As filed with the Securities and Exchange Commission on December 22, 1999.
Registration Nos. 333-__________ 333-__________-01
333-__________-02
333-__________-03
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
TXU EASTERN FUNDING COMPANY TXU EUROPE LIMITED
(EXACT NAME OF REGISTRANT (EXACT NAME OF REGISTRANT
AS SPECIFIED IN ITS CHARTER) AS SPECIFIED IN ITS CHARTER)
ENGLAND AND WALES ENGLAND AND WALES
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
7389 6719
(PRIMARY STANDARD INDUSTRIAL (PRIMARY STANDARD INDUSTRIAL
CODE NUMBER) CODE NUMBER)
98-0203668 98-0188080
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
The Adelphi The Adelphi
1-11 John Adam Street 1-11 John Adam Street
London, England WC2N 6HT London, England WC2N 6HT
011-44-207-879-8081 011-44-207-879-8081
(ADDRESS, INCLUDING ZIP CODE, AND (ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA CODE, TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OF REGISTRANT'S PRINCIPAL
OFFICES) EXECUTIVE OFFICES)
TXU EUROPE CAPITAL I
TXU EUROPE FUNDING I, L.P.
(EXACT NAME OF REGISTRANTS AS SPECIFIED IN THEIR CHARTERS)
DELAWARE TO BE APPLIED FOR
(STATE OF INCORPORATION OR ORGANIZATION) (I.R.S. EMPLOYER IDENTIFICATION NOS.)
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
(214) 812-4600
(Address, including zip code, and telephone number, including area code, of
registrants' principal executive offices)
ROBERT A. WOOLDRIDGE, Esq. PETER B. TINKHAM, Esq. ROBERT J. REGER, JR., Esq.
Worsham, Forsythe & Secretary Thelen Reid & Priest LLP
Wooldridge, L.L.P. TXU Corp 40 West 57th Street
1601 Bryan Street 1601 Bryan Street New York, New York 10019
Dallas, Texas 75201 Dallas, Texas 75201 (214) 812-4600
(214) 979-3000 (212) 603-2000
(NAMES AND 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:
RICHARD L. HARDEN, Esq. PHILIP ELLIS
Winthrop, Stimson, Putnam & Roberts Secretary, TXU Europe Limited
One Battery Park Plaza c/o TXU Europe Group plc
New York, New York 10004-1490 Wherstead Park
(212) 858-1000 Ipswich, Suffolk, England IP9 2AQ
011-44-1473-55-3102
Approximate date of commencement of proposed sale to the public:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
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,
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, 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |__| _______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |__|
<PAGE>
---------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
REGISTERED REGISTERED UNIT(1) PRICE(1) REGISTRATION FEE
- - - - ---------------------------------------------- -------------- ----------------------- ------------------------ ------------------
Preferred Trust Securities of
TXU Europe Capital I...................... 20,000,000 $25.00 $500,000,000(1) $132,000
Preferred Partnership Securities of
TXU Europe Funding I, L.P................. (2) (2) (2) N/A
Junior Subordinated Debentures of
TXU Eastern Funding Company............... (3) (3) (3) N/A
Guarantee of TXU Europe Limited with
respect to Preferred Trust Securities..... (4) (4) (4) N/A
Guarantee of TXU Europe Limited with
respect to Preferred Partnership
Securities................................ (4) (4) (4) N/A
Guarantee of TXU Europe Limited with
respect to Junior Subordinated Debentures of
of TXU Eastern Funding Company............ (4) (4) (4) N/A
Guarantees of TXU Europe Limited with
respect to Subsidiary Debentures.......... (4) (4) (4) N/A
Total................................ 20,000,000 $25.00 $500,000,000 $132,000
---------- ------------ --------
</TABLE>
(1) The proposed maximum aggregate offering price has been estimated solely for
the purpose of calculating the registration fee pursuant to Rule 457(a)
under the Securities Act of 1933.
(2) Preferred Partnership Securities will be purchased by TXU Europe Capital I
with the proceeds of the sale of the Preferred Trust Securities of TXU
Europe Capital I. No separate consideration will be received for such
Preferred Partnership Securities.
(3) Junior subordinated debentures of TXU Eastern Funding Company and junior
subordinated debentures of one or more other subsidiaries of TXU Europe
Limited will be purchased by TXU Europe Funding I, L.P. (the "Partnership")
with the proceeds of the sale of the Preferred Partnership Securities and
the sale to TXU Europe Limited of the general partner interest in the
Partnership. No separate consideration will be received for the junior
subordinated debentures of TXU Eastern Funding Company or the other
subsidiary debentures.
(4) No separate consideration will be received for the TXU Europe Limited
guarantees with respect to the Preferred Trust Securities, the Preferred
Partnership Securities, or the junior subordinated debentures to be issued
by TXU Eastern Funding Company or one or more other subsidiaries of TXU
Europe Limited.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
<PAGE>
Subject to Completion
Preliminary Prospectus dated December 22, 1999
PROSPECTUS
- - - - ----------
20,000,000 PREFERRED TRUST SECURITIES
TXU EUROPE CAPITAL I
____% TRUST ORIGINATED PREFERRED SECURITIESSM ("TOPRSSM")
LIQUIDATION AMOUNT $25 PER TOPRS
GUARANTEED TO THE EXTENT DESCRIBED IN THIS PROSPECTUS BY
TXU EUROPE LIMITED
--------------------------------
THE TOPRS:
o TOPrS represent preferred beneficial ownership interests in the assets
of TXU Europe Capital I. The sole assets of TXU Europe Capital I will
be the Preferred Partnership Securities of TXU Europe Funding I, L.P.
which represent preferred ownership interests in TXU Europe Funding I,
L.P.
o The sole assets of TXU Europe Funding I, L.P. will be the debentures
issued by TXU Eastern Funding Company and one or more other eligible
subsidiaries of TXU Europe Limited and other eligible debt securities
described in this prospectus.
o The TOPrS and the Preferred Partnership Securities do not have any
stated maturity.
o TXU Europe Capital I will apply to have the TOPrS trade on the New York
Stock Exchange, starting within 30 days after the TOPrS are issued, and
the Luxembourg Stock Exchange.
o Closing Date: _______, 1999.
DISTRIBUTIONS ON THE TOPRS:
o Each TOPrS pays a quarterly distribution at the rate of % or $ per TOPrS
per year, if TXU Europe Funding I, L.P. pays distributions on the
Preferred Partnership Securities. Distributions not paid by TXU Europe
Funding I, L.P. on the scheduled payment date will accumulate and
compound quarterly at the rate of %.
o If TXU Europe Capital I and TXU Europe Funding I, L.P. redeem the TOPrS
and the Preferred Partnership Securities, the holders of the TOPrS will
receive $25 plus accumulated distributions for each TOPrS owned.
o If TXU Europe Capital I redeems the TOPrS or is liquidated, but TXU
Europe Funding I, L.P. does not redeem the Preferred Partnership
Securities, the holders of the TOPrS will receive Preferred Partnership
Securities rather than cash.
o TXU Europe Limited will guarantee the TOPrS and the Preferred
Partnership Securities to the extent described in this prospectus.
INVESTING IN THE TOPRS INVOLVES RISKS THAT ARE DESCRIBED IN THE RISK
FACTORS SECTION BEGINNING ON PAGE __ OF THIS PROSPECTUS.
--------------------------------
PER TOPRS TOTAL
Public offering price(1) ............................ $_______ $___________
Underwriting discount to be paid by TXU
Europe Limited ...................................... $_______ $___________
Proceeds to TXU Europe Capital I .................... $_______ $___________
(1) Plus accumulated distributions from _____________ __, ____ if settlement
occurs after that date.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The TOPrS will be ready for delivery in book-entry form through The
Depository Trust Company on or about _____________ _____, _______.
MERRILL LYNCH & CO.
--------------------------------
The date of this prospectus is _________________.
- - - - --------
"TOPrSSM" and "Trust Originated Preferred Securities" are service marks
owned by Merrill Lynch & Co., Inc.
<PAGE>
TABLE OF CONTENTS
SUMMARY .................................................................... 4
RISK FACTORS ............................................................... 15
PRESENTATION OF CURRENCY, FINANCIAL AND OTHER INFORMATION .................. 21
TXU EUROPE LIMITED ......................................................... 21
TXU EUROPE GROUP plc ....................................................... 22
TXU EASTERN FUNDING COMPANY ................................................ 22
TXU EUROPE CAPITAL I ....................................................... 22
TXU EUROPE FUNDING I, L.P. ................................................. 23
CAPITALIZATION OF TXU EUROPE LIMITED ....................................... 25
EXCHANGE RATES ............................................................. 26
USE OF PROCEEDS ............................................................ 26
FORWARD-LOOKING STATEMENTS ................................................. 27
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS .................................................... 28
INDUSTRY BACKGROUND ........................................................ 45
TXU EUROPE GROUP BUSINESS OVERVIEW ......................................... 52
SECURITY OWNERSHIP ......................................................... 68
MANAGEMENT OF TXU EASTERN FUNDING COMPANY .................................. 68
MANAGEMENT OF TXU EUROPE LIMITED ........................................... 69
RELATIONSHIPS OF MANAGEMENT TO FUNDING AND TXU EUROPE LIMITED AND
RELATED TRANSACTIONS ..................................................... 71
MANAGEMENT OF TXU EUROPE GROUP plc ......................................... 71
DESCRIPTION OF THE TOPrS ................................................... 73
DESCRIPTION OF THE TRUST GUARANTEE ......................................... 86
DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES ........................ 89
DESCRIPTION OF THE PARTNERSHIP GUARANTEE ...................................101
DESCRIPTION OF THE FUNDING DEBENTURES ......................................105
MATERIAL INCOME TAX CONSIDERATIONS .........................................115
UNDERWRITING ...............................................................119
EXPERTS ....................................................................120
LEGALITY ...................................................................121
NATURE OF FINANCIAL INFORMATION ............................................121
WHERE YOU CAN FIND MORE INFORMATION ........................................121
LUXEMBOURG STOCK EXCHANGE AND OTHER INFORMATION ............................122
INDEX TO FINANCIAL STATEMENTS ..............................................F-1
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS.
NEITHER TXU EUROPE LIMITED, TXU EASTERN FUNDING COMPANY, TXU EUROPE CAPITAL I
NOR TXU EUROPE FUNDING I, L.P. HAVE AUTHORIZED ANYONE TO PROVIDE YOU, WITH
DIFFERENT INFORMATION. IF ANYONE PROVIDES YOU WITH DIFFERENT OR INCONSISTENT
INFORMATION, YOU SHOULD NOT RELY ON IT. NEITHER TXU EUROPE LIMITED, TXU EASTERN
FUNDING COMPANY, TXU EUROPE CAPITAL I NOR TXU EUROPE FUNDING I, L.P. ARE MAKING
AN OFFER OF THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT
PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THIS PROSPECTUS. THE BUSINESS PROFILE, FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND PROSPECTS OF TXU EUROPE LIMITED, TXU EASTERN FUNDING COMPANY, TXU
EUROPE CAPITAL I OR TXU EUROPE FUNDING I, L.P. MAY HAVE CHANGED SINCE THAT DATE.
This prospectus is based on information provided by TXU Europe Limited,
TXU Eastern Funding, TXU Europe Capital I and TXU Europe Funding I, L.P. and
by other sources that TXU Europe Limited, TXU Eastern Funding, TXU Europe
Capital I and TXU Europe Funding I, L.P. believe are reliable. TXU Europe
Limited, TXU Eastern Funding, TXU Europe Capital I and TXU Europe Funding I,
L.P. accept responsibility for the information relating to them contained in
this document. To the best knowledge and belief of TXU Europe Limited,
TXU Eastern Funding, TXU Europe Capital I and TXU Europe Funding I, L.P.
(which have taken all reasonable care to ensure that such is the case), the
information contained in this document is in accordance with the facts to
the extent material and does not omit anything likely to materially affect
such information.
The TOPrS are not being offered to the public in the United Kingdom and
this document may only be issued or passed on in the United Kingdom to a person
who is of a kind described in Article 11(3) of the Financial Services Act 1986
2
<PAGE>
(Investment Advertisements) (Exemptions) Order 1996, as amended, or to a person
to whom it may otherwise lawfully be issued or passed on.
Until _______ __, ____, all dealers that effect transactions in these
securities, whether or not participating in this offering, may be required to
deliver a prospectus. This is in addition to the dealers' obligation to deliver
a prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
3
<PAGE>
SUMMARY
This summary may not contain all the information that may be important to
you. You should read the entire prospectus, including the financial data and
related notes, before making an investment decision.
CORPORATE AND TRANSACTION STRUCTURE
Chart of Corporate and Transaction Structure appears here.
* TXU Europe Funding I, L.P. will also invest in junior subordinated
debentures of one or more eligible subsidiaries of TXU Europe Limited and
eligible debt securities, as described in this prospectus. The junior
subordinated debentures will be guaranteed by TXU Europe Limited.
4
<PAGE>
TXU EUROPE LIMITED AND TXU EASTERN FUNDING COMPANY
TXU Europe Limited, formerly TXU Eastern Holdings Limited, is a private
limited company (Company No. 3505836) incorporated under the laws of England and
Wales on February 5, 1998. TXU Europe Limited is an indirect wholly-owned
subsidiary of Texas Utilities Company. Texas Utilities Company is now doing
business as TXU Corp. TXU Europe Limited is a holding company for TXU Corp's UK
operations.
TXU Eastern Funding Company (Funding) is a private unlimited company
(Company No. 3710529) incorporated on February 4, 1999 under the laws of England
and Wales. It is a wholly-owned indirect subsidiary of TXU Europe Limited.
Funding was organized solely to provide funding for the operations of TXU Europe
Limited and its subsidiaries by issuing debt securities, including the
subordinated debentures that will be issued to the partnership, and lending the
proceeds to TXU Europe Limited. In May 1999, Funding issued $1.5 billion
((pound)921 million) of senior notes guaranteed on a senior basis by TXU Europe
Limited.
TXU Europe Limited's and Funding's principal offices are located at The
Adelphi, 1-11 John Adam Street, London WC2N 6HT, England, and the telephone
number is (011) 44 171 879-8081.
TXU EUROPE GROUP PLC
TXU Europe Group plc (TXU Europe Group or Group), formerly Eastern Group
plc, which is an indirect subsidiary of TXU Europe Limited, is the holding
company for a group of companies engaged in a variety of energy businesses in
Europe. The management of these businesses is coordinated to give TXU Europe
Group access to many energy markets, to provide the Group's customers access to
a range of energy products and to enable the Group to respond efficiently to
changes in demand for and prices of energy throughout Europe. The Group's
principal business operations are electricity networks and energy businesses in
the UK.
The networks, or electricity distribution, business of TXU Europe Group is
the largest distributor of electricity in England and Wales, with over 3 million
customers in an authorized service area covering approximately 20,300 square
kilometers in the east of England and parts of north London.
The energy businesses include retailing of electricity and gas, as well as
generation of electric power, gas production and energy portfolio management
operations. TXU Europe Group is one of the largest generators of electricity in
the UK, based on registered generating capacity as of December 31, 1998. It
currently owns, operates or has an interest in approximately 9.4% of the total
UK generating capacity. TXU Europe Group is also one of the largest retailers of
electricity and natural gas in England and Wales, with approximately 4.0 million
electric and natural gas customers. TXU Europe Group is also forming business
alliances with European power companies in order to position itself to implement
its strategy of integrating energy businesses across the rest of Europe, as
these markets open to competition.
5
<PAGE>
SUMMARY INFORMATION REGARDING TXU EUROPE CAPITAL I,
TXU EUROPE FUNDING I, L.P. AND THE TOPRS
This summary includes questions and answers that highlight selected
information from this prospectus to help you understand the TOPrS. You should
carefully read this prospectus to fully understand the terms of the TOPrS, as
well as the tax and other considerations that are important in making a decision
about whether to invest in the TOPrS. You should pay special attention to the
RISK FACTORS to determine whether an investment in the TOPrS is appropriate for
you.
WHAT ARE THE TOPRS?
Each TOPrS represents an undivided beneficial interest in the assets of TXU
Europe Capital I, or the trust. The assets of the trust will be Preferred
Partnership Securities in TXU Europe Funding I, L.P., or the partnership. The
partnership will use the proceeds from the sale of the Preferred Partnership
Securities and the capital contribution from TXU Europe Limited, as general
partner of the partnership, to purchase subordinated debentures of Funding and
one or more other eligible subsidiaries of TXU Europe Limited and certain
eligible debt securities as described in this prospectus under DESCRIPTION OF
THE PREFERRED PARTNERSHIP SECURITIES -- "Partnership Investments."
WHAT IS THE TRUST?
TXU Europe Capital I is a Delaware statutory business trust that exists for
the sole purpose of issuing the TOPrS, investing the proceeds from that issuance
and engaging in incidental activities. The sole assets of the trust are the
Preferred Partnership Securities.
WHAT IS THE PARTNERSHIP?
TXU Europe Funding I, L.P. is a Delaware limited partnership. Generally,
the partnership, subject to the investment criteria described in this
prospectus, may invest in debentures of eligible subsidiaries of TXU Europe
Limited and in eligible debt securities. The sole assets of the partnership
initially will consist of subordinated debentures of Funding and, to a limited
extent, one or more other eligible subsidiaries of TXU Europe Limited and
eligible debt securities. TXU Europe Limited is the general partner of the
partnership.
WHAT DISTRIBUTIONS WILL I RECEIVE ON THE TOPRS?
The trust expects to pay the holders of the TOPrS a quarterly cash
distribution at the rate of ____% per annum. Distributions are expected to be
paid on each ________, _______, _______ and _______, commencing ________.
Distributions will be paid out of distributions on the Preferred Partnership
Securities if declared by the general partner. These distributions will
accumulate from ______________, the date of original issuance of the TOPrS. The
initial cash distribution is expected to be paid on ______________, and to equal
$_____ for each $25 TOPrS. Distributions on the TOPrS will be deferred if
interest payments on the subsidiary debentures are deferred as described below.
WHAT WILL AFFECT THE TRUST'S DISTRIBUTIONS?
The ability of the trust to pay the holder of the TOPrS is entirely
dependent on its receipt of corresponding distributions on the Preferred
Partnership Securities held by the trust. In turn, the partnership's ability to
pay the trust is entirely dependent on its receipt of payments on the subsidiary
debentures and the eligible debt securities held by the partnership. In
addition, the partnership has no obligation to make distributions to the trust.
If distributions are not paid to the holder of the TOPrS, TXU Europe Limited
will not be permitted to make any distributions with respect to its issued share
capital as described below.
WHAT ARE THE SUBSIDIARY DEBENTURES?
The subsidiary debentures are long term debt obligations of Funding and one
or more other eligible subsidiaries of TXU Europe Limited. These subsidiary
debentures will be unsecured and subordinated obligations and will be junior in
right of payment to senior debt of those subsidiaries, as defined in the
indentures under which the subsidiary debentures are issued. All of the
subsidiary debentures in which the partnership initially holds beneficial
interests will be fully and unconditionally guaranteed on a subordinated basis
by TXU Europe Limited. An issuer of a subsidiary debenture may elect to defer
interest payments for a period not exceeding ____ consecutive quarters.
WHAT ARE THE GUARANTEES?
TXU Europe Limited provides several subordinated guarantees in connection
with the issuance of the TOPrS. These are guarantees of
6
<PAGE>
. distributions by the partnership to the trust, and by the trust to the
holders of the TOPrS;
. the amount due to the holders of the TOPrS upon redemption of the
TOPrS;
. the liquidation amount of the TOPrS if the trust is liquidated; and
. payments under the subsidiary debentures initially held by the
partnership.
The guarantees, when taken together with TXU Europe Limited's obligations
to pay all fees and expenses of the trust and the partnership, constitute a
guarantee, to the extent set forth in the guarantees, by TXU Europe Limited of
selected obligations relating to the distribution, redemption and liquidation
amounts payable to the holders of the TOPrS. However, the guarantees do not
apply to either (1) current distributions by the partnership unless and until
the partnership declares distributions out of funds legally available for
payment, or (2) liquidating distributions by the partnership and the trust
unless there are partnership or trust assets, as the case may be, legally
available for payment.
TXU Europe Limited's obligations under the guarantees of subsidiary
debentures are subordinate and junior in right of payment to all other
unsubordinated liabilities of TXU Europe Limited and will be effectively
subordinated to existing and future liabilities and preference share capital of
TXU Europe Limited's subsidiaries. TXU Europe Limited's obligations under the
guarantees of subsidiary debentures will rank equally with other subordinated
obligations of TXU Europe Limited that are not subordinated by their terms to
the guarantees and with similar guarantees issued by TXU Europe Limited in
respect of any subordinated debentures of any other subsidiary. TXU Europe
Limited's obligations under the guarantees of the TOPrS and the Preferred
Partnership Securities will be subordinated to its obligations under the
guarantees of subsidiary debentures and will rank equally with any preference
share capital of TXU Europe Limited issued in the future and with similar
guarantees issued by TXU Europe Limited in respect of any preferred security of
any other finance subsidiary.
