subordinated Debentures will be irrevocably and
unconditionally guaranteed by Yorkshire Group with respect to interest and
principal, including payments on acceleration, redemption and otherwise (the
"Debentures Guarantee"), pursuant to the terms of the Indenture. Pursuant to an
agreement as to expenses and liabilities, dated as of ____________ 1, 1998 (the
"Agreement as to Expenses and Liabilities"), among AEP Resources, New Century
International Inc., a Delaware corporation ("NCI" and, together with AEP
Resources, the "US Affiliates")), and the Trust, the US Affiliates will
irrevocably and conditionally guarantee to each person or entity to whom the
Trust becomes indebted or liable the full payment of any indebtedness, expenses
or liabilities of the Trust, other than obligations of the Trust to pay to the
Holders, the amounts due such holders pursuant to the terms of the Trust
Securities.
The Trust Securities will be issued pursuant to an Amended and Restated
Trust Agreement, dated as of ___, 1998 (the "Trust Agreement"), among Yorkshire
Group, as holder of the Control Certificate (as defined therein), AEP Resources,
Inc., an Ohio corporation, as Depositor ("AEP Resources"), Stephan T. Haynes,
Jeffrey D. Cross, Teresa S. Madden and Brian P. Jackson (collectively, the
"Administrative Trustees"), The Bank of New York (Delaware), a Delaware banking
corporation, as Delaware trustee (the "Delaware Trustee"), The Bank of New York,
a New York banking corporation, as property trustee (the "Property Trustee" and,
together with the Delaware Trustee and the Administrative Trustees, the
"Trustees"), and the several Holders (as defined therein). The Junior
Subordinated Debentures will be issued pursuant to a Subordinated Indenture,
dated as of ____ 1, 1998 ( the "Base Indenture"), among Yorkshire Group,
Yorkshire Finance and The Bank of New York, as trustee (the "Indenture
Trustee"), and a first supplemental indenture to the Base Indenture, dated as of
____, 1998 (the "Supplemental Indenture" and together with the Base Indenture
and any other amendments or supplements thereto, the "Indenture"), among
Yorkshire Finance, Yorkshire Group and the Indenture Trustee.
The Junior Subordinated Debentures will be issued initially only as a
global debenture in bearer form (the "Global Debentures"). The Global
Debentures will be delivered to the Bank of New York, which will initially hold
the Global Debentures, as depositary (the "Book-Entry Depositary"), for and on
behalf of the Property Trustee for the benefit of the Trust. Pursuant to a
deposit agreement, dated as of ____________ 1, 1998 (the "Deposit Agreement"),
among Yorkshire Finance, the Book-Entry Depositary and the holders and
beneficial owners from time to time of interests in the Book-Entry Interests (as
defined below), the Book-Entry Depositary will issue to the Property Trustee,
for the benefit of the Trust, one or more certificateless depositary interests
(the
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"Book-Entry Interests") representing a 100% beneficial interest in the Global
Debentures and will record the Property Trustee on its books as the initial
registered owner of the Book-Entry Interests.
SECTION 1. SALE TO UNDERWRITERS; UNDERWRITING COMMISSION.
---------------------------------------------
(a) Upon the basis of the representations and warranties and on the terms
and subject to the conditions herein set forth, the Trust agrees to issue and
sell to each Underwriter and each Underwriter, severally and not jointly, agrees
to purchase from the Trust, at the purchase price per security set forth in
Schedule II hereto, the number of Trust Securities set forth opposite such
Underwriter's name in Schedule I hereto plus any additional number of Trust
Securities that such Underwriter may become obligated to purchase pursuant to
the provisions of section 7 hereof.
(b) In view of the fact that the proceeds of the sale of the Trust
Securities will be used to purchase the Junior Subordinated Debentures,
Yorkshire Finance hereby agrees to pay at the Time of Purchase (as defined
below) to Merrill Lynch, Pierce Fenner & Smith Incorporated ("ML"), for the
accounts of the several Underwriters, as compensation for their arranging the
investment therein of such proceeds a commission per Trust Security as set forth
in Schedule II for the Trust Securities to be delivered by the Trust hereunder
at the Time of Purchase.
SECTION 2. PAYMENT AND DELIVERY.
--------------------
(a) Payment for the Trust Securities shall be made to the Trust or its
order by wire transfer of immediately available funds to such account or
accounts as the Trust shall specify in writing to ML no later than the close of
business on the business day prior to the Time of Purchase, or by such other
means as the parties hereto shall agree prior to the Time of Purchase, upon the
delivery of the certificates for the Trust Securities to or for the accounts of
the several Underwriters against receipt therefor signed by ML on behalf of
itself and for the other several Underwriters. Such payment and delivery shall
be made through the facilities of The Depository Trust Company ("DTC") as
provided in Section 2(b) hereof at 10:00 A.M., New York Time, on ______ __, 1998
(or on such later business day, not more than five business days subsequent to
such day, as may be agreed upon by the Representatives and the Offerors), unless
postponed in accordance with the provisions of Section 7 hereof, at the offices
of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019,
or at such other place as the Trust and the Representatives shall mutually agree
in writing. It is understood that each Underwriter has authorized ML, for its
account, to accept delivery of, receipt for, and make payment for the purchase
price for, the Trust Securities it has agreed to purchase. ML, individually and
not as representative of the Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Trust Securities to be purchased by
any Underwriter whose funds have not been received by the Time of Purchase, but
such payment shall not relieve such Underwriter from its obligations hereunder.
The time at which such payment and delivery are to be made is herein called the
"Time of Purchase".
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(b) The Trust Securities will be represented by two global certificates in
definitive form and registered in the name of Cede & Co. as the nominee of DTC.
The certificates evidencing the Trust Securities shall be delivered to ML
through the facilities of DTC in New York, New York for the accounts of the
several Underwriters.
(c) At the time of Purchase, Yorkshire Finance will pay, or cause to be
paid, the compensation payable at such time to the Underwriters pursuant to
Section 1 hereof by wire transfer in immediately available funds to an account
designated by ML, for the accounts of the several Underwriters.
(d) With respect to the offering of the Trust Securities, each Underwriter,
severally and not jointly, represents and warrants to, and agrees with, the
Offerors that:
(1) It (i) has not offered or sold and, prior to the date six months
after the Time of Purchase, will not offer or sell any Trust
Securities to persons in the United Kingdom except to persons
whose ordinary activities involve them in acquiring, holding,
managing or disposing of investments (as principal or agent) for
the purposes of their businesses or otherwise in circumstances
which have not resulted and will not result in an offer to the
public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995, (ii) has complied and will
comply with all applicable provisions of the Financial Services
Act 1986 of Great Britain (the "FSA") with respect to anything
done by it in relation to the Trust Securities in, from or
otherwise involving the United Kingdom and (iii) has only issued
or passed on, and will only issue or pass on, in the United
Kingdom any document received by it in connection with the
issuance of the Trust Securities to a person who is of a kind
described in Article 11(3) of the Financial Services Act 1986 of
Great Britain (Investment Advertisements) (Exemptions) Order 1996
(as amended) or is a person to whom such document may otherwise
be lawfully issued or passed on; and
(2) No invitation has been or will be made to the public in the
Cayman Islands to purchase any Junior Subordinated Debentures or
any Trust Securities, whether directly or indirectly.
SECTION 3. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
---------------------------------------
The several obligations of the Underwriters hereunder are subject to the
accuracy at the Time of Purchase of the warranties and representations on the
part of the Offerors, jointly and severally, and to the following other
conditions:
(a) That no stop order suspending the effectiveness of the Registration
Statement (as defined herein) shall be in effect at the Time of
Purchase and no proceeding for that purpose shall be pending before,
or to the knowledge of Yorkshire Group threatened by, the Securities
and Exchange
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Commission (the "Commission") on such date. If filing of the
Preliminary Prospectus or the Prospectus (each as defined herein), or
any supplement thereto, is required pursuant to Rule 424 of the rules
and regulations of the Commission ("Rule 424") under the United States
Securities Act of 1933, (the "Securities Act"), the Preliminary
Prospectus or the Prospectus, and any such supplement, shall have been
filed in the manner and within the time period required by Rule 424.
(b) That all legal proceedings to be taken and all legal opinions to be
rendered in connection with the issuance and sale of the Securities
and the other transactions contemplated hereby shall be satisfactory
in form and substance to the Underwriters and Winthrop, Stimson,
Putnam & Roberts, counsel to the Underwriters, and each of the
Offerors shall have furnished to such counsel all documents and
information that it may reasonably request to enable it to pass upon
such matters.
(c) That, at the Time of Purchase, the Representatives shall be furnished
with the following opinions, dated the day of the Time of Purchase,
with such changes therein as may be agreed upon by the Trust and the
Representatives with the approval of Winthrop, Stimson, Putnam &
Roberts, counsel to the Underwriters:
(i) Opinion of Richards Layton & Finger, P.A., special Delaware
counsel to the Trust, Yorkshire Finance and Yorkshire Group as
to Delaware law, substantially in the form attached hereto as
Exhibit A;
(ii) Opinion of Dewey Ballantine LLP, counsel to the Trust,
Yorkshire Finance and Yorkshire Group as to United States law,
substantially in the form attached hereto as Exhibit B;
(iii) Opinion of Allen & Overy, counsel to the Trust, Yorkshire
Finance and Yorkshire Group as to English law, substantially in
the form attached hereto as Exhibit C;
(iv) Opinion of Maples and Calder, counsel to Yorkshire Finance as
to Cayman Islands law, substantially in the form attached
hereto as Exhibit D;
(v) Opinion of Winthrop, Stimson, Putnam & Roberts, counsel to the
Underwriters, substantially in the form attached hereto as
Exhibit E;
(vi) Opinion of ______________, counsel to the Delaware Trustee,
substantially in the form attached hereto as Exhibit F; and
(vii) Opinion of Emmet, Marvin & Martin LLP, counsel to the Indenture
Trustee, the Property Trustee, the Guarantee Trustee and
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the Book-Entry Depositary, substantially in the form attached
hereto as Exhibit G.
(d) That the Representatives shall have received a letter from Deloitte &
Touche in form and substance satisfactory to the Representatives and
dated the date of the Time of Purchase.
(e) That no amendment or supplement to the Registration Statement or the
Prospectus shall contain material information substantially different
from that contained in the Registration Statement or the Prospectus
which is unsatisfactory in substance to the Representatives or
unsatisfactory in form to Winthrop, Stimson, Putnam & Roberts, counsel
to the Underwriters.
(f) That, at the Time of Purchase, there shall not have been any material
adverse change in the business, properties or financial condition of
the Offerors from that set forth in the Registration Statement or the
Prospectus (other than changes set forth in or contemplated by the
Registration Statement or the Prospectus), and that the Offerors
shall, at the Time of Purchase, have delivered to the Underwriters a
certificate of an Administrative Trustee of the Trust and a
certificate of an officer of Yorkshire Finance and Yorkshire Group to
the effect that, (i) to the best of his knowledge, information and
belief, there has been no such change, (ii) the warranties and
representations on the part of each of the Offerors contained in this
Agreement are true and correct with the same force and effect as
through expressly made at and as of the Time of Purchase and (iii)
each of the Offerors has complied with all agreements and satisfied
all conditions on its part to be performed or satisfied under this
Agreement at or prior to the Time of Purchase.
(g) That, at the Time of Purchase, (i) the Trust Securities shall have
been accepted for listing, subject to notice of issuance, on the New
York Stock Exchange, (ii) the Junior Subordinated Debentures shall
have been accepted for listing on the Luxembourg Stock Exchange and
(iii) Yorkshire Finance's registration statement on Form 8-A relating
to the Trust Securities shall have become effective under the United
States Securities Exchange Act of 1934 (the "Exchange Act").
(h) That the Offerors shall have performed such of their obligations under
this Agreement as are to be performed at or before the Time of
Purchase by the terms hereof.
(i) That there shall have been issued and there shall be in full force and
effect orders of the Commission under the United States Public Utility
Holding Company Act of 1935 (the "1935 Act") permitting the issuance
and sale of the Securities, the Junior Subordinated Debentures, the
Debenture Guarantee and the Control Certificate.
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(j) That the Underwriters shall have received evidence satisfactory to
them that Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Services ("SEP") shall have publicly assigned ratings
to the Trust Securities.
In case any of the conditions specified above in this Section 3 shall not
have been fulfilled, this Agreement may be terminated by the Underwriters at any
time at or prior to the Time of Purchase upon written notice thereof to the
Offerors. Any such termination shall be without liability of any party to any
other party except as otherwise provided in Section 4(e), Section 4(f) and
Section 4(g) hereof and except for any liability under Section 6 hereof.
SECTION 4. CERTAIN COVENANTS OF THE OFFERORS.
---------------------------------
In further consideration of the agreements of the Underwriters herein
contained, each of the Offerors covenants and agrees, jointly and severally, as
follows:
(a) The Offerors, on or prior to the Time of Purchase, will deliver to the
Underwriters conformed copies of the Registration Statement as
originally filed and of all amendments thereto, heretofore or
hereafter made, including any post-effective amendment (in each case
including all exhibits filed therewith, and including unsigned copies
of each consent and certificate included therein or filed as an
exhibit thereto). As soon as Yorkshire Group is advised thereof, it
will advise ML orally (and to confirm such advice in writing) of (i)
the issuance of any stop order under the Securities Act with respect
to the Registration Statement, or the institution of any proceedings
therefor, of which Yorkshire Group shall have received notice, and
will use its best efforts to prevent the issuance of any such stop
order and to secure the prompt removal thereof, if issued and (ii) any
request by the Commission for amendments or supplements to the
Registration Statement or the Prospectus or for additional information
relating thereto. The Offerors will deliver to the Representatives
sufficient conformed copies of the Registration Statement, the
Preliminary Prospectus and the Prospectus and of all supplements and
amendments thereto (in each case without exhibits) for distribution to
each Underwriter and, from time to time, as many copies of the
Preliminary Prospectus and the Prospectus and any amendments and
supplements thereto in forms approved by the Representatives as the
Underwriters may reasonably request for the purposes contemplated by
the Securities Act or the Exchange Act.
(b) If, during the period (not exceeding nine months) when the delivery of
a prospectus shall be required by law in connection with the sale of
any Trust Securities by any Underwriter or dealer, any event relating
to or affecting any of the Offerors, or of which any of the Offerors
shall be advised in writing by the Underwriters, shall occur, which in
the opinion of counsel for any of the Offerors or the Underwriters
should be set forth
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in a supplement to or an amendment of the Prospectus, in order to make
the Prospectus not misleading in the light of the circumstances when
it is delivered, or if for any other reason it shall be necessary
during such period to amend or supplement the Prospectus in order to
comply with the Securities Act or the Exchange Act, the Offerors
forthwith will (i) notify the Underwriters to suspend solicitation of
offers to purchase or purchases of the Trust Securities and (ii) at
its expense, make any such filing or prepare and furnish to the
Underwriters a reasonable number of copies of a supplement or
supplements or an amendment or amendments to the Prospectus which will
supplement or amend the Prospectus so that, as supplemented or
amended, it will not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances when the
Prospectus is delivered, not misleading or which will effect any other
necessary compliance. In case any Underwriter is required to deliver a
prospectus in connection with the sale of any Trust Securities after
the expiration of the period specified in the preceding sentence, the
Offerors, upon the request of such Underwriter, will furnish to such
Underwriter, at the expense of such Underwriter, a reasonable quantity
of supplements or amendments to the Prospectus complying with Section
10(a) of the Securities Act.
(c) Yorkshire Group will make generally available to its security holders
as soon as practicable but not later than 45 days after the close of
the period covered thereby, an earning statement of Yorkshire Group
(in form complying with the provisions of Section 11(a) of the
Securities Act and Rule 158 of the rules and regulations of the
Commission under the Securities Act) covering a twelve-month period
beginning not later than the first day of Yorkshire Group's fiscal
quarter next following the "effective date" (as defined in Rule 158)
of the Registration Statement.
(d) As soon as practicable after the date of this Agreement, and in any
event within the time prescribed by Rule 424, the Offerors will file
the Prospectus with the Commission and will advise ML of such filing
and to confirm such advice in writing.
(e) The Offerors will use their best efforts to qualify the Securities
(and, if necessary, the Debentures Guarantee and the Junior
Subordinated Debentures) for offer and sale under the securities or
"blue sky" laws of such jurisdictions as the Underwriters may
designate within six months after the date hereof and will pay, or
will reimburse the Underwriters and their counsel for, reasonable
filing fees and expenses in connection therewith in an amount not
exceeding $3,500 in the aggregate (including filing fees and expenses
paid and incurred prior to the date hereof); provided, however, that
neither the Trust, Yorkshire Finance nor Yorkshire Group shall be
required to qualify as a foreign corporation or to file a consent to
service of process or to file annual reports or to comply
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with any other requirements deemed by the Trust, Yorkshire Finance or
Yorkshire Group to be unduly burdensome.
(f) Yorkshire Group or Yorkshire Finance will pay, except as otherwise
expressly provided herein, for all expenses incidental to the
performance of its obligations under this Agreement, including (i) the
preparation of the Registration Statement, the Preliminary Prospectus
and the Prospectus (and any amendments or supplements thereto), (ii)
the issuance and delivery of the Securities, the Junior Subordinated
Debentures, the Debentures Guarantee and the Control Certificate,
(iii) the fees and disbursements of the Offerors' counsel and
accountants, (iv) the fees of The Bank of New York, the Delaware
Trustee and the fees and disbursements of their counsel, (v) the fees
and expenses in connection with the rating of the Trust Securities by
securities rating organizations, (vi) the printing and delivery of
copies of the Registration Statement, the Preliminary Prospectus and
the Prospectus (including any amendments or supplements thereto),
(vii) the fees and expenses in connection with the listing of the
Trust Securities and, if applicable, the Junior Subordinated
Debentures on the New York Stock Exchange and the Junior Subordinated
Debentures on the Luxembourg Stock Exchange including the applications
therefor and (viii) the Offerors' costs and expenses for travel,
lodging and incidental expenses relating to investor presentations on
any "road show" undertaken in connection with the marketing of the
Trust Securities. It is understood that, except as provided in
Section 4(e), this Section 4(f), Section 4(g) and Section 6 hereof,
the Underwriters will pay all of their costs and expenses, fees of
their counsel, Winthrop, Stimson, Putnam & Roberts, transfer taxes
payable on resale of any of the Trust Securities by them, and any
advertising expenses connected with any offers they may make.
(g) If the Underwriters shall not take up and pay for the Trust Securities
due to the failure of the Offerors to comply with any of the
conditions specified in Section 3 hereof, or, if this Agreement shall
be terminated in accordance with the provisions of Section 7 or 8
hereof, Yorkshire Group or Yorkshire Finance will pay the fees and
disbursements of Winthrop, Stimson, Putnam & Roberts, counsel to the
Underwriters, and, if the Underwriters shall not take up and pay for
the Trust Securities due to the failure of the Offerors to comply with
any of the conditions specified in Section 3 hereof, Yorkshire Group
or Yorkshire Finance will reimburse the Underwriters for their
reasonable out-of-pocket expenses, in an aggregate amount not
exceeding a total of $10,000, incurred in connection with the
financing contemplated by this Agreement.
(h) During the period of 30 days from the date hereof, the Offerors agree
not to sell, offer to sell, offer to sell, grant any option for the
sale of, or otherwise dispose of, without the prior written consent of
the Representatives, any Trust Securities, any security convertible
into or
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exchangeable into or exercisable for Trust Securities or the Junior
Subordinated Debentures or debt securities substantially similar to
the Junior Subordinated Debentures or equity securities substantially
similar to the Trust Securities (except for the Junior Subordinated
Debentures and the Trust Securities issued pursuant to this
Agreement).
(i) The Offerors will (1) use their reasonable best efforts to list,
subject to notice of issuance, the Trust Securities on the New York
Stock Exchange and to register the Trust Securities under the Exchange
Act; (2) if the Trust Securities are exchanged for Junior Subordinated
Debentures, use their reasonable best efforts to list, subject to
notice of issuance, the Junior Subordinated Debentures on any exchange
on which the Trust Securities are then listed and to register the
Junior Subordinated Debentures under the Exchange Act; and (3) use
their reasonable best efforts to list the Junior Subordinated
Debentures on the Luxembourg Stock Exchange.
(j) At any time prior to completion of the offering of the Trust
Securities by the Underwriters to purchasers, the Offerors will not
make any amendment or supplement to the Prospectus of which the
Underwriters shall not have previously been advised and furnished a
copy.
(k) The Offerors will use their reasonable best efforts to permit the
Trust Securities to be eligible for clearance and settlement through
DTC.
SECTION 5. WARRANTIES AND REPRESENTATIONS OF THE OFFERORS.
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The Offerors, jointly and severally, warrant and represent to each of the
Underwriters that:
(a) A registration statement on Form S-1, (File Nos. 333-47925, 333-47925-
01, and 333-47925-02) in respect of the Securities, the Debentures
Guarantee and the Junior Subordinated Debentures has been prepared and
filed with the Commission by the Offerors in accordance with the
provisions of the Securities Act such registration statement, as
amended at the time it (or the most recent post-effective amendment
thereto) became effective (the "Effective Date"), including the
financial statements, the exhibits thereto and the information deemed
to be part thereof pursuant to Rule 430A(b) of the rules and
regulations of the Commission under the Securities Act, being herein
called the "Registration Statement", the preliminary prospectus
included in the Registration Statement prior to the Effective Date or
filed with the Commission pursuant to paragraph (a) of Rule 424 prior
to the Effective Date or paragraph (b) of Rule 424 after the Effective
Date being herein called "Preliminary Prospectus", and the prospectus,
including the price and terms of the offering, the distribution rate,
maturity date and certain other information filed with the Commission
in accordance with Rule 430A of the rules and regulations of
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the Commission under the Securities Act, and pursuant to Rule 424, and
as it may thereafter be amended or supplemented, being herein called
"Prospectus." The Registration Statement has been declared effective
by the Commission and no stop order suspending the effectiveness of
the Registration Statement has been issued and no proceeding for that
purpose has been initiated or, to the best knowledge of Yorkshire
Group, threatened by the Commission.
(b) The Registration Statement, at the Effective Date, and the Preliminary
Prospectus, when delivered to the Underwriters for their use in
marketing the Trust Securities, complied, and the Prospectus, at the
time it was filed pursuant to Rule 424(b) under the Securities Act and
at the Time of Purchase, will comply, in all material respects, in
form and substance, with the applicable provisions of the Securities
Act, the Exchange Act, the United States Trust Indenture Act of 1939
(the "TIA") and the rules and regulations of the Commission
thereunder. On the Effective Date, the Registration Statement did not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading. At the time that the Preliminary
Prospectus was delivered to the Underwriters for their use in
marketing the Trust Securities, the Preliminary Prospectus did not,
and at the time it was filed pursuant to Rule 424(b) under the
Securities Act and at the Time of Purchase, the Prospectus will not,
contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. The foregoing warranties and representations in this
Section 5(b) do not apply to (A) the parts of the Registration
Statement that constitute the Statements of Eligibility of the
Property Trustee, the Guarantee Trustee and the Indenture Trustee on
Form T-1 (collectively, the "Form T-1") under the TIA, (B) any
statements or omissions made in the Registration Statement or the
Prospectus in reliance upon and in conformity with information
furnished in writing to the Offerors by any Underwriter through the
Representatives expressly for use therein or (C) any information with
respect to DTC or its systems or operations set forth in the
Prospectus under the captions "Description of the Trust Securities--
Book-Entry Issuance" and "Description of the Junior Subordinated
Debentures-Form, Book-Entry Procedures and Transfer."
(c) Yorkshire Group has been duly incorporated and is validly existing as
a private limited company under the laws of England and Wales, and has
due corporate authority to conduct its business as described in the
Prospectus, to enter into and perform its obligations under this
Agreement, the Trust Agreement, the Trust Securities Guarantee
Agreement and the Indenture, to issue the Trust Securities Guarantee
and the Debentures Guarantee and to own and hold the Control
Certificate issued by the Trust.
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(d) Yorkshire Finance has been duly incorporated and is validly existing
and in good standing as a company with limited liability under the
laws of the Cayman Islands with the power and authority to own
property and to conduct its business as described in the Prospectus,
to enter into and perform its obligations under this Agreement, the
Deposit Agreement and the Indenture and to issue and sell the Junior
Subordinated Debentures; Yorkshire Finance is duly qualified to
transact business as a foreign company and is in good standing in any
other jurisdiction in which such qualification is necessary, except to
the extent that the failure to so qualify or be in good standing would
not have a material adverse effect on Yorkshire Finance; and Yorkshire
Finance is and will be treated as a consolidated subsidiary of
Yorkshire Group pursuant to United States generally accepted
accounting principles.
(e) Yorkshire Electricity Group plc ("YEG") has been duly incorporated and
is validly existing as a public limited company under the laws of
England and Wales, and has due corporate authority to conduct its
business as described in the Prospectus and to own and operate the
properties used by it in such business.
(f) The Trust has been duly created and is validly existing and in good
standing as a business trust under the Delaware Act with the power and
authority to own property and to conduct its business as described in
the Prospectus, to enter into and perform its obligations under this
Agreement, the Agreement as to Expenses and Liabilities and the Trust
Securities and to issue and sell the Trust Securities and to issue and
deliver the Control Certificate; the Trust is duly qualified to
transact business and is in good standing in any other jurisdiction in
which such qualification is necessary, except to the extent that the
failure to so qualify or be in good standing would not have a material
adverse effect on the Trust; the Trust is not a party to or otherwise
bound by any agreement other than those described in the Prospectus;
the Trust has conducted, and will conduct, no business other than the
transactions contemplated by this Agreement and described in the
Prospectus; and the Trust is and will be treated as a consolidated
subsidiary of Yorkshire Group pursuant to United States generally
accepted accounting principles.
(g) This Agreement has been duly authorized, executed and delivered by
each of the Offerors.
(h) The Trust Agreement has been duly authorized by Yorkshire Group and,
at the Time of Purchase, will have been duly executed and delivered by
Yorkshire Group and the Administrative Trustees, and assuming due
authorization, execution and delivery of the Trust Agreement by AEP
Resources, the Delaware Trustee and the Property Trustee, the Trust
Agreement will, at the Time of Purchase, constitute a valid and
binding obligation of Yorkshire Group and the Administrative Trustees,
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enforceable against Yorkshire Group and the Administrative Trustees in
accordance with its terms, except as may be limited by (1) bankruptcy,
insolvency, reorganization, receivership, liquidation, fraudulent
conveyance and transfer, moratorium or other similar laws affecting
creditors' rights generally or (2) general principles of equity
(whether considered in a proceeding at law or in equity) (the
"Enforceability Exceptions") and will conform in all material respects
to all statements relating thereto in the Prospectus; and, at the Time
of Purchase, the Trust Agreement will have been duly qualified under
the TIA.
(i) The Trust Securities Guarantee Agreement has been duly authorized by
Yorkshire Group and, at the Time of Purchase, will have been duly
executed and delivered by Yorkshire Group, and, assuming due
authorization, execution and delivery of the Trust Securities
Guarantee Agreement by the Guarantee Trustee, the Trust Securities
Guarantee Agreement will, at the Time of Purchase, constitute a valid
and binding obligation of Yorkshire Group, enforceable against
Yorkshire Group in accordance with its terms except as may be limited
by the Enforceability Exceptions, and the Trust Securities Guarantee
and the Trust Securities Guarantee Agreement will conform in all
material respects to all statements relating thereto contained in the
Prospectus; and, at the Time of Purchase, the Trust Securities
Guarantee Agreement will have been duly qualified under the TIA.
(j) The Trust Securities have been duly authorized by the Trust Agreement
and, at the Time of Purchase, will have been duly executed by the
Administrative Trustees, and, when issued and delivered by the Trust
pursuant to this Agreement against payment of the consideration set
forth herein, will be duly and validly issued and (subject to the
terms of the Trust Agreement) fully paid and non-assessable undivided
beneficial interests in the assets of the Trust, will be entitled to
the benefits of the Trust Agreement and will conform in all material
respects to all statements relating thereto contained in the
Prospectus; the issuance of the Trust Securities is not subject to
preemptive or other similar rights; and (subject to the terms of the
Trust Agreement) holders of Trust Securities will be entitled to the
same limitation of personal liability under Delaware law as extended
to stockholders of private corporations for profit.
(k) The Indenture has been duly authorized by Yorkshire Group and
Yorkshire Finance and, at the Time of Purchase, will have been duly
executed and delivered by Yorkshire Group and Yorkshire Finance, and,
assuming due authorization, execution and delivery of the Indenture by
the Indenture Trustee, the Indenture will, at the Time of Purchase,
constitute a valid and binding obligation of each of Yorkshire Group
and Yorkshire Finance, enforceable against each in accordance with its
terms except as may be limited by the Enforceability Exceptions; the
Indenture will conform in all material respects to all statements
relating thereto contained
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in the Prospectus; and, at the Time of Purchase, the Indenture will
have been duly qualified under the TIA.
(l) The issuance and delivery of the Junior Subordinated Debentures have
been duly authorized by Yorkshire Finance and, at the Time of
Purchase, the Junior Subordinated Debentures will have been duly
executed by Yorkshire Finance and, when authenticated in the manner
provided for in the Indenture and delivered against payment therefor,
will constitute valid and legally binding obligations of Yorkshire
Finance, enforceable against Yorkshire Finance in accordance with
their terms, except may be limited by the Enforceability Exceptions,
will be in the form contemplated by, and entitled to the benefits of,
the Indenture and will conform in all material respects to all
statements relating thereto in the Prospectus.
(m) The execution and delivery of the Debentures Guarantee has been duly
authorized by Yorkshire Group and, at the Time of Purchase, the
Debentures Guarantee will have been duly executed and delivered by
Yorkshire Group and, when the Junior Subordinated Debentures are
authenticated in the manner provided for in the Indenture and
delivered against payment therefor, will constitute a valid and
legally binding obligation of Yorkshire Group enforceable against
Yorkshire Group in accordance with its terms, except as may be limited
by the Enforceability Exceptions, and the Debentures Guarantee will
conform in all material respects to all statements relating thereto
contained in the Prospectus.
(n) The Deposit Agreement has been duly authorized by Yorkshire Finance
and, at the Time of Purchase, will have been duly executed and
delivered by Yorkshire Finance and, assuming due authorization,
execution and delivery of the Deposit Agreement by the Book-Entry
Depositary, the Deposit Agreement will constitute a valid and binding
obligation of Yorkshire Finance, enforceable against Yorkshire Finance
in accordance with its terms except as may be limited by the
Enforceability Exceptions; and the Deposit Agreement will conform in
all material respects to all statements relating thereto contained in
the Prospectus.
(o) The Control Certificate has been duly authorized by the Trust
Agreement and at the Time of Purchase, will be duly and validly issued
pursuant to the terms of the Trust Agreement.
(p) Neither the Trust, Yorkshire Finance nor Yorkshire Group is and, after
giving effect to the offering and sale of the Trust Securities, will
be an "investment company" or an entity "controlled" by an "investment
company" required to be registered under the United States Investment
Company Act of 1940 (the "1940 Act").
(q) The execution, delivery and performance by the Offerors of this
Agreement, by Yorkshire Finance of the Deposit Agreement, by Yorkshire
Group and Yorkshire Finance of the Indenture, by Yorkshire
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Group of the Trust Agreement, the Trust Securities Guarantee and the
Debentures Guarantee and the consummation by the Offerors of the
transactions contemplated herein and therein and compliance by the
Offerors with their respective obligations hereunder and thereunder
shall have been duly authorized by all necessary action (corporate or
otherwise) on the part of the Offerors and do not and will not result
in any violation of the charter or bylaws of Yorkshire Finance,
Yorkshire Group or the Trust Agreement or the certificate of trust of
the Trust and do not and will not conflict with, or result in a breach
of any of the terms or provisions of, or constitute a default under,
or result in the creation or imposition of any lien, charge or
encumbrance upon any property or assets of the Offerors or YEG under
(A) any contract, indenture, mortgage, loan agreement, note, lease or
other agreement or instrument to which the Offerors or YEG are a party
or by which any of them may be bound or to which any of their
properties or assets may be subject (except for conflicts, breaches or
defaults which would not, individually or in the aggregate, be
materially adverse to the Offerors or YEG or materially adverse to the
transactions contemplated by this Agreement), (B) any existing
applicable law, rule, regulation, judgment, order or decree of any
government, governmental instrumentality or court, domestic or
foreign, or any regulatory body or administrative agency or other
governmental body having jurisdiction over the Offerors or YEG or any
of their respective properties or assets (except for conflicts which
would not, individually or in the aggregate, be materially adverse to
the Offerors or YEG or materially adverse to the transactions
contemplated by this Agreement) or (C) the PES License (as defined in
the Prospectus).
(r) No authorization, approval, consent or order of any court or
governmental authority or agency of the United States, the United
Kingdom or the Cayman Islands is necessary in connection with the
offering of the Trust Securities, the Junior Subordinated Debentures,
the Trust Securities Guarantee or the Debentures Guarantee, the
issuance and delivery of the Control Certificate or the transactions
contemplated in this Agreement, the Indenture, the Trust Agreement or
the Deposit Agreement, except (A) such as have been obtained under the
Securities Act, the Exchange Act, the TIA or the rules and regulations
thereunder; (B) such as have been obtained under the 1935 Act; (C)
such as may be required under United States state securities or "blue
sky" laws; (D) such as may be required by any person selling
securities in the United Kingdom under any rules or regulations under
the FSA which are applicable to it; and (E) that the Inland Revenue
may require the Trust and/or a paying agent in the United Kingdom to
give to it certain particulars of the issue of the Trust Securities in
connection with regulations made under the Income and Corporation
Taxes Act 1988 (as amended by the Finance Act 1996).
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(s) YEG is entitled to the exemption from the 1935 Act, provided by
Section 33(a) (1) thereof.
(t) The consolidated financial statements of Yorkshire Group and its
consolidated subsidiaries, together with notes thereto, included in
the Prospectus present fairly the financial position of Yorkshire
Group and its consolidated subsidiaries at the dates or for the
periods indicated; said consolidated financial statements have been
prepared in conformity with United States generally accepted
accounting principles applied on a consistent basis throughout the
periods involved. The selected financial data and the summary
financial information included in the Preliminary Prospectus and the
Prospectus present fairly the information shown therein and have been
compiled on a basis consistent with that of the audited financial
statements included in the Preliminary Prospectus and the Prospectus.
The pro forma financial information included in the Preliminary
Prospectus and the Prospectus is fairly presented and has been
properly compiled on the bases described therein.
(u) Except as set forth in or contemplated by the Prospectus, and except
as would not, individually or in the aggregate, be materially adverse
to the business or operations of YEG, YEG possesses adequate
franchises, licenses, permits and other rights to conduct its business
and operations as now conducted.
SECTION 6. INDEMNITY AND CONTRIBUTION.
---------- --------------------------
(a) Yorkshire Group and Yorkshire Finance agree, to the extent permitted by
law, to indemnify, jointly and severally, and hold harmless each of the
Underwriters and each person, if any, who controls any such Underwriter within
the meaning of Section 15 of the 1933 Act or Section 20(a) of the Exchange Act,
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Securities Act or
otherwise, and to reimburse the Underwriters and such controlling person or
persons, if any, for any legal or other expenses as incurred by them in
connection with defending any action, insofar as such losses, claims, damages,
liabilities or actions arise out of or are based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, the Preliminary Prospectus or the Prospectus, or if the Offerors
shall furnish or cause to be furnished to the Underwriters any amendments or any
supplements thereto, as they may be so amended or supplemented, or arise out of
or are based upon any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any such untrue statement or alleged
untrue statement or omission or alleged omission which was made in the
Registration Statement, the Preliminary Prospectus or the Prospectus as so
amended or supplemented in reliance upon and in conformity with information
furnished in writing by any Underwriter through the Representatives expressly
for use therein and except (i) with respect to information relating to DTC or
its systems or procedures as set forth in the
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Registration Statement, the Prospectus or the Preliminary Prospectus under the
captions "Description of the Trust Securities Book- Entry Issuance" and
"Description of the Junior Subordinated Debentures- Form, Book-Entry Procedures
and Transfer" and (ii) with respect to the Form T-1, and except that this
indemnity shall not inure to the benefit of any Underwriter (or of any person
controlling such Underwriter) on account of any losses, claims, damages,
liabilities or actions arising from the sale of the Trust Securities to any
person if a copy of the Prospectus, as the same may then be supplemented or
amended, was not sent or given by or on behalf of such Underwriter to such
person with or prior to the written confirmation of the sale involved and the
omission or alleged omission or untrue statement or alleged untrue statement was
corrected in the Prospectus as supplemented or amended at the time of such
confirmation and the Prospectus, as so amended and supplemented, was timely
delivered to the Underwriters by the Offerors. Each Underwriter agrees within
ten days after the receipt by it of notice of the commencement of any action in
respect to which indemnity from the Offerors on account of its agreement
contained in this Section 6(a) may be sought by it, or by any person controlling
it, to notify the Offerors in writing of the commencement thereof, but the
failure of such Underwriter so to notify the Offerors of any such action shall
not release the Offerors from any liability which it may have to such
Underwriter or to such controlling person otherwise than on account of the
indemnity agreement contained in this Section 6(a). In case any such action
shall be brought against any Underwriter or any such person controlling such
Underwriter and such Underwriter shall notify the Offerors of the commencement
thereof, as above provided, the Offerors shall be entitled to participate in
(and, to the extent that the Offerors shall wish, including the selection of
counsel (which counsel shall be reasonably satisfactory to the Underwriters), to
direct) the defense thereof at their own expense. In case the Offerors elect to
direct such defense and select such counsel ("Offerors' Counsel"), any
Underwriter or any controlling person shall have the right to employ its own
counsel, but, in any such case, the fees and expenses of such counsel shall be
at the expense of such Underwriter or controlling person unless (i) the Offerors
have agreed in writing to pay such fees and expenses or (ii) the named parties
to any such action (including any impleaded parties) include both any
Underwriter or any controlling person and the Offerors, and any Underwriter or
any controlling person shall have been advised by its counsel that a conflict of
interest between the Offerors and any Underwriter or controlling person may
arise (and the Offerors' Counsel shall have concurred in good faith with such
advice) and for this reason it is not desirable for the Offerors' Counsel to
represent both the indemnifying party and the indemnified party (it being
understood, however, that the Offeror shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for any Underwriter or any controlling person (plus any local counsel
retained by any Underwriter or any controlling person in their reasonable
judgment), which firm (or firms) shall be designated in writing by any
Underwriter or any controlling person).
(b) Each Underwriter agrees, to the extent permitted by law, to indemnify,
hold harmless and reimburse the Offerors, their directors and their officers,
and each person, if any, who controls the Offerors within the meaning of Section
15 of the 1933
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Act or Section 20(a) of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Offerors set forth in Section 6(a)
hereof, but only with respect to untrue statements or alleged untrue statements
or omissions or alleged omissions made in the Registration Statement, the
Preliminary Prospectus, the Prospectus, as they may be amended or supplemented,
in reliance upon and in conformity with information furnished in writing to the
Offerors by any Underwriter through the Representatives expressly for use
therein. The Offerors agree within ten days after the receipt by it or notice of
the commencement of any action in respect to which indemnity from any
Underwriter on account of its agreement contained in this Section 6(b) may be
sought by it, or by a person controlling it, to notify such Underwriter in
writing of the commencement thereof, but failure of an Offeror so to notify the
Underwriter of any such action shall not release such Underwriter from any
liability which it may have to an Offeror or to such controlling person
otherwise than on account of the indemnity agreement contained in this Section
6(b).
(c) If recovery is not available under Section 6(a) or 6(b) hereof for any
reason other than as specified therein, the indemnified party shall be entitled
to contribution for any and all losses, claims, damages, liabilities and
expenses for which such indemnification is so unavailable under this Section
6(c). In determining the amount of contribution to which such indemnified party
is entitled, there shall be considered the portion of the proceeds of the
offering of the Trust Securities realized, the relative knowledge and access to
information concerning the matter with respect to which the claim was asserted,
the opportunity to correct and prevent any statement or omission, and any
equitable considerations appropriate under the circumstances. The Offerors and
the Underwriters agree that it would not be equitable if the amount of such
contribution were determined by pro rata or per capita allocation (even if the
Underwriters were treated as one entity for such purpose) without reference to
the considerations called for in the previous sentence. No Underwriter or any
person controlling such Underwriter shall be obligated to contribute any amount
or amounts hereunder which in the aggregate exceeds the total price of the Trust
Securities purchased by such Underwriter under this Agreement, less the
aggregate amount of any damages which such Underwriter and its controlling
persons have otherwise been required to pay in respect of the same claim or any
substantially similar claim. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. Any Underwriter's obligation to contribute under this Section
6 is in proportion to its purchase obligation and not joint with any other
Underwriter or Underwriters.
(d) No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 6 (whether or not the indemnified parties are actual or
potential parties thereto), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii)
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does not include a statement as to or an admission of fault, culpability or a
failure to act by or on behalf of such indemnified party.
SECTION 7. DEFAULT OF UNDERWRITERS.
-----------------------
If any Underwriter or Underwriters under this Agreement shall fail or
refuse (otherwise than for some reason sufficient to justify, in accordance with
the terms hereof, the cancellation or termination of its obligations hereunder)
to purchase and pay for the number of Trust Securities which it has agreed to
purchase and pay for hereunder, and the aggregate number of Trust Securities
with respect to which such default occurs is not more than one-tenth of the
aggregate number of the Trust Securities, the other Underwriters shall be
obligated severally in the proportions which the amounts of Trust Securities set
forth opposite their names in Schedule I hereto bear to the aggregate number of
Trust Securities set forth opposite the names of all such non-defaulting
Underwriters, to purchase the Trust Securities which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase on the terms set forth
herein; provided that in no event shall the number of Trust Securities which any
Underwriter has agreed to purchase pursuant to Section 1 hereof be increased
pursuant to this Section 7 by an amount in excess of one-ninth of such number of
Trust Securities without the written consent of such Underwriter. If any
Underwriter or Underwriters shall fail or refuse (otherwise than for some reason
sufficient to justify, in accordance with the terms hereof, the cancellation or
termination of its obligations hereunder) to purchase and pay for the number of
Trust Securities which it has agreed to purchase and pay for hereunder, and the
aggregate number of Trust Securities with respect to which such default occurs
is more than one-tenth of the aggregate number of the Trust Securities, then
this Agreement shall terminate. In the event of any such termination, the
Offerors shall not be under any liability to any Underwriter (except to the
extent, if any, provided in Section 4(e), Section 4(f) and Section 4(g) or
Section 6 hereof), nor shall any Underwriter (other than an Underwriter who
shall have failed or refused to purchase the Trust Securities it has agreed to
purchase and pay for hereunder without some reason sufficient to justify, in
accordance with the terms hereof, its cancellation or termination of its
obligations hereunder) be under any liability to the Offerors or any other
Underwriter.
Nothing herein contained shall release any defaulting Underwriter from its
liability to the Offerors or any non-defaulting Underwriter for damages
occasioned by its default hereunder.
SECTION 8. TERMINATION OF AGREEMENT BY THE
--------------------------------
UNDERWRITERS.
------------
This Agreement may be terminated at any time prior to the Time of Purchase
by the Representatives if, after the execution and delivery of this Agreement
and prior to the Time of Purchase, in the reasonable judgment of the
Representatives, the Underwriters' ability to market the Trust Securities shall
have been materially adversely affected because:
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(i) trading in securities on the New York Stock Exchange shall have been
generally suspended by the Commission or by the New York Stock Exchange, or
(ii) any outbreak or material escalation of hostilities or other calamity
or crisis materially adversely affecting the financial markets of the
United States of America or the United Kingdom shall have occurred, or
(iii) a general banking moratorium shall have been declared by United
States federal, New York State or United Kingdom authorities, or
(iv) there shall have been any decrease in the ratings of any of Yorkshire
Finance's outstanding debt securities by Moody's or S&P or either Moody's
or S&P shall publicly announce that it has such rating under consideration
for possible downgrade.
If the Representatives elect to terminate this Agreement, as provided in
this Section 8, the Representatives will promptly notify the Offerors by
telephone or by telex or facsimile transmission, confirmed in writing. If this
Agreement shall not be carried out by any Underwriter for any reason permitted
hereunder, or if the sale of the Trust Securities to the Underwriters as herein
contemplated shall not be carried out because the Offerors are not able to
comply with the terms hereof, the Offerors shall not be under any obligation
under this Agreement and shall not be liable to any Underwriter or to any member
of any selling group for the loss of anticipated profits from the transactions
contemplated by this Agreement (except to the extent, if any, provided in
Section 4(e), Section 4(f) and Section 4(g) or Section 6 hereof) and the
Underwriters shall be under no liability to the Offerors nor be under any
liability under this Agreement to one another.
SECTION 9. NOTICES.
-------
All notices hereunder shall, unless otherwise expressly provided, be in
writing and be delivered at or mailed to the following addresses or by telex or
facsimile transmission confirmed in writing to the following addresses: if to
the Underwriters, to Merrill Lynch, Pierce, Fenner & Smith Incorporated, World
Financial Center, North Tower, 27th Floor, New York, New York 10281-1307,
Attention: Robert D. Craig, if to Yorkshire Group to Yorkshire Power Group
Limited, Wetherby Road, Scarcroft, Leeds LS14 2HE England, Attention: Roger
Dickinson, if to Yorkshire Finance to Yorkshire Power Finance Limited c/o
Yorkshire Power Group Limited, Wetherby Road, Scarcroft, Leeds LS14 2HE,
England, Attention: Roger Dickinson and if to the Trust to Yorkshire Capital
Trust I c/o American Electric Power Service Corporation, 1 Riverside Plaza,
Columbus, Ohio 43215, Attention: Stephan T. Haynes.
SECTION 10. PARTIES IN INTEREST.
-------------------
The agreement herein set forth has been and is made solely for the benefit
of the Underwriters, the Offerors, the controlling persons, if any, referred to
in Sections 5 and 6 hereof, and their respective successors, assigns, executors
and administrators, and, except as expressly otherwise provided in Section 7
hereof, no other person shall acquire or have any right under or by virtue of
this Agreement.
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SECTION 11. CONDITIONS OF THE OFFERORS' OBLIGATIONS.
---------------------------------------
The obligations of the Offerors hereunder are subject to the Underwriters'
performance of their obligations hereunder.
SECTION 12. APPLICABLE LAW; SUCCESSORS.
--------------------------
This Agreement will be governed and construed in accordance with the laws
of the State of New York. The term "successors" as used in this Agreement
shall not include any purchaser, as such purchaser, of any of the Trust
Securities from any of the respective Underwriters.
SECTION 13. CONSENT TO JURISDICTION; APPOINTMENT OF AGENT TO ACCEPT
-------------------------------------------------------
SERVICE OF PROCESS.
------------------
(a) The Offerors and the Underwriters irrevocably consent and agree that
any civil legal action, suit or proceeding against them with respect to their
obligations, liabilities or any other matter arising out of or in connection
with this Agreement may be brought in the Supreme Court of New York, New York
County or the United States District Court for the Southern District of New York
and any appellate court from either thereof and, until amounts due and to become
due in respect of the Trust Securities have been paid, hereby irrevocably
consent and submit to the non-exclusive jurisdiction of each such court in
personam, generally and unconditionally with respect to any civil action, suit
or proceeding for themselves and in respect of their properties, assets and
revenues.
(b) Yorkshire Group and Yorkshire Finance have irrevocably designated,
appointed, and empowered CT Corporation System, located at 1633 Broadway, New
York, New York 10019, as their designee, appointee and agent to receive, accept
and acknowledge for and on their behalf, and their properties, assets and
revenues, service of any and all legal process, summons, notices and documents
which may be served in any action, suit or proceeding brought against Yorkshire
Group or Yorkshire Finance in any United States or state court. If for any
reason such designee, appointee and agent hereunder shall cease to be available
to act as such, the Yorkshire Group and Yorkshire Finance agree to designate a
new designee, appointee and agent in the Borough of Manhattan, The City of New
York. Yorkshire Group and Yorkshire Finance further hereby irrevocably consent
and agree to the service of any and all legal process, summons, notices and
documents in any action, suit or proceeding against Yorkshire Group or Yorkshire
Finance by serving a copy thereof upon the relevant agent for service of process
referred to in this Section 13 (whether or not the appointment of such agent
shall for any reason prove to be ineffective or such agent shall accept or
acknowledge such service) or by mailing copies thereof by registered or
certified air mail, postage prepaid, to Yorkshire Group or Yorkshire Finance at
their respective addresses specified in or designated pursuant to this
Agreement. Yorkshire Group and Yorkshire Finance agree that the failure of any
such designee, appointee and agent to give any notice of such service to them
shall not impair or affect in any way the validity of such service or any
judgment rendered in any action or proceeding based thereon. Nothing herein
shall in
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any way be deemed to limit the ability of the Underwriters to serve any such
legal process, summons, notices and documents in any other manner permitted by
applicable law or to obtain jurisdiction over Yorkshire Group or Yorkshire
Finance or bring actions, suits or proceedings against Yorkshire Group or
Yorkshire Finance in such other jurisdictions, and in such manner, as may be
permitted by applicable law. Yorkshire Group and Yorkshire Finance irrevocably
and unconditionally waive, to the fullest extent permitted by law, any objection
which they may now or hereafter have to the laying of venue of any of the
aforesaid actions, suits or proceedings arising out of or in connection with
this Agreement brought in the Supreme Court of New York, New York County or the
United States District Court for the Southern District of New York and any
appellate court from either thereof and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that any
such action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
SECTION 14. FOREIGN TAXES; WAIVER OF IMMUNITIES;
------------------------------------
JUDGMENT CURRENCY.
-----------------
(a) All payments by each of Yorkshire Group or Yorkshire Finance to the
Underwriters hereunder shall be made free and clear of, and without deduction or
withholding for or on account of, any and all present and future income, stamp
or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by the United Kingdom or any other jurisdiction in which Yorkshire Group or
Yorkshire Finance have a branch or an office from which payment is made or
deemed to be made, excluding (i) any such tax imposed by reason of any
Underwriter having some connection with any such jurisdiction other than its
participation as an Underwriter hereunder and (ii) any income or franchise tax
on the overall net income of any Underwriter imposed by the United States of
America or by the State of New York or any political subdivision of the United
States of America or of the State of New York or any political subdivision of
the United States of America or of the State of New York (all such non-excluded
taxes, "Foreign Taxes"). If either Yorkshire Group or Yorkshire Finance is
prevented by operation of law or otherwise from paying, causing to be paid or
remitting that portion of amounts payable hereunder represented by Foreign Taxes
withheld or deducted, then amounts payable under this Agreement shall, to the
extent permitted by law, be increased to such amount as is necessary to yield
and remit to such Underwriter an amount that, after deduction of all Foreign
Taxes (including all Foreign Taxes payable on such increased payments), equals
the amount that would have been payable if no Foreign Taxes applied.
(b) To the extent that Yorkshire Group or Yorkshire Finance may in any
jurisdiction claim for itself or its assets immunity (to the extent such
immunity may now or hereafter exist, whether on the grounds of sovereign
immunity or otherwise) from, suit, execution, attachment (whether in aid of
execution, before judgment or otherwise) or other legal process (whether through
service or notice or otherwise), and to the extent that in any such jurisdiction
there may be attributed to itself or its assets such immunity (whether or not
claimed), Yorkshire Group and Yorkshire Finance irrevocably agree with respect
to any matter arising under the Agreement, for the benefit of the Underwriters,
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not to claim, and irrevocably waive, such immunity to the full extent permitted
by the laws of such jurisdiction.
(c) If for the purpose of obtaining judgment in any court it is necessary
to convert a sum due hereunder to the Underwriters from United States dollars
into another currency, Yorkshire Group and Yorkshire Finance have agreed, and
each Underwriter will be deemed to have agreed, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures such Underwriters could purchase
United States dollars with such other currency in The City of New York on the
business day preceding the day on which final judgment is given.
(d) The obligations of Yorkshire Group and Yorkshire Finance in respect of
any sum payable by them to the Underwriters shall, notwithstanding any judgment
in a currency (the "judgment currency") other than United States dollars, be
discharged only to the extent that on the business day following receipt by such
Underwriter of any sum, adjudged to be so due in the judgment currency, such
Underwriter may in accordance with normal banking procedures purchase United
States dollars with the judgment currency; if the amount of United States
dollars so purchased is less than the sum originally due to such Underwriter in
the judgment currency (determined in the manner set forth in the preceding
paragraph), the Yorkshire Group and Yorkshire Finance agree, as a separate
obligation and notwithstanding any such judgment, to indemnify such Underwriter
against such loss, and if the amount of the United States dollars so purchased
exceeds the sum originally due to such Underwriter, such Underwriter agrees to
remit to Yorkshire Group and Yorkshire Finance such excess amount.
SECTION 15. EXECUTION OF COUNTERPARTS.
-------------------------
This Agreement may be executed in several counterparts, each of which shall
be regarded as an original and all of which shall constitute one and the same
document.
SECTION 16. SURVIVAL.
--------
The indemnity and contribution agreements contained in Section 6 hereof,
Section 13 hereof, Section 14 hereof, and all covenants, warranties and
representations contained in this Agreement, shall remain in full force and
effect regardless of any investigation make by or on behalf of any persons, and
shall survive the delivery of and payment for the Trust Securities hereunder.
23
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Offerors a counterpart hereof, whereupon this
letter agreement will become a binding agreement among the Offerors and the
Underwriters in accordance with its terms.
Very truly yours,
YORKSHIRE POWER GROUP LIMITED
By:
Title:
----------------------------------
YORKSHIRE POWER FINANCE
LIMITED
By:
Title:
----------------------------------
YORKSHIRE CAPITAL TRUST I
By: AEP Resources Inc.,
as Depositor
Title:
----------------------------------
MERRILL LYNCH & CO.
MERRILL, LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
As representatives of the other several Underwriters
named in Schedule I hereto
[Co-Managers]
By: MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:____________________________________
Title: Authorized Signatory
24
<PAGE>
SCHEDULE I
- ----------
Underwriter NUMBER OF TRUST SECURITIES
- ----------- --------------------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
II-1
<PAGE>
SCHEDULE II
Initial public offering price per Trust Security
(and purchase price per security to be paid by
the several Underwriters): $25
Compensation per Trust Security to be paid
by Yorkshire Finance to the several
Underwriters in respect of their
commitments: $________ per Trust Security;
provided that such compensation will be
$______ per Trust Security for sales of
10,000 or more Trust Securities to a single
purchaser
II-2
<PAGE>
EXHIBIT A
[Letterhead of RICHARDS, LAYTON & FINGER, P.A.]
_______________ __, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
[Co-Managers]
As Representatives of the several Underwriters
named in Schedule I to the Underwriting
Agreement referred to below
c/o Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1209
Re: Yorkshire Capital Trust I
-------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Yorkshire Power Group
Limited, a private company with limited liability incorporated under the laws of
England and Wales ("Yorkshire Group"), Yorkshire Power Finance Limited, a
private company with limited liability incorporated under the laws of the Cayman
Islands ("Yorkshire Finance"), and Yorkshire Capital Trust I, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
This opinion is being furnished to you pursuant to Section 3(b)(i) of the
Underwriting Agreement, dated ___________, 1998 (the "Underwriting Agreement"),
among Yorkshire Group, Yorkshire Finance, the Trust and you, as Representatives
of the several Underwriters listed in Schedule I thereto.
For purposes of giving the opinions hereinafter set forth, our examination
of documents has been limited to the examination of originals or copies of the
following:
(a) The Certificate of Trust of the Trust, dated ____________, 1998 (the
"Certificate"), as filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on _____________, 1998;
(b) The Trust Agreement of the Trust, dated as of _______________, 1998
(including the Control Certificate attached as an exhibit thereto) among AEP
Resources, Inc., as Depositor ("AEP Resources"), and the trustees of the Trust
named therein;
(c) The Amended and Restated Trust Agreement, dated as of
_________________, 1998 (including Exhibits A and C thereto) (the "Trust
Agreement"), among AEP Resources, as depositor, the trustees of the Trust named
A-1
<PAGE>
therein, Yorkshire Group, as Control Party, and the holders, from time to time,
of undivided beneficial interests in the assets of the Trust;
(d) The Underwriting Agreement;
(e) The Prospectus, dated ________________, 1998 (the "Prospectus"),
relating to the ___% Trust Securities of the Trust representing undivided
beneficial interests in the assets of the Trust (each, a "Trust Security" and
collectively, the "Trust Securities");
(f) A Certificate of Good Standing for the Trust, dated ___________,
1998, obtained from the Secretary of State;
(g) The Subordinated Debenture Indenture, dated as of ____________,
1998, among Yorkshire Group, Yorkshire Finance and The Bank of New York, as
trustee, as supplemented by the First Supplemental Indenture thereto dated as of
_________ 1, 1998 (collectively, the "Indenture"), which includes the guarantee
of the Debentures (as hereinafter defined) by Yorkshire Group (the "Debentures
Guarantee");
(h) A specimen of the ___% Junior Subordinated Deferrable Interest
Debentures, Series A due ____________, 2038 (the "Debentures") issued pursuant
to the Indenture; and
(i) The Trust Securities Guarantee Agreement, dated as of ___________ 1,
1998 between Yorkshire Group and The Bank of New York, as trustee (the "Trust
Securities Guarantee Agreement" and, collectively with the Debentures Guarantee,
the "Guarantees").
Capitalized terms used herein and not otherwise defined are used as defined
in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other than
the documents listed in paragraphs (a) through (i) above. In particular, we
have not reviewed any document (other than the documents listed in paragraphs
(a) through (i) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
A-2
<PAGE>
For purposes of this opinion, we have assumed (i) the Trust Agreement
constitutes the entire agreement among the parties thereto with respect to the
subject matter thereof, including with respect to the creation, operation and
termination of the Trust, and that the Trust Agreement and the Certificate are
in full force and effect and have not been amended, (ii) except to the extent
provided in paragraph 1 below, the due organization or due formation or due
creation, as the case may be, and valid existence in good standing of each party
to the documents examined by us under the laws of the jurisdiction governing its
organization, formation or creation, (iii) the legal capacity of natural persons
who are parties to the documents examined by us, (iv) except to the extent
provided in paragraph 2 below, the power and authority of each of the parties to
the documents examined by us to execute and deliver, and to perform its
obligations under, such documents, (v) except to the extent provided in
paragraphs 4 and 10 below, the due authorization, execution and delivery by all
parties thereto of all documents examined by us, (vi) the receipt by each Person
to whom a Trust Security is to be issued by the Trust (collectively, the "Trust
Security Holders") of a Trust Securities Certificate for such Trust Security and
the payment for the Trust Security acquired by it, in accordance with the Trust
Agreement and as described in the Prospectus, (vii) the issuance and sale of the
Trust Securities to the Trust Security Holders in accordance with the Trust
Agreement and as described in the Prospectus and (viii) that the Trust Yorkshire
Group [the US Affiliates] and Yorkshire Finance derive no income from or
connected with sources within the State of Delaware and have no assets,
activities (other than (i) with respect to the Trust, having a Delaware Trustee
as required by the Business Trust Act (as defined below), (ii) having a
registered agent as required by the General Corporation Law of the State of
Delaware and (iii) the filing of documents and payment of franchise taxes with
the Secretary of State). We have not participated in the preparation of the
Prospectus.
This opinion is limited to the laws of the State of Delaware (excluding the
securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder that are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of law
and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
(S) 3801, et seq. (the "Business Trust Act"), and all filings required under the
laws of the State of Delaware with respect to the creation and valid existence
of the Trust as a business trust have been made.
2. Under the Business Trust Act and the Trust Agreement, the Trust has
the trust power and authority to (i) own property and conduct its business, all
as described in the Prospectus, (ii) execute and deliver, and to perform its
obligations under,
A-3
<PAGE>
the Underwriting Agreement, (iii) issue, sell and perform its obligations under,
the Trust Securities and the Control Certificate and (iv) perform its
obligations under the Trust Agreement.
3. The Trust Securities have been duly authorized by the Trust Agreement
and are duly and validly issued and subject to the qualifications set forth in
paragraph 6 below, are fully paid and non-assessable undivided beneficial
interests in the assets of the Trust and are entitled to the benefits of the
Trust Agreement. Under the Business Trust Act and the Trust Agreement, the
issuance of the Trust Securities is not subject to any preemptive or other
similar rights.
4. Under the Business Trust Act and the Trust Agreement, (i) the
issuance and sale by the Trust of the Trust Securities and the execution and
delivery by the Trust of the Underwriting Agreement, and the performance by the
Trust of its obligations thereunder, have been duly authorized by all necessary
trust action on the part of the Trust and (ii) assuming the due execution and
delivery of the Underwriting Agreement by the Depositor on behalf of the Trust
and of the certificates for the Trust Securities by one or more of the
Administrative Trustees on behalf of the Trust, the Underwriting Agreement and
the Trust Securities have been duly executed and delivered by the Trust.
5. No authorization, approval, consent or order of any Delaware court or
Delaware governmental authority or Delaware agency is required to be obtained by
the Trust, Yorkshire Group, the US Affiliates or Yorkshire Finance solely as a
result of (i) the issuance and sale of the Trust Securities, (ii) the issuance
and sale of the Debentures and (iii) the issuance and delivery of the Guarantees
and the Control Certificate.
6. The Trust Security Holders, as beneficial owners of the Trust, will
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Trust Security
Holders may be obligated, pursuant to the Trust Agreement, to (i) provide
indemnity and/or security in connection with and pay taxes or governmental
charges arising from transfers or exchanges of Trust Securities Certificates and
the issuance of replacement Trust Securities Certificates and (ii) provide
security or indemnity in connection with requests of or directions to the
Property Trustee to exercise its rights and powers under the Trust Agreement.
7. The Trust Agreement constitutes a valid and binding obligation of AEP
Resources, Yorkshire Group and the Trustees, and is enforceable against AEP
Resources, Yorkshire Group and the Trustees, in accordance with its terms.
8. The issuance and sale by the Trust of the Trust Securities, the
issuance and delivery by the Trust of the Control Certificate, the execution,
delivery and performance by the Trust of the Underwriting Agreement, the
consummation by the Trust of the transactions contemplated by the Underwriting
Agreement and the Trust Agreement and compliance by the Trust with its
obligations thereunder do not violate
A-4
<PAGE>
(i) any of the provisions of the Certificate or the Trust Agreement or (ii) any
applicable Delaware law or Delaware administrative regulation.
9. We have reviewed the statements in the Prospectus under the caption
"Yorkshire Capital Trust I" and, insofar as they contain statements of Delaware
law, such statements are fairly presented.
10. The Control Certificate has been duly authorized by the Trust
Agreement and has been duly and validly issued pursuant to the terms of the
Trust Agreement.
The opinion expressed in paragraph 7 above is subject to the effect upon
the Trust Agreement of (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent conveyance and transfer and other
similar laws relating to or affecting the rights and remedies of creditors
generally, (ii) principles of equity, including applicable law relating to
fiduciary duties (regardless of whether considered and applied in a proceeding
in equity or at law), and (iii) the effect of applicable public policy on the
enforceability of provisions relating to indemnification.
We consent to your, and the other several Underwriters, relying as to
matters of Delaware law upon this opinion in connection with the Underwriting
Agreement. We consent to the law firms of Dewey Ballantine LLP and Winthrop,
Stimson, Putnam & Roberts relying as to matters of Delaware law upon this
opinion in connection with opinions to be rendered by them pursuant to the
Underwriting Agreement. Except as stated above, without our prior written
consent, this opinion may not be furnished or quoted to, or relied upon by, any
other Person for any purpose.
Very truly yours,
RICHARDS, LAYTON & FINGER, P.A.
A-5
<PAGE>
EXHIBIT B
[Letterhead of DEWEY BALLANTINE LLP]
_______________ __, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
[Co-Managers]
As Representatives of the several Underwriters
named in Schedule I to the Underwriting
Agreement referred to below
c/o Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1209
Re: Yorkshire Capital Trust I
-------------------------
Ladies and Gentlemen:
We, together with Allen and Overy, London, England and Richards, Layton &
Finger, P.A., Wilmington, Delaware, have acted as counsel to Yorkshire Power
Finance Limited, a private company with limited liability incorporated under the
laws of the Cayman Islands ("Yorkshire Finance"), and Yorkshire Power Group
Limited, a private company with limited liability incorporated under the laws of
England and Wales ("Yorkshire Group"), in connection with (i) the formation of
Yorkshire Capital Trust I, a Delaware statutory business trust (the "Trust" and,
collectively, along with Yorkshire Group and Yorkshire Finance, the "Offerors"),
pursuant to the Amended and Restated Trust Agreement dated _______________, 1998
among Yorkshire Group, AEP Resources, Inc., an Ohio corporation ("AEP
Resources"), and the trustees named therein (the "Trust Agreement"); (ii) the
Trust's issuance and sale of 11,000,000 ____% Trust Securities evidencing
undivided beneficial interests in the assets of the Trust (the "Trust
Securities"); (iii) Yorkshire Finance's issuance and sale to the Trust of
$275,000,000 of its ___% Junior Subordinated Deferrable Interest Debentures,
Series A due ____________, 2038 (the "Debentures") pursuant to a Subordinated
Debenture Indenture dated as of _____________ 1, 1998, among Yorkshire Finance,
Yorkshire Group and The Bank of New York, as trustee (the "Indenture Trustee"),
as supplemented by the First Supplemental Indenture dated as of _______- __,
1998 (collectively, the "Indenture"); (iv) the Agreement as to Expenses and
Liabilities dated as of ________ __, 1998, between AEP Resources and New Century
International, Inc., a Delaware corporation (collectively, the "US Affiliates")
Yorkshire Group's and the Trust (the "Agreement as to Expenses and
Liabilities"); (v) issuance of a guarantee (the "Trust Securities Guarantee") of
the Trust Securities pursuant to a Trust Securities Guarantee Agreement dated as
of _________ 1, 1998 (the "Trust Securities Guarantee Agreement") between
Yorkshire Group and The Bank of New York, as guarantee trustee (the "Guarantee
Trustee"); and
B-1
<PAGE>
(vi) Yorkshire Group's issuance of a guarantee (the "Debenture Guarantee") of
the Debentures pursuant to the terms of the Indenture. The Trust Securities are
being sold to you today pursuant to the terms of an Underwriting Agreement dated
__________, 1998 (the "Underwriting Agreement"), among Yorkshire Group,
Yorkshire Finance, the Trust and the underwriters named in Schedule I thereto
(the "Underwriters") for whom you are acting as Representatives. This opinion is
being delivered to you as Representatives pursuant to Section 3(c)(ii) thereof.
All capitalized terms not otherwise defined herein shall have the meanings
set forth in the Underwriting Agreement.
In rendering the opinions expressed below, we have examined the
Registration Statement and the Prospectus. In addition, we have examined, and
have relied as to matters of fact upon, the documents delivered to you at the
closing, and we have made such other and further investigations as we deemed
necessary to express the opinions hereinafter set forth. In such examination,
we have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to us as originals, the
conformity to original documents of all documents submitted to us as certified
or photostatic copies, and the authenticity of the originals of such latter
documents. Based upon the foregoing, and subject to the qualifications and
limitations stated herein, we are of the opinion that:
1. All orders, consents, or other authorizations or approvals of the
Commission legally required for the issuance and delivery of the Trust
Securities Guarantee and the Debentures Guarantee by Yorkshire Group, the
issuance and sale of the Debentures by Yorkshire Finance, the issuance and sale
of the Trust Securities by the Trust and the issuance and delivery of the
Control Certificate by the Trust under the 1935 Act have been obtained; such
orders are sufficient for the issuance and delivery of the Trust Securities
Guarantee and the Debentures Guarantee by Yorkshire Group, the issuance and sale
of the Debentures by Yorkshire Finance, the issuance and sale of the Trust
Securities by the Trust and the issuance and delivery of the Control Certificate
by the Trust under the 1935 Act; and no other order, consent or other
authorization or approval of any United States federal or New York State
governmental body (other than orders of the Commission under the Securities Act,
the Exchange Act and the TIA, which have been duly obtained, or in connection or
in compliance with the provisions of the securities or "blue sky" laws of any
jurisdiction) is legally required for the issuance and delivery of the Trust
Securities Guarantee and the Debentures Guarantee by Yorkshire Group, the
issuance and sale of the Debentures by Yorkshire Finance, the issuance and sale
of the Trust Securities by the Trust and the issuance and delivery of the
Control Certificate by the Trust in accordance with the terms of the
Underwriting Agreement, the performance by the Trust of its obligations with
respect to the Trust Securities, the performance by Yorkshire Group of its
obligations with respect to the Trust Securities Guarantee and the Debentures
Guarantee, the performance by Yorkshire Finance of its obligations with respect
to the Debentures and the performance by each of the Offerors and the US
Affiliates under the Indenture, the Underwriting Agreement, the Trust Agreement,
the Trust Securities Guarantee Agreement, the Deposit Agreement and the
Agreement as to Expenses and Liabilities, as applicable.
B-2
<PAGE>
2. The Indenture, assuming the due authorization, execution and delivery
thereof by Yorkshire Group, Yorkshire Finance and the Indenture Trustee, and
except as to any provisions thereof that purport to provide an independent
obligation under a currency indemnity clause after a judgment has been rendered
or to waive any immunity with respect to the attachment of property of Yorkshire
Group or Yorkshire Finance prior to the entry of judgment, upon which we do not
express any opinion, constitutes a valid and legally binding instrument of each
of Yorkshire Group and Yorkshire Finance, enforceable against each of them in
accordance with its terms, subject to the qualifications that the enforceability
of their obligations under the Indenture may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and the Indenture conforms as to legal matters in all
material respects to the description thereof in the Prospectus.
3. Assuming due authorization, execution and delivery thereof by
Yorkshire Finance, the Debentures, when authenticated by the Indenture Trustee
in the manner provided in the Indenture and delivered against payment therefor
by the Trust pursuant to the Trust Agreement, will constitute valid and binding
obligations of Yorkshire Finance, enforceable against Yorkshire Finance in
accordance with their terms, subject to the qualifications that the
enforceability of Yorkshire Finance's obligations under the Debentures may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally and by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and are entitled to the benefits provided by
the Indenture; and the Debentures conform as to legal matters in all material
respects to the description thereof in the Prospectus, provided that no opinion
is expressed herein with respect to material relating to DTC or its systems or
operations in the Prospectus under the heading "Description of the Junior
Subordinated Debentures-Form, Book - Entry Procedures and Transfer".
4. Assuming due authorization, execution and delivery thereof by
Yorkshire Group, and except as to any provisions thereof that purport to provide
an independent obligation under a currency indemnity clause after a judgment has
been rendered or to waive any immunity with respect to the attachment of
property of Yorkshire Group prior to the entry of judgment, upon which we do not
express any opinion, the Debentures Guarantee, when the Debentures are
authenticated by the Trustee in the manner provided in the Indenture and
delivered against payment therefor by the Trust pursuant to the Trust Agreement,
will constitute a valid and binding obligation of Yorkshire Group enforceable
against Yorkshire Group in accordance with its terms, subject to the
qualifications that the enforceability of Yorkshire Group's obligations under
the Debentures Guarantee may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally and by general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law);
and the Debentures Guarantee conforms as to legal matters in all material
respects to the description thereof in the Prospectus.
B-3
<PAGE>
5. Assuming due authorization, execution and delivery of the Trust
Securities Guarantee Agreement by Yorkshire Group, and assuming due
authorization, execution and delivery thereof by the Guarantee Trustee, and
except as to any provisions thereof that purport to provide an independent
obligation under a currency indemnity clause after a judgment has been rendered
or to waive any immunity with respect to the attachment of property of Yorkshire
Group prior to the entry of judgment, upon which we do not express any opinion,
the Trust Securities Guarantee constitutes a valid and binding obligation of
Yorkshire Group enforceable against Yorkshire Group in accordance with its
terms, subject to the qualifications that the enforceability of Yorkshire
Group's obligations under the Trust Securities Guarantee may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally and by general principles
of equity (regardless of whether such enforceability is considered in a
proceeding in equity or at law); and the Trust Securities Guarantee and the
Trust Securities Guarantee Agreement conforms as to legal matters in all
material respects to the descriptions thereof in the Prospectus.
6. The Agreement as to Expenses and Liabilities has been duly
authorized, executed and delivered by each of the US Affiliates and constitutes
a valid and binding obligation of each of the US Affiliates, enforceable against
each of the US Affiliates in accordance with its terms, subject to the
qualifications that the enforceability of the US Affiliates' obligations under
the Agreement as to Expenses and Liabilities may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and the Agreement as to Expenses and Liabilities conforms as
to legal matters in all material respects to the description thereof in the
Prospectus.
7. Assuming due authorization, execution and delivery thereof by the
Yorkshire Finance, and assuming due authorization, execution and delivery
thereof by the Book-Entry Depositary, the Deposit Agreement (except as to any
provision thereof that purports to waive immunity with respect to the attachment
of property of Yorkshire Finance prior to the entry of judgment, upon which we
do not express any opinion) constitutes a valid and legally binding instrument
of Yorkshire Finance, enforceable against Yorkshire Finance in accordance with
its terms, subject to the qualifications that the enforceability of Yorkshire
Finance's obligations under the Deposit Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and the Deposit Agreement conforms as to legal matters in all
material respects to the description thereof in the Prospectus.
8. Each of the Indenture, the Trust Securities Guarantee Agreement and
the Trust Agreement has been duly qualified under the TIA.
9. The Trust Agreement has been duly authorized, executed and delivered
by AEP Resources, has been duly executed and delivered by the Administrative
Trustees, and, assuming due authorization, execution and delivery thereof by
Yorkshire
B-4
<PAGE>
Group, and assuming due authorization, execution and delivery thereof by the
Property Trustee and the Delaware Trustee, the Trust Agreement constitutes a
valid and binding obligation of Yorkshire Group and AEP Resources, enforceable
against Yorkshire Group and AEP Resources in accordance with its terms, subject
to the qualifications that the enforceability of the obligations of Yorkshire
Group and AEP Resources under the Trust Agreement may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law); and the Trust Agreement conforms as to legal matters in all
material respects to the description thereof in the Prospectus.
10. The Underwriting Agreement has been duly executed and delivered by
the Depositor on behalf of the Trust.
11. The Trust Securities have been duly authorized by the Trust
Agreement, have been duly executed and delivered by the Administrative Trustees
and, when delivered to and paid for by the Underwriters pursuant to the
Underwriting Agreement, will be duly and validly issued and fully paid and non-
assessable undivided beneficial interests in the assets of the Trust and
entitled to the benefits of the Trust Agreement; the holders of the Trust
Securities will be entitled to the same limitation of personal liability is
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware; under the Delaware Act and the
Trust Agreement the issuance of the Trust Securities is not subject to any
preemptive or other similar rights; and the Trust Securities conform as to legal
matters in all material respects to the description thereof in the Prospectus,
provided that no opinion is expressed herein with respect to material relating
to DTC or its systems or operations in the Prospectus under the heading
"Description of the Trust Securities - Book-Entry Issuance".
12. The statements made in the Prospectus under the heading "Certain
Income Tax Considerations - US Federal Income Tax Considerations", to the extent
that they constitute matters of United States federal law or legal conclusions
under United States federal law, are accurate in all material respects.
13. Neither the Trust, Yorkshire Finance nor Yorkshire Group is, and
after giving effect to the offering and sale of the Trust Securities, will be an
"investment company" or a company "controlled" by an "investment company"
required to register under the Investment Company Act of 1940.
14. The execution, delivery and performance by the Offerors of the
Underwriting Agreement, the execution, delivery and performance by Yorkshire
Group and Yorkshire Finance of the Indenture, the execution, delivery and
performance by Yorkshire Group, the Administrative Trustees and AEP Resources of
the Trust Agreement, the execution, delivery and performance by Yorkshire Group
of the Trust Securities Guarantee Agreement, the execution, delivery and
performance by Yorkshire Finance of the Deposit Agreement and the execution,
delivery and performance by the US Affiliates of the Agreement as to Expenses
and Liabilities and the consummation by
B-5
<PAGE>
the above-mentioned parties of the transactions contemplated therein and
compliance by the above-mentioned parties with their respective obligations
thereunder will not violate any provision of any federal law of the United
States of America or any law of the State of New York applicable to the above-
mentioned parties or YEG or, to the best of our knowledge, any provisions of any
order, writ, judgment or decree of any governmental instrumentality of the
United States of America or the State of New York applicable to the above-
mentioned parties or YEG (except that various consents of, and filings with
governmental authorities of, the State of New York may be required to be
obtained or made, as the case may be, in connection or compliance with the
provisions of the securities or "blue sky" laws of the State of New York.
We have not independently verified the accuracy, completeness or fairness
of the statements made or included in the Registration Statement or the
Prospectus and take no responsibility therefor, except as and to the extent set
forth in paragraphs 2, 3, 4, 5, 7, 8, 9, 11 and 12 above. In the course of the
preparation by the Offerors of the Registration Statement and the Prospectus, we
participated in conferences with certain officers and employees of the Offerors,
with representatives of Deloitte & Touche, with Allen & Overy, English counsel
to the Offerors, Maples & Calder, Cayman Islands counsel to Yorkshire Finance,
Richards Layton & Finger, P.A., Delaware counsel to the Offerors and with your
counsel. Based upon our examination of the Registration Statement and the
Prospectus, our investigations made in connection with the preparation of the
Registration Statement and the Prospectus and our participation in the
conferences referred to above, (i) we are of the opinion that the Registration
Statement, as of the Effective Date, and the Prospectus, at the time it was
filed pursuant to Rule 424(b) under the Securities Act, complied as to form in
all material respects with the requirements of the Securities Act and the TIA
and the applicable rules thereunder, except that we express no opinion as to the
financial statements or other financial or statistical data contained in the
Registration Statement or the Prospectus, and (ii) nothing came to our attention
which gives us reason to believe that the Registration Statement, as of the
Effective Date, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading, or that the Prospectus, at the time it was
filed pursuant to Rule 424(b) under the Securities Act, or on the date hereof
contained or contains any untrue statement of a material fact or omitted or
omits to state a material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading, except
that in each case we express no opinion or belief with respect to (x) the
financial statements or other financial or statistical data contained in the
Registration Statement and the Prospectus or (y) material in the Registration
Statement and the Prospectus under the headings "Description of the Trust
Securities - Book-Entry Issuance" or "Description of the Junior Subordinated
Debentures - Form, Book-Entry Procedures and Transfer" with respect to DTC, its
systems or operations or "Certain Income Tax Considerations - UK Income Tax
Considerations" or "Certain Income Tax Considerations Cayman Islands Tax
Considerations".
We are members of the State Bar of New York and we do not express any
opinion herein concerning any law other than the law of the State of New York
and the federal law of the United States and, to the extent set forth herein,
the law of the State of
B-6
<PAGE>
Delaware and, with respect to the validity of the Debentures, the law of the
Cayman Islands. In rendering the opinion expressed in paragraph 3 above with
respect to the validity of the Debentures, we have relied upon the opinion
addressed to you and dated the date hereof of Maples and Calder as to matters of
Cayman Island law. In rendering opinions of Delaware law herein, we have relied
upon the opinion addressed to you and dated the date hereof of Richards Layton &
Finger, P.A. as to matters of Delaware law.
This opinion is rendered solely to you and the several Underwriters in
connection with the above matter. This opinion may not be relied upon by you
and the several Underwriters for any other purpose or relied upon by or
furnished to any other person without our prior written consent.
Very truly yours,
DEWEY BALLANTINE LLP
B-7
<PAGE>
EXHIBIT C
ALLEN & OVERY OPINION
C-1
<PAGE>
EXHIBIT D
MAPLES & CALDER OPINION
D-1
<PAGE>
EXHIBIT E
WINTHROP, STIMSON, PUTNAM & ROBERTS OPINION
E-1
<PAGE>
EXHIBIT F
[Letterhead of DELAWARE TRUSTEE'S COUNSEL]
_______________ __, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
[Co-Managers]
As Representatives of the several Underwriters
named in Schedule I to the Underwriting
Agreement referred to below
c/o Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1209
Re: Yorkshire Capital Trust I
-------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel to The Bank of New York
(Delaware), a Delaware banking corporation ("BONY (DE)"), in connection with
Yorkshire Capital Trust I, a business trust created under the laws of the State
of Delaware (the "Trust"), pursuant to the Trust Agreement, dated as of
__________, 1998, as amended and restated by the Amended and Restated Trust
Agreement, dated as of _____________, 1998 among BONY (DE), Yorkshire Power
Group Limited ("Yorkshire Group"), AEP Resources, Inc., the other trustees named
therein and the holders from time to time of the undivided beneficial interests
in the assets of the Trust (the "Trust Agreement"). This opinion is being
delivered to you pursuant to Section 3(c)(vi) of the Underwriting Agreement,
dated _________ __, 1998 (the "Underwriting Agreement"), among you, as the
representatives of the several Underwriters named in Schedule I thereto,
Yorkshire Group, Yorkshire Power Finance Limited and the Trust, pursuant to
which the 11,000,000 ___% Trust Securities of the Trust will be sold. All
capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Underwriting Agreement.
We examined an original or a copy of the Trust Agreement. We have also
examined originals or copies of such other documents and such corporate records,
certificates and other statements of governmental officials and corporate
officers and other representatives of BONY(DE) as we have deemed necessary or
appropriate for the purposes of this opinion. Moreover, as to certain facts
material to the opinions expressed herein, we have relied upon the
representations and warranties contained in the documents referred to in this
paragraph.
F-1
<PAGE>
Based upon the foregoing and upon an examination of such questions of law
as we have deemed necessary or appropriate, and subject to the assumptions,
exceptions and qualifications set forth below, we advise you that, in our
opinion:
1. BONY(DE) is duly incorporated and is validly existing in good standing
as a banking corporation with trust powers under the laws of the State of
Delaware and has the corporate power and authority to execute, deliver and
perform its obligations under the Trust Agreement.
2. The Trust Agreement has been duly authorized, executed and delivered by
BONY(DE) and constitutes a legal, valid and binding obligation of BONY(DE),
enforceable against BONY(DE), in accordance with its terms.
3. The execution and delivery of, and performance of the terms of, the
Trust Agreement by BONY(DE), do not conflict with or constitute a breach of, or
default under, the charter or by-laws of BONY(DE).
4. No consent, approval or authorization of, or registration, declaration
or filing with, any court or governmental agency or body having jurisdiction in
the premises is required under Delaware law for the execution, delivery or
performance by BONY(DE) of the Trust Agreement.
The foregoing opinions are subject to the following exceptions,
qualifications and assumptions:
(A) We are admitted to practice in the State of Delaware and we do not hold
ourselves out as being experts on the law of any other jurisdiction. The
foregoing opinions are limited to the laws of the State of Delaware and the
federal laws of the United States of America governing the banking and trust
powers of BONY(DE) (except that we express no opinion with respect to (i) state
securities or blue sky laws and (ii) federal securities laws, including, without
limitation, the Securities Act of 1933, the Securities Exchange Act of 1934,
Trust Indenture Act of 1939 and the Investment Company Act of 1940) and we have
not considered and express no opinion on the laws, rules and regulations of any
other jurisdiction.
(B) The foregoing opinions regarding enforceability are subject to (i)
applicable bankruptcy, insolvency, moratorium, receivership, reorganization,
fraudulent transfer or conveyance and similar laws relating to and affecting the
rights and remedies of creditors generally, (ii) principles of equity
(regardless of whether considered and applied in a proceeding in equity or at
law), and (iii) the effect of federal or state securities laws on the
enforceability of provisions relating to indemnification or contribution.
(C) We have assumed the due authorization, execution and delivery by each
of the parties thereto, other than BONY(DE), of the Trust Agreement, and that
each of such parties has the full power, authority and legal right to execute,
deliver and perform such document.
F-2
<PAGE>
(D) We have assumed that all signatures (other than those of the Delaware
Trustee) on documents examined by us are genuine, that all documents submitted
to us as originals are authentic, and that all documents submitted to us as
copies or specimens conform with the originals, which facts we have not
independently verified.
This opinion may be relied upon by you and the other several Underwriters
in connection with the matters set forth herein, and without our prior written
consent, may not be furnished or quoted to, or relied upon by, any other person
or entity for any purpose.
Very truly yours,
F-3
<PAGE>
EXHIBIT G
[Letterhead of EMMET, MARVIN & MARTIN, LLP]
_______________ __, 1998
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
[Co-Managers]
As Representatives
of the several Underwriters
c/o Merrill Lynch & Co.
World Financial Center
North Tower
New York, New York 10281-1209
YORKSHIRE CAPITAL TRUST I
___% Trust Securities
Ladies and Gentlemen:
We have acted as counsel to the Bank of New York (the "Bank") in connection
with (a) the Subordinated Debenture Indenture, dated as of __________ __, 1998
(the "Original Indenture"), among Yorkshire Power Group Limited ("Yorkshire
Group"), Yorkshire Power Finance Limited ("Yorkshire Finance") and the Bank, as
Trustee, (b) the First Supplemental Indenture dated as of __________ __, 1998
(together with the Original Indenture, herein called the "Indenture"), among
Yorkshire Group, Yorkshire Finance and the Bank, as Trustee, (c) the Trust
Securities Guarantee Agreement dated as of __________, 1998 (the "Guarantee
Agreement") between Yorkshire Group and the Bank, as guarantee trustee, (d) the
Amended and Restated Trust Agreement, dated as of __________ __, 1998 (the
"Trust Agreement") among Yorkshire Group, AEP Resources, Inc., the Bank, as
Property Trustee, The Bank of New York (Delaware), as Delaware Trustee, and the
Administrative Trustees named therein and (e) the Deposit Agreement, dated as of
____________, 1998 (the "Deposit Agreement") between Yorkshire Finance and the
Bank, as Book-Entry Depositary.
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, records and other
instruments as we have deemed necessary or appropriate for the purpose of this
opinion, including copies of the Indenture, the Trust Agreement, the Guarantee
Agreement, the Deposit Agreement and certain resolutions adopted by the Board of
Directors of the Bank.
Based upon the foregoing, we are of the opinion that:
i) the Bank has been duly incorporated and is validly existing as a
banking corporation in good standing under the laws of the State of New York;
G-1
<PAGE>
ii) the Bank has the corporate trust power and authority to execute,
deliver and perform its duties under the Indenture, the Trust Agreement, the
Deposit Agreement and the Guarantee Agreement, has duly executed and delivered
the Indenture, the Trust Agreement, the Deposit Agreement and the Guarantee
Agreement, and, insofar as the laws governing the trust powers of the Bank are
concerned and assuming due authorization, execution and delivery thereof by the
other parties thereto, each of the Indenture, the Trust Agreement, the Deposit
Agreement and the Guarantee Agreement constitutes a legal, valid and binding
agreement of the Bank, enforceable against the Bank in accordance with its terms
(subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights generally
from time to time in effect and subject, as to enforceability, to general
principles of equity, regardless of whether such enforceability is considered in
a proceeding in equity or at law).
iii) the execution, delivery and performance by the Bank of the Indenture,
the Trust Agreement, the Deposit Agreement and the Guarantee Agreement do not
conflict with or constitute a breach of the charter or bylaws of the Bank.
iv) no approval, authorization or other action by, or filing with, any
governmental authority of the United States of America or the State of New York
having jurisdiction over the trust powers of the Bank is required in connection
with the execution and delivery by the Bank of the Indenture, the Trust
Agreement or the Guarantee Agreement or the performance by the Bank of its
duties thereunder, except such as have been obtained, taken or made.
We are admitted to practice in the State of New York, and we express no
opinion as to matters governed by any laws other than the laws of the State of
New York and the Federal law of the United States of America. We are furnishing
this opinion to you solely for your benefit and the benefit of the other several
Underwriters. This opinion is not to be used, circulated, quoted or otherwise
referred to for any other purpose.
Very truly yours,
EMMET, MARVIN & MARTIN LLP
G-2
<PAGE>
EXHIBIT 3.1
THE COMPANIES ACT 1985
A PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM
AND
ARTICLES OF ASSOCIATION
OF
YORKSHIRE POWER GROUP
LIMITED
(incorporating all amendments to 11th April, 1997
<PAGE>
6
- --------------------------------------------------------------------------------
ALLEN & OVERY
London
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
Company number
3227432
THE COMPANIES ACT 1985
A PRIVATE COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
YORKSHIRE POWER GROUP
LIMITED(1)
(Incorporating all amendments to 11th April, 1997)
1. The Company's name is "Alnery No.1607 Limited".
2. The Company's registered office is to be situated in England and Wales.
3. The Company's objects are:
(1) to acquire and hold any kind of interest in, or to provide capital
for, any person or undertaking of any kind, to carry on business as a
holding and investment company and to co-ordinate and manage the
activities of, and to provide finance, services and facilities to, any
person or undertaking controlled directly or indirectly by the Company
or in which the Company is interested, whether as a shareholder or
otherwise and whether directly or indirectly;(2)
(2) to carry on business as a general commercial company;
(3) to carry on any trade or business whatsoever;
(4) to do all such things as are, in the opinion of the directors,
incidental or conducive to the carrying on of any trade or business by
it;
(5) to do all such things as the directors consider to be desirable or for
the benefit of the Company;
(6) to guarantee in any manner, or to enter into any indemnity or other
arrangement in relation to, the discharge, observance or performance
of any liabilities of any person, including, but without limitation,
any body corporate which is a holding company, a subsidiary or a
fellow subsidiary of the Company and to secure any such guarantee,
- ---------------
1 The Company was incorporated under the name "Alnery No. 1607 Limited" and
adopted its present name on 21st February, 1997.
2 This paragraph was inserted by special resolution passed on 13th February,
1997.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
indemnity or arrangement or the discharge, observance and performance
of any liabilities of any person by any mortgage, charge, pledge, lien
or other security of any kind over the whole or any part of the
undertaking, property, assets and revenues of the Company, including
its uncalled capital;(3)
(6A) to borrow and raise money and to secure or discharge any debt or
obligation of or binding on the Company in such manner as may be
thought fit and in particular by any mortgage, charge, pledge, lien or
security of any kind upon all or part of the undertaking, property,
assets and revenues (present and future) and the uncalled capital of
the Company, or by the creation and issue of debentures, debenture
stock or other securities of any description; and(4)
(7) to give any financial assistance that may lawfully be given in
connection with the acquisition of shares in the Company or any other
company which is its holding company;
(8) to sell, transfer or otherwise dispose of all or any part of the
undertaking, assets and liabilities of the Company;
(9) to provide or arrange for any pension, lump sum payment, gratuity,
life, health, accident and other insurance and other benefit
(pecuniary or otherwise) of any kind to or for the benefit of any
individual who is or has been a director of, or employed by, or who
provides or has provided services to or for, the Company or any body
corporate which is or has been a subsidiary, holding company or fellow
subsidiary of the Company or otherwise connected with the Company or
any predecessor in business of the Company or of any such subsidiary,
holding company or fellow subsidiary or connected company and to or
for the benefit of any present or former spouse, child or other
relative or dependant of such individual or any other person who has
or formerly had with any such individual any such connection as the
directors may specify; and for those purposes to establish or
participate in any fund or scheme, to effect or contribute to any form
of insurance and to enter into any other arrangement of any kind which
the directors may approve;
(10) to support and subscribe to any institution or association which may
be for the benefit of the Company or its directors or employees or
connected with any town or place where the Company carries on
business, to support and subscribe to any charitable or public object
whatsoever and to make donations to bodies, associations or causes
with political objects;
(11) to act as trustee, personal representative, director or agent of any
kind and for any purpose;
(12) to exercise any power of the Company for any consideration of any kind
or for no consideration;
and it is declared that:
- ---------------
3 This paragraph was amended by special resolution passed on 23rd February,
1997.
4 This paragraph was inserted by special resolution passed on 23rd February,
1997.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(a) this clause shall be interpreted in the widest and most general
manner and without regard to the eiusdem generis rule or any
other restrictive principle of interpretation;
(b) each of the above subclauses shall, unless it expressly provides
to the contrary, be deemed to set out a separate, distinct and
independent object of the Company and not a power ancillary or
incidental to the objects set out in any other subclause;
(c) each subclause is without prejudice to the generality of the
objects and powers conferred by any other subclause and no
subclause shall be in any way limited or restricted by reference
to or inference from any other subclause;
(d) in this clause:
(i) "assets" includes property, rights and interests of every
description, whether present or future, actual or contingent
and wherever situate;
(ii) "dispose of", in relation to an asset, includes surrendering
or extinguishing it, and also creating or granting it or any
interest or right out of or in respect of it;
(iii) "liabilities" includes debts and obligations of every
description, whether present or future, actual or
contingent; and
(iv) "person" includes any partnership or other body of persons,
whether corporate or unincorporate, and any country,
territory, public authority and international organisation.
4. The liability of each member is limited.
5. The Company's share capital is(pound)100 divided into 100 shares of(pound)1
each.(5)
- ---------------
5 The Company's authorised share capital was increased from (pound)100 to
(pound)436,000,100 by the creation of 436,000,000 ordinary shares of
(pound)1 each by an ordinary resolution passed on 11th April, 1997.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
I, the subscriber to this memorandum of association, wish to form a company
pursuant to this memorandum; and I agree to take the number of shares shown
opposite my name.
<TABLE>
<CAPTION>
Name and address of subscriber Number of shares
taken by subscriber
<S> <C>
Alnery Incorporations No.1 Limited 1
9 Cheapside
London EC2V 6AD
D.W. Stewart
for and on behalf of
Alnery Incorporations
No.1 Limited
----
Total shares taken 1
----
</TABLE>
Dated 8th July, 1996
Witness to the above signature:
E.G. Rouse
9 Cheapside
London EC2V 6AD
- --------------------------------------------------------------------------------
<PAGE>
THE COMPANIES ACT 1985
A PRIVATE COMPANY LIMITED BY SHARES
NEW
ARTICLES OF ASSOCIATION
OF
YORKSHIRE POWER GROUP LIMITED
(ADOPTED BY SPECIAL RESOLUTION PASSED ON 23RD february, 1997
AND AMENDED BY SPECIAL RESOLUTION PASSED ON 11TH APRIL, 1997)
NO. 3227432
ALLEN & OVERY
LONDON
<PAGE>
- --------------------------------------------------------------------------------
Company number
3227432
THE COMPANIES ACT 1985
A PRIVATE COMPANY LIMITED BY SHARES
NEW
ARTICLES OF ASSOCIATION
OF
YORKSHIRE POWER GROUP LIMITED
(adopted by special resolution
passed on 23rd February, 1997 and amended by
special resolution passed on 11th April, 1997)
PRELIMINARY
1. Except as otherwise provided in these articles, the regulations contained
in Table A shall apply to the Company. For the purposes of these articles,
Table A means Table A in the Schedule to the Companies (Tables A to F)
Regulations 1985, as amended by the Companies (Tables A to F) (Amendment)
Regulations 1985.
2. (1) In these articles, unless the contrary intention appears:
(a) the "Statutes" means the Act and every other statute, statutory
instrument, regulation or order for the time being in force
concerning companies registered under the Act; and
(b) words importing the singular number include the plural number and
vice versa, words importing one gender include all genders and
words importing persons include bodies corporate and
unincorporated associations.
(2) Headings to these articles are inserted for convenience only and shall
not affect construction.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SHARE CAPITAL
3.(1)Section 89(1) of the Act (which regulates the power to allot equity
securities, as defined in section 94 of the Act) is excluded.
4. (1) The directors may, in their absolute discretion and without assigning
any reason, refuse to register any proposed transfer of a share.
(2) The directors may also refuse to register a transfer of a share on
which the Company has a lien.
(3) A person executing an instrument of transfer of a share is deemed to
remain the holder of the share until the name of the transferee is
entered in the register of members of the Company in respect of it.
(4) The first sentence of regulation 24 of Table A shall not apply.
GENERAL MEETINGS
5. A poll may be demanded at any general meeting by the chairman or by any
member present in person or by proxy and entitled to vote. Regulation 46 of
Table A shall be amended accordingly.
6. The chairman at any general meeting shall not be entitled to a second or
casting vote. Regulation 50 of Table A shall not apply.
7. (1) A general meeting or a meeting of any class of members of the Company
may consist of a conference between members some or all of whom are in
different places provided that each member who participates is able:
(a) to hear each of the other participating members addressing the
meeting; and
(b) if he so wishes, to address all of the other participating
members simultaneously,
whether directly, by conference telephone or by any other form of
communications equipment (whether in use when these articles are
adopted or not) or by a combination of those methods.
(2) A quorum is deemed to be present if those conditions are satisfied in
respect of at least the number of members required to form a quorum.
(3) A meeting held in this way is deemed to take place at the place where
the largest group of participating members is assembled or, if no such
group is readily identifiable, at the place from where the chairman of
the meeting participates.
(4) A resolution put to the vote of a meeting shall be decided by each
member indicating to the chairman (in such manner as the chairman may
direct) whether the member votes in favour of or against the
resolution or abstains. Regulation 46 of Table A shall be amended
accordingly.
- ---------------
1 Paragraphs (1) and (2) of this clause were deleted by special resolution
passed on 11th April, 1997.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(5) References in this article to members shall include their duly
appointed proxies and, in the case of corporate members, their duly
authorised representatives.
SHAREHOLDERS' RESOLUTIONS
8. A resolution in writing signed or approved by letter, facsimile, telegram
or telex by or on behalf of all the members of the Company who would be
entitled to vote on it if it had been proposed at a general meeting or at a
meeting of any class of members of the Company shall be as valid and
effectual as if it had been passed at a general meeting or at such class
meeting (as the case may be) duly convened and held. The resolution may be
contained in one document or in several documents in like form each stating
the terms of the resolution accurately and signed by or on behalf of one or
more of the members. This article is in addition to, and not limited by,
the provisions in sections 381A, 381B and 381C of the Act. Regulation 53 of
Table A shall not apply.
VOTES OF MEMBERS
9. (1) A proxy appointed by a member of the Company under section 372 of the
Act may vote on a show of hands as well as on a poll, but no person
present shall be entitled to more than one vote on a show of hands.
Regulation 54 of Table A shall be amended accordingly.
(2) The instrument appointing a proxy and any authority under which it is
executed (or such copy of the instrument or the authority or both as
the directors may approve) may be deposited at the place where the
meeting or adjourned meeting is to be held at any time before the time
for holding the meeting or adjourned meeting at which the person named
in the instrument proposes to vote. This provision is in addition and
without prejudice to the provisions of paragraphs (a), (b) and (c) of
regulation 62 of Table A and the last provision of regulation 62 shall
be amended accordingly.
DIRECTORS
10. (1) Persons together holding at least 50 per cent of the ordinary shares
in the Company in issue may appoint any person as a director of the
Company and the same persons may remove any such director and appoint
any person as a replacement for any such director. Any appointment or
removal shall be made in writing signed by the same persons together
holding at least 50 per cent of the ordinary shares in issue and, in
the case of a body corporate holding any of these shares, the
signature of any officer or other duly appointed representative shall
suffice. Any appointment or removal shall take effect when it is
lodged at the office or produced at any meeting of the directors.
(2) In addition to the circumstances set out in Regulation 81 of Table A
the office of a director shall be vacated if he is removed from that
office in accordance with this article.(2)
(3) The directors shall not be subject to retirement by rotation and
regulations 73 to 80 (inclusive) and the last sentence of regulation
84 of Table A shall not apply.(3)
- ---------------
2 This paragraph was inserted by special resolution passed on 11th April,
1997.
3 This paragraph was amended by special resolution passed on 11th April,
1997.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
(4) No director shall vacate his office or be ineligible for
re-appointment as a director, nor shall any person be ineligible for
appointment as a director, by reason only of his having attained a
particular age.
(5) No special notice is required of any resolution appointing or
approving the appointment of such a director nor is any notice
required to state the age of the person to whom the resolution
relates.
ALTERNATE DIRECTORS
11. (1) In addition to the persons mentioned in regulation 65 of Table A, any
director may appoint a director of any holding company of the Company
or of any other subsidiary of that holding company or any person
approved by a majority of the other directors to act as an alternate
director.(4)
(2) An alternate director shall be entitled to receive notice of all
meetings of directors, to attend and to vote at any such meeting at
which the director appointing him is not personally present and at
that meeting to exercise and discharge all the functions, powers and
duties of his appointor as a director and for the purposes of the
proceedings at that meeting the provisions of these articles shall
apply as if he was a director. Regulation 66 of Table A shall not
apply.
(3) Every person acting as an alternate director shall have one vote for
each director for whom he acts as alternate, in addition to his own
vote if he is also a director, but he shall count as only one for the
purpose of determining whether a quorum is present. The last sentence
of each of regulations 88 and 89 of Table A shall not apply.
(4) Any person appointed as an alternate director shall vacate his office
as an alternate director if the director by whom he has been appointed
ceases to be a director or removes him or on the happening of any
event which, if he is or were a director, causes or would cause him to
vacate that office. Regulation 67 of Table A shall not apply.
(5) An alternate director shall alone be responsible to the Company for
his acts and defaults and shall not be deemed to be the agent of the
director appointing him. Regulation 69 of Table A shall not apply.
POWERS OF DIRECTORS
12. (1) The powers of the directors mentioned in regulation 87 of Table A
shall be exercisable as if the word "executive" (which appears before
the word "office") were deleted.
(2) Without prejudice to any other of their powers, the directors may
exercise any of the powers conferred by the Statutes to make provision
for the benefit of persons employed or formerly employed by the
Company or any of its subsidiaries in
- ---------------
4 This paragraph was amended by special resolution passed on 11th April,
1997.
- --------------------------------------------------------------------------------
<PAGE>
connection with the cessation or the transfer to any person of the
whole or part of the undertaking of the Company or any of its
subsidiaries.
PROCEEDINGS OF DIRECTORS
13. Provided that he has disclosed to the directors the nature and extent of
any material interest of his, a director may vote as a director on a
resolution concerning any matter in which he has, directly or indirectly,
an interest or duty and, if he votes, his vote shall be counted and he
shall be counted in the quorum when that resolution or matter is under
consideration. Regulations 94 to 96 (inclusive) of Table A shall not apply.
14. Notices of meetings of the directors shall be given to all directors and to
any alternate directors appointed by them. Regulation 88 of Table A shall
be amended accordingly.
15. (1) The quorum for a meeting of the directors shall be two directors
present throughout the meeting. The first sentence of regulation 89 of
Table A shall not apply.
(2) Unanimous approval of the directors present and voting at any meeting
of the board of directors or acting by written resolution or consent
shall be required for the approval, authorisation or taking of any
action.
(3) In the case of an equality of votes at any meeting of the directors,
the chairman of the meeting shall not have a second or casting vote.
Regulation 88 of Table A shall be amended accordingly.
16. Regulation 93 of Table A (written resolutions of directors) shall apply as
if the word "signed" included "approved by letter, facsimile, telegram or
telex".
17. (1) A meeting of the directors may consist of a conference between
directors some or all of whom are in different places provided that
each director who participates is able:
(a) to hear each of the other participating directors addressing the
meeting; and
(b) if he so wishes, to address all of the other participating
directors simultaneously,
whether directly, by conference telephone or by any other form of
communications equipment (whether in use when these articles are
adopted or not) or by a combination of those methods.
(2) A quorum is deemed to be present if those conditions are satisfied in
respect of at least the number of directors required to form a quorum,
subject to the provisions of article 13.
(3) A meeting held in this way is deemed to take place at the place where
the largest group of participating directors is assembled or, if no
such group is readily identifiable, at the place from where the
chairman of the meeting participates.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
SEAL
18.(5)(1) The Company may exercise the powers conferred by the Statutes with
regard to having official seals and those powers shall be vested in
the directors.
(2) The directors shall provide for the safe custody of every seal which
the Company may have.
(3) A seal shall be used only by the authority of the directors or a duly
authorised committee but that authority may consist of an instruction
or approval given by letter, facsimile, telegram, telex or telephone
by a majority of the directors or of the members of a duly authorised
committee.
(4) The directors may determine who shall sign any instrument to which a
seal is applied, either generally or in relation to a particular
instrument or type of instrument, and may also determine, either
generally or in any particular case, that such signatures shall be
dispensed with or affixed by some mechanical means.
(5) Unless otherwise decided by the directors:
(a) certificates for shares, debentures or other securities of the
Company to which a seal is applied need not be signed; and
(b) every other instrument to which a seal is applied shall be signed
by at least one director and the secretary or by at least two
directors.
(6) Regulation 6 of Table A shall be amended accordingly. Regulation 101
of Table A shall not apply.
NOTICES
19. (1) The Company may give any notice to a member either personally or by
sending it by prepaid airmail or first class post or facsimile
transmission to the member at his registered address or by leaving it
at that address. In the case of joint holders of a share, all notices
shall be given to the joint holder whose name stands first in the
register of members in respect of the joint holding and notice so
given shall be sufficient notice to all the joint holders.
(2) Regulation 112 of Table A shall not apply and regulation 116 shall
apply as if the words "within the United Kingdom" did not appear.
20. (1) Proof that:
(a) an envelope containing a notice was properly addressed, prepaid
and posted (by airmail or first class post, where available); or
(b) facsimile transmission setting out the terms of a notice was
properly addressed and despatched
- ---------------
5 The original clause 18 was deleted by special resolution passed on 11th
April, 1997.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
shall be conclusive evidence that the notice was given. A notice shall
be deemed to be given at the expiry of 24 hours after the envelope
containing it was posted or, in the case of facsimile transmission,
when despatched.
(2) Regulation 115 of Table A shall not apply.
INDEMNITY
21. (1) Subject to the provisions of and to the extent permitted by the
Statutes, every director, other officer or auditor of the Company
shall be indemnified out of the assets of the Company against any
liability incurred by him in the actual or purported execution or
discharge of his duties or the exercise or purported exercise of his
powers or otherwise in relation to or in connection with his duties,
powers or office, but:
(a) this indemnity shall not apply to any liability to the extent
that it is recovered from any other person; and
(b) the indemnity is subject to such officer or auditor taking all
reasonable steps to effect such recovery, so that the indemnity
shall not apply to the extent that an alternative right of
recovery is capable of being enforced.
(2) Regulation 118 of Table A shall not apply.
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 3.2
[LOGO]
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
Company No. 3227432
The Registrar of Companies for England and Wales hereby certifies that
ALNERY NO. 167 LIMITED
is this day incorporated under the Companies Act 1985 as a private company and
that the company is limited.
Given at Companies House, Cardiff, the 19th July 1996
/s/ G Wookey
G. Wookey
For the Registrar of Companies
[LOGO]
<PAGE>
[LOGO]
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 3227432
The Registrar of Companies for England and Wales hereby certifies that
ALNERY NO. 1607 LIMITED
having by special resolution changed its name, is now incorporated under
the name of
Yorkshire Power Group Limited
Given at Companies House, London, the 21st February 1997
/s/ S. Bashar
Miss S. Bashar
For The Registrar Of Companies
[LOGO]
COMPANIES HOUSE
<PAGE>
CERTIFICATE OF INCORPORATION
OF A PRIVATE LIMITED COMPANY
Company No. 3227432
The Registrar of Companies for England and Wales hereby certifies that
ALNERY NO. 167 LIMITED
is this day incorporated under the Companies Act 1985 as a private company and
that the company is limited.
Given at Companies House, Cardiff, the 19th July 1996
/s/ G Wookey
G. Wookey
For the Registrar of Companies
<PAGE>
CERTIFICATE OF INCORPORATION
ON CHANGE OF NAME
Company No. 3227432
The Registrar of Companies for England and Wales hereby certifies that
ALNERY NO. 1607 LIMITED
having by special resolution changed its name, is now incorporated under
the name of
Yorkshire Power Group Limited
Given at Companies House, London, the 21st February 1997
/s/ S. Bashar
Miss S. Bashar
For The Registrar Of Companies
<PAGE>
EXHIBIT 3.3
CONFORMED COPY
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
MEMORANDUM OF ASSOCIATION
OF
YORKSHIRE POWER FINANCE LIMITED
l. The name of the Company is Yorkshire Power Finance Limited.
2. The Registered Office of the Company shall be at the offices of Maples and
Calder, Attorneys-at-Law, Ugland House, P.O. Box 309, George Town, Grand Cayman,
Cayman Islands, British West Indies or at such other place as the Directors may
from time to time decide.
3. The objects for which the Company is established are unrestricted and shall
include, but without limitation, the following:
( i) (a) To carry on the business of an investment company and to act as
promoters and entrepreneurs and to carry on business as financiers,
capitalists, concessionaires, merchants, brokers, traders, dealers, agents,
importers and exporters and to undertake and carry on and execute all kinds
of investment, financial, commercial, mercantile, trading and other
operations.
(b) To carry on whether as principals, agents or otherwise howsoever
the business of realtors, developers, consultants, estate agents or
managers, builders, contractors, engineers, manufacturers, dealers in or
vendors of all types of property including services.
( ii) To exercise and enforce all rights and powers conferred by or
incidental to the ownership of any shares, stock, obligations or other
securities including without prejudice to the generality of the foregoing
all such powers of veto or control as may be conferred by virtue of the
holding by the Company of some special proportion of the issued or nominal
amount thereof, to provide managerial and other executive, supervisory and
consultant services for or in relation to any company in which the
<PAGE>
2
Company is interested upon such terms as may be thought fit.
(iii) To purchase or otherwise acquire, to sell, exchange, surrender,
lease, mortgage, charge, convert, turn to account, dispose of and deal with
real and personal property and rights of all kinds and, in particular,
mortgages, debentures, produce, concessions, options, contracts, patents,
annuities, licences, stocks, shares, bonds, policies, book debts, business
concerns, undertakings, claims, privileges and choses in action of all
kinds.
(iv) To subscribe for, conditionally or unconditionally, to underwrite,
issue on commission or otherwise, take, hold, deal in and convert stocks,
shares and securities of all kinds and to enter into partnership or into
any arrangement for sharing profits, reciprocal concessions or cooperation
with any person or company and to promote and aid in promoting, to
constitute, form or organise any company, syndicate or partnership of any
kind, for the purpose of acquiring and undertaking any property and
liabilities of the Company or of advancing, directly or indirectly, the
objects of the Company or for any other purpose which the Company may think
expedient.
(v) To stand surety for or to guarantee, support or secure the performance
of all or any of the obligations of any person, firm or company whether or
not related or affiliated to the Company in any manner and whether by
personal covenant or by mortgage, charge or lien upon the whole or any part
of the undertaking, property and assets of the Company, both present and
future, including its uncalled capital or by any such method and whether or
not the Company shall receive valuable consideration therefor.
(vi) To engage in or carry on any other lawful trade, business or
enterprise which may at any time appear to the Directors of the Company
capable of being conveniently carried on in conjunction with any of the
aforementioned businesses or activities or which may appear to the
Directors of the Company likely to be profitable to the Company.
<PAGE>
3
In the interpretation of this Memorandum of Association in general and of
this Clause 3 in particular no object, business or power specified or
mentioned shall be limited or restricted by reference to or inference from
any other object, business or power, or the name of the Company, or by the
juxtaposition of two or more objects, businesses or powers and that, in the
event of any ambiguity in this clause or elsewhere in this Memorandum of
Association, the same shall be resolved by such interpretation and
construction as will widen and enlarge and not restrict the objects,
businesses and powers of and exercisable by the Company.
4. Except as prohibited or limited by the Companies Law (1995 Revision), the
Company shall have full power and authority to carry out any object and shall
have and be capable of from time to time and at all times exercising any and all
of the powers at any time or from time to time exercisable by a natural person
or body corporate in doing in any part of the world whether as principal, agent,
contractor or otherwise whatever may be considered by it necessary for the
attainment of its objects and whatever else may be considered by it as
incidental or conducive thereto or consequential thereon, including, but without
in any way restricting the generality of the foregoing, the power to make any
alterations or amendments to this Memorandum of Association and the Articles of
Association of the Company considered necessary or convenient in the manner set
out in the Articles of Association of the Company, and the power to do any of
the following acts or things, viz: to pay all expenses of and incidental to the
promotion, formation and incorporation of the Company; to register the Company
to do business in any other jurisdiction; to sell, lease or dispose of any
property of the Company; to draw, make, accept, endorse, discount, execute and
issue promissory notes, debentures, bills of exchange, bills of lading, warrants
and other negotiable or transferable instruments; to lend money or other assets
and to act as guarantors; to borrow or raise money on the security of the
<PAGE>
4
undertaking or on all or any of the assets of the Company including uncalled
capital or without security; to invest monies of the Company in such manner as
the Directors determine; to promote other companies; to sell the undertaking of
the Company for cash or any other consideration; to distribute assets in specie
to Members of the Company; to make charitable or benevolent donations; to pay
pensions or gratuities or provide other benefits in cash or kind to Directors,
officers, employees, past or present and their families; to purchase Directors
and officers liability insurance and to carry on any trade or business and
generally to do all acts and things which, in the opinion of the Company or the
Directors, may be conveniently or profitably or usefully acquired and dealt
with, carried on, executed or done by the Company in connection with the
business aforesaid PROVIDED THAT the Company shall only carry on the businesses
for which a licence is required under the laws of the Cayman Islands when so
licensed under the terms of such laws.
5. The liability of each Member is limited to the amount from time to time
unpaid on such Member's shares.
6. The share capital of the Company is US$50,000 divided into 50,000 shares of a
nominal or par value of US$1.00 each with power for the Company insofar as is
permitted by law, to redeem or purchase any of its shares and to increase or
reduce the said capital subject to the provisions of the Companies Law (1995
Revision) and the Articles of Association and to issue any part of its capital,
whether original, redeemed or increased with or without any preference, priority
or special privilege or subject to any postponement of rights or to any
conditions or restrictions and so that unless the conditions of issue shall
otherwise expressly declare every issue of shares whether declared to be
preference or otherwise shall be subject to the powers hereinbefore contained.
7. If the Company is registered as exempted, its operations will be carried on
subject to the provisions of Section 192 of the Companies Law (1995 Revision)
and, subject to the provisions of the
<PAGE>
5
Companies Law (1995 Revision) and the Articles of Association, it shall have the
power to register by way of continuation as a body corporate limited by shares
under the laws of any jurisdiction outside the Cayman Islands and to be
deregistered in the Cayman Islands.
WE the several persons whose names and addresses are subscribed are desirous of
being formed into a company in pursuance of this Memorandum of Association and
we respectively agree to take the number of shares in the capital of the Company
set opposite our respective names.
<PAGE>
6
DATED the 18th day of August, 1997
<TABLE>
<CAPTION>
SIGNATURE and ADDRESS NUMBER OF SHARES
OF EACH SUBSCRIBER TAKEN BY EACH
------------------ -------------
<S> <C>
----------------------------------
Linda Martin, Attorney-at-Law One
PO Box 309, Grand Cayman
----------------------------------
Graham Lockington, Attorney-at-Law One
PO Box 309, Grand Cayman
----------------------------------
Jane Gibbs
Witness to the above signatures
</TABLE>
I, __________________________ Registrar of Companies in and for the Cayman
Islands HEREBY CERTIFY that this is a true and correct copy of the Memorandum of
Association of this Company duly incorporated on the ____ day of ____________
1997
-----------------------------------------------------------
REGISTRAR OF COMPANIES
<PAGE>
CONFORMED COPY
THE COMPANIES LAW (1995 REVISION)
COMPANY LIMITED BY SHARES
ARTICLES OF ASSOCIATION
OF
YORKSHIRE POWER FINANCE LIMITED
1. In these Articles Table A in the Schedule to the Statute does not apply and,
unless there be something in the subject or context inconsistent therewith,
"Articles" means these Articles as originally framed or
as from time to time altered by Special
Resolution.
"Auditors" means the persons for the time being
performing the duties of auditors of the
Company.
"Company" means the above-named Company.
"debenture" means debenture stock, mortgages, bonds and
any other such securities of the Company
whether constituting a charge on the assets
of the Company or not.
"Directors" means the directors for the time being of
the Company.
"dividend" includes bonus.
"Member" shall bear the meaning as ascribed to it in
the Statute.
"month" means calendar month.
"paid-up" means paid-up and/or credited as paid-up.
"registered office" means the registered office for the time
being of the Company.
"Seal" means the common seal of the Company and
includes every duplicate seal.
"Secretary" includes an Assistant Secretary and any
person appointed to perform the duties of
Secretary of the
<PAGE>
2
Company.
"share" includes a fraction of a share.
"Special Resolution" has the same meaning as in the Statute and
includes a resolution approved in writing as
described therein.
"Statute" means the Companies Law of the Cayman
Islands as amended and every statutory
modification or re-enactment thereof for the
time being in force.
"written" and "in writing" include all modes of representing or
reproducing words in visible form.
Words importing the singular number only include the plural number and
vice-versa.
Words importing the masculine gender only include the feminine gender.
Words importing persons only include corporations.
2. The business of the Company may be commenced as soon after incorporation as
the Directors shall see fit, notwithstanding that part only of the shares may
have been allotted.
3. The Directors may pay, out of the capital or any other monies of the Company,
all expenses incurred in or about the formation and establishment of the Company
including the expenses of registration.
CERTIFICATES FOR SHARES
4. Certificates representing shares of the Company shall be in such form as
shall be determined by the Directors. Such certificates may be under Seal. All
certificates for shares shall be consecutively numbered or otherwise identified
and shall specify the shares to which they relate. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered in the register of Members of the
Company. All certificates surrendered to the Company for transfer shall be
cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled. The
Directors may authorise certificates to be issued with the seal and authorised
signature(s) affixed by some method or system of mechanical process.
5. Notwithstanding Article 4 of these Articles, if a share certificate be
defaced, lost or destroyed, it may be renewed on payment of a fee of one dollar
(US$l.00) or such less sum and on such terms (if any) as to evidence and
indemnity and the payment of the expenses incurred by the Company
<PAGE>
3
in investigating evidence, as the Directors may prescribe.
ISSUE OF SHARES
6. Subject to the provisions, if any, in that behalf in the Memorandum of
Association and to any direction that may be given by the Company in general
meeting and without prejudice to any special rights previously conferred on the
holders of existing shares, the Directors may allot, issue, grant options over
or otherwise dispose of shares of the Company (including fractions of a share)
with or without preferred, deferred or other special rights or restrictions,
whether in regard to dividend, voting, return of capital or otherwise and to
such persons, at such times and on such other terms as they think proper. The
Company shall not issue shares in bearer form.
7. The Company shall maintain a register of its Members and every person whose
name is entered as a Member in the register of Members shall be entitled without
payment to receive within two months after allotment or lodgement of transfer
(or within such other period as the conditions of issue shall provide) one
certificate for all his shares or several certificates each for one or more of
his shares upon payment of fifty cents (US$0.50) for every certificate after the
first or such less sum as the Directors shall from time to time determine
provided that in respect of a share or shares held jointly by several persons
the Company shall not be bound to issue more than one certificate and delivery
of a certificate for a share to one of the several joint holders shall be
sufficient delivery to all such holders.
TRANSFER OF SHARES
8. The instrument of transfer of any share shall be in writing and shall be
executed by or on behalf of the transferor and the transferor shall be deemed to
remain the holder of a share until the name of the transferee is entered in the
register in respect thereof.
9. The Directors may in their absolute discretion decline to register any
transfer of shares without assigning any reason therefor. If the Directors
refuse to register a transfer they shall notify the transferee within two months
of such refusal.
10. The registration of transfers may be suspended at such time and for such
periods as the Directors may from time to time determine, provided always that
such registration shall not be suspended for more than forty-five days in any
year.
REDEEMABLE SHARES
11. (a) Subject to the provisions of the Statute and the Memorandum of
Association, shares may be issued on the terms that they are, or at the option
of the Company or the holder are, to be redeemed on such terms and in such
manner as the Company, before the issue of the shares, may by Special Resolution
determine.
(b) Subject to the provisions of the Statute and the Memorandum of
Association, the Company may purchase its own shares (including fractions of a
share), including any redeemable
<PAGE>
4
shares, provided that the manner of purchase has first been authorised by the
Company in general meeting and may make payment therefor in any manner
authorised by the Statute, including out of capital.
VARIATION OF RIGHTS OF SHARES
12. If at any time the share capital of the Company is divided into different
classes of shares, the rights attached to any class (unless otherwise provided
by the terms of issue of the shares of that class) may, whether or not the
Company is being wound-up, be varied with the consent in writing of the holders
of three-fourths of the issued shares of that class, or with the sanction of a
Special Resolution passed at a general meeting of the holders of the shares of
that class.
The provisions of these Articles relating to general meetings shall apply
to every such general meeting of the holders of one class of shares except that
the necessary quorum shall be one person holding or representing by proxy at
least one-third of the issued shares of the class and that any holder of shares
of the class present in person or by proxy may demand a poll.
13. The rights conferred upon the holders of the shares of any class issued with
preferred or other rights shall not, unless otherwise expressly provided by the
terms of issue of the shares of that class, be deemed to be varied by the
creation or issue of further shares ranking pari passu therewith
COMMISSION ON SALE OF SHARES
14. The Company may in so far as the Statute from time to time permits pay a
commission to any person in consideration of his subscribing or agreeing to
subscribe whether absolutely or conditionally for any shares of the Company.
Such commissions may be satisfied by the payment of cash or the lodgement of
fully or partly paid-up shares or partly in one way and partly in the other. The
Company may also on any issue of shares pay such brokerage as may be lawful.
NON-RECOGNITION OF TRUSTS
15. No person shall be recognised by the Company as holding any share upon any
trust and the Company shall not be bound by or be 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 is otherwise provided by these Articles or the
Statute) any other rights in respect of any share except an absolute right to
the entirety thereof in the registered holder.
LIEN ON SHARES
16. The Company shall have a first and paramount lien and charge on all shares
(whether fully paid-up or not) registered in the name of a Member (whether
solely or jointly with others) for all debts, liabilities or engagements to or
with the Company (whether presently payable or not) by such Member or his
estate, either alone or jointly with any other person, whether a Member or not,
but the Directors may at any time declare any share to be wholly or in part
exempt from the provisions of this Article. The registration of a transfer of
any such share shall operate as a waiver of the Company's lien
<PAGE>
5
(if any) thereon. The Company's lien (if any) on a share shall extend to all
dividends or other monies payable in respect thereof.
17. The Company may sell, in such manner as the Directors think fit, any shares
on which the Company has a lien, but no sale shall be made unless a 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 payment of such
part of the amount in respect of which the lien exists as is presently payable,
has been given to the registered holder or holders for the time being of the
share, or the person, of which the Company has notice, entitled thereto by
reason of his death or bankruptcy.
18. To give effect to any such sale the Directors may authorise some person to
transfer the shares sold to the purchaser thereof. The purchaser shall be
registered as the holder of the shares comprised in any such transfer, and he
shall not be bound to see to the application of the purchase money, nor shall
his title to the shares be affected by any irregularity or invalidity in the
proceedings in reference to the sale
19. The proceeds of such sale shall be received by the Company and applied in
payment of such part of the amount in respect of which the lien exists as is
presently payable and the residue, if any, shall (subject to a like lien for
sums not presently payable as existed upon the shares before the sale) be paid
to the person entitled to the shares at the date of the sale.
CALL ON SHARES
20. (a) The Directors may from time to time make calls upon the Members in
respect of any monies unpaid on their shares (whether on account of the nominal
value of the shares or by way of premium or otherwise) and not by the conditions
of allotment thereof made payable at fixed terms, provided that no call shall be
payable at less than one month from the date fixed for the payment of the last
preceding call, and each Member shall (subject to receiving at least fourteen
days notice specifying the time or times of payment) pay to the Company at the
time or times so specified the amount called on the shares. A call may be
revoked or postponed as the Directors may determine. A call may be made payable
by instalments.
(b) A call shall be deemed to have been made at the time when the
resolution of the Directors authorising such call was passed.
(c) The joint holders of a share shall be jointly and severally liable to
pay all calls in respect thereof.
21. If a sum called in respect of a share is not paid before or on a day
appointed for payment thereof, the persons 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 such rate not exceeding ten per cent per annum as the
Directors may determine, but the Directors shall be at liberty to waive payment
of such interest either wholly or in part.
22. Any sum which by the terms of issue of a share becomes payable on allotment
or at any fixed date, whether on account of the nominal value of the share or by
way of premium or otherwise,
<PAGE>
6
shall for the purposes of these Articles be deemed to be a call duly made,
notified and payable on the date on which by the terms of issue the same becomes
payable, and in the case of non-payment all the relevant provisions of these
Articles as to payment of interest forfeiture or otherwise shall apply as if
such sum had become payable by virtue of a call duly made and notified.
23. The Directors may, on the issue of shares, differentiate between the holders
as to the amount of calls or interest to be paid and the times of payment.
24. (a) The Directors may, if they think fit, receive from any Member willing to
advance the same, all or any part of the monies uncalled and unpaid upon any
shares held by him, and upon all or any of the monies so advanced may (until the
same would but for such advances, become payable) pay interest at such rate not
exceeding (unless the Company in general meeting shall otherwise direct) seven
per cent per annum, as may be agreed upon between the Directors and the Member
paying such sum in advance.
(b) No such sum paid in advance of calls shall entitle the Member paying
such sum to any portion of a dividend declared in respect of any period prior to
the date upon which such sum would, but for such payment, become presently
payable.
FORFEITURE OF SHARES
25. (a) If a Member fails to pay any call or instalment of a call or to make any
payment required by the terms of issue on the day appointed for payment thereof,
the Directors may, at any time thereafter during such time as any part of the
call, instalment or payment remains unpaid, give notice requiring payment of so
much of the call, instalment or payment as is unpaid, together with any interest
which may have accrued and all expenses that have been incurred by the Company
by reason of such non-payment. Such notice shall name a day (not earlier than
the expiration of fourteen days from the date of giving of the notice) on or
before which the payment required by the notice is to be made, and shall state
that, in the event of non-payment at or before the time appointed the shares in
respect of which such notice was given will be liable to be forfeited.
(b) If the requirements of any such notice as aforesaid are not complied
with, any share in respect of which the notice has been given may at any time
thereafter, before the payment required by the notice has been made, be
forfeited by a resolution of the Directors to that effect. Such forfeiture shall
include all dividends declared in respect of the forfeited share and not
actually paid before the forfeiture.
(c) A forfeited share may be sold or otherwise disposed of on such terms
and in such manner as the Directors think fit and at any time before a sale or
disposition the forfeiture may be cancelled on such terms as the Directors think
fit.
26. A person whose shares have been forfeited shall cease to be a Member in
respect of the forfeited shares, but shall, notwithstanding, remain liable to
pay to the Company all monies which, at the date of forfeiture were payable by
him to the Company in respect of the shares together with interest thereon, but
his liability shall cease if and when the Company shall have received payment in
full of all monies whenever payable in respect of the shares.
<PAGE>
7
27. A certificate in writing under the hand of one Director or the Secretary of
the Company that a share in the Company has been duly forfeited on a date stated
in the declaration shall be conclusive evidence of the fact therein stated as
against all persons claiming to be entitled to the share. The Company may
receive the consideration given for the share on any sale or disposition thereof
and may execute a transfer of the share in favour of the person to whom the
share is sold or disposed of and he shall thereupon 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, sale or
disposal of the share.
28. The provisions of these Articles as to forfeiture shall apply in the case of
non-payment of any sum which, by the terms of issue of a share, becomes payable
at a fixed time, whether on account of the nominal value of the share or by way
of premium as if the same had been payable by virtue of a call duly made and
notified.
REGISTRATION OF EMPOWERING INSTRUMENTS
29. The Company shall be entitled to charge a fee not exceeding one dollar
(US$l.00) on the registration of every probate, letters of administration,
certificate of death or marriage, power of attorney, notice in lieu of
distringas, or other instrument.
TRANSMISSION OF SHARES
30. In case of the death of a Member, the survivor or survivors where the
deceased was a joint holder, and the legal personal representatives of the
deceased where he was a sole holder, shall be the only persons recognised by the
Company as having any title to his interest in the shares, but nothing herein
contained shall release the estate of any such deceased holder from any
liability in respect of any shares which had been held by him solely or jointly
with other persons.
31. (a) Any person becoming entitled to a share in consequence of the death or
bankruptcy or liquidation or dissolution of a Member (or in any other way than
by transfer) may, upon such evidence being produced as may from time to time be
required by the Directors and subject as hereinafter provided, elect either to
be registered himself as holder of the share or to make such transfer of the
share to such other person nominated by him as the deceased or bankrupt person
could have made and to have such person registered as the transferee thereof,
but the Directors shall, in either 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 his death or bankruptcy as the case may be.
(b) If the person so becoming entitled shall elect to be registered himself
as holder he shall deliver or send to the Company a notice in writing signed by
him stating that he so elects.
32. A person becoming entitled to a share by reason of the death or bankruptcy
or liquidation or dissolution of the holder (or in any other case than by
transfer) shall be entitled to the same dividends and other advantages to which
he would be entitled if he were the registered holder of the share, except that
he shall not, before being registered as a Member in respect of the share, be
entitled in respect of it to exercise any right conferred by membership in
relation to meetings of the Company PROVIDED HOWEVER that the Directors may at
any time give notice requiring any such person to elect either to be registered
himself or to transfer the share and if the notice is not complied with within
<PAGE>
8
ninety days the Directors may thereafter withhold payment of all dividends,
bonuses or other monies payable in respect of the share until the requirements
of the notice have been complied with.
AMENDMENT OF MEMORANDUM OF ASSOCIATION, CHANGE OF
LOCATION OF REGISTERED OFFICE & ALTERATION OF CAPITAL
33. (a) Subject to and in so far as permitted by the provisions of the Statute,
the Company may from time to time by ordinary resolution alter or amend its
Memorandum of Association otherwise than with respect to its name and objects
and may, without restricting the generality of the foregoing:
(i) increase the share capital by such sum to be divided into shares
of such amount or without nominal or par value as the resolution
shall prescribe and with such rights, priorities and privileges
annexed thereto, as the Company in general meeting may determine.
(ii) consolidate and divide all or any of its share capital into
shares of larger amount than its existing shares;
(iii) by subdivision of its existing shares or any of them divide the
whole or any part of its share capital into shares of smaller
amount than is fixed by the Memorandum of Association or into
shares without nominal or par value;
(iv) 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.
(b) All new shares created hereunder shall be subject to the same
provisions with reference to the payment of calls, liens, transfer,
transmission, forfeiture and otherwise as the shares in the original share
capital.
(c) Subject to the provisions of the Statute, the Company may by Special
Resolution change its name or alter its objects.
(d) Without prejudice to Article 11 hereof and subject to the provisions of
the Statute, the Company may by Special Resolution reduce its share capital and
any capital redemption reserve fund.
(e) Subject to the provisions of the Statute, the Company may by resolution
of the Directors change the location of its registered office.
CLOSING REGISTER OF MEMBERS OR FIXING RECORD DATE
34. For the purpose of determining Members entitled to notice of or to vote at
any meeting of Members or any adjournment thereof, or Members entitled to
receive payment of any dividend, or in order to make a determination of Members
for any other proper purpose, the Directors of the Company may provide that the
register of Members shall be closed for transfers for a stated period but not to
exceed in any case forty days. If the register of Members shall be so closed for
the purpose of determining Members entitled to notice of or to vote at a meeting
of Members such register shall be so closed for at least ten days immediately
preceding such meeting and the record date for such
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9
determination shall be the date of the closure of the register of Members.
35. In lieu of or apart from closing the register of Members, the Directors may
fix in advance a date as the record date for any such determination of Members
entitled to notice of or to vote at a meeting of the Members and for the purpose
of determining the Members entitled to receive payment of any dividend the
Directors may, at or within 90 days prior to the date of declaration of such
dividend fix a subsequent date as the record date for such determination.
36. If the register of Members is not so closed and no record date is fixed for
the determination of Members entitled to notice of or to vote at a meeting of
Members or Members entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of Members. When a determination of Members
entitled to vote at any meeting of Members has been made as provided in this
section, such determination shall apply to any adjournment thereof.
GENERAL MEETING
37. (a) Subject to paragraph (c) hereof, the Company shall within one year of
its incorporation and in each year of its existence thereafter hold a general
meeting as its annual general meeting and shall specify the meeting as such in
the notices calling it. The annual general meeting shall be held at such time
and place as the Directors shall appoint and if no other time and place is
prescribed by them, it shall be held at the registered office on the second
Wednesday in December of each year at ten o'clock in the morning.
(b) At these meetings the report of the Directors (if any) shall be
presented.
(c) If the Company is exempted as defined in the Statute it may but shall
not be obliged to hold an annual general meeting.
38. (a) The Directors may whenever they think fit, and they shall on the
requisition of Members of the Company holding at the date of the deposit of the
requisition not less than one-tenth of such of the paid-up capital of the
Company as at the date of the deposit carries the right of voting at general
meetings of the Company, proceed to convene a general meeting of the Company.
(b) The requisition must state the objects of the meeting and must be
signed by the requisitionists and deposited at the registered office of the
Company and may consist of several documents in like form each signed by one or
more requisitionists.
(c) If the Directors do not within twenty-one days from the date of the
deposit of the requisition duly proceed to convene a general meeting, the
requisitionists, or any of them representing more than one-half of the total
voting rights of all of them, may themselves convene a general meeting, but any
meeting so convened shall not be held after the expiration of three months after
the expiration of the said twenty-one days.
(d) A general meeting convened as aforesaid by requisitionists shall be
convened in the same manner as nearly as possible as that in which general
meetings are to be convened by Directors.
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10
NOTICE OF GENERAL MEETINGS
39. At least five days' notice shall be given of an annual general meeting or
any other general meeting. Every notice shall be exclusive of the day on which
it is given or deemed to be given and of the day for which it is given and shall
specify the place, the day and the hour of the meeting and the general nature of
the business and shall be given in manner hereinafter mentioned or in such other
manner if any as may be prescribed by the Company PROVIDED that a general
meeting of the Company shall, whether or not the notice specified in this
regulation has been given and whether or not the provisions of Article 38 have
been complied with, be deemed to have been duly convened if it is so agreed:
(a) in the case of a general meeting called as an annual general meeting
by all the Members entitled to attend and vote thereat or their
proxies; and
(b) in the case of any other general meeting by a majority in number of
the Members having a right to attend and vote at the meeting, being a
majority together holding not less than seventy-five per cent in
nominal value or in the case of shares without nominal or par value
seventy-five per cent of the shares in issue, or their proxies.
40. The accidental omission to give notice of a general meeting to, or the
non-receipt of notice of a meeting by any person entitled to receive notice
shall not invalidate the proceedings of that meeting.
PROCEEDINGS AT GENERAL MEETINGS
41. No business shall be transacted at any general meeting unless a quorum of
Members is present at the time when the meeting proceeds to business; two
Members present in person or by proxy shall be a quorum provided always that if
the Company has one Member of record the quorum shall be that one Member present
in person or by proxy.
42. A resolution (including a Special Resolution) in writing (in one or more
counterparts) signed by all Members for the time being entitled to receive
notice of and to attend and vote at general meetings (or being corporations by
their duly authorised representatives) shall be as valid and effective as if the
same had been passed at a general meeting of the Company duly convened and held.
43. If within half an hour from the time appointed for the meeting a quorum is
not present, the meeting, if convened upon the requisition of Members, shall be
dissolved and in any other case it shall stand adjourned to the same day in the
next week at the same time and place or to such other time or such other place
as the Directors may determine and if at the adjourned meeting a quorum is not
present within half an hour from the time appointed for the meeting the Members
present shall be a quorum.
44. The Chairman, if any, of the Board of Directors shall preside as Chairman at
every general meeting of the Company, or if there is no such Chairman, or if he
shall not be present within fifteen minutes after the time appointed for the
holding of the meeting, or is unwilling to act, the Directors present shall
elect one of their number to be Chairman of the meeting.
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11
45. If at any general meeting no Director is willing to act as Chairman or if no
Director is present within fifteen minutes after the time appointed for holding
the meeting, the Members present shall choose one of their number to be Chairman
of the meeting.
46. The Chairman may, with the consent of any general meeting duly constituted
hereunder, and shall if so directed by the meeting, adjourn the meeting from
time to time and from place to place, but no business shall be transacted at any
adjourned meeting other than the business left unfinished at the meeting from
which the adjournment took place. When a general meeting is adjourned for thirty
days or more, notice of the adjourned meeting shall be given as in the case of
an original meeting; save as aforesaid it shall not be necessary to give any
notice of an adjournment or of the business to be transacted at an adjourned
general meeting.
47. 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, demanded by the Chairman or any other Member
present in person or by proxy.
48. Unless a poll be so demanded a declaration by the Chairman that a resolution
has on a show of hands been carried, or carried unanimously, or by a particular
majority, or lost, and an entry to that effect in the Company's Minute Book
containing the Minutes of the proceedings of the meeting shall be conclusive
evidence of that fact without proof of the number or proportion of the votes
recorded in favour of or against such resolution.
49. The demand for a poll may be withdrawn.
50. Except as provided in Article 52, if a poll is duly demanded it shall be
taken in such manner as the Chairman directs and the result of the poll shall be
deemed to be the resolution of the general meeting at which the poll was
demanded.
51. In the case of an equality of votes, whether on a show of hands or on a
poll, the Chairman of the general meeting at which the show of hands takes place
or at which the poll is demanded, shall be entitled to a second or casting vote.
52. 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 at such time as the Chairman of the general meeting directs and
any business other than that upon which a poll has been demanded or is
contingent thereon may be proceeded with pending the taking of the poll.
VOTES OF MEMBERS
53. Subject to any rights or restrictions for the time being attached to any
class or classes of shares, on a show of hands every Member of record present in
person or by proxy at a general meeting shall have one vote and on a poll every
Member of record present in person or by proxy shall have one vote for each
share registered in his name in the register of Members.
54. In the case of joint holders of record the vote of the senior who tenders a
vote, whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders, and
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12
for this purpose seniority shall be determined by the order in which the names
stand in the register of Members.
55. A Member of unsound mind, or in respect of whom an order has been made by
any court, having jurisdiction in lunacy, 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 that court, and
any such committee, receiver, curator bonis or other persons may vote by proxy.
56. No Member shall be entitled to vote at any general meeting unless he is
registered as a shareholder of the Company on the record date for such meeting
nor unless all calls or other sums presently payable by him in respect of shares
in the Company have been paid.
57. No objection shall be raised to the qualification of any voter except at the
general meeting or adjourned general meeting at which the vote objected to is
given or tendered and every vote not disallowed at such general meeting shall be
valid for all purposes. Any such objection made in due time shall be referred to
the Chairman of the general meeting whose decision shall be final and
conclusive.
58. On a poll or on a show of hands votes may be given either personally or by
proxy.
PROXIES
59. The instrument appointing a proxy shall be in writing and shall be executed
under the hand of the appointor or of his attorney duly authorised in writing,
or, if the appointor is a corporation under the hand of an officer or attorney
duly authorised in that behalf. A proxy need not be a Member of the Company.
60. The instrument appointing a proxy shall be deposited at the registered
office of the Company or at such other place as is specified for that purpose in
the notice convening the meeting no later than the time for holding the meeting,
or adjourned meeting provided that the Chairman of the Meeting may at his
discretion direct that an instrument of proxy shall be deemed to have been duly
deposited upon receipt of telex, cable or telecopy confirmation from the
appointor that the instrument of proxy duly signed is in the course of
transmission to the Company.
61. The instrument appointing a proxy may be in any usual or common form and may
be expressed to be for a particular meeting or any adjournment thereof or
generally until revoked. An instrument appointing a proxy shall be deemed to
include the power to demand or join or concur in demanding a poll.
62. A vote given in accordance with the terms of an instrument of proxy shall be
valid notwithstanding the previous death or insanity of the principal or
revocation of the proxy or of the authority under which the proxy was executed,
or the transfer of the share in respect of which the proxy is given provided
that no intimation in writing of such death, insanity, revocation or transfer as
aforesaid shall have been received by the Company at the registered office
before the commencement
<PAGE>
13
of the general meeting, or adjourned meeting at which it is sought to use the
proxy.
63. Any corporation which is a Member of record of the Company may in accordance
with its Articles or in the absence of such provision by resolution of its
Directors or other governing body authorise such person as it thinks fit to act
as its representative at any meeting of the Company or of any class of Members
of the Company, and the person so authorised shall be entitled to exercise the
same powers on behalf of the corporation which he represents as the corporation
could exercise if it were an individual Member of record of the Company.
64. Shares of its own capital belonging to the Company or held by it in a
fiduciary capacity shall not be voted, directly or indirectly, at any meeting
and shall not be counted in determining the total number of outstanding shares
at any given time.
DIRECTORS
65. There shall be a Board of Directors consisting of not less than one or more
than ten persons (exclusive of alternate Directors) PROVIDED HOWEVER that the
Company may from time to time by ordinary resolution increase or reduce the
limits in the number of Directors. The first Directors of the Company shall be
determined in writing by, or appointed by a resolution of, the subscribers of
the Memorandum of Association or a majority of them.
66. The remuneration to be paid to the Directors shall be such remuneration as
the Directors shall determine. Such remuneration shall be deemed to accrue from
day to day. The Directors shall also be entitled to be paid their travelling,
hotel and other expenses properly incurred by them in going to, attending and
returning from meetings of the Directors, or any committee of the Directors, or
general meetings of the Company, or otherwise in connection with the business of
the Company, or to receive a fixed allowance in respect thereof as may be
determined by the Directors from time to time, or a combination partly of one
such method and partly the other.
67. The Directors may by resolution award special remuneration to any Director
of the Company undertaking any special work or services for, or undertaking any
special mission on behalf of, the Company other than his ordinary routine work
as a Director. Any fees paid to a Director who is also counsel or solicitor to
the Company, or otherwise serves it in a professional capacity shall be in
addition to his remuneration as a Director.
68. A Director or alternate Director may hold any other office or place of
profit under the Company (other than the office of Auditor) in conjunction with
his office of Director for such period and on such terms as to remuneration and
otherwise as the Directors may determine.
69. A Director or alternate Director may act by himself or his firm in a
professional capacity for the Company and he or his firm shall be entitled to
remuneration for professional services as if he were not a Director or alternate
Director.
70. A shareholding qualification for Directors may be fixed by the Company in
general
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14
meeting, but unless and until so fixed no qualification shall be required.
71. A Director or alternate Director of the Company may be or become a director
or other officer of or otherwise interested in any company promoted by the
Company or in which the Company may be interested as shareholder or otherwise
and no such Director or alternate Director shall be accountable to the Company
for any remuneration or other benefits received by him as a director or officer
of, or from his interest in, such other company.
72. No person shall be disqualified from the office of Director or alternate
Director or prevented by such office from contracting with the Company, either
as vendor, purchaser or otherwise, nor shall any such contract or any contract
or transaction entered into by or on behalf of the Company in which any Director
or alternate Director shall be in any way interested be or be liable to be
avoided, nor shall any Director or alternate Director so contracting or being so
interested be liable to account to the Company for any profit realised by any
such contract or transaction by reason of such Director holding office or of the
fiduciary relation thereby established. A Director (or his alternate Director in
his absence) shall be at liberty to vote in respect of any contract or
transaction in which he is so interested as aforesaid PROVIDED HOWEVER that the
nature of the interest of any Director or alternate Director in any such
contract or transaction shall be disclosed by him or the alternate Director
appointed by him at or prior to its consideration and any vote thereon.
73. A general notice that a Director or alternate Director is a shareholder of
any specified firm or company and is to be regarded as interested in any
transaction with such firm or company shall be sufficient disclosure under
Article 72 and after such general notice it shall not be necessary to give
special notice relating to any particular transaction.
ALTERNATE DIRECTORS
74. Subject to the exception contained in Article 82, a Director who expects to
be unable to attend Directors' Meetings because of absence, illness or otherwise
may appoint any person to be an alternate Director to act in his stead and such
appointee whilst he holds office as an alternate Director shall, in the event of
absence therefrom of his appointor, be entitled to attend meetings of the
Directors and to vote thereat and to do, in the place and stead of his
appointor, any other act or thing which his appointor is permitted or required
to do by virtue of his being a Director as if the alternate Director were the
appointor, other than appointment of an alternate to himself, and he shall ipso
facto vacate office if and when his appointor ceases to be a Director or removes
the appointee from office. Any appointment or removal under this Article shall
be effected by notice in writing under the hand of the Director making the same.
POWERS AND DUTIES OF DIRECTORS
75. The business of the Company shall be managed by the Directors (or a sole
Director if only one is appointed) who may pay all expenses incurred in
promoting, registering and setting up the Company, and may exercise all such
powers of the Company as are not, from time to time by the Statute, or by these
Articles, or such regulations, being not inconsistent with the aforesaid, as may
be prescribed by the Company in general meeting required to be exercised by the
Company in general
<PAGE>
15
meeting PROVIDED HOWEVER that no regulations made by the Company in general
meeting shall invalidate any prior act of the Directors which would have been
valid if that regulation had not been made.
76. The Directors may from time to time and at any time by powers of attorney
appoint any company, firm, person or body of persons, whether nominated directly
or indirectly by the Directors, to be the attorney or attorneys of the Company
for such purpose 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 powers of attorney may contain such provisions for the protection and
convenience of persons dealing with any such attorneys as the Directors may
think fit and may also authorise any such attorney to delegate all or any of the
powers, authorities and discretions vested in him.
77. All cheques, promissory notes, drafts, bills of exchange and other
negotiable instruments and all receipts for monies paid to the Company shall be
signed, drawn, accepted, endorsed or otherwise executed as the case may be in
such manner as the Directors shall from time to time by resolution determine.
78. The Directors shall cause minutes to be made in books provided for the
purpose:
(a) of all appointments of officers made by the Directors;
(b) of the names of the Directors (including those represented thereat by
an alternate or by proxy) present at each meeting of the Directors and
of any committee of the Directors;
(c) of all resolutions and proceedings at all meetings of the Company and
of the Directors and of committees of Directors.
79. The Directors on behalf of the Company may pay a gratuity or pension or
allowance on retirement to any Director who has held any other salaried office
or place of profit with the Company or to his widow or dependants and may make
contributions to any fund and pay premiums for the purchase or provision of any
such gratuity, pension or allowance.
80. The Directors may exercise all the powers of the Company to borrow money and
to mortgage or charge its undertaking, property and uncalled capital or any part
thereof and to issue debentures, debenture stock and other securities whether
outright or as security for any debt, liability or obligation of the Company or
of any third party.
MANAGEMENT
81. (a) The Directors may from time to time provide for the management of the
affairs of the Company in such manner as they shall think fit and the provisions
contained in the three next following paragraphs shall be without prejudice to
the general powers conferred by this paragraph.
(b) The Directors from time to time and at any time may establish any
committees, local boards or agencies for managing any of the affairs of the
Company and may appoint any persons to be members of such committees or local
boards or any managers or agents and may fix their
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16
remuneration.
(c) The Directors from time to time and at any time may delegate to any
such committee, local board, manager or agent any of the powers, authorities and
discretions for the time being vested in the Directors and may authorise the
members for the time being of any such local board, or any of them to fill up
any vacancies therein and to act notwithstanding vacancies and any such
appointment or delegation may be made on such terms and subject to such
conditions as the Directors may think fit and the Directors may at any time
remove any person so appointed 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.
(d) Any such delegates as aforesaid may be authorised by the Directors to
subdelegate all or any of the powers, authorities, and discretions for the time
being vested in them.
MANAGING DIRECTORS
82. The Directors may, from time to time, appoint one or more of their body (but
not an alternate Director) to the office of Managing Director for such term and
at such remuneration (whether by way of salary, or commission, or participation
in profits, or partly in one way and partly in another) as they may think fit
but his appointment shall be subject to determination ipso facto if he ceases
from any cause to be a Director and no alternate Director appointed by him can
act in his stead as a Director or Managing Director.
83. The Directors may entrust to and confer upon a Managing Director any of the
powers exercisable by them upon such terms and conditions and with such
restrictions as they may 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.
PROCEEDINGS OF DIRECTORS
84. Except as otherwise provided by these Articles, the Directors shall meet
together for the despatch of business, convening, adjourning and otherwise
regulating their meetings as they think fit. Questions arising at any meeting
shall be decided by a majority of votes of the Directors and alternate Directors
present at a meeting at which there is a quorum, the vote of an alternate
Director not being counted if his appointor be present at such meeting. In case
of an equality of votes, the Chairman shall have a second or casting vote.
85. A Director or alternate Director may, and the Secretary on the requisition
of a Director or alternate Director shall, at any time summon a meeting of the
Directors by at least two days' notice in writing to every Director and
alternate Director which notice shall set forth the general nature of the
business to be considered unless notice is waived by all the Directors (or their
alternates) either at, before or after the meeting is held and PROVIDED FURTHER
if notice is given in person, by cable, telex or telecopy the same shall be
deemed to have been given on the day it is delivered to the Directors or
transmitting organisation as the case may be. The provisions of Article 40 shall
apply mutatis mutandis with respect to notices of meetings of Directors.
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17
86. The quorum necessary for the transaction of the business of the Directors
may be fixed by the Directors and unless so fixed shall be two, a Director and
his appointed alternate Director being considered only one person for this
purpose, PROVIDED ALWAYS that if there shall at any time be only a sole Director
the quorum shall be one. For the purposes of this Article an alternate Director
or proxy appointed by a Director shall be counted in a quorum at a meeting at
which the Director appointing him is not present.
87. The continuing Directors may act notwithstanding any vacancy in their body,
but if and so long as their number is reduced below the number fixed by or
pursuant to these Articles as the necessary quorum of Directors the continuing
Directors or Director may act for the purpose of increasing the number of
Directors to that number, or of summoning a general meeting of the Company, but
for no other purpose.
88. The Directors may elect a Chairman of their Board and determine the period
for which he is to hold office; but if no such Chairman is elected, or if at any
meeting the Chairman is not 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.
89. The Directors may delegate any of their powers to committees consisting of
such member or members of the Board of Directors (including Alternate Directors
in the absence of their appointors) as they think fit; any committee so formed
shall in the exercise of the powers so delegated conform to any regulations that
may be imposed on it by the Directors.
90. A committee may meet and adjourn as it thinks proper. Questions arising at
any meeting shall be determined by a majority of votes of the members present,
and in the case of an equality of votes the Chairman shall have a second or
casting vote.
91. All acts done by any meeting of the Directors or of a committee of Directors
(including any person acting as an alternate Director) shall, notwithstanding
that it be afterwards discovered that there was some defect in the appointment
of any Director or alternate Director, or that they or any of them were
disqualified, be as valid as if every such person had been duly appointed and
qualified to be a Director or alternate Director as the case may be.
92. Members of the Board of Directors or of any committee thereof may
participate in a meeting of the Board or of such committee by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other and participation in a
meeting pursuant to this provision shall constitute presence in person at such
meeting. A resolution in writing (in one or more counterparts), signed by all
the Directors for the time being or all the members of a committee of Directors
(an alternate Director being entitled to sign such resolution on behalf of his
appointor) shall be as valid and effectual as if it had been passed at a meeting
of the Directors or committee as the case may be duly convened and held.
93. (a) A Director may be represented at any meetings of the Board of Directors
by a proxy appointed by him in which event the presence or vote of the proxy
shall for all purposes be deemed to be that of the Director.
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(b) The provisions of Articles 59-62 shall mutatis mutandis apply to the
appointment of proxies by Directors.
VACATION OF OFFICE OF DIRECTOR
94. The office of a Director shall be vacated:
(a) if he gives notice in writing to the Company that he resigns the
office of Director;
(b) if he absents himself (without being represented by proxy or an
alternate Director appointed by him) from three consecutive meetings
of the Board of Directors without special leave of absence from the
Directors, and they pass a resolution that he has by reason of such
absence vacated office;
(c) if he dies, becomes bankrupt or makes any arrangement or composition
with his creditors generally;
(d) if he is found a lunatic or becomes of unsound mind.
APPOINTMENT AND REMOVAL OF DIRECTORS
95. The Company may by ordinary resolution appoint any person to be a Director
and may in like manner remove any Director and may in like manner appoint
another person in his stead.
96. The Directors shall have power at any time and from time to time to appoint
any person to be a Director, either to fill a casual vacancy or as an addition
to the existing Directors but so that the total amount of Directors (exclusive
of alternate Directors) shall not at any time exceed the number fixed in
accordance with these Articles.
PRESUMPTION OF ASSENT
97. A Director of the Company who is present at a meeting of the Board of
Directors at which action on any Company matter is taken shall be presumed to
have assented to the action taken unless his dissent shall be entered in the
Minutes of the meeting or unless he shall file his written dissent from such
action with the person acting as the Secretary of the meeting before the
adjournment thereof or shall forward such dissent by registered mail to such
person immediately after the adjournment of the meeting. Such right to dissent
shall not apply to a Director who voted in favour of such action.
SEAL
98. (a) The Company may, if the Directors so determine, have a Seal which shall,
subject to paragraph (c) hereof, only be used by the authority of the Directors
or of a committee of the Directors authorised by the Directors in that behalf
and every instrument to which the Seal has been affixed shall be signed by one
person who shall be either a Director or the Secretary or Secretary-Treasurer or
some person appointed by the Directors for the purpose.
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(b) The Company may have a duplicate Seal or Seals each of which shall be a
facsimile of the Common Seal of the Company and, if the Directors so determine,
with the addition on its face of the name of every place where it is to be used.
(c) A Director, Secretary or other officer or representative or attorney
may without further authority of the Directors affix the Seal of the Company
over his signature alone to any document of the Company required to be
authenticated by him under Seal or to be filed with the Registrar of Companies
in the Cayman Islands or elsewhere wheresoever.
OFFICERS
99. The Company may have a President, a Secretary or Secretary-Treasurer
appointed by the Directors who may also from time to time appoint such other
officers as they consider necessary, all for such terms, at such remuneration
and to perform such duties, and subject to such provisions as to
disqualification and removal as the Directors from time to time prescribe.
DIVIDENDS, DISTRIBUTIONS AND RESERVE
100. Subject to the Statute, the Directors may from time to time declare
dividends (including interim dividends) and distributions on shares of the
Company outstanding and authorise payment of the same out of the funds of the
Company lawfully available therefor.
101. The Directors may, before declaring any dividends or distributions, set
aside such sums as they think proper as a reserve or reserves which shall at the
discretion of the Directors, be applicable for any purpose of the Company and
pending such application may, at the like discretion, be employed in the
business of the Company.
102. No dividend or distribution shall be payable except out of the profits of
the Company, realised or unrealised, or out of the share premium account or as
otherwise permitted by the Statute.
103. Subject to the rights of persons, if any, entitled to shares with special
rights as to dividends or distributions, if dividends or distributions are to be
declared on a class of shares they shall be declared and paid according to the
amounts paid or credited as paid on the shares of such class outstanding on the
record date for such dividend or distribution as determined in accordance with
these Articles but no amount paid or credited as paid on a share in advance of
calls shall be treated for the purpose of this Article as paid on the share.
104. The Directors may deduct from any dividend or distribution payable to any
Member all sums of money (if any) presently payable by him to the Company on
account of calls or otherwise.
105. The Directors may declare that any dividend or distribution be paid wholly
or partly by the distribution of specific assets and in particular of paid up
shares, debentures, or debenture stock of any other company or in any one or
more of such ways and where any difficulty arises in regard to such
distribution, the Directors may settle the same as they think expedient and in
particular may issue fractional certificates and fix the value for distribution
of such specific assets or any part thereof and may determine that cash payments
shall be made to any Members upon the footing of the value so
<PAGE>
20
fixed in order to adjust the rights of all Members and may vest any such
specific assets in trustees as may seem expedient to the Directors.
106. Any dividend, distribution, interest or other monies payable in cash in
respect of shares may be paid by cheque or warrant sent through the post
directed to the registered address of the holder or, in the case of joint
holders, to the holder who is first named on the register of Members or to such
person and to such address as such holder or joint holders may in writing
direct. Every such cheque or warrant shall be made payable to the order of the
person to whom it is sent. Any one of two or more joint holders may give
effectual receipts for any dividends, bonuses, or other monies payable in
respect of the share held by them as joint holders.
107. No dividend or distribution shall bear interest against the Company.
CAPITALISATION
108. The Company may upon the recommendation of the Directors by ordinary
resolution authorise the Directors to capitalise any sum standing to the credit
of any of the Company's reserve accounts (including share premium account and
capital redemption reserve fund) or any sum standing to the credit of profit and
loss account or otherwise available for distribution and to appropriate such sum
to Members in the proportions in which such sum would have been divisible
amongst them had the same been a distribution of profits by way of dividend and
to apply such sum on their behalf in paying up in full unissued shares for
allotment and distribution credited as fully paid up to and amongst them in the
proportion aforesaid. In such event the Directors shall do all acts and things
required to give effect to 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 the benefit of
fractional entitlements accrue to the Company rather than to the Members
concerned). The Directors may authorise any person to enter on behalf of all of
the Members interested into 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.
BOOKS OF ACCOUNT
109. The Directors shall cause proper books of account to be kept with respect
to:
(a) all sums of money received and expended by the Company and the matters
in respect of which the receipt or expenditure takes place;
(b) all sales and purchases of goods by the Company;
(c) the assets and liabilities of the Company.
Proper books shall not be deemed to be kept if there are not kept such books of
account as are necessary to give a true and fair view of the state of the
Company's affairs and to explain its transactions.
110. The Directors shall from time to time determine whether and to what extent
and at what
<PAGE>
21
times and places and under what conditions or regulations the accounts and books
of the Company or any of them shall be open to the inspection of Members not
being Directors and no Member (not being a Director) shall have any right of
inspecting any account or book or document of the Company except as conferred by
Statute or authorised by the Directors or by the Company in general meeting.
111. The Directors may from time to time cause to be prepared and to be laid
before the Company in general meeting profit and loss accounts, balance sheets,
group accounts (if any) and such other reports and accounts as may be required
by law.
AUDIT
112. The Company may at any annual general meeting appoint an Auditor or
Auditors of the Company who shall hold office until the next annual general
meeting and may fix his or their remuneration.
113. The Directors may before the first annual general meeting appoint an
Auditor or Auditors of the Company who shall hold office until the first annual
general meeting unless previously removed by an ordinary resolution of the
Members in general meeting in which case the Members at that meeting may appoint
Auditors. The Directors may fill any casual vacancy in the office of Auditor but
while any such vacancy continues the surviving or continuing Auditor or
Auditors, if any, may act. The remuneration of any Auditor appointed by the
Directors under this Article may be fixed by the Directors.
114. Every Auditor of the Company shall have a right of access at all times to
the books and accounts and vouchers of the Company and shall be entitled to
require from the Directors and Officers of the Company such information and
explanation as may be necessary for the performance of the duties of the
auditors.
115. Auditors shall at the next annual general meeting following their
appointment and at any other time during their term of office, upon request of
the Directors or any general meeting of the Members, make a report on the
accounts of the Company in general meeting during their tenure of office.
NOTICES
116. Notices shall be in writing and may be given by the Company to any Member
either personally or by sending it by post, cable, telex or telecopy to him or
to his address as shown in the register of Members, such notice, if mailed, to
be forwarded airmail if the address be outside the Cayman Islands.
117. (a) Where a notice is sent by post, service of the notice shall be deemed
to be effected by properly addressing, pre-paying and posting a letter
containing the notice, and to have been effected at the expiration of sixty
hours after the letter containing the same is posted as aforesaid.
(b) Where a notice is sent by cable, telex, or telecopy, service of the
notice shall be deemed to be effected by properly addressing, and sending such
notice through a transmitting organisation and to have been effected on the day
the same is sent as aforesaid.
<PAGE>
22
118. A notice may be given by the Company to the joint holders of record of a
share by giving the notice to the joint holder first named on the register of
Members in respect of the share.
119. A notice may be given by the Company to the person or persons which the
Company has been advised are entitled to a share or shares in consequence of the
death or bankruptcy of a Member by sending it through the post as aforesaid in a
pre-paid letter addressed to them by name, or by the title of representatives of
the deceased, or trustee of the bankrupt, or by any like description at the
address supplied for that purpose by the persons claiming to be so entitled, or
at the option of the Company by giving the notice in any manner in which the
same might have been given if the death or bankruptcy had not occurred.
120. Notice of every general meeting shall be given in any manner hereinbefore
authorised to:
(a) every person shown as a Member in the register of Members as of the
record date for such meeting except that in the case of joint holders
the notice shall be sufficient if given to the joint holder first
named in the register of Members.
(b) every person upon whom the ownership of a share devolves by reason of
his being a legal personal representative or a trustee in bankruptcy
of a Member of record where the Member of record but for his death or
bankruptcy would be entitled to receive notice of the meeting; and
No other person shall be entitled to receive notices of general meetings.
WINDING UP
121. If the Company shall be wound up the liquidator may, with the sanction of a
Special Resolution of the Company and any other sanction required by the
Statute, divide amongst the Members in specie or kind the whole or any part of
the assets of the Company (whether they shall consist of property of the same
kind or not) and may for such purpose set such value as he deems fair upon any
property to be divided as aforesaid and may determine how such division shall be
carried out as between the Members or different classes of Members. The
liquidator may with the like sanction, vest the whole or any part of such assets
in trustees upon such trusts for the benefit of the contributories as the
liquidator, with the like sanction, shall think fit, but so that no Member shall
be compelled to accept any shares or other securities whereon there is any
liability.
122. If the Company shall be wound up, and the assets available for distribution
amongst the Members as such shall be insufficient to repay the whole of the
paid-up capital, such assets shall be distributed so that, as nearly as may be,
the losses shall be borne by the Members in proportion to the capital paid up,
or which ought to have been paid up, at the commencement of the winding up on
the shares held by them respectively. And if in a winding up the assets
available for distribution amongst the Members shall be more than sufficient to
repay the whole of the capital paid up at the commencement of the winding up,
the excess shall be distributed amongst the Members in proportion to the capital
paid up at the commencement of the winding up on the shares held by them
respectively.
<PAGE>
23
This Article is to be without prejudice to the rights of the holders of shares
issued upon special terms and conditions.
INDEMNITY
123. The Directors and officers for the time being of the Company and any
trustee for the time being acting in relation to any of the affairs of the
Company and their heirs, executors, administrators and personal representatives
respectively shall be indemnified out of the assets of the Company from and
against all actions, proceedings, costs, charges, losses, damages and expenses
which they or any of them shall or may incur or sustain by reason of any act
done or omitted in or about the execution of their duty in their respective
offices or trusts, except such (if any) as they shall incur or sustain by or
through their own wilful neglect or default respectively and no such Director,
officer or trustee shall be answerable for the acts, receipts, neglects or
defaults of any other Director, officer or trustee or for joining in any receipt
for the sake of conformity or for the solvency or honesty of any banker or other
persons with whom any monies or effects belonging to the Company may be lodged
or deposited for safe custody or for any insufficiency of any security upon
which any monies of the Company may be invested or for any other loss or damage
due to any such cause as aforesaid or which may happen in or about the execution
of his office or trust unless the same shall happen through the wilful neglect
or default of such Director, Officer or trustee.
FINANCIAL YEAR
124. Unless the Directors otherwise prescribe, the financial year of the Company
shall end on 31st December in each year and, following the year of
incorporation, shall begin on 1st January in each year.
AMENDMENTS OF ARTICLES
125. Subject to the Statute, the Company may at any time and from time to time
by Special Resolution alter or amend these Articles in whole or in part.
TRANSFER BY WAY OF CONTINUATION
126. If the Company is exempted as defined in the Statute, it shall, subject to
the provisions of the Statute and with the approval of a Special Resolution,
have the power to register by way of continuation as a body corporate under the
laws of any jurisdiction outside the Cayman Islands and to be deregistered in
the Cayman Islands.
<PAGE>
24
DATED 18th day of August, 1997
------------------------------------
Linda Martin, Attorney-at-Law
PO Box 309, Grand Cayman
------------------------------------
Graham Lockington, Attorney-at-Law
PO Box 309, Grand Cayman
------------------------------------
Jane Gibbs
Witness to the above signatures
I, _____________________ Registrar of Companies in and for the Cayman Islands
HEREBY CERTIFY that this is a true and correct copy of the Articles of
Association of this Company duly incorporated on the ____ day of ____________
1997.
-----------------------------------------------------------
REGISTRAR OF COMPANIES
<PAGE>
EXHIBIT 3.4
CR-75763
CERTIFICATE OF INCORPORATION
I, CINDY YVONNE JEFFERSON, Deputy Registrar of Companies of the Cayman Islands
DO HEREBY CERTIFY, pursuant to the Companies Law (Revised), that all the
requirements of the said Law in respect of registration were complied with by
YORKSHIRE POWER FINANCE (CAYMAN) LIMITED
An Exempted Company incorporated in the Cayman Islands with Limited Liability
with effect from the 18th Day of August One Thousand Nine Hundred Ninety-Seven.
Given under my hand and Seal at George Town in the
Island of Grand Cayman this Eighteenth Day of August
One Thousand Nine Hundred Ninety-Seven
[SEAL]
REGISTRAR OF COMPANIES
EXEMPTED
CAYMAN ISLANDS
/s/ Cindy Yvonne Jefferson
-------------------------------------
Deputy Registrar
of Companies, Cayman Islands, B.W.I.
0165780049
<PAGE>
CR-75763
CERTIFICATE OF INCORPORATION ON CHANGE OF NAME
[SEAL]
REGISTRAR OF COMPANIES
EXEMPTED
CAYMAN ISLANDS
I DO HEREBY CERTIFY that
YORKSHIRE POWER FINANCE (CAYMAN) LIMITED
having by Special Resolution dated 12th of December 1997
changed its name, is now incorporated under the name of
YORKSHIRE POWER FINANCE LIMITED
CERTIFIED TO BE A TRUE AND CORRECT COPY
Given under my hand and Seal at George Town in the
Island of Grand Cayman this Thirtieth Day of December
One Thousand Nine Hundred Ninety-Seven
SIG /s/ Anthony I. Goddard
--------------------------------
ANTHONY I. GODDARD
Asst. Registrar of Companies
Date: 30th December, 1997 An Authorized Officer,
------------------------------- Registry of Companies
Cayman Islands, B.W.I.