ARE THERE ANY RISKS ASSOCIATED WITH AN INVESTMENT IN THE TOPRS?
Yes, an investment in the TOPrS involves risks. Please refer to the section
entitled RISK FACTORS in this prospectus.
WHAT HAPPENS IF THE TRUST DOESN'T PAY A DISTRIBUTION ON THE TOPRS?
If at any time:
o the holders of the TOPrS have not received a distribution in the full
expected quarterly amount of $___ for each $25 TOPrS (plus any
compounded amounts) for ____ consecutive quarters,
o an event of default occurs and is continuing on any subsidiary
debentures, or
o TXU Europe Limited defaults on its obligations under the trust
guarantee, the partnership guarantee or any guarantee of subsidiary
debentures,
then:
o the Property Trustee of the trust may direct a special representative
appointed on behalf of holders of Preferred Partnership Securities to
enforce the partnership's creditors' rights, including the right to
receive payments under the subsidiary debentures and any of TXU Europe
Limited's guarantees of the subsidiary debentures,
o the Property Trustee has the right to direct the special
representative to enforce the terms of the Preferred Partnership
Securities, including the trust's right to receive distributions on
the Preferred Partnership Securities, and
o the Trust Guarantee Trustee, as the holder of the trust guarantee, or
the special representative appointed on behalf of holders of Preferred
Partnership Securities, as the holder of the partnership guarantee,
may enforce those guarantees, including the right to enforce the
covenant restricting dividends, distributions and other similar
payments to others by TXU Europe Limited and any of its finance
subsidiaries described below.
You should be aware that a special representative would not have the
authority to cause the partnership to declare distributions on the Preferred
Partnership Securities. If the partnership does not declare and pay
distributions on the Preferred Partnership Securities, the trust will not have
sufficient funds to make distributions on the TOPrS.
7
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TXU Europe Limited has agreed that if:
o payments on a cumulative basis in the full expected quarterly amount
of $____ for each $25 TOPrS (plus any compounded amounts) are not
paid to the holders of the TOPrS or set aside by the trust for
payment to the holders of the TOPrS,
o an investment event of default occurs and is continuing on any
subsidiary debentures, or
o TXU Europe Limited is in default on any of its obligations under the
trust guarantee, the partnership guarantee or any guarantee of
subsidiary debentures,
then, during that period, TXU Europe Limited will not declare or pay
dividends on, or acquire, or make a liquidation payment with respect to, any of
its issued share capital. In addition, during that period, TXU Europe Limited
will not permit any finance subsidiary to make any payment of any dividends on,
any distribution with respect to, or any acquisition of, or any liquidation
payment with respect to, any preferred security of any finance subsidiary.
This limitation prevents TXU Europe Limited from paying cash or certain
other dividends to its own shareholders if payments are not being made on the
TOPrS, or any subsidiary debentures, or if TXU Europe Limited is in default
under its guarantees of the TOPrS, the Preferred Partnership Securities and the
subsidiary debentures.
These provisions will not restrict the payment of dividends or
distributions paid in the form of shares of, or options, warrants or rights to
subscribe for or purchase shares of, TXU Europe Limited's issued share capital,
or conversions or exchanges of common shares of one class in TXU Europe Limited
into common shares of another class of TXU Europe Limited.
These provisions will not restrict TXU Corp from declaring and paying
dividends on its capital stock.
OPTIONAL REDEMPTION
The partnership has the option to redeem the Preferred Partnership
Securities, in whole at any time or in part from time to time, on and after
__________________ at an amount equal to $25 per Preferred Partnership Security
plus accumulated and unpaid distributions on the Preferred Partnership
Securities. If the Preferred Partnership Securities are redeemed, the TOPrS will
in turn be redeemed for $25 per TOPrS plus accumulated and unpaid distributions.
Neither the Preferred Partnership Securities nor the TOPrS have any scheduled
maturity nor are they redeemable at any time at the option of the holders.
WHO WILL CONTROL THE TRUST?
A wholly-owned subsidiary of TXU Europe Limited organized in the US and
designated under the terms of the trust agreement, known as the Control Party,
will retain administrative and appointment powers with respect to the trust by
virtue of its ownership of the trust's control certificate. The control
certificate will not provide any economic interest in the trust to the Control
Party.
DO I HAVE VOTING RIGHTS?
Generally, holders of the TOPrS will not have any voting rights. However,
the holders of a majority in liquidation amount of the TOPrS have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or direct the exercise of any trust or power
conferred upon the Property Trustee.
WHAT HAPPENS IF THE TRUST IS LIQUIDATED?
If the trust is liquidated, other than in connection with the occurrence of
changes in the US or UK tax laws, sometimes referred to as a tax event, or
changes in the US Investment Company Act of 1940, sometimes referred to as an
investment company event, that affect the status of the trust, the partnership
or the subsidiary debentures, the partnership will have the right to redeem the
Preferred Partnership Securities, in whole, but not in part, at $25 per
Preferred Partnership Security plus accumulated and unpaid distributions on the
Preferred Partnership Securities and, therefore, cause a redemption of the
TOPrS at the same price.
WHAT ARE ADDITIONAL AMOUNTS?
All payments made on the subsidiary debentures or with respect to the TXU
Europe Limited subordinated guarantees will be made without withholding or
deduction for taxes or other governmental charges, unless required by law.
Subject to customary exceptions only with respect to the Trust Guarantee (and
the Partnership Guarantee following the distribution of Preferred Partnership
Securities to the holders of TOPrS on liquidation of the trust), if
withholding is required with respect to payments made on the subsidiary
debentures or these guarantees, the issuers of the subsidiary debentures or TXU
Europe Limited, as applicable, will pay "Additional Amounts" so that the
partnership, in the case of the subsidiary debentures or the related TXU Europe
Limited guarantees, or the holders of the Preferred Partnership Securities or
8
<PAGE>
the holders of the TOPrS, in the case of the Partnership Guarantee and the Trust
Guarantee, respectively, would receive the same payments with respect to these
instruments as if no withholding or deduction had been made.
WHAT HAPPENS IF A TAX EVENT OR AN INVESTMENT COMPANY EVENT OCCURS?
Upon the occurrence of a trust tax event, which event will generally be
triggered upon the occurrence of specified adverse tax consequences with respect
to the trust, Additional Amounts being payable on the subsidiary debentures or
the related guarantees as a result of a change in law, or the denial of an
interest deduction on the subsidiary debentures held by the partnership, or upon
the occurrence of a trust investment company event, which event will generally
be triggered if the trust is considered an "investment company" under the
Investment Company Act, except in limited circumstances, the Administrative
Trustees will have the right to liquidate the trust and cause Preferred
Partnership Securities to be distributed to the holders of the TOPrS. In most
circumstances involving a partnership tax event, which event will generally be
triggered upon the occurrence of specified adverse tax consequences with respect
to the partnership, Additional Amounts being payable on the subsidiary
debentures or the related guarantees as a result of a change in law, or the
denial of an interest deduction on the subsidiary debentures held by the
partnership, or upon the occurrence of a partnership investment company event,
which event will generally be triggered if the partnership is considered an
"investment company" under the Investment Company Act, the partnership will have
the right to redeem the Preferred Partnership Securities, in whole, but not in
part, at $25 per Preferred Partnership Security plus accumulated and unpaid
distributions on the Preferred Partnership Securities and, therefore, cause a
redemption of the TOPrS at the same price.
LISTING
TXU Europe Limited will apply to have the TOPrS listed on The New York
Stock Exchange, or NYSE, and on the Luxembourg Stock Exchange, or LSE.
FORM OF THE TOPRS
The TOPrS will be represented by one or more global certificates registered
in the name of Cede & Co., as nominee for The Depository Trust Company, or DTC.
Beneficial interests in the TOPrS will be evidenced by, and transfers of
beneficial interests will be effected through, records maintained by the
participants in either DTC (in the United States) or Cedelbank or Morgan
Guaranty Trust Company of New York, Brussels Office, as operator of Euroclear
(in Europe). Except in certain limited circumstances, TOPrS in
certificated form will not be issued in exchange for the global certificate or
certificates.
USE OF PROCEEDS
All of the proceeds from the issuance and sale of the TOPrS will be
invested by the trust in the Preferred Partnership Securities. The partnership
will use the funds, together with the capital contribution of TXU Europe
Limited, as general partner, to make investments in the subsidiary debentures
and other eligible debt securities. The subsidiaries of TXU Europe Limited that
are the issuers of the debentures will use the proceeds from the sale of these
debentures to repay corporate debt and for general corporate purposes.
9
<PAGE>
SELECTED FINANCIAL INFORMATION
On May 19, 1998, TXU Europe Limited obtained control of The Energy Group
PLC, or TEG, the former holding company of TXU Europe Group. At the same time,
TEG disposed of its US and Australian coal businesses and its US energy
marketing business. For financial reporting purposes, TXU Europe Group is
considered to be the "Predecessor Company" to TXU Europe Limited. TXU Europe
Group constituted 97% of TXU Europe Limited's assets as of September 30, 1999
and generated 100% of TXU Europe Limited's operating revenues for the nine
months ended September 30, 1999. The principal difference between the results of
operation of TXU Europe Group and the results of operation of the continuing
businesses of TEG is the interest expense associated with debt securities issued
by Energy Group Overseas, B.V., or Overseas, a financing subsidiary of TEG. See
TXU Europe Limited's unaudited condensed consolidated pro forma statement of
income for the year ended December 31, 1998 included elsewhere in this
prospectus. This pro forma statement of income includes TXU Europe Group's
operation and the interest expense of Overseas, as if TXU Europe Limited had
acquired TEG on January 1, 1998. See also the financial statements of Overseas
included elsewhere in this prospectus.
The selected financial data of TXU Europe Group for, and as of, each of the
four years in the period ended March 31, 1998 and for the period from April 1,
1998 through May 18, 1998, have been derived from financial statements of TXU
Europe Group, which have been audited by PricewaterhouseCoopers, independent
accountants. The financial statements of TXU Europe Group for each of the four
years in the period ended March 31, 1998 have been prepared in accordance with
UK GAAP. The financial statements of TXU Europe Group for the years ended March
31, 1997 and 1998 also have been prepared in accordance with US GAAP. TXU Europe
Group's financial statements for the period from April 1, 1998 through May 18,
1998 have been prepared in accordance with US GAAP.
In October 1997, Overseas issued $500 million aggregate principal amount of
guaranteed debt securities. Overseas is now a subsidiary of TXU Europe Limited,
and its financial statements for the periods from its formation through March
31, 1998 and from April 1, 1998 through May 18, 1998 are included elsewhere in
this prospectus. If interest expense of Overseas had been included in TXU Europe
Group's financial statements, (1) UK GAAP net income/(loss), ratio of earnings
to fixed charges and net interest expense would have been (pound)42 million, 2.5
and (pound)95 million, respectively, for the year ended March 31, 1998, (2) US
GAAP net income/(loss), ratio of earnings to fixed charges and net interest
expense would have been (pound)(45) million, 1.7 and (pound)136 million,
respectively, for the year ended March 31, 1998 and (pound)(23) million, 0.1 and
(pound)19 million, respectively, for the period from April 1, 1998 through May
18, 1998, (3) UK GAAP long-term debt and other obligations, less amounts due
currently, would have been (pound)1.8 billion as of March 31, 1998 and (4) US
GAAP long-term debt and other obligations, less amounts due currently, would
have been (pound)2.3 billion as of March 31, 1998.
The selected financial data of TXU Europe Limited for the period from
formation (February 5, 1998) through December 31, 1998, for the period from
formation through March 31, 1999 and as of December 31, 1998 and March 31, 1999,
have been derived from financial statements of TXU Europe Limited, which have
been audited by PricewaterhouseCoopers, independent accountants. The selected
financial data of TXU Europe Limited for the nine months ended September 30,
1999 have been derived from the unaudited financial statements of TXU Europe
Limited. The financial statements of TXU Europe Limited have been prepared in
accordance with US GAAP. TXU Europe Limited recorded its approximately 22%
equity interest in the net income of TEG for the period from March to May 18,
1998 and has accounted for TEG and TXU Europe Group as consolidated subsidiaries
since May 19, 1998. Results of TXU Europe Limited for the periods from formation
through December 31, 1998 and March 31, 1999 and for the nine months ended
September 30, 1999 are not indicative of results for an annual period. Because
TXU Europe Limited obtained control of TEG on May 19, 1998, earnings of TXU
Europe Group are not reflected in TXU Europe Limited's results before May 19,
1998, other than as a result of TXU Europe Limited's 22% equity interest in the
net income of TEG for the period from March through May 18, 1998. In addition,
TXU Europe Limited's operations are affected by seasonal weather patterns.
For more information, see MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS and the consolidated financial statements
and related notes of TXU Europe Group as of March 31, 1998 and for the two years
in the period then ended, and for the period from April 1, 1998 through May 18,
1998 and of TXU Europe Limited as of, and for the periods from formation through
December 31, 1998 and March 31, 1999 and as of, and for the nine months ended
September 30, 1999 included elsewhere in this prospectus.
TXU Europe Limited's unaudited pro forma condensed consolidated income
statement and other consolidated data presented below for the year ended
December 31, 1998 reflect the acquisition by TXU Europe Limited of TEG as if it
10
<PAGE>
had occurred as of January 1, 1998. That unaudited pro forma condensed
consolidated income statement and other consolidated data have been prepared by
TXU Europe Limited from US GAAP historical information and assumptions deemed
proper by it and include the effects of an allocation of the purchase price
paid. The unaudited pro forma condensed consolidated income statement and other
data presented in this prospectus are shown for illustrative purposes only and
are not necessarily indicative of the future results of operations of TXU Europe
Limited or of the results of operations of TXU Europe Limited if the transaction
had occurred as of January 1, 1998. This information should be read in
conjunction with the unaudited condensed consolidated pro forma statement of
income and related notes of TXU Europe Limited included elsewhere in this
prospectus.
11
<PAGE>
<TABLE>
<CAPTION>
TXU EUROPE GROUP PLC
(PREDECESSOR COMPANY)
UK GAAP US GAAP
------------------------------------- -----------------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED MARCH 31, APRIL 1, 1998 JANUARY 1,
------------------------------------- THROUGH 1998 THROUGH
1995 1996 1997 1998 1997 1998 MAY 18, 1998 MAY 18, 1998
---- ---- ---- ---- ---- ---- ------------- ------------
((POUND)MILLION (UNAUDITED)
CONSOLIDATED INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues................. 2,061 2,119 2,984 3,475 2,984 3,475 425 1,563
Operating income/(loss)............ 244 43 346 337 298 267 (11) 91
Net income/(loss).................. 141 221 265 49 (90) (38) (21) 16
</TABLE>
<TABLE>
<CAPTION>
UK GAAP US GAAP
------------------------------------- -----------------
AS OF MARCH 31,
--------------------------------------------------------
1995 1996 1997 1998 1997 1998
---- ---- ---- ---- ---- ----
((POUND)MIlLION)
CONSOLIDATED BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C>
Total assets...................... 2,053 2,364 3,709 3,888 5,422 5,826
Common stock equity............... 832 1,189 1,314 1,167 2,025 1,802
Minority interest................. (1) (2) 19 6 19 6
Long-term debt and other
obligations, less amounts due
currently....................... 484 682 1,466 1,499 1,837 1,976
</TABLE>
<TABLE>
<CAPTION>
UK GAAP US GAAP
------------------------------------- -----------------------------------------
PERIOD FROM PERIOD FROM
YEAR ENDED MARCH 31, APRIL 1, 1998 JANUARY 1,
------------------------------------- THROUGH 1998 THROUGH
1995 1996 1997 1998 1997 1998 MAY 18, 1998 MAY 18, 1998
---- ---- ---- ---- ---- ---- ------------- ------------
((POUND)MILLION, EXCEPT RATIOS) (UNAUDITED)
CONSOLIDATED CASH FLOW DATA (1):
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating activities.............. 284 (189) (116) 614 292 341 74 154
Investing activities.............. (452) 306 (1,052) (238) (229) (234) (78) (139)
Financing activities.............. (5) 560 915 (148) (316) 121 16 27
OTHER CONSOLIDATED DATA:
Earnings before interest, taxes and
minority interest (EBIT)
(unaudited)(2).................. 217 280 364 347 303 277 (10) 92
Earnings before interest, taxes,
minority interest, depreciation
and amortization (EBITDA)
(unaudited)(2).................. 273 345 436 436 464 462 16 165
Ratio of earnings to fixed charges
(unaudited)(3).................. 5.8 4.9 4.2 2.6 2.5 1.7 0.1 1.6
Net interest expense.............. 14 22 46 85 88 126 16 41
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
TXU EUROPE LIMITED
(SUCCESSOR COMPANY)
US GAAP
PERIOD FROM FORMATION PERIOD FROM
(FEBRUARY 5, 1998) THROUGH PRO FORMA YEAR FORMATION NINE MONTH
-------------------------- ENDED THROUGH ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1998 1999
----------------------------------------- -----------------------------
(UNAUDITED)
((POUND)million)
CONSOLIDATED INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Operating revenues................. 2,165 3,338 3,690 939 2,686
Operating income................... 314 484 508 53 354
Net income (loss).................. 77 126 94 (25) 71
</TABLE>
<TABLE>
<CAPTION>
AS OF AS OF AS OF
DECEMBER 31, 1998 MARCH 31, 1999 SEPTEMBER 30, 1999
----------------- -------------- ------------------
(UNAUDITED)
((POUND)million)
CONSOLIDATED BALANCE SHEET DATA:
<S> <C> <C> <C>
Total assets....................... 8,529 8,583 8,429
Total common stock equity.......... 1,535 1,581 1,607
Minority interest.................. 190 200 197
Note payable to TXU Corp........... 682 682 -
Long-term debt, less amounts due
currently........................ 3,629 3,754 4,495
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM FORMATION NINE MONTHS
(FEBRUARY 5, 1998) THROUGH PERIOD FROM ENDED
---------------------------------------- FORMATION THROUGH SEPTEMBER 30,
DECEMBER 31, 1998 MARCH 31, 1999 SEPTEMBER 30, 1999 1999
----------------------------------------- -------------------- -------------
(UNAUDITED)
((POUND)million)
CONSOLIDATED CASH FLOW DATA:
<S> <C> <C> <C> <C>
Operating activities............... 37 44 12 447
Investing activities............... (1,767) (1,858) (1,569) (347)
Financing activities............... 2,197 2,228 3,427 (206)
</TABLE>
<TABLE>
<CAPTION>
PERIOD FROM FORMATION PERIOD FROM
(FEBRUARY 5, 1998) THROUGH PRO FORMA YEAR FORMATION NINE MONTH
-------------------------- ENDED THROUGH ENDED
DECEMBER 31, MARCH 31, DECEMBER 31, SEPTEMBER 30, SEPTEMBER 30,
1998 1999 1998 1998 1999
----------------------------------------- -----------------------------
(UNAUDITED)
((POUND)million)
OTHER CONSOLIDATED DATA:
<S> <C> <C> <C> <C> <C>
Earnings before interest, taxes and
minority interest (EBIT)
(unaudited)(2)................... 360 531 539 81 359
Earnings before interest, taxes,
minority interest, depreciation
and amortization (EBITDA)
(unaudited)(2)................... 504 733 771 165 542
Ratio of earnings to fixed charges
(unaudited)(3)..................... 1.5 1.7 1.4 0.7 1.6
Net interest expense................. 205 278 341 128 213
</TABLE>
13
<PAGE>
(1) Cash flow information on a UK GAAP basis for the years ended March 31,
1995, 1996, 1997 and 1998 have been reformatted to US GAAP
presentation style.
(2) EBIT equals earnings before interest income, interest expense, income
taxes and minority interest. EBITDA equals earnings before interest
income, interest expense, income taxes, minority interest,
depreciation and amortization. This information is provided for
informational purposes only. EBIT and EBITDA are not measures defined
under US GAAP and have not been presented in accordance with US GAAP.
Neither EBIT nor EBITDA should be construed as an alternative to
operating income under US GAAP as an indicator of operating
performance, or as an alternative to cash flows from operating
activities under US GAAP as a measure of liquidity. EBIT and EBITDA
are widely accepted financial indicators of a company's ability to
incur and service debt. However, these measures of EBIT and EBITDA may
not be comparable to similar measures presented by other companies.
(3) The ratio of earnings to fixed charges is computed as the sum of
earnings plus fixed charges divided by fixed charges. Earnings consist
of the aggregate of net income (loss) before minority interests,
income taxes and fixed charges excluding interest capitalized. Fixed
charges consist of interest expensed and capitalized and the estimated
interest portion of rent expense. For TXU Europe Group, for the
period from April 1, 1998 through May 18, 1998 total fixed charges
exceeded total earnings by (pound) 26 million. For TXU Europe
Limited, for the period from formation through September 30, 1998,
total fixed charges exceeded total earnings by (pound)50 million.
14
<PAGE>
RISK FACTORS
In addition to the other information in this prospectus, the following
factors pertain to an investment in the TOPrS.