<PAGE>
EXHIBIT 4.1
===================================================================
YORKSHIRE POWER FINANCE LIMITED
AND
YORKSHIRE POWER GROUP LIMITED
AND
THE BANK OF NEW YORK, AS TRUSTEE
PRINCIPAL PAYING AGENT,
REGISTRAR AND TRANSFER AGENT
AND
BANQUE GENERALE DU LUXEMBOURG S.A.,
AS PAYING AGENT AND TRANSFER AGENT
SUBORDINATED DEBENTURE INDENTURE
Dated as of May _____, 1998
===================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I DEFINITIONS ...................................................................................1
SECTION 1.01. Definitions........................................................................1
SECTION 1.02. Compliance Certificates and Opinions..............................................10
SECTION 1.03. Form of Documents Delivered to Trustee............................................11
SECTION 1.04. Acts of Holders...................................................................12
SECTION 1.05. Notices, Etc., to Trustee and Company.............................................14
SECTION 1.06. Notice to Holders; Waiver.........................................................14
SECTION 1.07. Conflict with Trust Indenture Act.................................................16
SECTION 1.08. Effect of Headings and Table of Contents..........................................16
SECTION 1.09. Successors and Assigns............................................................16
SECTION 1.10. Separability Clause...............................................................16
SECTION 1.11. Benefits of Indenture.............................................................16
SECTION 1.12. Governing Law.....................................................................16
SECTION 1.13. Legal Holidays....................................................................16
ARTICLE II SECURITIES ..................................................................................17
SECTION 2.01. Forms Generally...................................................................17
SECTION 2.02. Form of Trustee's Certificate of Authentication...................................17
SECTION 2.03. Form of Trustee's Certificate of Authentication by an Authenticating
Agent......................................................................18
SECTION 2.04. Form of Guarantee.................................................................18
SECTION 2.05. Amount Unlimited; Issuable in Series..............................................19
SECTION 2.06. Denominations.....................................................................22
SECTION 2.07. Execution, Authentication, Delivery and Dating....................................22
SECTION 2.08. Transfer Agent and Paying Agent...................................................24
SECTION 2.09. Temporary Securities..............................................................24
SECTION 2.10. Registration, Registration of Transfer and Exchange...............................25
SECTION 2.11. Mutilated, Destroyed, Lost and Stolen Securities..................................27
SECTION 2.12. Payment of Interest; Interest Rights Reserved.....................................28
SECTION 2.13. Persons Deemed Owners.............................................................29
SECTION 2.14. Cancellation......................................................................30
SECTION 2.15. Computation of Interest...........................................................30
SECTION 2.16. Global Securities.................................................................30
SECTION 2.17. Extension of Interest Payment Period; Deferral of Interest Payment................31
SECTION 2.18. CUSIP Numbers.....................................................................31
ARTICLE III COVENANTS ..................................................................................32
SECTION 3.01. Payment of Principal, Premium and Interest........................................32
SECTION 3.02. Maintenance of Office or Agency...................................................32
SECTION 3.03. Money for Securities Payments to Be Held in Trust.................................33
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
SECTION 3.04. Appointments to Fill Vacancies in Trustee's Office................................34
SECTION 3.05. Certificate to Trustee............................................................34
SECTION 3.06. Compliance with Consolidation Provisions..........................................35
SECTION 3.07. Limitation on Dividends...........................................................35
SECTION 3.08. Covenants as to the Related Business Trust........................................36
SECTION 3.09. Covenants as to Treatment of Securities...........................................36
SECTION 3.10. Additional Interest...............................................................36
SECTION 3.11. Waiver of Certain Covenants.......................................................36
SECTION 3.12. Payment of Additional Amounts.....................................................37
SECTION 3.13. Copies Available to Holders.......................................................38
SECTION 3.14. Company Covenants.................................................................39
ARTICLE IV HOLDERS, LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE....................................39
SECTION 4.01. Holders' Lists....................................................................39
SECTION 4.02. Preservation and Disclosure of Lists..............................................39
SECTION 4.03. Reports of the Company and the Guarantor..........................................41
SECTION 4.04. Reports by the Trustee............................................................41
ARTICLE V REMEDIES OF THE TRUSTEE AND HOLDERS ON EVENT OF DEFAULT.......................................42
SECTION 5.01. Events of Default.................................................................42
SECTION 5.02. Payment of Securities on Default; Suit Therefor...................................44
SECTION 5.03. Application of Moneys Collected by Trustee........................................46
SECTION 5.04. Proceedings by Holders............................................................47
SECTION 5.05. Remedies Cumulative and Continuing................................................48
SECTION 5.06. Direction of Proceedings and Waiver of Defaults by Majority of Holders............48
SECTION 5.07. Undertaking to Pay Costs..........................................................49
ARTICLE VI CONCERNING THE TRUSTEE.......................................................................49
SECTION 6.01. Certain Duties and Responsibilities...............................................49
SECTION 6.02. Notice of Defaults................................................................50
SECTION 6.03. Certain Rights of Trustee.........................................................51
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities............................52
SECTION 6.05. May Hold Securities...............................................................52
SECTION 6.06. Money Held in Trust...............................................................52
SECTION 6.07. Compensation and Reimbursement....................................................52
SECTION 6.08. Disqualification; Conflicting Interests...........................................53
SECTION 6.09. Corporate Trustee Required; Eligibility...........................................53
SECTION 6.10. Resignation and Removal; Appointment of Successor Trustee.........................53
SECTION 6.11. Acceptance of Appointment by Successor............................................55
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.......................56
SECTION 6.13. Preferential Collecting of Claims Against Company.................................56
SECTION 6.14. Authenticating Agents.............................................................60
ARTICLE VII CONCERNING THE HOLDERS......................................................................62
SECTION 7.01. Action by Holders.................................................................62
SECTION 7.02. Proof of Execution by Holders.....................................................63
SECTION 7.03. Who Are Deemed Absolute Owners....................................................63
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding................................63
SECTION 7.05. Revocation of Consents; Future Holders Bound......................................64
ARTICLE VIII HOLDERS' MEETINGS..........................................................................64
SECTION 8.01. Purposes of Meetings..............................................................64
SECTION 8.02. Call of Meetings by Trustee.......................................................65
SECTION 8.03. Call of Meetings by Company or Holders............................................65
SECTION 8.04. Qualifications for Voting.........................................................65
SECTION 8.05. Regulations.......................................................................65
SECTION 8.06. Voting............................................................................66
ARTICLE IX SUPPLEMENTAL INDENTURES......................................................................67
SECTION 9.01. Supplemental Indentures Without Consent of Holders................................67
SECTION 9.02. Supplemental Indentures With Consent of Holders...................................69
SECTION 9.03. Compliance with Trust Indenture Act; Effect of Supplemental Indentures............70
SECTION 9.04. Notation on Securities............................................................70
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished Trustee..........71
ARTICLE X CONSOLIDATION, CONVERSION, MERGER, SALE, CONVEYANCE AND LEASE.................................71
SECTION 10.01. Company and Guarantor May Consolidate, etc., on Certain Terms.....................71
SECTION 10.02. Successor Corporation Substituted.................................................71
SECTION 10.03. Withholding.......................................................................72
ARTICLE XI SATISFACTION AND DISCHARGE...................................................................72
SECTION 11.01. Satisfaction and Discharge of Securities..........................................72
SECTION 11.02. Satisfaction and Discharge of Indenture...........................................75
SECTION 11.03. Application of Trust Money........................................................75
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XII IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS.............................76
SECTION 12.01. Indenture and Securities Solely Corporate Obligations.............................76
ARTICLE XIII REDEMPTION OF SECURITIES...................................................................76
SECTION 13.01. Applicability of Article..........................................................76
SECTION 13.02. Optional Tax Redemption...........................................................76
SECTION 13.03. Notice of Redemption; Selection of Securities.....................................77
SECTION 13.04. Securities Payable on Redemption Date.............................................78
SECTION 13.05. Securities Redeemed in Part.......................................................79
ARTICLE XIV SUBORDINATION OF SECURITIES.................................................................79
SECTION 14.01. Agreement to Subordinate..........................................................79
SECTION 14.02. Default on Senior Debt............................................................79
SECTION 14.03. Liquidation; Dissolution; Bankruptcy..............................................80
SECTION 14.04. Subrogation.......................................................................81
SECTION 14.05. Trustee to Effectuate Subordination...............................................82
SECTION 14.06. Notice by the Company.............................................................82
SECTION 14.07. Rights of the Trustee; Holders of Senior Debt.....................................83
SECTION 14.08. Subordination May Not Be Impaired.................................................84
ARTICLE XV GUARANTEE OF SECURITIES......................................................................84
SECTION 15.01. Applicability of Article; Unconditional Guarantee.................................84
SECTION 15.02. Waiver of Notice and Demand.......................................................85
SECTION 15.03. Guarantor Obligations Not Affected................................................85
SECTION 15.04. Execution of Guarantee............................................................86
SECTION 15.05. Subrogation.......................................................................87
SECTION 15.06. Independent Obligations...........................................................87
ARTICLE XVI SINKING FUNDS...............................................................................87
SECTION 16.01. Applicability of Article..........................................................87
SECTION 16.02. Satisfaction of Sinking Fund Payments with Securities.............................88
SECTION 16.03. Redemption of Securities for Sinking Fund.........................................88
ARTICLE XVII MISCELLANEOUS PROVISIONS...................................................................89
SECTION 17.01. Consent to Jurisdiction; Appointment of Agent to Accept Service of Process........89
SECTION 17.02. Successors........................................................................91
SECTION 17.03. Official Acts by Successor Corporation............................................91
SECTION 17.04. Execution in Counterparts.........................................................91
</TABLE>
iv
<PAGE>
TIE-SHEET
of provisions of Trust Indenture Act of 1939 with Indenture dated as of May ___,
1998 between Yorkshire Power Finance Limited, Yorkshire Power Group Limited and
The Bank of New York, Trustee:
<TABLE>
<CAPTION>
ACT SECTION INDENTURE SECTION
<S> <C>
310(a)(1)....................................................................6.09
(a)(2) ...................................................................6.09
310(a)(3).....................................................................N/A
(a)(4).....................................................................N/A
310(a)(5)..............................................................6.10, 6.11
310(b).......................................................................6.08
311(a) and (b).........................................................6.13, 4.04
312(a).......................................................................4.01
312(b) and (c)...............................................................4.02
313(a).......................................................................4.04
313(b)(1).....................................................................N/A
313(b)(2)....................................................................4.04
313(c).......................................................................4.04
313(d).......................................................................4.04
314(a).......................................................................4.03
314(b)........................................................................N/A
314(c)(1) and (2)............................................................1.02
314(c)(3).....................................................................N/A
314(d) .......................................................................N/A
314(e).......................................................................1.02
314(f) .......................................................................N/A
315(a)(c) and (d)............................................................6.01
315(b) ......................................................................6.02
315(e) ......................................................................5.07
316(a)(1) .............................................................5.02, 5.06
316(a)(2).....................................................................N/A
316(b) ......................................................................5.04
317(a) ................................................................5.02, 5.03
317(b) ......................................................................6.05
318(a) ......................................................................1.07
</TABLE>
- -----------
THIS TIE-SHEET IS NOT PART OF THE INDENTURE AS EXECUTED
v
<PAGE>
THIS SUBORDINATED DEBENTURE INDENTURE, dated as of May ____, 1998, among
Yorkshire Power Finance Limited, a limited liability company organized under the
laws of the Cayman Islands (the "Company"), having its registered office at P.O.
Box 309, Georgetown, Grand Cayman, Cayman Islands, British West Indies, as
issuer, Yorkshire Power Group Limited, a company organized under the laws of
England and Wales, having its principal office at Wetherby Road, Scarcroft,
Leeds, England ("Yorkshire Group" or the "Guarantor"), The Bank of New York, a
New York banking corporation, as trustee, principal paying agent, registrar and
transfer agent (the "Trustee") and Banque Generale du Luxembourg S.A., as paying
agent and transfer agent.
W I T N E S S E T H:
WHEREAS, the Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities") to be issued in one or more series as provided in this
Indenture; and
WHEREAS, the Guarantor has duly authorized the execution and delivery of
this Indenture to provide for the guarantee of the Securities as herein
provided; and
WHEREAS, all things necessary to make this Indenture a valid agreement of
the Company and the Guarantor, in accordance with its terms, have been done.
NOW, THEREFORE, for and in consideration of the premises and the purchase
of the Securities by the Holders thereof, it is mutually covenanted and agreed,
for the equal and proportionate benefit of all Holders of the Securities or of
series thereof, as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
For all purposes of this Indenture, except as otherwise expressly provided
or unless the context otherwise requires:
(1) The terms defined in this Article shall have the respective meanings
specified in this Article.
(2) All other terms used in this Indenture which are defined in the Trust
Indenture Act (as defined herein), or which are by reference therein defined in
the Securities Act (as defined herein), shall (except as herein otherwise
expressly provided or unless the context otherwise requires) have the meanings
assigned to such terms in said Trust Indenture Act and in said Securities Act as
in force at the date of this Indenture as originally executed.
<PAGE>
(3) All accounting terms used herein and not expressly defined shall have
the meanings assigned to such terms in accordance with generally accepted
accounting principles and the term "generally accepted accounting principles"
means such accounting principles as are generally accepted at the time of any
computation.
(4) The words "herein", "hereof" and "hereunder" and other words of similar
import refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision. Headings are used for convenience of reference
only and do not affect interpretation. The singular includes the plural and vice
versa.
"Additional Amounts" shall have the meaning set forth in Section 3.12.
"Additional Interest" means such additional amounts as may be required so
that the net amounts received and retained by the Holder after paying taxes,
duties, assessments or governmental charges of whatever nature imposed by a
Taxing Jurisdiction will not be less than the amounts the Holder would have
received had no such taxes, duties, assessments or other governmental charges
been imposed.
"Administrative Trustees" when used with respect to the Securities of any
series means the Persons designated as such in the Trust Agreement of the
related Business Trust.
"Affiliate" shall mean, with respect to a specified Person, (a) any Person
directly or indirectly owning, controlling or holding the power to vote 10% or
more of the outstanding voting securities or other ownership interests of the
specified Person, (b) any Person 10% or more of whose outstanding voting
securities or other ownership interests are directly or indirectly owned,
controlled or held with power to vote by the specified Person, (c) any Person
directly or indirectly controlling, controlled by, or under common control with
the specified Person, (d) a partnership in which the specified Person is a
general partner, (e) any officer or director of the specified Person, and (f) if
the specified Person is an individual, any entity of which the specified Person
is an officer, director or general partner.
"Authenticating Agent" shall mean any agent or agents of the Trustee which
at the time shall be appointed and acting pursuant to Section 6.14.
"Bankruptcy Law" shall mean Title 11, U.S. Code, or any similar federal or
state law for the relief of debtors.
"Bearer Security" means any Security that is payable to bearer.
"Board of Directors" shall mean either the Board of Directors of the
Company or the Guarantor, as applicable, or any duly authorized committee of the
officers and/or directors of the Company or the Guarantor appointed by
that board.
"Board Resolution" shall mean a copy of a resolution certified by a
Director of the Company or the Guarantor, as applicable, to have been duly
adopted by
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its Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Book-Entry Depositary" means, with respect to the Securities of any series
issuable or issued in whole or in part in the form of one or more Global
Securities, the Person designated as Book-Entry Depositary (or a nominee
thereof) by the Company pursuant to Section 2.05 and, if so provided pursuant to
Section 2.05 with respect to the Securities of a series, any successor to such
Person. If at any time there is more than one such Person, "Book-Entry
Depositary" shall mean, with respect to any series of Securities, the qualifying
entity which has been appointed with respect to the Securities of that series.
"Book-Entry Interests" means certificateless depositary interests
(representing in the aggregate a 100% beneficial interest in a Global Bearer
Security) to be issued by the Book-Entry Depositary to the Business Trust or DTC
or its successor as depositary of the Book-Entry Interests.
"Business Day" shall mean, with respect to the Place of Payment any series
of Securities, any day other than a Saturday or a Sunday or a day on which
banking institutions in any Place of Payment are authorized or required by law
or executive order to close.
"Business Trust" means any Delaware statutory business trust formed by the
Guarantor or an affiliate to issue its Trust Securities, the proceeds of which
will be used to purchase Securities of one or more series.
"Commission" shall mean the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" shall mean Yorkshire Power Finance Limited, a limited liability
company organized under the laws of the Cayman Islands, and, subject to the
provisions of Article X, shall include its successors and assigns.
"Company Request" or "Company Order" shall mean a written request or order
signed in the name of the Company by any Director and by any other Director or
the Treasurer, the Secretary or an Assistant Secretary or Assistant Treasurer of
the Company or any other officer so authorized, and delivered to the Trustee.
"Control Certificate" means a certificate evidencing voting control and
appointment power of a Business Trust.
"corporation" includes corporations, associations, companies, partnerships
and business trusts.
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"Custodian" shall mean any receiver, trustee, assignee, liquidator, or
similar official under any Bankruptcy Law.
"Default" shall mean any event, act or condition that with notice or lapse
of time, or both, would constitute an Event of Default.
"Defaulted Interest" shall have the meaning set forth in Section 2.12.
"Delaware Trustee" when used with respect to the Securities of any series
means the Person designated as such in the Trust Agreement of the related
Business Trust.
"Deposit Agreement" means any deposit agreement among the Company, a
Book-Entry Depositary and the holders and beneficial owners from time to time of
interests in Book-Entry Interests.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States as of the time shall be legal tender for the
payment of public and private debt in the United States.
"DTC" shall mean The Depository Trust Company, (or a nominee thereof) or
its successors.
"Event of Default" shall mean any event specified in Section 5.01,
continued for the period of time, if any, and after the giving of the notice, if
any, therein designated.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles, as recognized by the
American Institute of Certificated Public Accountants and the Financial
Accounting Standards Board, consistently applied and maintained on a consistent
basis for the Company and its Subsidiaries throughout the period indicated and
consistent with the prior financial practice of the Company and its
Subsidiaries.
"Global Bearer Security" means a Bearer Security, evidencing all or part of
a series of Securities, issued to the Book-Entry Depositary for such series.
"Global Registered Security" means a Registered Security, evidencing all or
part of a series of Securities, issued to the Book-Entry Depositary for such
series.
"Global Security" means a Global Registered Security or a Global Bearer
Security.
"Government Obligations" shall mean securities that are (i) direct
obligations of the United States of America for the payment of which its full
faith and credit is pledged or (ii) obligations of a Person controlled or
supervised by and acting as
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an agency or instrumentality of the United States of America the payment of
which is unconditionally guaranteed as a full faith and credit obligation by the
United States of America, which, in either case under clauses (i) or (ii) are
not callable or redeemable at the option of the issuer thereof, and shall also
include a certificate, depository receipt or other instrument which evidences a
direct ownership in such obligations with respect to any such Government
Obligation or a specific payment of interest on or principal of any such
Government Obligation held by such custodian for the account of the holder of a
certificate, depository receipt or other instrument, provided that (except as
required by law) such custodian is not authorized to make any deduction from the
amount payable to the holder of such instrument from any amount received by the
custodian in respect of the Government Obligation or the specific payment of
interest on or principal of the Government Obligation evidenced by such
instrument.
"Gross-Up Taxes" shall have the meaning set forth in Section 3.12.
"Guarantee" means the guarantee set forth in Article XV by the Guarantor of
any Security of any series authenticated and delivered pursuant to this
Indenture either (i) if specified, as contemplated by Section 15.01, to be
applicable to Securities of such series and not endorsed on such securities
pursuant to Article XV hereof, or (ii) in all other cases, endorsed on such
Securities.
"Guarantor" means the Person named as the "Guarantor" in the first
paragraph of this instrument until a successor corporation shall have become
such pursuant to the applicable provisions of this Indenture, and thereafter
"Guarantor" shall mean such successor corporation.
"Holder", "holder of Securities", or other similar terms, means, in the
case of a Registered Security, the Person in whose name a Security is registered
in the Security Register and, in the case of a Global Bearer Security, the
Book-Entry Depositary therefor.
"Indenture" shall mean this instrument as originally executed or, if
amended as herein provided, as so amended.
"Intercompany Notes" means promissory notes issued, from time to time, by
the Guarantor and certain of its affiliates which the Company purchases with the
proceeds from the issuance of the Securities.
"Interest Payment Date", when used with respect to any Security, means the
Stated Maturity of an installment of interest on such Security.
"Investment Company Act Event" shall mean that the Guarantor or the Company
shall have received an opinion of independent counsel (which may be counsel to
the Guarantor or its affiliates) experienced in such matters, to the effect
that, as a result of the occurrence of a change in law or regulation or a change
in interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (an "Investment Company Act
Change"), there is more than an insubstantial risk that the Guarantor or the
Company is or will be considered an
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"investment company" that is required to be registered under the Investment
Company Act of 1940, as amended, which Investment Company Act Change becomes
effective on or after the date of the prospectus for the Trust Securities.
"Maturity" means, when used with respect to any Security, the date on which
the principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at Stated Maturity or by the
declaration of acceleration, call for redemption or otherwise.
"Notice of Default" shall have the meaning set forth in Section 5.01(c).
"Officers" shall mean any Director or the Treasurer, the Secretary or an
Assistant Secretary or an Assistant Treasurer of the Company or any other
officer of the Company so authorized.
"Officers' Certificate" shall mean a certificate signed by two Officers and
delivered to the Trustee.
"Opinion of Counsel" shall mean a written opinion of counsel, who may be
counsel for the Company or the Guarantor.
"Outstanding", when used with reference to Securities, shall, subject to
the provisions of Section 7.04, mean, as of any particular time, all Securities
authenticated and delivered by the Trustee or an Authenticating Agent under this
Indenture, except
(a) Securities theretofore cancelled by the Trustee or an Authenticating
Agent or delivered to the Trustee for cancellation;
(b) Securities, or portions thereof, for the payment or redemption of
which moneys in the necessary amount shall have been deposited in
trust with the Trustee or with any Paying Agent (other than the
Company) or shall have been set aside and segregated in trust by the
Company (if the Company shall act as its own Paying Agent) for the
Holders of such Securities; provided that, if such Securities, or
portions thereof, are to be redeemed prior to maturity thereof, notice
of such redemption shall have been given as in Article XIII provided
or provision satisfactory to the Trustee shall have been made for
giving such notice; and
(c) Securities in lieu of or in substitution for which other Securities
shall have been authenticated and delivered pursuant to the terms of
Section 2.09 unless proof satisfactory to the Company and the Trustee
is presented that any such Securities are held by bona fide holders in
due course.
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"Paying Agent" means Banque Generale du Luxembourg S.A. and any other
Person, authorized by the Company to pay the principal of, and premium, if any,
or interest, if any, on any Securities on behalf of the Company, including,
without limitation, the Principal Paying Agent.
"Person" shall mean a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Place of Payment", when used with respect to the Securities of any series,
means the place or places, specified as contemplated by Section 2.05, at which,
subject to Section 3.02, principal of and premium, if any, and interest, if any,
on the Securities of such series are payable.
"Predecessor Security" of any particular Security shall mean every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 2.11 in lieu of a lost, destroyed or
stolen Security shall be deemed to evidence the same debt as the lost, destroyed
or stolen Security.
"Principal Paying Agent" means The Bank of New York until a successor
Principal Paying Agent shall have become such pursuant to the applicable
provisions of this Indenture and, thereafter, "Principal Paying Agent" shall
mean such successor Principal Paying Agent.
"Property Trustee" when used with respect to the Securities of any series
means the Person designated as such in the Trust Agreement of the related
Business Trust.
"Redemption Price" means, when used with respect to any Security to be
redeemed, the price at which it is to be redeemed pursuant to Indenture
exclusive of accrued and unpaid interests.
"Redemption Date", when used with respect to any Security to be redeemed,
means the date fixed for such redemption by or pursuant to the Indenture.
"Registered Security", means any Security that is payable to a registered
owner or registered assigns thereof as registered in the Security Register.
"Regular Record Date" for the interest payable on any Interest Payment Date
on the Securities of any series means the date specified for that purpose as
contemplated by Section 2.05.
"Relevant Date" means whichever is the later of (i) the date on which
payment first becomes due and (ii) if the full amount payable has not been
received in The City of New York by the Book-Entry Depositary or the Trustee on
or prior to such
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due date, the date on which, the full amount having been so received, notice to
that effect shall have been given to the holders in accordance with the
Indenture.
"Responsible Officer", when used with respect to the Trustee, shall mean
any officer of the Trustee including any vice-president, any assistant
vice-president, any secretary, any assistant secretary, the treasurer, any
assistant treasurer or any other officer within the Corporate Trust Office of
the Trustee customarily performing functions similar to those performed by any
of the above-designated officers and also means, with respect to a particular
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Securities" has the meaning stated in the first recital of this Indenture
and more particularly means any securities authenticated and delivered under
this Indenture.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Security Register" and "Security Registrar" shall have the respective
meanings set forth in Section 2.10.
"Senior Debt" shall mean with respect to any person: (i) any payment due in
respect of indebtedness of such person, whether outstanding at the date of
execution of the Indenture or thereafter incurred, created or assumed, (a) in
respect of money borrowed (including any financial derivative, hedging or
futures contract or similar instrument) and (b) evidenced by securities, bonds,
debentures, notes or other similar instruments issued by such person that, by
their terms, are senior or senior subordinated debt securities, (ii) all capital
lease obligations; (iii) all obligations issued or assumed as the deferred
purchase price of property, all conditional sale obligations and all obligations
of such person under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business and long-term purchase
obligations), (iv) all obligations for the reimbursement of any letter of
credit, banker's acceptance, security purchase facility or similar credit
transaction, (v) all obligations of the type referred to in clauses (i) through
(iv) above of other persons the payment of which such person is responsible or
liable as obligor, guarantor or otherwise, and (vi) all obligations of the type
referred to in clauses (i) through (v) above of other persons secured by any
lien on any property or asset of such person (whether or not such obligation is
assumed by such person); provided, however, that Senior Debt shall not include
(1) any such indebtedness that is by its terms subordinated to or pari passu
with the Securities and (2) any unsecured indebtedness between or among such
person or its affiliates. Such Senior Debt shall continue to be Senior Debt and
be entitled to the benefits of the subordination provisions contained in the
Indenture irrespective of any amendment, modification or waiver of any term of
such Senior Debt.
"Special Event" means either a Tax Event or an Investment Company Act
Event.
"Special Record Date" for the payment of any Defaulted Interest means a
date fixed by the Trustee pursuant to Section 2.12.
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"Stated Maturity", when used with respect to any obligation or any
installment of principal thereof or interest thereon, means the date, if any, on
which the principal of such obligation or such installment of principal or
interest is stated to be due and payable (without regard to any provisions for
redemption, prepayment, declaration of acceleration, purchase or extension);
provided that, with regard to any installment of interest, Stated Maturity shall
not include any date as to which the Company shall have elected to extend the
interest payment period in accordance with Section 2.05.
"Subsidiary" means a corporation more than 50% of the outstanding voting
stock of which is owned, directly or indirectly, by the Guarantor, an affiliate
thereof or by one or more other Subsidiaries. For the purposes of this
definition, "voting stock" means shares, interests, participations or other
equivalents in the equity interest (however designated) in such corporation
having ordinary voting power for the election of a majority of the directors (or
the equivalent) of such corporation, other than shares, interests,
participations or other equivalents having such power only by reason of the
occurrence of a contingency.
"Tax Event" means the receipt by the Guarantor or the Company of an opinion
of independent counsel (which may be counsel to the Guarantor or its affiliates)
experienced in such matters to the effect that there has been (a) amendment to,
or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of any supranational federation to which the United
Kingdom belongs or the jurisdiction (or any political subdivision or taxing
authority thereof or therein) in which the Company or the Guarantor is
incorporated or created, as applicable, or in which the Company or the Guarantor
is managed or has a place of business (each, a "Taxing Jurisdiction"), (b) any
official administrative pronouncement or judicial decision interpreting,
clarifying or applying such laws or regulations or (c) a threatened challenge
asserted by a government or taxing authority with respect to the Guarantor or
any of its subsidiaries, or a threatened challenge asserted in writing by a
government or taxing authority against any other taxpayer that has raised
capital through the issuance of securities that are substantially similar to the
Securities or the Trust Securities, which amendment or change is effective or
which pronouncement clarification, challenge or decision is announced on or
after the date of the prospectus for the related Trust Securities, and that
results in their being more than an insubstantial risk that (i) the Company is,
or will be within 90 days of the date thereof , subject to income tax within a
Taxing Jurisdiction (other than the United Kingdom corporation income tax) with
respect to interest received or accrued on the Intercompany Notes, (ii) the
Company is, or will be within 90 days of the date thereof, subject to more than
a de minimis amount of other tax, duties or other governmental charges, (iii)
interest payable by the Company on the Securities is not, or within 90 days of
the date thereof, will not be, deductible, in whole or in part for United States
Federal income tax or United Kingdom corporation income tax purposes, as they
accrue by the Company or by a member of any tax group to which the Guarantor
belongs or (iv) interest payable with respect to the Intercompany Notes by the
Guarantor or its affiliates is not, or within 90 days of the date thereof, will
not be, deductible, in whole or in part, for (as appropriate) United States
Federal or United Kingdom corporation income tax purposes, by one of (as
appropriate) the Guarantor, its shareholders or a member of any tax group to
which the Guarantor belongs.
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"Tax Payments" means any direct or indirect payment by the Guarantor to
governmental authorities in respect of United Kingdom, United States or Cayman
Islands taxes arising from the operations of the Guarantor, the Company, the
Trust or Yorkshire Electricity Group plc as and when such taxes become due and
payable.
"Trustee" shall mean the Person identified as "Trustee" in the first
paragraph hereof, and, subject to the provisions of Article VI hereof, shall
also include its successors and assigns as Trustee hereunder.
"Trust Agreement" when used with respect to a Business Trust shall mean the
agreement or instrument that governs the affairs of such Business Trust.
"Trust Indenture Act" shall mean the Trust Indenture Act of 1939 as in
force at the date of execution of this Indenture except as provided in Section
9.03; provided, however, that, in the event the Trust Indenture Act of 1939 is
amended after such date, "Trust Indenture Act" shall mean, to the extent
required by any such amendment, the Trust Indenture Act of 1939 as so amended.
"Trust Securities" shall mean the securities issued by a Business Trust
evidencing undivided beneficial interests in the assets of the Business Trust.
Trust Securities related to a particular series of Securities means the series
of Trust Securities the proceeds of the sale of which were loaned to the Company
in exchange for such series of Securities.
"Trust Securities Guarantee" shall mean any guarantee agreement executed
and delivered by the Guarantor for the benefit of the holders from time to time
of all or a portion of the Trust Securities of a Business Trust. The Trust
Securities Guarantee related to a particular series of Trust Securities means
the agreement pursuant to which the Guarantor has guaranteed, to the extent
stated therein, the payment of distributions and certain other amounts with
respect to such series of Trust Securities.
"United Kingdom" means the United Kingdom of Great Britain and Northern
Ireland, its territories, its possessions and other areas subject to its
jurisdiction.
"United States" means the United States of America (including the District
of Columbia), its territories, its possessions and other areas subject to its
jurisdiction.
SECTION 1.02. Compliance Certificates and Opinions.
Except as otherwise expressly provided by this Indenture, upon any
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture
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relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(4) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer or Director may be based, insofar
as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer or Director knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or Opinion of Counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers or Director or
Directors stating that the information with respect to such factual matters is
in the possession of the Company, unless such counsel knows, or in the exercise
of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
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SECTION 1.04. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders may
be embodied in and evidenced by one or more instruments of substantially similar
tenor signed by such Holders in Person or by agent duly appointed in writing,
and, except as herein otherwise expressly provided, such action shall become
effective when such instrument or instruments are delivered to the Trustee and,
where it is hereby expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced thereby) are herein
sometimes referred to as the "Act" of the Holders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section 1.04.
Without limiting the generality of the foregoing, unless otherwise
established in or pursuant to a Board Resolution or set forth or determined in
an Officers' Certificate, or established in one or more indentures supplemental
hereto, pursuant to Section 2.05, a Holder, including a Book-Entry Depositary
that is a Holder of a Global Security, may make, give or take, by a proxy, or
proxies, duly appointed in writing, any request, demand, authorization,
direction, notice, consent, waiver or other action provided in this Indenture to
be made, given or taken by Holders, and a Book-Entry Depositary that is a Holder
of a Global Security may provide its proxy or proxies to the beneficial owners
of interests in any such Global Security through such Book-Entry Depositary's
standing instructions and customary practices.
(b) The fact and date of the execution by any Person of any such
instrument, writing or proxy may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument, writing or proxy acknowledged to him the execution thereof.
Where such execution is by a signer acting in a capacity other than his
individual capacity, such certificate or affidavit shall also constitute
sufficient proof of his authority. The fact and date of the execution of any
such instrument, writing or proxy, or the authority of the Person executing the
same, may also be proved in any other manner which the Trustee deems sufficient.
(c) The ownership of Registered Securities shall be proved by the Security
Register.
(d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Security shall bind every future Holder of the
same Security and the Holder of every Security issued upon the registration of
transfer thereof or in exchange therefor or in lieu thereof in respect of
anything done, omitted or suffered to be done by the Trustee or the Company in
reliance thereon, whether or not notation of such action is made upon such
Security.
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(e) The principal or face amount and serial numbers of Bearer Securities of
any series held by any Person, and the date of holding the same, may be proved
by the production of such Bearer Securities or by a certificate executed by the
Book-Entry Depositary for such Bearer Securities.
(f) If the Company shall solicit from the Holders of Securities of any
series any request, demand, authorization, direction, notice, consent, waiver or
other Act, the Company may, at its option, by Board Resolution, fix in advance a
record date for purposes of determining the identity of Holders of Securities
entitled to give such request, demand, authorization, direction, notice,
consent, waiver or other Act, but the Company shall have no obligation to do so.
Any such record date shall be fixed at the Company's discretion. If such a
record date is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be sought or given before or after the record
date, but only the Holders of Securities of record at the close of business on
such record date shall be deemed to be Holders of Securities for the purpose of
determining whether Holders of the requisite proportion of Securities of such
series Outstanding have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Securities of such series Outstanding shall be computed as of
such record date.
With regard to any record date set pursuant to this subsection, the Holders
of Outstanding Securities of the relevant series on such record date (or their
duly appointed agents), and only such Persons, shall be entitled to take
relevant action, whether or not such Holders remain Holders after such record
date. With regard to any action that may be taken hereunder only by Holders of a
requisite principal amount of Outstanding Securities of any series (or their
duly appointed agents) and for which a record date is set pursuant to this
subsection, the Company may, at its option, set an expiration date after which
no such action purported to be taken by any Holder shall be effective hereunder
unless taken on or prior to such expiration date by Holders of the requisite
principal amount of Outstanding Securities of such series on such record date
(or their duly appointed agents).
On or prior to any expiration date set pursuant to this subsection, the
Company may, on one or more occasions at its option, extend such expiration date
to any later date. Nothing in this subsection shall prevent any Holder (or any
duly appointed agent thereof) from taking, at any time, any action contrary to
or different from, any action previously taken, or purported to have been taken,
hereunder by such Holder, in which event the Company may set a record date in
respect thereof pursuant to this subsection. Notwithstanding the foregoing or
the Trust Indenture Act, the Company shall not set a record date for, and the
provisions of this paragraph shall not apply with respect to, any action to be
taken by Holders pursuant to Section 5.01 or 5.06.
Upon receipt by the Trustee of written notice of any default described in
Section 5.01, any declaration of acceleration, or any rescission and annulment
of any such declaration, pursuant to Section 5.01 or of any direction in
accordance with Section 5.06, a record date shall automatically and without any
other action by any Person be set for the purpose of determining the Holders of
Outstanding Securities of the series entitled
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to join in such notice, declaration, or rescission and annulment, or direction,
as the case may be, which record date shall be the close of business on the day
the Trustee receives such notice, declaration, rescission and annulment or
direction, as the case may be. The Holders of Outstanding Securities of such
series on such record date (or their duly appointed agent), and only such
Persons, shall be entitled to join in such notice, declaration, rescission and
annulment, or direction, as the case may be, whether or not such Holders remain
Holders after such record date; provided that, unless such notice, declaration,
rescission and annulment, or direction, as the case may be, shall have become
effective by virtue of Holders of the requisite principal amount of Outstanding
Securities of such series on such record date (or their duly appointed agents)
having joined therein on or prior to the 90th day after such record date, such
notice of default, declaration, rescission and annulment, or direction, as the
case may be, given or made by the Holders, as the case may be, shall
automatically and without any action by any Person be canceled and of no further
effect. Nothing in this paragraph shall prevent a Holder (or a duly appointed
agent thereof) from giving, before or after the expiration of such 90-day
period, a notice of default, a declaration of acceleration, a rescission and
annulment of a declaration of acceleration or a direction in accordance with
Section 5.06, contrary to or different from, or, after the expiration of such
period, identical to, a previously given notice, declaration, rescission and
annulment, or direction, as the case may be, that has been canceled pursuant to
the proviso to the preceding sentence, in which event a new record date in
respect thereof shall be set pursuant to this paragraph.
SECTION 1.05. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice, consent, waiver or
Act of Holders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with,
(1) the Trustee by any Holder or by the Company or the Guarantor shall
be sufficient for every purpose hereunder if made, given, furnished or
filed in writing to or with the Trustee at its corporate trust office, or
(2) the Company by the Trustee or by any Holder shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
in writing and mailed, first-class postage prepaid, to the Company
addressed to it at the address of its registered office, with a copy
addressed to the Guarantor at the address of its registered office, each as
specified in the first paragraph of this instrument or at any other address
previously furnished in writing to the Trustee by the Company.
SECTION 1.06. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any event, such
notice shall be sufficiently given (unless otherwise herein expressly provided)
if in writing and mailed, first-class postage prepaid, to each Holder affected
by such event, (i) in the case of a Holder of Registered Securities, at his
address as it appears in the Security Register, and (ii) in the case of a Holder
of Global Bearer Securities, at the address
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provided in or pursuant to the relevant Deposit Agreement of the relevant
Book-Entry Depositary, not later than the latest date, and not earlier than the
earliest date, prescribed for the giving of such notice. In any case where
notice to Holders is given by mail, neither the failure to mail such notice, nor
any defect in any notice so mailed, to any particular Holder shall affect the
sufficiency of such notice with respect to other Holders.
If Securities of any series are listed on the Luxembourg Stock Exchange and
the rules of such Stock Exchange so require, notice to Holders of such
Securities shall be published in a leading newspaper having general circulation
in Luxembourg.
If, by reason of the suspension of regular mail service or by reason of any
other cause, it shall be impracticable to give such notice by mail, then such
notification as shall be made at the direction of the Company in a manner
reasonably calculated, to the extent practicable under the circumstances, to
provide prompt notice shall constitute a sufficient notification for every
purpose hereunder.
Except as otherwise expressly provided herein or otherwise specified with
respect to any Securities pursuant to Section 2.05, where this Indenture
provides for notice to Holders of Bearer Securities of any event and the rules
of any securities exchange on which such Bearer Securities are listed so
require, such notice shall be sufficiently given to Holders of such Bearer
Securities if published in such newspaper or newspapers as may be specified in
such Securities on a Business Day at least twice, the first such publication to
be not earlier than the earliest date, and not later than the latest date,
prescribed for the giving of such notice. Any such notice by publication shall
be deemed to have been given on the date of the first such publication. In
addition, notice to the Holder of any Global Bearer Security shall be given by
mail in the manner provided above.
If by reason of any cause it shall be impracticable to publish any notice
to Holders of Bearer Securities as provided above, then such notification to
Holders of Bearer Securities as shall be given with the approval of the Trustee
shall constitute sufficient notice to such Holders for every purpose hereunder.
Neither the failure to give notice by publication to Holders of Bearer
Securities as provided above, nor any defect in any notice so published, shall
affect the sufficiency of such notice with respect to other Holders of Bearer
Securities or the sufficiency of any notice to Holders of Registered Securities
given as provided herein.
Any request, demand, authorization, direction, notice, consent, waiver or
Act required or permitted under this Indenture shall be in the English language,
except that any published notice may be in an official language of the country
of publication.
Where this Indenture provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by Holders shall be filed with the Trustee, but such filing
shall not be a condition precedent to the validity of any action taken in
reliance upon such waiver.
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SECTION 1.07. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with any provision
of the Trust Indenture Act or another provision which is required or deemed to
be included in this Indenture by any of the provisions of the Trust Indenture
Act, the provision or requirement of the Trust Indenture Act shall control. If
any provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, such provision of the Trust
Indenture Act shall be deemed to apply to this Indenture as so modified or
excluded, as the case may be.
SECTION 1.08. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns.
All covenants and agreements in this Indenture by the Company or the
Guarantor shall bind their respective successors and assigns, whether so
expressed or not.
SECTION 1.10. Separability Clause.
In case any provision in this Indenture, in the Securities or in any
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 1.11. Benefits of Indenture.
Nothing in this Indenture, in the Securities or in any Guarantee, express
or implied, shall give to any Person, other than the parties hereto and their
successors hereunder and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law.
This Indenture, the Securities and any Guarantee shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 1.13. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the
Securities) payment of principal, premium, if any, or interest, if any, need not
be made at such Place of Payment on such date, but may be made on the next
succeeding Business Day at such Place of Payment with the same force and effect
as if made on the Interest Payment Date or Redemption Date, or at the Stated
Maturity, and no interest shall accrue for the period
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from and after such Interest Payment Date, Redemption Date or Stated Maturity,
as the case may be.
ARTICLE II
SECURITIES
SECTION 2.01. Forms Generally.
The Securities of each series shall be in substantially the form appended
to the supplemental indenture establishing such series, or in such other form as
shall be established by or pursuant to a Board Resolution (or Officers'
Certificate delivered pursuant thereto) or in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, a Board Resolution or one or more indentures
supplemental hereto, and may have such letters, numbers or other marks of
identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the Director or Directors executing such
Securities, as evidenced by the Director's or Directors' execution of the
Securities. If the form of Securities of any series is established by action
taken pursuant to a Board Resolution, a copy of an appropriate record of such
action shall be certified by an authorized Director or officer of the Company
and delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 2.07 for the authentication and delivery of such
Securities.
The Trustee's certificates of authentication shall be in substantially the
form set forth in this Article or in a Board Resolution (or Officers'
Certificate delivered pursuant thereto) or an indenture supplemental hereto.
The definitive Securities shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the Director or Directors executing such Securities, as evidenced by the
Director's or Directors' execution of such Securities.
SECTION 2.02. Form of Trustee's Certificate of Authentication.
This is one of the Securities of the series designated herein and referred
to in the within-mentioned Indenture.
Dated: ______________________ as Trustee
By: ______________________________
Authorized Signatory
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SECTION 2.03. Form of Trustee's Certificate of Authentication by an
Authenticating Agent.
If at any time there shall be an Authenticating Agent appointed with
respect to any series of Securities, then the Trustee's Certificate of
Authentication by such Authenticating Agent to be borne by the Securities of
each such series shall be substantially as follows:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred
to in the within-mentioned Indenture.
Dated: ______________________ as Trustee
By: [NAME OF AUTHENTICATING AGENT]
Authenticating Agent
By: ______________________________
Authorized Signatory
SECTION 2.04. Form of Guarantee.
FOR VALUE RECEIVED, YORKSHIRE POWER GROUP LIMITED, a private limited
company duly incorporated and existing under the laws of England and Wales (the
"Guarantor", which term includes any successor Person under the Indenture
referred to in the Security on which this notation is endorsed), hereby fully
and unconditionally guarantees to the Holder of the accompanying Security issued
by Yorkshire Power Finance Limited (the "Company"), pursuant to the terms of the
Guarantee contained in Article XV of the Indenture, the due and punctual payment
of the principal of, premium, if any, and interest, if any, on this Security
(and any Additional Amounts payable in respect thereof), when and as the same
shall become due and payable, whether at Stated Maturity, by declaration of
acceleration, call for redemption or otherwise, in accordance with the terms of
this Security and the Indenture. In case of the failure of the Company
punctually to pay any such principal, premium, if any, or interest, if any, the
Guarantor hereby agrees to cause any such payment to be made punctually when and
as the same shall become due and payable as if such payment were made by the
Company.
The obligations of the Guarantor to the Holders of the Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article XV of the Indenture, and reference is hereby made to such Article and
Indenture for the precise terms of the Guarantee.
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THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Security upon which this notation of the
Guarantee is endorsed shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
YORKSHIRE POWER GROUP LIMITED
By: _______________________________
Authorized Signatory
SECTION 2.05. Amount Unlimited; Issuable in Series.
The aggregate principal amount of Securities which may be authenticated and
delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. Prior to the
authentication, issuance and delivery of Securities of any series there may be
established by specification in a supplemental indenture or in a Board
Resolution, or in an Officers' Certificate pursuant to a supplemental indenture
or a Board Resolution:
(a) the title of the Securities of such series (which shall
distinguish the Securities of such series from Securities of all other
series);
(b) any limit upon the aggregate principal amount of the Securities of
such series which may be authenticated and delivered under this Indenture
(except for Securities authenticated and delivered upon registration of
transfer of, or in exchange for, or in lieu of, other Securities of such
series pursuant to Section 2.09, 2.10 or 2.11 and except for any Securities
which, pursuant to Section 2.07, are deemed never to have been
authenticated and delivered hereunder);
(c) the Person or Persons (without specific identification) to whom
interest on Securities of such series shall be payable on any Interest
Payment Date, if other than the bearer (in the case of a Bearer Security)
or the Persons in whose names such Securities (or one or more Predecessor
Securities) are registered at the close of business on the Regular Record
Date for such interest;
(d) the date or dates, if any, on which the principal of the
Securities of such series is payable or any formulary or other method or
other means by which such date or dates shall be determined, by reference
to an index or other fact or event ascertainable outside this Indenture or
otherwise (without regard to any
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provisions for redemption, prepayment, declaration of acceleration,
purchase or extension);
(e) the rate or rates at which the Securities of such series shall
bear interest, if any (including the rate or rates at which overdue
principal shall bear interest, if different from the rate or rates at which
such Securities shall bear interest prior to the Stated Maturity, if any,
and, if applicable, the rate or rates at which overdue premium or interest
shall bear interest, if any), or any formulary or other method or other
means by which such rate or rates shall be determined, by reference to an
index or other fact or event ascertainable outside this Indenture or
otherwise; the date or dates from which such interest shall accrue; the
Interest Payment Dates on which such interest shall be payable and the
Regular Record Date, if any, for the interest payable on such Securities on
any Interest Payment Date; the right of the Company, if any, to extend the
interest payment periods and the duration of any such extension or to defer
the payment of interest; the obligation of the Company to pay Additional
Interest and the right, if any, to extend or advance the Stated Maturity of
the Securities and the conditions to such extension or advancement;
(f) the place or places at which or methods by which (1) the principal
of and premium, if any, and interest, if any, on Securities of such series
shall be payable, (2) registration of transfer of Securities of such series
may be effected, (3) exchanges of Securities of such series may be effected
and (4) notices and demands to or upon the Company in respect of the
Securities of such series and this Indenture may be served; the Security
Registrar and Paying Agent or Agents for such series; and if such is the
case, and if acceptable to the Trustee, that the principal of such
Securities shall be payable without presentment or surrender thereof;
(g) the period or periods within which, or the date or dates on which,
the price or prices at which and the terms and conditions upon which the
Securities of such series may be redeemed, in whole or in part, at the
option of the Company and any restrictions on such redemptions, including
but not limited to a restriction on a partial redemption by the Company of
the Securities of any series, resulting in delisting of such Securities
from any national exchange;
(h) the obligation or obligations, if any, of the Company to redeem or
purchase the Securities of such series pursuant to any sinking fund or
other analogous mandatory redemption provisions or at the option of a
Holder thereof and the period or periods within which or the date or dates
on which, the price or prices at which and the terms and conditions upon
which such Securities shall be redeemed or purchased, in whole or in part,
pursuant to such obligation;
(i) the denominations in which Securities of such series shall be
issuable if other than denominations of $25 and any integral multiple
thereof;
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(j) the currency or currencies, including composite currencies, in
which payment of the principal of and premium, if any, and interest, if
any, on the Securities of such series shall be payable (if other than in
dollars);
(k) if the principal of or premium, if any, or interest, if any, on
the Securities of such series are to be payable, at the election of the
Company or a Holder thereof, in a coin or currency other than that in which
the Securities are stated to be payable, the period or periods within which
and the terms and conditions upon which, such election may be made;
(l) if the principal of or premium, if any, or interest, if any, on
the Securities of such series are to be payable, or are to be payable at
the election of the Company or a Holder thereof, in securities or other
property, the type and amount of such securities or other property, or the
formulary or other method or other means by which such amount shall be
determined, and the period or periods within which, and the terms and
conditions upon which, any such election may be made;
(m) any restriction or condition on the transferability of a series of
Securities;
(n) if the amount payable in respect of principal of or premium, if
any, or interest, if any, on the Securities of such series may be
determined with reference to an index or other fact or event ascertainable
outside this Indenture, the manner in which such amounts shall be
determined to the extent not established pursuant to clause (e) of this
paragraph;
(o) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series which shall be payable upon
declaration of immediate payability pursuant to Section 5.01;
(p) any Events of Default, in addition to those specified in Section
5.01 with respect to the Securities of such series, and any covenants of
the Company or Guarantor for the benefit of the Holders of the Securities
of such series, in addition to those set forth in Article III and whether
any such covenants may be waived pursuant to Section 3.11;
(q) the terms, if any, pursuant to which the Securities of such series
may be converted into or exchanged for shares of capital stock or other
securities of the Company or any other Person;
(r) the obligations or instruments, if any, which shall be considered
to be Government Obligations in respect of the Securities of such series
denominated in a currency other than dollars or in a composite currency,
and any additional or alternative provisions for the reinstatement of the
Company's indebtedness in respect of such Securities after the satisfaction
and discharge thereof as provided in Section 11.01;
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(s) if the Securities of such series are to be issued in whole or in
part in form of one of more Global Securities, (i) whether beneficial
owners of interests in any such Global Security or Securities may exchange
such interests for definitive Registered Securities, of such series of like
tenor and of authorized form and denomination and the circumstances under
which any such changes may occur, if other than in the manner provided in
Section 2.10 and (ii) to Book-Entry Depositary for such Global Security or
Securities;
(t) if the Securities of such series are to be issuable as definitive
Bearer Securities, any and all matters incidental thereto which are not
specifically addressed in a supplemental indenture as contemplated by
clause (g) of Section 9.01;
(u) to the extent not established pursuant to clause (s) of this
paragraph, any limitations on the rights of the Holders of the Securities
of such Series to transfer or exchange such Securities or to obtain the
registration of transfer thereof; and if a service charge will be made for
the registration of transfer or exchange of Securities of such series the
amount or terms thereof;
(v) any exceptions to Section 1.01, or variation in the definition of
Business Day, with respect to the Securities of such series;
(w) the designation of the Business Trust to which Securities of such
series are to be issued;
(x) if Article XV and the other provisions of this Indenture relating
to the Guarantee of the Securities are applicable to such series; and
(y) any other terms of the Securities of such series not inconsistent
with the provisions of this Indenture.
The Securities of each series shall be subordinated in right of payment to
Senior Debt as provided in Article XIV.
SECTION 2.06. Denominations.
The Securities of each series shall be issuable in bearer form or in
registered form without coupons, except as otherwise expressly provided in a
supplemental indenture hereto, in such denominations as shall be specified as
contemplated by Section 2.05. In the absence of any such provisions with respect
to the Securities of any series, the Securities of such series shall be issuable
in denominations of $25 and any integral multiple thereof.
SECTION 2.07. Execution, Authentication, Delivery and Dating.
The Securities shall be executed on behalf of the Company by any Director,
the Secretary or any other signatory of the Company so authorized and need not
be attested. Definitive Registered Securities of any series may have the
Company's seal
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reproduced thereon which need not be attested. The Securities of any series
shall be executed by such additional Director or authorized signatory, if any,
as shall be specified pursuant to Section 2.05. The signature of any of these
authorized signatories on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signature of any individual who
was at any time the proper Director or authorized signatory of the Company shall
bind the Company, notwithstanding that such individual has ceased to hold such
office prior to the authentication and delivery of such Securities or did not
hold such office at the date of authentication of such Securities.
At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Securities, and the Trustee in accordance
with the Company Order shall authenticate and deliver such Securities. If the
form or terms of the Securities of the series have been established in or
pursuant to one or more Board Resolutions as permitted by Sections 2.01 and
2.05, in authenticating such Securities, and accepting the additional
responsibilities under this Indenture in relation to such Securities, the
Trustee shall be entitled to receive, and (subject to Section 6.01) shall be
fully protected in relying upon, an Opinion of Counsel stating,
(a) if the form of such Securities has been established by or pursuant
to Board Resolution as permitted by Section 2.01, that such form has been
established in conformity with the provisions of this Indenture;
(b) if the terms of such Securities have been established by or
pursuant to Board Resolution as permitted by Section 2.05, that such terms
have been established in conformity with the provisions of this Indenture;
and
(c) that such Securities, when authenticated and delivered by the
Trustee and issued by the Company in the manner and subject to any
conditions specified in such Opinion of Counsel, will constitute valid and
legally binding obligations of the Company, enforceable in accordance with
their terms, subject to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting the enforcement of
creditors' rights and to general principles of equity.
Notwithstanding the provisions of Section 2.05 and of the preceding
paragraph, if all Securities of a series are not to be originally issued at one
time, it shall not be necessary to deliver the Officers' Certificate otherwise
required pursuant to Section 2.05 or the Company Order and Opinion of Counsel
otherwise required pursuant to such preceding paragraph at or prior to the time
of authentication of each Security of such series if such documents are
delivered at or prior to the time of authentication upon original issuance of
the first Security of such series to be issued.
Each Security shall be dated the date of its authentication.
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No Security shall be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for herein
executed by the Trustee or an Authenticating Agent by manual signature, and such
certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture. Notwithstanding the
foregoing, if any Security shall have been authenticated and delivered hereunder
but never issued and sold by the Company, and the Company shall deliver such
Security to the Trustee for cancellation as provided in Section 2.14 together
with a written statement (which need not be accompanied by an Opinion of
Counsel) stating that such Security has never been issued and sold by the
Company, for all purposes of this Indenture such Security shall be deemed never
to have been authenticated and delivered hereunder and shall never be entitled
to the benefits of this Indenture.
SECTION 2.08. Transfer Agent and Paying Agent.
For so long as the Securities are listed on the Luxembourg Stock Exchange
and such stock exchange shall so require, the Company shall maintain a Paying
Agent and Transfer Agent in Luxembourg.
The Company shall enter into an appropriate agency agreement with any
Registrar, Transfer Agent or Paying Agent not a party to this Indenture, which
shall implement the provisions of this Indenture that relate to such Person. The
Company shall notify the Trustee of the name and address of any such Person. If
the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act
as such and shall be entitled to appropriate compensation therefor pursuant to
Section 6.06. The Company initially appoints the Trustee as Registrar, Transfer
Agent and Principal Paying Agent in The City of New York and Banque Generale du
Luxembourg S.A. as Paying Agent and Transfer Agent in Luxembourg in connection
with the Securities.
Banque Generale du Luxembourg S.A. shall be responsible for only those
duties that are described in the provisions of this Indenture that relate to the
Paying Agent and Transfer Agent. No implied duties or obligations shall be read
into this Indenture against Banque Generale du Luxembourg S.A. It is understood
and agreed that the actions taken by Banque Generale du Luxembourg S.A. as
Paying Agent and Transfer Agent shall be limited to actions including definitive
Registered Securities.
SECTION 2.09. Temporary Securities.
Pending the preparation of a permanent Global Security or definitive
Securities of any series, the Company may execute, and upon Company Order the
Trustee or the Authenticating Agent shall authenticate, and deliver, temporary
Securities which are printed, lithographed, typewritten, mimeographed or
otherwise produced, in any authorized denomination, substantially of the tenor
of the definitive Securities in lieu of which they are issued, in registered
form or, if authorized, in bearer form, and with such appropriate insertions,
omissions, substitutions and other variations as the officer or
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officers executing such Securities may determine, as evidenced by their
execution of such Securities.
If temporary Securities of any series are issued, the Company will cause
definitive Securities of that series to be prepared without unreasonable delay.
After the preparation of definitive Securities of such series, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment for that series, without
charge to the Holder except as provided in Section 2.10 in connection with a
transfer and except that a Person receiving definitive Bearer Securities shall
bear the cost of insurance, postage, transportation and the like. Upon surrender
for cancellation of any one or more temporary Securities of any series the
Company shall execute and the Trustee or the Authenticating Agent shall
authenticate and deliver in exchange therefor a like principal amount of
definitive Securities of the same series and of like tenor of authorized
denominations.
Upon any exchange of a portion of a temporary Global Security for a
definitive Global Security for the individual Securities represented thereby
pursuant to this Section 2.09 or Section 2.10, the temporary Global Security
shall be endorsed by the Trustee to reflect the reduction of the principal
amount of such temporary Global Security, and such principal amount shall be
reduced for all purposes by the amount so exchanged and endorsed.
SECTION 2.10. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the corporate trust office a register
(the register maintained in such office and in any other office or agency of the
Company in a Place of Payment being herein sometimes collectively referred to as
the "Security Register") in which, subject to such reasonable regulations as it
may prescribe, the Company shall provide for the registration of Registered
Securities and of transfers of Registered Securities. The Trustee is hereby
appointed "Security Registrar" for the purpose of registering Registered
Securities and transfers of Registered Securities as herein provided. The
Company may have one or more coregistrars and the term "Security Registrar"
includes any co-registrar.
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency in a Place of Payment for that series, the
Company shall execute, and the Trustee or the Authenticating Agent shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Registered Securities of the same series, of any
authorized denominations and of a like aggregate principal amount and tenor.
At the option of the Holder, any Registered Security or Registered
Securities of any series, other than a Global Security, may be exchanged for
other Registered Securities of the same series, of any authorized denominations
and of a like aggregate principal amount and tenor, upon surrender of the
Registered Securities to be
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exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and upon receipt of a Company Order the
Trustee or the Authenticating Agent shall authenticate and deliver, the
Registered Securities which the Holder making the exchange is entitled to
receive. Bearer Securities may not be delivered by the Trustee, the
Authenticating Agent or the Security Registrar in exchange for Registered
Securities.
All Securities issued upon any registration of transfer or exchange of
Registered Securities shall be the valid obligations of the Company, evidencing
the same debt, and entitled to the same benefits under this Indenture, as the
Registered Securities surrendered upon such registration of transfer or
exchange.
Every Registered Security presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Trustee) be
duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed, by the
Holder thereof or his attorney duly authorized in writing.
Interests in a Global Security or Securities may be exchanged for
definitive Registered Securities of the same series in whole or in part only
under the circumstances provided in this Indenture, in an Officers' Certificate
(pursuant to a Board Resolution) or in an indenture supplemental hereto pursuant
to which Securities of that series are issued or in the Securities of that
series. In such event the Company will execute, and the Trustee or the
Authenticating Agent, upon receipt of a Company Order for the authentication and
delivery of definitive Registered Securities of such series, will authenticate
and deliver such definitive Registered Securities. Any such definitive
Registered Securities so issued shall be registered in the name of such Person
or Persons as the Book-Entry Depositary shall instruct the Trustee and the
Security Registrar in writing. The Trustee or the Security Registrar shall
deliver such definitive Registered Securities to the Persons in whose names such
definitive Registered Securities are so registered. Upon the exchange (i) in
whole of a Global Security or Securities for definitive Registered Securities in
equal aggregate principal amount, such Global Security or Securities shall be
delivered to the Trustee for cancellation or (ii) in part of a Global Security
or Securities for definitive Registered Securities, then the principal amount of
such Global Security or Securities shall be reduced by an endorsement on such
Global Security or Securities in an amount equal to the aggregate principal
amount of such definitive Registered Securities. Interests in a Global Security
or Securities may not be exchanged for definitive Bearer Securities.
Notwithstanding the foregoing, interests in a Global Security may not be
exchanged for definitive Registered Securities during the sixteen day period
immediately prior to and including each Interest Payment Date.
No service charge shall be made to the Holder for any registration of
transfer or exchange of Securities, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Securities, other
than exchanges pursuant to Sections 2.09 or 13.05 not involving any transfer.
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The Company shall not be required (i) to issue, register the transfer of or
exchange Securities of any series during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption under
Section 13.03 and ending at the close of business on the day of such mailing,
(ii) to register the transfer of or exchange any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part or (iii) to exchange any Bearer Security so selected for
redemption except that such a Bearer Security may be exchanged for a Registered
Security of the series (but only if and under the circumstances for which the
Securities of such series are issuable as Registered Securities), provided that
such Registered Security shall be immediately surrendered for redemption with
written instructions for payment consistent with the provisions of this
Indenture.
The provisions of this Section 2.10 are, with respect to any Global
Security, subject to Section 2.16 hereof.
SECTION 2.11. Mutilated, Destroyed, Lost and Stolen Securities.
If any mutilated Security is surrendered to the Trustee, the Company shall
execute and the Trustee shall authenticate and deliver in exchange therefor a
new Security of the same series and of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i) evidence to
their satisfaction of the destruction, loss or theft of any Security and (ii)
such Security or indemnity as may be required by them to save each of them and
any agent of either of them harmless, then, in the absence of notice to the
Company or the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and upon its written request the Trustee
shall authenticate and deliver, in lieu of any such destroyed, lost or stolen
Security, a new Security of the same series and of like tenor and principal
amount and bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section 2.11, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security of any series issued pursuant to this Section 2.11 in
lieu of any destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the destroyed,
lost or stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of that series duly issued hereunder.
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The provisions of this Section 2.11 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 2.12. Payment of Interest; Interest Rights Reserved.
Interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid (in the case of a
Bearer Security) to the bearer thereof and (in the case of a Registered
Security) to the Person in whose name that Registered Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest.
Payment of interest, if any, in respect of any Registered Security will be
made by check mailed to the address of the Person entitled thereto as such
person's address appearing in the Security Register. Payment of interest, if
any, in respect of any Registered Security may also be made, in the case of a
Holder of at least U.S. $1,000,000 aggregate principal amount of Registered
Securities, and payment of interest, if any, in respect of a Global Registered
Security shall be made, by wire transfer to a U.S. Dollar account maintained by
the Holder with a bank in the United States; provided that such Holder elects
payment by wire transfer by giving written notice to the Trustee or a Paying
Agent to such effect designating such account no later than 15 days immediately
preceding the relevant due date for payment (or such other date as the Trustee
may accept in its discretion).
Any interest on any Security of any series which is payable but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall, in the case of Registered Securities,
forthwith cease to be payable to the Holder thereof on the relevant Regular
Record Date by virtue of having been such Holder, and such Defaulted Interest
may be paid by the Company, at its election in each case, as provided in clause
(1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names the Registered Securities of such series (or
their respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company shall
notify the Trustee in writing of the amount of Defaulted Interest proposed
to be paid on each Registered Security of such series and the date of the
proposed payment, and at the same time the Company shall deposit with the
Trustee an amount of money equal to the aggregate amount proposed to be
paid in respect of such Defaulted Interest or shall make arrangements
satisfactory to the Trustee for such deposit prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. Unless the
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Trustee is acting as the Security Registrar, promptly after such Special
Record Date, the Company shall furnish the Trustee with a list, or shall
make arrangements satisfactory to the Trustee with respect thereto, of the
names and addresses of, and respective principal amounts of such Registered
Securities held by, the Holders appearing on the Security Register at the
close of business on such Special Record Date. The Trustee shall promptly
notify the Company of such Special Record Date and, in the name and at the
expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed,
first-class postage prepaid, to each Holder of Securities of such series at
his address as it appears in the Security Register, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names
the Securities of such series (or their respective Predecessor Securities)
are registered at the close of business on such Special Record Date and
shall no longer be payable pursuant to the following clause (2).
(2) The Company may make payment of any Defaulted Interest on the
Registered Securities of any series or any Global Registered Security in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which such Registered Securities may be listed, and
upon such notice as may be required by such exchange.
Defaulted Interest on Bearer Securities shall be payable to the bearer
thereof at the time of payment of such Defaulted Interest by the Company.
Subject to the foregoing provisions of this Section 2.12, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security, shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 2.13. Persons Deemed Owners.
Prior to due presentment of a Registered Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Registered Security is registered as the
owner of such Registered Security for the purpose of receiving payment of
principal of, premium, if any, and (subject to Section 2.12) interest, if any,
on such Registered Security and for all other purposes whatsoever, whether or
not such Registered Security be overdue, and neither the Company, the Trustee
nor any agent of the Company or the Trustee shall be affected by notice to the
contrary. All such payments so made to any such person, or upon such person's
order, shall be valid, and, to the extent of the sums so paid, effectual to
satisfy and discharge the liability for monies payable upon any such Security.
The Company, the Trustee and any agent of the Company or the Trustee may
treat the Book-Entry Depositary for a Global Bearer Security as the absolute
owner of such Global Bearer Security for the purpose of receiving payment
thereof or on
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account thereof and for all other purposes whatsoever, whether or not such
Global Bearer Security or coupon be overdue, and neither the Company or the
Trustee nor any agent of the Company or the Trustee shall be affected by notice
to the contrary.
No holder of any beneficial interest in any Global Security held on its
behalf by a Book-Entry Depositary shall have any rights under this Indenture
with respect to such Global Security, and such Book-Entry Depositary may be
treated by the Company, the Trustee, and any agent of the Company or the Trustee
as the owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall impair, as between a
Book-Entry Depositary and such holders of beneficial interests, the operation of
customary practices governing the exercise of the rights of the Book-Entry
Depositary as holder of any Security.
SECTION 2.14. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange or for credit against any sinking fund payment shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by it. The Company may at any time deliver to the
Trustee for cancellation any Securities previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and all
Securities so delivered shall be promptly canceled by the Trustee. No Securities
shall be authenticated in lieu of or in exchange for any Securities canceled as
provided in this Section 2.14, except as expressly permitted by this Indenture.
All canceled Securities held by the Trustee shall be disposed of as directed by
a Company Order.
SECTION 2.15. Computation of Interest.
Except as otherwise specified as contemplated by Section 2.05 for
Securities of any series, interest, if any, on the Securities of each series
shall be computed on the basis of a 360-day year of twelve 30-day months. In the
event that any date on which an interest payment is payable on the Securities is
not a Business Day, then the interest payment payable on such date will be made
on the next succeeding day which is a Business Day (an without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on the date such payment was originally payable.
SECTION 2.16. Global Securities.
If the Company shall establish pursuant to Section 2.05 that the Securities
of a particular series are to be issued in the form of a Global Security, then
the Company shall execute and the Trustee shall, in accordance with Section
2.07, authenticate and deliver, a Global Security or Securities which (i) shall
represent, and shall be denominated in an aggregate amount equal to the
aggregate principal amount of, all of the Outstanding Securities of such series,
(ii) shall be in bearer form or, if in registered form, registered in the name
of the Book-Entry Depositary or its nominee, (iii) shall be
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delivered by the Trustee to the Book-Entry Depositary or pursuant to the
Book-Entry Depositary's instruction and (iv) shall bear a legend substantially
to the following effect:
"This Security is a Global Security within the meaning of the Indenture
hereinafter referred to and if this Security is in bearer form, is held by a
Book-Entry Depositary or, if this Security is in registered form, is registered
in the name of a Book-Entry Depositary or a nominee of a Book-Entry Depositary.
This Security is exchangeable for Securities, if this Security is in bearer
form, held by, or if this Security is in registered form, registered in the name
of, a person other than the Book-Entry Depositary or its nominee only in the
limited circumstances described in the Indenture.
Unless this Global Security is presented by an authorized representative of
the Book-Entry Depositary to the Company or its agent for registration of
transfer, if this Security is in registered form, exchange or payment, and any
definitive Registered Security is issued in the name or names as directed in
writing by the Book-Entry Depositary, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL in as much as the bearer
or the registered owner hereof, as the case may be, the Book-Entry Depositary,
has an interest herein."
Unless and until definitive Registered Securities of a series are issued in
exchange for the Global Security of a series as permitted by this Indenture, the
Global Security of a series may be transferred, in whole but not in part and in
the manner provided in Section 2.10, only to another nominee of the Book-Entry
Depositary for such series, or to a successor Book-Entry Depositary for such
series selected or approved by the Company or to a nominee of such successor
Book-Entry Depositary.
No Security that is not a Global Bearer Security may be payable to bearer
(except as otherwise provided in an indenture supplemental hereto or in an
Officers' Certificate (pursuant to a Board Resolution) pursuant to Section
2.05(s)).
SECTION 2.17. Extension of Interest Payment Period; Deferral of Interest
Payment.
The Company shall have the right at any time, so long as no Event of
Default shall have occurred and be continuing with respect to the Securities of
any series hereunder, to extend interest payment periods, or to defer the
payment of interest, on all Securities of one or more series, if so specified as
contemplated by Section 2.05 with respect to such Securities and upon such terms
as may be specified as contemplated by Section 2.05 with respect to such
Securities.
SECTION 2.18. CUSIP Numbers.
The Company in issuing the Securities of any series may use "CUSIP" numbers
(if then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Securities of such series or as contained in any notice
of a redemption and that
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reliance may be placed only on the other identification numbers printed on the
Securities of such series, and any such prepayment shall not be affected by any
defect in or omission of such numbers. The Company will promptly notify the
Trustee of any change in the CUSIP numbers.
ARTICLE III
COVENANTS
SECTION 3.01. Payment of Principal, Premium and Interest.
The Company covenants and agrees for the benefit of each series of
Securities that it will duly and punctually pay the principal of, premium, if
any, and interest and Additional Amounts, if any, on the Securities of that
series in accordance with the terms of the Securities and this Indenture. An
installment of principal of or interest on the Securities of a series shall be
considered paid on the date it is due if the Trustee or Paying Agent holds at
11:00 a.m. New York City time on that date money deposited by the Company in
immediately available funds and designated for, and sufficient to pay, the
installment in full.
When Securities of a series or Book-Entry Interests are held by a Business
Trust, neither the Company, the Guarantor, nor any agent of the Company or the
Guarantor will have any responsibility or liability for any aspect relating to
payments made or to be made by the Book-Entry Depositary to the Business Trust
in respect of the Securities of a series or the Book-Entry Interests. When
Securities of a series or Book-Entry Interest are held by DTC, neither the
Company, the Guarantor, nor any agent of the Company or the Guarantor will have
any responsibility or liability for any aspect relating to payments made or to
be made by the Book-Entry Depositary to DTC in respect of the Securities of a
series or the Book-Entry Interests. None of the Company, the Trustee, the
Book-Entry Depositary or any agent of any of the foregoing will have any
responsibility or liability for any aspect relating to payments made or to be
made by DTC on account of a participant's or indirect participant's ownership of
an interest in the Book-Entry Interests or for maintaining, supervising or
reviewing any records relating to a participant's interests in the Book-Entry
Interests.
SECTION 3.02. Maintenance of Office or Agency.
The Company will maintain (i) in the Borough of Manhattan, The City of New
York, an office or agency where Securities of any series may be presented or
surrendered for payment, and where notices and demands to or upon the Company in
respect of the Securities of such series and this Indenture may be served and if
definitive Registered Securities have been issued, an office or agency of a
Transfer Agent where Securities may be surrendered for registration of transfer
or exchange, and (ii) an office or agency of a Paying Agent where the Securities
may be paid in Luxembourg so long as the Securities are listed on the Luxembourg
Stock Exchange and the rules of such exchange so require. The Company will give
prompt written notice to the Trustee of the location, and any change in the
location, of any such office or agency. If at any time the
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Company shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the corporate trust office of the
Trustee, except that Bearer Securities of that series pursuant to Section 13.01
may be presented at the place specified for the purpose pursuant to Section
2.05, and the Company hereby appoints the Paying Agent as its agent to receive
all such presentations, surrenders, notices and demands.
The Company may also from time to time designate one or more other offices
or agencies (in or outside of such Place of Payment) where the Securities of one
or more series and any appurtenant coupons (subject to Section 13.01) may be
presented or surrendered for any or all of such purposes, and may from time to
time rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Company of its obligation to maintain
an office or agency in each Place of Payment for any series of Securities for
such purposes. The Company will give prompt written notice to the Trustee of any
such designation and any change in the location of any such other office or
agency. The Company will at all times maintain at least one Paying Agent which
is located outside the United Kingdom for each series of Securities.
SECTION 3.03. Money for Securities Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent with respect
to any series of Securities, it will, on or before each due date of the
principal of, premium, if any, or interest, if any, on any of the Securities of
that series, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal, premium, if any, or interest, if
any, so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents for any series of
Securities, it will, no later than 11:00 a.m., New York City time, on or prior
to each due date of the principal of, premium, if any, or interest, if any, on
any Securities of that series, deposit with a Paying Agent a sum in immediately
available funds sufficient to pay the principal, premium, if any, or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest.
The Company will cause each Paying Agent for any series of Securities other
than the Trustee to execute and deliver to the Trustee an instrument in which
such Paying Agent shall agree with the Trustee, subject to the provisions of
this Section 3.03, that such Paying Agent will:
(1) hold all sums held by it for the payment of the principal of,
premium, if any, or interest, if any, on Securities of that series in trust
for the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
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(2) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of that series) in the making of any
payment of principal of, premium, if any, or interest, if any, on the
Securities of that series; and
(3) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the satisfaction
and discharge of this Indenture or for any other purpose, pay, or by Company
Order direct any Paying Agent to pay, to the Trustee all sums held in trust by
the Company or such Paying Agent, such sums to be held by the Trustee upon the
same trusts as those upon which such sums were held by the Company or such
Paying Agent; and, upon such payment by the Company or by any Paying Agent to
the Trustee, the Company or such Paying Agent, as the case may be, shall be
released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held by
the Company, in trust for the payment of the principal of, premium, if any, or
interest, if any, on any Security of any series and remaining unclaimed for two
years after such principal, premium, if any, or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease.
SECTION 3.04. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the office of
Trustee, will appoint, in the manner provided in Section 6.10, a Trustee, so
that there shall at all times be a Trustee hereunder.
SECTION 3.05. Certificate to Trustee.
The Guarantor will deliver to the Trustee on or before 120 days after the
end of each fiscal year in each year, commencing with the first fiscal year
ending after the date hereof, so long as Securities of any series are
outstanding hereunder, an Officers' Certificate, stating that in the course of
the performance by the signers of their duties as officers of the Guarantor they
would normally have knowledge of any default by the Guarantor in the performance
of any covenants contained herein, stating whether or not they have knowledge of
any such default and, if so, specifying each such default of which the signers
have knowledge and the nature thereof.
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SECTION 3.06. Compliance with Consolidation Provisions.
Neither the Company nor the Guarantor will, while any of the Securities of
any series remain outstanding, consolidate with, or merge or convert into, or
merge or convert into itself, or sell or convey all or substantially all of its
property to, any other Person unless the provisions of Article X hereof are
complied with.
SECTION 3.07. Limitation on Dividends.
Except as may be provided in a supplemental indenture or an Officers'
Certificate with respect to a series of Securities, neither the Company nor the
Guarantor shall, directly or indirectly, (i) declare or pay any cash dividends
or distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of its capital stock (which includes common and preferred
stock) or (ii) make any payment of principal of, or interest or premium, if any,
on or repay or repurchase or redeem any debt securities (including any other
Securities) that rank pari passu with or junior in interest to the Securities or
the Guarantee, respectively, or (iii) make any guarantee payments with respect
to any guarantee that ranks pari passu with or junior in interest to the
Securities or the Guarantee, respectively, or (iv) make any payment of principal
or premium, if any, or interest on, or repay, repurchase or redeem any of its
debt securities held by, make any loans or advances to, or make any payments
with respect to any guarantee of the debt of, any affiliate, in each case other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of the Company or the
Guarantor and exchanges or conversions of common stock of one class for common
stock of another class; (b) payments by the Guarantor under the Trust Securities
Guarantee (or any other guarantee by the Guarantor with respect to any
securities issued by its direct or indirect subsidiaries, provided that the
proceeds from the issuance of such securities were used to purchase other
Securities); (c) payments by the Guarantor under the Guarantee; (d) any dividend
or payment by the Guarantor which is applied, directly or indirectly, to any Tax
Payments (e) payments by the Guarantor, directly or indirectly, on the
Intercompany Notes or any other promissory notes held by the Company (or any
other direct or indirect wholly-owned subsidiary of the Guarantor) evidencing
loans made with the proceeds from the issuance by the Company (or any other
direct or indirect wholly-owned subsidiary of the Guarantor) of securities
guaranteed by the Guarantor or (f) the reinvestment of any proceeds received
under clause (e) above by the Company (or any other direct or indirect
wholly-owned subsidiary of the Guarantor) in additional debt securities of the
Guarantor or any of its other direct or indirect wholly-owned subsidiaries, if
at such time (i) there shall have occurred and be continuing a payment default
pursuant to Section 5.01(a) or 5.01(b) (whether before or after any period of
grace) or an Event of Default hereunder with respect to any series of
Securities, (ii) the Guarantor shall be in default with respect to its payment
obligations under the Trust Securities Guarantee or the Guarantee or any other
such guarantee as described above or (iii) the Company shall have given notice
of its election of the exercise of its right to defer payment of interest as
provided in Sections 2.05 and 2.17 with respect to any series of Securities,
shall not have rescinded such notice and any such deferral shall be continuing
until of all such Deferred Interest, together with interest accrued thereon,
shall have been paid in full.
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SECTION 3.08. Covenants as to the Related Business Trust.
(a) In the event Securities of any series are issued to a Business Trust or
a trustee of such trust in connection with the issuance of Trust Securities by
such Business Trust, for so long as such Trust Securities remain outstanding,
Yorkshire Group shall use its reasonable efforts, consistent with the terms and
provisions of the Trust Agreement of such Business Trust, to cause (a) such
Business Trust to not be classified as anything other than a grantor trust for
United States Federal income tax purposes, (b) such Business Trust to remain a
trust falling within the provisions of Section 60 United Kingdom of Chargeable
Gains Act of 1992 ("Section 60") and not to be treated as a company for purposes
of United Kingdom tax law and (c) each of the Guarantor, the Company and such
Business Trust not to be required to register as an "investment company" under
the Investment Company Act.
SECTION 3.09. Covenants as to Treatment of Securities.
The Guarantor and the Company covenant to treat each series of Securities
as indebtedness of the Company for all United States Federal income tax
purposes.
SECTION 3.10. Additional Interest.
If the Securities of a series provide for the payment of Additional
Interest to the holders of such Securities, then the Guarantor or the Company,
as the case may be, shall pay to each holder of such Securities the Additional
Interest as provided therein.
SECTION 3.11. Waiver of Certain Covenants.
The Company or the Guarantor may omit in any particular instance to comply
with any term, provision or condition set forth in this Indenture with respect
to the Securities of any series if before the time for such compliance the
Holders of at least a majority in aggregate principal amount of the Outstanding
Securities of such series shall, by Act of such Holders, either waive such
compliance in such instance or generally waive compliance with such term,
provision or condition, provided that no such waiver shall without the consent
of each Holder affected thereby (a) change the Stated Maturity, if any, upon
which the principal of or the interest on the Securities is due and payable, (b)
reduce the principal amount thereof or the rate of interest thereon or extend
the time of payment of interest thereon (except pursuant to Section 2.17), (c)
change any obligation of the Company to pay Additional Amounts, (d) change any
Place of Payment or the currency in which, the Securities or any premium or the
interest thereon is payable, (e) reduce any amount payable under, delay or defer
the required time of payment under or impair the right to institute suit for the
enforcement of any payment under the Guarantee or (f) reduce the percentage in
principal amount of the outstanding Securities of any series, the consent of
whose Holders is required with respect to supplemental indentures and for any
waiver of compliance with certain provisions of the Indenture or certain
defaults hereunder and their consequences provided for in the Indenture;
provided, however, so long as any of the Trust Securities remain outstanding, no
such modification may be made that adversely affects the holders of the Trust
Securities, and no termination
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of the Indenture may occur, and no waiver of any Event of Default under the
Indenture or compliance with any covenant under the Indenture may be effective,
without the prior consent of the holders of a majority of the aggregate
liquidation amount of such Trust Securities unless and until the principal of
the series of Securities relating to such Trust Securities and all accrued and
unpaid interest or other amounts thereon have been paid in full.
SECTION 3.12. Payment of Additional Amounts.
Unless the Securities of a particular series otherwise provide, all
payments of principal and interest (including payments of discount and premium,
if any) with respect to the Securities of a particular series and all payments
made pursuant to the Guarantee shall be made free and clear of, and without
withholding or deduction for or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by or within a Taxing Jurisdiction or by or
within any political subdivision thereof or any authority therein or thereof
having power to tax ("Gross-Up Taxes"), unless such withholding or deduction is
required by law. In the event of any such withholding or deduction, the Company
or the Guarantor, as the case may be, shall pay to the Holder of such Securities
the amount that would otherwise have been due to such Holder in the absence of
such withholding or deduction ("Additional Amounts"), except that no such
Additional Amounts shall be payable:
(a) to, or to a Person on behalf of, a Holder who is liable for such
Gross-Up Taxes with respect to the Securities or the Guarantee, by reason of
such Holder having some connection with the relevant Taxing Jurisdiction
(including being a citizen or resident or national of, or carrying on a business
or maintaining a permanent establishment in, or being physically present in,
such Taxing Jurisdiction) other than the mere holding of a Security or the
receipt of principal and interest (including payments of discount and premium,
if any) in respect thereof or in respect of the Guarantee;
(b) to, or to a Person on behalf of, a Holder who presents a Security
(whenever presentation is required) for payment more than 30 days after the
Relevant Date except to the extent that such Holder would have been entitled to
such Additional Amounts on presenting such Security for payment on the last day
of such period of 30 days;
(c) to, or to a Person on behalf of, a Holder who presents a Security
(where presentation is required) in the United Kingdom or Cayman Islands;
(d) to, or to a Person on behalf of, a Holder who would not be liable or
subject to the withholding or deduction by making a declaration of non-residence
or similar claim for exemption to the relevant tax authority; or
(e) to, or to a Person on behalf of, a Holder of a Registered Security that
is not a Global Security issued pursuant to the request of owners of interests
representing a majority in Outstanding principal amount of such Securities
following and
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during the continuance of an Event of Default if such Holder (or any predecessor
Holder) was one of such owners requesting that such Registered Securities be so
issued.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Security (or any interest therein) been the Holder of the Security,
he would not have been entitled to payment of Additional Amounts by reason of
any one or more of clauses (a) through (e) above. If the Company or the
Guarantor, as applicable, shall determine that Additional Amounts will not be
payable because of the immediately preceding sentence, the Company or the
Guarantor, as applicable, will inform such Holder promptly after making such
determination setting forth the reason(s) therefor.
At least 30 Business Days prior to the first Interest Payment Date (and at
least 10 Business Days prior to each succeeding Interest Payment Date if there
has been any change with respect to the matters set forth in the below-mentioned
Officers' Certificate) the Company will furnish to the Trustee and any Paying
Agent an Officers' Certificate instructing the Trustee and any Paying Agent
whether payments of principal of or interest on the Securities is due on such
Interest Payment Date shall be without deduction or withholding for or on
account of any Gross-Up Taxes. If any such deduction or withholding shall be
required, prior to such Interest Payment Date the Company will furnish the
Trustee and any Paying Agent with an Officers' Certificate which specifies the
amount, if any, required to be withheld on such payment to Holders and certifies
that the Company shall pay such withholding or deduction. The Company covenants
to indemnify the Trustee for, and to hold the Trustee harmless against, any
loss, liability or expense reasonably incurred without negligence, willful
misconduct or bad faith on their part, arising out or in connection with actions
taken or omitted by the Trustee in reliance on any Officers' Certificate
furnished pursuant to this paragraph. Any Officers' Certificate required by this
Section 3.12 to be provided to the Trustee and any Paying Agent shall be deemed
to be duly provided if telecopied to the Trustee and such Paying Agent.
Reference to principal, interest, discount or premium in respect of the
Securities (or any payments pursuant to any Guarantee) shall be deemed also to
refer to any Additional Amounts which may be payable as set forth in this
Indenture or in the Securities.
The Company shall furnish to the Trustee the official receipts (or a
certified copy of the official receipts) evidencing payment of Gross-Up Taxes.
Copies of such receipts shall be made available to the Holders of the Securities
upon request.
SECTION 3.13. Copies Available to Holders.
Copies of this Indenture shall be available for inspection by the Holders
on a Business Day during normal business hours at the principal office of the
Company and at the corporate trust office. In addition, if the Securities of any
series are listed on the London Stock Exchange, the Luxembourg Stock Exchange or
any other stock exchange located outside the United States and such stock
exchange shall so require, copies of this Indenture, the Deposit Agreement, the
Letter of Representations, the memorandum and
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articles of association of the Company and the most recent publicly available
annual report of the Guarantor shall be made available for inspection by the
Holders of such Securities on a Business Day during normal business hours at the
offices of the paying agents and at the office of the listing agent required to
be maintained by such exchange for so long as the Securities of such series are
outstanding and are listed on such stock exchange.
SECTION 3.14. Company Covenants.
The Company covenants (i) to not, at any time, be engaged in a United
States trade or business for United States Federal income tax purposes and (ii)
to remain a partnership and not to be classified as an association or publicly
traded partnership taxable as a corporation for United States Federal income tax
purposes.
ARTICLE IV
HOLDERS, LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 4.01. Holders' Lists
The Company covenants and agrees that it will furnish or cause to be
furnished to the Trustee:
(a) on a semi-annual basis, not later than December 31 and June 30 in
each year, commencing June 30, 1998, a list, in such form as the Trustee
may reasonably require, of the names and addresses of the Holders of such
series as of the preceding November 15 or May 15, as the case may be; and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
except that, no such lists need be furnished so long as the Trustee is in
possession thereof by reason of its acting as Security Registrar.
SECTION 4.02. Preservation and Disclosure of Lists.
(a) The Trustee shall preserve, in as current a form as is reasonably
practicable, all information as to the names and addresses of the Holders of the
Securities of a series (1) contained in the most recent list furnished to it as
provided in Section 4.01 or (2) received by it in the capacity of Securities
Registrar (if so acting) hereunder. The Trustee may destroy any list furnished
to it as provided in Section 4.01 upon receipt of a new list so furnished.
(b) In case three or more Holders of Securities of a series (hereinafter
referred to as "applicants") apply in writing to the Trustee and furnish to the
Trustee
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reasonable proof that each such applicant has owned a Security for a period of
at least six months preceding the date of such application, and such application
states that the applicants desire to communicate with other Holders of
Securities of such series or with Holders of all Securities with respect to
their rights under this Indenture and is accompanied by a copy of the form of
proxy or other communication which such applicants propose to transmit, then the
Trustee shall within 5 Business Days after the receipt of such application, at
its election, either:
(1) afford such applicants access to the information preserved at the
time by the Trustee in accordance with the provisions of subsection (a) of
this Section 4.02; or
(2) inform such applicants as to the approximate number of Holders of
all Securities, whose names and addresses appear in the information
preserved at the time by the Trustee in accordance with the provisions of
subsection (a) of this Section 4.02, and as to the approximate cost of
mailing to such Holders the form of proxy or other communication, if any,
specified in such application.
If the Trustee shall elect not to afford such applicants access to such
information, the Trustee shall, upon the written request of such applicants,
mail to each Holder whose name and address appear in the information preserved
at the time by the Trustee in accordance with the provisions of subsection (a)
of this Section 4.02 a copy of the form of proxy or other communication which is
specified in such request with reasonable promptness after a tender to the
Trustee of the material to be mailed and of payment, or provision for the
payment, of the reasonable expenses of mailing, unless within five days after
such tender, the Trustee shall mail to such applicants and file with the
Commission, together with a copy of the material to be mailed, a written
statement to the effect that, in the opinion of the Trustee, such mailing would
be contrary to the best interests of the Holders of all Securities or would be
in violation of applicable law. Such written statement shall specify the basis
of such opinion. If the Commission, after opportunity for a hearing upon the
objections specified in the written statement so filed, shall enter an order
refusing to sustain any of such objections or if, after the entry of an order
sustaining one or more of such objections, the Commission shall find, after
notice and opportunity for hearing, that all the objections so sustained have
been met and shall enter an order so declaring, the Trustee shall mail copies of
such material to all such Holders with reasonable promptness after the entry of
such order and the renewal of such tender; otherwise the Trustee shall be
relieved of any obligation or duty to such applicants respecting their
application.
(c) Each and every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any Paying Agent shall be held accountable by reason of the disclosure of
any such information as to the names and addresses of the Holders of Securities
in accordance with the provisions of subsection (b) of this Section 4.02,
regardless of the source from which such information was derived, and that the
Trustee shall not be held accountable by reason of mailing any material pursuant
to a request made under said subsection (b).
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SECTION 4.03. Reports of the Company and the Guarantor.
The Company and the Guarantor covenant and agree:
(a) to file with the Trustee, within 15 days after the date on which the
Company and the Guarantor are required to file the same with the Commission,
copies of the annual reports and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may from
time to time by rules and regulations prescribe) which the Company and the
Guarantor may be required to file with the Commission pursuant to Section 13 or
Section 15(d) of the Exchange Act; or, if the Company or the Guarantor is not
required to file information, documents or reports pursuant to either of such
sections, then to file with the Trustee and the Commission, in accordance with
rules and regulations prescribed from time to time by the Commission, such of
the supplementary and periodic information, documents and reports which may be
required pursuant to Section 13 of the Exchange Act in respect of a security
listed and registered on a national securities exchange as may be prescribed
from time to time in such rules and regulations.
(b) to file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance by the
Company with the conditions and covenants provided for in this Indenture as may
be required from time to time by such rules and regulations.
(c) to transmit by mail to all Holders of Securities, as the names and
addresses of such holders appear upon the Security Register, within 30 days
after the filing thereof with the Trustee, such summaries of any information,
documents and reports required to be filed by the Company pursuant to
subsections (a) and (b) of this Section 4.03 as may be required by rules and
regulations prescribed from time to time by the Commission.
(d) to notify the Trustee when and as the Securities of any series become
admitted to trading on any national securities exchange.
Delivery of such reports, information and documents to the Trustee is for
informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
SECTION 4.04. Reports by the Trustee.
(a) The Trustee shall transmit to Holders such reports concerning the
Trustee and its actions under this Indenture as may be required pursuant to the
Trust Indenture Act at the times and in the manner provided pursuant thereto. If
required by Section 313(a) of the Trust Indenture Act, the Trustee shall, not
later than June 30 in each
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year, commencing June 30, 1998, deliver to Holders a brief report, dated as of
such June 30, which complies with the provisions of such Section 313(a).
(b) A copy of each such report shall, at the time of such transmission to
Holders, be filed by the Trustee with each stock exchange, if any, upon which
the Securities are listed, with the Commission and with the Company. The Company
will promptly notify the Trustee when and if the Securities are listed on any
stock exchange.
ARTICLE V
REMEDIES OF THE TRUSTEE AND HOLDERS
ON EVENT OF DEFAULT
SECTION 5.01. Events of Default.
One or more of the following events with respect to Securities of any
series which has occurred and is continuing shall constitute an Event of Default
hereunder with respect to such series:
(a) failure to pay interest, if any, including any Additional Interest, on
any Security of such series within 60 days after the same becomes due and
payable (whether or not payment is prohibited by the provisions of Article
Fourteen hereof); provided, however, that a valid extension of the interest
payment period or deferral of interest payment by the Company as contemplated in
Section 2.17 of this Indenture shall not constitute a failure to pay interest
for this purpose; or
(b) failure to pay the principal of or premium, if any, on any Security of
such series (whether or not payment is prohibited by the provisions of Article
Fourteen hereof) when due and payable; or
(c) failure to perform or breach of any covenant or warranty of the Company
or the Guarantor in this Indenture (other than a covenant or warranty a default
in the performance of which or breach of which is elsewhere in this Section
specifically dealt with or which has expressly been included in this Indenture
solely for the benefit of one or more series of Securities other than such
series) for a period of 60 days after there has been given, by registered or
certified mail, to the Company or the Guarantor by the Trustee or to the Company
or the Guarantor and the Trustee by the Holders of at least 33% in aggregate
principal amount of the outstanding Securities of such series, a written notice
specifying such default or breach and requiring it to be remedied and stating
that such notice is a "Notice of Default" hereunder; or
(d) the entry by a court having jurisdiction in the premises of (1) a
decree or order for relief in respect of the Company or the Guarantor in an
involuntary case or proceeding under any applicable Federal or state bankruptcy,
insolvency, reorganization or other similar law or (2) a decree or order
adjudging the Company or the Guarantor a bankrupt or insolvent, or approving as
properly filed a petition by one or more Persons other than the Company or the
Guarantor seeking reorganization, arrangement, adjustment or composition of or
in respect of the Company or the Guarantor
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under any applicable Federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official for the
Company or the Guarantor or for any substantial part of its property, or
ordering the winding-up or liquidation of its affairs, and any such decree or
order for relief or any such other decree or order shall have remain unstayed
and in effect for a period of 90 consecutive days; or
(e) the commencement by the Company or the Guarantor of a voluntary case or
proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Company or the Guarantor in a case
or proceeding under any applicable Federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable Federal
or state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the Company or the
Guarantor or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the
authorization of such action by the Board of Directors.
(f) the Guarantee shall be held in a final judicial proceeding to be
unenforceable or invalid or shall cease for any reason to be in full force and
effect.
(g) any other Event of Default specified with respect to the terms of the
Securities of such series as contemplated herein.
If an Event of Default due to the default in payment of principal of, or
interest on, any series of Securities or due to the default in the performance
or breach of any other covenant or warranty of the Company or the Guarantor
applicable to the Securities of such series but not applicable to all
outstanding Securities shall have occurred and be continuing, either the Trustee
or the Holders of not less than 33% in aggregate principal amount of the
outstanding Securities of such series may then declare the principal of all
Securities of such series and interest accrued thereon to be due and payable
immediately (provided that the payment of principal and interest on such
Securities shall remain subordinated to the extent provided in Article XIV
hereof). If the Trustee or the Holders of not less than 33% in principal amount
of the Securities of such series fail to make such declaration, and the Trust
Securities issued by the Business Trust to which such series of Securities
relate are still outstanding, then the holders of not less than 33% in aggregate
liquidation preference of such series of Trust Securities may make such
declaration. If an Event of Default due to the default in the performance of any
other of the covenants or agreements herein applicable to all outstanding
Securities or an Event of Default specified in Section 5.01(d) or (e) shall have
occurred and be continuing, either the Trustee or the Holders of not less than
33% in aggregate principal amount of all Securities then outstanding (or Trust
Securities), considered as one class, and not the Holders of the Securities (or
Trust Securities) of any one of such series, may declare the principal of all
Securities and interest accrued thereon to be due and payable immediately
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(provided that the payment of principal and interest on such Securities shall
remain subordinated to the extent provided in Article XIV).
If an Event of Default shall occur and be continuing with respect to the
Securities of any series, the Property Trustee will have the right to declare
the principal of and premium, if any, and interest on such Securities and any
other amounts payable under the Indenture, to be immediately due and payable and
to enforce its other rights as a creditor with respect to such Securities.
At any time after such a declaration of acceleration with respect to
Securities of any series shall have been made and before a judgment or decree
for payment of the money due shall have been obtained by the Trustee as
hereinafter in this Article provided, the Event or Events of Default giving rise
to such declaration of acceleration shall, without further act, be deemed to
have been waived, and such declaration and its consequences shall, without
further act, be deemed to have been rescinded and annulled, if (a) the Company
or the Guarantor shall have paid or deposited with the Trustee a sum sufficient
to pay (1) all overdue interest on all Securities of such series, (2) the
principal of and premium, if any, on any Securities of such series which shall
have become due otherwise than by such declaration of acceleration and interest
thereon at the rate or rates prescribed therefor in such Securities, (3) to the
extent that payment of such interest is lawful, interest upon overdue interest,
if any, at the rate or rates prescribed therefor in such Securities, and (4) all
amounts due to the Trustee under Section 6.06, and (b) any other Event or Events
of Default with respect to Securities of such series, other than the non-payment
of the principal of Securities of such series which shall have become due solely
by such declaration of acceleration, shall have been cured or waived as provided
in Section 5.06.
No such rescission shall affect any subsequent Event of Default or impair
any right consequent thereon. In case the Trustee or any Holder shall have
proceeded to enforce any right under this Indenture and such proceedings shall
have been discontinued or abandoned for any reason or shall have been determined
adversely to the Trustee, then and in every such case the Company, the
Guarantor, the Trustee and the Holders of the Securities shall be restored
respectively to their several positions and rights hereunder, and all rights,
remedies and powers of the Company, the Trustee and the Holders of the
Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Securities on Default; Suit Therefor.
If an Event of Default described in clause (a) or (b) of Section 5.01 shall
have occurred and be continuing, the Company shall, upon demand of the Trustee,
pay to it, for the benefit of the Holders of the Securities of the series with
respect to which such Event of Default shall have occurred, the whole amount
then due and payable on such Securities for principal and premium, if any, and
interest, if any, and, to the extent permitted by law, interest on premium, if
any, and on any overdue principal and interest, at the rate or rates prescribed
therefor in such Securities, and, in addition thereto, such further amount as
shall be sufficient to cover any amounts due to the Trustee under Section 6.06.
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If the Company shall fail to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, may
prosecute such proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to Securities of any series shall have
occurred and be continuing, the Trustee may in its discretion proceed to protect
and enforce its rights and the rights of the Holders of Securities of such
series by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
If an Event of Default shall have occurred and be continuing as to the
Securities of any series and if Trust Securities relating to such series of
Securities are outstanding, the Property Trustee holding such series of
Securities shall have the right to declare the principal of and interest on such
series of Securities to be immediately due and payable and to enforce its other
rights as a creditor with respect to such series of Securities.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Securities under Title
11, United States Code, or any other applicable law, or in case a receiver or
trustee shall have been appointed for the property of the Company or such other
obligor, or in the case of any other similar judicial proceedings relative to
the Company or other obligor upon the Securities, or to the creditors or
property of the Company or such other obligor, the Trustee, irrespective of
whether the principal of the Securities shall then be due and payable as therein
expressed or by declaration or otherwise and irrespective of whether the Trustee
shall have made any demand pursuant to the provisions of this Section 5.02,
shall be entitled and empowered, by intervention in such proceedings or
otherwise, to file and prove a claim or claims for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of the
Securities and, in case of any judicial proceedings, to file such proofs of
claim and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for all amounts payable
pursuant to Section 6.06 to the Trustee and each predecessor Trustee) and of the
Holders allowed in such judicial proceedings relative to the Company or any
other obligor on the Securities, or to the creditors or property of the Company
or such other obligor, unless prohibited by applicable law and regulations, to
vote on behalf of the holders of the Securities in any election of a trustee or
a standby trustee in arrangement, reorganization, liquidation or other
bankruptcy or insolvency proceedings or Person performing similar functions in
comparable proceedings, and to collect and receive any moneys or other property
payable or deliverable on any such claims, and to distribute the same after the
deduction of its charges and expenses; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized by each of the
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Holders to make such payments to the Trustee, and, in the event that the Trustee
shall consent to the making of such payments directly to the Holders, to pay to
the Trustee such amounts as shall be sufficient to pay to the Trustee and each
predecessor Trustee all amounts payable pursuant to Section 6.06.
Nothing herein contained shall be construed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Securities, may be enforced by the Trustee without the possession of
any of the Securities, or the production thereof in any trial or other
proceeding relative thereto, and any such suit or proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the Holders of the
Securities.
In any proceedings brought by the Trustee (and also any proceedings
involving the interpretation of any provision of this Indenture to which the
Trustee shall be a party) the Trustee shall be held to represent all the Holders
of the Securities, and it shall not be necessary to make any Holders of the
Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee with respect to a particular series of
Securities pursuant to this Article V shall be applied in the order following,
at the date or dates fixed by the Trustee for the distribution of such moneys,
upon presentation of the Securities in respect of which moneys have been
collected, and stamping thereon the payment, if only partially paid, and upon
surrender thereof if fully paid:
First: To the payment of all amounts due the Trustee under Section 6.06,
including the costs and expenses of collection applicable to the Securities and
reasonable compensation to the Trustee, its agents, attorneys and counsel, and
of all other expenses and liabilities incurred, and all advances made, by the
Trustee except as a result of its negligence or bad faith;
Second: To the payment of all Senior Debt of the Company if and to the
extent required by Article XIV;
Third: In case the principal of the outstanding Securities in respect of
which moneys have been collected shall not have become due and be unpaid, to the
payment of the amounts then due and unpaid upon Securities for principal of (and
premium, if any) and interest on the Securities, in respect of which or for the
benefit of which money has been collected, ratably, without preference of
priority of any kind, according to the amounts due on such Securities for
principal (and premium, if any) and interest, respectively; and
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Fourth: To the Company or to whomsoever may be lawfully entitled to receive
the same or as a court of competent jurisdiction may direct.
SECTION 5.04. Proceedings by Holders.
No Holder shall have any right to institute any proceeding, judicial or
otherwise, with respect to this Indenture, or for the appointment of a receiver
or trustee, or for any other remedy hereunder, unless:
(a) such Holder shall have previously given written notice to the Trustee
of a continuing Event of Default with respect to the Securities of such series;
(b) the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all series in respect of which an Event of Default
shall have occurred and be continuing, considered as one class, shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default in its own name as Trustee hereunder;
(c) such Holder or Holders shall have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request and
offer of indemnity shall have failed to institute any such proceeding; and
(e) no direction inconsistent with such written request shall have been
given to the Trustee during such 60-day period by the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all series in
respect of which an Event of Default shall have occurred and be continuing,
considered as one class;
it being understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any provision
of this Indenture to affect, disturb or prejudice the rights of any other of
such Holders or to obtain or to seek to obtain priority or preferences over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
Notwithstanding any other provision in this Indenture, but subject to
Article XIV, the Holder of any Security shall have the right, which is absolute
and unconditional, to receive payment of the principal of and premium, if any,
and (subject to extension pursuant to Section 2.17) interest, if any, on such
Security on or after the same shall have become due and payable and to institute
suit for the enforcement of any such payment, and such rights shall not be
impaired without the consent of such Holder. So long as the Securities of any
series are held by a Business Trust, a registered holder of Trust Securities
issued by such Business Trust may institute a proceeding directly against the
Guarantor pursuant to the Guarantee, without first instituting a legal
proceeding directly against or requesting or directing that action be taken by
the Property Trustee of such Business Trust or any other Person, for enforcement
of payment to such registered
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holder of principal of or interest on Securities of such series having a
principal amount equal to the aggregate stated liquidation amount of such Trust
Securities of such registered holder on or after the due dates therefor
specified or provided for in the Securities of such series.
SECTION 5.05. Remedies Cumulative and Continuing.
All powers and remedies given by this Article V to the Trustee or to the
Holders shall, to the extent permitted by law, be deemed cumulative and not
exclusive of any other powers and remedies available to the Trustee or the
holders of the Securities, by judicial proceedings or otherwise, to enforce the
performance or observance of the covenants and agreements contained in this
Indenture or otherwise established with respect to the Securities, and no delay
or omission of the Trustee or of any holder of any of the Securities to exercise
any right or power accruing upon any Event of Default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 5.04, every power and remedy given by this Article V or by
law to the Trustee or to the Holders may be exercised from time to time, and as
often as shall be deemed expedient, by the Trustee or by the Holders.
SECTION 5.06. Direction of Proceedings and Waiver of Defaults by Majority
of Holders.
If an Event of Default shall have occurred and be continuing in respect of
a series of Securities, the Holders of a majority in principal amount of the
Outstanding Securities of such series shall have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred on the Trustee, with respect
to the Securities of such series; provided, however, that if an Event of Default
shall have occurred and be continuing with respect to more than one series of
Securities, the Holders of a majority in aggregate principal amount of the
Outstanding Securities of all such series, considered as one class, shall have
the right to make such direction, and not the Holders of the Securities of any
one of such series; and provided, further, that
(a) such direction shall not be in conflict with any rule of law or with
this Indenture, and could not involve the Trustee in personal liability, in
circumstances where indemnity would not, in the Trustee's sole discretion, be
adequate; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
The Holders of a majority in principal amount of the Outstanding Securities
of any series may on behalf of the Holders of all the Securities of such series
waive any past default hereunder with respect to such series and its
consequences, except a default
(a) in the payment of the principal of or premium, if any, or interest, if
any, on any Security of such series (unless such default has been cured and a
sum
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sufficient to pay all matured installments of interest, principal and such other
amounts due otherwise that by acceleration has been deposited with the Trustee),
or
(b) in respect of a covenant or provision hereof which under Section 9.02
cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series affected;
provided, however, that so long as a Business Trust is the beneficial owner of
the Securities or the Book-Entry Interests in Securities of any series, such
Business Trust may not waive compliance by the Company or the Guarantor with any
past default without the consent of a majority in aggregate liquidation
preference of the outstanding Trust Securities issued by such Business Trust
affected, obtained as provided in the Trust Agreement pertaining to such
Business Trust.
Upon any such waiver, such default shall cease to exist, and any and all
Events of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 5.07. Undertaking to Pay Costs.
All parties to this Indenture agree, and each Holder of any Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken or
omitted by it as Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit, and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees and
expenses, against any party litigant in such suit, having due regard to the
merits and good faith of the claims or defenses made by such party litigant; but
the provisions of this Section 5.07 shall not apply to any suit instituted by
the Trustee, to any suit instituted by any Holder, or group of Holders, holding
in the aggregate more than 10% in aggregate principal amount of the Securities
outstanding, or to any suit instituted by any Holder for the enforcement of the
payment of the principal of (or premium, if any) or interest on any Security
against the Company on or after the date the same shall have become due and
payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Certain Duties and Responsibilities.
(a) Except during the continuance of a default with respect to the
Securities of any series,
(1) the Trustee undertakes to perform, such duties and only such
duties as are specifically set forth in this Indenture, and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
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(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture; but in
the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Trustee, the Trustee shall
examine the same to determine whether or not they conform to the
requirements of this Indenture.
(b) In case a default has occurred and is continuing, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use
the same degree of care and skill in their exercise, as a prudent man would
exercise or use under the circumstances in the conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own willful misconduct, except that:
(1) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless the Trustee was negligent in
ascertaining the pertinent facts;
(2) no provision of this Indenture shall require the Trustee to spend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if repayment of such funds or adequate indemnity
against such risk or liability satisfactory to the Trustee has not been
assured to it; and
(3) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of not less than a majority in principal amount of the
outstanding Securities of any series, determined as provided in Section
5.04, relating to the time, method and place of conducting any proceeding
for any remedy available to the Trustee, or exercising any trust or power
conferred upon the Trustee, under this Indenture with respect to the
Securities of such series.
(d) Whether or not therein expressly so provided, every provision of this
Indenture relating to the conduct or affecting the liability of or affording
protection to the Trustee shall be subject to the provisions of this Section
6.01.
SECTION 6.02. Notice of Defaults.
Within 90 days after the occurrence of any default hereunder with respect
to the Securities of any series, the Trustee shall transmit by mail to all
Holders of Securities of such series notice of such default hereunder known to
the Trustee, unless such default shall have been cured or waived; provided,
however, that, except in the case of a default in the payment of the principal
of, premium, if any, or interest, if any, on any Security of such series or in
the payment of any sinking fund installment with respect to Securities of such
series, the Trustee shall be protected in withholding such notice if and
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so long as the board of directors, the executive committee or a trust committee
of directors or a Responsible Officer of the Trustee in good faith determine
that the withholding of such notice is in the interest of the Holders of
Securities of such series; and provided, further, that in the case of any
default of the character specified in Section 5.01(c) with respect to Securities
of such series, no such notice to Holders shall be given until at least 60 days
after the occurrence thereof. For the purpose of this Section 6.02, the term
"default" means any event which is, or after notice or lapse of time or both
would become, an Event of Default with respect to Securities of such series.
SECTION 6.03. Certain Rights of Trustee.
Subject to the provisions of Section 6.01:
(a) the Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture, note, other
evidence of indebtedness or other paper or document believed by it to be genuine
and to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order or as otherwise
expressly provided herein and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall deem
it desirable that a matter be proved or established prior to taking, suffering
or omitting any action hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon
an Officers' Certificate;
(d) the Trustee may consult with counsel, and the written advice of such
counsel or any Opinion of Counsel shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to expend or risk its own
funds or to exercise, at the request or direction of any of the Holders, any of
the rights or powers vested in it by this Indenture pursuant to this Indenture,
unless such Holders shall have offered to the Trustee security or indemnity
satisfactory to the Trustee against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled
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upon reasonable prior request and during normal business hours to examine the
books, records and premises of the Company, personally or by agent or attorney;
and
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and shall not be liable for the actions or omissions of such agents
appointed and supervised by it with due care.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities.
The recitals contained herein and in the Securities, except the Trustee's
certificates of authentication, shall be taken as the statements of the Company,
and neither the Trustee nor any Authenticating Agent assumes any responsibility
for their correctness. The Trustee makes no representations as to the validity
or sufficiency of this Indenture or of the Securities. Neither the Trustee nor
any Authenticating Agent shall be accountable for the use or application by the
Company of Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities.
The Trustee, any Authenticating Agent, any Paying Agent, any Security
Registrar or any other agent of the Company, in its individual or any other
capacity, may become the owner or pledgee of Securities and, subject to Sections
6.08 and 6.13, may otherwise deal with the Company with the same rights it would
have if it were not Trustee, Authenticating Agent, Paying Agent, Security
Registrar or such other agent.
SECTION 6.06. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be segregated from
other funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed with the Company.
SECTION 6.07. Compensation and Reimbursement.
The Company agrees:
(1) to pay to the Trustee from time to time such compensation as is
agreed upon in writing;
(2) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel, which compensation, expenses
and disbursements shall be set forth in sufficient written detail to the
satisfaction of
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the Company), except any such expense, disbursement or advance as may be
attributable to its or their negligence or bad faith; and
(3) to indemnify the Trustee, its officers, directors and employees
for, and to hold it harmless against, any loss, liability or expense
incurred without negligence, bad faith, or willful misconduct on its part,
arising out of or in connection with the acceptance or administration of
the trust or trusts hereunder, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
Obligations under this Section 6.07(3) will survive the satisfaction and
discharge of this Indenture pursuant to Article XI hereof.
SECTION 6.08. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest within the
meaning of the Trust Indenture Act, the Trustee shall either eliminate such
interest or resign, to the extent and in the manner provided by, and subject to
the provisions of, the Trust Indenture Act and this Indenture.
SECTION 6.09. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be eligible to
act as trustee under the Trust Indenture Act and which shall have a combined
capital and surplus of at least U.S.$50,000,000. If the Trustee does not have an
office in The City of New York, the Trustee may appoint an agent in The City of
New York reasonably acceptable to the Company to conduct any activities which
the Trustee may be required under this Indenture to conduct in The City of New
York. If the Trustee does not have an office in The City of New York or has not
appointed an agent in The City of New York, the Trustee shall be a participant
in The Depository Trust Company and FAST distribution systems. If such
corporation publishes reports of condition at least annually, pursuant to law or
to the requirements of a United States federal, state, territorial or District
of Columbia supervising or examining authority, then for the purposes of this
Section 6.09, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. If at any time the Trustee shall cease to be
eligible in accordance with the provisions of this Section 6.09, the Trustee
shall resign immediately in the manner and with the effect hereinafter specified
in this Article.
SECTION 6.10. Resignation and Removal; Appointment of Successor Trustee.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 6.11.
(b) The Trustee may resign at any time with respect to the Securities of
one or more series by giving written notice thereof to the Company. If the
instrument
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of acceptance by a successor Trustee required by Section 6.11 shall not have
been delivered to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee with respect to the
Securities of such series.
(c) The Trustee may be removed at any time with respect to the Securities
of any series by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series, delivered to the Trustee and to the
Company.
(d) If at any time:
(1) the Trustee shall fail to comply with section 310(b) of the Trust
Indenture Act pursuant to Section 6.08 with respect to any series of
Securities after written request therefor by the Company or by any Holder
who has been a bona fide holder of a Security for at least six months, or
(2) the Trustee shall cease to be eligible under Section 6.09 and
shall fail to resign after written request therefor by the Company or by
any such Holder, or
(3) the Trustee shall become incapable of acting or shall be adjudged
a bankrupt or insolvent or a receiver of the Trustee or of its property
shall be appointed or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee with respect to all Securities, or (ii) subject to Section 5.07, any
Holder who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the removal of the Trustee with respect to all
Securities and the appointment of a successor Trustee or Trustees.
(e) If the Trustee shall resign, be removed or become incapable of acting,
or if a vacancy shall occur in the office of Trustee for any cause, with respect
to the Securities of one or more series, the Company, by a Board Resolution,
shall promptly appoint a successor Trustee or Trustees with respect to the
Securities of that or those series (it being understood that any such successor
Trustee may be appointed with respect to the Securities of one or more or all of
such series and that at any time there shall be only one Trustee with respect to
the Securities of any particular series) and shall comply with the applicable
requirements of Section 6.11. If no successor Trustee with respect to the
Securities of any series shall have been so appointed by the Company and
accepted appointment in the manner required by Section 6.11, any Holder who has
been a bona fide Holder of a Security of such series for at least six months
may, on behalf of himself and all others similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee with
respect to the Securities of such series.
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(f) The Company shall give notice of each resignation and each removal of
the Trustee with respect to the Securities of any series and each appointment of
a successor Trustee with respect to the Securities of any series by mailing
written notice of such event by first-class mail, postage prepaid, to all
Holders of Securities of such series as their names and addresses appear in the
Security Register. Each notice shall include the name of the successor Trustee
with respect to the Securities of such series and the address of its corporate
trust office.
SECTION 6.11. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Trustee with
respect to all Securities, every such successor Trustee so appointed shall
execute, acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or removal
of the retiring Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee; but, on the request
of the Company or the successor Trustee, such retiring Trustee shall, upon
payment of its charges, execute and deliver an instrument transferring to such
successor Trustee all the rights, powers and trusts of the retiring Trustee and
shall duly assign, transfer and deliver to such successor Trustee all property
and money held by such retiring Trustee hereunder.
(b) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
retiring Trustee and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture supplemental hereto
wherein each successor Trustee shall accept such appointment and which (1) shall
contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the rights, powers,
trusts and duties of the retiring Trustee with respect to the Securities of that
or those series to which the appointment of such successor Trustee relates, (2)
if the retiring Trustee is not retiring with respect to all Securities, shall
contain such provisions as shall be deemed necessary or desirable to confirm
that all the rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the retiring Trustee, and
(3) shall add to or change any of the provisions of this Indenture as shall be
necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee; and upon the execution and delivery of such supplemental
indenture the resignation or removal of the retiring Trustee shall become
effective to the extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, trusts and duties of the retiring Trustee with respect to the
Securities of that or those series to which the appointment of such successor
Trustee relates; but on request of the company or any successor trustee, such
retiring Trustee shall duly assign, transfer and deliver to such successor
Trustee all property and money held
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by such retiring Trustee hereunder with respect to the Securities of that or
those series to which the appointment of such successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company shall execute
any and all instruments for more fully and certainly vesting in and confirming
to such successor Trustee all such rights, powers and trusts referred to in
paragraph (a) or (b) of this Section 6.11, as the case may be.
(d) No successor Trustee shall accept its appointment unless at the time of
such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or converted or with
which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder; provided such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto. In case any Securities shall have been authenticated,
but not delivered, by the Trustee then in office, any successor by merger,
conversion or consolidation to such authenticating Trustee may adopt such
authentication and deliver the Securities so authenticated with the same effect
as if such successor Trustee had itself authenticated such Securities.
SECTION 6.13. Preferential Collecting of Claims Against Company.
(a) Subject to Subsection (b) of this Section 6.13, if the Trustee shall be
or shall become a creditor, directly or indirectly, secured or unsecured, of the
Company within three months prior to a default, as defined in Subsection (c) of
this Section 6.13, or subsequent to such a default, then, unless and until such
default shall be cured, the Trustee shall set apart and hold in a special
account for the benefit of the Trustee individually, the Holders of the
Securities and the holders of other indenture securities, as defined in
Subsection (c) of this Section 6.13:
(1) an amount equal to any and all reductions in the amount due and
owing upon any claim as such creditor in respect of principal or interest
effected after the beginning of such three months' period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (2) of this Subsection, or from the exercise of any right of
setoff which the Trustee could have exercised if a petition in bankruptcy
had been applied by or against the Company upon the date of such default;
and
(2) all property received by the Trustee in respect of any claims as
such creditor, either as security therefor, or in satisfaction or
composition
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thereof, or otherwise, after the beginning of such three months' period, or
an amount equal to the proceeds of any such property, if disposed of,
subject, however, to the rights, if any, of the Company and its other
creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee:
(A) to retain for its own account (i) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
and (ii) the proceeds of the bona fide sale of any such claim by the
Trustee to a third Person, and (iii) distributions made in cash, securities
or other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law;
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three months' period;
(C) to realize, for its own account, but only to extent of the claim
hereinafter mentioned, upon any property held by it as security for any
such claim, if such claim was created after the beginning of such three
months' period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default, as defined in
Subsection (c) of this Section 6.13, would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C), against the release of any property held as security for such claim as
provided in paragraph (B) or (C) , as the case may be, to the extent of the
fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted after
the beginning of such three months' period for property held as security at the
time of such substitution shall, to the extent of the fair value of the property
released, have the same status as the property released, and, to the extent that
any claim referred to in any of such paragraphs is created in renewal of or in
substitution for or for the purpose of repaying or refunding any pre-existing
claim of the Trustee as such creditor, such claim shall have the same status as
such pre-existing claim.
If the Trustee shall be required to account for the funds and property held
in such special account, the proceeds thereof shall be apportioned among the
Trustee, the Holders and the holders of other indenture securities in such
manner that the Trustee, the Holders and the holders of other indenture
securities realize, as a result of payments from such special account and
payments of dividends on claims filed against the Company in bankruptcy or
receivership or in proceedings for reorganization pursuant to the Federal
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Bankruptcy Act or applicable State law or winding up or administration pursuant
to the insolvency laws of the Cayman Islands or the United Kingdom, as
applicable, the same percentage of their respective claims, figured before
crediting to the claim of the Trustee anything on account of the receipt by it
from the Company of the funds and property in such special account and before
crediting to the respective claims of the Trustee and the Holders and the
holders of other indenture securities dividends on claims filed against the
Company in bankruptcy or receivership or in proceedings for reorganization
pursuant to the Federal Bankruptcy Act or applicable State law or winding up or
administration pursuant to the insolvency laws of the Cayman Islands or the
United Kingdom, as applicable, but after crediting thereon receipts on account
of the indebtedness represented by their respective claims from all sources
other than from such dividends and from the funds and property so held in such
special account. As used in this paragraph, with respect to any claim, the term
"dividends" shall include any distribution with respect to such claim, in
bankruptcy or receivership or proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable State law or winding up or administration
pursuant to the insolvency laws of the Cayman Islands or the United Kingdom, as
applicable, whether such distribution is made in cash, securities or other
property, but shall not include any such distribution with respect to the
secured portion, if any, of such claim.
Any Trustee which has resigned or been removed after the beginning of such
three months' period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee has resigned
or been removed prior to the beginning of such three months' period, it shall be
subject to the provisions of this Subsection if and only if the following
conditions exist:
(i) the receipt of property or reduction of claim, which would have given
rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such three months' period;
and
(ii) such receipt of property or reduction of claim occurred within three
months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection (a) of this
Section 6.13 a creditor relationship arising from:
(1) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(2) advances authorized by a receivership or bankruptcy court of
competent jurisdiction or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon, if notice of such advances and of the circumstances surrounding
the making thereof is given to the Holders at the time and in the manner
provided in this Indenture;
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(3) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depository, or other similar
capacity;
(4) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction, as defined in Subsection (c) of this
Section 6.13;
(5) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25 (a) of the Federal Reserve
Act, as amended, which is directly or indirectly a creditor of the Company;
and
(6) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper, as defined in Subsection (c) of
this Section 6.13.
(c) For the purposes of this Section 6.13 only:
(1) the term "default" means any failure to make payment in full of
the principal of or interest on any of the Securities or upon the other
indenture securities when and as such principal or interest becomes due and
payable;
(2) the term "other indenture securities" means securities upon which
the Company is an obligor (as defined in the Trust Indenture Act)
outstanding under any other indenture (i) under which the Trustee is also
trustee, (ii) which contains provisions substantially similar to the
provisions of this Section 6.13, and (iii) under which a default exists at
the time of the apportionment of the funds and property held in such
special account;
(3) the term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand;
(4) the term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation;
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(5) the term "Company" means any obligor upon the Securities; and
(6) the term "Federal Bankruptcy Act" means the Bankruptcy Code or
Title 11 of the United States Code.
SECTION 6.14. Authenticating Agents.
From time to time the Trustee, with the prior written approval of the
Company, may appoint one or more Authenticating Agents with respect to one or
more series of Securities with power to act on the Trustee's behalf and subject
to its direction in the authentication and delivery of Securities of such series
or in connection with transfers and exchanges under Sections 2.08, 2.09, 2.10,
and 13.05 as fully to all intents and purposes as though the Authenticating
Agent had been expressly authorized by those Sections of this Indenture to
authenticate and deliver Securities of such series. For all purposes of this
Indenture, the authentication and delivery of Securities by an Authenticating
Agent pursuant to this Section 6.14 shall be deemed to be authentication and
delivery of such Securities "by the Trustee". Each such Authenticating Agent
shall be acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States, any State
thereof or the District of Columbia, authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
U.S.$50,000,000 and subject to supervision or examination by Federal, State or
District of Columbia authority. If such corporation publishes reports of
condition at least annually pursuant to law or the requirements of such
authority, then for the purposes of this Section 6.14 the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time an Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section 6.14, such Authenticating Agent shall resign
immediately in the manner and with the effect specified in this Section 6.14.
Any corporation into which any Authenticating Agent may be merged or with
which it may be consolidated, or any corporation resulting from, any merger or
consolidation or to which any Authenticating Agent shall be a party, or any
corporation succeeding to the corporate trust business of any Authenticating
Agent, shall be the successor of the Authenticating Agent hereunder, if such
successor corporation is otherwise eligible under this Section 6.14, without the
execution or filing of any paper or any further act on the part of the parties
hereto or the Authenticating Agent or such successor corporation.
An Authenticating Agent may resign at any time by giving written notice of
resignation to the Trustee and to the Company. The Trustee may at any time
terminate the agency of any Authenticating Agent by giving written notice of
termination to such Authenticating Agent and to the Company. Upon receiving such
a notice of resignation or upon such a termination, or in case at any time any
Authenticating Agent shall cease to be eligible under this Section 6.14, the
Trustee may appoint a successor Authenticating Agent with the prior written
approval of the Company and shall mail notice of such
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appointment to all Holders of Securities of the series with respect to which
such Authenticating Agent will serve, as the names and addresses of such Holders
appear on the Security Register. Any successor Authenticating Agent, upon
acceptance of its appointment hereunder, shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect as if
originally named as an Authenticating Agent. No successor Authenticating Agent
shall be appointed unless eligible under the provisions of this Section 6.14.
The Trustee agrees to pay to each Authenticating Agent from time to time
reasonable compensation for its services under this Section 6.14 as may be
agreed in a separate writing among the Company, the Trustee and such
Authenticating Agent, and the Trustee shall be entitled to be reimbursed for
such payments pursuant to Section 6.07.
If an appointment with respect to one or more series of Securities is made
pursuant to this Section 6.14, the Securities of such series may have endorsed
thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication in the following form:
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This is one of the Securities of the series designated herein referred to
in the within mentioned Indenture.
Dated: _____________________________
As Trustee
{NAME OF AUTHENTICATING
AGENT}
______________________________
Authenticating Agent
By:
______________________________
Authorized Signatory
ARTICLE VII
CONCERNING THE HOLDERS
SECTION 7.01. Action by Holders.
Whenever in this Indenture it is provided that the Holders of a specified
percentage in aggregate principal amount of the Securities of one or more, or
all, series may take any action (including the making of any demand or request,
the giving of any notice, consent or waiver or the taking of any other action)
the fact that at the time of taking any such action the Holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by such Holders in person
or by agent or proxy appointed in writing, or (b) by the record of such Holders
of Securities voting in favor thereof at any meeting of such Holders duly called
and held in accordance with the provisions of Article VIII, or (c) by a
combination of such instrument or instruments and any such record of such a
meeting of such Holders.
If the Company shall solicit from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other action, the Company
may, at its option, as evidenced by an Officers' Certificate, fix in advance a
record date for the determination of Holders entitled to give such request,
demand, authorization, direction, notice, consent, waiver or other action, but
the Company shall have no obligation to do so. If such a record date is fixed,
such request, demand, authorization, direction, notice, consent, waiver or other
action may be given before or after the record date, but only the Holders of
record at the close of business on the record date shall be deemed to be Holders
for the purposes of determining whether Holders of the requisite proportion of
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Outstanding Securities have authorized or agreed or consented to such request,
demand, authorization, direction, notice, consent, waiver or other action, and
for that purpose the Outstanding Securities shall be computed as of the record
date; provided, however, that no such authorization, agreement or consent by
such Holders on the record date shall be deemed effective unless it shall become
effective pursuant to the provisions of this Indenture not later than six months
after the record date.
SECTION 7.02. Proof of Execution by Holders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the
execution of any instrument by a Holder or his agent or proxy shall be
sufficient if made in accordance with such reasonable rules and regulations as
may be prescribed by the Trustee or in such manner as shall be satisfactory to
the Trustee. The ownership of Securities shall be proved by the Security
Register or by a certificate of the Security Registrar. The Trustee may require
such additional proof of any matter referred to in this Section as it shall deem
necessary.
The record of any Holders' meeting shall be proved in the manner provided
in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any Security, the
Company, the Trustee, any Authenticating Agent, any Paying Agent, any transfer
agent and any Security Registrar may deem the Person in whose name such Security
shall be registered upon the Security Register to be, and may treat him as, the
absolute owner of such Security (whether or not such Security shall be overdue)
for the purpose of receiving payment of or on account of the principal of and
premium, if any, and interest on such Security and for all other purposes; and
neither the Company nor the Trustee nor any Authenticating Agent nor any Paying
Agent nor any transfer agent nor any Security Registrar shall be affected by any
notice to the contrary. All such payments so made to any holder for the time
being or upon his order shall be valid, and, to the extent of the sum or sums so
paid, effectual to satisfy and discharge the liability for moneys payable upon
any such Security.
SECTION 7.04. Securities Owned by Company Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate principal
amount of Securities of one or more, or all, series have concurred in any
direction, consent or waiver under this Indenture, Securities which are owned by
the Company or any other obligor on the Securities or by any Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company, except for the Securities owned by or on behalf of the
related Business Trust, or any other obligor on the Securities shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver, only
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Securities which a Responsible Officer of the Trustee actually knows are so
owned shall be so disregarded. Securities so owned which have been pledged in
good faith may be regarded as outstanding for the purposes of this Section 7.04
if the pledgee shall establish to the satisfaction of the Trustee the pledgee's
right to vote such Securities and that the pledgee is not the Company or any
such other obligor or Person directly or indirectly controlling or controlled by
or under direct or indirect common control with the Company or any such other
obligor. In the case of a dispute as to such right, any decision by the Trustee
taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Trustee, as
provided in Section 7.01, of the taking of any action by the Holders of the
percentage in aggregate principal amount of the Securities of one or more, or
all, series specified in this Indenture in connection with such action, any
Holder of such a Security (or any Security issued in whole or in part in
exchange or substitution therefor) the serial number of which is shown by the
evidence to be included in the Securities the Holders of which have consented to
such action may, by filing written notice with the Trustee at its principal
office and upon proof of holding as provided in Section 7.02, revoke such action
so far as concerns such Security (or so far as concerns the principal amount
represented by any exchanged or substituted Security). Except as aforesaid, any
such action taken by the Holder of any Security shall be conclusive and binding
upon such Holder and upon all future Holders and owners of such Security, and of
any Security issued in exchange or substitution therefor, irrespective of
whether or not any notation in regard thereto is made upon such Security or any
Security issued in exchange or substitution therefor.
ARTICLE VIII
HOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings
A meeting of Holders of one or more, or all, series may be called at any
time and from time to time pursuant to the provisions of this Article VIII for
any of the following purposes:
(a) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any Default hereunder
and its consequences, or to take any other action authorized to be taken by such
Holders pursuant to any of the provisions of Article V;
(b) to remove the Trustee of such series and nominate a successor trustee
pursuant to the provisions of Article VI;
(c) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 9.02; or
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(d) to take any other action authorized to be taken by or on behalf of the
Holders of any specified aggregate principal amount of such Securities under any
other provision of this Indenture or under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Holders of one or more, or
all, series to take any action specified in Section 8.01, to be held at such
time and at such place in the Borough of Manhattan, The City of New York, as the
Trustee shall determine or, with the approval of the Company, at any other
place. Notice of every such meeting, setting forth the time and the place of
such meeting and in general terms the action proposed to be taken at such
meeting, shall be mailed to Holders of such Securities at their addresses as
they shall appear on the Securities Register. Such notice shall be mailed not
less than 20 nor more than 180 days prior to the date fixed for the meeting.
SECTION 8.03. Call of Meetings by Company or Holders.
In case at any time the Trustee shall have been requested to call a meeting
of Holders of one or more, or all, series by the Company, pursuant to a
resolution of the Board of Directors, or by the Holders of at least 33% in
aggregate principal amount of all of such series, considered as one class, by
written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within 20 days after receipt of such request, then the Company or such
Holders may determine the time and the place in the Borough of Manhattan, The
City of New York, for such meeting and may call such meeting to take any action
authorized in Section 8.01, by mailing notice thereof as provided in Section
8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Holders of one or more, or all,
series, a Person shall be (a) a Holder of one or more outstanding Securities of
such series or (b) a Person appointed by an instrument in writing as proxy by a
holder of one or more Securities of such series. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders of any series shall
be the Persons entitled to vote at such meeting and their counsel and any
representatives of the Trustee and its counsel and any representatives of the
Company and its counsel.
SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Holders, in regard to proof of the holding of such Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, the submission and examination of proxies, certificates and
other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit.
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The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Holders as provided in Section 8.03, in which case the Company or
the Holders of the series calling the meeting, as the case may be, shall in like
manner appoint a temporary chairman. A permanent chairman and a permanent
secretary of the meeting shall be elected by majority vote of the meeting.
Subject to the provisions of Section 8.04, at any meeting each Holder of
Securities of such series or proxy therefor shall be entitled to one vote for
each $25 principal amount of Securities held or represented by him; provided,
however, that no vote shall be cast or counted at any meeting in respect of any
Security challenged as not outstanding and ruled by the chairman of the meeting
to be not outstanding. The chairman of the meeting shall have no right to vote
other than by virtue of Securities held by him or instruments in writing as
aforesaid duly designating him as the person to vote on behalf of other Holders.
Any meeting of Holders duly called pursuant to the provisions of Section 8.02 or
8.03 may be adjourned from time to time by a majority in aggregate principal
amount of the outstanding Securities of all series represented at the meeting,
considered as one class, and the meeting may be held as so adjourned without
further notice.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of such Holders or of their representatives by proxy and the serial
number or numbers of the Securities of the series with respect to which the
meeting shall have been called, held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
triplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Holders shall be prepared by the secretary of the
meeting and there shall be attached to said record the original reports of the
inspectors of votes on any vote by ballot taken thereat and affidavits by one or
more persons having knowledge of the facts setting forth a copy of the notice of
the meeting and showing that said notice was mailed as provided in Section 8.02.
The record shall show the serial numbers of the Securities voting in favor of or
against any resolution. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
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ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, the Guarantor and the
Trustee, at any time and from time to time, may enter into one or more
indentures supplemental hereto, in form satisfactory to the Trustee, for any of
the following purposes:
(a) to evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company or the
Guarantor herein and in the Securities, all as provided in Article X; or
(b) to add one or more covenants of the Company or the Guarantor or other
provisions for the benefit of all Holders or for the benefit of the Holders of,
or to remain in effect only so long as there shall be Outstanding, Securities of
one or more specified series, or to surrender any right or power herein
conferred upon the Company or the Guarantor; or
(c) to add any additional Events of Default with respect to all or any
series of Securities Outstanding hereunder; or
(d) to change or eliminate any provisions of this Indenture or to add any
new provisions to this Indenture; provided, however, that if such change,
elimination or addition shall adversely affect the interests of the Holders of
Securities of any series Outstanding on the date of such indenture supplemental
hereto in any material respect, such change, elimination or addition shall
become effective with respect to such series only pursuant to the provisions of
Section 9.02 hereof or when no Security of such series remains Outstanding; or
(e) to provide collateral security for the Securities; or
(f) to establish the form or terms of Securities of any series as
contemplated by Sections 2.01 and 2.05; or
(g) to provide for the authentication and delivery of Bearer Securities and
coupons appertaining thereto representing interest, if any, thereon and for the
procedures for the registration, exchange and replacement thereof and for the
giving of notice to, and the solicitation of the vote or consent of, the holders
thereof, and for any and all other matters incidental thereto; or
(h) to evidence and provide for the acceptance of appointment hereunder by
a separate or successor Trustee or co-trustee with respect to the Securities of
one or more series and to add to or change any of the provisions of this
Indenture as
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shall be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, pursuant to the requirements herein; or
(i) to provide for the procedures required to permit the Company to
utilize, at its option, a non-certificated system of registration for all, or
any series of, the Securities; or
(j) to change any place or places where (1) the principal of and premium,
if any, and interest, if any, on all or any series of Securities shall be
payable, (2) all or any series of Securities may be surrendered for registration
of transfer, (3) all or any series of Securities may be surrendered for exchange
and (4) notices and demands to or upon the Company or the Guarantor in respect
of all or any series of Securities and this Indenture may be served; or
(k) to cure any ambiguity, to correct or supplement any provision herein
which may be defective or inconsistent with any other provision herein, or to
make any other changes to the provisions hereof or to add other provisions with
respect to matters or questions arising under this Indenture; provided that such
other changes or additions shall not adversely affect the interests of the
Holders of securities of any series in any material respect.
The Trustee is hereby authorized to join with the Company and the Guarantor
in the execution of any supplemental indenture to effect such amendment, to make
any further appropriate agreements and stipulations which may be therein
contained and to accept the conveyance, transfer and assignment of any property
thereunder, but the Trustee shall not be obligated to, but may in its
discretion, enter into any such supplemental indenture which affects the
Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any amendment to this Indenture authorized by the provisions of this
Section 9.01 may be executed by the Company, the Guarantor and the Trustee
without the consent of the Holders of any of the Securities at the time
outstanding, notwithstanding any of the provisions of Section 9.02.
Without limiting the generality of the foregoing, if the Trust Indenture
Act as in effect at the date of the execution and delivery of this Indenture or
at any time thereafter shall be amended and (x) if any such amendment shall
require one or more changes to any provisions hereof or the inclusion herein of
any additional provisions, or shall by operation of law be deemed to effect such
changes or incorporate such provisions by reference or otherwise, this Indenture
shall be deemed to have been amended so as to conform to such amendment to the
Trust Indenture Act, and the Company, the Guarantor and the Trustee may, without
the consent of any Holders, enter into an indenture supplemental hereto to
effect or evidence such changes or additional provisions; or (y) if any such
amendment shall permit one or more changes to, or the elimination of, any
provisions hereof which, at the date of the execution and delivery hereof or at
any time thereafter, are required by the Trust Indenture Act to be contained
herein, this Indenture shall be deemed to have been amended to effect such
changes or elimination, and the
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Company, the Guarantor and the Trustee may, without the consent of any Holders,
enter into an indenture supplemental hereto to evidence such amendment hereof.
SECTION 9.02. Supplemental Indentures With Consent of Holders.
With the consent (evidenced as provided in Section 7.01) of the Holders of
a majority in aggregate principal amount of each series of the Securities then
outstanding under this Indenture that is directly affected thereby, the Company,
when authorized by a Board Resolution, the Guarantor and the Trustee may from
time to time and at any time modify this Indenture for the purpose of adding any
provisions to, or changing in any manner or eliminating any of the provisions
of, this Indenture or modifying in any manner the rights of the Holders of such
series of the Securities under this Indenture; provided, however, that no such
modification shall without the consent of the Holder of each Security of such
series then outstanding and affected thereby (i) change the Stated Maturity, if
any, of the principal of, or any installment of or interest on (except as
contemplated by Article XV), any series of Securities, or reduce the principal
amount thereof, or reduce the rate of interest thereon (or the amount of any
installment of interest thereon) or change the method of calculating such rate
or reduce any premium payable upon the redemption thereof, or change the coin or
currency (or other property), in which any Security or any premium or the
interest thereon is payable, or impair the right to institute suit for the
enforcement of any such payment, (ii) reduce the percentage of principal amount
of outstanding Securities of any series (or, if applicable, in liquidation
preference amount of any series of Trust Securities), the holders of which are
required to consent to any such modification of this Indenture, (iii) reduce any
amount payable under, delay or defer the required time of payment under, or
impair the right to institute suit to enforce any payment under the Guarantee,
(iv) modify the provisions of this Indenture with respect to the subordination
of the Securities or the Guarantee or (v) modify any of the provisions of this
Section 9.02, Section 5.06 or Section 3.11, except to increase the percentage in
principal amount required or to provide that certain other provisions of this
Indenture cannot be modified or waived without the consent of the holder of each
outstanding Security affected thereby; provided, however, that so long as any of
the Trust Securities of such series remain outstanding, if such modification
adversely affects the holders of such Trust Securities, such modification shall
not be effective, and no termination of the Indenture may occur, and no waiver
of any Event of Default or compliance with any covenant under this Indenture may
be effective, until the holders of a majority in aggregate liquidation
preference amount of such Trust Securities shall have given their prior consent,
obtained as provided in the Trust Agreement pertaining to such Business Trust,
to such modification, termination or waiver unless and until the principal of
the Securities of such series and all accrued and unpaid interest thereon have
been paid in full; provided, further, that if the prior consent of the holder of
each outstanding Security is required, such amendment shall not be effective
until each holder of the corresponding Trust Securities shall have so consented
to such amendment.
Notwithstanding the foregoing, no amendment or modification may be made to
the Indenture if such amendment or modification would cause (i) the Company to
be classified as an association or a publicly traded partnership taxable as a
corporation for United States Federal income tax purposes or (ii) the Company or
the Guarantor to be
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deemed an "investment company" which is required to register under the
Investment Company Act.
Upon the request of the Company accompanied by a copy of a resolution of
the Board of Directors certified by an authorized signatory of the Company
authorizing the execution of any supplemental indenture affecting such
amendment, and upon the filing with the Trustee of evidence of the consent of
Holders as aforesaid, the Trustee shall join with the Company and the Guarantor
in the execution of such supplemental indenture unless such supplemental
indenture affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company, the Guarantor and the Trustee
of any supplemental indenture pursuant to the provisions of this Section, the
Trustee shall transmit by mail, first class postage prepaid, a notice, prepared
by the Company, setting forth in general terms the substance of such
supplemental indenture, to the affected Holders as their names and addresses
appear upon the Security Register. Any failure of the Trustee to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such supplemental indenture.
It shall not be necessary for the consent of such Holders under this
Section 9.02 to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
SECTION 9.03. Compliance with Trust Indenture Act; Effect of Supplemental
Indentures.
Any supplemental indenture executed pursuant to the provisions of this
Article IX shall comply with the Trust Indenture Act. Upon the execution of any
supplemental indenture pursuant to the provisions of this Article IX, this
Indenture shall be and be deemed to be modified and amended in accordance
therewith and the respective rights, limitations of rights, obligations, duties
and immunities under this Indenture of the Trustee, the Company, the Guarantor
and the holders of Securities shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 9.04. Notation on Securities.
Securities of any series authenticated and delivered after the execution of
any supplemental indenture affecting such series pursuant to the provisions of
this Article IX may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture. If the Company or the
Trustee shall so determine, new Securities so modified as to conform, in the
opinion of the Trustee and the Board of Directors, to any modification of this
Indenture contained in any such supplemental
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indenture may be prepared and executed by the Company, the Guarantor,
authenticated by the Trustee or the Authenticating Agent and delivered in
exchange for such Securities then outstanding.
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be
Furnished Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, may
receive an Officers' Certificate and an Opinion of Counsel as conclusive
evidence that any supplemental indenture executed pursuant to this Article is
authorized or permitted by, and conforms to, the terms of this Article and that
it is proper for the Trustee under the provisions of this Article to join in the
execution thereof.
ARTICLE X
CONSOLIDATION, CONVERSION, MERGER,
SALE, CONVEYANCE AND LEASE
SECTION 10.01. Company and Guarantor May Consolidate, etc., on Certain
Terms.
Neither the Company nor the Guarantor shall consolidate with or merge into
any other corporation, or convey or otherwise transfer or lease its properties
and assets substantially as an entirety to any Person, unless (a) the
corporation formed by such consolidation or into which the Company or the
Guarantor is merged or the Person which acquires by conveyance or transfer, or
which leases, the properties and assets of the Company or the Guarantor
substantially as an entirety (a "successor corporation") shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the Trustee, the
due and punctual payment of the principal of and premium, if any, and interest,
if any, on all outstanding Securities and the performance of every covenant of
this Indenture on the part of the Company or the Guarantor, as the case may be,
to be performed or observed, (b) immediately after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing (c) the Company or Guarantor, as the case may be, shall have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger, conveyance, or other transfer or
lease and such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transactions have been
complied with and (d), solely, with respect to the Company, the successor
corporation to the Company will be treated as a partnership and not as an
association or publicly traded partnership taxable as a corporation for United
States Federal income tax purposes.
SECTION 10.02. Successor Corporation Substituted.
Upon any consolidation by the Company or the Guarantor with or merger by
the Company or the Guarantor into any other corporation or any conveyance,
transfer, lease or other disposition of the properties and assets of the Company
or the Guarantor
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substantially as an entirety in accordance with Section 10.01, the successor
corporation formed by such consolidation or into which the Company or the
Guarantor is merged or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or the Guarantor under this Indenture with the same effect as if
such successor corporation had been named as the Company or the Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Securities.
SECTION 10.03. Withholding.
In the event that any such successor entity is organized under the laws of
a country located outside of the Taxing Jurisdiction and withholding or
deduction is required by law for or on account of any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by or within such country in which the successor
entity is organized or by or within any political subdivision thereof or any
authority therein or thereof having power to tax, the successor entity shall pay
to the relevant holder of the Securities, such additional amounts, under the
same circumstances and subject to the same limitations as are specified for
"Gross-Up Taxes" as is set forth in Section 3.12 hereof, but substituting for
the applicable Taxing Jurisdiction in each place the name of the country under
the laws of which such successor entity is organized. In addition, such
successor entity shall be entitled to effect an optional tax redemption of the
Securities under the same circumstances and subject to the same limitations as
are set forth in Section 13.02 hereof, but substituting for the applicable
Taxing Jurisdiction in each place the name of the country under the laws of
which such successor entity is organized.
ARTICLE XI
SATISFACTION AND DISCHARGE
SECTION 11.01. Satisfaction and Discharge of Securities.
Any Security or Securities, or any portion of the principal amount thereof,
shall be deemed to have been paid for all purposes of this Indenture, and the
entire indebtedness of the Company in respect thereof shall be deemed to have
been satisfied and discharged, if there shall have been irrevocably deposited
with the Trustee or any Paying Agent (other than the Company), in trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the Maturity of such Securities
or portions thereof, Government Obligations, which shall not contain provisions
permitting the redemption or other prepayment thereof at the option of the
issuer thereof, the principal of and the interest on which when due, without any
regard to reinvestment thereof, will provide moneys which, together with the
money, if any, deposited with or held by the Trustee or such Paying Agent, shall
be sufficient, or
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(c) a combination of (a) or (b) which shall be sufficient, to pay when due
the principal of and premium, if any, and to pay when due the principal of and
premium, if any, and interest, if any, due and to become due on such Securities
or portions thereof on or prior to Maturity; provided, however, that in the case
of the provision for payment or redemption of less than all the Securities of
any series, such Securities or portions thereof shall have been selected by the
Security Registrar as provided herein and, in the case of a redemption, the
notice requisite to the validity of such redemption shall have been given or
irrevocable authority shall have been given by the Company to the Trustee to
give such notice, under arrangements satisfactory to the Trustee; and provided,
further, that the Company shall have delivered to the Trustee and such Paying
Agent:
(x) if such deposit shall have been made prior to the Maturity of such
Securities, a Company Order stating that the money and Government
Obligations deposited in accordance with this Section shall be held in
trust, as provided in Section 11.03; and
(y) if Government Obligations shall have been deposited, an Opinion of
Counsel that the obligations so deposited constitute Government Obligations
and do not contain provisions permitting the redemption or other prepayment
at the option of the issuer thereof, and an opinion of an independent
public accountant of nationally recognized standing, selected by the
Company, to the effect that the requirements set forth in clause (b) above
have been satisfied; and
(z) if such deposit shall have been made prior to the Maturity of such
Securities, an Officer's Certificate stating the Company's intention that,
upon delivery of such Officer's Certificate, its indebtedness in respect of
such Securities or portions thereof will have been satisfied and discharged
as contemplated in this Section.
Upon the deposit of money or Government Obligations, or both, in accordance
with this Section, together with the documents required by clauses (x), (y) and
(z) above, the Trustee shall, upon receipt of a Company Request, acknowledge in
writing that the Security or Securities or portions thereof with respect to
which such deposit was made are deemed to have been paid for all purposes of
this Indenture and that the entire indebtedness of the Company in respect
thereof has been satisfied and discharged as contemplated in this Section. In
the event that all of the conditions set forth in the preceding paragraph shall
have been satisfied in respect of any Securities or portions thereof except
that, for any reason, the Officer's Certificate specified in clause (z), if
required, shall not have been delivered, such Securities or portions thereof
shall nevertheless be deemed to have been paid for all purposes of this
Indenture, and the Holders of such Securities or portions thereof shall
nevertheless be no longer entitled to the benefits of this Indenture or of any
of the covenants of the Company under Article III (except the covenants
contained in Sections 3.01 and 3.02) or any other covenants made in respect of
such Securities or portions thereof as contemplated by Section 2.05, but the
indebtedness of the Company in respect of such Securities or portions thereof
shall not be
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deemed to have been satisfied and discharged prior to Maturity for any other
purpose, and the Holders of such Securities or portions thereof shall continue
to be entitled to look to the Company for payment of the indebtedness
represented thereby; and, upon Company Request, the Trustee shall acknowledge in
writing that such Securities or portions thereof are deemed to have been paid
for all purposes of this Indenture.
If payment at Stated Maturity of less than all of the Securities of any
series is to be provided for in the manner and with the effect provided in this
Section, the Security Registrar shall select such Securities, or portions of
principal amount thereof, in the manner specified by Section 13.05 for selection
for redemption of less than all the Securities of a series.
In the event that Securities which shall be deemed to have been paid for
purposes of this Indenture, and, if such is the case, in respect of which the
Company's indebtedness shall have been satisfied and discharged, all as provided
in this Section do not mature and are not to be redeemed within the 60-day
period commencing with the date of the deposit of moneys or Government
Obligations, as aforesaid, the Company shall, as promptly as practicable, give a
notice, in the same manner as a notice of redemption with respect to such
Securities, to the Holders of such securities to the effect that such deposit
has been made and the effect thereof. Notwithstanding that any Securities shall
be deemed to have been paid for purposes of this Indenture, as aforesaid, the
obligations of the Company and the Trustee in respect of such Securities under
Sections 2.09, 2.10, 2.11, 3.02, 3.03, 6.07, 6.14, 13.03, 16.03 (as to notice of
redemption), and this Article XI shall survive.
The Company shall pay, and shall indemnify the Trustee or any Paying Agent
with which Government Obligations shall have been deposited as provided in this
Section against, any tax, fee or other charge imposed on or assessed against
such Government Obligations or the principal or interest received in respect of
such Government Obligations, including, but not limited to, any such tax payable
by any entity deemed, for tax purposes, to have been created as a result of such
deposit.
Anything herein to the contrary notwithstanding, (a) if, at any time after
a Security would be deemed to have been paid for purposes of this Indenture,
and, if such is the case, the Company's indebtedness in respect thereof would be
deemed to have been satisfied or discharged, pursuant to this Section (without
regard to the provisions of this paragraph), the Trustee or any Paying Agent, as
the case may be, shall be required to return the money or Government
Obligations, or combination thereof, deposited with it as aforesaid to the
Company or its representative under any applicable Federal or State bankruptcy,
insolvency or other similar law, such Security shall thereupon be deemed
retroactively not to have been paid and any satisfaction and discharge of the
Company's indebtedness in respect thereof shall retroactively be deemed not to
have been effected, and such Security shall be deemed to remain Outstanding and
(b) any satisfaction and discharge of the Company's indebtedness in respect of
any Security shall be subject to the provisions of the last paragraph of Section
3.03.
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SECTION 11.02. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further effect
(except as hereinafter expressly provided), and the Trustee, at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(a) no Securities remain Outstanding hereunder; and
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company;
provided, however, that if, in accordance with the last paragraph of
Section 11.01, any Security, previously deemed to have been paid for
purposes of this Indenture, shall be deemed retroactively not to have been
so paid, this Indenture shall thereupon be deemed retroactively not to have
been satisfied and discharged, as aforesaid, and to remain in full force
and effect, and the Company shall execute and deliver such instruments as
the Trustee shall reasonably request to evidence and acknowledge the same.
Notwithstanding the satisfaction and discharge of this Indenture as
aforesaid, the obligations of the Company and the Trustee under Sections 2.09,
2.10, 2.11, 3.02, 3.03, 6.07, 6.14, 13.03, 16.03 (as to notice of redemption),
and this Article XI shall survive.
Upon satisfaction and discharge of this Indenture as provided in this
Section, the Trustee shall assign, transfer and turn over to the Company,
subject to the lien provided by Section 6.07, any and all money, securities and
other property then held by the Trustee for the benefit of the Holders of the
Securities other than money and Government Obligations held by the Trustee
pursuant to Section 11.03.
SECTION 11.03. Application of Trust Money.
Neither the Government Obligations nor the money deposited pursuant to
Section 11.01, nor the principal or interest payments on any such Government
Obligations, shall be withdrawn or used for any purpose other than, and shall be
held in trust for, the payment of the principal of and premium, if any, and
interest, if any, on the Securities or portions of principal amount thereof in
respect of which such deposit was made, all subject, however, to the provisions
of Section 3.03; provided, however, that, so long as there shall not have
occurred and be continuing an Event of Default, any cash received from such
principal or interest payments on such Government Obligations, if not then
needed for such purpose, shall, to the extent practicable, be invested upon
Company Request and upon receipt of the documents referred to in clause (y) of
Section 11.01 in Government Obligations of the type described in clause (b) in
the first paragraph of Section 11.01 maturing at such times and in such amounts
as shall be sufficient together with any other moneys and the principal of and
interest on any other Government Obligations then held by the Trustee to pay
when due the principal of and premium, if any, and interest, if any, due and to
become due on such Securities or portions thereof on
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and prior to the Maturity thereof, and interest earned from such reinvestment
shall be paid over to the Company as received, free and clear of any trust, lien
or pledge under this Indenture except the lien provided by Section 6.07; and
provided, further, that, so long as there shall not have occurred and be
continuing an Event of Default, any moneys held in accordance with this Section
on the Maturity of all such Securities in excess of the amount required to pay
the principal of and premium, if any, and interest, if any, then due on such
Securities shall be paid over to the Company free and clear of any trust, lien
or pledge under this Indenture except the lien provided by Section 6.07; and
provided, further, that if an Event of Default shall have occurred and be
continuing, moneys to be paid over to the Company pursuant to this Section shall
be held until such Event of Default shall have been waived or cured.
ARTICLE XII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS AND DIRECTORS
SECTION 12.01. Indenture and Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or
interest on any Security, or for any claim based thereon or otherwise in respect
thereof, and no recourse under or upon any obligation, covenant or agreement of
the Company or the Guarantor in this Indenture, or in any Security, or because
of the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or the Guarantor or of any successor Person to the
Company or the Guarantor, either directly or through the Company or any
successor Person to the Company or the Guarantor, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly understood that all such liability is
hereby expressly waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Securities.
ARTICLE XIII
REDEMPTION OF SECURITIES
SECTION 13.01. Applicability of Article.
Securities of any series which are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified in or contemplated by Section 2.05 for Securities of any series) in
accordance with this Article XIII.
SECTION 13.02. Optional Tax Redemption.
If (a) the Company or Yorkshire Group satisfies the Trustee prior to the
giving of a notice as provided below that it has or will become obligated to pay
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Additional Amounts with respect to the Securities of any series as a result of
either (x) any change in, or amendment to, the laws or regulations of the Taxing
Jurisdiction or any political subdivision or any authority or agency thereof or
therein having power to tax or levy duties, or any change in the application or
interpretation of such laws or regulations, which change or amendment becomes
effective on or after the date of the prospectus for the Trust Securities or (y)
the issuance of Definitive Securities pursuant to either (i) in the event of the
occurrence and continuance of an Event of Default with respect to such
Securities, a written request from the Book-Entry Depositary upon instructions
from owners of interest representing a majority in outstanding principal amount
of the certificateless depository interests in the Global Security or Securities
that such Securities be exchanged for one or more Definitive Securities, (ii)
the unwillingness or inability of DTC to continue to hold the certificateless
depository interests in the Global Security or Securities or DTC's ceasing to be
a "clearing agency" registered under the Exchange Act and, in either case, a
successor is not appointed by the Company within 120 days, or (iii) the
unwillingness or inability of the Book-Entry Depositary to continue to serve as
the book-entry depository with respect to the Global Security or Securities and
a successor is not appointed by the Company within 120 days and (b) such
obligation cannot be avoided by the Company or Yorkshire Group taking reasonable
measures available to it, then the Company shall have the right, at its option,
upon not less than 30 days nor more than 60 days' written notice to the Holders
of such series, to redeem such Securities, in whole but not in part, at the
Redemption Price plus accrued and unpaid interest thereon, and Additional
Amounts, if any, provided that no such notice of redemption shall be given
earlier than 90 days prior to the earliest date on which the Guarantor or the
Company would be obligated to pay such Additional Amounts were a payment in
respect of such Securities then due. Prior to the publication of any notice of
redemption pursuant to this paragraph, the Company shall deliver to the Trustee
a certificate signed by a director of the Company stating that the obligation
referred to in (a) above cannot be avoided by Yorkshire Group or the Company
taking reasonable measures available to it, and the Trustee shall accept such
certificate as sufficient evidence of the condition precedent set out in (b)
above, in which event it shall be conclusive and binding on the Holders.
SECTION 13.03. Notice of Redemption; Selection of Securities.
In case the Company shall desire to exercise the right to redeem all, or,
as the case may be, any part of the Securities of any series in accordance with
their terms, it shall fix a date for redemption and shall mail a notice of such
redemption at least 30 and not more than 60 days prior to the date fixed for
redemption to the Holders of such Securities so to be redeemed as a whole or in
part at their last addresses as the same appear on the Security Register. Such
mailing shall be by first class mail. The notice if mailed in the manner herein
provided shall be conclusively presumed to have been duly given, whether or not
the Holder receives such notice. In any case, failure to give such notice by
mail or any defect in the notice to the holder of any Security designated for
redemption as a whole or in part shall not affect the validity of the
proceedings for the redemption of any other Security.
Each such notice of redemption shall specify the CUSIP number of the
Securities to be redeemed, the date fixed for redemption, the redemption price
at which
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the Securities are to be redeemed (or the method by which such redemption price
is to be calculated), the place or places of payment, that payment will be made
upon presentation and surrender of the Securities, that interest accrued to the
date fixed for redemption will be paid as specified in said notice, that the
redemption is for a sinking or other fund, if such is the case, and that on and
after said date interest thereon or on the portions thereof to be redeemed will
cease to accrue. If less than all the Securities of a series are to be redeemed
the notice of redemption shall specify the numbers of the Securities to be
redeemed. In case any Security is to be redeemed in part only, the notice of
redemption shall state the portion of the principal amount thereof to be
redeemed and shall state that on and after the date fixed for redemption, upon
surrender of such Security, a new Security or Securities in principal amount
equal to the unredeemed portion thereof will be issued.
The Redemption Price shall be paid prior to 12:00 noon, New York City time,
on the redemption date specified in the notice of redemption given as provided
in this Section, or such earlier time as the Company determines; provided that,
prior to 10:00 a.m., New York City time, on such date of redemption, the Company
shall deposit with the Trustee or with one or more Paying Agents an amount of
money sufficient to redeem all the Securities so called for redemption at the
appropriate Redemption Price, together with accrued interest to the date fixed
for redemption.
The Company will give the Trustee notice in writing not less than 45 days
prior to the redemption date as to the aggregate principal amount of Securities
of such series to be redeemed and the Trustee shall select, in such manner as in
its sole discretion it shall deem appropriate and fair, the Securities or
portions thereof (in integral multiples of $25, except as otherwise set forth in
the applicable form of Security) to be redeemed.
SECTION 13.04. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities so to
be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price and accrued and
unpaid interest) such Securities shall cease to bear interest. Upon surrender of
any such Security for redemption in accordance with said notice, and Security
shall be paid by the Company at the Redemption Price, together with accrued and
unpaid interest to the Redemption Date; provided, however, that installments of
interest whose Stated Maturity is on or prior to the Redemption Date shall be
payable to the Holders of such Securities, or one or more Predecessor
Securities, and in the case of the Registered Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 2.11.
In any Security called for redemption shall not be so paid upon surrender
thereof for redemption, the principal (and premium, if any) shall, until paid,
bear interest from the Redemption Date at the rate prescribed therefor in the
Security.
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SECTION 13.05. Securities Redeemed in Part.
Any Security (including any Global Security) which is to be redeemed only
in part shall be surrendered at a Place of Payment therefor (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee upon written direction shall authenticate
and deliver to the Holder of such Security without service charge, a new
Security or Securities of the same series, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the security so surrendered;
provided, that if a Global Security is so surrendered, the new Global Security
shall be in a denomination equal to the unredeemed portion of the principal of
the Global Security so surrendered.
ARTICLE XIV
SUBORDINATION OF SECURITIES
SECTION 14.01. Agreement to Subordinate.
The Company covenants and agrees, and each Holder of Securities of each
series issued hereunder likewise covenants and agrees, that the Securities shall
be issued subject to the provisions of this Article XIV; and each Holder of the
Securities of each series, whether upon original issue or upon transfer or
assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the principal of and premium, if any, and
interest on all Securities issued hereunder shall, to the extent and in the
manner hereinafter set forth, be subordinated and junior in right of payment to
the prior payment in full of all amounts with respect to Senior Debt, whether
outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XIV shall prevent the occurrence of any
Default or Event of Default hereunder.
SECTION 14.02. Default on Senior Debt.
In the event and during the continuation of (1) any default in any payment
of principal, premium, interest or any other payment with respect to any Senior
Debt, or (2) an event of default with respect to any Senior Debt resulting in
the declaration of acceleration thereof which remains uncured, then, in either
case, no payments with respect to the principal of, premium, if any, or
interest, if any, on any Securities shall be made.
In the event of the declaration of acceleration of any Securities of any
series, the holders of all Senior Debt outstanding at the time of such
declaration shall be entitled to receive payment in full of all amounts due in
respect of such Senior Debt
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(including any amounts due upon such declaration) before the Holders of
Securities will be entitled to receive any payment upon the principal of,
premium, if any, or interest, if any, on any of the Securities.
In the event that, notwithstanding the foregoing, any payment shall be
received by the Trustee when such payment is prohibited by the preceding
paragraphs of this Section 14.02, such payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of Senior Debt
or their respective representatives, or to the trustee or trustees under any
indenture pursuant to which any of such Senior Debt may have been issued, as
their respective interests may appear, but only to the extent of the amounts due
in respect of such Senior Debt and only to the extent that the holders of the
Senior Debt (or their representative or representatives or a trustee) notify the
Trustee in writing, within 90 days of such payment, of the amounts then due and
owing on such Senior Debt and only the amounts specified in such notice to the
Trustee shall be paid to the holders of such Senior Debt.
SECTION 14.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the Company of
any kind or character, whether in cash, property or securities, to creditors
upon any liquidation, dissolution, winding-up, reorganization, assignment for
the benefit of creditors, or marshaling of assets of the Company, whether
voluntary or involuntary or any bankruptcy, insolvency, debt restructuring or
similar proceedings in connection with any insolvency or bankruptcy proceeding
of the Company, the holders of Senior Debt of the Company shall first be
entitled to receive payment in full of principal of, premium, if any, and
interest, if any, on such Senior Debt before the Holders of Securities will be
entitled to receive or retain any payment in respect of the principal of,
premium, if any, or interest, if any, on the Securities; and upon any such
dissolution or winding-up or liquidation or reorganization, any payment by the
Company, or distribution of assets of the Company of any kind or character,
whether in cash, property or securities, to which the Holders or the Trustee
would be entitled to receive from the Company, except for the provisions of this
Article XIV, shall be paid by the Company or by any receiver, trustee in
bankruptcy, liquidating trustee, agent or other Person making such payment or
distribution, or by the Holders or by the Trustee under this Indenture if
received by them or it, directly to the holders of Senior Debt of the Company
(pro rata to such holders on the basis of the respective amounts of Senior Debt
held by such holders, as calculated by the Company) or their representative or
representatives, or to the trustee or trustees under any indenture pursuant to
which any instruments evidencing such Senior Debt may have been issued, as their
respective interests may appear, to the extent necessary to pay such Senior Debt
in full, in money or money's worth, after giving effect to any concurrent
payment or distribution to or for the holders of such Senior Debt, before any
payment or distribution is made to the Holders or to the Trustee.
In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities, prohibited by the foregoing, shall be received by the
Trustee before all Senior Debt is paid in full, or provision is made for such
payment in money in
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accordance with its terms, such payment or distribution shall be held in trust
for the benefit of and shall be paid over or delivered to the holders of such
Senior Debt or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing such
Senior Debt may have been issued, and their respective interests may appear, as
calculated by the Company, for application to the payment of all Senior Debt
remaining unpaid to the extent necessary to pay such Senior Debt in full in
money in accordance with its terms, after giving effect to any concurrent
payment or distribution to or for the benefit of the holders of such Senior
Debt.
For purposes of this Article XIV, the words "cash, property or securities"
shall not be deemed to include shares of stock of the Company as reorganized or
readjusted, or securities of the Company or any other corporation provided for
by a plan of reorganization or readjustment, the payment of which is
subordinated at least to the extent provided in this Article XIV with respect to
the Securities to the payment of Senior Debt that may at the time be
outstanding, provided that (i) such Senior Debt is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Senior Debt are not, without the consent
of such holders, altered by such reorganization or readjustment. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the sale,
conveyance, transfer or lease of its property as an entirety, or substantially
as an entirety, to another Person upon the terms and conditions provided for in
Article X of this Indenture shall not be deemed a dissolution, winding-up,
liquidation or reorganization for the purposes of this Section 14.03 if such
other Person shall, as a part of such consolidation, merger, sale, conveyance,
transfer or lease, comply with the conditions stated in Article X of this
Indenture. Nothing in Section 14.02 or in this Section 14.03 shall apply to
claims of, or payments to, the Trustee under or pursuant to Section 6.06 of this
Indenture.
SECTION 14.04. Subrogation.
Subject to the payment in full of all amounts due in respect of Senior
Debt, the rights of the Holders shall be subrogated to the rights of the holders
of such Senior Debt to receive payments or distributions of cash, property or
securities of the Company, as the case may be, applicable to such Senior Debt
until the principal of (and premium, if any) and interest on the Securities
shall be paid in full; and, for the purposes of such subrogation, no payments or
distributions to the holders of such Senior Debt of any cash, property or
securities to which the Holders or the Trustee would be entitled except for the
provisions of this Article XIV, and no payment over pursuant to the provisions
of this Article XIV to or for the benefit of the holders of such Senior Debt by
Holders or the Trustee, shall, as between the Company, its creditors other than
holders of Senior Debt of the Company, and the Holders of the Securities, be
deemed to be a payment by the Company to or on account of such Senior Debt. It
is understood that the provisions of this Article XIV are and are intended
solely for the purposes of defining the relative rights of the Holders of the
Securities, on the one hand, and the holders of such Senior Debt, on the other
hand.