BECAUSE TXU EUROPE LIMITED'S GUARANTEES AND THE SUBSIDIARY DEBENTURES ARE
SUBORDINATED OBLIGATIONS, THE CLAIMS OF GENERAL CREDITORS OF TXU EUROPE LIMITED
AND THE ISSUERS OF THE SUBSIDIARY DEBENTURES ARE SENIOR TO CLAIMS OF HOLDERS OF
TOPRS UNDER THOSE GUARANTEES AND SUBSIDIARY DEBENTURES.
TXU Europe Limited's obligations under the guarantees and the
obligations of the issuers of the subsidiary debentures under those debentures
are subordinated to the claims of general creditors of TXU Europe Limited and
the issuers of those debentures. As of September 30, 1999, there was an
aggregate of (pound)2.20 billion of long-term debt of TXU Europe Limited that
would have been senior to the guarantees. Upon liquidation or reorganization of
TXU Europe Limited, or an issuer of subsidiary debentures, the claims of senior
creditors generally will be paid before payments can be made on the guarantees
or the subsidiary debentures, as the case may be.
BECAUSE TXU EUROPE LIMITED IS A HOLDING COMPANY, CLAIMS OF CREDITORS OF TXU
EUROPE LIMITED'S SUBSIDIARIES ALSO ARE EFFECTIVELY SENIOR TO CLAIMS OF HOLDERS
OF TOPRS UNDER TXU EUROPE LIMITED'S GUARANTEES.
TXU Europe Limited is a holding company. Almost all of its operating
income comes from TXU Europe Group and TXU Europe Group's subsidiaries. Almost
all of TXU Europe Limited's consolidated assets are held by TXU Europe Group and
TXU Europe Group's subsidiaries. Accordingly, the ability of TXU Europe Limited
to service its debt, including its obligations under the guarantees, is
primarily dependent on the earnings of TXU Europe Group and its subsidiaries and
the payment of those earnings to TXU Europe Limited in the form of dividends,
loans or advances and through repayment of loans or advances from TXU Europe
Limited. Neither the subsidiaries of TXU Europe Limited, except for the trust,
nor TXU Europe Group and its subsidiaries have any obligation to pay any amounts
due on the TOPrS.
Funding is a special purpose entity formed solely as a financing
vehicle for TXU Europe Limited and its affiliates. Therefore, Funding's ability
to make interest and other payments on the debentures that it will issue to the
partnership is entirely dependent on TXU Europe Limited and its affiliates
making payments on their obligations to Funding as and when required. If TXU
Europe Limited and its affiliates were not to make such payments for any reason,
Funding would not have sufficient funds to make payments on these debentures. In
this event, the partnership, as the holder of these debentures, would, except to
the extent Funding can fully exercise its rights to defer interest, rely on the
enforcement of its rights against TXU Europe Limited pursuant to the terms of
its guarantee of these debentures.
Unexpected declines in TXU Europe Group's future business, which may
result from the increasingly competitive environment in the UK electric and gas
utility industries, increases in operating or capital costs, changes in
regulatory policies or the inability to borrow additional funds, could impair
TXU Europe Group's ability to meet its debt service obligations, or to make
distributions to TXU Europe Limited. This could adversely affect (a) the ability
of the issuers of the subsidiary debentures to make payments on their
obligations to the partnership as well as the partnership's ability to declare
distributions on the Preferred Partnership Securities that the trust would need
to pay distributions on the TOPrS and (b) TXU Europe Limited's ability to make
any payments pursuant to the guarantees. 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 TXU Europe Limited.
Since TXU Europe Limited is a holding company, the guarantees will be
effectively subordinated to existing and future liabilities and preference share
capital of TXU Europe Limited's subsidiaries. As of September 30, 1999, there
was an aggregate of (pound)2.20 billion of debt and preference share capital of
TXU Europe Limited's subsidiaries, other than debt securities of finance
subsidiaries that are guaranteed by TXU Europe Limited, that would have been
senior to the guarantees. The financial statements of TXU Europe Limited and TXU
Europe Group included in this prospectus show the aggregate amount of subsidiary
debt and preference share capital as of the date of those statements. This
includes trade payables, guarantees and leases, letters of credit and other
obligations of TXU Europe Limited's subsidiaries. Upon liquidation or
reorganization of a subsidiary of TXU Europe Limited, the claims of that
subsidiary's creditors generally will be paid before payments can be made on the
guarantees or to other creditors of TXU Europe Limited. Although some debt
instruments limit the amount of debt TXU Europe Limited and its subsidiaries may
incur, both TXU Europe Limited and its subsidiaries retain the ability to incur
substantial additional indebtedness and other obligations that will rank senior
15
<PAGE>
to the guarantees. See MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- "Liquidity and Capital Resources -
Financing Arrangements."
TXU EUROPE LIMITED HAS ALREADY INCURRED SUBSTANTIAL INDEBTEDNESS. THIS LEVEL OF
INDEBTEDNESS MAY LIMIT TXU EUROPE LIMITED'S ABILITY TO SERVICE ITS INDEBTEDNESS
AND TO CONDUCT BUSINESS.
As of September 30, 1999, the ratio of TXU Europe Limited's
consolidated net debt to consolidated net debt plus equity as determined in
accordance with US GAAP was approximately 68.5%. See the consolidated financial
statements of TXU Europe Limited and the notes that accompany each of them. The
degree to which TXU Europe Limited and its consolidated subsidiaries may be
leveraged in the future could affect their ability to service their
indebtedness, to make capital investments, to take advantage of business
opportunities, to respond to competitive pressures or to obtain additional
financing. In addition, TXU Europe Limited and some of its subsidiaries have
outstanding indebtedness that contains cross-default provisions. Therefore, a
default by TXU Europe Limited or those subsidiaries on these and other
obligations could cause a default under indebtedness that contains cross-default
provisions.
IF TXU EUROPE LIMITED, AS GENERAL PARTNER OF THE PARTNERSHIP, DOES NOT DECLARE
DISTRIBUTIONS ON THE PREFERRED PARTNERSHIP SECURITIES, THE TRUST WILL NOT HAVE
THE FUNDS TO PAY DISTRIBUTIONS ON THE TOPRS.
The trust's ability to pay distributions to the holder of the TOPrS is
dependent upon its receipt of distributions on the Preferred Partnership
Securities. If subsidiaries of TXU Europe Limited defer or fail to make interest
or principal payments on the subsidiary debentures and if TXU Europe Limited
fails to make guarantee payments on the guarantees of the subsidiary debentures,
the partnership will lack the funds necessary to pay distributions on the
Preferred Partnership Securities. If the partnership does not make current
distributions on the Preferred Partnership Securities, either because TXU Europe
Limited, as the general partner, does not declare distributions to be made or
because the partnership lacks sufficient funds, the trust will not have funds
available to make current distributions on the TOPrS. In that event, the Trust
Guarantee will apply to those distributions until the trust has sufficient funds
available to pay those distributions. Distributions not paid in respect of the
Preferred Partnership Securities on the scheduled payment date will accumulate
and compound quarterly at the rate of ____% of the liquidation amount of $25
per Preferred Partnership Security per annum, and any amounts paid will then
be paid on the TOPrS at the same rate.
TAX CONSEQUENCES OF FAILURE OF DISTRIBUTIONS. Even if the partnership
fails to pay current distributions on the Preferred Partnership Securities, the
holders of the TOPrS will continue to recognize income for US federal income tax
purposes in advance of the receipt of cash and the holders of the TOPrS will not
receive the cash from the trust related to such income if the holders of the
TOPrS dispose of the TOPrS prior to the record date for the date on which
distributions of such amounts are made by the trust.
THE PARTNERSHIP MAY HAVE INSUFFICIENT INCOME OR ASSETS TO PAY DISTRIBUTIONS TO
THE TRUST THAT ARE SUFFICIENT TO PAY DISTRIBUTIONS ON THE TOPRS.
The holders of the TOPrS are subject to the risk that the current or
liquidating distributions expected to be payable on the TOPrS will not match the
rate paid on the securities held by the partnership, including the subsidiary
debentures and any additional securities acquired by the partnership in the
future.
A mismatch could occur if:
. at any time that the partnership is receiving current
payments in respect of the securities held by the
partnership (including the subsidiary debentures),
TXU Europe Limited, as the general partner of the
partnership, in its sole discretion, does not declare
distributions on the Preferred Partnership Securities
or the partnership receives insufficient amounts from
its investments to pay the resulting additional
compounded distributions that will accumulate on any
unpaid distributions,
. the partnership reinvests the proceeds received from
the subsidiary debentures upon their redemption or at
their maturities in other subsidiary debentures or
eligible debt securities that do not generate income
sufficient to pay full quarterly distributions in
respect of the Preferred Partnership Securities at a
rate of ___% per annum, or, if sufficient to pay
those distributions either in full or in part, the
partnership does not declare or make those
distributions, or
16
<PAGE>
. the partnership reinvests the proceeds received from
the subsidiary debentures upon their redemption or at
their maturities in other subsidiary debentures that
are not guaranteed by TXU Europe Limited and those
subsidiary debentures cannot be liquidated by the
partnership for an amount sufficient to pay those
distributions in full or, if sufficient to pay those
distributions in full or in part, the partnership
does not declare or make those distributions.
The trust will not have sufficient funds available to pay the holders
of the TOPrS full expected current or liquidating distributions on the TOPrS if
the partnership lacks sufficient funds to make current or liquidating
distributions on the Preferred Partnership Securities in full.
ALMOST ALL OF THE PARTNERSHIP'S INITIAL INVESTMENTS WILL BE IN DEBENTURES OF
SUBSIDIARIES OF TXU EUROPE LIMITED.
With the proceeds from the issuance of the TOPrS, the trust will
purchase the Preferred Partnership Securities. The partnership will invest
approximately ____% of the proceeds from the issuance of the Preferred
Partnership Securities and the general partner's capital contribution in the
subsidiary debentures. If TXU Europe Limited's subsidiaries default on their
obligations under the subsidiary debentures, and TXU Europe Limited defaults on
its obligations under the guarantees, the trust will not be able to pay the
expected current or liquidating distributions on the TOPrS.
IN SOME CASES, THE HOLDERS OF THE TOPRS MAY RECEIVE CASH OR PREFERRED
PARTNERSHIP SECURITIES IN EXCHANGE FOR THE TOPRS. IF THAT HAPPENS, THE HOLDERS
OF THE TOPRS MAY HAVE TO PAY TAXES AND THE VALUE OF THE INVESTMENT IN THE TOPRS
MAY BE REDUCED.
The occurrence of:
. specifiedadverse tax consequences to the trust or the
partnership, Additional Amounts being payable on the
subsidiary debentures or the related guarantees as a
result of a change in law or the denial of an
interest deduction in the US or the UK by TXU Europe
Limited or any subsidiary on any subsidiary
debentures held by the partnership, or
. the trust or the partnership being considered an
"investment company" under the Investment
Company Act,
would constitute a "special event." If a trust special event occurs, there is a
possibility that the TOPrS will be redeemed for cash prior to the time that the
TOPrS could otherwise be optionally redeemed, or that the holder of the TOPrS
will receive Preferred Partnership Securities in exchange for the TOPrS. See
DESCRIPTION OF THE TOPrS -- "Trust Special Event Redemption or Distribution" for
the definition of trust special event. Preferred Partnership Securities may not
trade at the same value as the TOPrS. In addition, the receipt of Preferred
Partnership Securities may cause the holders of the TOPrS to incur tax liability
in excess of what the holders of the TOPrS initially contemplated. There is also
the possibility that the partnership will redeem Preferred Partnership
Securities for cash in the event that a partnership special event occurs. See
DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES -- "Partnership Special
Event Redemption" for the definition of partnership special event.
TAX CONSEQUENCES. Unless the liquidation of the trust occurs as a
result of the trust being subject to US federal income tax with respect to
income on the Preferred Partnership Securities, a distribution of the Preferred
Partnership Securities upon the dissolution of the trust would not be a taxable
event to holders of the TOPrS. If, as a consequence of a trust special event
resulting from the trust becoming subject to US federal income tax with respect
to income on the Preferred Partnership Securities, Preferred Partnership
Securities are distributed to the holders of the TOPrS by the trust, the holders
of the TOPrS would likely recognize gain or loss as if the holders of the TOPrS
had exchanged TOPrS for the Preferred Partnership Securities in a taxable
exchange. Similarly, the holders of the TOPrS would recognize a gain or loss if,
upon an occurrence of a partnership special event, the trust redeems the TOPrS
for cash.
EXCHANGE ISSUES. Because the holders of the TOPrS may receive Preferred
Partnership Securities upon the occurrence of a special event, you are also
making an investment decision with regard to the Preferred Partnership
Securities and should carefully review all the information regarding the
Preferred Partnership Securities contained herein. Neither TXU Europe Limited,
the trust, nor the partnership can make any assurance as to the market prices
for the Preferred Partnership Securities that may be distributed in exchange for
TOPrS if a dissolution or liquidation of the trust were to occur. Accordingly,
the Preferred Partnership Securities that holders of TOPrS may receive may trade
at a discount to the purchase price of the TOPrS.
17
<PAGE>
HOLDERS OF TOPRS CANNOT CAUSE TXU EUROPE LIMITED, AS GENERAL PARTNER OF THE
PARTNERSHIP, TO DECLARE DISTRIBUTIONS.
If a special representative is appointed to act on behalf of holders of
Preferred Partnership Securities, that special representative's ability to take
action on behalf of the holders of the TOPrS is limited, and it is uncertain
that the holders of the TOPrS would receive a distribution on the TOPrS even if
the special representative took such action. Under no circumstances will the
special representative have authority to cause the general partner to declare
distributions on the Preferred Partnership Securities. As a result, although the
special representative may be able to enforce the partnership's creditors'
rights to accelerate and receive payments on the subsidiary debentures and the
TXU Europe Limited guarantees of the subsidiary debentures, the partnership
would be entitled to reinvest those payments in additional subsidiary debentures
or other eligible debt securities, subject to satisfying the applicable
reinvestment criteria, rather than declaring and making distributions on the
Preferred Partnership Securities.
HOLDERS OF TOPRS WILL HAVE LIMITED VOTING RIGHTS.
Holders of the TOPrS will have limited voting rights and will not be
entitled to vote to appoint, change, or to increase or decrease the number of
trustees. Those voting rights are vested exclusively in the Control Party as the
holder of the control certificate.
TRADING PRICES MAY NOT FULLY REFLECT THE VALUE OF DISTRIBUTIONS DUE ON THE TOPRS
AND MAY BE VOLATILE.
The price at which the TOPrS trade may not fully reflect the value of
the accumulated but unpaid distributions on the TOPrS, which will equal the
accumulated but unpaid distributions on the Preferred Partnership Securities. If
you dispose of your TOPrS prior to the record date for the date on which
distributions of such amounts are made by the trust, your adjusted tax basis in
the TOPrS will include accumulated but unpaid distributions on the Preferred
Partnership Securities through the date of disposition, which you will include
in gross income for US federal income tax purposes. To the extent the selling
price is less than the adjusted tax basis of the TOPrS, the holder of those
TOPrS will recognize a capital loss. Subject to limited exceptions, the holder
of the TOPrS cannot apply capital losses to offset ordinary income for US
federal income tax purposes.
In addition, as a result of the option of the general partner not to
declare current distributions on the Preferred Partnership Securities, the
market price of the TOPrS, which represent undivided beneficial ownership
interests in the Preferred Partnership Securities, may be more volatile than
other similar securities where there is no such right not to pay current
distributions.
THERE HAS BEEN NO PRIOR MARKET FOR THE TOPRS.
The TOPrS constitute a new issue of securities with no established
trading market. We will apply to have the TOPrS listed on the NYSE and the LSE.
We cannot assure that an active market for the TOPrS will develop or be
sustained in the future on the NYSE or the LSE. Although the underwriters have
indicated to TXU Europe Limited that they intend to make a market in the TOPrS,
as permitted by applicable laws and regulations, they are not obligated to do so
and may discontinue any market-making at any time without notice. Accordingly,
we cannot give any assurances as to the liquidity of, or trading markets for,
the TOPrS.
CHANGES IN CURRENCY EXCHANGE RATES MAY AFFECT THE ABILITY OF SUBSIDIARIES OF TXU
EUROPE LIMITED TO MAKE PAYMENTS ON THE SUBSIDIARY DEBENTURES AND TXU EUROPE
LIMITED'S ABILITY TO MAKE PAYMENTS ON THE GUARANTEES.
TXU Europe Limited's and its subsidiaries' revenues will be primarily
received in pounds sterling while the price which will be paid to the trust for
the TOPrS will be paid in US dollars, and the interest and principal payment
obligations on the subsidiary debentures (and the related TXU Europe Limited
guarantees) and the payment obligations on the TOPrS and Preferred Partnership
Securities (and the related TXU Europe Limited guarantees) will be payable in US
dollars. As a result, any change in the currency rate that increases the
effective principal and interest payment obligations on the subsidiary
debentures and payment obligations on TXU Europe Limited's guarantees on the
Preferred Partnership Securities and TOPrS, upon conversion of pounds
sterling-based revenues into TXU Europe Limited's guarantees of the US dollars
may have a material adverse effect on TXU Europe Limited and its subsidiaries or
on their ability to make payments on the subsidiary debentures or those
guarantees and, therefore on the ability of the partnership and the trust
to make payments on the Preferred Partnership Securities and the TOPrS. See
EXCHANGE RATES for information concerning the Noon Buying Rate for pounds
sterling expressed in US dollars.
18
<PAGE>
THERE ARE A NUMBER OF REGULATORY RISKS ASSOCIATED WITH TXU EUROPE GROUP'S
BUSINESSES.
Governmental agencies in the UK are reviewing various elements of the
electricity generation, supply and distribution industry, with a view to
increasing competition in each of these segments of the electricity business.
DISTRIBUTION PRICE REVIEW COULD SUBSTANTIALLY REDUCE REVENUES OF TXU EUROPE
GROUP'S NETWORKS BUSINESS AND COULD LEAD TO A DOWNGRADE IN THE RATINGS OF THE
TOPRS.
TXU Europe Group's networks business, which primarily involves the
distribution of electricity in its UK service territory, accounted for
approximately 48% of TXU Europe Limited's profits before interest, taxes and
exceptional items for the twelve months ended September 30, 1999. This business
is regulated under a governmental license, and electricity distribution pricing
is determined by a distribution price formula established by the regulator.
Application of this formula may or may not allow TXU Europe Group to recoup all
of its costs with respect to this business. The various elements of the formula
and the terms of TXU Europe Group's license are subject to amendment from time
to time. A review of the distribution price formula is scheduled to be completed
by the regulator in April 2000. In his draft proposals for the distribution
price control review which were released in August 1999 and adjusted in October
1999, the regulator has proposed a substantial decrease in distribution prices
charged by the networks business in its service territory. TXU Europe Limited
cannot predict the final outcome of the distribution price control review or
what the result of the review will be on TXU Europe Limited's revenues or cash
flow or on the rating of the TOPrS. For further information, see TXU EUROPE
GROUP BUSINESS OVERVIEW -- "UK Regulatory Matters--Networks Regulation --
Distribution Price Regulation."
SUPPLY PRICE RESTRAINTS MAY REDUCE REVENUES OF TXU EUROPE GROUP'S ELECTRICITY
SUPPLY BUSINESS.
Supply charges to residential and small business customers in TXU
Europe Group's electricity distribution area account for a substantial portion
of TXU Europe Group's supply businesses. They are currently regulated by maximum
price restraints. When the regulator determines that an adequate level of
competition has been established, these supply price restraints are expected to
no longer apply. A determination is not expected for at least two years. Until
then, these maximum price restraints could adversely affect TXU Europe Limited's
revenues from these markets. For further information, see TXU EUROPE GROUP
BUSINESS OVERVIEW -- "UK Regulatory Matters--Energy Regulation; Electricity
Supply Price Regulation."
UK REGULATIONS ENCOURAGING FURTHER COMPETITION COULD RESULT IN TXU EUROPE GROUP
LOSING CUSTOMERS OR REDUCING ITS PRICES TO REMAIN COMPETITIVE.
The phasing in of competition for electricity supply to all service
areas, each of which had previously limited supply service to a single
authorized regional electricity company, was completed in May 1999. With the
introduction of full retail competition, it is expected that supply price
restraints will no longer apply to current supply customers after April 1, 2000,
except for a control on prices charged to residential and small business
customers until an adequate level of competition is established. The generation
market and electricity trading arrangements will also be affected by the outcome
of the current regulatory reviews of energy sources and pool arrangements by
governmental agencies. No assurance can be given that TXU Europe Group will
maintain or increase its current market share and margins in each of these
markets as they become more competitive.
OTHER REGULATORY RISKS
Subsidiaries of TXU Europe Limited hold various licenses that subject
their operations to comprehensive regulation. As a result of recent UK
government reviews of the regulation of electric and gas industries, various
reforms are anticipated, which may result in:
. Divestiture of generating plants, by large generators like
TXU Europe Group;
. Replacement of the wholesale trading market for electricity in
England and Wales, commonly referred to as the Pool, into which
all electric generation is now sold by generators, with a set of
voluntary markets;
. Separation of the management of the distribution and supply
businesses and/or the legal entities in which those
businesses are held;
19
<PAGE>
. Continuation of the restrictions which limit the construction
of new gas-fired generating plants; and
. Changes encouraging increased competition.