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Nothing contained in this Article XIV or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as between the Company, its
creditors other than the holders of Senior Debt of the Company, and the Holders
of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of (and
premium, if any) and interest on the Securities as and when the same shall
become due and payable in accordance with their terms, or is intended to or
shall affect the relative rights of the Holders of the Securities and creditors
of the Company, as the case may be, other than the holders of Senior Debt of the
Company, as the case may be, nor shall anything herein or therein prevent the
Trustee or the Holder of any Security from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article XIV of the holders of such Senior Debt in
respect of cash, property or securities of the Company, as the case may be,
received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in
this Article XIV, the Trustee, subject to the provisions of Article VI of this
Indenture, and the Holders shall be entitled to conclusively rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding-up, liquidation or reorganization proceedings are pending, or a
certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent
or other Person making such payment or distribution, delivered to the Trustee or
to the Holders, for the purposes of ascertaining the Persons entitled to
participate in such distribution, the holders of Senior Debt and other
indebtedness of the Company, as the case may be, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article XIV.
SECTION 14.05. Trustee to Effectuate Subordination.
Each Holder by such Holder's acceptance thereof authorizes and directs the
Trustee on such Holder's behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article XIV and
appoints the Trustee such Holder's attorney-in-fact for any and all such
purposes.
SECTION 14.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer of
the Trustee of any fact known to the Company that would prohibit the making of
any payment of monies to or by the Trustee in respect of the Securities pursuant
to the provisions of this Article XIV. Notwithstanding the provisions of this
Article XIV or any other provision of this Indenture, the Trustee shall not be
charged with knowledge of the existence of any facts that would prohibit the
making of any payment of monies to or by the Trustee in respect of the
Securities pursuant to the provisions of this Article XIV, unless and until a
Responsible Officer of the Trustee shall have received written notice thereof
from the Company or a holder or holders of Senior Debt or from any trustee
therefor; and before the receipt of any such written notice, the Trustee,
subject to the provisions of Article VI of this Indenture, shall be entitled in
all respects to assume that no such facts exist; provided, however, that if the
Trustee shall not have received the
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notice provided for in this Section 14.06 at least two Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose (including, without limitation, the payment of the principal of (or
premium, if any) or interest on any Security), then, anything herein contained
to the contrary notwithstanding, the Trustee shall have full power and authority
to receive such money and to apply the same to the purposes for which they were
received, and shall not be affected by any notice to the contrary that may be
received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture,
shall be entitled to conclusively rely on the delivery to it of a written notice
by a Person representing himself to be a holder of Senior Debt of the Company,
as the case may be (or a trustee on behalf of such holder), to establish that
such notice has been given by a holder of such Senior Debt or a trustee on
behalf of any such holder or holders. In the event that the Trustee determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of such Senior Debt to participate in any payment or
distribution pursuant to this Article XIV, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of such Senior Debt held by such Person, the extent to which such Person
is entitled to participate in such payment or distribution and any other facts
pertinent to the rights of such Person under this Article XIV, and, if such
evidence is not furnished, the Trustee may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
Upon any payment or distribution of assets of the Company referred to in
this Article XIV, the Trustee and the Holders shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
insolvency, bankruptcy, receivership, liquidation, reorganization, dissolution,
winding up or similar case or proceeding is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders, for the purpose of
ascertaining the Persons entitled to participate in such payment or
distribution, the holders of Senior Debt and other indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article XIV.
SECTION 14.07. Rights of the Trustee; Holders of Senior Debt.
The Trustee in its individual capacity shall be entitled to all the rights
set forth in this Article XIV in respect of any Senior Debt at any time held by
it, to the same extent as any other holder of Senior Debt, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Debt of the Company, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article XIV, and no implied covenants or
obligations with respect to the holders of such Senior Debt shall be read into
this Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary duty to the holders of
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such Senior Debt and, subject to the provisions of Article VI of this Indenture,
the Trustee shall not be liable to any holder of such Senior Debt if it shall
pay over or deliver to Holders, the Company or any other Person money or assets
to which any holder of such Senior Debt shall be entitled by virtue of this
Article XIV or otherwise.
Nothing in this Article XIV shall apply to claims of, or payments to, the
Trustee under or pursuant to Section 6.06.
SECTION 14.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Debt of the Company
to enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act, in good faith, by any such holder, or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof that any such holder may have or
otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Debt of the Company may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders, without
incurring responsibility to the Holders and without impairing or releasing the
subordination provided in this Article XIV or the obligations hereunder of the
Holders of the Securities to the holders of such Senior Debt, do any one or more
of the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or alter, such Senior Debt, or otherwise amend or
supplement in any manner such Senior Debt or any instrument evidencing the same
or any agreement under which such Senior Debt is outstanding; (ii) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing such Senior Debt; (iii) release any Person liable in any
manner for the collection of such Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
ARTICLE XV
GUARANTEE OF SECURITIES
SECTION 15.01. Applicability of Article; Unconditional Guarantee.
If, pursuant to Section 2.05, provision is made for the Guarantee of the
Securities of any series by the Guarantor, then the provisions of this Article
XV, with such modifications thereto as may be specified pursuant to Section 2.05
with respect to any Securities, shall apply to such Securities. The Guarantor
hereby fully and unconditionally guarantees to each Holder of a Security of each
series authenticated and delivered by the Trustee the due and punctual payment
of the principal of (including any amount due in respect of original issue
discount), premium, if any, and interest in respect of such Security (and any
Additional Amounts payable in respect thereof) (subject to any extension of an
interest payment period pursuant to Section 2.05), and the due and punctual
payment of any sinking fund payments provided for pursuant to terms of such
Security, when and as the same shall become due and payable, whether at the
Stated Maturity, by declaration of acceleration, call for redemption or
otherwise, in accordance with the terms of such
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Security and of this Indenture, regardless of any defense, right of set-off or
counterclaim that the Guarantor may have or assert, except the defense of
payment. The Guarantor's obligation to make a payment under this Article XV may
be satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Company to pay such amounts to the Holders.
To the extent permitted under applicable law, if any Holder or the Trustee
is required by a final non-appealable judgment of any court or otherwise to
return to either the Company or the Guarantor, or any custodian, trustee,
liquidator or other similar official acting in relation to the Company or the
Guarantor, any amount paid by either the Company or the Guarantor to such Holder
or the Trustee, any Guarantee, to the extent theretofore discharged, shall be
reinstated in full force and effect. To the extent permitted under applicable
law, the Guarantor further agrees that, as between the Guarantor, on the one
hand, and the Holders and the Trustee, on the other hand, (x) the maturity of
the obligations guaranteed hereby may be accelerated as provided in Article V
for the purpose of any Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any acceleration of such obligations
as provided in Article V, such obligations (whether or not due and payable)
shall forthwith become due and payable by the Guarantor for the purpose of any
Guarantee.
No past, present or future stockholder, officer, director, employee or
incorporator of the Guarantor shall have any personal liability under the
Guarantee set forth in this Section 15.01 by reason of his or its status as such
stockholder, officer, director, employee or incorporator.
The Guarantee set forth in this Section 15.01 shall not be valid or become
obligatory for any purpose with respect to a Security until the certificate of
authentication on such Security shall have been authenticated by or on behalf of
the Trustee by manual signature.
SECTION 15.02. Waiver of Notice and Demand.
The Guarantor hereby waives notice of acceptance of this guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
filing of claims with a court in the event of insolvency or bankruptcy of the
Company, any right to require a proceeding first against the Company, the
Trustee or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 15.03. Guarantor Obligations Not Affected.
The obligations, covenants, agreements and duties of the Guarantor under
this Article XV shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
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(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Company of any express or implied agreement,
covenant, term or condition relating to the Securities to be performed or
observed by the Company;
(b) the extension of time for the payment by the Company of all or any
portion of the interest on the Securities, the Redemption Price of any other
sums payable under the terms of the Securities or the extension of time for the
performance of any other obligation under, arising out of, or in connection
with, the Securities;
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Securities, or any action
on the part of the Company granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition or readjustment of debt of, or other similar
proceedings affecting, the Company or any of the assets of the Company;
(e) any invalidity of, or defect or deficiency in, the Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor (other than payment of
the underlying obligation), it being the intent of this Article XV that the
obligations of the Guarantor hereunder shall be absolute and unconditional under
any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
the consent of, the Guarantor with respect to the happening of any of the
foregoing.
SECTION 15.04. Execution of Guarantee.
To evidence its guarantee to the Holders specified in Section 15.01, the
Guarantor hereby agrees to execute the notation of the Guarantee in
substantially the form set forth in Section 2.04 to be endorsed on each Security
authenticated and delivered by the Trustee. The Guarantor hereby agrees that its
Guarantee set forth in Section 15.01 shall remain in full force and effect
notwithstanding any failure to endorse on each Security a notation of such
Guarantee. Each such notation of the Guarantee shall be signed on behalf of the
Guarantor, by a director or officer, prior to the authentication of the Security
on which it is endorsed, and the delivery of such Security by the Trustee, after
the due authentication thereof by the Trustee hereunder, shall constitute due
delivery of the Guarantee on behalf of the Guarantor. Such signature upon the
notation of the Guarantee may be a manual or facsimile signature of any present,
past or future such director or officer and may be imprinted or otherwise
reproduced below the notation of the Guarantee, and in case any such director or
officer who shall have signed the notation
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of the Guarantee shall cease to be such director or officer before the Security
on which such notation is endorsed shall have been authenticated and delivered
by the Trustee or disposed of by the Company, such Security nevertheless may be
authenticated and delivered or disposed of as though the person who signed the
notation of the Guarantee had not ceased to be such director or officer of the
Guarantor.
SECTION 15.05. Subrogation.
The Guarantor shall be subrogated to all rights (if any) of the Holders
against the Company in respect of any amounts paid to the Holders by the
Guarantor under this Article XV with respect to any series of Securities;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Article XV with
respect to a series of Securities if, at any time of such payment, any amounts
are due and unpaid under such series of Securities. If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 15.06. Independent Obligations.
The Guarantor acknowledges that its obligations hereunder are independent
of the obligations of the Company with respect to the Securities and that the
Guarantor shall be liable as principal and as debtor hereunder to make payments
pursuant to the terms of the Securities notwithstanding the occurrence of any
event referred to in subsections (a) through (g), inclusive, of Section 15.03
hereof.
ARTICLE XVI
SINKING FUNDS
SECTION 16.01. Applicability of Article.
The provisions of this Article shall be applicable to any sinking fund for
the retirement of Securities of a series except as otherwise specified as
contemplated by Section 2.05 for Securities of such series.
The minimum amount of any sinking fund payment provided for by the terms of
Securities of any series is herein referred to as a "mandatory sinking fund
payment", and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment". If provided for by the terms of Securities of any series, the
cash amount of any sinking fund payment may be subject to reduction as provided
in Section 16.02. Each sinking fund payment shall be applied to the redemption
of Securities of any series as provided for by the terms of Securities of such
series.
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SECTION 16.02. Satisfaction of Sinking Fund Payments with Securities.
In lieu of making all or any part of any mandatory sinking fund payment
with respect to any series of Securities in cash, the Company may at its option
(a) deliver to the Trustee Securities of such series theretofore purchased or
otherwise acquired (except upon redemption pursuant to the mandatory sinking
fund) by the Company or receive credit for Securities of such series (not
previously so credited) theretofore purchased or otherwise acquired (except as
aforesaid) by the Company and delivered to the Trustee for cancellation pursuant
to Section 3.10, (b) receive credit for optional sinking fund payments (not
previously so credited) made pursuant to this Section 16.02, or (c) receive
credit for Securities of such series (not previously so credited) redeemed by
the Company through any optional redemption provision contained in the terms of
such series. Securities so delivered or credited shall be received or credited
by the Trustee at the sinking fund Redemption Price specified in such
Securities.
SECTION 16.03. Redemption of Securities for Sinking Fund.
Not less than 30 days prior to each sinking fund payment date for any
series of Securities, the Company will deliver to the Trustee an Officers'
Certificate specifying (a) the amount of the next ensuing sinking fund payment
for that series pursuant to the terms of that series, (b) whether or not the
Company intends to exercise its right, if any, to make an optional sinking fund
payment with respect to such series on the next ensuing sinking fund payment
date and, if so, the amount of such optional sinking fund payment, and (c) the
portion thereof, if any, which is to be satisfied by payment of cash and the
portion thereof, if any, which is to be satisfied by delivering and crediting
Securities of that series pursuant to Section 16.02, and will also deliver to
the Trustee any Securities to be so delivered. Such written statement shall be
irrevocable and upon its receipt by the Trustee the Company shall become
unconditionally obligated to make all the cash payments or payments therein
referred to, if any, on or before the next succeeding sinking fund payment date.
Failure of the Company, on or before any such 30th day, to deliver such written
statement and Securities specified in this paragraph, if any, shall not
constitute a default but shall constitute, on and as of such date, the
irrevocable election of the Company (i) that the mandatory sinking fund payment
for such series due on the next succeeding sinking fund payment date shall be
paid entirely in cash without the option to deliver or credit Securities of such
series in respect therefor and (ii) that the Company will make no optional
sinking fund payment with respect to such series as provided in this Section
16.03.
Not less than 30 days before each such sinking fund payment date the
Trustee shall select the Securities to be redeemed upon such sinking fund
payment date in the manner specified in Section 13.03 and cause notice of the
redemption thereof to be given in the name of and at the expense of the Company
in the manner provided in Section 13.04. Such notice having been duly given, the
redemption of such Securities shall be made upon the terms and in the manner
stated in Sections 13.05, 13.06 and 13.07.
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The Trustee shall not redeem or cause to be redeemed any Security of a
series with sinking fund moneys or mail any notice of redemption of Securities
of such series by operation of the sinking fund during the continuance of a
default in payment of interest with respect to Securities of that series or an
Event of Default with respect to the Securities of that series except that,
where the mailing of notice of redemption of any Securities shall theretofore
have been made, the Trustee shall redeem or cause to be redeemed such
Securities, provided that it shall have received from the Company a sum
sufficient for such redemption. Except as aforesaid, any moneys in the sinking
fund for such series at the time when any such default or Event of Default,
shall occur, and any moneys thereafter paid into the sinking fund, shall, during
the continuance of such default or Event of Default, be deemed to have been
collected under Article Five and held for the payment of all such Securities. In
case such Event of Default shall have been waived as provided in Section 5.06 or
the default or Event of Default cured on or before the 30th day preceding the
sinking fund payment date, such moneys shall thereafter be applied on the next
succeeding sinking fund payment date in accordance with this Section 16.03 to
the redemption of such Securities.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
SECTION 17.01. Consent to Jurisdiction; Appointment of Agent to Accept
Service of Process
(a) Each of the Company and the Guarantor irrevocably consents and agrees,
for the benefit of the Holders from time to time of the Securities and the
Trustee, that any civil legal action, suit or proceeding against it with respect
to its obligations, liabilities or any other matter arising out of or in
connection with this Indenture, the Securities or any Guarantee may be brought
in the Supreme Court of New York, New York County or the United States District
Court for the Southern District of New York and any appellate court from either
thereof and, until amounts due and to become due in respect of the Securities or
any Guarantee have been paid, hereby irrevocably consents and submits to the
non-exclusive jurisdiction of each such court in personam, generally and
unconditionally with respect to any legal action, suit or proceeding for itself
and in respect of its properties, assets and revenues and agrees to file such
consents with such authorities as may be required to irrevocably evidence such
agreement.
(b) Each of the Company and the Guarantor has irrevocably designated,
appointed, and empowered CT Corporation System, acting through its office at
1633 Broadway, New York, New York 10019, as its designee, appointee and agent to
receive, accept and acknowledge for and on its behalf, and its properties,
assets and revenues, service of any and all legal process, summons, notices and
documents which may be served in any legal action, suit or proceeding brought
against the Company or the Guarantor in any United States or state court. If for
any reason such designee, appointee and agent hereunder shall cease to be
available to act as such, each of the Company and the Guarantor agrees to
designate a new designee, appointee and agent in the Borough of Manhattan, The
City of New York on the terms and for the purposes of this Section 17.01
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satisfactory to the Trustee. Each of the Company and the Guarantor further
hereby irrevocably consents and agrees to the service of any and all legal
process, summons, notices and documents in any legal action, suit or proceeding
against the Company or the Guarantor by serving a copy thereof upon the relevant
agent for service of process referred to in this Section 17.01 (whether or not
the appointment of such agent shall for any reason prove to be ineffective or
such agent shall accept or acknowledge such service) or by mailing copies
thereof by registered or certified air mail, postage prepaid, to each of the
Company or the Guarantor at its address specified in or designated pursuant to
this Indenture. Each of the Company and the Guarantor agrees that the failure of
any such designee, appointee and agent to give any notice of such service to it
shall not impair or affect in any way the validity of such service or any
judgment rendered in any action or proceeding based thereon. Nothing herein
shall in any way be deemed to limit the ability of the holders of the Securities
and the Trustee, to serve any such legal process, summons, notices and documents
in any other manner permitted by applicable law or to obtain jurisdiction over
the Company or the Guarantor or bring legal actions, suits or proceedings
against the Company or the Guarantor in such other jurisdictions, and in such
manner, as may be permitted by applicable law. Each of the Company and the
Guarantor irrevocably and unconditionally waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any of the aforesaid actions, suits or proceedings arising out of or
in connection with this Indenture brought in the Supreme Court of New York, New
York County or the United States District Court for the Southern District of New
York and any appellate court from either thereof and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) To the extent that the Company or the Guarantor may in any jurisdiction
claim for itself or its assets immunity (to the extent such immunity may now or
hereafter exist, whether on the grounds of sovereign immunity or otherwise) from
suit, execution, attachment (whether in aid of execution, before judgment or
otherwise) or other legal process (whether through service or notice or
otherwise), and to the extent that in any such jurisdiction there may be
attributed to itself or its assets such immunity (whether or not claimed), the
Company and the Guarantor irrevocably agrees with respect to any matter arising
under the Indenture for the benefit of the Holders from time to time of the
Securities, not to claim, and irrevocably waives, such immunity to the full
extent permitted by the laws of such jurisdiction.
(d) If for the purpose of obtaining a judgment or order in any court it is
necessary to convert a sum due hereunder to the holder of any Security from U.S.
dollars into another currency, each of the Company and the Guarantor has agreed,
and each holder by holding such Security will be deemed to have agreed, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures such Holder
could purchase U.S. dollars with such other currency in The City of New York on
the Business Day preceding the day on which final judgment is given.
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(e) The obligation of the Company and the Guarantor in respect of any sum
payable by it to the holder of a Security shall, notwithstanding any judgment or
order in a currency (the "judgment currency") other than U.S. dollars, be
discharged only to the extent that on the Business Day following receipt by the
Holder of such security of any sum, adjudged to be so due in the judgment
currency, the Holder of such Security may in accordance with normal banking
procedures purchase U.S. dollars with the judgment currency; if the amount of
U.S. dollars so purchased is less than the sum originally due to the holder of
such Security in the judgment currency (determined in the manner set forth in
the preceding paragraph), each of the Company and the Guarantor agrees, as a
separate obligation and notwithstanding any such judgment, to indemnify the
Holder of such Security against such loss, and if the amount of the U.S. dollars
so purchased exceeds the sum originally due to the Holder of such Security, such
Holder agrees to remit to the Company or the Guarantor such excess, provided
that such Holder shall have no obligation to remit any such excess as long as
the Company or the Guarantor shall have failed to pay such Holder any
obligations due and payable under such Security, in which case such excess may
be applied to such obligations of the Company or the Guarantor under such
Security in accordance with the terms thereof. The foregoing indemnity shall
constitute a separate and independent obligation of the Company and the
Guarantor and shall continue in full force and effect notwithstanding any such
judgment or order as aforesaid.
SECTION 17.02. Successors.
All the covenants, stipulations, promises and agreements in this Indenture
contained by the Company and the Guarantor shall bind their successors and
assigns whether so expressed or not.
SECTION 17.03. Official Acts by Successor Corporation.
Any act or proceeding by any provision of this Indenture authorized or
required to be done or performed by any board, committee or officer of the
Company shall and may be done and performed with like force and effect by the
like board, committee or officer of any corporation that shall at the time be
the lawful sole successor of the Company.
SECTION 17.04. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of which
shall be an original, but such counterparts shall together constitute but one
and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed by their respective officers, directors or signatories duly
authorized thereto, as of the day and year first above written.
YORKSHIRE POWER FINANCE LIMITED
By_________________________________
Name:
Title:
YORKSHIRE POWER GROUP LIMITED
By_________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Trustee, Principal Paying, Security
Registrar and Transfer Agent
By_________________________________
Name:
Title:
BANQUE GENERALE DU LUKEMBOURG S.A.,
as Paying Agent and Transfer Agent
By_________________________________
Name:
Title:
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EXHIBIT 4.2
YORKSHIRE POWER FINANCE LIMITED, as Issuer
and
YORKSHIRE POWER GROUP LIMITED, as Guarantor
and
THE BANK OF NEW YORK,
as Trustee, Principal Paying Agent,
Registrar and Transfer Agent
and
BANQUE GENERALE DU LUXEMBOURG S.A.,
as Paying Agent and Transfer Agent
$275,000,000
___% Junior Subordinated Deferrable Interest
Debentures, Series A due ________, 2038
First Supplemental Indenture
Dated as of May __, 1998
<PAGE>
FIRST SUPPLEMENTAL INDENTURE, dated as of May __, 1998 (this "First
Supplemental Indenture"), among YORKSHIRE POWER FINANCE LIMITED, a limited
liability company organized under the laws of the Cayman Islands, as issuer (the
"Company"), YORKSHIRE POWER GROUP LIMITED, a private limited company
incorporated under the laws of England and Wales, as guarantor (the
"Guarantor"), THE BANK OF NEW YORK, as Trustee, Principal Paying Agent,
Registrar and Transfer Agent under the Original Indenture referred to below (the
"Trustee"), and BANQUE GENERALE DU LUXEMBOURG S.A., as Paying and Transfer Agent
under the Original Indenture.
WITNESSETH:
WHEREAS, each of the Company and the Guarantor has heretofore executed and
delivered to the Trustee an indenture dated as of May __, 1998 (hereinafter
called the "Original Indenture"), to provide for the issuance from time to time
of certain of its unsecured subordinated debentures, notes or other evidences of
indebtedness (herein called the "Securities"), the form and terms of which are
to be established as set forth in Sections 2.01 and 2.05 of the Original
Indenture;
WHEREAS, Section 9.01 of the Original Indenture provides, among other
things, that the Company, the Guarantor and the Trustee may enter into
indentures supplemental to the Original Indenture for, among other things, the
purpose of establishing the form and terms of the Securities of any series as
permitted by Sections 2.01 and 2.05 of the Original Indenture and of appointing
an Authenticating Agent with respect to the Securities of any series;
WHEREAS, the Company desires to create a series of the Securities in an
aggregate principal amount of $275,000,000 to be designated the "___% Junior
Subordinated Deferrable Interest Debentures, Series A due ________, 2038", and
all action on the part of the Company necessary to authorize the issuance of
these Securities under the Original Indenture and this First Supplemental
Indenture has been duly taken; and
WHEREAS, all acts and things necessary to make such Securities, when
executed by the Company and authenticated and delivered by the Trustee as in the
Original Indenture provided, the valid and binding obligations of the Company
and to constitute these presents a valid and binding supplemental indenture and
agreement according to its terms, have been done and performed;
NOW, THEREFORE, THIS FIRST SUPPLEMENTAL INDENTURE WITNESSETH:
That in consideration of the premises and of the acceptance and purchase of
the Series A Debentures (hereinafter defined) by the holders thereof and of the
acceptance of this trust by the Trustee, each of the Company and the Guarantor
covenants and agrees with the Trustee, for the equal benefit of holders of the
Series A Debentures, as follows:
<PAGE>
ARTICLE ONE
DEFINITIONS
The use of the terms and expressions herein is in accordance with the
definitions, uses and constructions contained in the Original Indenture and the
forms of Securities attached hereto as Exhibits A and B, respectively. In
addition, for all purposes of this First Supplemental Indenture, except as
otherwise expressly provided or unless the context otherwise expressly requires,
the following terms shall have the respective meanings assigned to them as
follows and shall be construed as if defined in Article One of the Original
Indenture:
"Book-Entry Depositary" means The Bank of New York as designated by the
Company in the Deposit Agreement until a successor shall have become such
pursuant to the applicable provisions of the Deposit Agreement, and thereafter
"Book-Entry Depositary" shall mean such successor Book-Entry Depositary or its
nominee or the custodian of either.
"Corporate Trust Office" means the principal office of the Trustee in the
City of New York, at which at any particular time its corporate trust business
shall be administered, which at the date hereof is 101 Barclay Street, New York,
New York 10286.
"Deferred Interest" means each installment of interest not paid during any
Extension Period and interest thereon. Deferred installments of interest shall
bear interest at the rate of ____% per annum from the applicable Interest
Payment Date to the date of payment, compounded quarterly, to the extent
permitted by applicable law.
"Definitive Registered Series A Debentures" means Series A Debentures in
the form of Exhibit B to this First Supplemental Indenture.
"Deposit Agreement" means the Deposit Agreement, dated as of May 1, 1998,
among the Company, the Book-Entry Depositary and the holders and beneficial
owners from time to time of interests in the Book-Entry Interests issued
thereunder.
"DTC" means The Depository Trust Company, New York, New York, or its
successors.
"Extension Period" means any period during which the Company has elected to
defer payments of interest, which deferral may be for a period of up to twenty
(20) consecutive quarters.
"Global Series A Debentures" means Global Bearer Securities, evidencing the
Series A Debentures issued to the Book-Entry Depositary substantially in the
form of Exhibit A to this First Supplemental Indenture.
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"Series A Debenture" means the Company's ____% Junior Subordinated
Deferrable Interest Debenture, Series A due _______, 2038, as authenticated and
issued under this Indenture.
"Stated Maturity" means, with respect to the Series A Debentures, ________,
2038.
"Trust" means Yorkshire Capital Trust I, a statutory business trust formed
under Delaware law to issue Trust Securities, the proceeds of which will be used
to purchases the Series A Debentures.
ARTICLE TWO
TERMS AND ISSUANCE OF THE SERIES A DEBENTURES
SECTION 201. Issue of Securities. A series of Securities which shall be
designated the ____% Junior Subordinated Deferrable Interest Debenture, Series A
due ________, 2038 shall be executed, authenticated and delivered in accordance
with the provisions of, and shall in all respects be subject to, the terms,
conditions and covenants of the Original Indenture and this First Supplemental
Indenture (including the forms of Series A Debentures set forth in Exhibits A
and B hereto). The aggregate principal amount of the Series A Debentures which
may be authenticated and delivered under the First Supplemental Indenture shall
not, except as permitted by the provisions of the Original Indenture, exceed
$275,000,000.
SECTION 202. Form of Series A Debentures; Incorporation of Terms. The forms
of the Global Series A Debentures and the Definitive Registered Series A
Debentures shall be substantially in the forms of Exhibits A and B,
respectively, attached hereto, the terms of which are herein incorporated by
reference and which are part of this First Supplemental Indenture.
SECTION 203. Additional Interest. So long as any Trust Securities issued by
the Trust remain outstanding, if the Trust shall be required to pay, with
respect to any income derived from payments of principal of or interest on the
Series A Debentures or pursuant to the Guarantee, any amount for or on an
account of any taxes, duties, assessments or governmental charges of whatever
nature imposed by a Taxing Jurisdiction or any other taxing authority, then, in
any such case, the Company or the Guarantor, as the case may be, will pay
Additional Interest on such Series A Debentures.
SECTION 204. Deferral of Interest Payments. So long as no Event of Default
has occurred and is continuing, the Company has the right to extend the interest
payment period of the Series A Debentures, at any time and from time to time,
for up to twenty (20) consecutive quarters (each, an "Extension Period"), but
not beyond the Stated Maturity. Until all deferred payments of interest together
with interest thereon have been paid in full, interest will continue to accrue,
together with interest thereon at ____%, to the extent permitted by law. Prior
to the termination of any such Extension Period, the Company may further extend
the interest payment period, provided that such
3
<PAGE>
Extension Period, together with all such previous and further extensions of that
Extension Period, shall not exceed twenty (20) consecutive quarters.
Upon the termination of any Extension Period, which termination shall be on
an Interest Payment Date, the Company shall pay all Deferred Interest on the
next succeeding Interest Payment Date (in the case of a Bearer Security) to the
bearer thereof and (in the case of a Registered Security) to the Person in whose
name the Series A Debentures are registered on the Regular Record Date for such
Interest Payment Date; provided, that Deferred Interest payable at Stated
Maturity or on any Redemption Date will be paid to the Person to whom principal
is payable.
The Company shall give the Holder or Holders of the Series A Debentures and
the Trustee notice of its selection or extension of an Extension Period at least
one Business Day prior to the earlier of (i) the next succeeding Interest
Payment Date, or (ii) the date the Company is required to give notice to the New
York Stock Exchange or other applicable self-regulatory organization or to the
Holders of the Series A Debentures of the record date or Interest Payment Date,
but, in any event, not less than one Business Day prior to such record date. The
Company shall cause the Trust to give notice of the Company's selection of such
Extension Period to Holders of the Trust Securities of the Trust. The month in
which any notice is given pursuant to the immediately preceding sentence of this
Section shall constitute the first month of the first quarter of the twenty (20)
quarters.
At any time any of the foregoing notices are given to the Trustee, the
Company shall give to the Paying Agent for the Series A Debentures such
information as said Paying Agent shall reasonably require to order to fulfill
its tax reporting obligations with respect to such Series A Debentures.
SECTION 205. Guarantee. The Guarantee provided by Article XV of the
Original Indenture shall be applicable to the Series A Debentures.
SECTION 206. Place of Payment. The Place of Payment in respect of the
Series A Debentures will be in The City of New York, initially the Corporate
Trust Office of The Bank of New York, and, for so long as the Series A
Debentures are listed on the Luxembourg Stock Exchange, in Luxembourg, initially
the corporate trust office of Banque Generale du Luxembourg S.A., which at the
date hereof, is located at 50 Avenue J. F. Kennedy, L-2951 Luxembourg.
SECTION 207. Issuance of Global Series A Debentures. The Series A
Debentures shall be issued as one or more Global Series A Debentures and
delivered by the Trustee to the Book-Entry Depositary, as the Holder thereof, or
a nominee or custodian therefor, to be held by the Book-Entry Depositary
pursuant to the Deposit Agreement. Definitive Registered Series A Debentures
shall only be issued by the Company in exchange for the Global Series A
Debentures in the circumstances set forth in the Global Series A Debentures.
4
<PAGE>
SECTION 208. Denominations. The Series A Debentures may be issued in the
denominations of $25, or any integral multiple thereof.
SECTION 209. Regular Record Date for the Series A Debentures. The Regular
Record Date for the Series A Debentures shall be 15 calendar days immediately
prior to each Interest Payment Date.
SECTION 210. Redemption. The Series A Debentures shall be subject to
redemption at the option of the Company, in whole or in part, without premium or
penalty, at any time or from time to time on or after _______, 2003, at a
Redemption Price equal to 100% of the principal amount to be redeemed plus
accrued but unpaid interest, including Additional Interest, if any, to the
Redemption Date; provided, however, that if a redemption in part shall result in
the delisting of the Trust Securities issued by the Trust, the Company may only
redeem the Series A Debentures in whole. In addition, upon the occurrence of a
Special Event at any time, the Company may, within ninety (90) days following
the occurrence thereof and subject to the terms and conditions of the Indenture,
elect to redeem the Series A Debentures, in whole, at a price equal to 100% of
the principal amount to be redeemed plus any accrued but unpaid interest
(including Additional Interest) to the Redemption Date.
The Company shall not redeem less than all of the Series A Debentures
unless all accrued and unpaid interest, if any, has been paid in full on all
Outstanding Series A Debentures for all interest periods terminating on or prior
to the Redemption Date.
In the event of redemption of the Series A Debentures in part only, a new
Series A Debenture or Debentures for the unredeemed portion will be issued in
the name or names of the Holders thereof upon the surrender thereof.
The Series A Debentures will not have a sinking fund.
Notice of redemption shall be given as provided in Section 13.03 of the
Original Indenture.
Any redemption of less than all of the Series A Debentures shall, with
respect to the principal thereof, be divisible by $25.
SECTION 211. Listing of Series A Debentures. If the Trust is liquidated
pursuant to the Trust Agreement and the Series A Debentures remain Outstanding,
the Company will use its best efforts to list the Series A Debentures on the New
York Stock Exchange or any other such exchange on which the Trust Securities
relating to the Trust are then listed and traded.
5
<PAGE>
ARTICLE THREE
AUTHENTICATING AGENT; BOOK-ENTRY DEPOSITARY
SECTION 301. Authenticating Agent; Book-Entry Depositary. The Bank of New
York, a New York banking corporation, and its successors are hereby appointed
Authenticating Agent and Book-Entry Depositary with respect to the Series A
Debentures.
ARTICLE FOUR
MISCELLANEOUS
SECTION 401. Execution of Supplemental Indenture. This First Supplemental
Indenture is executed and shall be construed as an indenture supplemental to the
Original Indenture and, as provided in the Original Indenture, this First
Supplemental Indenture forms a part thereof.
SECTION 402. Conflict with Trust Indenture Act. If any provision hereof
limits, qualifies or conflicts with another provision hereof which is required
to be included in this First Supplemental Indenture by any of the provisions of
the Trust Indenture Act, such required provision shall control.
SECTION 403. Effect of Headings. The Article and Section headings herein
are for convenience only and shall not affect the construction hereof.
SECTION 404. Successors and Assigns. All covenants and agreements in this
First Supplemental Indenture by each of the Company or the Guarantor shall bind
its successors and assigns, whether so expressed or not.
SECTION 405. Separability Clause. In case any provision in this First
Supplemental Indenture or in the Series A Debentures shall be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 406. Benefits of First Supplemental Indenture. Nothing in this
First Supplemental Indenture or in the Series A Debentures, express or implied,
shall give to any person, other than the parties hereto and their successors
hereunder and the Holders, any benefit or any legal or equitable right, remedy
or claim under this First Supplemental Indenture.
SECTION 407. Execution and Counterparts. This First Supplemental Indenture
may be executed in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute but one and
the same instrument.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereof have caused this First Supplemental
Indenture to be duly executed by their respective officers, directors or
signatories duly authorized thereto, all as of the day and year first above
written.
YORKSHIRE POWER FINANCE
LIMITED
By
------------------------------------------
Title:
YORKSHIRE POWER GROUP LIMITED
By
------------------------------------------
Title:
THE BANK OF NEW YORK,
as Trustee, Principal Paying Agent, Security
Registrar and Transfer Agent
By
------------------------------------------
Title:
BANQUE GENERALE DU
LUXEMBOURG S.A., as Paying Agent
and Transfer Agent
By
------------------------------------------
Title:
7
<PAGE>
EXHIBIT A
{FORM OF FACE OF GLOBAL SERIES A DEBENTURE}
THE INDEBTEDNESS EVIDENCED BY THIS SECURITY IS, TO THE EXTENT PROVIDED IN
THE INDENTURE, SUBORDINATE AND SUBJECT IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT
IN FULL OF ALL SENIOR DEBT OF THE COMPANY AND THIS SECURITY IS ISSUED SUBJECT TO
THE PROVISIONS OF THE INDENTURE WITH RESPECT THERETO.
THIS SECURITY IS A GLOBAL BEARER SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS HELD BY A BOOK-ENTRY DEPOSITARY. THIS
SECURITY IS EXCHANGEABLE FOR SECURITIES HELD BY A PERSON OTHER THAN THE
BOOK-ENTRY DEPOSITARY OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED
IN THE INDENTURE.
UNLESS THIS GLOBAL BEARER SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE BOOK-ENTRY DEPOSITARY TO THE COMPANY OR ITS AGENT FOR
EXCHANGE OR PAYMENT, AND ANY DEFINITIVE REGISTERED SECURITY IS ISSUED IN THE
NAME OR NAMES AS DIRECTED IN WRITING BY THE BOOK-ENTRY DEPOSITARY, ANY TRANSFER,
PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE BEARER HEREOF, THE BOOK-ENTRY DEPOSITARY, HAS AN
INTEREST HEREIN.
YORKSHIRE POWER FINANCE LIMITED
____% Junior Subordinated Deferrable Interest Debenture, Series A due ______,
2038
No. ___________ $_________________
CUSIP No.:________
YORKSHIRE POWER FINANCE LIMITED, a limited liability company incorporated
under the laws of the Cayman Islands (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to the bearer upon surrender hereof,
the principal sum of __________ Dollars on ________________, and to pay interest
thereon from _____________, or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, quarterly on ____________,
____________, ____________ and ____________ in each year, commencing
________________, 199__, at the rate per annum provided in the title hereof,
until the principal hereto is paid or made available for payment. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the bearer on such Interest
Payment Date. So long as an Extension Period is not
A-1
<PAGE>
occurring, any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the bearer on such Interest Payment Date and
may be paid to the bearer hereof at the time of payment of such Defaulted
Interest or be paid at any time in any other lawful manner not inconsistent with
the requirements of any securities exchange on which the Securities of this
series may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture.
All payments in respect of this Security and all payments made pursuant to
the Guarantee of this Security shall be made in immediately available funds at
or through the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, and, for so long as this
Security shall be listed on the Luxembourg Stock Exchange, in Luxembourg, in
such coin or currency of the United States of America as at the time of payment
is legal tender for the payment of public and private debt.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right at any time and from time to time during the term of this
Security to extend the interest payment period of such Security for up to 20
consecutive quarters but not beyond the Stated Maturity of this Security (each,
an "Extension Period"), during which periods unpaid interest (together with
interest thereon) will compound quarterly at the interest rate on this Security
("Deferred Interest"). Upon the termination of each Extension Period, which
shall be an Interest Payment Date, the Company shall pay all Deferred Interest
on the next succeeding Interest Payment Date to the bearer thereof, as provided
in the Indenture, provided that any Deferred Interest payable at Stated Maturity
or on any Redemption Date will be paid to the Person to whom principal is
payable. Prior to the termination of any such Extension Period, the Company may
extend the interest payment period, provided that such Extension Period together
with all such previous and further extensions thereof shall not exceed 20
consecutive quarters. Upon the termination of any such Extension Period, and the
payment of all accrued and unpaid interest and any Additional Interest then due,
the Company may select a new Extension Period, subject to the above
requirements. If the Company shall have given notice of its election to select
any Extension Period, neither the Company nor the Guarantor referred to herein
shall, directly or indirectly, (i) declare or pay any cash dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of its capital stock (which includes common and preferred
stock) or (ii) make any payment of principal of, or interest or premium, if any,
on or repay or repurchase or redeem any of its debt securities (including any
other Securities) that rank pari passu with or junior in interest to the
Securities or the Guarantee, respectively, or (iii) make any payments with
respect to any guarantee that ranks pari passu with or junior in interest to the
Securities or the Guarantee, respectively, or (iv) make any payment of principal
or premium, if any, or interest on, or repay, repurchase or redeem any of its
debt securities held by, make any loans or advances to, or make any payments
with respect to any guarantee of the debt of, any affiliate, in each case other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of the Company or the
Guarantor and exchanges or conversions of common stock of one class for common
stock of another class; (b) payments by the Guarantor under the Trust Securities
Guarantee (or any other
A-2
<PAGE>
guarantee by the Guarantor with respect to any securities of any of its direct
or indirect subsidiaries, provided that the proceeds from the issuance of such
securities were used to purchase other Securities; (c) payments by the Guarantor
under the Guarantee; (d) any dividend or payment by the Guarantor which is
applied, directly or indirectly, to the payment of any Tax Payments (e) payments
by the Guarantor, directly or indirectly, on the Intercompany Notes or any other
promissory notes held by the Company (or any other direct or indirect
wholly-owned subsidiary of the Guarantor) evidencing loans made with the
proceeds from the issuance by the Company) (or any other direct or indirect
wholly-owned subsidiary of the Guarantors) of securities guaranteed by the
Guarantor or (f) the reinvestment of any proceeds received under clause (e)
above by the Company (or any other direct or indirect wholly-owned subsidiary of
the Guarantor) in additional debt securities of the Guarantor or any of its
other direct or indirect wholly-owned subsidiaries. The Company shall give the
Holder of this Security and the Trustee notice of its selection or extension of
an Extension Period at least one Business Day prior to the earlier of (i) the
next succeeding Interest Payment Date or (ii) the date the Company is required
to give notice to the New York Stock Exchange or other applicable
self-regulatory organization or to the Holders of this Security of the record
date or Interest Payment Date, but, in any event, not less than one Business Day
prior to such record date.
The indebtedness evidenced by this Security is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Debt (as defined in the Indenture) of the Company, and
this security is issued subject to the provisions of the Indenture with respect
thereto. Each Holder of this security, by accepting the same, (a) agrees to and
shall be bound by such provisions, (b) authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to effectuate the
subordination so provided, and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance thereof, waives
all notice of the acceptance of the subordination provisions contained herein
and in the Indenture by each holder of Senior Debt of the Company, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.
All payments of principal of, and premium, if any, and interest in respect
of this Security and all payments made pursuant to the Guarantee of this
Security shall be made free and clear of, and without withholding or deduction
for or on account of any present or future taxes, duties, assessments or
governmental charges of whatever nature imposed, levied, collected, withheld or
assessed by or within a Taxing Jurisdiction or by or within any political
subdivision thereof or any authority therein or thereof having power to tax
("Gross-Up Taxes"), unless such withholding or deduction is required by law. In
the event of any such withholding or deduction, the Company or the Guarantor, as
the case may be, shall pay to the Holder such additional amounts that would
otherwise have been due to such Holder in the absence of such withholding or
deduction ("Additional Amounts") except that no such Additional Amounts shall be
payable:
(a) to, or to a Person on behalf of, a Holder who is liable for such
Gross-Up Taxes in respect of this Security or the Guarantee of this
Security by reason of such Holder or beneficial owner having some
connection with the relevant Taxing
A-3
<PAGE>
Jurisdiction (including being a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or
being physically present in, such Taxing Jurisdiction) other than the mere
holding of this Security or the receipt of principal of, and premium, if
any and interest in respect thereof or in respect of the Guarantee of this
Security;
(b) to, or to a Person on behalf of, a Holder who presents this
Security (where presentation is required) for payment more than 30 days
after the Relevant Date except to the extent that the Holder would have
been entitled to such Additional Amounts on presenting this Security for
payment on the last day of such period of 30 days;
(c) to, or to a Person on behalf of, a Holder who presents this
Security (where presentation is required) in the United Kingdom or Cayman
Islands;
(d) to, or to a Person on behalf of, a Holder who would not be liable
or subject to the withholding or deduction by making a declaration of
nonresidence or similar claim for exemption to the relevant tax authority;
or
(e) to, or to a Person on behalf of, a Holder of a Registered Security
that is not a Global Security issued pursuant to the request of owners of
interests representing a majority in Outstanding principal amount of such
Securities following and during the continuance of an Event of Default if
such Holder (or any predecessor Holder) was one of such owners requesting
that such Registered Securities be so issued.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Security (or any interest therein) been the Holder of the Security,
he would not have been entitled to payment of Additional Amounts by reason of
any one or more of clauses (a) through (e) above. If the Company or the
Guarantor, as applicable, shall determine that Additional Amounts will not be
payable because of the immediately preceding sentence, the Company or the
Guarantor, as applicable, will inform such Holder promptly after making such
determination setting forth the reason(s) therefor.
"Relevant Date" means whichever is the later of (i) the date on which such
payment first becomes due and (ii) if the full amount payable has not been
received in The City of New York by the Book-Entry Depositary of the Trustee on
or prior to such due date, the date on which, the full amount having been so
received, notice to that effect shall have been given to the bearer hereof in
accordance with the Indenture.
References to principal of, and premium or interest in respect of, this
Security or any payments pursuant to the Guarantee of this Security shall be
deemed to include any Additional Amounts which may be payable as set forth in
the Indenture or in this Security.
The Company shall furnish to the Trustee the official receipts (or a
certified copy of the official receipts) evidencing payment of the Gross-Up
Taxes.
A-4
<PAGE>
Copies of such receipts shall be made available to the Holder of this Security
upon request.
So long as the Securities of this series are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require, notices to
Holders of Securities of this series will be published in a leading newspaper
having general circulation in Luxembourg (which is expected to be the
Luxemburger Wort).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
A-5
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an authorized signatory of the Company.
YORKSHIRE POWER FINANCE
LIMITED
By:
-----------------------------------
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred
to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:
-----------------------------------
Authorized Signatory
Dated:
A-6
<PAGE>
[Form of Reverse of Security]
YORKSHIRE POWER FINANCE LIMITED
___% Junior Subordinated Deferrable Interest Debenture, Series A
due ____________, 2038
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of May 1, 1998 (herein called the "Original
Indenture"), among the Company, Yorkshire Power Group Limited, as guarantor (the
"Guarantor"), The Bank of New York, as trustee, principal paying agent,
registrar and transfer agent (herein called the "Trustee", which term includes
any successor trustee under the Indenture), and Banque Generale du Luxembourg
S.A., as paying and transfer agent (the "Paying and Transfer Agent"), as
supplemented by the First Supplemental Indenture, dated as of May __, 1998
(together with the Original Indenture and any other supplements thereto, the
"Indenture"), among the Company, the Guarantor, the Trustee and the Paying and
Transfer Agent to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Company, the Guarantor, the
Trustee, the Paying and Transfer Agent and the Holders of the Securities and of
the terms upon which the Securities are, and are to be, authenticated and
delivered. This Security is one of the series designated on the face hereof,
limited in aggregate principal amount to $275,000,000.
The Company shall have the right, subject to the terms and conditions of
the Indenture, to redeem this Security at any time on or after ___________,
2003, at the option of the Company, without premium or penalty, in whole or in
part, at a Redemption Price equal to 100% of the principal amount to be redeemed
plus any accrued and unpaid interest, including Additional Interest, if any, to
the Redemption Date. Upon the occurrence of a Special Event (as defined below)
at any time, the Company may, within 90 days following the occurrence thereof
and subject to the terms and conditions of the Indenture, redeem this Security
without premium or penalty, in whole, at a Redemption Price equal to 100% of the
principal amount thereof plus any accrued and unpaid interest, including
Additional Interest, if any, to the Redemption Date. A Special Event may be a
Tax Event or an Investment Company Act Event.
"Tax Event" means the receipt by the Guarantor or the Company of an opinion of
independent counsel (which may be counsel to the Guarantor or its affiliates)
experienced in such matters to the effect that there has been (a) any amendment
to, or change (including any announced prospective change) in, the laws or any
regulations thereunder) of any supra national federation to which the United
Kingdom belongs or the jurisdiction (or any political subdivision or taxing
authority thereof or therein) in which the Company or the Guarantor is
incorporated or created, as applicable, or in which the Company or the Guarantor
is managed or has a place of business (each, a "Taxing Jurisdiction"), (b) any
official administrative pronouncement or judicial decision interpreting,
clarifying or applying such laws or regulations or (c) a threatened challenge
asserted by a government or taxing authority with respect to the Guarantor or
any of its
A-7
<PAGE>
subsidiaries, or a threatened challenge asserted in writing by a government or
taxing authority against any other taxpayer that has raised capital through the
issuance of securities that are substantially similar to the Securities or the
Trust Securities, which amendment or change is effective or which pronouncement
clarification, challenge or decision is announced on or after May __, 1998, and
that results in their being more than an insubstantial risk that (i) the Company
is, or will be within 90 days of the date thereof , subject to income tax within
a Taxing Jurisdiction (other than the United Kingdom corporation income tax)
with respect to interest received or accrued on the Intercompany Notes, (ii) the
Company is, or will be within 90 days of the date thereof, subject to more than
a de minimis amount of other tax, duties or other governmental charges, (iii)
interest payable by the Company on the Securities is not, or within 90 days of
the date thereof will not be, deductible, in whole or in part for United States
Federal income tax or United Kingdom corporation income tax purposes, as they
accrue by the Company or by a member of any tax group to which the Guarantor
belongs or (iv) interest payable with respect to the Intercompany Notes by the
Guarantor or its affiliates is not, or within 90 days of the date thereof will
not be, deductible, in whole or in part, for (as appropriate) United States
Federal or United Kingdom corporation income tax purposes, by one of (as
appropriate) the Guarantor, its shareholders or a member of any tax group to
which the Guarantor belongs. "Investment Company Act Event" shall mean that the
Guarantor or the Company shall have received an opinion of independent counsel
(which may be counsel to the Guarantor or its affiliates) experienced in such
matters to the effect that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (an
"Investment Company Act Change"), there is more than an insubstantial risk that
the Guarantor or the Company is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended, which Investment Company Act Change becomes effective on or after May
__, 1998.
Notice of redemption shall be given as provided in the Indenture not less
than 30 days nor more than 60 days prior to the date fixed for redemption.
If fewer than all the Securities of this series are to be redeemed,
selection of Securities of this series for redemption will be made by the
Trustee in any manner the Trustee deems fair and appropriate and that complies
with applicable legal and securities exchange requirements.
Unless the Company defaults in payment of the redemption price, from and
after the redemption date, the Securities of this series or portions thereof
called for redemption will cease to bear interest, and the Holders thereof will
have no right in respect to such Securities of this series except the right to
receive the redemption price thereof.
In the event of redemption of this Security in part only, a new Security of
this series and of like tenor for the unredeemed portion hereof will be issued
to the Holder hereof upon the cancellation hereof.
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<PAGE>
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. At any time after such declaration of acceleration with respect to
Securities of any series has been made, but before a judgment or decree for
payment of money has been obtained by the Trustee as provided in the Indenture,
if all Events of Default with respect to Securities of this series have been
cured or waived (other than the non-payment of principal of the Securities which
has become due solely by reason of such declaration of acceleration) then such
declaration of acceleration and its consequences shall be automatically annulled
and rescinded.
The Securities of this Series are subject to redemption in whole but not in
part upon not less than 30 nor more than 60 days' notice given as provided in
the Indenture, at a price equal to the outstanding principal amount thereof,
together with Additional Amounts, if any, and accrued and unpaid interest, if
any, to the Redemption Date if, (a) the Company or the Guarantor satisfies the
Trustee prior to the giving of such notice that it has or will become obligated
to pay Additional Amounts with respect to the Securities or the Guarantee as a
result of either (i) any change in, or amendment to, the laws or regulations of
a Taxing Jurisdiction or any political subdivision or any authority or agency
thereof or therein having power to tax or levy duties, or any change in the
application or interpretation of such laws or regulations, which change or
amendment becomes effective on or after May __, 1998 or (ii) the issuance of
Definitive Registered Series A Debentures Securities pursuant to any of clauses
(a), (b) or (d) of the third following paragraph and (b) such obligation cannot
be avoided by the Company or the Guarantor taking reasonable measures available
to it, subject, as provided in the Indenture, to the delivery by the Company or
the Guarantor of an Officers' Certificate stating that such obligation to pay
Additional Amounts cannot be avoided by the Company or the Guarantor taking
reasonable measures available to it.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the Indenture or any supplemental
indenture or the rights and obligations of the Company and the rights of the
Holders of the Securities of each series to be affected under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time Outstanding
of all series to be affected (voting as a class). The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute
A-9
<PAGE>
and unconditional, to pay the principal of, and premium, if any and interest, if
any, on this Security and all payments made pursuant to the Guarantee of this
Security at the times, place and rate, and in the coin or currency, herein
prescribed.
This Security shall be exchangeable, in whole or, in the case of clause (d)
below, in part as provided in the Indenture, for Definitive Registered Series A
Debentures registered in the names of Persons other than the Book-Entry
Depositary with respect to such series or its nominee only as provided in this
paragraph. This Security shall be so exchangeable if (a) DTC notifies the
Company and the Book-Entry Depositary that it is unwilling or unable to continue
to hold the Book-Entry Interests or at any time ceases to be a "clearing agency"
registered as such under the Exchange Act and, in either case, a successor is
not appointed by the Company within 120 days, (b) the Book-Entry Depositary for
the Securities of this series notifies the Company that it is unwilling or
unable to continue as Book-Entry Depositary with respect to this Security and no
successor is appointed within 120 days, (c) the Company executes and delivers to
the Trustee an Officers' Certificate providing that this Security shall be so
exchangeable, or (d) there shall have occurred and be continuing an Event of
Default with respect to the Securities of this series and the Holder, in such
circumstance, shall have requested in writing that this Security be exchanged
for one or more Definitive Registered Series A Debentures. Securities so issued
in exchange for this Security shall be of the same series, having the same
interest rate, if any, and maturity and having the same terms as this Security,
in authorized denominations and in the aggregate having the same principal
amount as this security and registered in such names as the Book-Entry
Depositary for this Security shall direct.
The bearer of this Security shall be treated as the owner of it for all
purposes, subject to the terms of the Indenture. As provided in the Indenture
and subject to certain limitations therein set forth, Securities of this series
are exchangeable for a like aggregate principal amount of Securities of this
series and of like tenor of a different authorized denomination, as requested by
the Holder surrendering the same.
No service charge shall be made for any such exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.
When a successor assumes all the obligations of its predecessor under the
Securities of this series and the Indenture in accordance with the terms of the
Indenture, the predecessor will be released from those obligations.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledge of Securities of this series and may otherwise
deal with the Company, the Guarantor or their respective Affiliates as if it
were not the Trustee.
No stockholder, director, officer, employee, incorporator or Affiliate of
the Company or the Guarantor under the Securities of this series or the
Indenture or for any claim based on, in respect of or by reason of, such
obligations of their creation. Each Holder of the Securities of this series by
accepting Securities this series waives and
A-10
<PAGE>
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities of this series.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities of this series as a convenience to the Holders of the
Securities of this series. No representation is made as to the accuracy of such
numbers as printed on the Securities of this series and reliance may be placed
only on the other identification numbers printed hereon.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
GUARANTEE
FOR VALUE RECEIVED, YORKSHIRE POWER GROUP LIMITED, a private limited
company duly incorporated and existing under the laws of England and Wales (the
"Guarantor", which term includes any successor Person under the Indenture
referred to in the Security on which this notation is endorsed), hereby fully
and unconditionally guarantees to the Holder of the accompanying Security issued
by Yorkshire Power Finance Limited (the "Company"), pursuant to the terms of the
Guarantee contained in Article XV of the Indenture, the due and punctual payment
of the principal of, and premium, if any, and interest in respect of this
Security (and any Additional Amounts payable in respect thereof), when and as
the same shall become due and payable, whether at Stated Maturity, by
declaration of acceleration, call for redemption or otherwise, in accordance
with the terms of this Security and the Indenture. In case of the failure of the
Company punctually to pay any such principal, premium, if any, or interest, the
Guarantor hereby agrees to cause any such payment to be made punctually when and
as the same shall become due and payable as if such payment were made by the
Company.
The obligations of the Guarantor to the Holders of the Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article XV of the Indenture, and reference is hereby made to such Article and
Indenture for the precise terms of the Guarantee.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Security upon which this notation of the
Guarantee is
A-11
<PAGE>
endorsed shall have been executed by the Trustee under the Indenture by the
manual signature of one of its authorized officers.
YORKSHIRE POWER GROUP LIMITED
By:_______________________________________
Authorized Signatory
A-12
<PAGE>
EXHIBIT B
[FORM OF FACE OF DEFINITIVE REGISTERED SERIES A DEBENTURE]
THE INDEBTEDNESS EVIDENCED BY THIS SECURITY IS, TO THE EXTENT PROVIDED IN THE
INDENTURE, SUBORDINATE AND SUBJECT IN RIGHT OF PAYMENT TO THE PRIOR PAYMENT IN
FULL OF ALL SENIOR DEBT OF THE COMPANY AND THIS SECURITY IS ISSUED SUBJECT TO
THE PROVISIONS OF THE INDENTURE WITH RESPECT THERETO.
YORKSHIRE POWER FINANCE LIMITED
___% Junior Subordinated Deferrable Interest Debenture due _______, 2038
No. _______________ $___________________
CUSIP No.:__________
YORKSHIRE POWER FINANCE LIMITED, a limited liability company incorporated
under the laws of the Cayman Islands (herein called the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to [name of registered owner], or its
registered assigns, the principal sum of _______________ Dollars on
_______________________, and to pay interest thereon from ____________________,
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, quarterly on __________, __________, __________ and
_____________ in each year, commencing _______________, 199_, at the rate per
annum provided in the title hereof, until the principal hereof is paid or made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such Indenture,
be paid to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record Date
for such interest, which shall be the fifteenth day (whether or not a Business
Day) immediately preceding such Interest Payment Date. So long as an Extension
Period is not occurring, any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Person in whose name this
Security (or one or more Predecessor Securities) is registered on such Regular
Record Date and may be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities of this series
not less than 10 days prior to such Special Record Date, or be paid at any time
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities of this series may be listed, and
upon such notice as may be required by such exchange, all as more fully provided
in said Indenture.
All payments in respect of this Security and all payments made pursuant to
the Guarantee of this Security shall be made in immediately available funds at
or through the office or agency of the Company maintained for that purpose in
the Borough of Manhattan, The City of New York, and for so long as this Security
shall be listed on the Luxembourg Stock Exchange, in Luxembourg, in such coin or
currency of the United
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<PAGE>
States of America as at the time of payment is legal tender for the payment of
public and private debt; provided, however, that at the option of the Company,
payment of interest may be made by check mailed to the address of the Person
entitled thereto as such address shall appear in the Security Register.
So long as no Event of Default has occurred and is continuing, the Company
shall have the right at any time and from time to time during the term of this
Security to extend the interest payment period of such Security for up to 20
consecutive quarters but not beyond the Stated Maturity of this Security (each,
an "Extension Period"), during which periods unpaid interest (together with
interest thereon) will compound quarterly at the interest rate on this Security
("Deferred Interest"). Upon the termination of each Extension Period, which
shall be an Interest Payment Date, the Company shall pay all Deferred Interest
on the next succeeding Interest Payment Date to the Person in whose name this
Security is registered at the close of business on the Regular Record Date for
such Interest Payment Date, provided that any Deferred Interest payable at
Stated Maturity or on any Redemption Date will be paid to the Person to whom
principal is payable. Prior to the termination of any such Extension Period, the
Company may extend the interest payment period, provided that such Extension
Period together with all such previous and further extensions thereof shall not
exceed 20 consecutive quarters. Upon the termination of any such Extension
Period, and the payment of all accrued and unpaid interest and any Additional
Interest then due, the Company may select a new Extension Period, subject to the
above requirements. If the Company shall have given notice of its election to
select any Extension Period, neither the Company nor the Guarantor referred to
herein shall, directly or indirectly, (i) declare or pay any cash dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of its capital stock (which includes common and preferred
stock) or (ii) make any payment of principal of, or interest or premium, if any,
on or repay or repurchase or redeem any of its debt securities (including any
other Securities) that rank pari passu with or junior in interest to the
Securities or the Guarantee, respectively, or (iii) make any payments with
respect to any guarantee that ranks pari passu with or junior in interest to the
Securities or the Guarantee, respectively, or (iv) make any payment of principal
or premium, if any, or interest on, or repay, repurchase or redeem any of its
debt securities held by, make any loans or advances to, or make any payments
with respect to any guarantee of the debt of, any affiliate, in each case other
than (a) dividends or distributions in shares of, or options, warrants or rights
to subscribe for or purchase shares of, common stock of the Company or the
Guarantor and exchanges or conversions of common stock of one class for common
stock of another class; (b) payments by the Guarantor under the Trust Securities
Guarantee (or any other guarantee by the Guarantor with respect to any
securities of any of its direct or indirect subsidiaries, provided that the
proceeds from the issuance of such securities were used to purchase other
Securities); (c) payments by the Guarantor under the Guarantee; (d) any dividend
or payment by the Guarantor which is applied, directly or indirectly, to the
payment of any Tax Payments (e) payments by the Guarantor, directly or
indirectly, on the Intercompany Notes or any other promissory notes held by the
Company (or any other direct or indirect wholly-owned subsidiary of the
Guarantor) evidencing loans made with the proceeds from the issuance by the
Company (or any other direct or indirect wholly-owned subsidiary of the
Guarantors) of securities guaranteed by the Guarantor or
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<PAGE>
(f) the reinvestment of any proceeds received under clause (e) above by the
Company (or any other direct or indirect wholly-owned subsidiary of the
Guarantor) in additional debt securities of the Guarantor or any of its other
direct or indirect wholly-owned subsidiaries. The Company shall give the Holder
of this Security and the Trustee notice of its selection or extension of an
Extension Period at least one Business Day prior to the earlier of (i) the next
succeeding Interest Payment Date or (ii) the date the Company is required to
give notice to the New York Stock Exchange or other applicable self-regulatory
organization or to the Holders of this Security of the record date or Interest
Payment Date, but, in any event, not less than one Business Day prior to such
record date.
All payments of principal of, premium, if any, and interest in respect of
this Security and all payments made pursuant to the Guarantee of this Security
shall be made free and clear of, and without withholding or deduction for or on
account of any present or future taxes, duties, assessments or governmental
charges of whatever nature imposed, levied, collected, withheld or assessed by
or within a Taxing Jurisdiction or by or within any political subdivision
thereof or any authority therein or thereof having power to tax ("Gross-Up
Taxes"), unless such withholding or deduction is required by law. In the event
of any such withholding or deduction, the Company or the Guarantor, as the case
may be, shall pay to the Holder such additional amounts that would otherwise
have been due to such Holder in the absence of such withholding or deduction
("Additional Amounts"), except that no such Additional Amounts shall be payable:
(a) to, or to a Person on behalf of, a Holder who is liable for such
Gross-Up Taxes in respect of this Security or the Guarantee of this
Security by reason of such Holder having some connection with the relevant
Taxing Jurisdiction (including a citizen or resident or national of, or
carrying on a business or maintaining a permanent establishment in, or
being physically present in, such Taxing Jurisdiction) other than the mere
holding of this Security or the receipt of principal of, premium, if any,
and interest in respect thereof or in respect of the Guarantee of this
Security;
(b) to, or to a Person on behalf of, a Holder who presents this
Security (where presentation is required) for payment more than 30 days
after the Relevant Date except to the extent that the Holder would have
been entitled to such Additional Amounts on presenting this Security for
payments on the last day of such period of 30 days;
(c) to, or to a Person on behalf of, a Holder who presents a Security
(where presentation is required) in the United Kingdom or Cayman Islands;
(d) to, or to a Person on behalf of, a Holder who would not be liable
or subject to the withholding or deduction by making a declaration of
nonresidence or similar claim for exemption to the relevant tax authority;
or
(e) to, or to a Person on behalf of, a Holder of a definitive
Registered Security issued pursuant to the request of owners of interests
B-3
<PAGE>
representing a majority in outstanding principal amount in the Book-Entry
Interest following and during the continuance of an Event of Default if
such Holder (or any predecessor Holder) was one of such owners requesting
that definitive Registered Securities be so issued.
Such Additional Amounts will also not be payable where, had the beneficial
owner of the Security (or any interest therein) been the Holder of the Security,
he would not have been entitled to payment of Additional Amounts by reason of
any one or more of clauses (a) through (e) above. If the Company or the
Guarantor, as applicable, shall determine that Additional Amounts will not be
payable because of the immediately preceding sentence, the Company or the
Guarantor, as applicable, will inform such Holder promptly after making such
determination setting forth the reason(s) therefor.
"Relevant Date" means whichever is the later of (i) the date on which such
payment first becomes due and (ii) if the full amount payable has not been
received in The City of New York by the Trustee or the Holder on or prior to
such due date, the date on which, the full amount having been so received,
notice to that effect shall have been given to the Holder in accordance with
this Indenture.
References to principal of, and premium or interest in respect of, this
Security or payments under the Guarantee of this Security shall be deemed to
include to any Additional Amounts which may be payable as set forth in the
Indenture or in this Security.
The Company shall furnish to the Trustee the official receipts (or a
certified copy of the official receipts) evidencing payment of Gross-Up Taxes.
Copies of such receipts shall be made available to the Holder of this Security
upon request.
So long as the Securities of this series are listed on the Luxembourg Stock
Exchange and the rules of the Luxembourg Stock Exchange so require, notices to
Holders of Securities of this series will be published in a leading newspaper
having general circulation in Luxembourg (which is expected to be the
Luxemburger Wort).
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
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<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by an authorized signatory of the Company.
YORKSHIRE POWER FINANCE
LIMITED
By _________________________________
Authorized Signatory
CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein and referred
to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By:_________________________________
Authorized Signatory
Dated:
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<PAGE>
[Form of Reverse of Security]
YORKSHIRE POWER FINANCE LIMITED
___% Junior Subordinated Deferrable Interest Debenture,
Series A due __________, 2038
This Security is one of a duly authorized issue of securities of the
Company (herein called the "Securities"), issued and to be issued in one or more
series under an Indenture, dated as of May 1, 1998 (herein called the "Original
Indenture"), among the Company, Yorkshire Power Group Limited, as guarantor (the
"Guarantor"), The Bank of New York, as trustee principal paying agent, register
and transfer agent (herein called the "Trustee", which term includes any
successor trustee under the Indenture), and Banque Generale du Luxembourg S.A.,
as paying and transfer agent (the "Paying and Transfer Agent"), as supplemented
by the First Supplemental Indenture, dated as of May __, 1998 (together with the
Original Indenture and any other supplements thereto, the "Indenture") among the
Company, the Guarantor, the Trustee and the Paying and Transfer Agent to which
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
thereunder of the Company, the Guarantor, the Trustee, the Paying and Transfer
Agent and the Holders of the Securities and of the terms upon which the
Securities are, and are to be, authenticated and delivered. This Security is one
of the series designated on the face hereof, limited in aggregate principal
amount to $275,000,000.
The Company shall have the right, subject to the terms and conditions of
the Indenture, to redeem this Security at any time on or after ___________,
2003, at the option of the Company, without premium or penalty, in whole or in
part, at a Redemption Price equal to 100% of the principal amount to be redeemed
plus any accrued and unpaid interest, including Additional Interest, if any, to
the Redemption Date. Upon the occurrence of a Special Event (as defined below)
at any time, the Company may, within 90 days following the occurrence thereof
and subject to the terms and conditions of the Indenture, redeem this Security
without premium or penalty, in whole, at a Redemption Price equal to 100% of the
principal amount thereof plus any accrued and unpaid interest, including
Additional Interest, if any, to the Redemption Date. A Special Event may be a
Tax Event or an Investment Company Act Event.
"Tax Event" means the receipt by the Guarantor or the Company of an opinion of
independent counsel (which may be counsel to the Guarantor or its affiliates)
experienced in such matters to the effect that there has been (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of any supra national federation to which the United
Kingdom belongs or the jurisdiction (or any political subdivision or taxing
authority thereof or therein) in which the Company or the Guarantor is
incorporated or created, as applicable, or in which the Company or the Guarantor
is managed or has a place of business (each, a "Taxing Jurisdiction"), (b) any
official administrative pronouncement or judicial decision interpreting,
clarifying or applying such laws or regulations or (c) a threatened challenge
asserted by a government or taxing authority with respect to the Guarantor or
any of its
B-6
<PAGE>
subsidiaries, or a threatened challenge asserted in writing by a government or
taxing authority against any other taxpayer that has raised capital through the
issuance of securities that are substantially similar to the Securities or the
Trust Securities, which amendment or change is effective or which pronouncement
clarification, challenge or decision is announced on or after May __, 1998, and
that results in their being more than an insubstantial risk that (i) the Company
is, or will be within 90 days of the date thereof , subject to income tax within
a Taxing Jurisdiction (other than the United Kingdom corporation income tax)
with respect to interest received or accrued on the Intercompany Notes, (ii) the
Company is, or will be within 90 days of the date thereof, subject to more than
a de minimis amount of other tax, duties or other governmental charges, (iii)
interest payable by the Company on the Securities is not, or within 90 days of
the date thereof will not be, deductible, in whole or in part for United States
Federal income tax or United Kingdom corporation income tax purposes, as they
accrue by the Company or by a member of any tax group to which the Guarantor
belongs or (iv) interest payable with respect to the Intercompany Notes by the
Guarantor or its affiliates is not, or within 90 days of the date thereof will
not be, deductible, in whole or in part, for (as appropriate) United States
Federal or United Kingdom corporation income tax purposes, by one of (as
appropriate) the Guarantor, its shareholders or a member of any tax group to
which the Guarantor belongs. "Investment Company Act Event" shall mean that the
Guarantor or the Company shall have received an opinion of independent counsel
(which may be counsel to the Guarantor or its affiliates) experienced in such
matters to the effect that, as a result of the occurrence of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority (an
"Investment Company Act Change"), there is more than an insubstantial risk that
the Guarantor or the Company is or will be considered an "investment company"
that is required to be registered under the Investment Company Act of 1940, as
amended, which Investment Company Act Change becomes effective on or after May
__, 1998.
Notice of redemption shall be given as provided in the Indenture not less
than 30 days nor more than 60 days prior to the date fixed for redemption.
If fewer than all the Securities of this series are to be redeemed,
selection of Securities for redemption will be made by the Trustee in any manner
the Trustee deems fair and appropriate and that complies with applicable legal
and securities exchange requirements.
Unless the Company defaults in payment of the redemption price, from and
after the redemption date, the Securities of this series or portions thereof
called for redemption will cease to bear interest, and the Holders thereof will
have no right in respect to such Securities of this series except the right to
receive the redemption price thereof.
In the event of redemption of this security in part only, a new Security or
Securities of this series and of like tenor for the unredeemed portion hereof
will be issued in the name of the Holder hereof upon the cancellation hereof.
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<PAGE>
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of the Securities of this series may be
declared due and payable in the manner and with the effect provided in the
Indenture. At any time after such declaration of acceleration with respect to
Securities of any series has been made, but before a judgment or decree for
payment of money has been obtained by the Trustee as provided in the Indenture,
if all Events of Default with respect to Securities of this series have been
cured or waived (other than the nonpayment of principal of the Securities which
has become due solely by reason of such declaration of acceleration) then such
declaration of acceleration and its consequences shall be automatically annulled
and rescinded.
The Securities of this series are subject to redemption upon not less than
30 nor more than 60 days' notice to the Holders of Securities by first-class
mail, at a price equal to the outstanding principal amount thereof, together
with Additional Amounts, if any, and accrued interest, if any, to the Redemption
Date if (a) the Company or the Guarantor satisfies the Trustee prior to the
giving of such notice that it has or will become obligated to pay Additional
Amounts with respect to the Securities or the Guarantee as a result of either
(i) any change in, or amendment to, the laws or regulations of a Taxing
Jurisdiction or any political subdivision or any authority or agency thereof or
therein having power to tax or levy duties, or any change in the application or
interpretation of such laws or regulations, which change or amendment becomes
effective on or after May __, 1998 or (ii) the issuance of Definitive Registered
Series A Notes as a result of: (A) DTC having notified the Company and the
Book-Entry Depositary that it was unwilling or unable to continue to hold the
Book-Entry Interests or at any time ceasing to be a "clearing agency" registered
as such under the Securities Exchange Act of 1934 and, in either case, a
successor is not being appointed by the Company within 120 days; (B) the
Book-Entry Depositary for the Securities of this series having notified the
Company that it was unwilling or unable to continue as Book-Entry Depositary
with respect to a Global security of this series and no successor Book-Entry
Depositary having been appointed by the Company within 120 days or (C) an Event
of Default with respect to the Securities of this series having occurred and
being continuing and a Holder, in such circumstance, having requested in writing
that a Global Bearer Series A Notes be exchanged for one or more Definitive
Registered Series A Notes and (b) such obligation cannot be avoided by the
Company and the Guarantor taking reasonable measures available to it, subject,
as provided in the Indenture, to the delivery by the Company or the Guarantor of
an Officers Certificate that such obligation referred to in (a) cannot be
avoided by the Company or the Guarantor taking reasonable measures available to
it.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the Indenture or any supplemental
indenture or the rights and obligations of the Company and the rights of the
Holders of the Securities of each series to be affected under the Indenture at
any time by the Company and the Trustee with the consent of the Holders of a
majority in aggregate principal amount of the Securities at the time Outstanding
of all series to be affected (voting as a class). The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the
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<PAGE>
Company with certain provisions of the Indenture and certain past defaults under
the Indenture and their consequences. Any such consent or waiver by the Holder
of this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Security.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of, premium, if any, and
interest, if any, on this Security and all payments made pursuant to the
Guarantee of the Security at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the office or
agency of the Company in any place where the principal of, premium, if any, and
interest, if any, on this Security are payable, duly endorsed by, or accompanied
by a written instrument of transfer in form satisfactory to the Company and the
Security Registrar duly executed by the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Securities of this series
and of like tenor, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Securities of this series are issuable only in registered form without
coupons in denominations of $25 and any integral multiple thereof. As provided
in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer, the
Company, the Trustee and any agent of the Company or the Trustee may treat the
Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
When a successor assumes all the obligations of its predecessor under the
Securities of this series and the Indenture in accordance with the terms of the
Indenture, the predecessor will be released from those obligations.
The Trustee under the Indenture, in its individual or any other capacity,
may become the owner or pledge of Securities of this series and may otherwise
deal with the Company, its Subsidiaries or their respective Affiliates as if it
were not the Trustee.
B-9
<PAGE>
No stockholder, director, officer, employee, incorporator or Affiliate of
the Company shall have any liability for any obligation of the Company under the
Securities of this series or the Indenture or for any claim based on, in respect
of or by reason of, such obligations or their creation. Each Holder of the
Securities of this series by accepting a Security of this series waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities of this series.
This Security shall not be valid until the Trustee or authenticating agent
signs the certificate of authentication on this Security.
Customary abbreviations may be used in the name of a Holder of a Securities
of this series or an assignee, such as: TEN COM (= tenants in common), TEN ENT
(= tenants by the entireties), JT TEN (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities of this series as a convenience to the Holders of the
Securities of this series. No representation is made as to the accuracy of such
numbers as printed on the Securities of this series and reliance may be placed
only on the other identification numbers printed hereon.
This Security shall be governed by and construed in accordance with the
laws of the State of New York.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
B-10
<PAGE>
GUARANTEE
FOR VALUE RECEIVED, YORKSHIRE POWER GROUP LIMITED, a company duly
incorporated and existing under the laws of England and Wales (the "Guarantor",
which term includes any successor Person under the Indenture referred to in the
Security on which this notation is endorsed), hereby fully and unconditionally
guarantees to the Holder of the accompanying Security issued by Yorkshire Power
Finance Limited (the "Company"), pursuant to the terms of the Guarantee
contained in Article XV of the Indenture, the due and punctual payment of the
principal of, premium, if any, and interest in respect of this Security (and any
Additional Amounts payable in respect thereof), when and as the same shall
become due and payable, whether at Stated Maturity, by declaration of
acceleration, call for redemption or otherwise, in accordance with the terms of
this Security and the Indenture. In case of the failure of the Company
punctually to pay any such principal, premium, if any, or interest, the
Guarantor hereby agrees to cause any such payment to be made punctually when and
as the same shall become due and payable as if such payment were made by the
Company.
The obligations of the Guarantor to the Holders of the Securities and to
the Trustee pursuant to the Guarantee and the Indenture are expressly set forth
in Article XV of the Indenture, and reference is hereby made to such Article and
Indenture for the precise terms of the Guarantee.
THIS GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
The Guarantee shall not be valid or obligatory for any purpose until the
certificate of authentication on the Security upon which this notation of the
Guarantee is endorsed shall have been executed by the Trustee under the
Indenture by the manual signature of one of its authorized officers.
YORKSHIRE POWER GROUP LIMITED
By:_________________________________
Authorized Signatory
B-11
<PAGE>
EXHIBIT 4.4
CERTIFICATE OF TRUST
OF
YORKSHIRE CAPITAL TRUST I
THIS CERTIFICATE OF TRUST of Yorkshire Capital Trust I (the "Trust"), dated
February 4, 1998, is being duly executed and filed by the undersigned, as
trustees of the Trust, to form a business trust under the Delaware Business
Trust Act (12 Del. C. Section 3801, et seq.).
1. Name. The name of the business trust being formed hereby is Yorkshire
Capital Trust I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware are
The Bank of New York (Delaware), White Clay Center, Route 273, Newark,
Delaware 19711.
3. Effective Date. This Certificate of Trust shall be effective as of its
filing.
IN WITNESS WHEREOF, the undersigned, being the trustees of the Trust, have
executed this Certificate of Trust as of the date first above written.
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
---------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Ming J. Shiang
---------------------------------
Name: Ming J. Shiang
Title: Assistant Vice President
STEPHAN T. HAYNES,
as Administrative Trustee
/s/ Stephan T. Haynes
------------------------------------
<PAGE>
EXHIBIT 4.5
TRUST AGREEMENT
THIS TRUST AGREEMENT is made as of February 1, 1998, by and among AEP
Resources, Inc., an Ohio corporation, as Depositor (the "Depositor"), Stephan T.
Haynes, as "Administrative Trustee", The Bank of New York, a New York banking
corporation, as "Property Trustee" and The Bank of New York (Delaware), duly
organized and existing in the State of Delaware, as "Delaware Trustee" (the
Property Trustee, the Delaware Trustee and the Administrative Trustee together,
the "Trustees"). The Depositor and the Trustees hereby agree as follows:
1. The trust created hereby shall be known as "Yorkshire Capital Trust I",
in which name the Trustees, the Depositor or the holder of the Control
Certificate (as herein defined), to the extent provided herein, may conduct the
business of the Trust, make and execute contracts, and sue and be sued.
2. The Depositor hereby assigns, transfers, conveys and sets over to the
Trust the sum of $10. Such amount shall constitute the initial trust estate. It
is the intention of the parties hereto that the Trust created hereby constitute
a business trust under Chapter 38 of Title 12 of the Delaware Code, 12 Del. C.
ss. 3801, et seq. (the "Business Trust Act"), and that this document constitute
the governing instrument of the Trust. The Trustees are hereby authorized and
directed to execute and file a certificate of trust with the Delaware Secretary
of State substantially in the form attached hereto or in such other form as the
Trustees may approve.
3. The Depositor and the Trustees will enter into an amended and restated
Trust Agreement (the "Amended and Restated Trust Agreement") satisfactory to
each such party and substantially in the form included as an exhibit to the
Registration Statement (the "1933 Act Registration Statement") filed under the
Securities Act of 1933, as amended (the "1933 Act"), or in such other form as
the Depositor and the holder of the Control Certificate (as herein defined) may
approve, to provide for the contemplated operation of the Trust created hereby
and the issuance of the Preferred Securities, as referred to therein. Prior to
the execution and delivery of such Amended and Restated Trust Agreement, the
Trustees shall not have any duty or obligation hereunder or with respect to the
trust estate, except as otherwise required by applicable law or as may be
necessary to obtain prior to such execution and delivery any licenses, consents
or approvals required by applicable law or otherwise. However, notwithstanding
the foregoing, the Trustees may take all actions deemed proper as are necessary
to effect the transactions contemplated herein.
4. The Depositor and the Trustees agree that, subsequent to the execution
of this Trust Agreement and prior to the execution of the Amended and Restated
Trust Agreement, the Depositor shall transfer an instrument (the "Control
Certificate") which will establish in the holder of such Control Certificate, in
addition to its rights, powers and duties hereunder, certain voting,
administrative and appointment powers with respect to the Trust. Such voting,
administrative and appointment powers shall be specified in the Amended and
Restated Trust Agreement.
5. The Depositor, as the sponsor of the Trust, and the holder of the
Control Certificate, as the case may be, acting singly or jointly, is hereby
authorized, to cause the following actions to be taken (i) to file with the
Securities and Exchange Commission (the "Commission"), on behalf of
<PAGE>
the Trust, (a) the 1933 Act Registration Statement including pre-effective or
post-effective amendments to such Registration Statement, relating to the
registration under the 1933 Act of the Preferred Securities of the Trust, (b)
any preliminary prospectus or prospectus or supplement thereto relating to the
Preferred Securities required to be filed pursuant to Rule 424 under the 1933
Act, and (c) a Registration Statement on Form 8-A or other appropriate form (the
"1934 Act Registration Statement") (including all pre-effective and
post-effective amendments thereto) relating to the registration of the Preferred
Securities of the Trust under Section 12(b) of the Securities Exchange Act of
1934, as amended; (ii) to file with the New York Stock Exchange or any other
exchange and execute on behalf of the Trust a listing application and all other
applications, statements, certificates, agreements and other instruments as
shall be necessary or desirable to cause the Preferred Securities to be listed
on the New York Stock Exchange or any other exchange; (iii) to file and execute
on behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Preferred
Securities under the securities or "Blue Sky" laws of such jurisdictions as the
Depositor, on behalf of the Trust, may deem necessary or desirable; and (iv) to
execute, deliver and perform on behalf of the Trust an underwriting agreement
with respect to the Preferred Securities of the Trust. The Trustees further
hereby ratify and approve all actions having previously been taken with respect
to the foregoing. In the event that any filing referred to in clauses (i)-(iii)
above is required by the rules and regulations of the Commission, the New York
Stock Exchange or any other exchange or state securities or Blue Sky laws to be
executed on behalf of the Trust by the Trustee, the Property Trustee and the
Delaware Trustee, in their capacities as trustees of the Trust, are hereby
authorized and directed to join in any such filing and to execute on behalf of
the Trust any and all of the foregoing, it being understood that the Property
Trustee and the Delaware Trustee in their capacities as trustees of the Trust
shall not be required to join in any such filing or execute on behalf of the
Trust any such document unless required by the rules and regulations of the
Commission, the New York Stock Exchange or any other exchange or state
securities or Blue Sky laws.
6. This Trust Agreement may be executed in one or more counterparts.
7. The number of Trustees initially shall be three (3) and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Depositor or the holder of the Control
Certificate which may increase or decrease the number of Trustees; provided,
however, that to the extent required by the Business Trust Act, one Trustee
shall either be a natural person who is a resident of the State of Delaware or,
if not a natural person, an entity which has its principal place of business in
the State of Delaware.
8. From and after issuance of the Control Certificate, this Trust
Agreement may be amended, modified or restated only with the consent of the
holder of the Control Certificate.
9. This Trust Agreement shall be construed in accordance with and governed
by the internal laws of the State of Delaware.
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Trust Agreement to
be duly executed as of the day and year first above written.
AEP RESOURCES, INC.,
as Depositor
By: /s/ Jeffrey D. Cross
Name: Jeffrey D. Cross
Title:
THE BANK OF NEW YORK,
as Property Trustee
By: /s/ Ming J. Shiang
Name: Ming J. Shiang
Title: Assistant Vice President
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By: /s/ Walter N. Gitlin
Name: Walter N. Gitlin
Title: Authorized Signatory
STEPHAN T. HAYNES,
as Administrative Trustee
/s/ Stephan T. Haynes
3
<PAGE>
EXHIBIT 4.6
YORKSHIRE CAPITAL TRUST I
AMENDED AND RESTATED
TRUST AGREEMENT
among
AEP RESOURCES, INC., as Depositor,
YORKSHIRE POWER GROUP LIMITED, AS CONTROL PARTY,
THE BANK OF NEW YORK, AS PROPERTY TRUSTEE,
THE BANK OF NEW YORK (DELAWARE), as Delaware Trustee,
and
JEFFREY D. CROSS, STEPHAN T. HAYNES, BRIAN P. JACKSON AND TERESA S. MADDEN,
AS ADMINISTRATIVE TRUSTEES
Dated as of May ___ 1, 1998
<PAGE>
YORKSHIRE CAPITAL TRUST I
Certain Sections of this Trust Agreement relating to
Sections 310 through 318(a) of the Trust Indenture Act of 1939:
<TABLE>
<CAPTION>
Trust Indenture Act Section Trust Agreement Section
<S> <C>
Section 310(a)(1)..................................................................9.07
(a)(2).....................................................................9.07
(a)(3).....................................................................9.09
(a)(4)..................................................................2.07(b)
(b)........................................................................9.08
Section 311(a).....................................................................9.13
(b)........................................................................9.13
Section 312(a).....................................................................5.07
(b)........................................................................5.07
(c)........................................................................5.07
Section 313(a)..................................................................9.14(a)
(a)(4)..................................................................9.14(b)
(b).....................................................................9.14(b)
(c).....................................................................9.14(c)
(d).....................................................................9.14(c)
Section 314(a).....................................................................9.15
(b)..............................................................Not Applicable
(c)(1)...............................................................9.15, 9.16
(c)(2).....................................................................9.16
(c)(3).....................................................................9.16
(d)..............................................................Not Applicable
(e)........................................................................9.16
Section 315(a).........................................................9.01(a), 9.03(i)
(b)...............................................................9.02, 9.14(b)
(c).....................................................................9.01(a)
(d)..................................................................9.01, 9.03
(e)..............................................................Not Applicable
Section 316(a)...........................................................Not Applicable
(a)(1)(A)..................................................................9.19
(a)(1)(B)..................................................................9.19
(a)(2)...........................................................Not Applicable
(b)..............................................................Not Applicable
(c)..............................................................Not Applicable
Section 317(a)(1)........................................................Not Applicable
(a)(2)...........................................................Not Applicable
(b)........................................................................5.09
Section 318(a)....................................................................11.10
</TABLE>
- -------------------------------
Note: This Cross-Reference Table does not constitute part of the Trust Agreement
and shall not affect the interpretation of any of its terms and provisions.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINED TERMS...............................................................2
Section 1.01 Definitions....................................................2
ARTICLE II ESTABLISHMENT OF THE TRUST................................................10
Section 2.01 Name..........................................................10
Section 2.02 Offices of the Trustees; Principal Place of Business..........10
Section 2.03 Initial Contribution of Trust Property; Organizational
Expenses....................................................11
Section 2.04 Issuance of the Trust Securities..............................11
Section 2.05 Subscription and Purchase of Junior Subordinated Debentures...11
Section 2.06 Declaration of Trust..........................................11
Section 2.07 Authorization to Enter into Certain Transactions..............12
Section 2.08 Assets of Trust...............................................16
Section 2.09 Title to Trust Property.......................................16
Section 2.10 Mergers and Consolidations of the Trust.......................16
ARTICLE III PAYMENT ACCOUNT..........................................................18
Section 3.01 Payment Account...............................................18
ARTICLE IV DISTRIBUTIONS; REDEMPTION.................................................18
Section 4.01 Distributions.................................................18
Section 4.02 Redemption....................................................19
Section 4.03 Payment Procedures............................................21
Section 4.04 Tax Returns and Reports.......................................21
ARTICLE V TRUST SECURITIES CERTIFICATES..............................................22
Section 5.01 Initial Ownership.............................................22
Section 5.02 The Trust Securities Certificates.............................22
Section 5.03 Authentication of Trust Securities Certificates...............22
Section 5.04 Registration of Transfer and Exchange of Trust Securities
Certificates................................................22
Section 5.05 Mutilated, Destroyed, Lost or Stolen Trust Securities
Certificates................................................23
Section 5.06 Persons Deemed Securityholders................................23
Section 5.07 Access to List of Securityholders Names and Addresses.........24
Section 5.08 Maintenance of Office or Agency...............................24
Section 5.09 Appointment of Paying Agent...................................24
Section 5.10 Book-Entry Trust Securities Certificates......................25
Section 5.11 Notices to Clearing Agency....................................26
Section 5.12 Definitive Trust Securities Certificates......................26
Section 5.13 Rights of Securityholders.....................................26
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VI CONTROL CERTIFICATE.......................................................27
Section 6.01 Ownership of Control Certificate..............................27
Section 6.02 No Economic Interest..........................................27
Section 6.03 Certain Duties and Responsibilities...........................27
ARTICLE VII ACTS OF SECURITYHOLDERS; MEETINGS; VOTING................................27
Section 7.01 Limitations on Voting Rights..................................27
Section 7.02 Notice of Meetings............................................28
Section 7.03 Meetings of Trust Securityholders.............................29
Section 7.04 Voting Rights.................................................29
Section 7.05 Proxies, etc..................................................29
Section 7.06 Securityholder Action by Written Consent......................29
Section 7.07 Record Date for Voting and Other Purposes.....................30
Section 7.08 Acts of Securityholders.......................................30
Section 7.09 Inspection of Records.........................................31
ARTICLE VIII REPRESENTATIONS AND WARRANTIES OF THE PROPERTY TRUSTEE AND DELAWARE
TRUSTEE..............................................................31
Section 8.01 Representations and Warranties of Property Trustee............31
Section 8.02 Representations and Warranties of Delaware Trustee............31
ARTICLE IX THE TRUSTEES..............................................................32
Section 9.01 Certain Duties and Responsibilities...........................32
Section 9.02 Notice of Defaults............................................33
Section 9.03 Certain Rights of Property Trustee............................33
Section 9.04 Not Responsible for Recitals or Issuance of Securities........34
Section 9.05 May Hold Securities...........................................34
Section 9.06 Compensation; Fees; Indemnity.................................34
Section 9.07 Trustees Required; Eligibility................................35
Section 9.08 Conflicting Interests.........................................35
Section 9.09 Co-Trustees and Separate Trustee..............................36
Section 9.10 Resignation and Removal; Appointment of Successor.............37
Section 9.11 Acceptance of Appointment by Successor........................38
Section 9.12 Merger, Conversion, Consolidation or Succession to Business...39
Section 9.13 Preferential Collection of Claims Against Certain Entities....39
Section 9.14 Reports by Property Trustee...................................40
Section 9.15 Reports to the Property Trustee...............................40
Section 9.16 Evidence of Compliance with Conditions Precedent..............40
Section 9.17 Number of Trustees............................................40
Section 9.18 Delegation of Power...........................................41
Section 9.19 Enforcement of Rights of Property Trustee by Securityholders..41
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE X TERMINATION AND LIQUIDATION................................................42
Section 10.01 Termination Upon Expiration Date.............................42
Section 10.02 Early Termination............................................42
Section 10.03 Termination..................................................42
Section 10.04 Liquidation..................................................42
Section 10.05 Bankruptcy...................................................44
ARTICLE XI MISCELLANEOUS PROVISIONS..................................................44
Section 11.01 Expense Agreement............................................44
Section 11.02 Limitation of Rights of Securityholders......................44
Section 11.03 Amendment....................................................45
Section 11.04 Separability.................................................46
Section 11.05 Governing Law................................................46
Section 11.06 Successors...................................................46
Section 11.07 Headings.....................................................46
Section 11.08 Notice and Demand............................................46
Section 11.09 Agreement Not to Petition....................................47
Section 11.10 Conflict with Trust Indenture Act............................47
EXHIBIT A Form of Control Certificate
EXHIBIT B Form of Expense Agreement
EXHIBIT C Form of Trust Securities Certificate
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT
THIS AMENDED AND RESTATED TRUST AGREEMENT is made as of __________ 1,
1998, by and among (i) AEP Resources, Inc., an Ohio company (the "Depositor"),
(ii) Yorkshire Power Group Limited, a private company with limited liability
incorporated under the laws of England and Wales ("Yorkshire Group"), as holder
of the Control Certificate (as herein defined) (the "Control Party"), (iii) The
Bank of New York, a banking corporation duly organized and existing under the
laws of New York, as trustee (the "Property Trustee" and, in its separate
corporate capacity and not in its capacity as Property Trustee, the "Bank"),
(iv) The Bank of New York (Delaware), a banking corporation duly organized under
the laws of Delaware, as Delaware trustee (the "Delaware Trustee" and, in its
separate corporate capacity and not in its capacity as Delaware Trustee, the
"Delaware Bank"), (v) Jeffrey D. Cross, an individual, Stephan T. Haynes, an
individual, Brian P. Jackson, an individual, and Teresa S. Madden, an
individual, as administrative trustees (each an "Administrative Trustee" and
together the "Administrative Trustees") (the Property Trustee, the Delaware
Trustee and the Administrative Trustees referred to collectively as the
"Trustees"), and (vi) the several Holders, as hereinafter defined.
WITNESSETH:
WHEREAS, the Depositor, Stephan T. Haynes, as initial Administrative
Trustee, the Property Trustee and the Delaware Trustee have heretofore duly
declared and established a business trust pursuant to the Delaware Business
Trust Act ( as defined herein) by the entering into of that certain Trust
Agreement, dated as of February 1, 1998 (the "Original Trust Agreement"), and by
the execution and filing by the Delaware Trustee with the Secretary of State of
the State of Delaware of the Certificate of Trust, dated February 4, 1998; and
WHEREAS, pursuant to the terms of the Original Trust Agreement, the
Depositor established a control certificate which bestowed to the holder thereof
certain voting rights and administrative and appointment powers in the Trust
(the "Control Certificate") and (ii) the Depositor, in turn, transferred such
Control Certificate to Yorkshire Group; and
WHEREAS, the parties hereto desire to amend and restate the Original
Trust Agreement in its entirety as set forth herein to provide for, among other
things, (i) the addition of Jeffrey D. Cross, Brian P. Jackson, and Teresa S.
Madden as administrative trustees of the Trust, (ii) the acquisition by the
Trust of all of the right, title and interest in the Junior Subordinated
Debentures (as defined herein) issued by Yorkshire Power Finance Limited, a
private company with limited liability incorporated under the laws of the Cayman
Islands ("Yorkshire Finance"), (iii) the ratification of the issuance of the
Control Certificate to the Depositor and the transfer of the Control Certificate
by the Depositor to Yorkshire Group, and (iv) the issuance and sale of the
<PAGE>
Trust Securities (as defined herein) by the Trust pursuant to the Underwriting
Agreement (as defined herein).
NOW, THEREFORE, in consideration of the agreements and obligations set
forth herein and for other good and valuable consideration, the sufficiency of
which is hereby acknowledged, each party, for the benefit of the other parties
and for the benefit of the Securityholders, hereby amends and restates the
Original Trust Agreement in its entirety and agrees as follows:
ARTICLE I
DEFINED TERMS
Section 1.01 Definitions. For all purposes of this Trust
-----------
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein that are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein;
(c) unless the context otherwise requires, any reference to an
"Article" or a "Section" refers to an Article or a Section, as the case may be,
of this Trust Agreement; and
(d) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Trust Agreement as a whole and not to any
particular Article, Section or other subdivision.
"Act" has the meaning specified in Section 7.08.
"Additional Sums" means, with respect to Trust Securities of a given
Liquidation Amount and/or a given period, an amount equal to Additional Amounts
and Additional Interest (each as defined in the Subordinated Indenture) paid by
Yorkshire Finance on a Like Amount of Junior Subordinated Debentures for such
period.
"Administrative Trustee" means each of the individuals identified as
an "Administrative Trustee" in the preamble to this Trust Agreement solely in
their capacities as Administrative Trustees of the Trust and not in their
individual capacities, or such trustee's successor(s) in interest in such
capacity, or any successor "Administrative Trustee" appointed as herein
provided.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of
2
<PAGE>
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Bank" has the meaning specified in the preamble to this Trust
Agreement.
"Bankruptcy Event" means, with respect to any Person:
(i) the entry of a decree or order by a court having jurisdiction in
the premises judging such Person a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjudication
or composition of or in respect of such Person under federal bankruptcy law
or any other applicable federal or state law, or appointing a receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
such Person or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of such
decree or order unstayed and in effect for a period of 60 consecutive days;
or
(ii) the institution by such Person of proceedings to be adjudicated
a bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or relief under
federal bankruptcy law or any other applicable federal or state law, or the
consent by it to the filing of such petition or to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator or similar official
of such Person or of any substantial part of its property, or the making by
it of an assignment for the benefit of creditors, or the admission by it in
writing of its inability to pay its debts generally as they become due, or
the taking of action by such Person in furtherance of any such action.
"Bankruptcy Laws" has the meaning specified in Section 11.09.
"Board Resolution" means, with respect to any Person (who is not an
individual), a copy of a resolution certified by or Director or the Secretary or
an Assistant Secretary of such Person to have been duly adopted by such Person's
Board of Directors or a duly authorized committee thereof and to be in full
force and effect on the date of such certification, and delivered to the
Trustees.
"Book-Entry Trust Securities Certificates" means certificates
representing Trust Securities issued in global, fully registered form to the
Clearing Agency (or its nominee) as described in Section 5.10.
"Business Day" means a day other than (i) a Saturday or a Sunday, (ii)
a day on which banking institutions in The City of New York are authorized or
required by law or executive order to remain closed or (iii) a day on which the
Corporate Trust Office or the Indenture Trustee's principal corporate trust
office is closed for business.
3
<PAGE>
"Certificate Depository Agreement" means the agreement among the
Trust, the Property Trustee and The Depository Trust Company, as the initial
Clearing Agency, dated __________, 1998, relating to the Book-Entry Trust
Securities Certificates, as the same may be amended and supplemented from time
to time.
"Clearing Agency" means an organization registered as a "clearing
agency" pursuant to Section 17A of the Exchange Act. The Depository Trust
Company will be the initial Clearing Agency.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time a Clearing
Agency effects book-entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Control Certificate" has the meaning specified in the preamble to
this Trust Agreement and a form of which is attached hereto as Exhibit A.
"Control Party" means the holder from time to time of the Control
Certificate, which, as of the date of this Trust Agreement, is Yorkshire Group.
"Corporate Trust Office" means the office of the Property Trustee at
which its corporate trust business shall be principally administered.
"Debentures Guarantee" means the Guarantee of Yorkshire Group of the
Junior Subordinated Debentures pursuant to Article XV of the Subordinated
Indenture and Section 2.05 of the Supplemental Indenture.
"Definitive Trust Securities Certificates" means Trust Securities
Certificates issued in certificated, fully registered form as provided in
Section 5.12.
"Delaware Bank" has the meaning specified in the preamble to this
Trust Agreement.
"Delaware Business Trust Act" means Chapter 38 of Title 12 of the
Delaware Code, 12 Del. Code Section 3801 et seq., as it may be amended from time
to time.
"Delaware Trustee" means the commercial bank or trust company or any
other Person identified as the "Delaware Trustee" and has the meaning specified
in the preamble to this Trust Agreement solely in its capacity as Delaware
Trustee of the Trust formed and continued hereunder and not in its individual
capacity, or its successor in
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interest in such capacity, or any successor Delaware Trustee appointed as herein
provided.
"Depositor" means AEP Resources, Inc., an Ohio corporation, in its
capacity as "Depositor" under this Trust Agreement, its successors and assigns.
"Distribution Date" has the meaning specified in Section 4.01(a).
"Distributions" means amounts payable in respect of the Trust
Securities as provided in Section 4.01.
"Event of Default" means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(i) the occurrence of an Indenture Event of Default; or
(ii) default by the Trust in the payment of any Distribution when it
becomes due and payable (subject to an Extension Period) and the
continuation of such default for a period of 60 days; or
(iii) default by the Trust in the payment of any Redemption Price
of any Trust Security when it becomes due and payable; or
(iv) default in the performance, or breach, of any covenant or
warranty of the Trustees in this Trust Agreement (other than a covenant or
warranty a default in the performance of which is covered by clause (ii) or
(iii) above), and continuation of such default or breach for a period of 60
days after there has been given, by registered or certified mail, to the
Trustees by the Holders of at least 33% in aggregate Liquidation Amount of
the Outstanding Trust Securities a written notice specifying such default
or breach and requiring it to be remedied and stating that such notice is a
"Notice of Default" hereunder; or
(v) the occurrence of a Bankruptcy Event with respect to the Trust.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor legislation.
"Expense Agreement" means the Agreement as to Expenses and Liabilities
among the US Affiliates and the Trust, substantially in the form attached as
Exhibit B, as amended from time to time.
"Extension Period" has the meaning set forth in Section 4.01(b).
"Guarantee" means the Trust Securities Guarantee Agreement executed
and delivered by Yorkshire Group and The Bank of New York, as Guarantee Trustee,
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contemporaneously with the execution and delivery of this Trust Agreement, for
the benefit of the Holders of the Trust Securities, as amended from time to
time.
"Indenture Event of Default" means an "Event of Default" as defined in
the Subordinated Indenture.
"Indenture Redemption Date" means "Redemption Date," as defined in the
Subordinated Indenture.
"Indenture Trustee" means the trustee under the Subordinated
Indenture.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Issue Date" means the date of the delivery of the Trust Securities.
"Junior Subordinated Debentures" means the $__________ aggregate
principal amount of Yorkshire Finance's ___% Junior Subordinated Deferrable
Interest Debentures, Series A due __________, 2038, issued pursuant to the
Subordinated Indenture.
"Lien" means any lien, pledge, charge, encumbrance, mortgage, deed of
trust, adverse ownership interest, hypothecation, assignment, security interest
or preference, priority or other security agreement or preferential arrangement
of any kind or nature whatsoever.
"Like Amount" means (i) with respect to a repayment or redemption of
Trust Securities, Trust Securities having a Liquidation Amount equal to that
portion of the principal amount of Junior Subordinated Debentures to be
contemporaneously repaid or redeemed in accordance with the Subordinated
Indenture and the proceeds of which will be used to pay the Redemption Price of
such Trust Securities and (ii) with respect to a distribution of Junior
Subordinated Debentures to Holders of the Trust Securities in connection with a
dissolution and liquidation of the Trust or a payment of any Additional Sums on
Trust Securities, Junior Subordinated Debentures having a principal amount equal
to the Liquidation Amount of the Trust Securities of the Holder to whom such
Junior Subordinated Debentures are distributed.
"Liquidation Amount" means the stated amount of $25 per Trust
Security.
"Liquidation Date" means the date on which Junior Subordinated
Debentures are to be distributed to Holders of Trust Securities in connection
with a dissolution and liquidation of the Trust pursuant to Section 10.04.
"Liquidation Distribution" has the meaning specified in Section 10.05.
"Officers' Certificate" means, with respect to any Person (who is not
an individual), a certificate signed by the Chairman of the Board, a Vice
Chairman of the Board, a Director, the President or a Vice President, and by the
Treasurer, an Assistant
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Treasurer, the Secretary or an Assistant Secretary, of such Person, and
delivered to the appropriate Trustee. An Officers' Certificate delivered with
respect to compliance with a condition or covenant provided for in this Trust
Agreement shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as is necessary, in such officer's opinion, to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of independent counsel
experienced in the matters to be opined on, who may be counsel for the Trust,
the Property Trustee, the Delaware Trustee, Yorkshire Group or Yorkshire
Finance, but not an employee of any thereof, and who shall be reasonably
acceptable to the Property Trustee. Any Opinion of Counsel pertaining to United
States federal income tax matters may rely on published rulings of the Internal
Revenue Service.
"Original Trust Agreement" has the meaning specified in the recitals
to this Trust Agreement.
"Outstanding", when used with respect to Trust Securities, means, as
of the date of determination, all Trust Securities theretofore authenticated and
delivered under this Trust Agreement, except:
(i) Trust Securities theretofore canceled by the Securities
Registrar or delivered to the Securities Registrar for cancellation;
(ii) Trust Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Property Trustee
or any Paying Agent for the Holders of such Trust Securities; provided that
if such Trust Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Trust Agreement; and
(iii) Trust Securities in exchange for or in lieu of which other
Trust Securities have been authenticated and delivered pursuant to this
Trust Agreement;
provided, however, that in determining whether the Holders of the requisite
Liquidation Amount of the Outstanding Trust Securities have given any request,
demand, authorization, direction, notice, consent or waiver hereunder, Trust
Securities owned by
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Yorkshire Group, Yorkshire Finance, the Control Party, the US Affiliates, any
Administrative Trustee or any Affiliate of Yorkshire Group, Yorkshire Finance,
the Control Party, the US Affiliates or any Administrative Trustee shall be
disregarded and deemed not to be Outstanding, except that (a) in determining
whether any Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Trust Securities which
such Trustee actually knows to be so owned shall be so disregarded and (b) the
foregoing shall not apply at any time when all of the Outstanding Trust
Securities are owned by Yorkshire Group, Yorkshire Finance, the Control Party,
the US Affiliates, one or more Administrative Trustees and/or any such
Affiliate. Trust Securities so owned which have been pledged in good faith may
be regarded as Outstanding if the pledgee establishes to the satisfaction of the
Administrative Trustees the pledgee's right so to act with respect to such Trust
Securities and that the pledgee is not Yorkshire Group, Yorkshire Finance, the
Control Party, a US Affiliate, or any Affiliate of Yorkshire Group, Yorkshire
Finance, the Control Party or a US Affiliate.
"Owner" means each Person who is the beneficial owner of a Book-Entry
Trust Securities Certificate as reflected in the records of the Clearing Agency
or, if a Clearing Agency Participant is not the Owner, then as reflected in the
records of a Person maintaining an account with such Clearing Agency (directly
or indirectly, in accordance with the rules of such Clearing Agency).
"Paying Agent" means any paying agent or co-paying agent appointed
pursuant to Section 5.09 and shall initially be the Property Trustee.
"Payment Account" means a segregated non-interest-bearing corporate
trust account maintained by the Property Trustee with the Bank in its trust
department for the benefit of the Securityholders in which all amounts paid in
respect of the Junior Subordinated Debentures will be held and from which the
Property Trustee shall make payments to the Securityholders in accordance with
Sections 4.01 and 4.02.
"Person" means an individual, corporation, partnership, joint venture,
trust, limited liability company or corporation, unincorporated organization or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Property Trustee" means the commercial bank or trust company
identified as the "Property Trustee" in the preamble to this Trust Agreement
solely in its capacity as Property Trustee or as Paying Agent and not in its
individual capacity, or its successor in interest in such capacity, or any
successor "Property Trustee" as herein provided.
"Redemption Date" means, with respect to any Trust Security to be
redeemed, the date fixed for such redemption by or pursuant to this Trust
Agreement; provided that each Indenture Redemption Date shall be a Redemption
Date for a Like Amount of Trust Securities.
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"Redemption Price" means, with respect to any Redemption Date of any
Trust Security, the Liquidation Amount of such Trust Security, plus accumulated
and unpaid Distributions to such Redemption Date.
"Relevant Trustee" has the meaning specified in Section 9.10.
"Responsible Officer" means, with respect to the Trustee, any managing
director, any vice president, any assistant vice president, any assistant
secretary, any assistant treasurer, or any other officer of the Corporate Trust
and Agency group of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Section 60" means Section 60 of the United Kingdom Taxation of
Chargeable Gains Act of 1992, as amended.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Securities Register" and "Securities Registrar" are described in
Section 5.04.
"Securityholder" or "Holder" means a Person in whose name a Trust
Security or Securities is registered in the Securities Register; any such Person
is a beneficial owner within the meaning of the Delaware Business Trust Act.
"Subordinated Indenture" means the Subordinated Debenture Indenture,
dated as of May 1, 1998, among Yorkshire Finance, Yorkshire Group and the
Indenture Trustee, as supplemented by the Supplemental Indenture.
"Supplemental Indenture" means the First Supplemental Indenture, dated
as of __________, 1998, by and among Yorkshire Finance, Yorkshire Group and the
Indenture Trustee.
"Trust" means the Delaware business trust continued hereby and
identified on the cover page to this Trust Agreement.
"Trust Agreement" means this Amended and Restated Trust Agreement, as
the same may be modified, amended or supplemented in accordance with the
applicable provisions hereof, including all exhibits hereto, including, for all
purposes of this Amended and Restated Trust Agreement and any modification,
amendment or supplement, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this Amended and Restated Trust Agreement and
any such modification, amendment or supplement, respectively.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as in
force at the date as of which this instrument was executed; provided, however,
that in the event
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the Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendment, the Trust Indenture
Act of 1939 as so amended.
"Trust Property" means (i) the Junior Subordinated Debentures, (ii)
any cash on deposit in, or owing to, the Payment Account, and (iii) all proceeds
and rights in respect of the foregoing and any other property and assets for the
time being held or deemed to be held by the Property Trustee pursuant to this
Trust Agreement, including the rights of the Property Trustee under the
Guarantee.
"Trust Security" means an undivided beneficial ownership interest in
the assets of the Trust having a Liquidation Amount of $25 and having rights
provided therefor in this Trust Agreement, including the right to receive
Distributions and a Liquidation Distribution as provided herein.
"Trust Securities Certificate" means a certificate evidencing
ownership of a Trust Security or Securities, substantially in the form attached
as Exhibit C.
"Trustees" means the Persons identified as "Trustees" in the preamble
to this Trust Agreement solely in their capacities as trustees and not in their
individual capacities, or their successor in interest in such capacity, or any
successor trustee appointed as herein provided.
"Underwriting Agreement" means the Underwriting Agreement, dated
__________, 1998, related to the Trust Securities, among Yorkshire Group,
Yorkshire Finance, the Trust and the Underwriters named therein.
"US Affiliates" means AEP Resources, Inc. and, an Ohio corporation,
New Century International, Inc., a Delaware corporation, and their successors
and assigns.
ARTICLE II
ESTABLISHMENT OF THE TRUST
Section 2.01 Name. The Trust continued hereby shall be known as
----
"Yorkshire Capital Trust I", in which name the Trustees may conduct the business
of the Trust, make and execute contracts and other instruments on behalf of the
Trust and sue and be sued. The Administrative Trustees may change the name of
the Trust from time to time following written notice to the Holders and the
other Trustees.
Section 2.02 Offices of the Trustees; Principal Place of Business.
----------------------------------------------------
The address of the Property Trustee is 101 Barclay Street, New York, New York
10286, or at such other address as the Property Trustee may designate by written
notice to the Securityholders, Yorkshire Group and Yorkshire Finance. The
principal place of business of the Delaware Trustee is White Clay Center, Route
273, Newark, Delaware 19711, or at such other address in Delaware as the
Delaware Trustee may designate by
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notice to Yorkshire Group and Yorkshire Finance. The address of the
Administrative Trustees is c/o American Electric Power Service Corporation, 1
Riverside Plaza, Columbus, Ohio 43215. The principal place of business of the
Trust is c/o American Electric Power Service Corporation, 1 Riverside Plaza,
Columbus, Ohio 43215. The Depositor may change the principal place of business
of the Trust at any time by giving notice thereof to the Trustees.
Section 2.03 Initial Contribution of Trust Property; Organizational
------------------------------------------------------
Expenses. The Delaware Trustee acknowledges receipt in trust from the
- --------
Depositor in connection with the Original Trust Agreement of the sum of $10,
which constituted the initial Trust Property. Pursuant to the Expense Agreement,
the US Affiliates shall pay organizational expenses of the Trust as they arise
or shall, upon request of the Trustees, promptly reimburse the Trustees for any
such expenses paid by the Trustees. The US Affiliates shall make no claim upon
the Trust Property for the payment of such expenses.
Section 2.04 Issuance of the Trust Securities. Contemporaneously
--------------------------------
with the execution and delivery of this Trust Agreement, at least one
Administrative Trustee, on behalf of the Trust, shall execute in accordance with
Section 5.02 and deliver in accordance with the Underwriting Agreement Trust
Securities Certificates, registered in the name of the nominee of the initial
Clearing Agency, in an aggregate amount of __,000,000 Trust Securities having an
aggregate Liquidation Amount of $__________, against receipt of the aggregate
purchase price of such Trust Securities of $__________, which amount the
Administrative Trustees shall promptly deliver to the Property Trustee.
Section 2.05 Subscription and Purchase of Junior Subordinated
------------------------------------------------
Debentures. Contemporaneously with the execution and delivery of this Trust
- ----------
Agreement, the Administrative Trustees, on behalf of the Trust, shall subscribe
to and purchase the Junior Subordinated Debentures, registered in the name of
the Property Trustee, from Yorkshire Finance on behalf of the Trust and the
Holders, and having an aggregate principal amount equal to $__________, and, in
satisfaction of the purchase price for such Junior Subordinated Debentures, the
Property Trustee, on behalf of the Trust, shall deliver to Yorkshire Finance the
sum of $__________.
Section 2.06 Declaration of Trust. The exclusive purposes and
--------------------
functions of the Trust are (i) to issue and sell the Trust Securities and use
the proceeds from such sale to acquire the Junior Subordinated Debentures, and
(ii) to engage in only those other activities necessary, incidental, appropriate
or convenient thereto. The Control Party hereby appoints each of the Bank, the
Delaware Bank, Jeffrey D. Cross, Stephan T. Haynes, Brian P. Jackson and Teresa
S. Madden as trustees of the Trust, to have all the rights, powers and duties to
the extent set forth herein. The Property Trustee hereby declares that it will
hold the Trust Property in trust upon and subject to the conditions set forth
herein for the benefit of the Trust and the Securityholders. The Trustees shall
have all rights, powers and duties set forth herein and in accordance with
applicable law with respect to accomplishing the purposes of the Trust. The
Delaware Trustee shall not be entitled to exercise any powers, nor shall the
Delaware Trustee have any of the duties and responsibilities, of the Property
Trustee or the Administrative Trustees set forth herein.
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The Delaware Trustee shall be one of the Trustees for the sole and limited
purpose of fulfilling the requirements of the Delaware Business Trust Act.
Section 2.07 Authorization to Enter into Certain Transactions.
------------------------------------------------
The Trustees shall conduct the affairs of the Trust in accordance with the terms
of this Trust Agreement. Subject to the limitations set forth in paragraph C of
this Section and Article IX, and in accordance with the following paragraphs A
and B, the Trustees shall have the authority to enter into all transactions and
agreements determined by the Trustees to be appropriate in exercising the
authority, express (in the case of the Property Trustee) or implied, otherwise
granted to the Trustees under this Trust Agreement, and to perform all acts in
furtherance thereof, including, without limitation, the following:
A. As among the Trustees, the Administrative Trustees, acting
singly or collectively, shall have the exclusive power, duty and authority to
act on behalf of the Trust with respect to the following matters:
(i) to acquire the Junior Subordinated Debentures with the proceeds
of the issuance and sale of the Trust Securities; provided, however, the
Administrative Trustees shall cause legal title to all of the Junior
Subordinated Debentures to be vested in, and the Junior Subordinated
Debentures to be held of record in the name of the Property Trustee for the
benefit of the Trust and Holders of the Trust Securities;
(ii) to give Yorkshire Group and the Property Trustee prompt
written notice of the occurrence of any Special Event (as defined in the
Supplemental Indenture) and to take any ministerial actions in connection
therewith; provided, that the Administrative Trustees shall consult with
Yorkshire Group and the Property Trustee before taking or refraining to
take any ministerial action in relation to a Special Event;
(iii) to establish a record date with respect to all actions to be
taken hereunder that require a record date be established, including for
the purposes of Section 316(c) of the Trust Indenture Act and with respect
to Distributions, voting rights, redemptions, and exchanges, and to issue
relevant notices to Holders of the Trust Securities and the Control Party
as to such actions and applicable record dates;
(iv) to bring or defend, pay, collect, compromise, arbitrate, resort
to legal action, or otherwise adjust claims or demands of or against the
Trust ("Legal Action"), unless pursuant to Section 2.07(B)(iii), the
Property Trustee has the power to bring such Legal Action;
(v) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(vi) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
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(vii) to give the certificate to the Property Trustee required by
Section 314(a)(4) of the Trust Indenture Act;
(viii) to take all actions and perform such duties as may be
required of the Administrative Trustees pursuant to the terms of this Trust
Agreement;
(ix) to take all action that may be necessary or appropriate for
the preservation and the continuation of the Trust's valid existence,
rights, franchises and privileges as a statutory business trust under the
laws of the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of
the Trust Securities or to enable the Trust to effect the purposes for
which the Trust has been created;
(x) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Administrative
Trustees, on behalf of the Trust;
(xi) to issue and sell the Trust Securities and perform the
Underwriting Agreement on behalf of the Trust;
(xii) to cause the Trust to enter into, and to execute, deliver
and perform on behalf of the Trust, the Expense Agreement and the
Certificate Depository Agreement and such other agreements as may be
necessary or desirable in connection with the consummation hereof;
(xiii) to assist in the registration of the Trust Securities under
the Securities Act and under state securities or blue sky laws, and the
qualification of this Trust Agreement as a trust indenture under the Trust
Indenture Act;
(xiv) to assist in the listing of the Trust Securities upon such
securities exchange or exchanges or other organizations, if any, as shall
be determined by the Depositor and, if required, the registration of the
Trust Securities under the Exchange Act, and the preparation and filing of
all periodic and other reports and other documents pursuant to the
foregoing;
(xv) to send notices (other than notices of default) and other
information regarding the Trust Securities and the Junior Subordinated
Debentures to the Securityholders and the Control Party in accordance with
this Trust Agreement;
(xvi) to appoint a Paying Agent (subject to Section 5.09), any
authenticating agent and the Securities Registrar in accordance with this
Trust Agreement;
(xvii) to register transfers of the Trust Securities in accordance
with this Trust Agreement;
(xviii) to assist in, to the extent provided in this Trust
Agreement, the winding up of the affairs of and termination of the Trust
and the preparation,
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execution and filing of the certificate of cancellation with the Secretary
of State of the State of Delaware; and
(xix) to take any action incidental to the foregoing as the
Administrative Trustees may from time to time determine is necessary,
appropriate, convenient or advisable to give offers to the terms of this
Trust Agreement for the benefit of the Securityholders (without
consideration of the effect of any such action on any particular
Securityholder).
Any expenses incurred by the Administrative Trustees pursuant to this
Section 2.07(A) shall be paid by the US Affiliates pursuant to the Expense
Agreement.
B. As among the Trustees, the Property Trustee shall have the
exclusive power, duty and authority to act on behalf of the Trust with respect
to the following matters:
(i) to engage in such ministerial activities as shall be necessary
or appropriate to effect the redemption of the Trust Securities to the
extent the Junior Subordinated Debentures are redeemed or mature;
(ii) upon notice of distribution issued by the Administrative
Trustees in accordance with the terms of this Trust Agreement, to engage in
such ministerial activities as shall be necessary or appropriate to effect
the distribution pursuant to terms of this Trust Agreement of Junior
Subordinated Debentures to Holders of Trust Securities;
(iii) subject to the terms hereof, to take any Legal Action which
arises out of or in connection with (a) an Event of Default of which a
Responsible Officer of the Property Trustee has actual knowledge or (b) the
Property Trustee's duties and obligations under this Trust Agreement or the
Trust Indenture Act;
(iv) to collect of interest, principal and other payments made in
respect of, and exercise all of the rights, powers and privileges of a
holder of, the Junior Subordinated Debentures;
(v) to distribute amounts owed to the Securityholders in respect of
the Trust Securities in accordance with the terms of this Trust Agreement
(but only if at such time the Property Trustee is the Paying Agent);
(vi) to register transfers of the Trust Securities in accordance
with the terms of this Trust Agreement (but only if at such time the
Property Trustee is the Securities Registrar);
(vii) after such an Event of Default, to take any action incidental
to the foregoing as the Property Trustee may from time to time determine is
necessary, appropriate, convenient or advisable to effect to the terms of
this Trust Agreement and protect and conserve the Trust Property for the
benefit of the Securityholders
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(without consideration of the effect of any such action on any particular
Securityholder); and
(viii) to take all actions and perform such duties as may be
specifically required of the Property Trustee pursuant to the terms of this
Trust Agreement.
Any expenses incurred by the Property Trustee pursuant to this Section
2.07(B) shall be paid by the US Affiliates pursuant to the Expense Agreement.
C. So long as this Trust Agreement remains in effect, the Trust (or
the Trustees acting on behalf of the Trust) shall not undertake any business,
activities or transaction except as expressly provided herein or contemplated
hereby. In particular, the Trustees shall not (i) acquire any investments or
engage in any activities not authorized by this Trust Agreement, (ii) sell,
assign, transfer, exchange, pledge, set-off or otherwise dispose of any of the
Trust Property or interests therein, including to Securityholders, except as
expressly provided herein, (iii) take any action that would cause the Trust to
fail or cease to qualify as a grantor trust for United States federal income tax
purposes or cause the Trust to be treated as a company or treated as a trust
which does not fall within the provisions of Section 60, in either case, for
purposes of United Kingdom tax law, (iv) incur any indebtedness for borrowed
money or issue any other debt, (v) take or consent to any action that would
result in the placement of a Lien on any of the Trust Property, (vi) issue any
securities other than the Trust Securities or the Control Certificate, or (vii)
have any power to, or agree to any action by the Control Party that would, vary
the investment (within the meaning of Treasury Regulation Section 301.7701-4(c))
of the Trust or of the Securityholders. The Trustees shall defend against all
claims and demands of all Persons at any time claiming any Lien on any of the
Trust Property adverse to the interest of the Trust or the Securityholders in
their capacity as Securityholders.
D. In connection with the issue and sale of the Trust Securities,
the Control Party shall have the right and responsibility to assist the Trust
with respect to, or effect on behalf of the Trust, the following (and any
actions taken by the Control Party in furtherance of the following prior to the
date of this Trust Agreement are hereby ratified and confirmed in all respects):
(i) to prepare for filing by the Trust with the Commission a
registration statement under the Securities Act in relation to the Trust
Securities, including any amendments thereto;
(ii) to determine the states in which to take appropriate action to
qualify or register for sale all or part of the Trust Securities and to do
any and all such acts, other than actions which must be taken by or on
behalf of the Trust, and advise the Trustees of actions they must take on
behalf of the Trust, and prepare for execution and filing any documents to
be executed and filed by the Trust or on behalf of the Trust, as the
Control Party deems necessary or advisable in order to comply with the
applicable laws of any such States;
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(iii) to prepare for filing by the Trust an application to the New
York Stock Exchange or any other national stock exchange or the Nasdaq
Stock Market's National Market for the listing upon notice of issuance of
the Trust Securities;
(iv) to prepare for filing by the Trust with the Commission a
registration statement on Form 8-A relating to the registration of the
Trust Securities under Section 12(b) of the Exchange Act, including any
amendments thereto;
(v) to negotiate the terms of, and execute and deliver, the
Underwriting Agreement providing for the issuance and sale of the Trust
Securities; and
(vi) any other actions necessary, incidental, appropriate or
convenient to carry out any of the foregoing activities.
Any expenses incurred by the Control Party pursuant to this Section
2.07(D) shall be paid by the US Affiliates pursuant to the Expense Agreement.
E. Notwithstanding anything herein to the contrary, the
Administrative Trustees are authorized and directed to conduct the affairs of
the Trust and to operate the Trust in such a way that (i) neither Yorkshire
Finance nor the Trust will be deemed to be an "investment company" required to
be registered under the Investment Company Act, (ii) the Trust will not be
classified as other than as a grantor trust for United States federal income tax
purposes, (iii) the Junior Subordinated Debentures will be treated as
indebtedness for United States federal income tax purposes, (iv) the Trust will
not be treated as a company for purposes of United Kingdom tax law and (v) the
Trust will be classified as a trust falling within the provisions of Section 60
for purposes of United Kingdom tax law. In this connection, the Control Party
and the Administrative Trustees are authorized to take any action, not
inconsistent with applicable law, the Certificate of Trust or this Trust
Agreement, that each of the Control Party and the Administrative Trustees
determines in its discretion to be necessary or desirable for such purposes, as
long as such action does not materially and adversely affect the interests of
the Holders of the Trust Securities.
Section 2.08 Assets of Trust. The assets of the Trust shall
---------------
consist of the Trust Property.
Section 2.09 Title to Trust Property. Legal title to all Trust
-----------------------
Property shall be vested at all times in the Property Trustee (in its capacity
as such) and shall be held and administered by the Property Trustee for the
benefit of the Securityholders and the Trust in accordance with this Trust
Agreement. The right, title and interest of the Property Trustee to the Junior
Subordinated Debentures shall vest automatically in each Person who may
thereafter be appointed as Property Trustee in accordance with the terms hereof.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
Section 2.10 Mergers and Consolidations of the Trust. The Trust
---------------------------------------
may not merge with or into, convert into, consolidate, amalgamate, or be
replaced by, or convey,
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transfer or lease its properties and assets substantially as an entirety to any
corporation or other Person, except as described below or otherwise described in
this Trust Agreement. The Trust may, at the request of the Control Party, with
the consent of the Administrative Trustees and without the consent of the
Holders of the Trust Securities, merge with or into, convert into consolidate,
amalgamate, or be replaced by or convey, transfer or lease its properties and
assets substantially as an entirety to a trust organized as such under the laws
of any jurisdiction; provided, that (i) such successor entity either (x)
expressly assumes all of the obligations of the Trust with respect to the Trust
Securities or (y) substitutes for the Trust Securities other securities having
substantially the same terms as the Trust Securities (herein referred to as the
"Successor Securities") so long as the Successor Securities rank the same as the
Trust Securities rank in priority with respect to Distributions and payments
upon liquidation, redemption and otherwise, (ii) such successor entity transfers
to the Control Party, directly or indirectly, a control certificate (or similar
instrument) or common securities relating to such successor entity, (iii) the
Control Party expressly appoints a trustee of such successor entity possessing
the same powers and duties as the Property Trustee as the holder, directly or
indirectly, of the Junior Subordinated Debentures, (iv) Successor Securities are
listed or traded, or any Successor Securities will be listed or traded upon
notification of issuance, on any national securities exchange or other
organization on which the Trust Securities are then listed, (v) such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease does not cause the Trust Securities (including any Successor Securities)
to be downgraded by any nationally recognized statistical rating organization,
(vi) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders of the Trust Securities (including any Successor
Securities) in any material respect, (vii) such successor entity has a purpose
substantially identical to that of the Trust, (viii) prior to such merger,
conversion, consolidation, amalgamation, replacement, conveyance, transfer or
lease, the Control Party, has received an Opinion of Counsel to the effect that
(A) such merger, conversion, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders of the Trust Securities (including any Successor
Securities) in any material respect, and (B) following such merger,
consolidation, conversion, amalgamation, replacement, conveyance, transfer or
lease, none of the Trust, the Control Party, Yorkshire Finance, either of the US
Affiliates nor such successor entity will be required to register as an
"investment company" under the Investment Company Act and (ix) Yorkshire Group
or any permitted successor or assignee guarantees the obligations of such
successor entity under the Successor Securities at least to the extent provided
by the Guarantee. Notwithstanding the foregoing, the Trust shall not, except
with the consent of Holders of 100% in Liquidation Amount of the Trust
Securities, consolidate, amalgamate, merge with or into, convert into, or be
replaced by or convey, transfer or lease its properties and assets substantially
as an entirety to any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, convert into, or replace it, if such
consolidation, amalgamation, merger, conversion or replacement would cause (A)
the Trust or the successor entity to be classified as other than a grantor trust
for United States federal income tax purposes, (B) the Trust or the successor
entity to be classified as a company or as a trust which does not fall within
the provisions of Section 60, in
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either case, for purposes of United Kingdom tax law or (C) the Control Party,
Yorkshire Finance, the Trust, either of the US Affiliates or the successor
entity to be required to register as an "investment company" under the
Investment Company Act.
ARTICLE III
PAYMENT ACCOUNT
Section 3.01 Payment Account.
---------------
(a) On or prior to the Issue Date, the Property Trustee shall
establish the Payment Account. The Property Trustee and an agent of the
Property Trustee shall have exclusive control and sole right of withdrawal with
respect to the Payment Account for the purpose of making deposits in and
withdrawals from the Payment Account in accordance with this Trust Agreement.
All monies and other property deposited or held from time to time in the Payment
Account shall be held by the Property Trustee in the Payment Account for the
exclusive benefit of the Securityholders and for distribution as herein
provided, including (and subject to) any priority of payments provided for
herein.
(b) The Property Trustee shall deposit in the Payment Account,
promptly upon receipt, all payments of principal of or interest on, and any
other payments or proceeds with respect to, the Junior Subordinated Debentures.
Amounts held in the Payment Account shall not be invested by the Property
Trustee pending distribution thereof.
ARTICLE IV
DISTRIBUTIONS; REDEMPTION
Section 4.01 Distributions.
-------------
(a) Distributions on the Trust Securities shall be cumulative and
accumulate from the Issue Date and, except in the event that Yorkshire Finance
exercises its right to extend the interest payment period for the Junior
Subordinated Debentures pursuant to Section _____ of the Supplemental Indenture,
shall be fixed at a rate of ____% per annum of the Liquidation Amount of the
Trust Securities payable quarterly in arrears on March 31, June 30, September 30
and December 31 of each year, commencing on June 30, 1998. If any date on which
Distributions are otherwise payable on the Trust Securities is not a Business
Day, then the payment of such Distribution shall be made on the next succeeding
day which is a Business Day (and without any interest or other payment in
respect of any such delay) except that, if such Business Day is in the next
succeeding calendar year, payment of such Distribution shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date (each date on which Distributions are payable in
accordance with the foregoing, a "Distribution Date").
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(b) The amount of Distributions payable for any full quarterly
period shall be computed on the basis of twelve 30-day months and a 360-day year
and for any partial period shall be computed on the basis of the number of days
elapsed in a 360-day year of twelve 30-day months. If the interest payment
period for the Junior Subordinated Debentures is extended pursuant to Section
_____ of the Supplemental Indenture (an "Extension Period"), then the rate per
annum at which Distributions on the Trust Securities accumulate shall be
increased by an amount such that the aggregate amount of Distributions that
accumulate on all Trust Securities during any such Extension Period is equal to
the aggregate amount of interest (including interest payable on unpaid interest
at the percentage rate per annum set forth above, compounded quarterly, to the
extent permitted by applicable law) that accrues during any such Extension
Period on the Junior Subordinated Debentures. The payment of such deferred
interest, together with interest thereon, will be distributed to the Holders of
the Trust Securities as received at the end of any Extension Period. Additional
sums received by the Trust for any period shall be distributed to the Holders of
Trust Securities in respect of such period in order that the entire amount
payable for such period under this Section 4.01 shall be distributed when
payable.
(c) Distributions on the Trust Securities shall be made and shall be
deemed payable on each Distribution Date only to the extent that the Trust has
sufficient funds available in the Payment Account for the payment of such
Distributions.
(d) Distributions, if any, on the Trust Securities on each
Distribution Date shall be payable to the Holders thereof as they appear on the
Securities Register for the Trust Securities on the relevant record date, which,
as long as the Trust Securities are represented by Book-Entry Trust Securities
Certificate, shall be one Business Day prior to the relevant Distribution Date.
In the event that any Trust Securities are not so represented, the relevant
record date for such Trust Securities shall be the close of business on the
fifteenth calendar day prior to the relevant Distribution Date.
Each Trust Security upon registration of transfer of or in exchange
for or in lieu of any other Trust Security shall carry the rights of
Distributions accumulated and unpaid, and to accumulate, which were carried by
such other Trust Security.
Section 4.02 Redemption.
----------
(a) On each Indenture Redemption Date with respect to, and on the
stated maturity of, the Junior Subordinated Debentures, the Trust will be
required to redeem a Like Amount of Trust Securities at the Redemption Price.
(b) Provided that the Property Trustee has received a written
direction from the Control Party to effect such redemption at least 45 days
prior to the Redemption Date, notice of redemption shall be given by the
Property Trustee by first-class mail, postage prepaid, mailed not less than 30
nor more than 60 days' prior to the Redemption Date to each Holder of Trust
Securities to be redeemed, at such Holder's address appearing in the Securities
Register. All notices of redemption shall state:
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(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the CUSIP number;
(iv) if less than all the Outstanding Trust Securities are to be
redeemed, the identification the total Liquidation Amount of the particular
Trust Securities selected by the Property Trustee to be redeemed; and
(v) that on the Redemption Date the Redemption Price will become
due and payable upon each such Trust Security to be redeemed and that
Distributions thereon will cease to accumulate on and after such date.
(c) The Trust Securities redeemed on each Redemption Date shall be
redeemed at the Redemption Price with the applicable proceeds from the
contemporaneous repayment or redemption of Junior Subordinated Debentures.
Redemptions of the Trust Securities shall be made, and the Redemption Price
shall be deemed payable, on each Redemption Date only to the extent that the
Trust has sufficient funds available in the Payment Account at 10:00 AM on the
Redemption Date for the payment of such Redemption Price.
(d) If the Property Trustee gives a notice of redemption in respect
of any Trust Securities, then, by 12:00 noon New York City time, on the
Redemption Date, subject to Section 4.02(c), the Property Trustee will, so long
as the Trust Securities are in represented by Book-Entry Trust Securities
Certificates, irrevocably deposit with the Clearing Agency funds sufficient to
pay the applicable Redemption Price and will give the Clearing Agency
irrevocable instructions and authority to pay the Redemption Price to the
Holders thereof. If the Trust Securities are not represented by Book-Entry
Trust Securities Certificates, the Property Trustee, subject to Section 4.02(c),
will irrevocably deposit with the Paying Agent funds sufficient to pay the
applicable Redemption Price and will give the Paying Agent irrevocable
instructions and authority to pay the Redemption Price to the Holders thereof
upon surrender of their Trust Securities Certificates. Notwithstanding the
foregoing, Distributions payable on or prior to the Redemption Date for any
Trust Securities called for redemption shall be payable to the Holders of such
Trust Securities as they appear on the Securities Register for the Trust
Securities on the relevant record dates for the related Distribution Dates. If
notice of redemption shall have been given and funds deposited as required, then
upon the date of such deposit, all rights of Securityholders holding Trust
Securities so called for redemption will cease, except the right of such
Securityholders to receive the Redemption Price, but without interest, and such
Trust Securities will cease to be Outstanding. In the event that any Redemption
Date is not a Business Day, then payment of the Redemption Price payable on such
date shall be made on the next succeeding day which is a Business Day (and
without any interest or other payment in respect of any such delay), except
that, if such Business Day falls in the next succeeding calendar year, such
payment will be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. In the event that
payment of the Redemption Price in
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respect of Trust Securities is improperly withheld or refused and not paid
either by the Trust or by Yorkshire Group pursuant to the Guarantee or the
Debentures Guarantee, Distributions on such Trust Securities will continue to
accumulate at the then applicable rate from such Redemption Date originally
established by the Trust for such Trust Securities to the date such Redemption
Price is actually paid, in which case the actual payment date will be the date
fixed for redemption for purposes of calculating the Redemption Price.
(e) If less than all of the Trust Securities are to be redeemed on a
Redemption Date, the particular Trust Securities to be redeemed shall be
selected on a pro rata basis not more than 60 days prior to the Redemption Date
by the Property Trustee from the Outstanding Trust Securities not previously
called for redemption, and which shall provide for the selection for redemption
of portions (equal to $25 or an integral multiple of $25 in excess thereof) of
the aggregate Liquidation Amount of Trust Securities of a denomination larger
than $25. The Property Trustee shall promptly notify the Securities Registrar
in writing of the Trust Securities selected for redemption and, in the case of
any Trust Securities selected for partial redemption, the Liquidation Amount
thereof to be redeemed. For all purposes of this Trust Agreement, unless the
context otherwise requires, all provisions relating to the redemption of Trust
Securities shall relate, in the case of any Trust Securities redeemed or to be
redeemed only in part, to the portion of the Liquidation Amount of Trust
Securities which has been or is to be redeemed.
(f) Subject to the foregoing provisions of this Section 4.02 and to
applicable law (including, without limitation, applicable United States federal
securities laws), Yorkshire Finance, the US Affiliates or their Affiliates may,
at any time and from time to time, purchase Outstanding Trust Securities by
tender, in the open market or by private agreement.
Section 4.03 Payment Procedures. Payments in respect of the Trust
------------------
Securities shall be made by check mailed to the address of the Person entitled
thereto as such address shall appear on the Securities Register or, if the Trust
Securities are held by a Clearing Agency in immediately available funds, such
Distributions shall be made to the Clearing Agency, which shall credit the
relevant Persons' accounts at such Clearing Agency on the applicable
Distribution Dates.
Section 4.04 Tax Returns and Reports. The Administrative Trustees
-----------------------
shall prepare (or cause to be prepared), at the expense of the US Affiliates
pursuant to the Expense Agreement, and file all United States federal, state and
local tax and information returns and reports required to be filed by or in
respect of the Trust. The Administrative Trustees shall provide or cause to be
provided on a timely basis to each Holder any Internal Revenue Service form
required to be so provided in respect of the Trust Securities. The Property
Trustee shall comply with United States federal withholding and back-up
withholding tax laws and information reporting requirements with respect to any
payments to Securityholders.
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ARTICLE V
TRUST SECURITIES CERTIFICATES
Section 5.01 Initial Ownership. Upon the creation of the Trust
-----------------
by the contribution by the Depositor pursuant to Section 2.03 and until the
issuance of the Trust Securities, and at any time during which no Trust
Securities are outstanding, the Depositor shall be the sole beneficial owner of
the Trust.
Section 5.02 The Trust Securities Certificates. Each of the Trust
---------------------------------
Securities Certificates shall be issued in minimum denominations of $25 and
integral multiples in excess thereof. The Trust Securities Certificates shall be
executed on behalf of the Trust by manual or facsimile signature of at least one
Administrative Trustee. Trust Securities Certificates bearing the manual or
facsimile signatures of individuals who were, at the time when such signatures
shall have been affixed, authorized to sign on behalf of the Trust, shall be
validly issued and entitled to the benefits of this Trust Agreement,
notwithstanding that such individuals or any of them shall have ceased to be so
authorized prior to the authentication and delivery of such Trust Securities
Certificates or did not hold such offices at the date of authentication and
delivery of such Trust Securities Certificates. A transferee of a Trust
Securities Certificate shall become a Securityholder, and shall be entitled to
the rights and subject to the obligations of a Securityholder hereunder, upon
due registration of such Trust Securities Certificate in such transferee's name
pursuant to Section 5.04, 5.10 or 5.12.
Section 5.03 Authentication of Trust Securities Certificates. On
-----------------------------------------------
the Issue Date, the Administrative Trustees shall cause Trust Securities
Certificates, in an aggregate Liquidation Amount as provided in Section 2.04, to
be executed on behalf of the Trust, authenticated, as provided herein, and
delivered to or upon the written order of the Control Party signed by its
Chairman of the Board, its President, any Vice President, or any Director
without further corporate action by the Control Party, in authorized
denominations. No Trust Securities Certificate shall entitle its holder to any
benefit under this Trust Agreement, or shall be valid for any purpose, unless
there shall appear on such Trust Securities Certificate a certificate of
authentication substantially in the form set forth in Exhibit C executed by the
Property Trustee by manual signature; such authentication shall constitute
conclusive evidence that such Trust Securities Certificate shall have been duly
authenticated and delivered hereunder. All Trust Securities Certificates shall
be dated the date of their authentication.
Section 5.04 Registration of Transfer and Exchange of Trust
----------------------------------------------
Securities Certificates. The Securities Registrar shall keep or cause to be
- -----------------------
kept, at the office or agency maintained pursuant to Section 5.08, a Securities
Register in which, subject to such reasonable regulations as it may prescribe,
the Securities Registrar shall provide for the registration of Trust Securities
Certificates and registration of transfers and exchanges of Trust Securities
Certificates as herein provided. The Property Trustee shall be the initial
Securities Registrar.
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Upon surrender for registration of transfer of any Trust Securities
Certificate at the office or agency maintained pursuant to Section 5.08, the
Administrative Trustees shall execute, authenticate and deliver in the name of
the designated transferee or transferees one or more new Trust Securities
Certificates in authorized denominations of a like aggregate Liquidation Amount
dated the date of authentication by the Administrative Trustee or Trustees. The
Securities Registrar shall not be required to register the transfer of any Trust
Securities that have been called for redemption. At the option of a Holder,
Trust Securities Certificates may be exchanged for other Trust Securities
Certificates in authorized denominations of the same class and of a like
aggregate Liquidation Amount upon surrender of the Trust Securities Certificates
to be exchanged at the office or agency maintained pursuant to Section 5.08.
Every Trust Securities Certificate presented or surrendered for
registration of transfer or exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Administrative Trustees and
the Securities Registrar duly executed by the Holder or his attorney duly
authorized in writing. Each Trust Securities Certificate surrendered for
registration of transfer or exchange shall be canceled and subsequently disposed
of by the Securities Registrar in accordance with its customary practice.
No service charge shall be made for any registration of transfer or
exchange of Trust Securities Certificates, but the Securities Registrar or the
Administrative Trustees may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer or
exchange of Trust Securities Certificates.
Section 5.05 Mutilated, Destroyed, Lost or Stolen Trust Securities
-----------------------------------------------------
Certificates. If (a) any mutilated Trust Securities Certificate shall be
- ------------
surrendered to the Securities Registrar, or if the Securities Registrar shall
receive evidence to its satisfaction of the destruction, loss or theft of any
Trust Securities Certificate and (b) there shall be delivered to the Securities
Registrar and the Administrative Trustees such security or indemnity as may be
required by them to save each of them harmless, then in the absence of notice
that such Trust Securities Certificate shall have been acquired by a bona fide
purchaser, the Administrative Trustees or any one of them on behalf of the Trust
shall execute and authenticate and make available for delivery, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Trust Securities
Certificate, a new Trust Securities Certificate of like class, tenor and
denomination. In connection with the issuance of any new Trust Securities
Certificate under this Section, the Administrative Trustees or the Securities
Registrar may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith. Any duplicate
Trust Securities Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the Trust, as if originally
issued, whether or not the lost, stolen or destroyed Trust Securities
Certificate shall be found at any time.
Section 5.06 Persons Deemed Securityholders. Prior to due
------------------------------
presentation of a Trust Securities Certificate for registration of transfer, the
Trustees or the Securities Registrar shall treat the Person in whose name any
Trust Securities Certificate shall be registered in the Securities Register as
the owner of such Trust Securities Certificate for
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the purpose of receiving Distributions (subject to Section 4.01(d)) and for all
other purposes whatsoever, and neither the Trustees nor the Securities Registrar
shall be bound by any notice to the contrary.
Section 5.07 Access to List of Securityholders' Names and
--------------------------------------------
Addresses. The Administrative Trustees shall furnish or cause to be furnished to
- ---------
(i) the Control Party and the Property Trustee semi-annually, not later than
June 1 and December 1 in each year, and (ii) the Control Party or the Property
Trustee, as the case may be, within 30 days after receipt by any Administrative
Trustee of a request therefor from the Control Party or the Property Trustee, as
the case may be, in writing, a list, in such form as the Control Party or the
Property Trustee, as the case may be, may reasonably require, of the names and
addresses of the Securityholders as of a date not more than 15 days prior to the
time such list is furnished; provided, that the Administrative Trustees shall
not be obligated to provide such list at any time such list does not differ from
the most recent list given to the Control Party and the Property Trustee by the
Administrative Trustees or at any time the Property Trustee is the Securities
Registrar. If one or more Holders of Trust Securities Certificates evidencing
not less than 25% of the Outstanding Liquidation Amount apply in writing to the
Administrative Trustees, and such application states that the applicants desire
to communicate with other Securityholders with respect to their rights under
this Trust Agreement or under the Trust Securities Certificates and such
application is accompanied by a copy of the communication that such applicants
propose to transmit, then the Administrative Trustees shall, within five
Business Days after the receipt of such application, afford such applicants
access during normal business hours to the current list of Securityholders. Each
Holder, by receiving and holding a Trust Securities Certificate, and each Owner
shall be deemed to have agreed not to hold either the Control Party or the
Administrative Trustees accountable by reason of the disclosure of its name and
address, regardless of the source from which such information was derived.
Section 5.08 Maintenance of Office or Agency. The Administrative
-------------------------------
Trustees shall maintain in the Borough of Manhattan, New York, an office or
offices or agency or agencies where Trust Securities Certificates may be
surrendered for registration of transfer or exchange and where notices and
demands to or upon the Trustees in respect of the Trust Securities Certificates
may be served. The Administrative Trustees initially designate
____________________, New York, New York _____, as its principal agency for such
purposes. The Administrative Trustees shall give prompt written notice to the
Control Party and to the Securityholders of any change in the location of the
Securities Register or any such office or agency.
Section 5.09 Appointment of Paying Agent. The Paying Agent shall
---------------------------
make Distributions and other payments provided hereby to Securityholders from
the Payment Account and shall report the amounts of such Distributions and
payments to the Property Trustee and the Administrative Trustees. Any Paying
Agent shall have the revocable power to withdraw funds from the Payment Account
for the purpose of making the Distributions and payments provided hereby. The
Administrative Trustees may revoke such power and remove the Paying Agent if
such Trustees determine in their sole discretion that the Paying Agent shall
have failed to perform its obligations under this
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Agreement in any material respect. The Paying Agent shall initially be the
Property Trustee, and it may choose any co-paying agent that is acceptable to
the Administrative Trustees and the Control Party. Any Person acting as Paying
Agent shall be permitted to resign as Paying Agent upon 30 days' written notice
to the Administrative Trustees and the Control Party. In the event that a Paying
Agent shall resign or be removed, the Administrative Trustees shall appoint a
successor that is acceptable to the Control Party to act as Paying Agent (which
shall be a bank or trust company). The Administrative Trustees shall cause such
successor Paying Agent or any additional Paying Agent appointed by the
Administrative Trustees to execute and deliver to the Trustees an instrument in
which such successor Paying Agent or additional Paying Agent shall agree with
the Trustees that as Paying Agent, such successor Paying Agent or additional
Paying Agent will hold all sums, if any, held by it for payment to the
Securityholders in trust for the benefit of the Securityholders entitled thereto
until such sums shall be paid to such Securityholders. The Paying Agent shall
return all unclaimed funds to the Property Trustee and upon removal of a Paying
Agent such Paying Agent shall also return all funds in its possession to the
Property Trustee. The provisions of Sections 9.01, 9.03 and 9.06 shall apply to
the Property Trustee also in its role as Paying Agent, for so long as the
Property Trustee shall act as Paying Agent and, to the extent applicable, to any
other paying agent appointed hereunder. Any reference in this Agreement to the
Paying Agent shall include any co-paying agent unless the context requires
otherwise.
Section 5.10 Book-Entry Trust Securities Certificates. The Trust
----------------------------------------
Securities, upon original issuance, will be issued in the form of typewritten
Book-Entry Trust Securities Certificates, to be delivered to or held on behalf
of The Depository Trust Company, the initial Clearing Agency, by, or on behalf
of, the Trust. Such Book-Entry Trust Securities Certificate or Certificates
shall initially be registered on the Securities Register in the name of Cede &
Co., the nominee of the initial Clearing Agency, and no Owner or other
beneficial owner will receive a Definitive Trust Securities Certificate
representing such beneficial owner's interest in such Trust Securities, except
as provided in Section 5.12. Unless and until Definitive Trust Securities
Certificates have been issued to Owners pursuant to Section 5.12:
(i) the provisions of this Section 5.10 shall be in full force and
effect;
(ii) the Securities Registrar and the Trustees shall be entitled to
deal with the Clearing Agency for all purposes of this Trust Agreement
relating to the Book-Entry Trust Securities Certificates (including the
payment of the Liquidation Amount of and Distributions on the Book-Entry
Trust Securities and the giving of instructions or directions to Owners of
Book-Entry Trust Securities) as the sole Holder of Book-Entry Trust
Securities Certificates and shall have no obligations to the Owners
thereof;
(iii) to the extent that the provisions of this Section conflict
with any other provisions of this Trust Agreement, the provisions of this
Section shall control; and
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(iv) the rights of the Owners of the Book-Entry Trust Securities
Certificates shall be exercised only through the Clearing Agency and shall
be limited to those established by law and agreements between such Owners
and the Clearing Agency and/or the Clearing Agency Participants. Pursuant
to the Certificate Depository Agreement, unless and until Definitive Trust
Securities Certificates are issued pursuant to Section 5.12, the Clearing
Agency will make book-entry transfers among the Clearing Agency
Participants and receive and transmit payments on the Trust Securities to
such Clearing Agency Participants.
Section 5.11 Notices to Clearing Agency. To the extent a notice
--------------------------
or other communication to the Owners is required under this Trust Agreement,
unless and until Definitive Trust Securities Certificates shall have been issued
to Owners pursuant to Section 5.12, the Trustees shall give all such notices and
communications specified herein to be given to Owners to the Clearing Agency,
and shall have no obligations to the Owners.
Section 5.12 Definitive Trust Securities Certificates If (i) the
----------------------------------------
Clearing Agency discontinues providing its services as securities depositary
with respect to the Trust Securities at any time by giving reasonable notice to
the Trust or Yorkshire Finance, (ii) the Trust or Yorkshire Finance decides to
discontinue use of the system of book-entry transfers through the Clearing
Agency (or a successor depositary) and a successor securities depositary is not
obtained or (iii) the Trust fails to pay any amounts due and payable in respect
of the Trust Securities or the Control Party fails to pay any amounts due and
payable in respect of the Trust Securities or the Control Party fails to pay any
amounts payable in respect of the Guarantee, as required by their respective
terms, upon surrender to the Administrative Trustees of the Book-Entry Trust
Securities Certificates representing the Trust Securities by the Clearing
Agency, accompanied by registration instructions, the Administrative Trustees or
any one of them shall execute and authenticate Definitive Trust Securities
Certificates representing the Trust Securities in accordance with the
instructions of the Clearing Agency. Neither the Securities Registrar nor the
Trustees shall be liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such instructions.
Upon the issuance of Definitive Trust Securities Certificates, the Trustees
shall recognize the Holders of the Definitive Trust Securities Certificates as
Securityholders. The Definitive Trust Securities Certificates shall be printed,
lithographed or engraved or may be produced in any other manner as is reasonably
acceptable to the Administrative Trustees, as evidenced by the execution thereof
by the Administrative Trustees or any one of them.
Section 5.13 Rights of Securityholders. The legal title to the
-------------------------
Trust Property is vested exclusively in the Property Trustee (in its capacity as
such) in accordance with Section 2.09, and the Securityholders shall not have
any right or title therein other than the undivided beneficial ownership
interest in the assets of the Trust conferred by their Trust Securities, and
they shall have no right to call for any partition or division of property,
profits or rights of the Trust except as described below. The Trust Securities
shall be personal property giving only the rights specifically set forth therein
and in this Trust Agreement. The Trust Securities shall have no preemptive or
other
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similar rights and when issued and delivered to Securityholders against payment
of the purchase price therefor, will be fully paid and nonassessable by the
Trust. The Control Party and the Holders of the Trust Securities shall be
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware.
ARTICLE VI
CONTROL CERTIFICATE
Section 6.01 Ownership of Control Certificate. The Control Party
--------------------------------
shall acquire, and thereafter retain, except as described below, ownership of
the Control Certificate. Any attempted transfer of the Control Certificate,
except for transfers by operation of law, in connection with a merger or
consideration of Yorkshire Group into another corporation pursuant to the
Subordinated Indenture or to an Affiliate of Yorkshire Group, shall be void. The
Control Certificate shall contain a legend stating "THIS CERTIFICATE IS NOT
TRANSFERABLE EXCEPT AS PROVIDED IN THE TRUST AGREEMENT REFERRED TO HEREIN".
Section 6.02 No Ownership or Economic Interest in the Trust. The
----------------------------------------------
Control Party, solely by virtue of its possession of the Control Certificate,
shall not be entitled to any financial or monetary interest in the Trust,
including, but not limited to, any Distribution, any amounts paid on liquidation
or termination of the Trust, or any entitlement to the Junior Subordinated
Debentures or payments thereon. The Control Party, in its capacity as such, is
not a Beneficial Owner of the Trust and the Control Certificate does not
constitute a beneficial interest in the Trust.
Section 6.03 Certain Duties and Responsibilities. The rights,
-----------------------------------
duties and responsibilities of the Control Party shall be as provided by the
Control Certificate and this Trust Agreement. Notwithstanding the foregoing, no
provision of the Original Trust Agreement, the Control Certificate and this
Trust Agreement shall require Yorkshire Group, as the Control Party, to incur
any of its own funds in the performance of its duties as Control Party. Whether
or not therein expressly so provided, every provision of the Control Agreement
and this Trust Agreement relating to the conduct of Yorkshire Group, as Control
Party, shall be subject to the provisions of this Section.
ARTICLE VII
ACTS OF SECURITYHOLDERS; MEETINGS; VOTING
Section 7.01 Limitations on Voting Rights.
----------------------------
(a) Except as provided in this Section, in Section 9.10, Section
9.19 or Section 11.03 of this Trust Agreement, in the Subordinated Indenture,
and as otherwise required by law, no Holder of Trust Securities shall have any
right to vote or in any manner otherwise control the administration, operation
and management of the Trust or
27
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the obligations of the parties hereto, nor shall anything herein set forth, or
contained in the terms of the Trust Securities Certificates and the Control
Certificate, be construed so as to constitute the Securityholders and the
Control Party, respectively, from time to time as partners or members of an
association. In each case where the Holders of the Trust Securities are entitled
to vote, the Control Party shall not be entitled to vote.
(b) So long as any Junior Subordinated Debentures are held by or for
the benefit of the Property Trustee, the Trustees shall not (i) direct the time,
method and place of conducting any proceeding for any remedy available to the
Indenture Trustee, or executing any trust or power conferred on the Indenture
Trustee with respect to such Junior Subordinated Debentures or the Debentures
Guarantee, (ii) waive any past default which is waivable under Section ___ of
the Subordinated Indenture, (iii) exercise any right to rescind or annul a
declaration that any interest payment or other payment with respect to the
Junior Subordinated Debentures or the Debentures Guarantee shall be due and
payable or (iv) consent to any amendment, modification or termination of the
Subordinated Indenture or the Junior Subordinated Debentures, where such consent
shall be required, or to any other action, under the Subordinated Indenture,
without, in each case, obtaining the prior approval of the Holders of at least a
majority in aggregate Liquidation Amount of all Outstanding Trust Securities;
provided, however, that where a consent under the Subordinated Indenture would
require the consent of each holder of Junior Subordinated Debentures affected
thereby, no such consent shall be given by the Trustees without the prior
written consent of each Holder of Trust Securities. The Trustees shall not
revoke any action previously authorized or approved by a vote of the Holders of
Trust Securities except by subsequent vote of the Holders of Trust Securities.
The Property Trustee shall notify all Holders of the Trust Securities of any
notice of default with respect to the Junior Subordinated Debentures. In
addition to obtaining the foregoing approvals of the Holders of the Trust
Securities, prior to taking any of the foregoing actions, the Trustees shall, at
the expense of the US Affiliates pursuant to the Expense Agreement, obtain an
Opinion of Counsel designated by the Control Party who is experienced in such
matters to the effect that (A) the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes on account of such
action, (B) the Trust will fall within the provisions of Section 60 and will not
be classified as a company, in either case, for purposes of United Kingdom tax
law, on account of such action and (C) neither the Trust, Yorkshire Finance nor
Yorkshire Group will be required to register as an "investment company" under
the Investment Company Act on account of such action.
Section 7.02 Notice of Meetings. Notice of all meetings of the
------------------
Securityholders, stating the time, place and purpose of the meeting, or of any
matter upon which action by written consent of such Securityholders is to be
taken, shall be given by the Administrative Trustees pursuant to Section 11.08
to each Securityholder of record, at his registered address, at least 15 days
and not more than 90 days before the meeting. At any such meeting, any business
properly before the meeting may be so considered whether or not stated in the
notice of the meeting. Any adjourned meeting may be held as adjourned without
further notice.
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Section 7.03 Meetings of Securityholders. No annual meeting of
---------------------------
Securityholders is required to be held. The Administrative Trustees, however,
shall call a meeting of Securityholders to vote on any matter upon the written
request of the Securityholders of record of 25% of the Outstanding Trust
Securities (based upon their aggregate Liquidation Amount) and the
Administrative Trustees or the Property Trustee may, at any time in their
discretion, call a meeting of Securityholders to vote on any matters as to which
Securityholders are entitled to vote.
Securityholders of record of 50% of the Outstanding Trust Securities
(based upon their aggregate Liquidation Amount), present in person or by proxy,
shall constitute a quorum at any meeting of Securityholders.
If a quorum is present at a meeting, an affirmative vote by the
Securityholders of record present, in person or by proxy, holding more than 66-
2/3% of the Securities (based upon their aggregate Liquidation Amount) held by
the Trust Securityholders of record present, either in person or by proxy, at
such meeting shall constitute the action of the Securityholders, unless this
Trust Agreement requires a greater or lesser number of affirmative votes.
Section 7.04 Voting Rights. In respect of any matter as to which
-------------
Trust Securityholders are entitled to vote, Trust Securityholders shall be
entitled to one vote for each $25 of Liquidation Amount represented by their
Trust Securities.
Section 7.05 Proxies, etc. At any meeting of Securityholders,
-------------
any Securityholder entitled to vote may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file with the
Administrative Trustees, or with such other officer or agent of the Trust as the
Administrative Trustees may direct, for verification prior to the time at which
such vote shall be taken. Pursuant to a resolution of the Property Trustee,
proxies may be solicited in the name of the Property Trustee or one or more
officers of the Property Trustee. Only Securityholders of record shall be
entitled to vote. When Trust Securities are held jointly by several Persons, any
one of them may vote at any meeting in person or by proxy in respect of such
Trust Securities, but if more than one of them shall be present at such meeting
in person or by proxy, and such joint owners or their proxies so present
disagree as to any vote to be cast, such vote shall not be received in respect
of such Trust Securities. A proxy purporting to be executed by or on behalf of a
Securityholder shall be deemed valid unless challenged at or prior to its
exercise, and the burden of proving invalidity shall rest on the challenger. No
proxy shall be valid more than three years after its date of execution.
Section 7.06 Securityholder Action by Written Consent. Any action
-----------------------------------------
which may be taken by Securityholders at a meeting may be taken without a
meeting if Securityholders holding at least 66-2/3% of all Outstanding Trust
Securities entitled to vote in respect of such action (or such other proportion
thereof as shall be required by any express provision of this Trust Agreement)
shall consent to the action in writing (based upon their aggregate Liquidation
Amount).
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Section 7.07 Record Date for Voting and Other Purposes. For the
-----------------------------------------
purposes of determining the Securityholders who are entitled to notice of and to
vote at any meeting or by written consent, or to participate in any Distribution
on the Trust Securities in respect of which a record date is not otherwise
provided for in this Trust Agreement, or for the purpose of any other action,
the Administrative Trustees may from time to time fix a date, not more than 90
days prior to the date of any meeting of Securityholders or the payment of
Distribution or other action, as the case may be, as a record date for the
determination of the identity of the Securityholders of record for such
purposes.
Section 7.08 Acts of Securityholders. Any request, demand,
-----------------------
authorization, direction, notice, consent, waiver or other action provided or
permitted by this Trust Agreement to be given, made or taken by Securityholders
or the Control Party may be embodied in and evidenced by one or more instruments
of substantially similar tenor signed by such Securityholders or the Control
Party in person or by an agent appointed in writing; and, except as otherwise
expressly provided herein, such action shall become effective when such
instrument or instruments are delivered to the Administrative Trustees. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Securityholders or
the Control Party signing such instrument or instruments. Proof of execution of
any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Trust Agreement and (subject to Section 9.01)
conclusive in favor of the Trustees, if made in the manner provided in this
Section.
The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of his authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner which the Trustees deem sufficient.
The ownership of Trust Securities shall be proved by the Securities
Register.
Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Securityholder of any Trust Security shall bind every future
Securityholder of the same Trust Security and the Securityholder of every Trust
Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof in respect of anything done, omitted or suffered to
be done by the Trustees or the Trust in reliance thereon, whether or not
notation of such action is made upon such Trust Security.
Without limiting the foregoing, a Securityholder entitled hereunder to
take any action hereunder with regard to any particular Trust Security may do so
with regard to all or any part of the Liquidation Amount of such Trust Security
or by one or more
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duly appointed agents each of which may do so pursuant to such appointment with
regard to all or any part of such Liquidation Amount.
Section 7.09 Inspection of Records. Upon reasonable notice to
---------------------
the Trustees, the records of the Trust shall be open to inspection by
Securityholders during normal business hours for any purpose reasonably related
to such Securityholder's interest as a Securityholder.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES OF THE
PROPERTY TRUSTEE AND DELAWARE TRUSTEE
Section 8.01 Representations and Warranties of Property Trustee.
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The Trustee that acts as initial Property Trustee represents and warrants to the
Trust and to the Control Party at the date of this Trust Agreement, and each
Successor Property Trustee represents and warrants to the Trust and the Control
Party at the time of the Successor Property Trustee's acceptance of its
appointment as Property Trustees, that:
(a) the Property Trustee is a New York banking corporation with
trust powers and authority to execute and deliver, and to carry out and perform
its obligations under the terms of, this Trust Agreement;
(b) The execution, delivery and performance by the Property Trustee
of this Trust Agreement has been duly authorized by all necessary corporate
action on the part of the Property Trustee. This Trust Agreement has been duly
executed and delivered by the Property Trustee and constitutes a legal, valid
and binding obligation of the Property Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) The execution, delivery and performance of this Trust Agreement
by the Property Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Property Trustee; and
(d) No consent, approval or authorization of, or registration with
or notice to, any New York State or federal banking authority is required for
the execution, delivery or performance by the Property Trustee of this Trust
Agreement.
Section 8.02 Representations and Warranties of Delaware Trustee.
--------------------------------------------------
The Trustee that acts as initial Delaware Trustee represents and warrants to the
Trust and to the Control Party at the date of this Trust Agreement, and each
Successor Delaware Trustee represents and warrants to the Trust and the Control
Party at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustees that:
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(a) The Delaware Trustee is duly organized, validly existing and in
good standing under the laws of the State of Delaware, with trust power and
authority to execute and deliver, and to carry out and perform its obligations
under the terms of, this Trust Agreement;
(b) The execution, delivery and performance by the Delaware Trustee
of this Trust Agreement has been duly authorized by all necessary corporate
action on the part of the Delaware Trustee. This Trust Agreement has been duly
executed and delivered by the Delaware Trustee and constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity and the discretion of the court
(regardless of whether the enforcement of such remedies is considered in a
proceeding in equity or at law);
(c) No consent, approval or authorization of, or registration with
or notice to, any federal banking authority is required for the execution,
delivery or performance by the Delaware Trustee of this Trust Agreement; and
(d) The Delaware Trustee is a natural person who is a resident of
the State of Delaware or, if not a natural person, an entity which has its
principal place of business in the State of Delaware.
ARTICLE IX
THE TRUSTEES
Section 9.01 Certain Duties and Responsibilities.
-----------------------------------
(a) The rights, duties and responsibilities of the Trustees shall be
as provided by this Trust Agreement and, in the case of the Property Trustee,
the Trust Indenture Act. Notwithstanding the foregoing, no provision of this
Trust Agreement shall require the Trustees to expend or risk their own funds or
otherwise incur any financial liability in the performance of any of their
duties hereunder, or in the exercise of any of their rights or powers, if they
shall have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably assured to
them. Whether or not therein expressly so provided, every provision of this
Trust Agreement relating to the conduct or affecting the liability of or
affording protection to the Trustees shall be subject to the provisions of this
Section.
(b) All payments made by the Property Trustee in respect of the
Trust Securities shall be made only from the income and proceeds from the Trust
Property and only to the extent that there shall be sufficient income or
proceeds from the Trust Property to enable the Property Trustee to make payments
in accordance with the terms hereof. Each Securityholder, by its acceptance of
a Trust Security, agrees that it will look solely to the income and proceeds
from the Trust Property to the extent available for distribution to it as herein
provided and that the Trustees are not personally liable to it for
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any amount distributable in respect of any Trust Security or for any other
liability in respect of any Trust Security. This Section 9.01(b) does not limit
the liability of the Trustees expressly set forth elsewhere in this Trust
Agreement or, in the case of the Property Trustee, in the Trust Indenture Act.
Section 9.02 Notice of Defaults and Extension Periods. (a) Within
----------------------------------------
90 days after the occurrence of any Event of Default, the Property Trustee shall
transmit, in the manner and to the extent provided in Section 11.08, notice of
any Event of Default actually known to a Responsible Officer of the Property
Trustee to the Securityholders, the Administrative Trustees, the Control Party
and the Depositor, unless such Event of Default shall have been cured or waived.
For purposes of this Section, the term "Event of Default" means any event that
is, or after purposes of this Section, the terms "Event of Default" means any
event that is, or after notice or lapse of time or both would become, an Event
of Default.
(b) The Property Trustee shall transmit, to the Securityholders in the
manner and to the extent provided in Section 11.08, notice of Yorkshire
Finance's election to begin or further extend an Extension Period on the Junior
Subordinated Debentures (unless such election shall have been revoked) within
five Business Days of the receipt of notice thereof.
Section 9.03 Certain Rights of Property Trustee. Subject to the
----------------------------------
provisions of Section 9.01 and except as provided by law:
(i) the Property Trustee may conclusively rely and shall be
protected in acting or refraining from acting in good faith upon any
resolution, Opinion of Counsel, certificate, written representation of a
Holder or transferee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, consent, order,
appraisal, bond or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(ii) if (A) in performing its duties under this Trust Agreement the
Property Trustee is required to decide between alternative courses of
action, or (B) in construing any of the provisions in this Trust Agreement
the Property Trustee finds the same ambiguous or inconsistent with any
other provisions contained herein, or (C) the Property Trustee is unsure of
the application of any provision of this Trust Agreement, then, except as
to any matter as to which the Trust Securityholders are entitled to vote
under the terms of this Trust Agreement, the Property Trustee shall deliver
a notice to the Control Party requesting written instructions of the
Control Party as to the course of action to be taken. The Property Trustee
shall take such action, or refrain from taking such action, as the Property
Trustee shall be instructed in writing to take, or to refrain from taking,
by the Control Party; provided, however, that if the Property Trustee does
not receive such instructions of the Control Party within ten Business Days
after it has delivered such notice, or such reasonably shorter period of
time set forth in such notice (which to the extent practicable shall not be
less than two Business Days), it may, but shall be under no duty to, take
or refrain from taking such action not
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inconsistent with this Trust Agreement as it shall deem advisable and in
the best interests of the Securityholders, in which event the Property
Trustee shall have no liability except for its own bad faith, negligence or
willful misconduct;
(iii) the Property Trustee may consult with counsel of its
selection and the advice of such counsel or any Opinion of Counsel shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon;
(iv) the Property Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Trust Agreement at the
request or direction of any of the Securityholders pursuant to this Trust
Agreement, unless such Securityholders shall have offered to the Property
Trustee reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with such request
or direction;
(v) the Property Trustee shall not be bound to make any
investigation into the facts or matters stated in any resolution,
certificate, statement, instrument, opinion, report, notice, request,
consent, order, approval, bond or other document, unless requested in
writing to do so by one or more Securityholders; and
(vi) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
its agents or attorneys, provided that the Property Trustee shall be
responsible for its own negligence or recklessness with respect to
selection of any agent or attorney appointed by it hereunder.