No assurance can be given as to what regulatory reforms may be
implemented, if any, when they might be implemented and how they might affect
TXU Europe Group and TXU Europe Limited. For further information, see INDUSTRY
BACKGROUND and TXU EUROPE GROUP BUSINESS OVERVIEW - "UK Regulatory
Matters."
INTERNAL AND EXTERNAL DATA PROCESSING ERRORS AFTER DECEMBER 31, 1999 COULD
REDUCE TXU EUROPE LIMITED'S REVENUES AND NET INCOME.
Many existing computer programs use only the last two digits to
identify a year in the date field. Thus, they would not recognize a year that
begins with 20 instead of 19. If not corrected, many computer applications could
fail or produce erroneous data on or about the year 2000.
As TXU Europe Limited's Year 2000, or Y2K, program proceeds, TXU Europe
Limited will continue to assess its internal and external risks, not all of
which are within its control. There can be no assurance that all material Y2K
risks within TXU Europe Limited's control will have been adequately identified
and corrected before the end of 1999. In addition, TXU Europe Limited's
operations are connected with the Pool, along with those of all UK energy
companies that use the Pool, and depend on the reliability of the national high
voltage transmission system and the operations of the Pool. For additional
information about the Pool, see INDUSTRY BACKGROUND - "The Electricity
Industry in England and Wales - The Pool." TXU Europe Limited can make no
assurances regarding the Y2K readiness of systems and parties outside its
control, nor can it currently assess the effect of any non-readiness by those
systems or parties. For further information, see MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-- "Year 2000 Issues."
20
<PAGE>
UK COURTS MIGHT NOT ENFORCE JUDGMENTS RENDERED OUTSIDE OF THE UK, WHICH MAY MAKE
IT DIFFICULT TO COLLECT ON JUDGMENTS RENDERED AGAINST FUNDING AND TXU EUROPE
LIMITED.
Funding is a private unlimited company and TXU Europe Limited is a
private limited company. Each is incorporated under the laws of England and
Wales. Substantially all the assets of Funding and TXU Europe Limited are
located outside the US. Funding and TXU Europe Limited have appointed Thelen
Reid & Priest LLP, New York, New York, as their authorized agent upon which
process may be served in any action arising out of or based upon the subsidiary
debenture indentures, the TOPrS, the Preferred Partnership Securities, the
guarantees, or the deposit agreement that may be instituted in any US Federal or
state court having subject matter jurisdiction in the Borough of Manhattan, The
City of New York, New York, and have consented to the jurisdiction of those
courts in any of those actions. However, it may not be possible for investors to
effect service of process within the US upon Funding or TXU Europe Limited in
connection with any other actions or to enforce against either of them, in
original actions or in actions for enforcement of judgments of US courts, civil
liabilities based upon US securities laws.
PRESENTATION OF CURRENCY, FINANCIAL AND OTHER INFORMATION
TXU Europe Limited publishes its consolidated financial statements in
pounds sterling. In this prospectus, references to "pounds sterling," "GBP,"
"pence" or "(pound)" are to the currency of the United Kingdom, or UK, and
references to "US dollars," "US$" or "$" are to the currency of the United
States, or US. References to "NLG" are to the national currency unit of The
Netherlands (being non-decimal denominations of the euro). As used in this
prospectus, "US GAAP" means US generally accepted accounting principles and "UK
GAAP" means UK generally accepted accounting principles. References to "MW" are
to megawatts, "MWh" are to megawatt hours, "kW" are to kilowatts, "kWh" are to
kilowatt hours, "TWh" are to terawatt hours, "GW" are to gigawatts, "GWh" are to
gigawatt hours, "kV" are to kilovolts and "LV" are to low volts.
For the convenience of the reader, this prospectus contains
translations of some pounds sterling amounts into US dollars at specified rates,
or, if the rate has not been specified, at the noon buying rate in New York City
for cable transfers in pounds sterling as certified for customs purposes by the
Federal Reserve Bank of New York (Noon Buying Rate) on September 30, 1999 of
$1.65 = (pound)1.00. Funding and TXU Europe Limited do not make any
representation that the pounds sterling amounts have been, could have been or
could be converted into US dollars at the rates indicated or at any other rates.
See EXCHANGE RATES for historical information regarding Noon Buying Rates.
TXU EUROPE LIMITED
Almost all of TXU Europe Limited's operating income is derived from TXU
Europe Group and TXU Europe Group's subsidiaries and almost all of TXU Europe
Limited's consolidated assets are held by TXU Europe Group and TXU Europe
Group's subsidiaries. TXU Europe Limited is a private limited company
incorporated in England and Wales in February 1998 and is an indirect
wholly-owned subsidiary of TXU Corp. TXU Europe Limited owns 90% of the
outstanding ordinary shares of TXU Finance (No. 2) Limited, or TXU Finance. The
remaining 10% of TXU Finance's outstanding ordinary shares are owned by a
wholly-owned US subsidiary of TXU Corp. In May 1998, TXU Acquisitions Limited
(Company No. 3455523), a wholly-owned subsidiary of TXU Finance, gained control
of TEG, the former holding company of TXU Europe Group, after all conditions to
its offer for all the ordinary shares of TEG had been satisfied or waived. In
August 1998, TXU Acquisitions completed the acquisition of TEG. In October 1998
TXU Acquisitions restructured its subsidiaries so that TXU Europe Group is now
owned by another subsidiary of TXU Acquisitions.
21
<PAGE>
TXU EUROPE GROUP PLC
TXU Europe Limited's major business operations are conducted through
the following subsidiaries of TXU Europe Group:
. TXU Europe Energy Trading Limited (formerly Eastern Power and
Energy Trading Limited) (Company No. 3116221), or Eastern Trading,
which coordinates and manages for TXU Europe Group the price and
volume risks associated with TXU Europe Group's generation,
electricity and gas retail businesses and those of third parties;
. Eastern Electricity plc, or Eastern Electricity, one of the
largest retailers of electricity in the UK, and Eastern Energy
Limited (Company No. 3181389), which supplies electricity outside
the authorized area served by Eastern Electricity;
. TXU Europe Power Limited (formerly Eastern Generation Limited)
(Company No. 2353756), or TXU Europe Power, one of
the largest generators of electricity in the UK; and
. Eastern Natural Gas Limited (Company No. 2907433), or Eastern
Natural Gas, one of the largest retail suppliers of
natural gas in the UK.
TXU Europe Group sells electricity and natural gas under the brand name
of Eastern Energy. The operations of Eastern Trading and TXU Europe Power are
treated by TXU Europe Limited as one segment for reporting purposes. The
electric and gas supply business is treated as the Energy Retail segment and the
distribution business is treated as the Networks segment for reporting purposes.
TXU EASTERN FUNDING COMPANY
Funding is a private unlimited company incorporated under the laws of
England and Wales and a wholly-owned indirect subsidiary of TXU Europe. Funding
was organized solely to provide funding for the operations of TXU Europe and its
subsidiaries by issuing debt securities, including the junior subordinated
debentures that will be issued to the partnership, and lending the proceeds to
TXU Europe. Funding's authorized and issued share capital consists of 200
ordinary shares with a nominal value of (pound)1 per share. Funding currently
has outstanding $1.5 billion ((pound)921 million) of senior notes that were
issued in May 1999.
TXU EUROPE CAPITAL I
TXU Europe Capital I is a statutory business trust formed under the
Delaware Business Trust Act pursuant to a trust agreement and the filing of a
certificate of trust with the Secretary of State of the State of Delaware on
November 22, 1999; that trust agreement will be amended and restated in its
entirety substantially in the form filed as an exhibit to the registration
statement of which this prospectus forms a part. The trust agreement will be
qualified as an indenture under the Trust Indenture Act of 1939. See DESCRIPTION
OF THE TOPrS. The Control Party will retain administrative and appointment
powers with respect to the trust by virtue of its ownership of the trust's
control certificate. The control certificate will not provide any economic
interest in the trust to the Control Party. The trust will use all the proceeds
derived from the issuance of the TOPrS to purchase the Preferred Partnership
Securities from the partnership and, accordingly, the assets of the trust will
consist solely of the Preferred Partnership Securities. The trust exists for the
exclusive purpose of (i) issuing the control certificate and the TOPrS, (ii)
investing the gross proceeds from the issuance of the TOPrS in the Preferred
Partnership Securities, and (iii) engaging in only those other activities
necessary or incidental to the activities described in (i) and (ii).
Under the trust agreement, there will initially be _____ trustees for
the trust. ___ of the trustees will be individuals who are employees or officers
of or who are affiliated with TXU Business Services Company, a US affiliate of
TXU Europe Limited. These trustees are referred to as Administrative Trustees.
The ___ trustee will be a financial institution that is unaffiliated with TXU
Europe Limited and is the indenture trustee for purposes of compliance with the
provisions of the Trust Indenture Act. This trustee will be referred to as the
Property Trustee. The _____ trustee will be an entity that maintains its
principal place of business in the State of Delaware. This trustee will be
referred to as the Delaware Trustee. Initially, The Bank of New York, a New York
banking corporation, will act as Property Trustee, and its affiliate, The Bank
of New York (Delaware), a Delaware corporation, will act as Delaware Trustee
until, in each case, removed or replaced by the Control Party as the holder of
the control certificate. For purposes of compliance with the Trust Indenture
22
<PAGE>
Act, The Bank of New York will also act as trustee under the Trust Guarantee and
as trustee under the indentures applicable to the subsidiary debentures. We
refer to the Bank of New York as the Trust Guarantee Trustee when it acts as
trustee under the Trust Guarantee.
The Property Trustee will hold title to the Preferred Partnership
Securities for the benefit of the holders of the TOPrS, and the Property Trustee
will have the power to exercise all rights, powers and privileges with respect
to the Preferred Partnership Securities under the limited partnership agreement
to be entered into by TXU Europe Limited and the trust as the holder of the
Preferred Partnership Securities. In addition, the Property Trustee will
maintain exclusive control of a segregated non-interest bearing bank account, or
property account, to hold all payments made in respect of the Preferred
Partnership Securities for the benefit of the holders of the TOPrS. The Trust
Guarantee Trustee will hold the Trust Guarantee for the benefit of the holders
of the TOPrS. The trust's business and affairs will be conducted by its
Administrative Trustees. Subject to the rights of the holders of the TOPrS to
appoint a substitute Property Trustee in certain instances, the Control Party,
as the holder of the control certificate, will have the right to appoint, remove
or replace any of the trustees and to increase or decrease the number of
trustees, provided that at least one trustee shall be a Delaware Trustee, at
least one trustee shall be the Property Trustee and at least one trustee shall
be an Administrative Trustee. TXU Europe Limited will provide funds to the trust
as needed to pay obligations of the trust to parties other than holders of
TOPrS.
For so long as the TOPrS remain outstanding, TXU Europe Limited will
covenant (i) to cause the trust to remain a statutory business trust and not to
voluntarily dissolve, wind-up, liquidate or be terminated, except as permitted
by the trust agreement and (ii) to use its commercially reasonable efforts to
ensure that the trust will not be (A) an "investment company" for purposes of
the Investment Company Act or (B) classified as other than a grantor trust for
US federal income tax purposes or as a transparent trust for UK taxation
purposes.
The rights of the holders of the TOPrS, including economic rights,
rights to information and voting rights, are as set forth in the trust agreement
and the Delaware Business Trust Act. See DESCRIPTION OF THE TOPrS. The trust
agreement and the Trust Guarantee also incorporate by reference the terms of the
Trust Indenture Act.
The office of the Delaware Trustee in the State of Delaware is White
Clay Center, Route 273, Newark, Delaware 19711. The principal place of business
of the trust is c/o TXU Corp, Energy Plaza, 1601 Bryan Street, Dallas, Texas
75201.
TXU EUROPE FUNDING I, L.P.
TXU Europe Funding I, L.P. is a limited partnership that was formed
under the Delaware Revised Uniform Limited Partnership Act, on November 22, 1999
for the exclusive purpose of purchasing eligible debt securities of certain
subsidiaries of TXU Europe Limited and other eligible debt securities with the
proceeds from the sale of Preferred Partnership Securities to the trust and a
capital contribution from TXU Europe Limited in exchange for the general partner
interest in the partnership. Under the certificate of limited partnership,
and the limited partnership agreement, as amended, TXU Europe Limited is the
sole general partner of the partnership. Upon the issuance of the Preferred
Partnership Securities, which represent limited partner interests in the
partnership, the trust will be the sole limited partner of the partnership.
Contemporaneously with the issuance of the Preferred Partnership Securities, the
general partner will contribute capital to the partnership in an amount
sufficient to establish its initial capital account at an amount equal to at
least 15% of the total capital of the partnership.
The partnership is managed by the general partner and exists for the
sole purpose of (1) issuing its partnership interests, (2) investing the
proceeds from those issuances in subsidiary debentures and eligible debt
securities and (3) engaging in only those other activities necessary or
incidental to the activities described in (1) and (2). To the extent that
aggregate payments to the partnership on the subsidiary debentures and on
eligible debt securities for each calendar quarter exceed distributions,
including accumulated distributions, paid with respect to the Preferred
Partnership Securities for these calendar quarters, the partnership may at times
have excess funds which, in the general partner's sole discretion, may be
distributed to the general partner in respect of its general partner interest in
the partnership.
For so long as the Preferred Partnership Securities remain outstanding,
the general partner will covenant in the limited partnership agreement to (i)
remain the sole general partner of the partnership and to maintain directly 100%
ownership of the general partner's interest in the partnership, or, in the case
of any merger or consolidation with or into, or transfer or lease of any of its
assets substantially as an entirety to, any corporation, partnership or trust,
the successor corporation, partnership or trust will expressly accept the
obligations of the general partner under the limited partnership agreement, (ii)
cause the partnership to remain a limited partnership and not to voluntarily
23
<PAGE>
dissolve, liquidate, wind-up or be terminated, except as permitted by the
limited partnership agreement and (iii) to use its commercially reasonable
efforts to ensure that the partnership will not be (A) an "investment company"
for purposes of the Investment Company Act or (B) an association or a publicly
traded partnership taxable as a corporation for US federal income tax purposes.
TXU Europe Limited or the then general partner may transfer its obligations as
general partner to a wholly-owned direct or indirect subsidiary of TXU Europe
Limited provided that (i) the successor entity expressly accepts the transfer of
the obligations as general partner under the limited partnership agreement and
(ii) prior to the transfer, TXU Europe Limited has received an opinion of
nationally recognized independent counsel to the partnership in the US
experienced in such matters to the effect that (A) the partnership will be
treated as a partnership (and not a publicly-traded partnership) for US federal
income tax and UK taxation purposes, (B) such transfer would not cause the trust
to be classified as other than a grantor trust for US federal income tax
purposes or other than as a transparent entity for UK taxation purposes, (C)
following such transfer, TXU Europe Limited and the successor entity will be in
compliance with the Investment Company Act without registering as an investment
company, and (D) the transfer will not adversely affect the limited liability of
the holders of the Preferred Partnership Securities.
The rights of the holders of the Preferred Partnership Securities,
including economic rights, rights to information and voting rights, are set
forth in the limited partnership agreement and the Delaware Revised Uniform
Limited Partnership Act. See DESCRIPTION OF THE PREFERRED PARTNERSHIP
SECURITIES.
The limited partnership agreement provides that the general partner
will have liability for the fees and expenses of the partnership, including any
taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed by the US or any other domestic taxing authority
upon the partnership, and will be responsible for all debts and obligations of
the partnership, other than with respect to the Preferred Partnership
Securities. Under Delaware law, assuming a limited partner in a Delaware limited
partnership such as the partnership, for example, a holder of the Preferred
Partnership Securities, does not participate in the control of the business of
the limited partnership, that limited partner will not be personally liable for
the debts, obligations and liabilities of the limited partnership, whether
arising in contract, tort or otherwise, solely by reason of being a limited
partner of the limited partnership, subject to any obligation the limited
partner may have to repay any funds that may have been wrongfully distributed to
it.
The partnership's business and affairs will be conducted by the general partner.
The principal place of business of the partnership is c/o TXU Corp,
Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201.
24
<PAGE>
CAPITALIZATION OF TXU EUROPE LIMITED
The following table describes the actual consolidated capitalization of
TXU Europe Limited at September 30, 1999, and the consolidated capitalization of
TXU Europe Limited as adjusted to reflect the issuance and the application of
the net proceeds of the TOPrS, the exchange of Funding's outstanding senior
notes for senior notes registered under the Securities Act of 1933, the
issuance of (pound)77 million of Norwegian bonds and the application of the
net proceeds of (pound)72 million to repay borrowings under the Sterling Credit
Agreement, and the borrowing of approximately (pound)200 million under the
Sterling Credit Agreement. The table has not been adjusted to reflect future
borrowings under Funding's and TXU Europe Limited's (euro) 2.0 billion
Medium Term Note Program. This table should be read in conjunction with
SUMMARY-- "Selected Financial Information," MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS and the consolidated financial
statements and related notes of TXU Europe Limited included elsewhere in this
prospectus. Except as disclosed in the "As Adjusted" columns, there have been no
material changes in the capitalization of TXU Europe Limited since September 30,
1999.
Solely for the convenience of the reader, UK pounds sterling amounts
have been translated into US dollars at the Noon Buying Rate on September 30,
1999 of $1.65 = (pound)1. See EXCHANGE RATES.
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------------------------------
Actual As Adjusted
------------------------------------------------------------
(pound) $ % (pound) $ %
------------------------------------------------------------
(millions, except %)
<S> <C> <C> <C> <C> <C> <C>
Long-term debt and other
Obligations, less amounts due
currently:
Notes and bonds:
Guaranteed notes.......... 311 513 5.0
Sterling bonds............ 832 1,373 13.2
Senior notes.............. 921 1,519 14.6
Exchange senior notes..... -- -- --
Other:
Credit Sterling Agreement 932 1,538 14.7
Rent factoring loans...... 252 416 4.0
Other unsecured loans..... 133 219 2.2
Capital leases............ 804 1,327 12.8
Cross border leases....... 310 512 4.9
----- ----- ----- ---- ---- -----
Total long-term debt and other
Obligations, less amounts
due currently................ 4,495 7,417 71.4
------ ----- ----- ---- ---- ----
Minority interest................. 197 325 3.1
------ ------ ----- ---- ---- ----
TOPrS .......................... -- -- --
------ ------ ----- ---- ---- ----
Common stock equity............... 1,607 2,651 25.5
------ ------ ----- ---- ---- ----
Total capitalization...... 6,299 10,393 100%
====== ====== ===== ==== ==== ====
</TABLE>
25
<PAGE>
EXCHANGE RATES
The following table lists, for the periods indicated, information
concerning the exchange rates between UK pounds sterling and US dollars based on
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
"Average" is the average of the Noon Buying Rates in effect on the last business
day of each month during the relevant period.
<TABLE>
<CAPTION>
PERIOD PERIOD END AVERAGE HIGH LOW
------ ---------- ------- ----
($ PER (POUND)1.00)
Fiscal Year Ended:
<S> <C> <C> <C> <C>
March 31, 1994..................................... 1.49 1.50 1.59 1.46
March 31, 1995..................................... 1.62 1.56 1.64 1.46
March 31, 1996..................................... 1.53 1.56 1.62 1.50
March 31, 1997..................................... 1.64 1.60 1.71 1.49
March 31, 1998..................................... 1.68 1.65 1.70 1.58
December 31, 1998.................................. 1.66 1.66 1.72 1.61
Twelve months ended March 31, 1999................. 1.61 1.65 1.72 1.60
Nine months ended September 30, 1999............... 1.65 1.61 1.65 1.58
On November 1, 1999, the Noon Buying Rate was $1.64 = (pound)1.
</TABLE>
USE OF PROCEEDS
All of the proceeds from the sale of the TOPrS will be invested by the
trust in the Preferred Partnership Securities. The partnership will use the
funds, together with the capital contribution of TXU Europe Limited, as general
partner, to make investments in the subsidiary debentures and other eligible
debt securities. The subsidiaries of TXU Europe Limited that are the issuers of
the debentures will use the proceeds from the sale of these debentures to repay
corporate debt and for general corporate purposes.