Section 9.04 Not Responsible for Recitals or Issuance of Securities
------------------------------------------------------
The recitals contained herein and in the Trust Securities Certificates shall
be taken as the statements of the Trust, and the Trustees do not assume any
responsibility for their correctness. The Trustees shall not be accountable for
the use or application by the Trust of the proceeds of the Trust Securities in
accordance with Section 2.05.
The Property Trustee may conclusively assume that any funds held by it
hereunder are legally available unless a Responsible Officer shall have received
written notice from the Company, any Holder or any other Trustee that such funds
are not legally available.
Section 9.05 May Hold Securities. Any Trustee or any other agent
-------------------
of the Trustees or the Trust, in its individual or any other capacity, may
become the owner or pledgee of Trust Securities and, except as provided in the
definition of the term "Outstanding" in Article I and subject to Sections 9.08
and 9.13, may otherwise deal with the Trust with the same rights it would have
if it were not a Trustee or such other agent.
Section 9.06 Compensation; Fees; Indemnity.
-----------------------------
The following expenses will be paid pursuant to the Expense Agreement:
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(1) the payment to the Trustees from time to time of reasonable
compensation, as agreed to in writing from time to time, for all services
rendered by the Trustees hereunder (which compensation shall not be limited by
any provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, the reimbursement
of the Trustees upon request for all reasonable expenses, disbursements and
advances incurred or made by the Trustees in accordance with any provision of
this Trust Agreement (including the reasonable compensation and the expenses and
disbursements of their agents and counsel), except any such expense,
disbursement or advance as may be attributable to their willful misconduct,
negligence or bad faith; and
(3) the indemnification of the Trustees for any and all loss,
damage, claims, liability or expense incurred without willful misconduct,
negligence or bad faith on their part, arising out of or in connection with the
acceptance or administration of this Trust Agreement, including the costs and
expenses of defending themselves against any claim or liability in connection
with the exercise or performance of any of their powers or duties hereunder.
The provisions of this Section 9.06 shall survive the termination of
this Trust Agreement.
Section 9.07 Trustees Required; Eligibility.
------------------------------
(a) There shall at all times be a Property Trustee hereunder with
respect to the Trust Securities. The Property Trustee shall be a Person that
has a combined capital and surplus of at least $50,000,000. If any such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of its supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such Person shall be deemed to
be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Property Trustee with respect to the
Trust Securities shall cease to be eligible in accordance with the provisions of
this Section, it shall resign immediately in the manner and with the effect
hereinafter specified in this Article.
(b) There shall at all times be one or more Administrative Trustees
hereunder with respect to the Trust Securities. Each Administrative Trustee
shall be either a natural person who is at least 21 years of age or a legal
entity that shall act through one or more persons authorized to bind such
entity.
(c) There shall at all times be a Delaware Trustee with respect to
the Trust Securities. The Delaware Trustee shall either be (i) a natural person
who is at least 21 years of age and a resident of the State of Delaware or (ii)
a legal entity authorized to conduct a trust business and with its principal
place of business in the State of Delaware that shall act through one or more
persons authorized to bind such entity.
Section 9.08 Conflicting Interests. If the Property Trustee has
---------------------
or shall acquire a conflicting interest within the meaning of the Trust
Indenture Act, the Property
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Trustee shall either eliminate such interest or resign, to the extent and in the
manner provided by, and subject to the provisions of, the Trust Indenture Act
and this Trust Agreement. To the extent permitted by the Trust Indenture Act,
the Property Trustee shall not be deemed to have a conflicting interest by
virtue of being trustee under the Guarantee or the Subordinated Indenture.
Section 9.09 Co-Trustees and Separate Trustee. Unless an
--------------------------------
Indenture Event of Default shall have occurred and be continuing, at any time or
times, for the purpose of meeting the legal requirements of the Trust Indenture
Act or of any jurisdiction in which any part of the Trust Property may at the
time be located, the Control Party and the Property Trustee shall have power to
appoint, and upon the written request of the Property Trustee, the Control Party
shall for such purpose join with the Property Trustee in the execution, delivery
and performance of all instruments and agreements necessary or proper to
appoint, one or more Persons approved by the Property Trustee either to act as
co-trustee, jointly with the Property Trustee, of all or any part of such Trust
Property, or to act as separate trustee of any such Trust Property, in either
case with such powers as may be provided in the instrument of appointment, and
to vest in such Person or Persons in the capacity aforesaid, any property,
title, right or power deemed necessary or desirable, subject to the other
provisions of this Section. If the Control Party does not join in such
appointment within 15 days after the receipt by it of a request so to do, or in
case an Indenture Event of Default has occurred and is continuing, the Property
Trustee alone shall have power to make such appointment. Any co-trustee or
separate trustee appointed pursuant to this Section must satisfy the
requirements of Section 9.07.
Should any written instrument from the Depositor be required by any
co-trustee or separate trustee so appointed for more fully confirming to such
co-trustee or separate trustee such property, title, right, or power, any and
all such instruments shall, on request, be executed, acknowledged, and delivered
by the Depositor.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following terms,
namely:
(i) The Trust Securities shall be executed, authenticated and
delivered and all rights, powers, duties, and obligations hereunder in
respect of the custody of securities, cash and other personal property held
by, or required to be deposited or pledged with, the Trustees hereunder,
shall be exercised, solely by the Trustees and not by such co-trustee or
separate trustee.
(ii) The rights, powers, duties, and obligations hereby conferred or
imposed upon the Property Trustee in respect of any property covered by
such appointment shall be conferred or imposed upon and exercised or
performed by the Property Trustee or by the Property Trustee and such co-
trustee or separate trustee jointly, as shall be provided in the instrument
appointing such co-trustee or separate trustee, except to the extent that
under any law of any jurisdiction in which any particular act is to be
performed, the Property Trustee shall be incompetent or unqualified to
perform such act, in which event such rights,
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powers, duties, and obligations shall be exercised and performed by such
co-trustee or separate trustee.
(iii) The Property Trustee at any time, by an instrument in writing
executed by it, with the written concurrence of the Control Party, may
accept the resignation of or remove any co-trustee or separate trustee
appointed under this Section, and, in case an Indenture Event of Default
has occurred and is continuing, the Property Trustee shall have power to
accept the resignation of, or remove, any such co-trustee or separate
trustee without the concurrence of the Control Party. Upon the written
request of the Property Trustee, the Control Party shall join with the
Property Trustee in the execution, delivery, and performance of all
instruments and agreements necessary or proper to effectuate such
resignation or removal. A successor to any co-trustee or separate trustee
so resigned or removed may be appointed in the manner provided in this
Section.
(iv) No co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Property Trustee, or any
other such trustee hereunder.
(v) The Trustees shall not be liable by reason of any act of a co-
trustee or separate trustee.
(vi) Any Act of Holders delivered to the Property Trustee shall be
deemed to have been delivered to each such co-trustee and separate trustee.
Section 9.10 Resignation and Removal; Appointment of Successor. No
-------------------------------------------------
resignation or removal of any Trustee (the "Relevant Trustee") and no
appointment of a successor Relevant Trustee pursuant to this Article shall
become effective until the acceptance of appointment by the successor Relevant
Trustee in accordance with the applicable requirements of Section 9.11.
Subject to the immediately preceding paragraph, the Relevant Trustee
may resign at any time by giving written notice thereof to the Securityholders.
If the instrument of acceptance by a successor Relevant Trustee required by
Section 9.11 shall not have been delivered to the Relevant Trustee within 30
days after the giving of such notice of resignation, the resigning Relevant
Trustee may petition any court of competent jurisdiction for the appointment of
a successor Relevant Trustee.
Unless an Indenture Event of Default shall have occurred and be
continuing, the Property Trustee or Delaware Trustee may be removed at any time
by Act of the Control Party. If an Indenture Event of Default shall have
occurred and be continuing, the Property Trustee or Delaware Trustee may be
removed at such time by Act of the Securityholders of a majority in aggregate
Liquidation Amount of the Trust Securities, delivered to the Property Trustee
(in its individual capacity and on behalf of the Trust).
An Administrative Trustee may be removed by the Control Party at any
time. In no event will the Securityholders have the right to vote, appoint,
remove or
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replace the Administrative Trustees, which rights are vested exclusively with
the Control Party, as holder of the Control Certificate.
If the Relevant Trustee shall resign, be removed or become incapable
of continuing to act as Trustee, or if a vacancy shall occur in the office of
the Relevant Trustee for any cause, at a time when no Indenture Event of Default
shall have occurred and be continuing, the Control Party shall promptly appoint
a successor Relevant Trustee or Trustees, and the retiring Relevant Trustee
shall comply with the applicable requirements of Section 9.11. If the Property
Trustee or Delaware Trustee shall resign, be removed or become incapable of
continuing to act as the Property Trustee or Delaware Trustee at a time when an
Indenture Event of Default shall have occurred and be continuing, the Holders of
Trust Securities, by Act of the Securityholders of a majority in Liquidation
Amount of the Trust Securities then Outstanding delivered to the retiring
Property Trustee or Delaware Trustee, shall promptly appoint a successor
Property Trustee or Delaware Trustee, and such appointee must comply with the
applicable requirements of Section 9.11. If no successor Relevant Trustee shall
have been so appointed in accordance with this Section 9.10 and accepted
appointment in the manner required by Section 9.11, any Securityholder who has
been a Securityholder of Trust Securities for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Relevant Trustee.
The retiring Relevant Trustee shall give notice of each resignation
and each removal of the Relevant Trustee, and each appointment of a successor
Trustee to all Securityholders in the manner provided in Section 11.08 and shall
give notice to the Control Party. Each notice shall include the name of the
successor Relevant Trustee and the address of its Corporate Trust Office if it
is the Property Trustee.
Notwithstanding the foregoing or any other provision of this Trust
Agreement, in the event any Administrative Trustee or a Delaware Trustee who is
a natural person dies or becomes incompetent or incapacitated or resigns, the
vacancy created by such death, incompetence or incapacity or resignation may be
filled by (i) the unanimous act of the remaining Administrative Trustee or
Trustees or (ii) otherwise by the Control Party (with the successor in each case
being an individual who satisfies the eligibility requirement for Administrative
Trustees set forth in Section 9.07).
Section 9.11 Acceptance of Appointment by Successor. In case of
--------------------------------------
the appointment hereunder of a successor Relevant Trustee, every such successor
Relevant Trustee so appointed shall execute, acknowledge and deliver to the
Trust and to the retiring Relevant Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the retiring Relevant
Trustee shall become effective and such successor Relevant Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Relevant Trustee; but, on the request
of the Control Party or the successor Relevant Trustee, such retiring Relevant
Trustee shall, upon payment of its charges, execute and deliver an instrument
transferring to such successor
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Relevant Trustee all the rights, powers and trusts of the retiring Relevant
Trustee and shall duly assign, transfer and deliver to such successor Relevant
Trustee all property and money held by such retiring Relevant Trustee hereunder.
Upon request of any such successor Relevant Trustee, the Trust shall
execute any and all instruments for more fully and certainly vesting in and
confirming to such successor Relevant Trustee all such rights, powers and trusts
referred to in the preceding paragraph.
No successor Relevant Trustee shall accept its appointment unless at
the time of such acceptance such successor Relevant Trustee shall be qualified
and eligible under this Article.
Section 9.12 Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any Person into which the Property Trustee, Delaware Trustee or any
- --------
Administrative Trustee which is not a natural person may be merged or converted
or with which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which such Relevant Trustee shall be a party, or
any Person succeeding to all or substantially all the corporate trust business
of such Relevant Trustee, shall be the successor of such Relevant Trustee
hereunder, provided such Person shall be otherwise qualified and eligible under
this Article, without the execution or filing of any paper or any further act on
the part of any of the parties hereto.
Section 9.13 Preferential Collection of Claims Against Certain
-------------------------------------------------
Entities. If and when the Property Trustee shall be or become a creditor of
- --------
the Control Party, Yorkshire Finance, Yorkshire Group or the Trust (or any other
obligor upon the Junior Subordinated Debentures or the Trust Securities), the
Property Trustee shall be subject to the provisions of the Trust Indenture Act
regarding the collection of claims against the Depositor or Trust (or any such
other obligor). For purposes of Section 311(b)(4) and (6) of the Trust Indenture
Act:
(a) "cash transaction" means any transaction in which full payment
for goods or securities sold is made within seven days after delivery of the
goods or securities in currency or in checks or other orders drawn upon banks or
bankers and payable upon demand; and
(b) "self-liquidating paper" means any draft, bill of exchange,
acceptance or obligation which is made, drawn, negotiated or incurred by the
Control Party, Yorkshire Finance, Yorkshire Group or the Trust (or any such
obligor) for the purpose of financing the purchase, processing, manufacturing,
shipment, storage or sale of goods, wares or merchandise and which is secured by
documents evidencing title to, possession of, or a lien upon, the goods, wares
or merchandise or the receivables or proceeds arising from the sale of the
goods, wares or merchandise previously constituting the security, provided the
security is received by the Property Trustee simultaneously with the creation of
the creditor relationship with the Control Party, Yorkshire Finance, Yorkshire
Group or the Trust (or any such obligor) arising from the making, drawing,
negotiating or incurring of the draft, bill of exchange, acceptance or
obligation.
39
<PAGE>
Section 9.14 Reports by Property Trustee.
---------------------------
(a) Within 60 days after May 15 of each year commencing with May 15,
1998, if required by Section 313(a) of the Trust Indenture Act, the Property
Trustee shall transmit a brief report dated as of such May 15 with respect to
any of the events specified in such Section 313(a) that may have occurred since
the later of the date of this Trust Agreement or the preceding May 15.
(b) The Property Trustee shall transmit to Securityholders the
reports required by Section 313(b) of the Trust Indenture Act at the times
specified therein.
(c) Reports pursuant to this Section shall be transmitted in the
manner and to the Persons required by Sections 313(c) and (d) of the Trust
Indenture Act.
Section 9.15 Reports to the Property Trustee. The Control Party
-------------- -------------------------------
and the Administrative Trustees on behalf of the Trust shall provide to the
Property Trustee such documents, reports and information as required by Section
314 of the Trust Indenture Act (if any) and, within 120 days after the end of
each fiscal year of the Control Party, the compliance certificate required by
Section 314(a)(4) of the Trust Indenture Act in the form and in the manner
required by Section 314 of the Trust Indenture Act.
Section 9.16 Evidence of Compliance with Conditions Precedent.
------------------------------------------------
Each of the Control Party and the Administrative Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Trust Agreement that relate
to any of the matters set forth in Section 314(c) of the Trust Indenture Act.
Any certificate or opinion required to be given pursuant to Section 314(c)(1) of
the Trust Indenture Act shall comply with Section 314(e) of the Trust Indenture
Act.
Section 9.17 Number of Trustees.
------------------
(a) The number of Trustees shall initially be six, provided that the
Control Party by written instrument may increase or decrease the number of
Administrative Trustees.
(b) If a Trustee ceases to hold office for any reason and the number
of Administrative Trustees is not reduced pursuant to Section 9.17(a), or if the
number of Trustees is increased pursuant to Section 9.17(a), a vacancy shall
occur. The vacancy shall be filled with a Trustee appointed in accordance with
Section 9.10.
(c) The death, resignation, retirement, removal, bankruptcy,
incompetence or incapacity to perform the duties of a Trustee shall not operate
to dissolve, terminate or annul the Trust. Whenever a vacancy in the number of
Administrative Trustees shall occur, until such vacancy is filled by the
appointment of an Administrative Trustee in accordance with Section 9.10, the
Administrative Trustees in office, regardless of their number (and
notwithstanding any other provision of this Trust Agreement), shall have all
powers granted to the Administrative Trustees and shall discharge the duties
imposed upon the Administrative Trustees by this Trust Agreement.
40
<PAGE>
Section 9.18 Delegation of Power.
-------------------
(a) Any Administrative Trustee may, by power of attorney consistent
with applicable law, delegate to any other natural person over the age of 21 his
or her power for the purpose of executing any documents contemplated in Section
2.07(A), including any registration statement or amendment thereto filed with
the Commission, or making any other governmental filing; and
(b) The Administrative Trustees shall have power to delegate from
time to time to such of their number the doing of such things and the execution
of such instruments either in the name of the Trust or the names of the
Administrative Trustees or otherwise as the Administrative Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
Section 9.19 Enforcement of Rights of Property Trustee by
--------------------------------------------
Securityholders. If an Event of Default occurs and is continuing, then the
- ---------------
Holders of Trust Securities will rely on the enforcement by the Property
Trustee, as the holder of the Junior Subordinated Debentures, of its rights
against Yorkshire Finance and Yorkshire Group. In addition, the Holders of a
majority in aggregate Liquidation Amount of the Trust Securities will have the
right to direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee or to direct the exercise of any trust
or power conferred upon the Property Trustee under this Trust Agreement,
including the right to direct the Property Trustee to exercise the remedies
available to it as a holder of the Junior Subordinated Debentures, provided that
such direction shall not be in conflict with any rule of law or with this Trust
Agreement, and could not involve the Property Trustee in personal liability in
circumstances where reasonable indemnity would not be adequate. If the Property
Trustee fails to enforce its rights under the Junior Subordinated Debentures, a
Holder of Trust Securities may, to the fullest extent permitted by applicable
law, institute a legal proceeding against Yorkshire Finance or Yorkshire Group
or both to enforce its rights under this Trust Agreement without first
instituting any legal proceeding against the Property Trustee or any other
Person, including the Trust; it being understood and intended that no one or
more of such Holders shall have any right in any manner whatsoever by virtue of,
or by availing of, any provision of this Trust Agreement to affect, disturb or
prejudice the rights of any other of such Holders or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Trust Agreement, except in the manner herein provided and for
the equal and ratable benefit of all such Holders. Notwithstanding the
foregoing, a Holder of Trust Securities may institute a legal proceeding
directly against Yorkshire Finance or Yorkshire Group or both, without first
instituting a legal proceeding against or requesting or directing that action be
taken by the Property Trustee or any other Person, for enforcement of payment to
such Holder of principal of or interest on the Junior Subordinated Debentures
having a principal amount equal to the aggregate stated liquidation amount of
the Trust Securities of such Holder on or after the due dates therefor specified
or provided for in the Junior Subordinated Debentures. Yorkshire Finance or
Yorkshire Group shall be subrogated to all rights of the Holders of Trust
Securities in respect of any amounts paid to such Holders by Yorkshire Finance
or
41
<PAGE>
Yorkshire Group pursuant to this Section. Any amount received by a Holder or
any related owner from Yorkshire Finance or Yorkshire Group under the Indenture
shall reduce by such amount the Trust's obligations to such Holder thereunder in
respect of which such amount was paid under the Indenture.
ARTICLE X
DISSOLUTION AND LIQUIDATION
Section 10.01 Dissolution Upon Expiration Date. The Trust shall
--------------------------------
automatically dissolve on _________, 2043 (the "Expiration Date") or earlier
pursuant to Section 10.02.
Section 10.02 Early Termination. Upon the first to occur of any
-----------------
of the following events (such first occurrence, an "Early Termination Event"),
the Trust shall be dissolved in accordance with the terms hereof:
(i) the occurrence of a Bankruptcy Event in respect of Yorkshire
Finance, dissolution or liquidation of Yorkshire Finance, or the
dissolution of the Trust pursuant to a judicial decree;
(ii) the delivery of written direction to the Property Trustee by
The Control Party at any time to dissolve the Trust (which direction is
optional and wholly within the discretion of The Control Party) and to
distribute the Junior Subordinated Debentures to Securityholders in
liquidation of the Trust as provided in Section 10.04; and
(iii) the payment at maturity or redemption of all of the Junior
Subordinated Debentures and the consequent redemption of all of the Trust
Securities.
Section 10.03 Termination. The respective obligations and
-----------
responsibilities of the Trust and the Trustees created hereby shall terminate
upon the latest to occur of the following: (a) the distribution by the Property
Trustee to Securityholders upon the liquidation of the Trust pursuant to Section
10.04, or upon the redemption of all of the Trust Securities pursuant to Section
4.02, of all amounts or instruments required to be distributed hereunder upon
the final payment of the Trust Securities; (b) the payment of any expenses owed
by the Trust; and (c) the discharge of all administrative duties of the
Administrative Trustees, including the performance of any tax reporting
obligations with respect to the Trust or the Securityholders.
Section 10.04 Liquidation.
-----------
(a) If any Early Termination Event specified in clause (i) or (ii)
of Section 10.02 occurs, the Trust shall be liquidated, and the Property Trustee
shall distribute the Junior Subordinated Debentures to the Securityholders as
provided in this Section 10.04.
42
<PAGE>
(b) In connection with a distribution of the Junior Subordinated
Debentures, each Holder of Trust Securities shall be entitled to receive, after
the satisfaction (whether by payment or reasonable provision for payment) of
liabilities to creditors of the Trust (as evidenced by a certificate of the
Administrative Trustees), a Like Amount of Junior Subordinated Debentures.
Notice of liquidation shall be given by the Trustees by first-class mail,
postage prepaid, mailed not later than 30 nor more than 60 days prior to the
Liquidation Date to the Holders thereof as they appear on the Securities
Register on the relevant record date which, as long as the trust Securities are
represented by Book-Entry Trust Securities Certificates, shall be one Business
Day prior to the Liquidation Date or, in the event that the Trust Securities are
not so represented, such relevant record date shall be the close of business on
the fifteenth calendar day prior to the Liquidation Date. All notices of
liquidation shall:
(i) state the Liquidation Date;
(ii) state that from and after the Liquidation Date, the Trust
Securities will no longer be deemed to be Outstanding and any Trust
Securities Certificates not surrendered for exchange will be deemed to
represent a Like Amount of Junior Subordinated Debentures; and
(iii) provide such information with respect to the mechanics by
which Holders may exchange Trust Securities Certificates for Junior
Subordinated Debentures as the Administrative Trustees or the Property
Trustee shall deem appropriate.
(c) In order to effect the liquidation of the Trust and distribution
of the Junior Subordinated Debentures to Securityholders, the Property Trustee
shall establish such procedures as it shall deem appropriate to effect the
distribution of Junior Subordinated Debentures in exchange for the Outstanding
Trust Securities Certificates.
(d) After the Liquidation Date, (i) the Trust Securities will no
longer be deemed to be Outstanding and the Guarantee will be discharged, (ii)
certificates representing a Like Amount of Junior Subordinated Debentures will
be issued to Holders of Trust Securities Certificates, upon surrender of such
certificates to the Administrative Trustees or their agent for exchange, (iii)
any Trust Securities Certificates not so surrendered for exchange will be deemed
to represent a Like Amount of Junior Subordinated Debentures, accruing interest
at the rate provided for in the Junior Subordinated Debentures from the last
Distribution Date on which a Distribution was made on such Trust Certificates
until such certificates are so surrendered (and until such certificates are so
surrendered, no payments of interest or principal will be made to Holders of
Trust Securities Certificates with respect to such Junior Subordinated
Debentures) and (iv) all rights of Securityholders holding Trust Securities will
cease, except the right of such Securityholders to receive Junior Subordinated
Debentures upon surrender of Trust Securities Certificates.
(e) Yorkshire Group will use its reasonable efforts to cause the
Junior Subordinated Debentures that are distributed in exchange for the Trust
Securities to be
43
<PAGE>
listed on such securities exchange as the Trust Securities are then listed. The
Clearing Agency, as the record holder of the Trust Securities, will receive
global book-entry interests representing a 100% beneficial interest in the
Junior Subordinated Debentures to be delivered upon such distribution, or, if
any Trust Securities are not held by the Clearing Agency, the certificates
representing the Trust Securities will be deemed to represent book-entry
interests representing the Junior Subordinated Debentures having a principal
amount equal to the Liquidation Amount of such Trust Securities, and bearing
accrued and unpaid interest in an amount equal to the accrued and unpaid
Distributions on the trust Securities until such certificates are presented to
Yorkshire Finance or its agent for transfer or reissuance.
Section 10.05 Bankruptcy. If an Early Termination Event specified
----------
in clause (i) of Section 10.02 has occurred, the Trust shall be dissolved and
liquidated. The Property Trustee shall distribute a Like Amount of the Junior
Subordinated Debentures to the Securityholders as provided in Section 10.04,
unless such distribution is determined by the Administrative Trustees not to be
practical, in which event the Holders will be entitled to receive, out of the
assets of the Trust available for distribution to Securityholders after
satisfaction of liabilities to creditors, an amount equal to the Liquidation
Amount per Trust Security plus accumulated and unpaid Distributions thereon to
the date of payment (such amount being the "Liquidation Distribution"). If such
Liquidation Distribution can be paid only in part because the Trust has
insufficient assets available to pay in full the aggregate Liquidation
Distribution, then the amounts payable directly by the Trust on the Trust
Securities shall be paid on a pro rata basis in proportion to the full
Liquidated Distribution for which the Trust Securities would be entitled.
ARTICLE XI
MISCELLANEOUS PROVISIONS
Section 11.01 Expense Agreement. The US Affiliates,
-----------------
contemporaneously with the execution and delivery of this Trust Agreement, shall
execute and deliver the Expense Agreement.
Section 11.02 Limitation of Rights of Securityholders. The death,
---------------------------------------
incapacity, dissolution, bankruptcy or termination of any Person having an
interest, beneficial or otherwise, in a Trust Security shall not operate to
terminate this Trust Agreement, nor dissolve, terminate or annul the Trust
(other than as contemplated by Section 10.02), nor entitle the legal
representatives or heirs of such Person or any Securityholder for such Person,
to claim an accounting, take any action or bring any proceeding in and for a
partition or winding up of the arrangements contemplated hereby, nor otherwise
affect the rights, obligations and liabilities of the parties hereto or any of
them.
44
<PAGE>
Section 11.03 Amendment.
---------
(a) This Trust Agreement may be amended from time to time by the
Trustees, the Control Party and the Depositor, without the consent of any
Securityholders, (i) to cure any ambiguity, correct or supplement any provision
herein that may be inconsistent with any other provision herein, or to make any
other provisions with respect to matters or questions arising under this Trust
Agreement that shall not be inconsistent with the other provisions of this Trust
Agreement; (ii) to modify, eliminate or add to any provisions of this Trust
Agreement to such extent as shall be necessary to ensure that (A) the Trust will
be classified for United States federal income tax purposes as a grantor trust
at all times that any Trust Securities are Outstanding, (B) the Trust will fall
within the provisions of Section 60 and will not be classified as a company, in
either case, for purposes of United Kingdom tax law or (C) neither the Trust,
Yorkshire Group nor Yorkshire Finance will be required to register as an
"investment company" under the Investment Company Act; or (iii) to effect the
acceptance of appointment by a successor Property Trustee provided, however,
that, except in the case of clause (ii), such action shall not adversely affect
in any material respect the interests of any Securityholder, and, in the case of
clause (i), any such amendment of this Trust Agreement shall become effective
when notice thereof is given to the Securityholders.
(b) Except as provided in Section 11.03(c) hereof, any provision in
this Trust Agreement may be amended by the Trust or the Trustees with (i) the
consent of Trust Securityholders representing not less than 66-2/3% in aggregate
Liquidation Amount of the Trust Securities then Outstanding and (ii) receipt by
the Trustees of an Opinion of Counsel to the effect that such amendment or the
exercise of any power granted to the Trustees in accordance with such amendment
will not (A) affect the Trust's status as a grantor trust for United States
federal income tax purposes, (B) affect the Trust's or Yorkshire Finance's
exemption from the Investment Company Act or (C) cause the Trust to be treated
as a company or as a trust which does not fall within the provisions of Section
60, in either case, for purposes of United Kingdom tax law.
(c) In addition to and notwithstanding any other provision in this
Trust Agreement, without the consent of each affected Securityholder (such
consent being obtained in accordance with Section 7.03 or 7.06 hereof), this
Trust Agreement may not be amended to (i) change the amount or timing of any
Distribution on the Trust Securities or otherwise adversely affect the amount of
any Distribution required to be made in respect of the Trust Securities as of a
specified date, (ii) restrict the right of a Securityholder to institute suit
for the enforcement of any such payment on or after such date or (iii) change
the consent required pursuant to this Section 11.03.
(d) Notwithstanding any other provisions of this Trust Agreement,
the Trustees shall not enter into or consent to any amendment or modification to
this Trust Agreement which would cause (i) the Trust to be classified as other
than a grantor trust for United States federal income tax purposes, (ii) the
Trust to be classified as a company or as a trust which does not fall within the
provisions of Section 60, in either case, for purposes of United Kingdom tax law
or (iii) the Trust, Yorkshire Finance or Yorkshire
45
<PAGE>
Group to be required to register as an "investment company" under the Investment
Company Act.
(e) Without the consent of the Depositor or the Control Party, this
Trust Agreement may not be amended in a manner which imposes any additional
obligation on the Depositor or the Control Party, respectively. In executing
any amendment permitted by this Trust Agreement, the Trustees shall be entitled
to receive, and (subject to Section 9.01) shall be fully protected in relying
upon, an Opinion of Counsel stating that the execution of such amendment is
authorized or permitted by this Trust Agreement. Any Trustee may, but shall not
be obligated to, enter into any such amendment which affects such Trustee's own
rights, duties, immunities or liabilities under this Trust Agreement or
otherwise.
(f) In the event that any amendment to this Trust Agreement is made,
the Administrative Trustees shall promptly provide to the Depositor and the
Control Party a copy of such amendment.
Section 11.04 Separability. In case any provision in this Trust
------------
Agreement or in the Trust Securities Certificates shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
Section 11.05 Governing Law. THIS TRUST AGREEMENT AND THE RIGHTS
-------------
AND OBLIGATIONS OF EACH OF THE SECURITYHOLDERS, THE TRUST, THE DEPOSITOR, THE
CONTROL PARTY AND THE TRUSTEES WITH RESPECT TO THIS TRUST AGREEMENT AND THE
TRUST SECURITIES AND THE CONTROL CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF DELAWARE.
Section 11.06 Successors. This Trust Agreement shall be binding
----------
upon and shall inure to the benefit of any successor to both the Trust and the
Trustees, including any successor by operation of law.
Section 11.07 Headings. The Article and Section headings are for
--------
convenience only and shall not affect the construction of this Trust Agreement.
Section 11.08 Notice and Demand. Any notice, demand or other
-----------------
communication which by any provision of this Trust Agreement is required or
permitted to be given or served to or upon any Securityholder, the Control
Party, or the Depositor may be given or served in writing by deposit thereof,
first-class postage prepaid, in the United States mail, hand delivery or
facsimile transmission, in each case, addressed, (i) in the case of a Trust
Securityholder, to such Trust Securityholder as such Securityholder's name and
address appear on the Securities Register, (ii) in the case of the Control
Party, to Yorkshire Power Group Limited, c/o AEP Resources, Inc., 1 Riverside
Plaza, Columbus, Ohio 43215, and (iii) in the case of the Depositor, to AEP
Resources, Inc., 1 Riverside Plaza, Columbus, Ohio 43215. Such notice, demand or
other communication
46
<PAGE>
to or upon a Securityholder shall be deemed to have been sufficiently given or
made, for all purposes, upon hand delivery, mailing or transmission.
Any notice, demand or other communication which by any provision of
this Trust Agreement is required or permitted to be given or served to or upon
the Trust or the Trustees shall be given in writing addressed (until another
address is published by the Trust) as follows: (i) with respect to the Property
Trustee and the Delaware Trustee, The Bank of New York, 101 Barclay Street, New
York, New York 10286; and (ii) with respect to the Administrative Trustees, to
them at the address above for notices to the Control Party, marked Attention:
Administrative Trustees of Yorkshire Capital Trust I c/o Secretary. Such
notice, demand or other communication to or upon the Trust or the Trustees shall
be deemed to have been sufficiently given or made only upon actual receipt of
the writing by the applicable Trustee.
Section 11.09 Agreement Not to Petition. Each of the Trustees,
-------------------------
the Control Party and the Depositor agrees for the benefit of the
Securityholders that, until at least one year and one day after the Trust has
been terminated in accordance with Article X, it shall not file, or join in the
filing of, a petition against the Trust under any bankruptcy, reorganization,
arrangement, insolvency, liquidation or other similar law (including, without
limitation, the United States Bankruptcy Code) (collectively, "Bankruptcy Laws")
or otherwise join in the commencement of any proceeding against the Trust under
any Bankruptcy Law. In the event the Depositor or the Control Party takes action
in violation of this Section 11.09, the Property Trustee agrees, for the benefit
of Securityholders, that it shall file an answer with the bankruptcy court or
otherwise properly contest the filing of such petition by the Depositor or the
Control Party against the Trust or the commencement of such action and raise the
defense that the Depositor or the Control Party has agreed in writing not to
take such action and should be stopped and precluded therefrom and such other
defenses, if any, as counsel for the Trustees or the Trust may assert. The
provisions of this Section 11.09 shall survive the termination of this Trust
Agreement.
Section 11.10 Conflict with Trust Indenture Act.
---------------------------------
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trustee Agreement and shall,
to the extent applicable, be governed by such provisions.
(b) The Property Trustee shall be the only Trustee which is a
Trustee for the purposes of the Trust Indenture Act.
(c) If any provision hereof limits, qualifies or conflicts with
another provision hereof which is required to be included in this Trust
Agreement by any of the provisions of the Trust Indenture Act, such required
provision shall control.
(d) The application of the Trust Indenture Act to this Trust
Agreement shall not affect the nature of the Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
47
<PAGE>
THE RECEIPT AND ACCEPTANCE OF A TRUST SECURITY OR ANY INTEREST THEREIN BY OR ON
BEHALF OF A SECURITYHOLDER OR ANY BENEFICIAL OWNER, WITHOUT ANY SIGNATURE OR
FURTHER MANIFESTATION OF ASSENT, SHALL CONSTITUTE THE UNCONDITIONAL ACCEPTANCE
BY THE SECURITYHOLDER AND ALL OTHERS HAVING A BENEFICIAL INTEREST IN SUCH TRUST
SECURITY OF ALL THE TERMS AND PROVISIONS OF THIS TRUST AGREEMENT AND AGREEMENT
TO THE SUBORDINATION PROVISIONS AND OTHER TERMS OF THE GUARANTEE AND THE
SUBORDINATED INDENTURE AND THE AGREEMENT OF THE TRUST, SUCH SECURITYHOLDER AND
SUCH OTHERS THAT THOSE TERMS AND PROVISIONS SHALL BE BINDING, OPERATIVE AND
EFFECTIVE AS BETWEEN THE TRUST AND SUCH SECURITYHOLDER AND SUCH OTHERS.
Section 11.11 Agreed Upon Tax Treatment. The Trust and, by
--------------------------
acceptance of a beneficial interest in a Trust Security, the Securityholders
agree to treat the Junior Subordinated Debentures as indebtedness of Yorkshire
Finance for all United States federal income tax purposes.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Trust
Agreement or have caused this Trust Agreement to be executed on their behalf,
all as of the day and year first above written.
YORKSHIRE POWER GROUP LIMITED,
as Control Party
By:
-------------------------------
Title:
----------------------------
AEP RESOURCES, INC.,
as Depositor
By:
-------------------------------
Title:
----------------------------
THE BANK OF NEW YORK,
as Property Trustee
By:
-------------------------------
Title:
----------------------------
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:
-------------------------------
Title:
----------------------------
________________________________ ___________________________________
Jeffrey D. Cross, Stephan T. Haynes,
as Administrative Trustee as Administrative Trustee
________________________________ ___________________________________
Brian P. Jackson, Teresa S. Madden,
as Administrative Trustee as Administrative Trustee
49
<PAGE>
EXHIBIT A
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS PROVIDED IN THE TRUST AGREEMENT
REFERRED TO HEREIN
Control Certificate
of
Yorkshire Capital Trust I
With respect to Yorkshire Capital Trust I, a statutory business trust
created under the laws of the State of Delaware (the "Trust"), by the execution
of that certain Trust Agreement, dated as of February 1, 1998, as the same may
be amended and restated from time to time (the "Trust Agreement") among AEP
Resources, Inc., as Depositor, Stephan T. Haynes, as Administrative Trustee, The
Bank of New York, as Property Trustee, and The Bank of New York (Delaware), as
Delaware Trustee, the Depositor hereby issues this Control Certificate to
YORKSHIRE POWER GROUP LIMITED, a private limited company incorporated under the
laws of England and Wales. The designations, rights, privileges, restrictions,
preferences of the holder of this Control Certificate and other terms and
provisions of the Control Certificate are set forth in, and shall in all
respects be subject to the terms and provisions of, the Trust Agreement. The
Trust will furnish a copy of the Trust Agreement to the Holder without charge
upon written request to the Trust at its principal place of business or
registered office.
Upon receipt of this Control Certificate, the holder hereof is bound
by the Trust Agreement and is entitled to the benefits thereunder. Receipt of
this Control Certificate will not bestow on the holder hereof any economic or
financial interest or obligation with respect to the Trust.
IN WITNESS WHEREOF, the Depositor of the Trust has executed this
Control Certificate this ____ day of ________, 19__.
AEP RESOURCES, INC.,
as Depositor
By: ____________________________________
Title:
AGREED AND ACCEPTED:
Yorkshire Power Group Limited,
as holder of the Control Certificate
By:_____________________________
Title:__________________________
EXHIBIT A - PAGE 1
<PAGE>
EXHIBIT B
AGREEMENT AS TO EXPENSES AND LIABILITIES
THIS AGREEMENT AS TO EXPENSES AND LIABILITIES (this "Agreement") is
made as of May 1, 1998, among AEP Resources, Inc., an Ohio Company ("AEP"), and
New Century International, Inc., a Delaware Company ("NCI" and together with
AEP, the "U.S. Affiliates"), and Yorkshire Capital Trust I, a Delaware business
trust (the "Trust").
WHEREAS, the Trust intends to Purchase Junior Subordinated Debentures
from Yorkshire Power Finance Limited, a company with limited liability
incorporated under the laws of the Cayman Islands and an indirect, wholly-owned
subsidiary of the U.S. Affiliates, and to issue and sell Yorkshire Capital Trust
I ___% Trust Securities (the "Trust Securities") with such powers, preferences
and special rights and restrictions as are set forth in the Amended and Restated
Trust Agreement of the Trust dated as of May 1, 1998 as the same may be amended
from time to time (the "Trust Agreement"); and
WHEREAS, Yorkshire Power Group Limited, a private limited company
incorporated under the laws of England and Wales and a wholly-owned subsidiary
of the U.S. Affiliates ("Yorkshire Group") is the guarantor of the Junior
Subordinated Debentures.
NOW, THEREFORE, in consideration of the purchase by each holder of the
Trust Securities, which purchase the U.S. Affiliates hereby agree shall benefit
the U.S. Affiliates and which purchase the U.S. Affiliates acknowledge will be
made in reliance upon the execution and delivery of this Agreement, the U.S.
Affiliates and the Trust hereby agree as follows:
ARTICLE I
Section 1.01. Guarantee by the U.S. Affiliates. Subject to the terms
--------------------------------
and conditions hereof, the U.S. Affiliates hereby irrevocably and
unconditionally guarantee to each person or entity to whom the Trust is now or
hereafter becomes indebted or liable (the "Beneficiaries") the full payment,
when and as due, of any and all Obligations (as hereinafter defined) to such
Beneficiaries. As used herein, "Obligations" means any indebtedness, expenses
or liabilities of the Trust, other than obligations of the Trust to pay to
holders of any Trust Securities or other similar interests in the Trust the
amounts due such holders pursuant to the terms of the Trust Securities or such
other similar interests, as the case may be. Further, the term "Obligations"
includes, but is not limited to, certain expenses which are described under
Sections 2.03, 2.07(A), 2.07(B), 2.07(D), 4.04, 7.01(b), 7.01(c) and 9.06 of the
Trust Agreement and Section 3.03 of the Guarantee (as defined in the Trust
Agreement). This Agreement is intended to be for the benefit of, and to be
enforceable by, all such Beneficiaries, whether or not such Beneficiaries have
EXHIBIT B - PAGE 1
<PAGE>
received notice hereof. The U.S. Affiliates shall make no claim upon the Trust
Property (as defined in the Trust Agreement) for the payment of Obligations.
Section 1.02. Term of Agreement. This Agreement shall terminate and
-----------------
be of no further force and effect upon the date on which there are no
Beneficiaries remaining; provided, however, that this Agreement shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
holder of Trust Securities or any Beneficiary must restore payment of any sums
paid under the Trust Securities, under any Obligation, under the Trust
Securities Guarantee Agreement dated the date hereof by Yorkshire Group and The
Bank of New York, as guarantee trustee, or under this Agreement for any reason
whatsoever. This Agreement is continuing, irrevocable, unconditional and
absolute.
Section 1.03. Waiver of Notice. The U.S. Affiliates hereby waive
----------------
notice of acceptance of this Agreement and of any Obligation to which it applies
or may apply, and the U.S. Affiliates hereby waive presentment, demand for
payment, protest, notice of nonpayment, notice of dishonor, notice of redemption
and all other notices and demands.
Section 1.04. No Impairment. The obligations, covenants, agreements
-------------
and duties of the U.S. Affiliates under this Agreement shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the extension of time for the payment by the Trust of all or any
portion of the Obligations or for the performance of any other obligation under,
arising out of, or in connection with, the Obligations;
(b) any failure, omission, delay or lack of diligence on the part of
the Beneficiaries to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Beneficiaries with respect to the Obligations or any
action on the part of the Trust granting indulgence or extension of any kind; or
(c) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust.
There shall be no obligation of the Beneficiaries to give notice to, or obtain
the consent of, the U.S. Affiliates with respect to the happening of any of the
foregoing.
Section 1.05. Enforcement. A Beneficiary may enforce this Agreement
-----------
directly against the U.S. Affiliates and the U.S. Affiliates waive any right or
remedy to require that any action be brought against the Trust or any other
person or entity before proceeding against the U.S. Affiliates.
B-2
<PAGE>
ARTICLE II
Section 2.01. Binding Effect. All guarantees and agreements
--------------
contained in this Agreement shall bind the successors, assigns, receivers,
trustees and representatives of the U.S. Affiliates and shall inure to the
benefit of the Beneficiaries.
Section 2.02. Amendment. So long as there remains any Beneficiary or
---------
any Trust Securities of any series are Outstanding, this Agreement shall not be
modified or amended in any manner adverse to such Beneficiary or to the holders
of the Trust Securities.
Section 2.03. Apportionment of Obligations. AEP and NCI shall each
----------------------------
be liable for 50% of the Obligations which are incurred by the Trust. The Trust
shall promptly submit copies of all invoices received to both AEP and NCI at
their respective addresses listed in Section 2.04 herein.
Section 2.04. Notices. Any notice, request or other communication
-------
required or permitted to be given hereunder shall be given in writing by
delivering the same against receipt therefor by facsimile transmission
(confirmed by mail), telex or by registered or certified mail, addressed as
follows (and if so given, shall be deemed given when mailed or upon receipt of
an answer-back, if sent by telex), to-wit:
Yorkshire Capital Trust I:
c/o The Bank of New York
101 Barclay Street
New York, New York 10286
Facsimile No.: (212)
Attention:
The U.S. Affiliates:
c/o AEP Resources, Inc.
1 Riverside Plaza
Columbus, Ohio 43215
Facsimile No.: (614) 223-2499
Attention:
and
New Century International, Inc.
1225 Seventeenth Street
Denver, Colorado 80502
Facsimile No.: (303) 294-8815
Attention:
B-3
<PAGE>
Section 2.05. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
B-4
<PAGE>
THIS AGREEMENT is executed as of the date and year first above
written.
AEP RESOURCES, INC.
By:
----------------------------
Title:
-------------------------
NEW CENTURY INTERNATIONAL, INC.
By:
----------------------------
Title:
-------------------------
YORKSHIRE CAPITAL TRUST I
By:
----------------------------
-------------------------, as
Administrative Trustee
B-5
<PAGE>
EXHIBIT C
Unless this certificate is presented by an authorized representative
of The Depository Trust Company, a New York corporation ("DTC"), to Yorkshire
Capital Trust I or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), any transfer, pledge, or other use hereof for
value or otherwise by or to any person is wrongful inasmuch as the registered
owner thereof, Cede & Co., has an interest herein.
Certificate Number Number of Trust Securities
_________
P-1 CUSIP NO. ____________
Certificate Evidencing Trust Securities
of
Yorkshire Capital Trust I
___% Trust Securities
(Liquidation Amount $25 Per Trust Security)
Yorkshire Capital Trust I, a statutory business trust created under
the laws of the State of Delaware (the "Trust"), hereby certifies that Cede &
Co. (the "Holder") is the registered owner of _______ MILLION (_______) Trust
Securities of the Trust representing undivided beneficial interests in the
assets of the Trust and designated Yorkshire Capital Trust I ___% Trust
Securities (liquidation amount $25 per Trust Security) (the "Trust Securities").
The Trust Securities are transferable on the books and records of the Trust, in
person or by a duly authorized attorney, upon surrender of this certificate duly
endorsed and in proper form for transfer as provided in Section 5.04 of the
Trust Agreement (as defined below). The designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Trust Securities
are set forth in, and this certificate and the Trust Securities represented
hereby are issued and shall in all respects be subject to the terms and
provisions of, the Amended and Restated Trust Agreement of the Trust, dated as
of May 1, 1998, as the same may be amended from time to time (the "Trust
Agreement"), including the designation of the terms of Trust Securities as set
forth therein. The holder of this certificate is entitled to the benefits of a
guarantee by Yorkshire Power Group Limited, a private limited company
incorporated under the laws of England and Wales ("Yorkshire Group") pursuant to
a Trust Securities Guarantee Agreement between Yorkshire Group and the Bank of
New York, as guarantee trustee, dated as of May 1, 1998, as the same may be
amended from time to time (the "Guarantee"), to the extent provided therein. The
Trust will furnish a copy of the Trust Agreement and the Guarantee to the holder
of this certificate without charge upon written request to the Trust at its
principal place of business.
EXHIBIT C - PAGE 1
<PAGE>
Upon receipt of this certificate, the holder of this certificate is
bound by the Trust Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Administrative Trustees of the Trust have
executed this certificate this ____ day of _____________, 19__.
YORKSHIRE CAPITAL TRUST I
By:
-----------------------------------
as Administrative Trustee
CERTIFICATE OF AUTHENTICATION
This is one of the Trust Securities referred to in the within-mentioned Trust
Agreement.
-----------------------------------------
as Property Trustee
C-2
<PAGE>
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Trust Security
to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Trust Securities Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
-----------------------------
Signature:
-----------------------------
(Sign exactly as your name appears on the other side of this Trust Securities
Certificate)
C-3
<PAGE>
EXHIBIT 4.8
TRUST SECURITIES GUARANTEE AGREEMENT
BETWEEN
YORKSHIRE POWER GROUP LIMITED
(AS GUARANTOR)
AND
THE BANK OF NEW YORK
(AS TRUSTEE)
DATED AS OF
MAY 1, 1998
<PAGE>
CROSS-REFERENCE TABLE/1/
<TABLE>
<CAPTION>
Section of Section of
Trust Indenture Act Guarantee
of 1939, as amended Agreement
- ------------------- ----------
<S> <C>
310(a)..............................................................................4.01(a)h
310(b).........................................................................4.01(c), 2.08
310(c)..........................................................................Inapplicable
311(a)...............................................................................2.02(b)
311(b)...............................................................................2.02(b)
311(c)..........................................................................Inapplicable
312(a)...............................................................................2.02(a)
312(b)...............................................................................2.02(b)
313.....................................................................................2.03
314(a)..................................................................................2.04
314(b)..........................................................................Inapplicable
314(c)..................................................................................2.05
314(d)..........................................................................Inapplicable
314(e)......................................................................1.01, 2.05, 3.02
314(f)............................................................................2.01, 3.02
315(a)...............................................................................3.01(d)
315(b)..................................................................................2.07
315(c)..................................................................................3.01
315(d)................................................................................3.01(d)
315(e)...........................................................................Inapplicable
316(a)..........................................................................5.04(i), 2.06
316(b)...................................................................................5.03
316(c)...................................................................................2.02
317(a)...........................................................................Inapplicable
317(b)...........................................................................Inapplicable
318(a)................................................................................2.01(b)
318(b)...................................................................................2.01
318(c)................................................................................2.01(a)
</TABLE>
- ---------------------------
/1/This Cross-Reference Table does not constitute part of the Guarantee
Agreement and shall not affect the interpretation of any of its terms or
provisions.
i
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I. DEFINITIONS...................................................1
SECTION 1.01 DEFINITIONS..........................................1
ARTICLE II. TRUST INDENTURE ACT..........................................3
SECTION 2.01 TRUST INDENTURE ACT; APPLICATION.....................3
SECTION 2.02 LISTS OF HOLDERS OF SECURITIES.......................4
SECTION 2.03 REPORTS BY THE TRUSTEE...............................4
SECTION 2.04 PERIODIC REPORTS TO TRUSTEE..........................4
SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.....4
SECTION 2.06 EVENTS OF DEFAULT; WAIVER............................4
SECTION 2.07 EVENT OF DEFAULT; NOTICE.............................1
SECTION 2.08 CONFLICTING INTERESTS................................5
ARTICLE III. POWERS DUTIES AND RIGHTS OF TRUSTEE.........................5
SECTION 3.01 POWERS AND DUTIES OF THE TRUSTEE.....................5
SECTION 3.02 CERTAIN RIGHTS OF TRUSTEE............................6
SECTION 3.03 COMPENSATION; FEES; INDEMNITY........................8
ARTICLE IV. TRUSTEE......................................................8
SECTION 4.01 TRUSTEE; ELIGIBILITY.................................8
SECTION 4.02 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEE......9
ARTICLE V. GUARANTEE.....................................................9
SECTION 5.01 GUARANTEE............................................9
SECTION 5.02 WAIVER OF NOTICE AND DEMAND..........................9
SECTION 5.03 OBLIGATIONS NOT AFFECTED............................10
SECTION 5.04 RIGHTS OF HOLDERS...................................10
SECTION 5.05 GUARANTEE OF PAYMENT................................11
SECTION 5.06 SUBROGATION.........................................11
SECTION 5.07 INDEPENDENT OBLIGATIONS.............................11
ARTICLE VI. SUBORDINATION...............................................11
SECTION 6.01 SUBORDINATION.......................................11
ARTICLE VII. TERMINATION................................................12
SECTION 7.01 TERMINATION.........................................12
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
ARTICLE VIII. MISCELLANEOUS.............................................12
SECTION 8.01 SUCCESSORS AND ASSIGNS..............................12
SECTION 8.02 AMENDMENTS..........................................12
SECTION 8.03 NOTICES.............................................12
SECTION 8.04 BENEFIT.............................................12
SECTION 8.05 INTERPRETATION......................................13
SECTION 8.06 GOVERNING LAW.......................................13
SECTION 8.07 CONSENT TO JURISDICTION; APPOINTMENT OF AGENT TO
ACCEPT SERVICE OF PROCESS...........................14
</TABLE>
ii
<PAGE>
TRUST SECURITIES GUARANTEE AGREEMENT
This TRUST SECURITIES GUARANTEE AGREEMENT ("Guarantee Agreement"), dated as
of May 1, 1998, between YORKSHIRE POWER GROUP LIMITED, a private limited company
incorporated under the laws of England and Wales (the "Guarantor"), and THE BANK
OF NEW YORK, a New York banking corporation, as trustee (the "Trustee"), for the
benefit of the Holders (as defined herein) from time to time of the Trust
Securities (as defined herein) of YORKSHIRE CAPITAL TRUST I, a Delaware
statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), dated as of May 1, 1998, among the Trustee, the other Trustees
named therein, AEP Resources, Inc., an Ohio company, as Depositor, the
Guarantor, in its capacity as holder of the Control Certificate (as defined
herein) and the holders of undivided beneficial interests in the assets of the
Trust, the Trust is issuing $___,000,000 aggregate liquidation amount of its
___% Trust Originated Trust Securities (the "Trust Securities") representing
preferred undivided beneficial interests in the assets of the Trust and having
the terms set forth in the Trust Agreement;
WHEREAS, the Trust Securities will be issued by the Trust and the proceeds
thereof will be used to purchase the Junior Subordinated Debentures (as defined
in the Trust Agreement) issued by Yorkshire Power Finance Limited, a private
company with limited liability incorporated under the laws of the Cayman Islands
("Yorkshire Finance"), and such Junior Subordinated Debentures will be held by
the Trust as trust assets; and
WHEREAS, as incentive for the Holders to purchase the Trust Securities, the
Guarantor desires to irrevocably and unconditionally agree, to the extent set
forth herein, to pay to the Holders the Guarantee Payments (as defined herein)
and to make certain other payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the payment for Trust Securities by
each Holder (as defined herein) thereof, which payment the Guarantor hereby
agrees shall benefit the Guarantor, the Guarantor executes and delivers this
Guarantee Agreement for the benefit of the Holders from time to time of the
Trust Securities.
ARTICLE I.
DEFINITIONS
SECTION 1.01 Definitions As used in this Guarantee Agreement, the terms
------------ -----------
set forth below shall, unless the context otherwise requires, have the following
meanings. Capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Trust Agreement as
in effect on the date hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or
1
<PAGE>
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Control Certificate" has the meaning specified in the preamble to the
Trust Agreement.
"Control Party" means the holder of the Control Certificate, which, as of
the date of this Agreement, is the Guarantor.
"Event of Default" means a failure by the Guarantor to perform any of its
payment obligations under this Guarantee Agreement.
"The Expense Agreement" means the Agreement as to Expenses and Liabilities,
dated as of May 1, 1998, among the US Affiliates and the Trust.
"Guarantee Payments" shall mean the following payments or distributions,
without duplication, with respect to the Trust Securities, to the extent not
paid or made by or on behalf of the Trust: (i) any accumulated and unpaid
distributions that are required to be paid on such Trust Securities but if and
only if and to the extent the Trust has sufficient funds available therefor to
make such payment; (ii) the redemption price, including all accrued and unpaid
distributions to the date of redemption (the "Redemption Price"), with respect
to the Trust Securities called for redemption by the Trust but if and only if
and to the extent that the Trust has sufficient funds available therefor to make
such payment; and (iii) upon a voluntary or involuntary dissolution, winding-up
or termination of the Trust (other than in connection with the distribution of
Junior Subordinated Debentures to the holders of Trust Securities or the
redemption of all of the Trust Securities), the lesser of (a) the aggregate of
the Liquidation Amount and all accrued and unpaid Distributions on the Trust
Securities to the date of payment, to the extent the Trust has sufficient funds
available therefor, and (b) the amount of assets of the Trust remaining
available for distribution to Holders in liquidation of the Trust (in either
case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records of
the Trust, of any Trust Securities; provided, however, that in determining
whether the holders of the requisite percentage of Trust Securities have given
any request, notice, consent or waiver hereunder, "Holder" shall not include the
Guarantor, Yorkshire Finance, the Controller or the US Affiliates or any
Affiliate of the Guarantor, Yorkshire Finance, the Controller or the US
Affiliates.
"Indenture" means the Subordinated Note Indenture dated as of May 1, 1998,
among Yorkshire Finance, as Subordinated Debenture Issuer, the Guarantor, as
guarantor, and The Bank of New York, as trustee, as supplemented by the First
Supplemental Indenture dated as of May 1, 1998, by and among the Yorkshire
Finance, the Guarantor and The Bank of New York, as trustee.
"Majority in liquidation amount of Trust Securities" means a vote by
Holder(s) of Trust Securities, voting separately as a class, of more than 50% of
the liquidation amount of all Trust Securities outstanding at the time of
determination.
"Officers' Certificate" means, with respect to any Person (who is not an
individual), a certificate signed by the Chairman of the Board, the President or
a Vice President, Director, the Treasurer, an Assistant Treasurer, the Secretary
or an Assistant Secretary, of such Person, and
2
<PAGE>
delivered to the Trustee. Any Officers' Certificate delivered with respect to
compliance with a condition or covenant provided for in this Guarantee Agreement
shall include:
(a) a statement that each officer signing the Officers' Certificate
has read the covenant or condition and the definitions relating thereto;
(b) a brief statement of the nature and scope of the examination or
investigation undertaken by each officer in rendering the Officers'
Certificate;
(c) a statement that each such officer has made such examination or
investigation as, in such officer's opinion, is necessary to enable such
officer to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(d) a statement as to whether, in the opinion of each such officer,
such condition or covenant has been complied with.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, trust, unincorporated organization or government or any
agency or political subdivision thereof or any other entity of whatever nature.
"Responsible Officer" means, with respect to the Trustee, any managing
director, any vice president, any assistant vice president, any assistant
secretary, any assistant treasurer, or any other officer of the Corporate Trust
and Agency Group of the Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Successor Trustee" means a successor Trustee possessing the qualifications
to act as Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trustee" means The Bank of New York until a Successor Trustee has been
appointed and has accepted such appointment pursuant to the terms of this
Guarantee Agreement and thereafter means each such Successor Trustee.
"US Affiliates" means AEP Resources, Inc. and New Century International,
Inc. as parties to the Expense Agreement.
ARTICLE II.
TRUST INDENTURE ACT
SECTION 2.01 Trust Indenture Act; Application.
------------ --------------------------------
(a) This Guarantee Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions; and
3
<PAGE>
(b) If and to the extent that any provision of this Guarantee Agreement
limits, qualifies or conflicts with the duties imposed by Sections 310 to 317,
inclusive, of the Trust Indenture Act, such imposed duties shall control.
SECTION 2.02 Lists of Holders of Securities.
------------ ------------------------------
(a) The Guarantor shall furnish or cause to be furnished to the Trustee (a)
semiannually, not later than June 1 and December 1 in each year, a list, in such
form as the Trustee may reasonably require, of the names and addresses of the
Holders ("List of Holders") as of a date not more than 15 days prior to the time
such list is furnished, and (b) at such other times as the Trustee may request
in writing, within 30 days after the receipt by the Guarantor of any such
request, a List of Holders as of a date not more than 15 days prior to the time
such list is furnished; provided that, the Guarantor shall not be obligated to
provide such List of Holders at any time the List of Holders does not differ
from the most recent List of Holders given to the Trustee by the Guarantor or at
any time the Trustee is the Securities Registrar under the Trust Agreement. The
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Trustee shall comply with its obligations under Sections 311(a),
311(b) and 312(b) of the Trust Indenture Act.
SECTION 2.03 Reports by the Trustee. Within 60 days after May 15 of each
------------ ----------------------
year commencing May 15, 1999, the Trustee shall provide to the Holders of
the Trust Securities such reports as are required by Section 313(a) of the
Trust Indenture Act, if any, in the form and in the manner provided by
Section 313 of the Trust Indenture Act. The Trustee shall also comply with
the other requirements of Section 313 of the Trust Indenture Act.
SECTION 2.04 Periodic Reports to Trustee. The Guarantor shall provide to
------------ ---------------------------
the Trustee such documents, reports and information as required by Section 314
of the Trust Indenture Act (if any) in the form, in the manner and at the times
required by Section 314 of the Trust Indenture Act, and shall provide, within
120 days after the end of each of its fiscal years, the compliance certificate
required by Section 314(a)(4) of the Trust Indenture Act in the form and in the
manner required by such Section.
SECTION 2.05 Evidence of Compliance with Conditions Precedent. The
------------ ------------------------------------------------
Guarantor shall provide to the Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Guarantee Agreement that
relate to any of the matters set forth in Section 314(c) of the Trust Indenture
Act. Any certificate or opinion required to be given by an officer pursuant to
Section 314(c)(1) may be given in the form of an Officers' Certificate.
SECTION 2.06 Events of Default; Waiver. The Holders of a Majority in
------------ -------------------------
liquidation amount of Trust Securities may, by vote, on behalf of all of the
Holders, waive any past Event of Default and its consequences. Upon such waiver,
any such Event of Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured, for every purpose of this
Guarantee Agreement, but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
4
<PAGE>
SECTION 2.07 Event of Default; Notice.
------------ -------------------------
(a) The Trustee shall, within 90 days after the occurrence of an Event of
Default, transmit by mail, first class postage prepaid, to the Holders, notices
of all Events of Default known to the Trustee, unless such defaults have been
cured before the giving of such notice, provided that the Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders.
(b) The Trustee shall not be deemed to have knowledge of any Event of
Default unless the Trustee shall have received written notice, or a Responsible
Officer charged with the administration of the Trust Agreement shall have
obtained written notice, of such Event of Default.
SECTION 2.08 Conflicting Interests . The Trust Agreement shall be deemed to
------------ ---------------------
be specifically described in this Guarantee Agreement for the purposes of clause
(i) of the first proviso contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III.
POWERS, DUTIES AND RIGHTS OF TRUSTEE
SECTION 3.01 Powers and Duties of the Trustee.
------------ ---------------------------------
(a) This Guarantee Agreement shall be held by the Trustee for the benefit
of the Holders, and the Trustee shall not transfer this Guarantee Agreement to
any Person except the Trustee shall assign rights hereunder to a Holder to the
extent such assignment is necessary to exercise such Holder's rights pursuant to
Section 5.04 or to a Successor Trustee upon acceptance by such Successor Trustee
of its appointment to act as Successor Trustee. The right, title and interest of
the Trustee shall automatically vest in any Successor Trustee, and such vesting
and cessation of title shall be effective whether or not conveyancing documents
have been executed and delivered pursuant to the appointment of such Successor
Trustee.
(b) If an Event of Default has occurred and is continuing, the Trustee
shall enforce this Guarantee Agreement for the benefit of the Holders.
(c) The Trustee, before the occurrence of any Event of Default and after
the curing or waiving of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.06), the Trustee shall
exercise such of the rights and powers vested in it by this Guarantee Agreement,
and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.
5
<PAGE>
(d) No provision of this Guarantee Agreement shall be construed to relieve
the Trustee from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Trustee shall be determined
solely by the express provisions of this Guarantee Agreement, and the
Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Guarantee
Agreement; and
(B) in the absence of bad faith on the part of the Trustee, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Trustee and conforming to
the requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof are
specifically required to be furnished to the Trustee, the Trustee
shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Guarantee Agreement;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts
upon which such judgment was made;
(iii) the Trustee shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in accordance with the
direction of the Holders of a Majority in liquidation amount of the Trust
Securities relating to the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust
or power conferred upon the Trustee under this Guarantee Agreement; and
(iv) no provision of this Guarantee Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if the Trustee shall have
reasonable grounds for believing that the repayment of such funds or
liability is not reasonably assured to it under the terms of this Guarantee
Agreement or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 3.02 Certain Rights of Trustee.
------------ --------------------------
(a) Subject to the provisions of Section 3.01:
(i) the Trustee may conclusively rely and shall be fully protected in
acting or refraining from acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness or
other paper or document believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties;
6
<PAGE>
(ii) any direction or act of the Guarantor contemplated by this
Guarantee Agreement shall be sufficiently evidenced by an Officers'
Certificate;
(iii) whenever, in the administration of this Guarantee Agreement,
the Trustee shall deem it desirable that a matter be proved or established
before taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an Officers'
Certificate which, upon receipt of such request, shall be promptly
delivered by the Guarantor;
(iv) the Trustee may consult with counsel of its choice, and the
advice or opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in accordance
with such advice or opinion; such counsel may be counsel to the Guarantor
or any of its Affiliates and may include any of its employees; the Trustee
shall have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction;
(v) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Guarantee Agreement at the request or
direction of any Holder, unless such Holder shall have provided to the
Trustee reasonable security and indemnity satisfactory to the Trustee
against the costs, expenses (including attorneys' fees and expenses) and
liabilities that might be incurred by it in complying with such request or
direction, including such reasonable advances as may be requested by the
Trustee; provided that nothing contained in this Section 3.02(a)(v) shall
be taken to relieve the Trustee, upon the occurrence of an Event of
Default, of its obligation to exercise the rights and powers vested in it
by this Guarantee Agreement;
(vi) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;
(vii) the Trustee may execute any of the trusts or powers hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(viii) whenever in the administration of this Guarantee Agreement the
Trustee shall deem it desirable to receive instructions with respect to
enforcing any remedy or right or taking any other action hereunder, the
Trustee (i) may request instructions from the Holders, (ii) may refrain
from enforcing such remedy or right or taking such other action until such
instructions are received, and (iii) shall be protected in acting in
accordance with such instructions.
7
<PAGE>
(b) No provision of this Guarantee Agreement shall be deemed to impose any
duty or obligation on the Trustee to perform any act or acts or exercise any
right, power, duty or obligation conferred or imposed on it in any jurisdiction
in which it shall be illegal, or in which the Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power
or authority available to the Trustee shall be construed to be a duty.
SECTION 3.03 Compensation; Fees; Indemnity.
------------ -----------------------------
The following expenses will be covered pursuant to the Expense Agreement:
(a) the payment to the Trustee from time to time of such compensation as
the Guarantor and the Trustee may agree for all services rendered by the Trustee
hereunder (which compensation shall not be limited by any provision of law in
regard to the compensation of a trustee of an express trust);
(b) except as otherwise expressly provided herein, the reimbursement of
the Trustee upon request for all reasonable expenses, disbursements and advances
incurred or made by the Trustee in accordance with any provision of this
Guarantee Agreement (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense, disbursement
or advance as may be attributable to its negligence or bad faith; and
(c) the indemnification of the Trustee for any and all loss, damage,
claims, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration of
this Guarantee Agreement, including the costs and expenses of defending itself
against any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
The provisions of this Section 3.03 shall survive the termination of this
Guarantee Agreement.
ARTICLE IV.
TRUSTEE
SECTION 4.01 Trustee; Eligibility.
------------ --------------------
(a) There shall at all times be a Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Securities and Exchange Commission to act as an institutional trustee under
the Trust Indenture Act, authorized under such laws to exercise corporate
trust powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination by
Federal, State, Territorial or District of Columbia authority. If such
corporation publishes reports of condition at least annually, pursuant to
law or to the requirements of the supervising or
8
<PAGE>
examining authority referred to above, then, for the purposes of this
Section 4.01(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
(b) If at any time the Trustee shall cease to be eligible to so act under
Section 4.01(a), the Trustee shall immediately resign in the manner and with the
effect set out in Section 4.02(c).
(c) If the Trustee has or shall acquire any "conflicting interest" within
the meaning of Section 310(b) of the Trust Indenture Act, the Trustee and
Guarantor shall in all respects comply with the provisions of Section 310(b) of
the Trust Indenture Act, subject to the rights of the Trustee under the
penultimate paragraph thereof.
SECTION 4.02 Appointment, Removal and Resignation of Trustee.
------------ -----------------------------------------------
(a) Subject to Section 4.02(b), the Trustee may be appointed or removed
without cause at any time by the Guarantor.
(b) The Trustee shall not be removed until a Successor Trustee has been
appointed and has accepted such appointment by written instrument executed by
such Successor Trustee and delivered to the Guarantor.
(c) The Trustee appointed to office shall hold office until a Successor
Trustee shall have been appointed or until its removal or resignation. The
Trustee may resign from office (without need for prior or subsequent accounting)
by an instrument in writing executed by the Trustee and delivered to the
Guarantor, which resignation shall not take effect until a Successor Trustee has
been appointed and has accepted such appointment by instrument in writing
executed by such Successor Trustee and delivered to the Guarantor and the
resigning Trustee.
(d) If no Successor Trustee shall have been appointed and accepted
appointment as provided in this Section 4.02 within 60 days after delivery to
the Guarantor of an instrument of resignation, the resigning Trustee may
petition any court of competent jurisdiction for appointment of a Successor
Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Trustee.
ARTICLE V.
GUARANTEE
SECTION 5.01 Guarantee. The Guarantor irrevocably and unconditionally
------------ ---------
agrees to pay in full to the Holders the Guarantee Payments (without duplication
of amounts theretofore paid by or on behalf of the Trust), as and when due,
regardless of any defense, right of set-off or counterclaim which the Guarantor
may have or assert against any Person. The Guarantor's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
the Guarantor to the Holders or by causing the Trust to pay such amounts to the
Holders.
SECTION 5.02 Waiver of Notice and Demand. The Guarantor hereby waives
------------ ---------------------------
notice of acceptance of this Guarantee Agreement and of any liability to which
it applies or may
9
<PAGE>
apply, presentment, demand for payment, any right to require a proceeding first
against the Trust or any other Person before proceeding against the Guarantor,
protest, notice of nonpayment, notice of dishonor, notice of redemption and all
other notices and demands.
SECTION 5.03 Obligations Not Affected. The obligation of the Guarantor to
------------ ------------------------
make the Guarantee Payments under this Guarantee Agreement shall in no way be
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Trust of any express or implied agreement,
covenant, term or condition relating to the Trust Securities to be performed or
observed by the Trust;
(b) the extension of time for the payment by the Trust of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Trust Securities or the extension of
time for the performance of any other obligation under, arising out of, or in
connection with, the Trust Securities (other than an extension of time for
payment of Distributions, Redemption Price, Liquidation Distribution or other
sum payable that results from the extension of any interest payment period on
the Junior Subordinated Debentures permitted by the Indenture);
(c) any failure, omission, delay or lack of diligence on the part of the
Holders to enforce, assert or exercise any right, privilege, power or remedy
conferred on the Holders pursuant to the terms of the Trust Securities, or any
action on the part of the Trust granting indulgence or extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale of any
collateral, receivership, insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition or readjustment of debt of,
or other similar proceedings affecting, the Trust or any of the assets of the
Trust;
(e) any invalidity of, or defect or deficiency in, the Trust Securities;
(f) the settlement or compromise of any obligation guaranteed hereby or
hereby incurred; or
(g) any other circumstance whatsoever that might otherwise constitute a
legal or equitable discharge or defense of a guarantor, it being the intent of
this Section 5.03 that the obligations of the Guarantor hereunder shall be
absolute and unconditional under any and all circumstances.
There shall be no obligation of the Holders to give notice to, or obtain
consent of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.04 Rights of Holders . The Guarantor expressly acknowledges that:
(i) this Guarantee Agreement will be deposited with the Trustee to be held
for the benefit of the Holders; (ii) the Trustee has the right to enforce
this Guarantee Agreement on behalf of the Holders; (iii) the Holders of a
Majority in liquidation amount of the Trust Securities have the right to
direct the time, method and place of conducting any proceeding for any
remedy available
10
<PAGE>
to the Trustee in respect of this Guarantee Agreement or exercising any trust or
power conferred upon the Trustee under this Guarantee Agreement, provided that
such direction shall not be in conflict with any rule of law or with this
Guarantee Agreement, and could not involve the Trustee in personal liability in
circumstances where reasonable indemnity would not be adequate; and (iv) any
Holder may institute a legal proceeding directly against the Guarantor to
enforce its rights under this Guarantee Agreement, without first instituting a
legal proceeding against or requesting or directing that action be taken by the
Trustee or any other Person; it being understood and intended that no one or
more of such Holders shall have any right in any manner whatsoever by virtue of,
or by availing of, any provision of this Guarantee Agreement to affect, disturb
or prejudice the rights of any other of such Holders or to obtain or to seek to
obtain priority or preference over any other of such Holders or to enforce any
right under this Guarantee Agreement, except in the manner herein provided and
for the equal and ratable benefit of all of such Holders.
SECTION 5.05 Guarantee of Payment. This Guarantee Agreement creates a
------------ --------------------
guarantee of payment and not of collection. This Guarantee Agreement will not be
discharged except by payment of the Guarantee Payments in full (without
duplication) or upon the distribution of Junior Subordinated Debentures to the
Holders in exchange for all of the Trust Securities.
SECTION 5.06 Subrogation. The Guarantor shall be subrogated to all (if
------------ -----------
any) rights of the Holders against the Trust in respect of any amounts paid to
the Holders by the Guarantor under this Guarantee Agreement; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any rights which it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts of Guarantee Payments are due
and unpaid under this Guarantee Agreement. If any amount shall be paid to the
Guarantor in violation of the preceding sentence, the Guarantor agrees to hold
such amount in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.07 Independent Obligations. The Guarantor acknowledges that its
------------ -----------------------
obligations hereunder are independent of the obligations of the Trust with
respect to the Trust Securities and that the Guarantor shall be liable as
principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI.
SUBORDINATION
SECTION 6.01 Subordination. This Guarantee Agreement will constitute an
------------ -------------
unsecured obligation of the Guarantor and will rank (i) subordinate and junior
in right of payment to all other liabilities of the Guarantor, except those
obligations or liabilities made pari passu or subordinate by their terms, (ii)
pari passu with the most senior preferred or preference stock now or hereafter
issued by the Guarantor and with any guarantee now or hereafter entered
11
<PAGE>
into by the Guarantor in respect of any preferred or preference securities of
any Affiliate of the Guarantor, and (iii) senior to all common stock of the
Guarantor.
ARTICLE VII.
TERMINATION
SECTION 7.01 Termination. This Guarantee Agreement shall terminate and be
------------ -----------
of no further force and effect upon: (i) full payment of the Redemption Price of
all Trust Securities, (ii) the distribution of Junior Subordinated Debentures to
the Holders in exchange for all of the Trust Securities, or (iii) full payment
of the amounts payable in accordance with the Trust Agreement upon liquidation
of the Trust. Notwithstanding the foregoing, this Guarantee Agreement will
continue to be effective will be reinstated, as the case may be, if at any time
any Holder must restore payment of any sums paid with respect to Trust
Securities or under this Guarantee Agreement.
ARTICLE VIII.
MISCELLANEOUS
SECTION 8.01 Successors and Assigns. All guarantees and agreements
------------ ----------------------
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor and shall inure to the
benefit of the Holders of the Trust Securities then outstanding. Except in
connection with a consolidation, merger, conveyance, transfer, or lease
involving the Guarantor that is permitted under Article Eight of the Indenture,
the Guarantor shall not assign its obligations hereunder.
SECTION 8.02 Amendments. Except with respect to any changes which do not
------------ ----------
materially and adversely affect the rights of Holders (in which case no consent
of Holders will be required), this Guarantee Agreement may only be amended with
the prior approval of the Holders of not less than 66-2/3% in Liquidation Amount
of all the outstanding Trust Securities. The provisions of Article Six of the
Trust Agreement concerning meetings of Holders shall apply to the giving of such
approval.
SECTION 8.03 Notices. Any notice, request or other communication required
------------ -------
or permitted to be given hereunder shall be in writing, duly signed by the party
giving such notice, and delivered, telecopied or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address set forth below or such other
address as the Guarantor may give notice of to the Trustee and the Holders:
Yorkshire Power Group Limited
Wetherby Road
Scarcroft, Leeds LS14 3HS, England
Facsimile No.: 011-44-113-289-____
Attn: _________________
with a copy to:
12
<PAGE>
American Electric Power Service Corporation
1 Riverside Plaza
Columbus, Ohio 43215
Facsimile No: 614-223-2499
Attn: _________________
and
New Century Energies, Inc.
1225 Seventeenth Street
Denver, Colorado 80502
Facsimile No: 303-294-8815
Attn: __________________
(b) if given to the Trust, in care of the Trustee, or to the Trustee at the
Trust's (and the Trustee's) address set forth below or such other address as the
Trustee on behalf of the Trust may give notice to the Holders:
Yorkshire Capital Trust I
c/o The Bank of New York
101 Barclay Street, fl. 21 West
New York, New York 10286
Attn: _________________
with a copy, in the case of a notice to the Trust (other than a notice from
the Guarantor), to the Guarantor;
(c) if given to any Holder, at the address set forth on the books and
records of the Trust.
All notices hereunder shall be deemed to have been given when received in
person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 8.04 Benefit. This Guarantee Agreement is solely for the benefit
------------ -------
of the Holders and, subject to Section 3.01(a), is not separately transferable
from the Trust Securities.
SECTION 8.05 Interpretation. In this Guarantee Agreement, unless the
------------ --------------
context otherwise requires:
(a) capitalized terms used in this Guarantee Agreement but not defined in
the preamble hereto have the respective meanings assigned to them in Section
1.01;
13
<PAGE>
(b) a term defined anywhere in this Guarantee Agreement has the same
meaning throughout;
(c) all references to "the Guarantee Agreement" or "this Guarantee
Agreement" are to this Guarantee Agreement as modified, supplemented or amended
from time to time;
(d) all references in this Guarantee Agreement to Articles and Sections are
to Articles and Sections of this Guarantee Agreement unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning when
used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa; and
(g) the masculine, feminine or neuter genders used herein shall include the
masculine, feminine and neuter genders.
SECTION 8.06 Governing Law. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
------------ -------------
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE
OF NEW YORK.
SECTION 8.07 Consent to Jurisdiction; Appointment of Agent to Accept
------------ -------------------------------------------------------
Service of Process
- ------------------
(a) The Guarantor irrevocably consents and agrees, for the benefit of the
Holders from time to time and the Trustee, that any civil legal action, suit or
proceeding against it with respect to its obligations, liabilities or any other
matter arising out of or in connection with this Guarantee may be brought in the
Supreme Court of New York, New York County or the United States District Court
for the Southern District of New York and any appellate court from either
thereof and, until amounts due and to become due in respect of the Trust
Securities or the Guarantee have been paid, hereby irrevocably consents and
submits to the non-exclusive jurisdiction of each such court in personam,
generally and unconditionally with respect to any legal action, suit or
proceeding for itself and in respect of its properties, assets and revenues and
agrees to file such consents with such authorities as may be required to
irrevocably evidence such agreement.
(b) The Guarantor has irrevocably designated, appointed, and empowered CT
Corporation System, acting through its office at 1633 Broadway, New York, New
York 10019, as its designee, appointee and agent to receive, accept and
acknowledge for and on its behalf, and its properties, assets and revenues,
service of any and all legal process, summons, notices and documents which may
be served in any legal action, suit or proceeding brought against the Guarantor
in any United States or state court. If for any reason such designee, appointee
and agent hereunder shall cease to be available to act as such, the Guarantor
agrees to designate a new designee, appointee and agent in the Borough of
Manhattan, The City of New York on the terms and for the purposes of this
Section 8.07 satisfactory to the Trustee. The Guarantor further hereby
irrevocably consents and agrees to the service of any and all legal process,
summons, notices and documents in any legal action, suit or proceeding against
the Guarantor by serving a
14
<PAGE>
copy thereof upon the relevant agent for service of process referred to in this
Section 8.07 (whether or not the appointment of such agent shall for any reason
prove to be ineffective or such agent shall accept or acknowledge such service)
or by mailing copies thereof by registered or certified air mail, postage
prepaid, to the Guarantor at its address specified in or designated pursuant to
this Guarantee. The Guarantor agrees that the failure of any such designee,
appointee and agent to give any notice of such service to it shall not impair or
affect in any way the validity of such service or any judgment rendered in any
action or proceeding based thereon. Nothing herein shall in any way be deemed to
limit the ability of the holders of the Trust Securities and the Trustee, to
serve any such legal process, summons, notices and documents in any other manner
permitted by applicable law or to obtain jurisdiction over the Guarantor or
bring legal actions, suits or proceedings against the Guarantor in such other
jurisdictions, and in such manner, as may be permitted by applicable law. The
Guarantor irrevocably and unconditionally waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying
of venue of any of the aforesaid actions, suits or proceedings arising out of or
in connection with this Guarantee brought in the Supreme Court of New York, New
York County or the United States District Court for the Southern District of New
York and any appellate court from either thereof and hereby further irrevocably
and unconditionally waives and agrees not to plead or claim in any such court
that any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) To the extent that the Guarantor may in any jurisdiction claim for
itself or its assets immunity (to the extent such immunity may now or hereafter
exist, whether on the grounds of sovereign immunity or otherwise) from suit,
execution, attachment (whether in aid of execution, before judgment or
otherwise) or other legal process (whether through service or notice or
otherwise), and to the extent that in any such jurisdiction there may be
attributed to itself or its assets such immunity (whether or not claimed), the
Guarantor irrevocably agrees with respect to any matter arising under this
Guarantee for the benefit of the Holders from time to time of the Trust
Securities, not to claim, and irrevocably waives, such immunity to the full
extent permitted by the laws of such jurisdiction.
(d) If for the purpose of obtaining a judgment or order in any court
it is necessary to convert a sum due hereunder to the holder of any Trust
Security from U.S. dollars into another currency, the Guarantor has agreed, and
each Holder by holding such Trust Security will be deemed to have agreed, to the
fullest extent that they may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures such Holder
could purchase U.S. dollars with such other currency in The City of New York on
the Business Day preceding the day on which final judgment is given.
(e) The obligation of the Guarantor in respect of any sum payable by it to
the holder of a Trust Security shall, notwithstanding any judgment or order in a
currency (the "judgment currency") other than U.S. dollars, be discharged only
to the extent that on the Business Day following receipt by the Holder of such
Trust Security of any sum, adjudged to be so due in the judgment currency, the
Holder of such Trust Security may in accordance with normal banking procedures
purchase U.S. dollars with the judgment currency; if the amount of U.S. dollars
so purchased is less than the sum originally due to the holder of such Trust
Security in the judgment currency (determined in the manner set forth in the
preceding paragraph), the Guarantor agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Holder of such
15
<PAGE>
Trust Security against such loss, and if the amount of the U.S. dollars so
purchased exceeds the sum originally due to the Holder of such Trust Security,
such Holder agrees to remit to the Guarantor such excess, provided that such
Holder shall have no obligation to remit any such excess as long as the
Guarantor shall have failed to pay such Holder any obligations due and payable
under such Trust Security, in which case such excess may be applied to such
obligations of the Guarantor under such Trust Security in accordance with the
terms thereof. The foregoing indemnity shall constitute a separate and
independent obligation of the Guarantor and shall continue in full force and
effect notwithstanding any such judgment or order as aforesaid.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
16
<PAGE>
THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
YORKSHIRE POWER GROUP LIMITED
By:--------------------------------------------
Name:
Title:
THE BANK OF NEW YORK,
as Trustee
By:--------------------------------------------
Name:
Title:
17
<PAGE>
EXHIBIT 4.10
CONTROL CERTIFICATE
OF
YORKSHIRE CAPITAL TRUST I
With respect to Yorkshire Capital Trust I, a statutory business trust
created under the laws of the State of Delaware (the "Trust"), by the execution
of that certain Trust Agreement, dated as of February 1, 1998, as the same may
be amended and restated from time to time (the "Trust Agreement") among AEP
Resources, Inc., as Depositor, Stephan T. Haynes, as Administrative Trustee, The
Bank of New York, as Property Trustee, and The Bank of New York (Delaware), as
Delaware Trustee, the Depositor hereby issues this Control Certificate to
YORKSHIRE POWER GROUP LIMITED, a private limited company incorporated under the
laws of England and Wales. The designations, rights, privileges, restrictions,
preferences of the holder of this Control Certificate and other terms and
provisions of the Control Certificate are set forth in, and shall in all
respects be subject to the terms and provisions of, the Trust Agreement. The
Trust will furnish a copy of the Trust Agreement to the Holder without charge
upon written request to the Trust at its principal place of business or
registered office.