26
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. TXU Europe Capital
I, TXU Europe Funding I, L.P., Funding and TXU Europe Limited have based these
forward-looking statements on their current expectations and projections about
future events and assumptions they believe to be reasonable. These
forward-looking statements are subject to risks, uncertainties and assumptions
about Funding, TXU Europe Limited and TXU Europe Limited's subsidiaries that
could cause the actual results of Funding or TXU Europe Limited to differ
materially from those projected in any forward-looking statement, including,
among other things:
. general economic and business conditions in the UK and in the
service area for Eastern Electricity, formerly Eastern
Electricity's authorized area, which has been opened to
competition;
. unanticipated changes in interest rates, in rates of inflation, or
in foreign exchange rates;
. prevailing governmental, statutory, regulatory or administrative
policies and initiatives affecting TXU Europe Limited, its
subsidiaries or the UK or European electric and gas utility
industries;
. general industry trends;
. competition;
. power costs and availability;
. changes in business strategy, development plans or vendor
relationships;
. availability, terms and deployment of capital and capital market
conditions;
. availability of qualified personnel;
. changes in, or the failure or inability to comply with,
governmental regulations, including, among other things,
environmental regulations;
. changes in tax laws;
. weather conditions and other natural phenomena;
. unanticipated population growth or decline, and changes in market
demand and demographic patterns;
. access to adequate transmission facilities to meet changing
demand;
. pricing and transportation of oil, coal, natural gas and other
commodities;
. unanticipated changes in operating expenses and capital
expenditures;
. the ability of TXU Europe Limited to enter into financial
instruments to hedge various market risks or the inability of the
counterparties to meet their obligations with respect to financial
instruments;
. changes in technology used and services offered by TXU Europe
Group;
. unanticipated problems related to TXU Europe Group's internal Y2K
initiative and potential adverse consequences related to Y2K
non-compliance of third parties; and
. other factors described in this prospectus.
Any forward-looking statements speak only as of the date of this
prospectus. TXU Europe Capital I, TXU Europe Funding I, L.P., Funding and TXU
Europe Limited undertake no obligation to publicly update or revise any
27
<PAGE>
forward-looking statements, whether as a result of new information, future
events or otherwise. In light of these risks, uncertainties and assumptions, the
forward-looking events discussed in this prospectus might not occur.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
The discussion below should be read in conjunction with the
consolidated financial statements and the related notes of TXU Europe Limited,
TXU Europe Group and Overseas appearing elsewhere in this prospectus. As
described under SUMMARY - "Selected Financial Information," for financial
reporting purposes, TXU Europe Group is considered the predecessor company to
TXU Europe Limited.
ACQUISITION OF THE ENERGY GROUP PLC (TEG) BY TXU CORP
On May 19, 1998, TXU Acquisitions, an indirect, wholly-owned subsidiary
of TXU Corp, gained control of TEG after all conditions to its offer for all of
the ordinary shares of TEG, the former holding company of TXU Europe Group, were
satisfied or waived. On August 7, 1998, TXU Acquisitions completed its
acquisition of TEG.
In connection with the offer and immediately before TXU Acquisitions
gained control of TEG, subsidiaries of TEG completed the sale of TEG's former
coal and power trading interests in the US and Australia, referred to as the
Peabody Sale. The adjusted gross consideration for the Peabody Sale was $2.1
billion ((pound)1.3 billion).
ACCOUNTING IMPACTS OF THE ACQUISITION
Purchase accounting adjustments
- - - - -------------------------------
TXU Europe Limited's acquisition of TEG became effective May 19, 1998
and was accounted for as a purchase in accordance with US GAAP. Accordingly, the
results of operations of TXU Europe Group and other subsidiaries of TEG acquired
by TXU Europe Limited have been consolidated into the results of operations of
TXU Europe Limited beginning on that date. The total purchase consideration for
the TEG businesses acquired, which refers to TEG exclusive of the operations
sold in the Peabody Sale, was approximately (pound)4.4 billion. At the date of
the acquisition, TEG had assets of (pound)6.0 billion, including cash of
(pound)2.0 billion, and liabilities of (pound)4.5 billion, including debt of
(pound)2.9 billion. The excess of the purchase consideration plus acquisition
costs over the net fair value of tangible and identifiable intangible assets
acquired and liabilities assumed resulted in goodwill of (pound)3.5 billion,
which is being amortized over 40 years. See Note 1 to TXU Europe Limited's
consolidated financial statements.
Accounting for coal-fired power stations
- - - - ----------------------------------------
TXU Europe Group entered into leases for five power stations in June
and July 1996 for terms of 99 years. Under US GAAP, leases for two of the
stations are accounted for as operating leases, and leases for three of the
stations are accounted for as capital leases. Before the acquisition, the
capital leased assets were being depreciated over 12 years and depreciation
expense totalled (pound)49 million, (pound)59 million and (pound)8 million for
the years ended March 31, 1997 and 1998 and for the period from April 1, 1998
through May 18, 1998, respectively. The fixed operating lease payments were
being expensed on a straight-line basis over 12 years, resulting in expense of
(pound)32 million for the year ended March 31, 1997, (pound)42 million for the
year ended March 31, 1998 and (pound)6 million for the period from April 1, 1998
through May 18, 1998. Twelve years represented management's best estimate of the
remaining useful lives of the power plants. Contingent payments of approximately
(pound)6 per megawatt hour, indexed to inflation, linked to output from these
power stations are payable for up to the first seven years of operation. No
output-linked payments are required after the first seven years of operation.
Before the acquisition by TXU Corp, under US GAAP, these output-linked payments
were charged to expense by TXU Europe Group in the period in which they were
accruable. Output-linked payments charged to expense by TXU Europe Group
totalled (pound)99 million for the year ended March 31, 1997, (pound)152 million
for the year ended March 31, 1998 and (pound)13 million for the period from
April 1, 1998 through May 18, 1998.
At the time of the acquisition of TEG, TXU Europe Limited established
the fair value of the capital leased assets and associated debt, including the
output-linked payments. Additionally, as a result of alternative operating
methodologies to be employed by TXU Corp, the estimated useful lives of these
five power stations were extended to a range of 18 to 22 years from original
lease inception.
28
<PAGE>
After the acquisition, total lease expense for all the coal-fired power
stations for the period from formation through March 31, 1999 was (pound)94
million.
Accounting for unfavorable gas and electricity purchase contracts
- - - - -----------------------------------------------------------------
In addition, TXU Europe Limited recorded a liability at the time of the
acquisition of TEG of (pound)257 million for unfavorable gas and electricity
purchase contracts. This liability, which is being amortized over the terms of
the unfavorable contracts, is based on the estimated fair market value of these
contracts over the present value of the future cash flows under the contracts at
the applicable discount rates and prices. Although amortization of the liability
for unfavorable contracts will reduce the reported expense related to this item,
it will not impact TXU Europe Limited's actual payments or cash flow
obligations.
RESULTS OF OPERATIONS
The business operations of TXU Europe Group were not significantly
changed as a result of the purchase by TXU Acquisitions. For purposes of the
discussion of operating revenues for the nine months ended September 30, 1999
compared to the nine months ended September 30, 1998, the revenues of TXU Europe
Group for the period from January 1, 1998 through May 18, 1998 have been
combined with the revenues of TXU Europe Limited for the period from May 19,
1998 through September 30, 1998. For purposes of the discussion of operating
revenues for the year ended March 31, 1999 compared to the year ended March 31,
1998, revenues of TXU Europe Group for the period from April 1, 1998 through May
18, 1998 have been combined with the revenues of TXU Europe Limited for the
period from May 19, 1998 through March 31, 1999. None of this combined
information has been audited. The post-acquisition results of TXU Europe Limited
include the results of TXU Europe Group plus purchase accounting adjustment and
financing costs of the acquisition. For a discussion of significant purchase
accounting adjustments, see -- "Introduction--Accounting Impacts of the
Acquisition."
OPERATING RESULTS
Energy
- - - - ------
TXU Europe Group's energy business is comprised of the energy retail
and the energy management and generation segments. Until October 1996, TXU
Europe Group's energy operations were only in the UK, where the increase in
demand for electricity in recent years has been modest. However, TXU Europe
Group managed to increase the profit attributable to its energy operations
significantly by:
. adding related assets, including three power stations leased from
National Power in June 1996 and two power stations leased from
PowerGen in June and July 1996, which increased TXU Europe Group's
generation capacity by almost 6,000 MW;
. successfully expanding electricity and gas sales in markets opened
to competition; and
. developing energy management activities to optimize the portfolio
of physical assets and supply contracts.
Prior to May 1999, TXU Europe Group had a license, or exclusive
franchise, to sell electricity to all customers in its authorized distribution
area that had an annual maximum demand of less than 100kW. Because this
franchise market for electricity sales became fully deregulated in May 1999,
these customers now are referred to as ex-franchise customers. Deregulation of
the franchise market allows TXU Europe Group to compete for ex-franchise
customers outside its authorized distribution area. Other licensed electricity
suppliers also can compete with TXU Europe Group for ex-franchise customers in
TXU Europe Group's authorized distribution area. TXU Europe Group cannot predict
the effect that increased competition due to the deregulation of the franchise
market will have on its results of operations.
The prices that the energy retail business can charge in the
ex-franchise market are subject to a price control formula that sets a maximum
price. The current supply price control formula is under review by the Office of
Gas and Electricity Markets. On October 8, 1999, the Office of Gas and
Electricity Markets issued proposed price adjustments for the electricity supply
businesses. The Office of Gas and Electricity Markets issued its final report on
December 2, 1999, and the supply price adjustments will become effective April
1, 2000.
29
<PAGE>
Networks
- - - - --------
The networks business primarily consists of TXU Europe Group's
electricity distribution business in the UK. The networks business has been a
predictable source of operating income and cash flow and, historically, the
growth in units of electricity distributed has generally matched increases in
the gross domestic product for the UK. The networks business is highly
regulated. The rates charged by the networks business in the UK are regulated by
a distribution price control formula. This formula is subject to periodic review
and adjustment. Two distribution price control reviews by the Office of
Electricity Regulation covering England, Wales and Scotland in 1994 and 1995
established the current distribution price control formula. Based on the current
distribution price control formula, future increases in profit by the networks
operations will depend upon unit growth and productivity improvements, which
there can be no assurance TXU Europe Group will achieve. A further distribution
price control review is scheduled to be completed in April 2000. On August 12,
1999, the Office of Gas and Electricity Markets, the successor to the Office of
Electricity Regulation covering England, Wales and Scotland, issued a draft
report, adjusted on October 8, 1999, proposing a range of substantial revenue
reductions for the distribution businesses of all regional electricity companies
in the UK. The final Office of Gas and Electricity Markets report is expected at
the end of November 1999, and the distribution price adjustments are expected to
become effective April 1, 2000.
On December 14, 1999, TXU Europe Group and EDF London Investments plc,
a subsidiary of Electricite de France, entered into an arrangement for the
creation of an equally held joint venture company. Employees of the joint
venturers' subsidiaries, Eastern Electricity and London Electricity plc, will be
employed by the new joint venture company in the management, operation and
maintenance of those subsidiaries' respective electricity distribution networks.
The physical assets, as well as all operating licenses, will continue to be held
by Eastern Electricity and London Electricity plc, respectively. Applications
for regulatory and competition law clearances are being prepared. The joint
venture will begin operations once these clearances are obtained, which may be
as early as April 2000. By the time the joint venture starts operations, it is
expected that the combined workforce currently engaged by Eastern Electricity
and London Electricity plc will have been reduced by approximately 400. It is
anticipated that the workforce will be further reduced by at least a similar
number during the joint venture's first 18 months of operations.
The joint venture is expected to help offset the price reductions
mandated by the Office of Gas and Electricity Marktet's recent distribution
price review by streamlining operations and reducing costs.
TXU Europe Group's retail sales and units distributed through the
network were as follows:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
-----------------------------------------------------------------
1997 1998 1999 1998 1999
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Retail sales (units sold):
Electricity (GWh).................. 32,546 35,920 37,859 26,770 27,665
Gas (millions of therms)........... 1,266 1,262 1,352 854 869
Network sales
(GWh distributed).................. 31,550 31,776 32,700 23,260 24,309
</TABLE>
30
<PAGE>
The following tables set out the revenues by segment, total operating
income and net interest expense of TXU Europe Group and TXU Europe Limited for
the periods indicated:
<TABLE>
<CAPTION>
TXU EUROPE GROUP AND TXU TXU EUROPE
TXU EUROPE GROUP EUROPE LIMITED LIMITED
---------------- ------------------------- ----------
NINE MONTHS ENDED
YEAR ENDED MARCH 31, SEPTEMBER 30,
------------------------------- ----------------
1997 1998 1999 1998 1999
----- ----- ---- ---- ----
((POUND)MIllion)
Revenues:
Energy:
<S> <C> <C> <C> <C> <C>
Energy retail......................... 2,158 2,151 2,298 1,084 1,197
Energy management and generation...... 952 1,337 1,487 1,084 1,167
Networks.................................... 420 414 427 308 317
Other....................................... 44 69 35 26 5
Intra-group sales........................... (509) (496) (484) - -
----- ----- ----- ----- -----
2,984 3,475 3,763 2,502 2,686
----- ------ ----- ----- -----
</TABLE>
<TABLE>
<CAPTION>
TXU EUROPE GROUP TXU EUROPE LIMITED
----------------------------------------------------------- ------------------
YEAR ENDED MARCH 31, APRIL 1, 1998 FORMATION THROUGH
THROUGH MAY 18, 1998 MARCH 31, 1999
---------------------------- -------------------- -------------------
1997 1998
----------------------------
((POUND)MIlLION)
<S> <C> <C> <C> <C>
Operating income...... 298 267 (11) 484
Net interest expense.. 88 126 16 278
</TABLE>
<TABLE>
<CAPTION>
TXU EUROPE GROUP TXU EUROPE LIMITED
-------------------------------------------------------------------
JANUARY 1, 1998 FORMATION THROUGH NINE MONTHS ENDED
THROUGH MAY 18, 1998 SEPTEMBER 30, 1998 SEPTEMBER 30, 1999
------------------------------------------ -------------------
((POUND)MIlLION)
<S> <C> <C> <C>
Operating income......................... 91 53 354
Net interest expense..................... 41 128 213
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 1998
Revenues
- - - - --------
Energy retail - Revenues in the energy retail operation increased by
approximately 10% from (pound)1.1 billion for the nine months ended September
30, 1998 to (pound)1.2 billion for the nine months ended September 30, 1999. The
volumes of gas and electricity sold and the unit sales prices primarily
determine the revenues. The increase in revenue arises primarily from additional
revenues in the gas residential market of (pound)93 million as a result of this
market being fully opened to competition.
Energy management and generation - Revenues in the energy management
and generation operations increased by approximately 8% from (pound)1.1 billion
for the nine months ended September 30, 1998 to (pound)1.2 billion for the nine
months ended September 30, 1999. This increase was principally attributable to
increased operating volumes in the gas portfolio which resulted in approximately
(pound)263 million in revenue, partially offset by lower revenues in the
electricity portfolio of approximately (pound)108 million, due to lower
time-weighted pool purchase prices and reduced volumes. In addition, there was a
loss of (pound)18 million of revenue in the 1999 period due to a fire at a
coal-fired power station which occurred in October 1998.
Networks - Revenues in the networks business increased by approximately
3% from (pound)308 million in the nine months ended September 30, 1998 to
(pound)317 million in the nine months ended September 30, 1999. This increase
was primarily due to an increase of 4.5% in gigawatt-hours (GWh) distributed and
an increase in regulated prices of approximately 1% from April 1999.
31
<PAGE>
Other - Other revenues were (pound)5 million in the nine months ended
September 30, 1999 compared with (pound)26 million in the nine months ended
September 30, 1998. This decrease can be attributed to the sale of the
telecommunications business in December 1998 which contributed (pound)9 million
to revenues and the modular building business operated by Rollalong Limited in
February 1999, which resulted in a net decrease of (pound)11 million.
Operating income
- - - - ----------------
Operating income of TXU Europe Limited for the nine months ended
September 30, 1999 of (pound)354 million consisted of (pound)2,686 million of
operating revenues offset by costs and expenses of (pound)2,332 million. Costs
and expenses included (pound)1,162 million for purchased power, (pound)602
million for gas purchased for resale, (pound)385 million for operation and
maintenance expense, (pound)64 million for amortization of goodwill and
(pound)119 million for depreciation and other amortization.
Operating income of TXU Europe Limited for the period from formation
through September 30, 1998 was (pound)53 million and consisted of (pound)939
million of operating revenues offset by costs and expenses of (pound)886
million. These results include the operations of TXU Europe Limited from May 19,
1998. Costs and expenses included (pound)420 million for purchased power,
(pound)154 million for gas purchased for resale, (pound)228 million for
operation and maintenance expense, (pound)53 million for depreciation and other
amortization and (pound)31 million for amortization of goodwill.
Operating income of TXU Europe Limited for the period from January 1,
1998 through May 18, 1998 was (pound)91 million and consisted of (pound)1,563
million of operating revenues offset by costs and expenses of (pound)1,472
million. Costs and expenses included (pound)743 million for purchased power,
(pound)281 million for gas purchased for resale, (pound)375 million for
operation and maintenance expense and (pound)73 million for depreciation and
amortization.
Net interest expense
- - - - --------------------
Net interest expense of TXU Europe Limited for the nine months ended
September 30, 1999 of (pound)213 million included interest expense of (pound)259
million offset by interest income of (pound)46 million on surplus cash balances.
Interest expense included (pound)48 million in respect of sterling denominated
Eurobonds and (pound)38 million in respect of the rent factoring financing
arrangement for three power stations under capital lease, as well as payments of
(pound)39 million under the Sterling Credit Agreement, (pound)21 million under
the senior notes and (pound)18 million on the note payable to TXU.
Net interest expense of TXU Europe Limited for the period from
formation through September 30, 1998 of (pound)128 million included interest
expense of (pound)174 million offset by interest income of (pound)46 million on
surplus cash balances. Interest expense included payments of (pound)53 million
under the Sterling Credit Agreement, (pound)24 million in respect of
sterling-denominated Eurobonds, (pound)23 million in respect of the rent
factoring financing arrangement as well as (pound)19 million on the note payable
to TXU.
Net interest expense of TXU Europe Limited for the period from January
1, 1998 through May 18, 1998 of (pound)41 million included interest expense of
(pound)76 million offset by interest income of (pound)35 million on surplus cash
balances.
Total tax expense
- - - - -----------------
Total tax expense of TXU Europe Limited for the nine months ended
September 30, 1999 was (pound)68 million. Total tax benefit of TXU Europe
Limited for the period from formation through September 30, 1998 was (pound)19
million. Total tax expense of TXU Europe Limited for the period from January 1,
1998 through May 18, 1998 was (pound)35 million. The effective tax rate in all
periods is affected by non-deductible expenses related to capital leases and
amortization of goodwill. The 1998 periods also reflected a tax benefit
associated with a 1% reduction in the statutory tax rate and included income
which was taxed at rates less than the statutory rate.
YEAR ENDED MARCH 31, 1999 COMPARED WITH YEAR ENDED MARCH 31, 1998
Revenues
- - - - --------
Energy retail - Revenues in the energy retail operation increased by
approximately 7% from (pound)2.2 billion for the year ended March 31, 1998 to
(pound)2.3 billion for the year ended March 31, 1999. The revenues are primarily
determined by the volumes of gas and electricity sold and the unit sales prices.
The increase in revenue is a result of higher prices in gas retail, 5.4% higher
volumes in electricity retail primarily in the industrial and commercial markets
and 7.1% higher volumes in gas retail primarily in the domestic market.
32
<PAGE>
Energy management and generation - Revenues in the energy management
and generation operations increased by approximately 11% from (pound)1.3 billion
for the year ended March 31, 1998 to (pound)1.5 billion for the year ended March
31, 1999. This increase was attributable to a significant increase in generation
output, including a full year's output from the King's Lynn power station which
became fully operational in December 1997 and resulted in additional revenue of
(pound)30 million, partially offset by reduced output from a coal-fired power
station that was out of service for four months of the year due to a fire in
October 1998, resulting in reduced revenues by approximately (pound)33 million.
Networks - Revenues in the networks business increased by approximately
3% from (pound)414 million in the year ended March 31, 1998 to (pound)427
million in the year ended March 31, 1999. This increase was primarily the result
of an increase of 2.9% in the GWh distributed.
Other - Other revenues decreased by approximately 49% from (pound)69
million in the year ended March 31, 1998 to (pound)35 million in the year ended
March 31, 1999. This decrease can be attributed primarily to the sale of TXU
Europe Group's contracting business in December 1997, which had revenues of
(pound)47 million for the period prior to sale. This was offset by increased
revenues of (pound)10 million in the telecommunications business. The
telecommunications business was sold in December 1998.
Operating income
- - - - ----------------
Operating income of TXU Europe Limited for the period from formation
through March 31, 1999 consisted of (pound)3,338 million of operating revenues
offset by costs and expenses of (pound)2,854 million. Costs and expenses
inCluded (pound)1,480 million for purchased power, (pound)646 million for gas
purchased for resale, (pound)526 million for operation and maintenance expense
and (pound)202 million for depreciation and amortization. Included in operating
income is a net decrease in operating expenses as a result of purchase
accounting adjustments of (pound)125 million offset by goodwill amortization of
(pound)72 million.
Operating income of TXU Europe Group for the year ended March 31, 1998
consisted of (pound)3,475 million of operating revenues offset by costs and
expenses of (pound)3,208 million. Costs and expenses included (pound)1,703
million for purchased power, (pound)514 million for gas purchased for resale,
(pound)806 million for operation and maintenance expense and (pound)185 million
for depreciation and amortization.
Operating income of TXU Europe Group for the period from April 1, 1998
through May 18, 1998 consisted of (pound)425 million of operating revenues
offset by costs and expenses of (pound)436 million. Costs and expenses included
(pound)202 million for purchased power, (pound)85 million for gas purchased for
resale, (pound)123 million for operation and maintenance and (pound)26 million
for depreciation and amortization.
Net interest expense
- - - - --------------------
Interest income of TXU Europe Limited for the period from formation
through March 31, 1999 was (pound)78 million and interest expense for the same
period was (pound)356 million including interest expense of (pound)89 million
relating to the Sterling Credit Agreement and (pound)44 million on the note
payable to TXU Corp.
Interest income of TXU Europe Group for the year ended March 31, 1998
was(pound)76 million and interest expense for the same period was(pound)202
million.
Interest income of TXU Europe Group for the period from April 1, 1998
through May 18, 1998 was(pound)12 million and interest expense for the same
period was(pound)28 million.
Total tax expense
- - - - -----------------
The tax expense of TXU Europe Limited for the period from formation
through March 31, 1999 was (pound)106 million. The tax expense for TXU Europe
Group for the year ended March 31, 1998 was (pound)189 million, including a
windfall tax charge of (pound)112 million (see -- "Windfall Tax" below). The tax
benefit of TXU Europe Group for the period from April 1, 1998 through May 18,
1998 was (pound)5 million.
33
<PAGE>
YEAR ENDED MARCH 31, 1998 COMPARED WITH YEAR ENDED MARCH 31, 1997
Revenues
- - - - --------
Energy retail - Overall revenues from the energy retail business
decreased approximately 0.3% from (pound)2,158 million for the year ended March
31, 1997 to (pound)2,151 million for the year ended March 31, 1998.
In the part of the electricity retail market which was open to
competition (customers with an annual maximum demand over 100 kW - principally
industrial and commercial customers), revenues increased by (pound)70 million to
(pound)0.7 billion. The increase in revenues in the competitive market of
(pound)70 million was offset by lower revenues in the price regulated part of
the electricity retail market which was not open to competition (customers with
an annual maximum demand under 100 kW principally residential and small business
customers) in which sales volumes decreased by 3.3% to 18,642 GWh arising mainly
from weather effects. Revenues in the price regulated market decreased by
(pound)74 million, or 8%, to (pound)1.2 billion reflecting the effect of the
supply price control regulatory formula.
In the gas retail market, volumes and revenues remained stable at
approximately 1.3 billion therms and (pound)0.2 billion, respectively, for each
period. There was, however, a substantial increase in the number of customers
signed up with future contract start dates as the remaining areas of the UK gas
retail market were opened up to competition.
Energy management and generation - Revenues of (pound)1,337 million
from the energy management and generation operations for the year ended March
31, 1998 increased approximately 40% from (pound)952 million for the year ended
March 31, 1997. Of the increase, (pound)267 million was attributable to the
inclusion for a full year of the additional output provided by the five power
stations leased in June and July 1996 and an increase in the power station
output levels during the year. There was also additional revenue of (pound)30
million during the commissioning period of the King's Lynn gas-fired power
station.
Networks - Networks revenues of (pound)414 million for the year ended
March 31, 1998 decreased approximately 1.4% from (pound)420 million for the year
ended March 31, 1997. Revenues from TXU Europe Group's core regulated
electricity distribution business, which are determined by the distribution
price control formula, remained broadly stable since the allowed increase
referable to the Retail Price Index was offset by the required, regulated price
reduction factor of 3%. Units distributed through the network increased by 0.7%
from 31,550 GWh to 31,776 GWh.
Other - Revenues in the other segment increased from the year ended
March 31, 1997 to the year ended March 31, 1998 as a result of increased
revenues of(pound)3 million from the telecommunications business.
Operating income
- - - - ----------------
Operating income decreased approximately 10% from(pound)298 million
for the year ended March 31, 1997 to(pound)267 million
for the year ended March 31, 1998.
Operating income for energy retail operations decreased substantially
as a result of higher gross profit in gas of (pound)10 million and in
electricity of (pound)2 million, partially offset by (pound)40 million of
increased costs associated with adding a substantial customer base in TXU Europe
Group's retail gas business, including costs of acquiring customers which are
expensed as incurred. During this period, operating income from the retail
electricity business remained stable in the price regulated franchise market and
increased slightly in the competitive market from higher gross margins.
Operating income from the energy management and generation business remained
stable at (pound)178 million in the year ended March 31, 1997 and (pound)180
million in the year ended March 31, 1998. The operating income in the networks
business increased by (pound)24 million to (pound)189 million due to cost
savings in TXU Europe Group's core electricity distribution business. The losses
in the other segment were reduced from the year ended March 31, 1997 to the year
ended March 31, 1998 because in the year ended March 31, 1997 there were charges
of (pound)19 million in this segment related to exposures on the overall energy
portfolio.
Net interest expense
- - - - --------------------
Net interest expense increased by approximately (pound)38 million from
(pound)88 million in the year ended March 31, 1997 to (pound)126 million in the
year ended March 31, 1998. The increase arose partly from interest capitalized
in the year ended March 31, 1997 of (pound)11 million relating to the
construction period of the King's Lynn gas-fired power station. In addition,
some funds were placed in a tax efficient scheme in the year ended March 31,
1998 resulting in dividends receivable of approximately (pound)4 million in
34
<PAGE>
place of interest on cash deposits. The remaining increase is a result of
interest expenses of (pound)23 million on higher net borrowings.
Total tax expense
- - - - -----------------
Total tax expense decreased by (pound)115 million from (pound)304
million in the year ended March 31, 1997 to (pound)189 million in the year ended
March 31, 1998. The decrease is a result of a large deferred tax charge in
connection with the five coal-fired power station leases and the related rent
factoring transaction in the year ended March 31, 1997. See -- "Financing
Arrangements" below. The decrease was offset by the windfall tax charge in the
year ended March 31, 1998 referred to below under - "Windfall Tax."
LIQUIDITY AND CAPITAL RESOURCES
PERIOD FROM JANUARY 1, 1998 THROUGH MAY 18, 1998 OF TXU EUROPE GROUP
AND PERIOD FROM FORMATION THROUGH SEPTEMBER 30, 1998 AND NINE MONTHS ENDED
SEPTEMBER 30, 1999 OF TXU EUROPE LIMITED.
Net cash generated by operating activities of TXU Europe Group was
(pound)154 million for the period from January 1, 1998 to May 18, 1998. Net cash
generated by operating activities of TXU Europe Limited was (pound)12 million
for the period from formation through September 30, 1998 and (pound)447 million
for the nine months ended September 30, 1999. Cash provided by changes in
operating assets and liabilities of TXU Europe Group was (pound)109 million for
the period from January 1, 1998 through May 18, 1998. Cash provided by changes
in operating assets and liabilities of TXU Europe Limited for the period from
formation through September 30, 1998 and for the nine months ended September 30,
1999 was (pound)53 million and (pound)216 million, respectively. Cash flows from
operations before changes in operating assets and liabilities of TXU Europe
Group were (pound)45 million for the period from January 1, 1998 to May 18, 1998
and for TXU Europe Limited were (pound)231 million for the nine months ended
September 30, 1999. Cash flows used from operations before changes in operating
assets and liabilities were (pound)41 million for the period from formation to
September 30, 1998.
Cash used in investing activities of TXU Europe Group was (pound)139
million for the period from January 1 to May 18, 1998 and for TXU Europe Limited
was (pound)1,569 million for the period from formation to September 30, 1998 and
(pound)347 million for the nine months ended September 30, 1999. The amount for
TXU Europe Limited for the period from formation through September 30, 1998
includes (pound)1,432 million representing the net cash paid to acquire TEG.
Capital expenditures were (pound)112 million for the period from January 1 to
May 18, 1998, (pound)117 million for the period from formation to September 30,
1998 and (pound)286 million for the nine months ended September 30, 1999, which
included (pound)88 million for the acquisition of gas assets. The year to date
1999 period also included $61 million for investments primarily in other
European assets.
TXU Europe Group received government consent to build a 215 MW combined
heat and power plant for which there is a commitment of (pound)117 million, most
of which falls due in 2000. TXU Europe also has a commitment to invest (pound)42
million in Savon Voima Oy, a regional electricity distributor in Finland. The
parties signed the agreement in October 1999, and the purchase of this
investment was closed on November 30, 1999.
Cash provided by financing activities of TXU Europe Group for the
period from January 1, 1998 through May 18, 1998 was (pound)27 million. Cash
provided by financing activities of TXU Europe Limited for the period from
formation through September 30, 1998 was (pound)3,427 million including common
stock issued to parent of (pound)1,467 million and borrowings under the
acquisition facility of (pound)1,656 million. In the nine months ended September
30, 1999, cash used for financing activities by TXU Europe Limited was
(pound)206 million. This included borrowings of (pound)2.0 billion in lower rate
long-term debt which was used in part to refinance most of the borrowings
related to the acquisition of TEG. Also impacting 1999 financing activities was
the securitization of receivables also described under -- "Financing
Arrangements" below.
YEARS ENDED MARCH 31, 1997 AND 1998 AND PERIOD FROM APRIL 1 TO MAY 18,
1998 OF TXU EUROPE GROUP AND PERIOD FROM FORMATION THROUGH MARCH 31, 1999 OF TXU
EUROPE LIMITED.
Net cash generated by operating activities of TXU Europe Group for the
years ended March 31, 1997 and 1998 was (pound)292 million and (pound)341
million, respectively. Net cash generated by operating activities of TXU Europe
Group was (pound)74 million for the period from April 1, 1998 through May 18,
1998. Net cash generated by operating activities of TXU Europe Limited was
(pound)44 million for the period from formation through March 31, 1999. Cash
provided by (used by) changes in operating assets and liabilities was
(pound)(23) million, (pound)223 million and (pound)(244) million for the years
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ended 1997, 1998 and 1999, respectively. The variances arise based upon changes
in working capital requirements. Cash flows from operations before changes in
operating assets and liabilities were (pound)315 million, (pound)118 million and
(pound)362 million for the years ended 1997, 1998 and 1999, respectively. In
1997 net deferred tax liabilities associated with leasing transactions were
established, resulting in a non-cash expense of (pound)251 million. There were
no transactions of this magnitude in 1998 or 1999. The increase in 1999 in
comparison to 1998 reflects net income which is (pound)143 million higher than
that recognized in 1998 as well as an increase in depreciation and amortization
expense, which are non-cash items.
In the year ended March 31, 1997, cash used for financing activities of
TXU Europe Group was (pound)316 million. This included the net effect of the
receipt of (pound)1.1 billion from commercial banks as a part of the
rent-factoring agreement less the (pound)408 million which was set aside in
investments as cash collateral for the future intra-group rental payments
assigned. Further details are set out below under -- "Financing Arrangements."
Also impacting 1997 cash flows was the retirement of (pound)468 million of
long-term debt, the repayment of (pound)389 million of bank debt and the payment
of (pound)140 million of dividends on common stock.
In the year ended March 31, 1998, cash provided by financing activities
of TXU Europe Group was (pound)121 million. In that year, long-term debt of
(pound)240 million was raised and a further (pound)300 million was raised
through a financing of receivables under a debt securitization program. In
addition, in that same year, retirements of long-term debt totalled (pound)215
million and a dividend of (pound)200 million was paid.
In the period from formation through March 31, 1999, cash provided by
financing activities was (pound)2.2 billion. There were drawings under the
acquisition facilities of (pound)2.1 billion, which were later rearranged as
described further below under -- "Financing Arrangements." There was also an
issue of common stock of TXU Europe Limited to subsidiaries of TXU Corp of
(pound)1.5 billion. These funds together provided a portion of the financing for
the acquisition of TEG. Approximately (pound)1.3 billion of borrowings under the
Credit Facilities Agreement were repaid during the period using the proceeds of
the sale of TEG's former coal and power trading interests. Part of the
acquisition of TEG was financed by the issue of common stock of TXU Corp to TEG
shareholders. A subsidiary of TXU Europe Limited acquired the TXU Corp common
stock used for this purpose by issuing a term note to TXU Corp for (pound)882
million, (pound)200 million of which was later repaid in cash in the period. TXU
Acquisitions also issued (pound)85 million of loan notes to TEG shareholders.
Another subsidiary of TXU Corp provided the remainder of the acquisition
financing. There were also additional net borrowings of approximately (pound)98
million in the period.
Cash used in investing activities of TXU Europe Group for the years
ended March 31, 1997 and 1998 and the period from April 1, 1998 through May 18,
1998 were (pound)229 million, (pound)234 million and (pound)78 million,
respectively. Cash used in investing activities of TXU Europe Limited for the
period from formation through March 31, 1999 was (pound)1.9 billion. The amount
for TXU Europe Limited includes (pound)1.4 billion representing the net cash
paid to acquire TEG. The capital expenditures of TXU Europe Group were
(pound)204 million, (pound)254 million and (pound)281 million for the years
ended March 31, 1997, 1998 and 1999, respectively. The increases primarily
relate to the increased level of expenditures on the distribution network and in
1998, on the development of the telecommunications business, which was sold in
December 1998. In addition, in the year ended March 31, 1997, TXU Europe Group
invested (pound)29.5 million in acquiring an 11.6% interest in Severomoravska
Energetica a.s., a distribution company in the Czech Republic, and (pound)19.9
million in acquiring a 52.8% interest in Teplarny Brno a.s., a district heating
company in the Czech Republic. In the year ended March 31, 1998 further
investments totalling (pound)9.9 million were made to increase TXU Europe
Group's interest in these two companies. In the period from formation through
March 31, 1999, a subsidiary of TXU Europe Limited also acquired the offtake
generated from water rights in hydroelectric power facilities in Norway for
(pound)124 million and spent (pound)36 million to increase its interest in
Hidroelectrica del Cantabrico, a Spanish energy company, to 5%.
FINANCING ARRANGEMENTS
At December 31, 1998, TXU Europe Limited, TXU Finance, TXU Acquisitions
and TEG had a joint sterling-denominated line of credit with a group of banking
institutions under a credit facility agreement (Sterling Credit Agreement).
Chase Manhattan plc, Lehman Brothers International (Europe) and Merrill Lynch
Capital Corporation are the lead arrangers of the bank group. The Sterling
Credit Agreement had an acquisition facility and a revolving credit facility.
Eastern Electricity also has a separate revolving credit facility, terminating
March 2, 2003, for short-term borrowings of up to (pound)250 million to be used
for Eastern Electricity's general corporate purposes. Borrowings under the
acquisition facility provided financing to acquire TEG and pay acquisition
related expenses. The revolving credit facility provided for short-term
borrowings. At December 31, 1998, borrowings totalled (pound)750 million under
the acquisition facility and a total of (pound)231 million under the two
revolving credit facilities. Under the terms of the Sterling Credit Agreement,
one half of the borrowings under the facilities were required to be swapped from
floating rate to fixed rate and, accordingly, swaps with a notional amount of
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(pound)800 million were entered into. On January 2, 1999 TXU Europe Limited's
ability to borrow additional amounts under the acquisition facility terminated.
The Sterling Credit Agreement was amended in March 1999. The amended
Sterling Credit Agreement provides for borrowings up to (pound)1.275 billion and
has two facilities: a (pound)750 million term facility which will terminate on
March 2, 2003 and a (pound)525 million revolving credit facility which has a
(pound)200 million 364-day tranche (Tranche A) and a (pound)325 million tranche
which terminates March 2, 2003 (Tranche B). Under the Sterling Credit Agreement,
TXU Finance must maintain a ratio of earnings before interest, taxes,
depreciation and amortization to net interest cost, each as calculated under the
Sterling Credit Agreement, of at least 2:1. In addition, TXU Europe Limited's
consolidated debt must not exceed 70% of consolidated capitalization, each as
calculated under the Sterling Credit Agreement. All of these financial ratios
under the Sterling Credit Agreement are determined in accordance with UK GAAP.
TXU Europe Limited is in compliance with these ratios. TXU Europe Limited and
TXU Finance currently are the only permitted borrowers under the amended
Sterling Credit Agreement. So long as no default under the Sterling Credit
Agreement has occurred and is continuing, any subsidiary or holding company of
TXU Europe Group which also is a wholly-owned subsidiary of TXU Finance and is
incorporated under the laws of England and Wales, except Eastern Electricity,
may be designated as an additional borrower under Tranche A or Tranche B by
agreeing to be bound by the terms of the Sterling Credit Agreement and by giving
notice to the banks. The amended Sterling Credit Agreement allows for borrowings
at various interest rates based on the prevailing rates in effect in the
countries in which the borrowings originate. As of September 30, 1999, (pound)
750 million of borrowings were outstanding under the term facility at an
interest rate of 5.98%, and approximately (pound)182 million under Tranche B,
at a weighted average interest rate of 5.59% ((pound)49 million in Spanish
pesetas at 3.34%, (pound)128 million in Norwegian krona at 6.54% and (pound)5
million in Euro's at 3.34%). On May 18, 1999, $198 million in letters of credit
issued under Tranche B of the revolving credit facility matured and were not
renewed.
On October 5, 1999, Eastern Norge Svartisen AS, a subsidiary of TXU
Europe Limited, issued (pound)77 million in Norwegian bonds due October 5, 2029,
at a fixed rate of 7.25%. The net proceeds were used to pay down a portion of
the Tranche B borrowings which had been used to finance asset purchases in
Norway. On November 5, 1999, approximately (pound)200 million was borrowed on
the Tranche B facility. The net proceeds were used to finance the acquisition
of the interest in Pohjolan Voima Oy joint venture.
The interest rate on Eastern Electricity's revolving credit facility is
based on LIBOR plus 0.5%. As of September 30, 1999, there were no borrowings
outstanding under Eastern Electricity's revolving credit facility.
As of September 30, 1999, Eastern Electricity had issued long-term,
fixed rate bonds in the aggregate outstanding principal amount of (pound)750
million, and Overseas had issued notes in the aggregate principal amount of
US$500 million which are guaranteed by TEG and TXU Europe Limited.
Eastern Merchant Properties Limited, a subsidiary of TXU Europe
Limited, has leased the five coal-fired power stations operated by TXU Europe
Group for 99 year terms commencing in 1996. Eastern Merchant Properties has
sub-leased those power stations to Eastern Merchant Generation Limited, another
subsidiary of TXU Europe Limited, for a five year term ending in 2001. Eastern
Merchant Properties has assigned the intra-group rental payments receivable from
Eastern Merchant Generation under the subleases to a group of banks, for which
Barclays Bank plc is the agent, in return for (pound)1,097 million. TXU Europe
Group and TXU Europe Power Limited have guaranteed the payment to those banks of
the assigned payments, or in some cases, the net present value of remaining
payments upon transfer by a bank of the right to receive future payments. The
guarantee requires:
. That TXU Europe Group maintain a consolidated tangible net worth,
as calculated under the guarantee, of not less than (pound)1
billion;
. That TXU Europe Group's consolidated net borrowings do not exceed
200% of its consolidated tangible net worth, each as calculated
under the guarantee; and
. That the ratio of TXU Europe Group's consolidated profit before
interest and taxes to its interest costs, each as calculated under
the guarantee, is in excess of 2:1.
As of September 30, 1999, TXU Europe Group was in compliance with these
covenants.
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The (pound)1,097 million described above was borrowed on October 28,
1996. (pound)408 million of the proceeds was used as collateral for obligations
to another group of banks in respect of the funding of the payment of a portion
of the fixed payments due under the leases of the West Burton, Rugeley B and
Ironbridge power stations.
TXU Europe Group has facilities with Citibank N.A. to provide financing
through trade accounts receivable whereby Eastern Electricity may sell up to
(pound)300 million of its electricity receivables and, beginning June 11, 1999,
TXU Finance may borrow up to an aggregate of (pound)275 million, which for
US GAAP purposes is treated as being collateralized by additional receivables
of Eastern Electricity, through a short-term note issue arrangement. The program
has an overall program limit of (pound)550 million.
Consistent with US GAAP through March 31, 1999, the electricity
receivable financings were in the form of short-term loans collateralized by
Eastern Electricity's trade accounts receivable. Subsequent to March 31, 1999,
the program was restructured so that a portion of the receivables are sold
outright rather than being used to collateralize short-term borrowings.
Eastern Electricity continually sells additional receivables to replace those
collected. At September 30, 1999, accounts receivable of Eastern Electricity
were reduced by (pound)207 million to reflect the sales of the receivables under
the new program. An additional (pound)93 million of receivables is treated for
US GAAP purposes as collateral for short-term loans. The borrowings by Eastern
Electricity bear interest at an annual rate based on commercial paper rates plus
0.225%, which was 5.3% at September 30, 1999.