Upon receipt of this Control Certificate, the holder hereof is bound by the
Trust Agreement and is entitled to the benefits thereunder. Receipt of this
Control Certificate will not bestow on the holder hereof any economic or
financial interest or obligation with respect to the Trust.
<PAGE>
IN WITNESS WHEREOF, the Depositor of the Trust has executed this Control
Certificate this ____ day of February, 1998.
AEP RESOURCES, INC.,
as Depositor
By: /s/ Jeffrey D. Cross
Title: Vice President
AGREED AND ACCEPTED:
Yorkshire Power Group Limited,
as holder of Control Certificate
By: /s/ Armando A. Pena
Title: Director
2
<PAGE>
EXHIBIT 4.11
================================================================================
DEPOSIT AGREEMENT
BETWEEN
THE BANK OF NEW YORK,
as Book-Entry Depositary
and
YORKSHIRE POWER FINANCE LIMITED
Dated as of May 1, 1998
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I Definitions and Other General Provisions.........................................................1
Section 1.01. Definitions............................................................................1
Section 1.02. Rules of Construction..................................................................4
ARTICLE II Book-Entry Interests............................................................................4
Section 2.01. Deposit of the Global Debentures.......................................................4
Section 2.02. Receipt of Book-Entry Interests........................................................4
Section 2.03. Registration of Transfer of the Book-Entry Interests...................................5
Section 2.04. Transfer or Exchange of Global Debentures..............................................6
Section 2.05. Issuance of Definitive Registered Debentures in Respect of the Debentures..............6
Section 2.06. Redemption of the Debentures...........................................................7
Section 2.07. Cancellation...........................................................................7
Section 2.08. Payments in Respect of the Book-Entry Interests and the Global Debentures..............7
Section 2.09. Change in Principal Amount of Global Debentures........................................8
Section 2.10. Record Date............................................................................8
Section 2.11. Action in Respect of the Book-Entry Interests or the Global Debentures.................9
Section 2.12. Reports................................................................................9
Section 2.13. Additional Amounts.....................................................................9
Section 2.14. Changes Affecting Global Debentures...................................................10
ARTICLE III The Book-Entry Depositary.....................................................................11
Section 3.01. Certain Duties and Responsibilities...................................................11
Section 3.02. Events of Default.....................................................................12
Section 3.03. Certain Rights of Book-Entry Depositary...............................................12
Section 3.04. Not Responsible for Recitals or Issuance of Debentures................................13
Section 3.05. Money Held in Trust...................................................................13
Section 3.06. Compensation and Reimbursement........................................................13
Section 3.07. Book-Entry Depositary Required; Eligibility...........................................14
Section 3.08. Resignation and Removal; Appointment of Successor.....................................15
Section 3.09. Acceptance of Appointment by Successor................................................16
Section 3.10. Merger, Conversion, Consolidation or Succession to Business...........................17
Section 3.11. Letter of Representations.............................................................17
ARTICLE IV Miscellaneous Provisions.......................................................................17
Section 4.01. Notices to Book-Entry Depositary or Issuer............................................17
Section 4.02. Notice to the Depositary; Waiver......................................................18
</TABLE>
i
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<TABLE>
<S> <C> <C>
Section 4.03. Effect of Headings and Table of Contents..............................................18
Section 4.04. Successors and Assign.................................................................18
Section 4.05. Separability Clause...................................................................18
Section 4.06. Benefits of Agreement.................................................................19
Section 4.07. GOVERNING LAW.........................................................................19
Section 4.08. Jurisdiction..........................................................................19
Section 4.09. Counterparts..........................................................................20
Section 4.10. Inspection of Agreement...............................................................20
Section 4.11. Satisfaction and Discharge............................................................20
Section 4.12. Amendments............................................................................20
Section 4.13. Book-Entry Depositary To Sign Amendments..............................................21
</TABLE>
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DEPOSIT AGREEMENT
This Deposit Agreement (as the same may be amended from time to time in
accordance with the provisions hereof, the "Deposit Agreement"), dated as of
May 1, 1998, is among The Bank of New York, a New York banking corporation, as
book-entry depositary hereunder (the "Book-Entry Depositary"), Yorkshire Power
Finance Limited, a company with limited liability incorporated under the laws of
the Cayman Islands (the "Issuer"), and the holders and beneficial owners from
time to time of interests in the Book-Entry Interests.
ARTICLE I
Definitions and Other General Provisions
Section 1.01. Definitions.
Terms not defined herein have the meanings ascribed to them in the
Indenture. The following terms, as used herein, have the following meanings:
"Book-Entry Depositary" means the party named as such in this Agreement or
its nominee or the custodian of either until a successor shall have become such
pursuant to Section 3.08 hereof, and thereafter "Book-Entry Depositary" shall
mean such successor or its nominee or the custodian of either.
"Book-Entry Interests" means the certificateless depositary interests that
shall at all times, prior to any issuance of Definitive Registered Debentures in
respect thereof, represent the right to receive 100% of the principal, premium
(if any), interest (including Additional Interest, if any) and Additional
Amounts (if any) with respect to the underlying Global Debentures and that are
issued to the Depositary by the Book-Entry Depositary.
"Book-Entry Register" has the meaning ascribed thereto in Section 2.03
hereof.
"Corporate Trust Office" means the office of the Book-Entry Depositary in
the City of New York, at which any particular time its corporate trust business
shall be principally administered, which at the date hereof is located at 101
Barclay Street, New York, NY 10286, Attn: Corporate Trust Department,
International Finance Unit.
"Debentures" means the Issuer's __% Junior Subordinated Deferrable Interest
Debentures, Series A due __________, 2038.
"Definitive Registered Debentures" means Debentures issued by the Issuer
pursuant to the Indenture substantially in the form included as exhibits to the
Supplemental Indentures and registered in the names of the beneficial owners
thereof.
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"Depositary" means the Trust (or DTC (including any nominee of DTC), in the
event that the Trust is liquidated pursuant to the terms of the Trust Agreement)
as the depositary of the Book-Entry Interests as recorded on the Book-Entry
Register.
"DTC" means The Depository Trust Company, New York, New York or its
successors.
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended.
"Global Debentures" means Debentures in bearer form issued by the Issuer to
the Book-Entry Depositary pursuant to the Indenture substantially in the form
included as exhibits to the Supplemental Indentures.
"Guarantor" means Yorkshire Power Group Limited, a private limited company
incorporated under the laws of England and Wales.
"Indenture" means the Indenture dated as of May 1, 1998, among the Issuer,
the Guarantor, and The Bank of New York, as trustee, principal paying agent,
registrar and transfer agent and Banque Generale du Luxembourg S.A., as paying
agent and transfer agent, relating to the Debentures as originally executed or
as it may from time to time be supplemented or amended including by the
Supplemental Indentures and for all purposes to the extent applicable, the
provisions of the Trust Indenture Act that are deemed to be a part of and govern
such instrument.
"Indirect Participant" means a Person that holds Interests through
Participants.
"Interests" means beneficial interests in the Book-Entry Interests that
will be represented by Trust Securities until the Trust is liquidated pursuant
to the terms of the Trust Agreement, whereafter the interests will be shown on
records maintained in book-entry form by DTC.
"Issuer" means the party named as such in this Agreement until a successor
replaces it pursuant to the applicable provisions of the Indenture and,
thereafter, means such successor.
"Issuer Order" means a written request or order signed in the name of the
Issuer by any Director of the Issuer and by any officer or other person duly
authorized by the Board of Directors, and delivered to the Book-Entry
Depositary.
"Letter of Representations" means the Letter of Representations to DTC
relating to the Debentures which will be entered into by the Book-Entry
Depositary and the Issuer upon the liquidation of the Trust.
"Participant" has the meaning specified in Section 2.02(b) herein.
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"Property Trustee" means the commercial bank or trust company identified as
the "Property Trustee" in the preamble to the Trust Agreement, or any successor
as therein provided.
"Officers' Certificate" means a certificate signed in the name of the
Issuer by any Director of the Issuer or by any officer or other person duly so
authorized by the Board of Directors and delivered to the Book-Entry Depositary.
"Opinion of Counsel" means a written opinion from legal counsel, who may be
an employee of or regular counsel for the Issuer or may be other counsel
reasonably acceptable to the Book-Entry Depositary.
"Registered Holder" means, with respect to any Book-Entry Interest, the
Person in whose name such Book-Entry Interest is registered on the Book-Entry
Register maintained by the Book-Entry Depositary.
"Responsible Officer", when used with respect to the Book-Entry Depositary,
means any authorized officer of the Book-Entry Depositary including any vice
president, assistant vice president, assistant secretary, treasurer, assistant
treasurer, or any other officer of the Book-Entry Depositary who customarily
performs functions similar to those performed by the Persons who at the time
shall be such officers, respectively, or to whom any depositary matter is
referred because of such officer's knowledge of and familiarity with the
particular subject.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Supplemental Indenture" mean the First Supplemental Indenture dated as of
May __, 1998, among the Issuer, the Guarantor, The Bank of New York, as trustee,
principal paying agent, registrar and transfer agent, and Banque Generale du
Luxembourg S.A., as paying agent and transfer agent, relating to the Debentures.
"Taxing Jurisdiction" means (i) any supranational federation to which the
United Kingdom belongs or (ii) the jurisdiction (or any political subdivision or
taxing authority thereof or therein) in which the Issuer or the Guarantor is
incorporated or created, as applicable, or in which the Issuer or the Guarantor
is managed or has a place of business.
"Trust" means Yorkshire Capital Trust I, a Delaware statutory business
trust.
"Trust Agreement" means the Amended and Restated Trust Agreement, dated as
of May __, 1998, among AEP Resources, Inc., as Depositor, the Guarantor, The
Bank of New York, as Property Trustee, The Bank of New York (Delaware), as
Delaware Trustee, and the administrative trustees named therein.
"Trust Securities" means the __% Trust Securities of the Trust.
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"Trustee" means The Bank of New York and its successors and assigns, as
trustee under the Indenture.
Section 1.02. Rules of Construction.
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) "including" means including without limitation; and
(d) words in the singular include the plural and words in the plural
include the singular.
ARTICLE II
Book-Entry Interests
Section 2.01. Deposit of the Global Debentures.
(a) The Book-Entry Depositary hereby accepts custody of the Global
Debentures from the Trustee and shall act as Book-Entry Depositary in accordance
with the terms of this Agreement. The Book-Entry Depositary shall hold such
Global Debentures at its Corporate Trust Office in the City of New York, at the
office of the paying agent in Luxembourg or at such place as it shall determine
with the consent of the Issuer and shall initially issue the Book-Entry
Interests to the Property Trustee to hold, pursuant to the Trust Agreement, for
the Trust.
(b) If pursuant to the Trust Agreement, the Trust is liquidated and
Book-Entry Interests are distributed to holders of Trust Securities in
liquidation of such holders' interests in the Trust, the Global Debenture held
by the Book-Entry Depositary and representing all of the Debentures will cease
to be held for the benefit of the Trust and will, for all purposes under this
Deposit Agreement, be held by the Book-Entry Depositary for the benefit of DTC
and its Participants, subject to Section 2.02, and all of the Book-Entry
Interests in the Global Debenture will, pursuant to the Trust Agreement, be
transferred by the Property Trustee to DTC.
Section 2.02. Receipt of Book-Entry Interests.
(a) Prior to the liquidation of the Trust pursuant to the Trust Agreement,
the Book-Entry Interests shall be held by the Property Trustee for benefit of
the Trust.
(b) To the extent the Book-Entry Interests are transferred to DTC as
contemplated by Section 2.01(b):
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1. Upon acceptance by DTC of the Book-Entry Interests for entry into its
book-entry settlement system in accordance with the terms of the
Letter of Representations, Interests in the Book-Entry Interests will
be recorded on and traded through DTC's book-entry system, and
ownership of such Interests shall be shown in, and the transfer of
such ownership shall be effected only through, records maintained by
(i) DTC or (ii) institutions that have accounts with DTC
("Participants"). Interests shall be transferable only as units
representing authorized denominations of the Debentures.
2. The Book-Entry Interests shall be issuable only to DTC or successors
of DTC or their respective nominees. Except as provided in Section
2.05, no beneficial owner of Interests shall be entitled to receive a
Definitive Registered Senior Note, and such beneficial owner's
Interests shall be reflected only in accordance with the procedures of
DTC as set forth in the Letter of Representations.
(c) Transfers of the Book-Entry Interests and Interests shall be subject to
the restrictions on transfer provided in the legend set forth on the face of the
Global Debentures relating thereto.
Section 2.03. Registration of Transfer of the Book-Entry Interests.
The Book-Entry Depositary agrees to maintain at the Book-Entry Depositary's
Corporate Trust Office the Book-Entry Register in which the Book-Entry
Depositary shall (x), prior to the liquidation of the Trust, record the Property
Trustee, as holder for the Trust, as the initial registered owner of the
Book-Entry Interests and (y) upon the liquidation of the Trust and transfer of
the Book-Entry Interests to DTC (i) record Cede & Co., as nominee of DTC, as the
registered owner of the Book-Entry Interests and (ii) record the registration
and transfer of the Book-Entry Interests. Notwithstanding anything contained
herein to the contrary, the Debentures (represented by the Book-Entry Interests)
shall be transferred only pursuant to the Trust Agreement for so long as the
Trust owns the Debentures. The Book-Entry Interests cannot be transferred unless
such transfer is recorded on the Book-Entry Register. The Book-Entry Depositary
shall not constitute the agent of the Issuer for any other purpose and, in
particular, it shall not constitute the agent of the Issuer in relation to any
payments it may make to the Depositary or be authorized to undertake any
obligations on behalf of the Issuer.
The foregoing paragraph shall not (i) impose an obligation on the
Book-Entry Depositary to record the ownership interests in or transfers of
Interests held by Participants or its successors or Indirect Participants or
(ii) restrict transfers of such Interests held by Participants or Indirect
Participants. The Book-Entry Depositary shall treat the Depositary as the
absolute owner of the Book-Entry Interests for all purposes whatsoever and shall
not be bound or affected by any notice to the contrary, other than an order of a
court having jurisdiction over the Book-Entry Depositary.
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Unless and until Global Debentures are exchanged in whole for Definitive
Registered Debentures pursuant to Section 2.05, the Book-Entry Depositary may
not register the transfer of the Book-Entry Interests except as a whole: (x)
prior to the liquidation of the Trust, by the Property Trustee to a successor
trustee as duly appointed under the Trust Agreement and (y) upon liquidation of
the Trust and transfer of the Book-Entry Interests to DTC, (i) by DTC to its
nominee; (ii) by a nominee of DTC to DTC or to another nominee of DTC; or (iii)
by DTC or any nominee to a successor depositary or a nominee of such successor
depositary.
Section 2.04. Transfer or Exchange of Global Debentures.
The Book-Entry Depositary shall hold the Global Debentures in custody for
the benefit of the Depositary Subject to Section 3.08, the Book-Entry Depositary
shall not transfer or lend the Global Debentures or any interest therein, except
that the Global Debentures, as a whole and with the Issuer's consent, may be
transferred (i) by the Book-Entry Depositary to a nominee of the Book-Entry
Depositary; (ii) by a nominee of the Book-Entry Depositary to the Book-Entry
Depositary or another nominee of the Book-Entry Depositary; or (iii) by the
Book-Entry Depositary or any such nominee to a successor Book-Entry Depositary
or a nominee of such successor Book-Entry Depositary. Notwithstanding the
foregoing, the Depositary may not under any circumstances request the Book-Entry
Depositary to surrender or deliver the Global Debentures to the Depositary.
Section 2.05. Issuance of Definitive Registered Debentures in Respect of
the Debentures.
Except as provided in this Section 2.05, no beneficial owner of Interests
shall be entitled to receive Definitive Registered Debentures.
The Book-Entry Depositary will promptly notify the Trustee and request in
writing that the Issuer issue and the Trustee authenticate and deliver
Definitive Registered Debentures in exchange for a series of Global Debentures,
as a whole but not in part, in such names and authorized denominations as the
Book-Entry Depositary shall specify, if: (i) after liquidation of the Trust and
transfer of the Book-Entry Interests to DTC, DTC notifies the Issuer and the
Book-Entry Depositary that it is unwilling or unable to continue to hold the
Book-Entry Interests related to the Global Debentures of such series or DTC at
any time ceases to be a "clearing agency" registered as such under the Exchange
Act and, in either case, a successor is not appointed by the Issuer within 120
days; (ii) the Book-Entry Depositary notifies the Issuer under Section 3.08
hereof that it is unwilling or unable to continue as Book-Entry Depositary and
no successor Book-Entry Depositary is appointed within 120 days; or (iii) the
Issuer in its sole discretion executes and delivers to the Trustee an Officers'
Certificate providing that the Global Debentures of such series shall be so
exchangeable. The Book-Entry Depositary agrees that in such event it will
promptly surrender the Global Debentures of such series held by it to the
Trustee in connection with such exchange and request in writing that the Issuer
execute and the Trustee authenticate and deliver without charge Definitive
Registered Debentures, having the same interest rate, if any, and maturity and
having the
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same terms as the Interests of the requesting owner, in authorized denominations
of $25 and integral multiples thereof and of an aggregate principal amount equal
to such owner's Interests and that such Global Debentures will be canceled upon
issuance of such Definitive Registered Debentures.
The Global Debentures shall also be exchangeable, in whole or in part, for
Definitive Registered Debentures if there shall have occurred and be continuing
an Event of Default with respect to the Debentures. In such circumstances,
beneficial owners of Interests relating to the Global Debentures may request in
writing that their Interests be exchanged for one or more Definitive Registered
Debentures (an "Optional Definitive Security Request"). Upon receipt of any such
written request, the Book-Entry Depositary shall (i) promptly surrender the
relevant Global Debenture to the Trustee and request in writing that the Issuer
execute and the Trustee authenticate and deliver without charge Definitive
Registered Debentures of the same series, having the same interest rate, if any,
and maturity and having the same terms as the Interests of the requesting owner,
in authorized denominations of $25 and integral multiples thereof and of an
aggregate principal amount equal to such owner's Interests; and (ii) if the
Global Debenture is being exchanged (x) as a whole, then the surrendered Global
Debenture shall be canceled by the Trustee, or (y) in part, then the principal
amount of the surrendered Global Debenture shall be reduced in accordance with
Section 2.09 herein.
All costs (taxes, governmental charges or otherwise) related to the
issuance of Definitive Registered Debentures will be borne by the Issuer subject
to any exceptions set forth in the Indenture.
Section 2.06. Redemption of the Debentures.
In the event that the Issuer exercises any right to redeem the Debentures
in whole or in part, the Book-Entry Depositary, as holder of the related series
of Global Debentures, shall, upon notice from the Issuer or the Trustee, as the
case may be, surrender the Global Debentures at a place of payment or such other
place as the Issuer may designate, and deliver such Global Debentures to the
Trustee for cancellation or for reduction of principal amount in accordance with
Sections 2.07 or 2.09 herein, as the case may be.
Section 2.07. Cancellation.
If the Global Debentures are surrendered for payment, for redemption in
whole or for exchange in whole for Definitive Registered Debentures to any
Person other than the Trustee, such Global Debentures shall be surrendered to
the Trustee for cancellation.
Section 2.08. Payments in Respect of the Book-Entry Interests and the
Global Debentures.
(a) Whenever the Book-Entry Depositary, as holder of the Global Debentures,
shall receive from the Trustee (or other paying agent under the Indenture) any
payment on the Global Debentures, such payments shall be distributed promptly to
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the Depositary on the payment date for the Global Debentures. So long as DTC is
the Depositary, such payments shall be made in accordance with the Letters of
Representations. The payment date for the Book-Entry Interests for payment of
any principal or interest shall be the same date as the payment date for the
related Global Debentures.
(b) The Book-Entry Depositary will forward to the Issuer or its agents such
information from its records as the Issuer may reasonably request in writing to
enable the Issuer or its agents to file necessary reports with governmental
agencies, and the Book-Entry Depositary, the Issuer or their agents may (but
shall not be required to) file any such reports necessary to obtain benefits
under any applicable tax treaties for the Depositary or the beneficial owners of
Interests.
(c) Notwithstanding any other provisions of this Agreement, the Book-Entry
Depositary shall be required to pay to the Depositary only amounts (including
Additional Interest and Additional Amounts, if any) received by the Book-Entry
Depositary from the Issuer under the Global Debentures or the Guarantor pursuant
to the Guarantee.
(d) Neither the Issuer, the Guarantor nor any agent of the Issuer or the
Guarantor (including but not limited to any paying agent) will have any
responsibility or liability for any aspect relating to payments (including
payments of Additional Interest and Additional Amounts, if any) made or to be
made by the Book-Entry Depositary to the Depositary in respect of the Global
Debentures or the Book-Entry Interests. None of the Issuer, the Guarantor, the
Trustee, the Book-Entry Depositary or any agent of any of the foregoing will
have any responsibility or liability for any aspect relating to payments
(including payments of Additional Interest and Additional Amounts, if any) made
or to be made by DTC on account of a Participant's or Indirect Participant's
ownership of an Interest or for maintaining, supervising or reviewing any
records relating to a Participant's Interests.
Section 2.09. Change in Principal Amount of Global Debentures.
Whenever the principal amount at maturity of the Global Debentures held by
the Book-Entry Depositary is changed by the Trustee as a result of partial
redemption or otherwise, the Book-Entry Depositary shall record on the
Book-Entry Register a corresponding change in the principal amount of the
related Book-Entry Interests and notify the Depositary of such corresponding
change.
Section 2.10. Record Date.
Whenever any payment is to be made in respect of the Global Debentures or
the Book-Entry Depositary shall receive notice of any action to be taken in
respect of the Book-Entry Interests or Global Debentures, or whenever the
Book-Entry Depositary otherwise deems it appropriate in respect of any other
matter, the Book-Entry Depositary shall fix a record date for determination of
the Depositary who shall be entitled to receive payment in respect of the
Book-Entry Interests corresponding to such Global Debentures
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or to take any such action or to act in respect of any such matter. Subject to
the provisions of this Agreement, only the Depositary who is registered on the
Book-Entry Register at the close of business on such record date shall be
entitled to receive any such payment, to give instructions as to such action or
to act in respect of any such matter.
Section 2.11. Action in Respect of the Book-Entry Interests or the Global
Debentures.
(a) Not later than 10 days from receipt by the Book-Entry Depositary of
notice of any solicitation of consents or request for a waiver or other action
with respect to the Book-Entry Interests or the Global Debentures under this
Agreement or the Indenture, the Book-Entry Depositary shall mail to the
Depositary a notice containing (i) such information as is contained in such
notice, (ii) a statement of the record date with respect to such consent, waiver
or other action, (iii) a statement that, on or prior to a specified date (which
specified date may be set no later than 180 days after the record date) (the
"Expiration Date") the Depositary will be entitled, subject to the provisions of
or governing the Book-Entry Interests or Global Debentures, as the case may be,
to instruct the Book-Entry Depositary as to such consent, waiver or such action,
and (iv) a statement specifying the manner in which such instructions may be
given. Upon receipt by the Book-Entry Depositary of instructions from the
Depositary on or prior to the Expiration Date and in the specified manner, the
Book-Entry Depositary shall endeavor (insofar as practicable and permitted under
the provisions of or governing the Book-Entry Interests or Global Debentures, as
the case may be), to take such measures regarding the requested consent, waiver
or other action in respect of such Book-Entry Interests or Global Debentures, as
the case may be, as shall be in accordance with any instructions set forth in
such request. The Book-Entry Depositary shall not itself exercise any discretion
in the granting of consents or waivers or the taking of any other action in
respect of the Book-Entry Interests or Global Debentures, as the case may be.
(b) The Depositary may direct the time, method and place of conducting any
proceeding for any remedy available to the Book-Entry Depositary or of
exercising any trust or power conferred on the Book-Entry Depositary. However,
the Book-Entry Depositary may refuse to follow any direction that conflicts with
law or this Agreement or the Indenture or, subject to Section 3.01 hereof, that
the Book-Entry Depositary determines would involve it in personal liability.
Section 2.12. Reports.
The Book-Entry Depositary shall immediately (and in no event later than 10
days from receipt) send to the Depositary a copy of any notices, reports and
other communications received by it relating to the Issuer, the Debentures or
the Book-Entry Interests.
Section 2.13. Additional Amounts.
All payments in respect of Global Debentures made by the Book-Entry
Depositary pursuant to this Agreement shall be made free and clear of, and
without
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deduction or withholding for, or on account of, any present or future taxes,
duties, assessments or governmental charges of whatever nature imposed, levied,
collected, withheld or assessed by or within a Taxing Jurisdiction or by or
within any political subdivision thereof or any authority therein or thereof
having power to tax ("Gross-Up Taxes"), unless the withholding or deduction is
then required by law. In the event that such withholding or deduction is
required to be made, the Book-Entry Depositary shall pay to the Depositary such
Additional Amounts that have been paid by the Issuer or the Guarantor to the
Book-Entry Depositary as will result in the payment to the Depositary of the
amount that would otherwise have been receivable by such party, as appropriate,
in the absence of such withholding or deduction; provided, that Additional
Amounts need only be paid to the Depositary to the extent that payments of
Additional Amounts from the Issuer or the Guarantor are required under Section
3.12 of the Indenture.
At least 10 days prior to the first interest payment date, and at least 10
days prior to each succeeding interest payment date if there has been any change
with respect to the matters set forth in the below-mentioned Officers'
Certificate, the Issuer will furnish the Book-Entry Depositary with an Officers'
Certificate instructing the Book-Entry Depositary whether such payment of
principal of, premium, if any, or interest on such Book-Entry Interests shall be
made to the Depositary without deduction or withholding for or on account of any
Gross-Up Taxes. If any such deduction or withholding shall be required, prior to
such interest payment date the Issuer will furnish the Book-Entry Depositary
with an Officers' Certificate that specifies the amount required to be deducted
or withheld on such payment. The Issuer shall indemnify the Book-Entry
Depositary, its officers, directors and employees for, and hold it harmless
against, any loss, liability or expense reasonably incurred without negligence,
willful misconduct or bad faith on its part arising out of or in connection with
actions taken or omitted by it in reliance on any Officers' Certificate
furnished to it pursuant to this Section 2.13.
Section 2.14. Changes Affecting Global Debentures.
Upon any reclassification of the Global Debentures, or upon any
recapitalization, reorganization, merger or consolidation or sale of assets
affecting the Issuer or to which it is a party, or upon an exchange of the
Global Debentures pursuant to the Indenture, any securities that shall be
received by the Book-Entry Depositary in exchange for, in conversion of or in
respect of the Global Debentures shall be treated as new Global Debentures under
this Agreement and the Book-Entry Interests shall thenceforth represent
beneficial interests in such new Global Debentures so received.
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ARTICLE III
The Book-Entry Depositary
Section 3.01. Certain Duties and Responsibilities.
(a) The Book-Entry Depositary undertakes to perform such duties and only
such duties as are specifically set forth in this Agreement and no implied
covenants or obligations shall be read into this Agreement against the
Book-Entry Depositary.
(b) In the absence of bad faith on its part, the Book-Entry Depositary may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon certificates or opinions furnished to the
Book-Entry Depositary and conforming to the requirements of this Agreement, but
in the case of any such certificates or opinions which by any provision hereof
are specifically required to be furnished to the Book-Entry Depositary, the
Book-Entry Depositary shall examine the same to determine whether or not they
conform to the requirements of this Agreement.
(c) No provision of this Agreement shall be construed to relieve the
Book-Entry Depositary from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct, except that:
(i) the Book-Entry Depositary shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Book-Entry
Depositary, unless the Book-Entry Depositary was negligent in ascertaining
the pertinent facts; and
(ii) the Book-Entry Depositary shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Depositary relating to the time, method and place of
conducting any proceeding for any remedy available to the Book-Entry
Depositary, or exercising any power conferred upon the Book-Entry
Depositary, under this Agreement or the Indenture.
(d) No provision of this Agreement shall require the Book-Entry Depositary
to spend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of its
rights or powers, if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk or liability
satisfactory to the Book-Entry Depositary has not been reasonably assured to it.
(e) Whether or not therein expressly so provided, every provision of this
Agreement relating to the conduct or affecting the liability of or affording
protection to the Book-Entry Depositary shall be subject to the provisions of
this Section 3.01.
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Section 3.02. Events of Default.
(a) Within 90 days after the occurrence of any Event of Default of which a
Responsible Officer of the Book-Entry Depositary assigned to its corporate trust
department has actual knowledge, the Book-Entry Depositary shall transmit by
mail to the Depositary in the manner provided in Section 4.02 hereof, notice of
such Event of Default, unless such Event of Default shall have been cured or
waived.
(b) Upon the occurrence of any Event of Default or in connection with any
other right of the holder of the Global Debentures under the Indenture, and if
requested by notice in writing by the Registered Holder, the Book-Entry
Depositary shall take such action as shall be requested in such notice in
respect of the Global Debentures.
Section 3.03. Certain Rights of Book-Entry Depositary.
Subject to the provisions of Section 3.01 hereof:
(a) the Book-Entry Depositary may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document believed by it
to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request or direction of the Issuer mentioned herein shall be
sufficiently evidenced by an Officers' Certificate or Issuer Order or as
otherwise expressly provided herein and any resolution of the Board of Directors
may be sufficiently evidenced by a Board Resolution;
(c) the Book-Entry Depositary may consult with counsel, and the written
advice of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon;
(d) the Book-Entry Depositary shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document, but
the Book-Entry Depositary, in its discretion, may make further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Book-Entry Depositary shall determine to make such further inquiry or
investigation, it shall be entitled upon reasonable prior request and during
normal business hours to examine the books, records and premises of the Issuer,
personally or by agent or attorney;
(e) the Book-Entry Depositary may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys, but the Book-Entry Depositary shall be responsible for any
misconduct or negligence on the part of any such agent or attorney appointed by
it hereunder;
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(f) the Book-Entry Depositary shall be under no obligation to expend or
risk its own funds or to exercise, at the request or direction of the
Depositary, any of the rights or powers vested in it by this Agreement or the
Indenture unless the Depositary shall have offered to the Book-Entry Depositary
security or indemnity satisfactory to the Book-Entry Depositary against the
costs, expenses and liabilities that might be incurred by it in compliance with
such request or direction;
(g) whenever in the administration of its duties under this Agreement the
Book-Entry Depositary shall deem it desirable that a matter be proved or
established prior to taking or suffering or omitting any action hereunder, the
Book-Entry Depositary (unless other evidence be herein specifically prescribed)
may, in the absence of negligence or bad faith on its part, rely upon an
Officers' Certificate.
Section 3.04. Not Responsible for Recitals or Issuance of Debentures.
The recitals contained in the Indenture and in the Debentures, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Issuer and the Book-Entry Depositary assumes no responsibility for their
correctness. The Book-Entry Depositary makes no representations as to the
validity or sufficiency of this Agreement or of the Debentures. The Book-Entry
Depositary shall not be accountable for the use or application by the Issuer of
the proceeds with respect to the Debentures.
Section 3.05. Money Held in Trust.
Money held by the Book-Entry Depositary in trust hereunder need not be
segregated from other funds held by the Book-Entry Depositary, except to the
extent required by law. The Book-Entry Depositary shall be under no obligation
to invest or pay interest on any money received by it hereunder, except as
otherwise agreed in writing with the Issuer. Any interest accrued on funds
deposited with the Book-Entry Depositary under this Agreement shall be paid to
the Issuer from time to time and the Depositary shall have no claim to any such
interest.
Section 3.06. Compensation and Reimbursement.
The Issuer agrees:
(a) to pay to the Book-Entry Depositary from time to time such
compensation as is agreed upon in writing for services rendered by it
hereunder;
(b) except as otherwise expressly provided herein, to reimburse the
Book-Entry Depositary upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Book-Entry Depositary in
accordance with any provision of this Agreement (including the reasonable
compensation and the reasonable expenses and disbursements of its agents
and counsel, which compensation, expenses and disbursements shall be set
forth in sufficient written detail to the satisfaction of the Issuer),
except any such expense, disbursement or advance as may be attributable to
its or their negligence, willful misconduct or bad faith; and
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(c) to indemnify the Book-Entry Depositary for, and to hold it
harmless against, any loss, liability or expense incurred without
negligence, bad faith or willful misconduct on its part arising out of or
in connection with the acceptance or administration of this Agreement and
its duties hereunder, including the costs and expenses of defending itself
against any claim of liability in connection with the exercise or
performance of any of its powers or duties hereunder. The indemnity
provided by this Section 3.06(c) shall survive the satisfaction and
discharge of this Agreement pursuant to Section 4.11 hereof.
In case any claim shall be made or action brought against the Book-Entry
Depositary for any reason for which indemnity may be sought against the Issuer
in accordance with paragraph (c) above, the Book-Entry Depositary shall promptly
notify the Issuer in writing setting forth the particulars of such claim or
action and the Issuer may assume the defense thereof. In the event that the
Issuer elects to assume such defense and select such counsel, the Book-Entry
Depositary shall have the rights to employ its own counsel, but, in any such
case, the fees and expenses of such counsel shall be at the expense of the
Book-Entry Depositary, unless (i) the Issuer agreed in writing to pay such fees
and expenses or (ii) the named parties to any such action (including any
impleaded parties) include both the Book-Entry Depositary and the Issuer and the
Book-Entry Depositary shall have been advised by its counsel that a conflict of
interest between the Book-Entry Depositary and the Issuer may arise (and
Issuer's counsel shall have concurred with such advise) and for this reason it
is not desirable for the Issuer's counsel to represent both the Book-Entry
Depositary and the Issuer (it being understood, however, that the Issuer shall
not, in connection with any one such action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for reasonable fees and expenses
of more than one separate firm of attorneys for the Book-Entry Depositary (plus
any local counsel retained by the Book-Entry Depositary in their reasonable
judgement), which firm shall be designated in writing by the Book-Entry
Depositary). The Book-Entry Depositary agrees to give all assistance reasonably
required in connection with the conduct of any such claim or action.
Section 3.07. Book-Entry Depositary Required; Eligibility.
At all times when there is a Book-Entry Depositary hereunder, such
Book-Entry Depositary shall be a corporation organized and doing business under
the laws of the United States of America, any state thereof or the District of
Columbia, having, together with its parents, a combined capital and surplus of
at least $50,000,000, subject to supervision or examination by Federal, state or
District of Columbia authority and willing to act on reasonable terms. Such
corporation shall have its principal place of business in the Borough of
Manhattan, The City of New York, if there be such a corporation in such location
willing to act upon reasonable and customary terms and conditions. If such
corporation, or its parent, publishes reports of condition at least annually,
pursuant to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section 3.07, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. The
Book-Entry Depositary
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hereunder shall at all times be the Trustee under the Indenture, subject to
receipt of an Opinion of Counsel that the same Person is precluded by law from
acting in such capacities. If at any time the Book-Entry Depositary shall cease
to be eligible in accordance with the provisions of this Section 3.07, it shall
resign immediately in the manner and with the effect hereinafter specified in
this Article.
Section 3.08. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Book-Entry Depositary and no
appointment of a successor Book-Entry Depositary pursuant to this Article shall
become effective until (i) the acceptance of appointment by the successor
Book-Entry Depositary in accordance with the applicable requirements of Section
3.09 hereof or (ii) the issuance of Definitive Registered Debentures for all
Global Debentures in accordance with Section 2.05 hereof and the Indenture.
(b) The Book-Entry Depositary may at any time resign as Book-Entry
Depositary with respect to the Global Debentures by giving written notice
thereof to the Issuer and the Depositary, in accordance with Section 4.01 and
Section 4.02 hereof, 60 days prior to the effective date of such resignation.
The Book-Entry Depositary may be removed at any time upon 90 days' notice by the
filing with it of an instrument in writing signed on behalf of the Issuer and
specifying such removal and the date when it is intended to become effective. If
the instrument of acceptance by a successor Book-Entry Depositary required by
Section 3.09 hereof shall not have been delivered to the Book-Entry Depositary
within 30 days after the giving of such notice of resignation or removal, the
resigning Book-Entry Depositary may petition any court of competent jurisdiction
for the appointment of a successor Book-Entry Depositary.
(c) If at any time:
(i) the Book-Entry Depositary shall cease to be eligible under Section
3.07 hereof, or shall cease to be eligible as Trustee under the Indenture,
and shall fail to resign after written request therefor by the Issuer or by
the Depositary, or
(ii) the Book-Entry Depositary shall become incapable of acting with
respect to the Book-Entry Interests or shall be adjudged a bankrupt or
insolvent, or a receiver or liquidator of the Book-Entry Depositary or of
its property shall be appointed or any public officer shall take charge or
control of the Book-Entry Depositary or of its property or affairs for the
purpose of rehabilitation, conservation or liquidation.
then, in any such case, (i) the Issuer, by Board Resolution, may remove the
Book-Entry Depositary and appoint a successor Book-Entry Depositary, and (ii) if
the Issuer shall fail to remove such Book-Entry Depositary and appoint a
successor Book-Entry Depositary within 30 days of any such event, then the
Depositary may, on behalf of itself and all others similarly situated, petition
any court of competent jurisdiction for the removal of the Book-Entry Depositary
or Book-Entry Depositaries and the appointment of a
15
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successor Book-Entry Depositary, unless Definitive Registered Debentures have
been issued in accordance with the Indenture.
(d) If the Book-Entry Depositary shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Book-Entry
Depositary for any cause, the Issuer, by Board Resolution, shall promptly
appoint a successor Book-Entry Depositary (other than the Issuer) and shall
comply with the applicable requirements of Section 3.09 hereof. If no successor
Book-Entry Depositary with respect to the Global Debentures shall have been so
appointed by the Issuer and accepted appointment in the manner required by
Section 3.09 within 120 days of any such resignation, removal, incapacity or
vacancy, then the Depositary may request that Definitive Registered Debentures
in such names and denominations as the Depositary shall instruct in writing with
respect to such Global Debentures be issued. The Book-Entry Depositary will
thereupon surrender such Global Debentures to the Trustee for cancellation and
the Trustee shall distribute such Definitive Registered Debentures in accordance
with the instructions of the Depositary.
(e) The Issuer shall give, or shall cause such successor Book-Entry
Depositary to give, notice of each resignation and each removal of a Book-Entry
Depositary and each appointment of a successor Book-Entry Depositary to the
Depositary in accordance with Section 4.02 hereof. Each notice shall include the
name of the successor Book-Entry Depositary and the address of its Corporate
Trust Office.
Section 3.09. Acceptance of Appointment by Successor.
(a) In case of the appointment hereunder of a successor Book-Entry
Depositary, every such successor Book-Entry Depositary so appointed shall
execute, acknowledge and deliver to the Issuer and to the retiring Book-Entry
Depositary an instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Book-Entry Depositary shall become
effective and such successor Book-Entry Depositary, without any further act,
deed or conveyance, shall become vested with all the rights, powers, agencies
and duties of the retiring Book-Entry Depositary, with like effect as if
originally named as Book-Entry Depositary hereunder; but, on the request of the
Issuer or the successor Book-Entry Depositary, such retiring Book-Entry
Depositary shall (i) execute and deliver an instrument transferring to such
successor Book-Entry Depositary all the rights and powers of the retiring
Book-Entry Depositary and (ii) duly assign, transfer and deliver to such
successor Book-Entry Depositary all property and money held by such retiring
Book-Entry Depositary hereunder. Any retiring Book-Entry Depositary shall,
nonetheless, retain a prior claim upon all property or funds held or collected
by such Book-Entry Depositary to secure any amounts then due it pursuant to
Section 3.06 hereof except to the extent that such prior claim and security
would breach or constitute a default under the Indenture or Debentures.
(b) Upon request of any such successor Book-Entry Depositary, the Issuer
shall execute any and all instruments for more fully and certainly vesting in
and confirming to such successor Book-Entry Depositary all such rights, powers
and agencies referred to in paragraph (a) of this Section 3.09.
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(c) No successor Book-Entry Depositary shall accept its appointment unless
at the time of such acceptance such successor Book-Entry Depositary shall be
eligible under this Article.
(d) Upon acceptance of appointment by any successor Book-Entry Depositary
as provided in this Section 3.09, the Issuer shall give notice thereof to the
Depositary in accordance with Section 4.02 hereof. If the acceptance of
appointment is substantially contemporaneous with the resignation of the
Book-Entry Depositary, then the notice called for by the preceding sentence may
be combined with the notice called for by Section 3.08(b) hereof. If the Issuer
fails to give such notice within 10 days after acceptance of appointment by the
successor Book-Entry Depositary, the successor Book-Entry Depositary shall cause
such notice to be given at the expense of the Issuer.
Section 3.10. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Book-Entry Depositary may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Book-Entry Depositary
shall be a party, or any corporation succeeding to all or substantially all the
corporate trust business of the Book-Entry Depositary, shall be the successor of
the Book-Entry Depositary hereunder, without the execution of filing of any
paper or any further act on the part of any of the parties hereto.
Section 3.11. Letter of Representations.
The Book-Entry Depositary agrees to enter into and comply with all of the
provisions set forth in the Letters of Representations so long as DTC is the
holder of the Book-Entry Interests.
ARTICLE IV
Miscellaneous Provisions
Section 4.01. Notices to Book-Entry Depositary or Issuer.
Any request, demand, authorization, direction, notice, consent, or waiver
or other document provided or permitted by this Agreement to be made upon, given
or furnished to, or filed with,
(a) the Book-Entry Depositary by the Depositary, by the Trustee or the
Issuer shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if made, given, furnished or filed in writing
and personally delivered or mailed, first-class postage prepaid, to the
Book-Entry Depositary at its Corporate Trust Office, Attention: Corporate
Trust Trustee Administration Department, or at any other address previously
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furnished in writing by the Book-Entry Depositary to the Depositary, the
Trustee and the Issuer, or
(b) the Issuer, by the Book-Entry Depositary or by DTC shall be sufficient
for every purpose hereunder (unless otherwise herein expressly provided) if
made, given, furnished or filed in writing and personally delivered or
mailed, first-class postage prepaid to Yorkshire Power Finance Limited, c/o
Yorkshire Power Group Limited, Wetherby Road, Scarcroft, Leeds LS14 3HS,
England, Attention: Finance Director, or at any other address previously
furnished in writing to the Book-Entry Depositary by the Issuer.
Section 4.02. Notice to the Depositary; Waiver.
Where this Agreement provides for notice to the Depositary of any event,
such notice shall be sufficiently given (unless otherwise herein expressly
provided or as provided in the Letter of Representations) if in writing and
mailed, first-class postage prepaid, to the Depositary at the address notified
to the Book-Entry Depositary, in each case not later than the latest date, and
not earlier than the earliest date, prescribed for the giving of such notice.
Where this Agreement provides for notice in any manner, such notice may be
waived in writing by the Person entitled to receive such notice, either before
or after the event, and such waiver shall be the equivalent of such notice.
Waivers of notice by the Depositary shall be filed with the Book-Entry
Depositary, but such filing shall not be a condition precedent to the validity
of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by reason of
any other cause it shall be impracticable to give such notice by mail, then such
notification as shall be made with the approval of the Book-Entry Depositary
shall constitute a sufficient notification for every purpose hereunder.
Section 4.03. Effect of Headings and Table of Contents.
The Article and Section headings herein are for convenience only and shall
not affect the construction hereof.
Section 4.04. Successors and Assign.
All covenants and agreements in this Agreement and the Debentures by the
Issuer shall bind its successors and assigns, whether so expressed or not.
Section 4.05. Separability Clause.
In case any provision in this Agreement or in the Debentures shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions hereof and thereof shall not in any way be affected or
impaired thereby.
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Section 4.06. Benefits of Agreement.
Nothing in this Agreement, the Debentures or the Indenture, express or
implied, shall give to any Person, other than the parties hereto and their
successors hereunder, any benefits or any legal or equitable right, remedy or
claim under this Agreement; provided, that the Depositary and the beneficial
owners of Interests shall be intended third-party beneficiaries of this
Agreement. The Depositary and beneficial owners from time to time of Interests
in the Book-Entry Interests shall be parties to this Agreement and shall be
bound by all of the terms and conditions hereof and of the Indenture and the
Debentures, by their acceptance of delivery of the Interests or beneficial
interests therein.
Section 4.07. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES
OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
Section 4.08. Jurisdiction.
(a) The Issuer agrees that any legal suit, action or proceeding against the
Issuer brought by the Book-Entry Depositary arising out of or based upon this
Agreement may be instituted in any state or Federal court in the Borough of
Manhattan, The City of New York, and waives any objection which it may now or
hereafter have to the laying of venue of any such proceeding and, until the
satisfaction and discharge of this Agreement pursuant to Section 4.11 hereof,
irrevocably submits to the nonexclusive jurisdiction of such courts in any suit,
action or proceeding.
(b) The Issuer has appointed CT Corporation System at 1633 Broadway, New
York, New York 10019, as its authorized agent (the "Authorized Agent") upon whom
process may be served in any legal suit, action or proceeding arising out of or
based upon this Agreement which may be instituted in the Supreme Court of New
York, New York County of the United States District Court for the Southern
District of New York by DTC or the Book-Entry Depositary, and expressly accepts
the nonexclusive jurisdiction of any such court in respect of any such action.
Such appointment shall be irrevocable. Service of process upon the Authorized
Agent shall be deemed, in every respect, effective service of process upon the
Issuer. Notwithstanding the foregoing, any action based on this Agreement may be
instituted by the Book-Entry Depositary in any competent court in England or the
Cayman Islands.
(c) To the extent that the Issuer may in any jurisdiction claim for itself
or its assets immunity (to the extent such immunity may now or hereafter exist,
whether on the grounds of sovereign immunity or otherwise) from suit, execution,
attachment (whether in aid of execution, before judgment or otherwise) or other
legal process (whether through service or notice or otherwise), and to the
extent that in any such
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jurisdiction there may be attributed to itself or its assets such immunity
(whether or not claimed), the Issuer irrevocably agrees with respect to any
matter arising under this Deposit Agreement for the benefit of the Registered
Holder from time to time of the Book-Entry Interests, not to claim, and
irrevocably waives, such immunity to the full extent permitted by the laws of
such jurisdiction.
Section 4.09. Counterparts.
This Agreement may be executed in any number of counterparts by the parties
hereto on separate counterparts, each of which, when so executed and delivered,
shall be deemed an original, but all such counterparts shall together constitute
one and the same instrument.
Section 4.10. Inspection of Agreement.
A copy of this Agreement shall be available at all reasonable times during
normal business hours at the Corporate Trust Office of the Book-Entry Depositary
for inspection by the Depositary.
Section 4.11. Satisfaction and Discharge.
This Agreement upon Issuer Order shall cease to be of further effect, and
the Book-Entry Depositary, at the expense of the Issuer shall execute proper
instruments acknowledging satisfaction and discharge of this Agreement, when (i)
either (a) the Indenture has been satisfied and discharged pursuant to the
provisions thereof or (b) Definitive Registered Debentures have been issued and
the Global Debentures have been canceled in accordance with the provisions of
Section 2.07 and the Indenture, (ii) the Issuer has paid or caused to be paid
all sums payable hereunder by the Issuer and (iii) the Issuer has delivered to
the Book-Entry Depositary an Officers' Certificate and an Opinion of Counsel,
stating that all conditions precedent herein provided relating to the
satisfaction and discharge of this Agreement have been complied with.
Section 4.12. Amendments.
The Issuer and the Book-Entry Depositary may amend this Agreement without
the consent of the Depositary:
(a) to cure any formal defect, omission, inconsistency or ambiguity
herein;
(b) to add to the covenants and agreements of the Issuer or the
Book-Entry Depositary ;
(c) to effect the assignment of the Book-Entry Depositary's rights and
duties to a qualified successor as provided herein;
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(d) to comply with any requirements of the Securities Act, the
Exchange Act, the Investment Company Act of 1940, as amended, the Trust
Indenture Act or any other applicable securities laws;
(e) to modify this Agreement in connection with an amendment to the
Indenture that does not require the consent of the Depositary; or
(f) to modify, alter, amend or supplement this Agreement in any other
respect not inconsistent with this Agreement which, in the opinion of
counsel acceptable to the Issuer, is not materially adverse to the
Depositary or the beneficial owners of Interests.
Except as set forth in this Section 4.12, no amendment which materially
adversely affects the Depositary or beneficial owners of Interests may be made
to this Agreement without the consent of the Depositary or such beneficial
owner.
Section 4.13. Book-Entry Depositary To Sign Amendments.
The Book-Entry Depositary shall sign any amendment authorized pursuant to
Section 4.12 hereof if the amendment does not materially adversely affect the
rights, duties, liabilities or immunities of the Book-Entry Depositary. If it
does, the Book-Entry Depositary may, but need not sign it.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
YORKSHIRE POWER FINANCE LIMITED
By:
---------------------------------
Name:
Title:
THE BANK OF NEW YORK, as
Book-Entry Depositary
By:
---------------------------------
Name:
Title:
22
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EXHIBIT 5.1
[Letterhead of Richards, Layton & Finger, P.A.]
May 1, 1998
Yorkshire Capital Trust I
1 Riverside Plaza
Columbus, Ohio 43215
Re: Yorkshire Capital Trust I
-------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for AEP Resources, Inc., an
Ohio corporation (the "Company"), and Yorkshire Capital Trust I, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated February 4, 1998 (the
"Certificate"), as filed in the office of the Secretary of State of the State of
Delaware (the "Secretary of State") on February 4, 1998;
(b) The Trust Agreement of the Trust, dated as of February 4, 1998,
among the Company, as depositor, and the trustees of the Trust named therein;
(c) Amendment No. 1 to the Registration Statement (the "Registration
Statement") on Form S-1, including a preliminary prospectus (the "Prospectus"),
relating to the __% Trust Securities of the Trust representing preferred
undivided beneficial interests in the assets of the Trust (each, a "Trust
Security" and collectively, the "Trust Securities"), as proposed to be filed by
the Company and the Trust with the Securities and Exchange Commission on or
about May 1, 1998;
(d) A form of Amended and Restated Trust Agreement of the Trust, to be
entered into among the Company, as depositor, the trustees of the Trust named
therein, Yorkshire Power Group Limited, as control party, and the holders, from
time to time, of undivided beneficial interests in the assets of the Trust
(including Exhibits A and C thereto) (the "Trust Agreement"), attached as an
exhibit to the Registration Statement; and
<PAGE>
(e) A Certificate of Good Standing for the Trust, dated May 1, 1998,
obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined are
used as defined in the Trust Agreement.
For purposes of this opinion, we have not reviewed any documents other
than the documents listed in paragraphs (a) through (e) above. In particular,
we have not reviewed any document (other than the documents listed in paragraphs
(a) through (e) above) that is referred to in or incorporated by reference into
the documents reviewed by us. We have assumed that there exists no provision in
any document that we have not reviewed that is inconsistent with the opinions
stated herein. We have conducted no independent factual investigation of our
own but rather have relied solely upon the foregoing documents, the statements
and information set forth therein and the additional matters recited or assumed
herein, all of which we have assumed to be true, complete and accurate in all
material respects.
With respect to all documents examined by us, we have assumed (i) the
authenticity of all documents submitted to us as authentic originals, (ii) the
conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the Trust
Agreement and the Certificate are in full force and effect and have not been
amended, (ii) except to the extent provided in paragraph 1 below, the due
creation or due organization or due formation, as the case may be, and valid
existence in good standing of each party to the documents examined by us under
the laws of the jurisdiction governing its creation, organization or formation,
(iii) the legal capacity of natural persons who are parties to the documents
examined by us, (iv) that each of the parties to the documents examined by us
has the power and authority to execute and deliver, and to perform its
obligations under, such documents, (v) the due authorization, execution and
delivery by all parties thereto of all documents examined by us, (vi) the
receipt by each Person to whom a Trust Security is to be issued by the Trust
(collectively, the "Trust Security Holders") of a Trust Securities Certificate
for such Trust Security and the payment for the Trust Security acquired by it,
in accordance with the Trust Agreement and the Registration Statement, and (vii)
that the Trust Securities are issued and sold to the Trust Security Holders in
accordance with the Trust Agreement and the Registration Statement. We have not
participated in the preparation of the Registration Statement and assume no
responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
<PAGE>
Based upon the foregoing, and upon our examination of such questions
of law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act.
2. The Trust Securities will represent valid and, subject to the
qualifications set forth in paragraph 3 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
3. The Trust Security Holders, as beneficial owners of the Trust,
will be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware. We note that the Trust Security
Holders may be obligated to make payments as set forth in the Trust Agreement.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. In addition,
we hereby consent to the use of our name under the heading "Legal Opinions" in
the Prospectus. In giving the foregoing consents, we do not thereby admit that
we come within the category of Persons whose consent is required under Section 7
of the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
/s/ RICHARDS, LAYTON & FINGER, P.A.
BJK
<PAGE>
Exhibit 5.2
May 1, 1998
Yorkshire Power Group Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Yorkshire Power Finance Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We are acting as United States counsel to Yorkshire Power Group Limited
("Yorkshire") and Yorkshire Power Finance Limited ("Yorkshire Finance") in
connection with the preparation of a Registration Statement on Form S-1,
including a preliminary prospectus, filed with the Securities and Exchange
Commission (the "Commission") on March 13, 1998 (the "Registration Statement"),
contemplating the registration under the Securities Act of 1933, as amended (the
"Act"), of (1) Junior Subordinated Deferrable Interest Debentures (the "Junior
Subordinated Debentures") to be issued by Yorkshire Finance to Yorkshire Capital
Trust I (the "Trust"), (2) Trust Securities (liquidation amount $25 per Trust
Security) to be issued by the Trust, (3) Yorkshire's Trust Securities Guarantee
(as defined in the Registration Statement) with respect to such Trust Securities
and (4) Yorkshire's Debentures Guarantee (as defined in the Registration
Statement) with respect to the Junior Subordinated Debentures. The Junior
Subordinated Debentures and the Debentures Guarantee will be issued pursuant to
a subordinated indenture, as supplemented, among Yorkshire, Yorkshire Finance,
and the trustee named therein (the "Subordinated Indenture") and the Trust
Securities Guarantee will be issued pursuant to a guarantee agreement between
Yorkshire and the trustee named therein (the "Trust Securities Guarantee
Agreement"), in each case in the respective forms filed as exhibits to the
Registration Statement.
We are of the opinion that, upon compliance with the pertinent provisions
of the Act, the Trust Indenture Act of 1939, as amended, and the Public Utility
Holding Company Act of 1935, as amended, upon compliance with applicable
securities or blue sky laws of various jurisdictions, upon the adoption of
appropriate resolutions by each of the Directors of Yorkshire Finance or a duly
authorized committee thereof and the
<PAGE>
Directors of Yorkshire or a duly authorized committee thereof, when the
Subordinated Indenture has been duly executed and delivered by the proper
officers of Yorkshire, Yorkshire Finance and the trustee named therein, when the
Trust Securities Guarantee Agreement has been duly executed and delivered by the
proper officers of Yorkshire and the trustee named therein, and when the Junior
Subordinated Debentures, the Debentures Guarantee and the Trust Securities
Guarantee have been executed, authenticated and delivered in accordance with the
terms of the Subordinated Indenture and the Trust Securities Guarantee
Agreement, as the case may be, (i) the Debentures Guarantee and the Trust
Securities Guarantee will be valid, binding and legal obligations of Yorkshire
(subject to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws relating to or affecting creditors' rights generally and to
general principles of equity, whether considered in a proceeding at law or in
equity) and (ii) the Junior Subordinated Debentures will be valid, binding and
legal obligations of Yorkshire Finance (subject to applicable bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally and to general principles of equity,
whether considered in a proceeding at law or in equity).
We are members of the State Bar of New York and we do not express any
opinion herein concerning any law other than the law of the State of New York,
the federal law of the United States and, with respect to the validity of the
Junior Subordinated Debentures, the laws of the Cayman Islands. In rendering the
opinion expressed in clause (ii) immediately above with respect to the validity
of the Junior Subordinated Debentures, we have relied upon the opinion address
to you and dated the date hereof of Maples and Calder as to matters of Cayman
Islands law.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the statements with respect to our firm under the
caption "Legal Opinions" in the Registration Statement. In giving the foregoing
consent, we do not hereby admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Commission thereunder.
Very truly yours,
DEWEY BALLANTINE LLP
2
<PAGE>
EXHIBIT 5.3
[letterhead of Maples and Calder]
1st May, 1998
To: Yorkshire Power Finance Limited
PO Box 309
George Town
Grand Cayman
Cayman Islands
British West Indies
Dear Sirs:
RE: REGISTRATION STATEMENT ON FORM S-1
- --- ----------------------------------
We are Cayman Islands Counsel to Yorkshire Power Finance Limited ("Yorkshire
Finance") in connection with the preparation of a registration statement on Form
S-1, including a preliminary prospectus, filed with the United States Securities
and Exchange Commission (the "Commission") on 13th March, 1998 (the
"Registration Statement"), contemplating the registration under the United
States Securities Act of 1933, as amended (the "Securities Act"), of Junior
Subordinated Deferrable Interest Debentures (the "Junior Subordinated
Debentures") to be issued by Yorkshire Finance and guaranteed by Yorkshire Power
Group Limited ("Yorkshire"). The Junior Subordinated Debentures will be issued
pursuant to a subordinated indenture, as supplemented, to be entered into
between Yorkshire Finance, Yorkshire and the trustee named therein (the
"Subordinated Indenture") in substantially the form filed as an exhibit to the
Registration Statement.
For the purposes of this opinion, we have reviewed the Companies Law (1995
Revision) of the Cayman Islands (the "Companies Law") and have examined and
relied upon:
1. the prospectus relating to the Junior Subordinated Debentures in the form
included in the Registration Statement;
2. the Memorandum and Articles of Association of Yorkshire Finance;
3. Certificate of Incorporation of Yorkshire Finance;
4. the form of the Subordinated Indenture;
5. the Minutes of a Meeting of the Board of Directors of Yorkshire Finance held
on 11th February, 1998 (the "Minutes"), the Power of Attorney granted by the
Company on 11th February, 1998 and the corporate records of Yorkshire
Finance; and
<PAGE>
2
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
6. a Certificate from a Director of Yorkshire Finance in the form annexed
hereto (the "Director's Certificate").
The following opinion is given only as to circumstances existing on the date
hereof and known to us and as to the laws of the Cayman Islands as the same are
in force at the date hereof. In giving this opinion, we have relied upon the
accuracy of the Director's Certificate without further verification and have
relied upon the following assumptions, which we have not independently
verified:-
(a) The Junior Subordinated Debentures and the Subordinated Indenture will be
duly authorised, executed and delivered by or on behalf of all relevant
parties (other than Yorkshire Finance) and will be legal, valid, binding
and enforceable against all relevant parties in accordance with their
respective terms under the laws of the State of New York and all other
relevant laws (other than the laws of the Cayman Islands);
(b) The choice of the laws of the State of New York as the governing law of the
Junior Subordinated Debentures and the Subordinated Indenture will be made
in good faith and would be regarded as a valid and binding selection which
will be upheld by the courts of the State of New York as a matter of New
York law and all other relevant courts (other than the courts of the
Cayman Islands);
(c) Copy documents or the forms of documents provided to us are true copies of,
or in the final forms of, the originals;
(d) The genuineness of all signatures;
(e) The power, authority and legal right of all parties under all relevant laws
and regulations (other than Yorkshire Finance under the laws of the Cayman
Islands) to execute and perform their respective obligations under the
Junior Subordinated Debentures and the Subordinated Indenture;
(f) The Junior Subordinated Debentures will be duly completed, executed and
authenticated and delivered in accordance with, and as contemplated by, the
provisions of the Subordinated Indenture;
(g) That all preconditions to the obligations of the parties to the Junior
Subordinated Debentures and the Subordinated Indenture have been or will be
satisfied or duly waived and there has been no breach of the terms of the
Junior Subordinated Debentures or the Subordinated Indenture; and
<PAGE>
3
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
(h) There is nothing under any law (other than the laws of the Cayman Islands)
which would or might affect the opinions hereinafter appearing.
Specifically, we have made no independent investigation of the laws of the
State of New York.
We render no opinion as to the negotiability or transferability by delivery of
any Junior Subordinated Debentures in any jurisdiction which does not recognise
such negotiability or transferability.
Based upon and subject to the foregoing and having regard to such legal
considerations as we deem relevant, we are of the opinion that:-
1. Yorkshire Finance has been duly incorporated and is validly existing under
the laws of the Cayman Islands;
2. Assuming that the precise terms of issue of the Junior Subordinated
Debentures are duly determined by an Attorney of the Company in accordance
with the resolutions set forth in the Minutes, the Subordinated Debentures
have been duly authorised by Yorkshire Finance and, when executed on behalf
of Yorkshire Finance, authenticated in the manner set forth in the Junior
Subordinated Indenture and delivered against due payment therefor, will
constitute the legal, valid and binding obligations of Yorkshire Finance
enforceable in accordance with their terms, except and insofar as such
enforcement may be limited as hereinafter set forth. The term "enforceable"
as used above means the obligations assumed by Yorkshire Finance under the
Junior Subordinated Debentures are of a type which the Courts of the Cayman
Islands enforce. It does not mean those obligations will necessarily be
enforced in all circumstances in accordance with their terms and we would
draw to your attention:
(i) enforcement may be limited by bankruptcy, insolvency, liquidation,
reorganization and other laws of general application relating to or
affecting the rights of creditors;
(ii) enforcement may be limited by general principles of equity - for
example, equitable remedies such as specific performance may not be
available, inter alia, where damages are considered to be an adequate
remedy;
(iii) claims may become barred under the statutes of limitation or may be or
become subject to defences of set-off or counterclaim;
(iv) where obligations are to be performed in a jurisdiction outside the
Cayman Islands, they may not be enforceable in the Cayman Islands to the
extent that performance would be illegal under the laws of that
jurisdiction;
(v) in the event of any proceedings being brought in the Cayman Islands
courts in respect of a monetary obligation expressed to be payable in a
currency other than Cayman
<PAGE>
4
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
Islands dollars, a Cayman Islands court will give judgement expressed as
an order to pay such other currency on enforcement of the judgement.
With respect to winding up proceedings, Cayman Islands law will require
that all claims or debts are converted into Yorkshire Finance's
functional currency of account;
(vi) Cayman Islands stamp duty will be payable if any of the Junior
Subordinated Debentures or the Subordinated Indenture is brought to or
executed in the Cayman Islands, which duty would be up to CI$250 on each
of the Junior Subordinated Debentures (unless Yorkshire Finance has paid
a duty of CI$500 in respect of the issue of the Junior Subordinated
Debentures) and would be CI$40 on the Subordinated Indenture;
(vii) a certificate, determination, calculation or designation of any party to
the foregoing documents as to any matter provided therein might be held
by a Cayman Islands court not to be conclusive, final and binding if,
for example, it could be shown to have an unreasonable or arbitrary
basis or in the event of manifest error;
(viii) although there is no statutory enforcement in the Cayman Islands of
judgments obtained in New York, the courts of the Cayman Islands will
recognise and enforce a foreign judgment of a court of competent
jurisdiction without reexamination or relitigation of the matter
adjudicated upon, based on the principle that a judgment of a competent
foreign court imposes upon the judgment debtor an obligation to pay the
sum for which judgment has been given, and provided such judgment is
final, for a liquidated sum not in respect of taxes or a fine or
penalty, and which was not obtained in a manner, and is not of a kind
the enforcement of which is, contrary to the public policy of the Cayman
Islands; a Cayman Islands court may stay proceedings if concurrent
proceedings are being brought elsewhere;
(ix) obligations to make payments that may be regarded as penalties will not
be enforceable to the extent that they are penal;
(x) in principle a Cayman Islands court will award costs and disbursements
in litigation in accordance with contractual provisions in this regard
but the applicable rule of court (GCR Order 62, rule 2) has been in
force only since 1st June, 1995 and there remains some uncertainty as to
the way in which it will be applicable in practice. Whilst it is clear
that costs incurred prior to judgement can be recovered in accordance
with the contract, it is likely that post-judgment costs will be
recoverable, if at all, in accordance with the scales laid down in the
Grand Court (Taxation of Costs) Rules 1995;
(xi) we reserve our opinion as to the extent to which a Cayman Islands court
would, in the event of any relevant illegality, sever the offending
provisions and enforce the remainder of the transaction of which such
provisions form a part, notwithstanding any express provisions in this
regard;
<PAGE>
5
To: Yorkshire Power Finance Limited 1st May 1998
Re: Registration Statement
- --------------------------------------------------------------------------------
(xii) to maintain Yorkshire Finance in good standing under the laws of the
Cayman Islands, annual filing fees must be paid and Returns made to the
Registrar of Companies;
(xiii) the obligations of Yorkshire Finance under the Junior Subordinated
Debentures or the Subordinated Indenture which involve the government of
any country which is currently the subject of United Nations sanctions as
extended to the Cayman Islands by an Order in Council (namely Iraq and
Libya and each an "Affected Country"), any person or body resident in,
incorporated in or constituted under the laws of any Affected Country or
exercising public functions in any Affected Country or any person or body
controlled by any of the foregoing or by any person acting on behalf of
any of the foregoing may be subject to restrictions pursuant to such
sanctions as implemented under the laws of the Cayman Islands;
(xiv) if Yorkshire Finance obtains a beneficial interest in any of the Junior
Subordinated Debentures then its rights and obligations in respect
thereof may merge thus extinguishing its rights and obligations in
respect thereof, so that any attempted resale of those Junior
Subordinated Debentures might constitute a separate issue of debt
obligations;
(xvi) we make no comment with regard to the references to foreign statutes in
the Junior Subordinated Debentures or the Subordinated Indenture.
This opinion is solely for the benefit of the addressee but may be relied upon
by the addressee's legal advisors (in that capacity only). It may not be relied
upon by (nor may it be disclosed to) any other person, without the prior written
consent of this firm. However, we do hereby consent to the filing of this
opinion as an exhibit to the Registration Statement and to the reference to us
under the heading "Legal Opinions" in the prospectus included in the
Registration Statement. In giving such consent, we do not thereby admit that we
are in the category of persons whose consent is required under Section 7 of the
Securities Act or the rules or regulations of the Commission thereunder.
Yours faithfully
/s/ Maples and Calder
<PAGE>
Exhibit 8.1
May 1, 1998
Yorkshire Power Group Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Yorkshire Power Finance Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
Re: Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
We are acting as United States counsel to Yorkshire Power Group Limited and
Yorkshire Power Finance Limited in connection with the preparation of a
Registration Statement on Form S-1, including a preliminary prospectus, filed
with the Securities and Exchange Commission (the "Commission") on March 13, 1998
(the "Registration Statement").
We hereby confirm our opinion that the statements as to matters of law and
legal conclusions set forth under the caption "Certain Income Tax Considerations
- - US Federal Income Tax Considerations" in the preliminary prospectus included
in the Registration Statement are correct in all material respects.
We hereby consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name under the
heading "Certain Income Tax Considerations - US Federal Income Tax
Considerations" in the preliminary prospectus forming part of the Registration
Statement. In giving the foregoing consent, we do not hereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the rules and regulations of the
Commission thereunder.
Very truly yours,
DEWEY BALLANTINE LLP
<PAGE>
EXHIBIT 8.2
May 1, 1998
Yorkshire Power Group Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS
Yorkshire Power Finance Limited
Wetherby Road, Scarcroft
Leeds LS14 3HS
Yorkshire Capital Trust I
1 Riverside Plaza
Columbus, Ohio 43215
Dear Ladies and Gentlemen,
Registration Statement on Form S-1
We are legal advisers as to English law to Yorkshire Capital Trust I, Yorkshire
Power Group Limited and Yorkshire Power Finance Limited in connection with the
preparation of a Registration Statement on Form S-1, including a preliminary
prospectus, filed with the Securities and Exchange Commission (the "Commission")
on 13th March, 1998 (the "Registration Statement").
We confirm our opinion that the information relating to United Kingdom taxation
in the section of the preliminary Prospectus headed "Tax Considerations" and
specifically the paragraphs headed "UK Tax Considerations" is correct in all
material respects.
We consent to the filing of this opinion with the Commission as an exhibit to
the Registration Statement and to the use of our name under the heading "Tax
Considerations - UK Tax Considerations" in the preliminary prospectus forming
part of the Registration Statement. 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, or the rules and
regulations of the Commission thereunder.
Yours faithfully,
ALLEN & OVERY
<PAGE>
EXHIBIT 8.3
[Letterhead of Maples and Calder]
1st May, 1998
To: Yorkshire Power Finance Limited
PO Box 309
George Town
Grand Cayman
Cayman Islands
British West Indies
Dear Sirs:
RE: REGISTRATION STATEMENT ON FORM S-1
- --- ----------------------------------
We are Cayman Islands Counsel to Yorkshire Power Finance Limited in connection
with the registration statement on Form S-1, including a preliminary prospectus,
filed with the Securities and Exchange Commission (the "Commission") on 13th
March, 1998 (the "Registration Statement").
We confirm our opinion that the statements as to matters of law and legal
conclusions set forth under the caption "Cayman Islands Taxation" in the
preliminary prospectus included in the Registration Statement are correct in all
material respects.
We here by consent to the filing of this opinion with the Commission as an
exhibit to the Registration Statement and to the use of our name under the
heading "Cayman Islands Taxation" in the preliminary prospectus forming part of
the Registration Statement. In giving the foregoing consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the United States Securities Act of 1933, as amended, or the
rules or regulations of the Commission thereunder.
Yours faithfully
/s/ Maples and Calder
<PAGE>
EXHIBIT 12
CALCULATION OF EARNINGS TO FIXED CHARGES RATIO
<TABLE>
<CAPTION>
Predecessor
Successor Nine months
Nine months ended ended
December 31, 1997 December 31, 1996
----------------- -----------------
(pounds) $ (pounds)
(Amounts in millions)
<S> <C> <C> <C>
Earnings
Pretax income from continuing
operations 47 77 117
Adjustment to include distributed
income of less than 50% owned
persons -- -- --
Add: Amortisation charge on
capitalized interest 1 2 1
Less: interest capitalized in the
period -- -- --
---- ---- ----
Total earnings before fixed charges 48 79 118
---- ---- ----
Fixed charges
Interest expenses 89 146 33
Interest capitalized -- -- --
---- ---- ----
Total fixed charges 89 146 33
---- ---- ----
Total earnings and fixed charges 137 225 151
Ratio of earnings/fixed charges 1.5 4.6
</TABLE>
<PAGE>
CALCULATION OF EARNINGS TO FIXED CHARGES RATIO PREDECESSOR COMPANY
<TABLE>
<CAPTION>
Year Ended March 31
Proforma
Year
Ended
March 31
1993 1994 1995 1996 1997 1997
(pounds) (pounds) (pounds) (pounds) (pounds) (pounds)
(Amounts in millions)
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Pretax income from continuing
operations 154 143 219 507 39 26
Adjustments to include
distributed income of less than
50% owned persons -- 2 (1) -- -- --
Add: Amortisation charge on
capitalized interest -- -- 1 1 1 1
Less: Interest capitalized in the
period (4) (6) -- -- -- --
---- ---- ---- ---- ---- ----
Total earnings before fixed
charges 150 139 219 508 40 27
==== ==== ==== ==== ==== ====
Fixed charges
Interest expenses 23 18 23 46 48 122
Interest capitalized 4 6 -- -- -- --
---- ---- ---- ---- ---- ----
Total fixed charges 27 24 23 46 48 122
==== ==== ==== ==== ==== ====
Total earnings and fixed charges 177 163 242 554 88 149
Ratio of earnings/fixed charges 6.6 6.8 10.5 12.0 1.8 1.2
</TABLE>
<PAGE>
DELOITTE &
TOUCHE
- ------------
------------------------------------------
CHARTERED ACCOUNTANTS,
Deloitte & Touche
Telephone: National
0113 243 9021
10-12 East Parade
Leeds LS7 2AJ International + 44
113 243 9021
Fax: 0113 244 5580
DX 26423
The Board of Directors
Yorkshire Power Group Limited
Wetherby Road
Scarcroft
Leeds LS143
May 1, 1998
Dear Sirs
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited interim
financial information of Yorkshire Power Group Limited and subsidiaries for
the period ended December 31, 1997 as indicated in our report dated April 30,
1998, because we did not perform an audit, we expressed no opinion on that
information.
We are aware that our report referred to above is being used in this
Registration Statement.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
Deloitte & Touche
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES OF
YORKSHIRE POWER GROUP LIMITED
(AND JURISDICTION OF INCORPORATION)
HOMEPOWER RETAIL (YE) LIMITED (ENGLAND)
HOMEPOWER RETAIL LIMITED (ENGLAND)
REGIONAL POWER GENERATORS LIMITED (ENGLAND)
SCARCROFT INSURANCE LIMITED (ENGLAND)
SCARCROFT INVESTMENTS LIMITED (ENGLAND)
SCARCROFT LEASING (SEP) LIMITED (ENGLAND)
YE GAS LIMITED (ENGLAND)
YEG FRESHCO. (ENGLAND)
YEG TEAM TELECOM LTD (ENGLAND)
YORKSHIRE CAPITAL TRUST I (DELAWARE)
YORKSHIRE COGEN LIMITED (ENGLAND)
YORKSHIRE ELECTRIC POWER LIMITED (ENGLAND)
YORKSHIRE ELECTRICITY GROUP PLC (ENGLAND)
YORKSHIRE ELECTRICITY GROUP SHARE SCHEME TRUSTEES LIMITED (ENGLAND)
YORKSHIRE ENERGY LIMITED (ENGLAND)
YORKSHIRE HOLDINGS PLC (ENGLAND)
YORKSHIRE POWER FINANCE LIMITED (CAYMAN ISLANDS)
YORKSHIRE TOTAL GAS LIMITED (ENGLAND)
YORKSHIRE WINDPOWER LIMITED (ENGLAND)
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-1 of
our reports dated July 15, 1997 on our audits of the financial statements and
financial statement schedules of Yorkshire Electricity Group plc and Yorkshire
Power Group Limited. We also consent to the references to us under the
captions "Selected Consolidated Financial Data" and "Experts".
Deloitte & Touche
Leeds
United Kingdom
May 1, 1998
<PAGE>
EXHIBIT 25.1
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
YORKSHIRE POWER FINANCE LIMITED
(Exact name of obligor as specified in its charter)
Cayman Islands Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Wetherby Road, Scarcroft
Leeds LS14 3HS England
(Address of principal executive offices) (Zip code)
----------
Junior Subordinated Deferrable Interest Debentures
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 21st day of April, 1998.
THE BANK OF NEW YORK
By: /S/LUCILLE FIRRINCIELI
--------------------------
Name: LUCILLE FIRRINCIELI
Title: VICE PRESIDENT
-4-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business December 31, 1997, published in accordance with
a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C> <C>
ASSETS
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .................................. $ 5,742,966
Interest-bearing balances ............................ 1,342,769
Securities:
Held-to-maturity securities ............................ 1,099,736
Available-for-sale securities .......................... 3,882,686
Federal funds sold and Securities
purchased under agreements to
resell ................................................. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .....................................35,019,608
LESS: Allowance for loan and
lease losses ..................................627,350
LESS: Allocated transfer risk
reserve .............................................0
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,392,258
Assets held in trading accounts .......................... 2,521,451
Premises and fixed assets (including
capitalized leases) .................................... 659,209
Other real estate owned .................................. 11,992
Investments in unconsolidated sub-
sidiaries and associated com-
panies ................................................. 226,263
Customers liability to this bank on
acceptances outstanding ................................ 1,187,449
Intangible assets ........................................ 781,664
Other assets ............................................. 1,736,574
------------
Total assets ............................................. $ 56,153,567
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,031,352
Non-interest-bearing .........................11,899,507
Interest-bearing .............................15,131,855
In foreign offices, Edge and
Agreement subsidiares, and IFBs ........................ 13,794,449
Non-interest bearing ............................590,999
Interest-bearing .............................13,203,450
Federal funds purchased and Secu-
rities sold under agreements to re-
purchase ............................................... 2,338,881
Demand notes issued to the U.S.
Treasury ............................................... 173,851
Trading liabilities ...................................... 1,695,216
Other borrowed money:
With remaining maturity of one
year or less ......................................... 1,905,330
With remaining maturity of more
than one year through three
years ................................................ 0
With remaining maturity of more
than three years ..................................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .................................. 1,195,923
Subordinated notes and debentures ........................ 1,012,940
Other liabilities ........................................ 2,018,960
------------
Total liabilities ........................................ 51,192,576
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale se-
curities ............................................... 36,866
Cumulative foreign currency transla-
tion adjustments ....................................... (36,184)
------------
Total equity capital ..................................... 4,951,011
------------
Total liabilities and equity capital ..................... $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in comformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi
Alan R. Griffin Directors
J. Carter Bacot
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 25.2
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
----------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
----------
YORKSHIRE POWER GROUP LIMITED
(Exact name of obligor as specified in its charter)
England and Wales Not Applicable
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Wetherby Road, Scarcroft
Leeds LS14 3HS, England
(Address of principal executive offices) (Zip code)
----------
Junior Subordinated Deferrable Interest Debentures
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 21st day of April, 1998.
THE BANK OF NEW YORK
By: /S/LUCILLE FIRRINCIELI
---------------------------
Name: LUCILLE FIRRINCIELI
Title: VICE PRESIDENT
-4-
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business December 31, 1997, published in accordance with
a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C> <C>
ASSETS
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .................................. $ 5,742,966
Interest-bearing balances ............................ 1,342,769
Securities:
Held-to-maturity securities ............................ 1,099,736
Available-for-sale securities .......................... 3,882,686
Federal funds sold and Securities
purchased under agreements to
resell ................................................. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .....................................35,019,608
LESS: Allowance for loan and
lease losses ..................................627,350
LESS: Allocated transfer risk
reserve .............................................0
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,392,258
Assets held in trading accounts .......................... 2,521,451
Premises and fixed assets (including
capitalized leases) .................................... 659,209
Other real estate owned .................................. 11,992
Investments in unconsolidated sub-
sidiaries and associated com-
panies ................................................. 226,263
Customers liability to this bank on
acceptances outstanding ................................ 1,187,449
Intangible assets ........................................ 781,664
Other assets ............................................. 1,736,574
------------
Total assets ............................................. $ 56,153,567
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,031,352
Non-interest-bearing .........................11,899,507
Interest-bearing .............................15,131,855
In foreign offices, Edge and
Agreement subsidiares, and IFBs ........................ 13,794,449
Non-interest bearing ............................590,999
Interest-bearing .............................13,203,450
Federal funds purchased and Secu-
rities sold under agreements to re-
purchase ............................................... 2,338,881
Demand notes issued to the U.S.
Treasury ............................................... 173,851
Trading liabilities ...................................... 1,695,216
Other borrowed money:
With remaining maturity of one
year or less ......................................... 1,905,330
With remaining maturity of more
than one year through three
years ................................................ 0
With remaining maturity of more
than three years ..................................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .................................. 1,195,923
Subordinated notes and debentures ........................ 1,012,940
Other liabilities ........................................ 2,018,960
------------
Total liabilities ........................................ 51,192,576
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale se-
curities ............................................... 36,866
Cumulative foreign currency transla-
tion adjustments ....................................... (36,184)
------------
Total equity capital ..................................... 4,951,011
------------
Total liabilities and equity capital ..................... $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in comformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi
Alan R. Griffin Directors
J. Carter Bacot
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 25.3
THIS CONFORMING PAPER FORMAT DOCUMENT IS BEING SUBMITTED
PURSUANT TO RULE 901(d) OF REGULATION S-T
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
YORKSHIRE CAPITAL TRUST I
(Exact name of obligor as specified in its charter)
Delaware To be Applied for
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1 Riverside Plaza
Columbus, Ohio 43215
(Address of principal executive offices) (Zip code)
Trust Securities
(Title of the indenture securities)
================================================================================
<PAGE>
1. General information. Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
Name Address
- -------------------------------------------------------------------------------------------
<S> <C>
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
</TABLE>
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission,
are incorporated herein by reference as an exhibit hereto, pursuant to
Rule 7a-29 under the Trust Indenture Act of 1939 (the "Act") and 17
C.F.R. 229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 21st day of April, 1998.
THE BANK OF NEW YORK
By: /s/ LUCILLE FIRRINCIELI
----------------------------
Name: LUCILLE FIRRINCIELLI
Title: VICE PRESIDENT
<PAGE>
EXHIBIT 7
- --------------------------------------------------------------------------------
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business December 31, 1997, published in accordance with
a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C> <C>
ASSETS
Cash and balances due from depository
institutions:
Noninterest-bearing balances and
currency and coin .................................. $ 5,742,966
Interest-bearing balances ............................ 1,342,769
Securities:
Held-to-maturity securities ............................ 1,099,736
Available-for-sale securities .......................... 3,882,686
Federal funds sold and Securities
purchased under agreements to
resell ................................................. 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income .....................................35,019,608
LESS: Allowance for loan and
lease losses ..................................627,350
LESS: Allocated transfer risk
reserve .............................................0
Loans and leases, net of unearned
income, allowance, and reserve ....................... 34,392,258
Assets held in trading accounts .......................... 2,521,451
Premises and fixed assets (including
capitalized leases) .................................... 659,209
Other real estate owned .................................. 11,992
Investments in unconsolidated sub-
sidiaries and associated com-
panies ................................................. 226,263
Customers liability to this bank on
acceptances outstanding ................................ 1,187,449
Intangible assets ........................................ 781,664
Other assets ............................................. 1,736,574
------------
Total assets ............................................. $ 56,153,567
============
LIABILITIES
Deposits:
In domestic offices .................................... $ 27,031,352
Non-interest-bearing .........................11,899,507
Interest-bearing .............................15,131,855
In foreign offices, Edge and
Agreement subsidiares, and IFBs ........................ 13,794,449
Non-interest bearing ............................590,999
Interest-bearing .............................13,203,450
Federal funds purchased and Secu-
rities sold under agreements to re-
purchase ............................................... 2,338,881
Demand notes issued to the U.S.
Treasury ............................................... 173,851
Trading liabilities ...................................... 1,695,216
Other borrowed money:
With remaining maturity of one
year or less ......................................... 1,905,330
With remaining maturity of more
than one year through three
years ................................................ 0
With remaining maturity of more
than three years ..................................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .................................. 1,195,923
Subordinated notes and debentures ........................ 1,012,940
Other liabilities ........................................ 2,018,960
------------
Total liabilities ........................................ 51,192,576
------------
EQUITY CAPITAL
Common stock ............................................. 1,135,284
Surplus .................................................. 731,319
Undivided profits and capital
reserves ............................................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale se-
curities ............................................... 36,866
Cumulative foreign currency transla-
tion adjustments ....................................... (36,184)
------------
Total equity capital ..................................... 4,951,011
------------
Total liabilities and equity capital ..................... $ 56,153,587
============
</TABLE>
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in comformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
Thomas A. Renyi
Alan R. Griffin Directors
J. Carter Bacot
- --------------------------------------------------------------------------------