On May 13, 1999, Funding issued $1.5 billion ((pound)921 million) of
senior notes which are guaranteed by TXU Europe Limited in three series: $350
million ((pound)215 million) at 6.15% due May 15, 2002, $650 million ((pound)399
million) at 6.45% due May 15, 2005, and $500 million ((pound)307 million) at
6.75% due May 15, 2009. The senior notes were sold pursuant to Rule 144A and
Regulation S under the Securities Act of 1933. The proceeds of this issuance
were used as follows: (pound)680 million to repay the note payable to TXU Corp,
(pound)55 million to reduce borrowings under the Sterling Credit Agreement and
(pound)186 million for general corporate purposes. Shortly afterwards, TXU
Europe Limited entered into various interest rate and currency swaps that in
effect changed the interest rates on the borrowings from fixed to variable based
on LIBOR and fixed the principal amount to be repaid in pounds sterling. On
October 14, 1999, TXU Europe Limited entered into additional swaps that in
effect changed the interest rate on the borrowings to a fixed rate payable in
sterling. On December 17, 1999, Funding exchanged the senior notes for new
senior notes registered under the Securities Act of 1933.
On December 15, 1999 Funding and TXU Europe commenced a euro 2.0
billion Medium Term Note Program. Under the Euro Medium Term Note Program,
Funding may from time to time issue notes on a continuing basis to one or more
dealers in a principal amount not exceeding ?2,000,000,000 outstanding. The Euro
Medium Term Note Program was arranged by Duetsche Bank AG London.
The notes may be denominated in any currency, will bear interest either
at fixed or variable rates and will have maturities, in each case as may be
agreed between Funding and the relevant dealer. The payment of all amounts
payable in respect of the notes will be guaranteed by TXU Europe Limited.
As of December 21, 1999, no notes have been issued under the Euro
Medium Term Note Program.
CUSTOMER ACQUISITION COSTS
Beginning in the year ended March 31, 1998, TXU Europe Group has paid
commissions to agents who assist TXU Europe Group in acquiring customers in the
newly deregulated gas market. Those costs of acquiring customers are charged to
expense when incurred, although revenues from the acquired customer base are
expected to be received over several years. Total charges for the years ended
March 31, 1997, 1998 and 1999 were zero, (pound)41 million and (pound)25
million, respectively, and for the nine months ended September 30, 1999 were
(pound)7 million. TXU Europe Group expects that it will continue to incur those
costs in connection with its effort to acquire natural gas customers for the
foreseeable future, although to a lesser degree. In addition, TXU Europe Group
expects to incur similar customer acquisition costs in connection with efforts
to acquire customers in deregulated electricity franchise markets.
WINDFALL TAX
For the year ended March 31, 1998, a windfall tax was levied on TXU
Europe Group according to a formula contained in the UK Finance (No. 2) Act
1997. The liability for the tax was assessed at (pound)112 million of which half
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was paid on December 1, 1997 and the balance was paid on December 1, 1998. The
windfall tax was included in the tax provision for the year ended March 31,
1998.
CURRENCY RISKS; ABSENCE OF HEDGING TRANSACTIONS
TXU Europe Limited's and its subsidiaries' revenues will be primarily
received in pounds sterling while the price which will be paid to the trust for
the TOPrS will be paid in US dollars, and the interest and principal payment
obligations on the subsidiary debentures (and the related TXU Europe Limited
guarantees) and the payment obligations on the TOPrS and Preferred Partnership
Securities (and the related TXU Europe Limited guarantees) will be payable in US
dollars. As a result, any change in the currency rate that increases the
effective principal and interest payment obligations on the subsidiary
debentures and the payment obligations on the Preferred Partnership Securities
upon conversion of pounds sterling-based revenues into US dollars may have a
material adverse effect on TXU Europe Limited and its subsidiaries or on their
ability to make payments on the subsidiary debentures, the Preferred Partnership
Securities or the related guarantees. See EXCHANGE RATES for information
concerning the Noon Buying Rate for pounds sterling expressed in US dollars.
EUROPEAN MONETARY UNION (EMU)
Most of TXU Europe Group's income and expenditures are denominated in
pounds sterling or in the currencies of other countries which either are not
eligible or have not joined the first stage of the EMU. TXU Europe Limited
therefore does not expect the new currency of countries which participate in the
EMU to have a material impact on those operations for so long as the UK
continues to remain outside the EMU. TXU Europe Limited has prepared its
accounting systems to be able to deal with the receipt of payments in Euros
effective from January 1, 1999.
EFFECT OF INFLATION
Because of the relatively low level of inflation experienced in the UK,
inflation did not have a material impact on results of operations for the
periods presented.
CHANGES IN ACCOUNTING STANDARDS
In June 1999, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of Financial
Accounting Standards Board Statement No. 133," which defers the implementation
of Statement of Financial Accounting Standards No. 133 to fiscal years beginning
after June 15, 2000. Statement of Financial Accounting Standards No. 133
establishes accounting and reporting standards for derivative financial
instruments, including derivative instruments embedded in other contracts, and
hedging activities. It requires the recognition of derivatives as either assets
or liabilities in the statement of financial position and the measurement of
those instruments at fair value. While TXU Europe Limited has not yet determined
the effects adopting this standard will have on the consolidated financial
statements, those effects could be material.
The Emerging Issues Task Force, or EITF, has issued No. 98-10,
"Accounting for Energy Trading and Risk Management Activities," which is
effective for fiscal years beginning after December 15, 1998. EITF 98-10
requires that contracts for energy commodities which are entered into under
trading activities should be marked to market with the gains and losses shown
net in the income statement. TXU Europe Limited adopted EITF 98-10 effective
January 1, 1999 for the fiscal year ending December 31, 1999. Since TXU Europe
Limited is not involved in substantial trading activities, EITF 98-10 has not
had a material impact on the consolidated financial statements upon adoption.
YEAR 2000 ISSUES
Many existing computer programs use only the last two digits to
identify a year in the date field. Thus, they would not recognize a year that
begins with 20 instead of 19. If not corrected, many computer applications could
fail or produce erroneous data on or about the year 2000.
In August 1996, TXU Europe Group established a program of projects to
ensure that all its systems are Y2K compliant. In testing for conformity, TXU
Europe Group uses the revised version of the British Standards Institute's
definition of Y2K conformity. TXU Europe Group's Y2K program is sponsored by the
Chief Executive of TXU Europe Group and is managed by a committee consisting of
TXU Europe Group Managing Directors and Senior Managers. Each of the projects in
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the program has six phases: inventory; risk assessment; analysis; remediation;
testing and contingency planning.
TXU EUROPE GROUP'S STATE OF READINESS
During the third quarter of 1999, the formal certification of systems,
both information technology, IT, and embedded, was completed. The current
assessment of remediation made by the industry regulator, Office of Gas and
Electricity Markets, for the electricity industry is 100% complete for
essential remedial work, including assessment of 100% of TXU Europe Group.
Eastern Electricity -- The inventory, risk assessment and analysis of
the mainframe billing systems were completed in June 1997. All the COBOL code
was fixed by November 1998 and the remediation work for the mainframe operating
system was completed in March 1999. Eastern Electricity's internal Y2K testing
of the remediated billing system application was completed in September 1999 and
the system is ready for operation through the millennium transition. A further
upgrade to the system is scheduled for January 14, 2000 to ensure that all of
the mainframe billing systems function correctly for February 29, 2000. The
other Eastern Electricity IT systems have all been through the Y2K compliance
certification process.
Eastern Power & Trading Limited (Eastern Trading) -- All of the
existing IT systems have been through the Y2K compliance certification process.
Eastern Trading is confident of business as usual into the millennium for the
vast majority of Eastern Trading's UK and European operations that are reliant
on these systems, accounting for approximately 99% of the business revenue. A
number of subsidiaries which come under the responsibility of the Eastern
Trading Y2K project (e.g., joint ventures in Europe and gas alliances in the
North Sea) are being risk assessed in terms of potential impact to the Eastern
Trading business as a whole, and satisfactory statements and evidence of Y2K
readiness have been obtained from the gas alliances in the North Sea. European
joint venture assessments have been completed, with the exception of those in
Spain, Sweden and Finland, which are scheduled to be finished in November 1999.
Metering -- All of the existing IT and embedded systems have been
through the Y2K compliance certification process. The one remaining piece of
work is to complete a fix to the customer key prepayment meters to enable tariff
changes in the year 2000 to be implemented. The supply of electricity is
unaffected by this upgrade. This process began in October 1999 and is on target
to address over 90% of customers by December 31, 1999. This project requires
customers to visit vending stations to collect special meter keys when they wish
to apply credit next. Not all customers will come into the vending stations
before December 31, 1999 to collect these special meter keys.
Generation -- All of the existing IT and embedded systems have been
through the Y2K compliance certification process. Rollover tests (setting ahead
the clocks to test systems as the year-end dates change) of main power station
process control systems are complete. There are a number of subsidiaries in the
generation business. These have been risk assessed in terms of potential impact
to the TXU Europe generation business as a whole, and satisfactory statements
and evidence of Y2K readiness have been obtained from each subsidiary. However,
TXU Europe's recently acquired investment in Finland is believed to be Y2K
compliant but no information has yet been supplied to verify this.
Networks -- All the existing IT and embedded systems have been through
the Y2K compliance certification process. All non-compliant remote telemetry
embedded systems on the distribution system have been upgraded to Y2K compliant
versions.
IT Infrastructure -- This project covers the local and wide area
networks, voice network, and the file and print server network. All of the
systems have been through the Y2K compliance certification process and the
operational infrastructure platforms are running Y2K compliant versions.
Upgrades were installed where necessary in November 1999.
Overall TXU Europe Group Program -- Since October 1996, a Y2K
compliance requirement has been included in TXU Europe Group's standard terms
and conditions for its purchasing contracts. New projects and systems during
1999 should not affect the scope and objectives of the above projects and the
Program. TXU Europe Group's operations are also exposed to the failure of third
parties to deal with their Y2K exposure. Assurances about Y2K compliance have
been received from most suppliers with whom TXU Europe Group does not have
contracts for existing IT and embedded systems that must be Y2K compliant.
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COSTS TO ADDRESS Y2K ISSUES
Because less remediation was required than had been expected, the
estimated costs of addressing the Y2K issue have been lowered to approximately
(pound)13 million ($22 million) from (pound)20 million ($33 million). These
costs include all Y2K related activities. They do not include the cost of
achieving Y2K compliance for new IT systems installed in connection with the
opening up of the domestic electricity retail market to competition, new systems
installed to meet other business needs, or the cost of developing contingency
plans for the energy management business. Costs of addressing the Y2K issue are
being expensed as incurred. Amounts expended through September 30, 1999 totalled
(pound)8 million ($13 million). Cost expenditures for the remainder of 1999 are
estimated at (pound)3 million ($5 million) and an additional (pound)2 million
($4 million) for 2000.
RISKS AND CONTINGENCY PLANS
With respect to internal risks, TXU Europe Group's current assessment
of the most reasonably likely worst case scenario is that impacts on either
service or financial performance will not be materially adverse. TXU Europe
Group believes, based on the results of testing that has already occurred on a
large portion of production equipment with embedded systems, that if any
disruption to service occurs, it will be isolated and of short-term duration.
All of TXU Europe Group's businesses have developed Y2K contingency
plans. The Y2K process includes a review of all the existing contingency plans
and further development of contingency arrangements to cover Y2K failure
scenarios.
Each of TXU Europe Group's businesses has carried out an analysis of
potential Y2K risks based on the following scenarios:
. Failure of data/voice communications - internal and external;
. Failure of electricity - Generation/National Grid/Distribution
Network;
. Failure of water supply and sewage;
. Failure of gas supply - predominantly to power stations; and
. Failure of computer systems due to unforeseen Y2K problems.
Each business has assessed the criticality and impact of each risk
based upon their key business processes and operational sites.
Contingency plans have been prepared by each of TXU Europe Group's
businesses for the risks associated with the scenarios identified above. These
contingency plans are regularly tested. All plans have been reviewed against
specific Y2K risks. The contingency plans for TXU Europe Group's business have
been through three reviews. On October 1, 1999, the interdependencies between
plans were tested. The results of the test enabled the businesses to further
refine and issue updated Y2K contingency plans that were tested in November
1999. Additional simulation exercises were conducted during November 1999 to
test the interfaces between the central contingency control and communications
center and business control rooms.
Two internal audits of the Y2K Program were contemplated in April 1998
and August 1998. The Office of Electric Regulation covering England, Wales and
Scotland audited the Y2K Program in January 1999, and the Office of Gas Supply
audited the Y2K Program in May 1999. The Office of Gas and Electricity
Markets has carried out further questionnaire audits during June, July and
August 1999. These have focused on updates to the compliance testing program,
contingency planning and communications.
As part of the contingency planning process, a Millennium Operating
Regime has been developed to ensure business as usual during the millennium
period. Key components include: an escalation and communications structure
including a contingency control and communications center supported by
appropriate TXU Europe Group directors, increased manpower levels for business
critical operations, an agreed remuneration package for staff working during the
millennium period, and a check of business critical systems at the rollover
date.
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TXU Europe Group is working with its equipment suppliers to ensure
their products and services are Y2K compliant. Reviews were completed by
December 1998. TXU Europe Group believes that any failure of those suppliers to
be compliant is unlikely to have a material effect on TXU Europe Group or its
operations. TXU Europe Group's operations are heavily dependent upon the
reliability of National Grid, the high voltage transmission system in England
and Wales, and the operations of the Pool, the wholesale trading market for
electricity in England and Wales. If National Grid were to have service
disruptions as a result of a Y2K problem, it might affect TXU Europe Group in
either of two ways. TXU Europe Group's generation business might not be able to
deliver electricity on to National Grid or TXU Europe Group's distribution
business might not be able to deliver electricity to its customers. If the Pool
were to have service disruptions as a result of a Y2K problem, it might affect
energy trading and the payments for that energy. TXU Europe Group, as a
generator, might be delivering electricity on to National Grid but not be
receiving the correct payments in the agreed timeframe. TXU Europe Group, as a
distributor and as a supplier, might not be able to settle its payments with
other electricity participants in the market place in the agreed timeframe. The
owners and operators of the National Grid and the Pool have taken the position
that they anticipate no material disruptions of service.
CHANGE IN CERTIFYING ACCOUNTANT OF TXU EUROPE LIMITED
On August 6, 1999, based upon the recommendation of its Audit
Committee, the Board of Directors of TXU Europe Limited voted to appoint
Deloitte & Touche as the principal accountants for TXU Europe Limited and its
subsidiaries for the year ended December 31, 1999. TXU Europe Limited chose not
to continue the engagement of PricewaterhouseCoopers, its former principal
accountants. The decision by TXU Europe Limited to change principal accountants
was made in order to align the principal accountants of TXU Europe Limited with
those of TXU Corp. Deloitte & Touche LLP have been the principal accountants for
TXU Corp and its predecessors since 1945.
No report of PricewaterhouseCoopers on TXU Europe Limited's financial
statements, including the period from formation, February 5, 1998, through
December 31, 1998, contained any adverse opinion or disclaimer of opinion, nor
was any report qualified in any manner.
During the period from formation through December 31, 1998 and the
period from January 1, 1999 to August 6, 1999, there were no disagreements with
PricewaterhouseCoopers on any matter of accounting principles or practices,
financial statement disclosure or auditing scope or procedure. During this
period, there were no "reportable events" as that term is defined in Item
304(a)(1)(v) of Regulation S-K of the Securities Act.
TXU Europe Limited requested and received from PricewaterhouseCoopers a
letter dated August 9, 1999 addressed to the SEC stating that it agreed with the
above statements for the period from formation through December 31, 1998 and the
period from January 1, 1999 to August 6, 1999.
On August 6, 1999, TXU Europe Limited engaged Deloitte & Touche as its
principal accountants to audit the financial statements for the year ending
December 31, 1999. TXU Europe Limited has not consulted Deloitte & Touche
regarding any of the matters or events listed in Item 304(a)(2)(i) and (ii) of
Regulation S-K of the Securities Act. TXU Corp had routine discussions with
Deloitte & Touche LLP concerning the application of accounting principles and
other matters primarily relating to the application of purchase accounting
principles and other matters primarily relating to the application of purchase
accounting to the consolidated financial statements of TXU Corp. TXU Corp and
Deloitte & Touche LLP do not believe that these discussions constitute
consultations within the context of Item 304(a)(2) of Regulation S-K.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
RISK MANAGEMENT
TXU Europe Limited is exposed to a number of different market risks
including changes in gas and electricity prices, interest rates and foreign
currency exchange rates. TXU Europe Limited has developed a control framework of
policies and procedures to monitor and manage the exposures arising from
volatility in these markets. To implement these policies and procedures, TXU
Europe Limited enters into various derivative instruments for hedging purposes.
Both the energy management and the treasury operations make use of those
instruments, but only well understood derivative instruments are authorized for
use.
42
<PAGE>
INTEREST RATE RISK
TXU Europe Limited's exposure to interest rate risk is managed by
maintaining a balance of fixed and floating rate borrowings and deposits.
Interest rate swaps and forward rate agreements are used from time to time to
adjust the proportion of fixed rate exposure within the specified limits.
The table below provides information concerning TXU Europe Limited's
financial instruments as of March 31, 1999 that are sensitive to changes in
interest rates, which include debt obligations by principal amount and interest
rate swaps. For debt obligations, the table presents principal cash flows and
related weighted average interest rates by expected maturity dates. TXU Europe
Limited has entered into interest rate swaps under which it has agreed to
exchange the difference between fixed-rate and variable-rate interest amounts
calculated with reference to specified notional principal amounts. The contracts
require settlement of net interest receivable at specified intervals which
generally coincide with the dates on which interest is payable on the underlying
debt, primarily semi-annually. When differences exist between the swap
settlement dates and the dates on which interest is payable on the underlying
debt, the gap exposure, or basis risk, is managed by means of forward rate
agreements. These forward rate agreements are not expected to have a material
effect on TXU Europe Limited's financial position, results of operations or cash
flows. For interest rate swaps, the table presents notional amounts and weighted
average interest rates by expected, or contractual, maturity dates. Weighted
average variable rates are based on rates in effect at the reporting date.
<TABLE>
<CAPTION>
EXPECTED MATURITY DATE
-----------------------------------------------------
MARCH 31, 1999
2000 2001 2002 2003 2004 THEREAFTER TOTAL FAIR VALUE
-----------------------------------------------------------------------------
Long-term Debt (including Current
maturities):
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Rate ((pound)m)......... 225.1 923.8 127.9 361.9 1,160.1 2,798.8 2,874.2
Average interest rate......... 7.35% 6.87% 7.35% 8.38% 8.20% 7.61%
Variable Rate ((pound)m)...... 1,004.0 75.6 1,079.6 1,079.6
Average interest rate......... 6.33% 5.42% 6.27%
Interest Rate Swaps:
Fixed to Variable ((pound)m).. 100.0 100.0 15.2
Average pay rate.............. 4.75%
Average Receive rate.......... 8.38%
Variable to Fixed ((pound)m).. 15.8 400.0 432.0 847.8 (57.4)
Average pay rate.............. 12.91% 6.71% 6.45%
Average receive rate.......... 8.02% 5.63% 5.76%
</TABLE>
Forward rate agreements totalling (pound)355 million for a maximum
duration of approximately one year to swap floating rate deposits into fixed
rates were outstanding at March 31, 1999 with a weighted average interest rate
of approximately 6.66%. The market value of these forward rate agreements was
not materially different from the notional value.
The market risk information of TXU Europe Limited as of September 30,
1999 is not significantly different from the March 31, 1999 information
presented above, except for changes in interest rate risk relating to new issues
of long-term debt as described in the notes to the unaudited condensed
consolidated financial statements of TXU Europe Limited for the nine months
ended September 30, 1999 presented elsewhere in this prospectus.
ENERGY RISK MANAGEMENT
The energy business contracts to supply electricity to customers at
fixed prices and buys output from the electricity Pool to meet the demand of
these customers. Since the price of electricity purchased from the Pool can be
43
<PAGE>
volatile, TXU Europe Group is exposed to the risk arising from the differences
between the fixed price at which it sells electricity to customers and the
variable prices at which it buys electricity from the Pool. TXU Europe Group's
generation business provides a physical hedge to this risk as it is exposed to
Pool price fluctuations from selling electricity into the Pool. TXU Europe
Group's overall exposure to those risks is managed by the energy management
business which also enters into derivatives to hedge the portfolio and maintain
energy price exposure to within a limit set by the Board of Directors of TXU
Europe Group. The derivatives used are contracts for differences and electricity
forward agreements. Contracts for differences are bilaterally negotiated
contracts which fix the price of electricity for an agreed quantity and duration
by reference to an agreed strike price, which is the price specified in the
contract for differences. Electricity forward agreements are similar in
principle to contracts for differences but are on standard terms and tend to be
for smaller quantities and shorter durations. The hypothetical loss in fair
value of TXU Europe Group's contracts for differences and electricity forward
agreements in existence at March 31, 1999 arising from a 10% adverse movement in
future electricity prices is estimated at (pound)52 million. This loss is
calculated by modeling the contracts against an internal forecast of Pool prices
using discounted cash flow techniques. The fair value of outstanding contracts
for differences and electricity forward agreements at March 31, 1999 was
(pound)48 million, calculated as the difference between the expected value of
the contracts for differences and electricity forward agreements, based on their
known strike price and known value and the current market value, based on an
estimate of forward prices for the contract for difference or electricity
forward agreement term.
TXU Europe Group also sells fixed price gas contracts to customers and
supplies the customer through a portfolio of gas purchase contracts and other
wholesale contracts. TXU Europe Group's overall net exposure to the gas spot
market is also managed within a limit set by the Board of Directors of TXU
Europe Group using natural gas futures and swaps, as appropriate, to hedge the
exposures. There were no gas swaps outstanding at September 30, 1999.
Management of the market risks associated with the portfolio of
physical generation assets, upstream gas assets and gas and electricity sales
and derivative contracts is critical to the success of TXU Europe Group and
therefore comprehensive risk management processes, policies and procedures have
been established to monitor and control these market risks.
FOREIGN CURRENCY
TXU Europe Limited manages its exposure to foreign currency rates
principally by matching foreign currency denominated assets with borrowings in
the same currency. Currency swaps and options are also used where appropriate to
hedge any residual exposures. In addition, some imports of capital equipment and
fuel are denominated in foreign currencies and the sterling cost of these is
fixed by means of forward contracts as soon as TXU Europe Limited's contractual
commitment is firm. The US$ option contracts outstanding at December 31, 1998
all matured in the period to March 31, 1999. The principal foreign currency
hedges outstanding at March 31, 1999 were as follows:
US$/GBP swaps in respect of the semi-annual interest payments on, but
not the principal amount of, the $500 million of guaranteed notes previously
issued to swap from US$ to GBP as follows:
<TABLE>
<CAPTION>
Annual March 31, 1999
Period Amount Rate Fair Value
------ ------ ---- ---------------
<S> <C> <C> <C> <C>
Annually to 2017 $14.8 million 1.61 (pound)(5.7) million
Annually to 2027 $22.5 million 1.62 (pound)(15.6) million
</TABLE>
44
<PAGE>
INDUSTRY BACKGROUND
GENERAL
Traditionally, the electric industry in the UK, including distribution,
transmission and generation, has been highly regulated. Throughout England and
Wales, electricity power stations, together with the transmission and
distribution systems, constitute a single integrated network. Privatization of
the UK electricity industry has opened the market to new participants. Each
participant must be licensed to generate, transmit or supply electricity. Almost
all electricity generated in England and Wales must be sold to and purchased
from the wholesale trading market for electricity, commonly known as the Pool.
Prices for electricity are set by the Pool for each half hour based on bids of
generators and a complex set of calculations that matches supply and demand.
The gas industry in Great Britain has been privatized and competition
among suppliers is encouraged by deregulation of the supply of gas, first to
larger customers and, more recently, to smaller customers including residential
users. Most of the gas transmission and distribution network in Great Britain is
owned and operated by BG plc, which is required to provide fair access to its
network to all shippers of gas. Charges to shippers of gas are based on the
amount of pipeline capacity reserved and the number of points of entry and exit
to and from the national network.
THE ELECTRICITY INDUSTRY IN ENGLAND AND WALES
Almost all electricity generated at power stations in England and Wales
is delivered through the high voltage transmission system owned and operated by
The National Grid Company. It is then transformed for delivery on to the local
distribution networks owned and operated by holders of public electricity supply
licenses like Eastern Electricity.
During the five years ended March 31, 1998, demand for electricity in
England and Wales rose by approximately eight percent. The National Grid Seven
Year Statement published in April 1998 states that demand is expected to rise by
approximately seven percent during the five years ended March 31, 2003.
"Energy Trends," the energy statistical bulletin issued by the UK
Department of Trade and Industry, reports that electricity produced by the UK
generating industry, including imports from Electricite de France, in the year
ended December 31, 1991, totalled approximately 300 TWh, of which approximately
66 percent was produced by coal-fired power stations and 21 percent by nuclear
power stations. Thirteen percent was output from pumped storage facilities - a
type of hydroelectric generating facility that uses generating capacity to pump
water from a lower reservoir to an upper reservoir during periods of low demand
for electricity and uses the flow of water from the upper to the lower reservoir
to generate electricity during periods of high demand, from oil fired power
stations and from interconnectors, which are electrical connectors between the
electrical facilities of two electric systems permitting a flow of energy
between the systems. During that time there was no significant production from
combined cycle gas turbine power stations. The bulletin indicates that in the
year ended December 31, 1997, including imports from Electricite de France, the
percentage of total electricity generated by coal-fired power stations had
declined to approximately 34 percent and the output from pumped storage, oil,
gas (other than combined cycle gas turbine power stations) and interconnectors
had declined to 12 percent while the percentage generated by nuclear power
stations had increased to 27 percent and combined cycle gas turbine power
stations accounted for 27 percent. Combined cycle gas turbine power stations are
a type of generating facility which combines a gas-powered combustion turbine
with a heat recovery boiler and a steam turbine. The heat recovery boiler uses
excess heat from the combustion turbine to produce steam to power the steam
turbine. This type of facility increases output and improves efficiency compared
to a facility that uses only a combustion turbine. Reasons for the development
of combined cycle gas turbine generating capacity since 1991 include the
availability of large volumes of natural gas, developments in technology and the
privatization of the UK electricity industry, which has allowed new entrants to
participate in the generation market.
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. The government's conclusions were published in an October
1998 policy statement. The government's policy for issuing consents for the
construction of new generating stations, as set out in the October 1998 policy
statement, is that gas-powered generation would normally be inconsistent with
the government's energy policy, unless the project has other benefits, such as
combined heat and power projects which produce both power and usable heat and
have environmental or transmission system benefits.
45
<PAGE>
THE POOL
The Pool was established in 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.
These characteristics create the need for a constant matching of supply and
demand.
All electricity generated in England and Wales, other than electricity
generated by small generators connected directly to the local distribution
networks rather than National Grid, must be sold to the Pool. In turn,
electricity suppliers generally must buy electricity from the Pool for resale to
their customers. Even groups which are both generators and licensed suppliers,
like TXU Europe Group, in most circumstances, must act through the Pool to sell
all the electricity they generate and to purchase all electricity they sell to
customers.
The Pool is operated under the Pooling and Settlement Agreement, which
is currently under review by the UK government. The Pooling and Settlement
Agreement governs the constitution and operation of the Pool and the calculation
of payments due to and from generators and suppliers of electricity. The UK
government and all licensed generators and suppliers of electricity in England
and Wales are parties to the Pooling and Settlement Agreement. The Pool also
provides centralized settlement of accounts and clearing.
Generators sell electricity to the Pool at a price for each unit of
electricity generated. Also, generators receive availability payments when they
declare themselves to be available but are not called upon to run. Suppliers buy
electricity through the Pool at a price which reflects these components and
which may also include additional amounts payable to National Grid.
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 that matches supply and demand and takes account of system
security. Generators make individual bids into the Pool once each day, stating
the price and volume at which they are prepared to generate at any point during
the following day. National Grid ranks the generating units in an order known as
the "merit order," primarily according to the price offered. National Grid then
schedules the generating units to operate according to this 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 demand. Factors
which may constrain National Grid's ability to order stations into operation in
strict observance of the merit order include the constraints of transmission
systems and the technical operating characteristics of some generating units.
The price paid to all generators which are called to run is set primarily by
reference to the highest bid price of all the generators selected to run in that
half hour. A computerized 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
Energy Settlements and Information Services Limited, a subsidiary of National
Grid, as settlement system administrator. Pool prices for the purchase of power
can vary significantly from day to day and during each day.
In order to reduce their exposure to fluctuations in Pool prices,
generators and suppliers enter into financial hedging contracts with each other.
These contracts are in the form of contracts for differences and electricity
forward agreements. Contracts for differences and electricity forward agreements
in effect fix the price that a supplier pays and a generator receives for
electricity. They therefore are used to reduce the price risk that would
otherwise be associated with the sale and purchase of electricity through the
Pool.
ELECTRICITY SUPPLY MARKETS IN ENGLAND AND WALES
The regulatory framework in England and Wales differs for consumers
with maximum annual demands over and under 100 kW. The under 100 kW market,
comprising the former regional supply monopolies or franchises of the twelve
regional electricity companies, has recently been opened to competition. It is
sometimes referred to as the "ex-franchise" market. This market itself contains
two subdivisions. The first consists of all residential customers and small
businesses using up to 12,000 kWh/year. It is called the designated market. The
remainder of the ex-franchise market consists of smaller businesses with annual
maximum demands under 100 kW that use more than 12,000 kWh/year. The over 100 kW
market consists of all customers with an annual maximum demand of 100 kW or
more.
Until September 1998, residential and small business customers in all
service areas could buy electricity only from the regional electricity company
authorized to supply service in the area where the customers were located.
46
<PAGE>
However, competition has been fully introduced and customers are now able to buy
electricity from any licensed supplier. Ex-franchise customers are usually
supplied with electricity in accordance with published tariffs. A price control
formula set out in the supplier's public electricity supply license limits
prices charged to customers in the designated market. These prices are regulated
by the Director General of Electricity Supply as described below under TXU
EUROPE GROUP BUSINESS OVERVIEW -- "UK Regulatory Matters; Energy Regulation;
Electricity Supply Price Regulation." A formula determines the maximum prices
which any public electricity supply license holder is permitted to charge. A
separate price control formula described below under TXU EUROPE GROUP BUSINESS
OVERVIEW -- "UK Regulatory Matters; Networks Regulation; Distribution Price
Regulation" determines the maximum distribution revenue which a public
electricity supply license holder may earn from charges made to its own
electricity supply business and other electricity suppliers for use of its
distribution network. These formulas are in effect until March 31, 2000.
To be able to supply electricity, a supplier must either have a second
tier supply license issued under the Electricity Act 1989 of Great Britain
described below under TXU EUROPE GROUP BUSINESS OVERVIEW -- "UK Regulatory
Matters; Networks Regulation; Distribution Price Regulation" or hold a public
electricity supply license for the authorized area where its customers are
located. The license holder must demonstrate that it has adequate systems and
processes in place to fulfill its obligations. Customers in the over 100 kW
market are charged under the terms of commercial contracts negotiated with their
supplier, which may provide for fixed or variable prices. Variable prices
normally reflect expected fluctuations in the price paid by suppliers for the
purchase of electricity from the Pool. Customers in the under 100kW market who
choose to be supplied by a second tier supplier are charged under the terms of
standard published contracts.
All suppliers use the national transmission system, for which they pay
published transmission charges, and the distribution system of the local public
electricity supply license holder, for which they pay published distribution
charges, to secure delivery of electricity to their customers.
Electricity supply and distribution businesses in England and Wales
are subject to price controls. Since the implementation of the initial price
controls in 1990, there have been two reviews of the supply price control,
effective for the periods from April 1, 1994 to March 31, 1998 and from April 1,
1998 to March 31, 2000. These reviews have resulted in reduced supply and
distribution prices, but because related costs have also been reduced, the
effect on TXU Europe Group has not been material. On August 12, 1999, the Office
of Gas and Electricity Markets issued draft proposals, adjusted on October 8,
1999, for a range of substantial net revenue reductions for the distribution
businesses of all regional electricity companies in the UK. The Office of Gas
and Electricity Markets issued its price adjustment proposals for the
electricity supply businesses on October 8, 1999. The Office of Gas
and Electricity Markets issued its final report on December 2, 1999, and the
supply price adjustments will become effective April 1, 2000. See TXU EUROPE
GROUP BUSINESS OVERVIEW-- "Energy Regulation- Electricity Supply Price
Regulation" and "Networks Regulation-Distribution Price Regulation."
With the consent of the public electricity supply license holders, the
Director General of Electricity Supply has modified the public electricity
supply licenses to require that the public electricity supply license holders
support the introduction of competition for ex-franchise supply customers by
offering services to competing suppliers. These services include registration,
data collection and aggregation, emergency reporting and meter operation. The
public electricity supply license holders may be required to provide meters to
customers who pay in advance for their electricity, usually customers with
outstanding obligations to the public electricity supply license holder. The
public electricity supply license holders are also required to provide,
collectively, consumption and other customer data and a data transfer service to
facilitate customer transfers to other providers in the open electricity market.
The regional electricity companies also have contributed to a program
by the Pool to adopt settlement arrangements for the competitive market in 1998.
The costs of this program will be recovered from charges to be made to suppliers
by the Pool over a five year period. There is a cap above which the regional
electricity companies will only partially recover these costs. TXU Europe
Group's share of the costs beyond this cap is not expected to be material.
REGULATION OF THE ELECTRICITY SUPPLY INDUSTRY UNDER THE ELECTRICITY ACT
The Electricity Act created the institutional framework under which the
industry is currently regulated, including the office of the Director General of
Electricity Supply, who is appointed by the UK Secretary of State for Trade and
Industry. The government is currently consulting on legislation to make
significant amendments to the Electricity Act to reflect proposed changes in the
regulatory and legal framework of the industry. The government appointed Callum
McCarthy, a former banker, as the Director General of Gas Supply beginning
November 1, 1998. He assumed the duties of the Director General of Electricity
47
<PAGE>
Supply beginning January 1, 1999. The Office of Gas Supply merged with that of
the Office of Electricity Regulation covering England, Wales and Scotland. Since
June 17, 1999, the merged office has been known as the Office of Gas and
Electricity Markets.
The Director General of Electricity Supply'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 UK
Secretary of State for Trade and Industry;
. Proposing modifications to licenses and, in case of non-acceptance
of those proposals by licensees, making license modification
referrals to the Monopolies and Mergers Commission;
. Enforcing compliance with license conditions;
. Advising the UK Secretary of State for Trade and Industry in
respect of the setting of each public electricity supply license
holder's non-fossil fuel obligation, which fixes the requirement
for the licensee to purchase electricity from non-fossil sources;
. Calculating the rate of the levy to reimburse generators and
regional electricity companies for the extra costs involved in
non-fossil fuel plant generation and collecting this fossil fuel
levy;
. Determining 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 covers
both distribution and supply activities.
The Director General of Electricity Supply exercises concurrently with
the Director General of Fair Trading functions relating to monopoly situations
under the UK Fair Trading Act 1973 and functions relating to courses of conduct
which have, or might have, the effect of restricting, distorting or preventing
competition in the generation, transmission or supply of electricity in
contravention of the UK Competition Act 1980. The new Competition Act which
becomes effective March 1, 2000 will replace some provisions of the UK Fair
Trading Act 1973 and the UK Competition Act 1980. The new Competition Act
conforms to fair trade laws being enacted throughout the EU, including the
introduction of stricter enforcement and investigative powers.
Subject to these duties, the UK Secretary of State for Trade and
Industry and the Director General of Electricity Supply are further 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 terms 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 UK Secretary of State for Trade and Industry and the Director
General of Electricity Supply 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.
48
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In performing their duties to protect the interests of consumers in
respect of prices and other terms of supply, the UK Secretary of State for Trade
and Industry and the Director General of Electricity Supply 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.
The Electricity Act requires the Director General of Electricity Supply
and the UK Secretary of State for Trade and Industry to carry out their
functions in the manner each considers is best calculated to ensure that all
reasonable demands for electricity will be satisfied, that license holders will
be able to finance their licensed activities and that will promote competition
in the generation and supply of electricity.
GOVERNMENT REVIEW OF UTILITY REGULATION
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 providers of water and telecommunications
services. The review culminated in a March 1998 policy statement which sets
forth a number of proposals of the UK government designed to re-examine utility
regulation in the UK. Among the main proposals contained in that policy
statement, some of which would require implementing legislation, are:
. The retention of the current distribution price control formula as the
basis for price regulation;
. Increased transparency and consistency of regulations;
. The separate licensing of the distribution and supply businesses of
the regional electricity companies; and
. 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.
On May 13, 1998, the Director General of Electricity Supply issued a
consultation paper on the separation of distribution and supply businesses for
regional electricity companies and the future treatment of metering and meter
reading. The material proposals and recommendations set out in the consultation
paper are the following:
. Full separation of the management of the supply and distribution
business was recommended and consideration of appropriate interim
arrangements for separate companies that will make up the
distribution and supply activities, each acting independently of
the other. Measures should be introduced to ensure that each
public electricity supply license holder's supply subsidiary
operates at arm's length from the distribution subsidiary. These
measures would include separate contracts between the supply and
distribution businesses to avoid the sharing of facilities between
the businesses. Separate management teams would be required for
the two businesses and corporate headquarters activities would be
minimized.
. The distribution company should be responsible for the maintenance
and operation of the network and have a statutory duty to develop
and maintain an efficient, coordinated and economical system of
electricity distribution and to facilitate competition in
generation and supply. It should connect any customer to the
network on reasonable terms and provide "last resort" meter
reading service for any supplier not wishing to provide the
service itself.
. All suppliers should be placed on the same legislative footing,
and tariff supply should be replaced by supply under contract.
License conditions would be introduced to protect customers and
competitors against dominant suppliers.
. Metering services should be open to competition, and arrangements
for transmission in Scotland should be brought into line with
those in England and Wales.
In October 1998, the Department of Trade and Industry published a
consultation paper setting out its views, following consultation on a number of
issues relating to the reform of regulatory structure in the gas and electricity
49
<PAGE>
markets. It intends to consult on issues arising from responses in the fall of
1999. The October 1998 consultation paper sets out the government's view that
separate ownership of distribution and supply companies was inappropriate, but
that the two businesses should be held in separate subsidiary companies.
In November 1998, the Director General of Electricity Supply set out
further proposals on business separation. These proposals concentrate on the
goal of full operational separation of integrated support activities for the
distribution and supply businesses. He also appointed consultants to advise him
in drawing up a separation compliance plan. These were followed on May 19, 1999
by a further document of the Office of Electricity Regulation covering England,
Wales and Scotland that stressed the need to move rapidly towards operational
separation and proposed that work begin immediately on company specific
compliance plans. The Office of Electricity Regulation covering England, Wales
and Scotland also proposed the appointment of a senior level compliance manager
within each regional electricity company.
The Director General of Electric Supply is also reviewing the
operations of the Pool with a view to promoting alternative trading
arrangements.
TXU Europe Limited and TXU Europe Group cannot predict the results of
any of these reviews, whether proposals recommended in the consultation paper
will be implemented or the ultimate effects on TXU Europe Group or TXU Europe
Limited.
THE GAS INDUSTRY IN THE UK
Natural gas is used for a wide range of residential and small business
and industrial purposes and also for gas-fired electricity generating stations.
Total consumption of natural gas in the UK in 1997 was equal to approximately 54
million tons of oil which equated to approximately 407 million barrels of oil.
Production of natural gas in the UK in 1997 was equal to approximately 87
million tons of oil which equated to approximately 656 million barrels of oil.
From the nationalization of the gas industry in Great Britain in 1948
until 1986, when British Gas plc was privatized, the supply of piped gas to
customers was a monopoly. Simultaneously with the privatization of British Gas
plc, steps were taken to develop greater competition within the industry,
initially by deregulating the supply of gas to the contract market. The contract
market is made up of customers that use more than 25,000 therms per year (1,000
tons of oil equivalent is equal to 0.3968 therms). Within the contract market
there are "interruptible" customers, whose supply can be interrupted in periods
of exceptional demand, and "firm" customers to whom supply is guaranteed.
Competition has been extended to all consumers, including residential
and small business customers.
British Gas plc divided itself into two separate companies, Centrica
plc and BG plc. Centrica plc is a shipper and supplier of gas, while almost all
of the UK gas transmission and distribution network is owned and operated by BG
plc.
Participants in the gas industry are required to hold licenses granted
by the Director General of Gas Supply. These are:
. A "public gas transporter's license," which permits the licensee to
carry gas through pipelines to any premises or to a pipeline system
operated by another public gas transporter;
. A "gas supplier's license," which is required to supply gas to
customers; and
. A "gas shipper's license," which allows the licensee to arrange with a
public gas transporter to introduce, convey or take gas out of the
transporter's pipeline system.
In addition, the exploration for and production of gas in the North Sea
is subject to license by the Department of Trade and Industry.
BG plc is required to provide fair access to its network to all
shippers of gas, who pay charges determined by the amount of capacity they have
reserved on the system's entry and exit points and commodity charges based on
the amount of gas actually transmitted.
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Shippers and suppliers obtain natural gas directly from offshore
fields, in which they may own equity interests, from wholesalers, or from both.
There are various types of contracts for the purchase of gas, but most of these
currently relate directly to physical volumes to be delivered into the UK gas
supply network. Many of these include "take or pay" obligations, under which the
buyer agrees to pay for a minimum quantity of gas in a year, although the amount
it takes in any specific time period can vary according to its need. Gas can be
purchased for delivery from one day to several years ahead.
Shippers in the gas industry have financial incentives to ensure that
they have sufficient gas, within limited tolerances, to meet the needs of their
suppliers and customers on a daily basis. Failure to do so could result in
additional costs being incurred. Fluctuations in demand are met by altering the
quantity of gas taken from fields, by adjusting wholesale purchase contracts and
the use of storage. Demand may also be limited by interrupting supplies to
interruptible customers. Any excess or shortfall in supply has to be sold to, or
bought from, the network operator at prices determined each day under an agreed
pricing formula.
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TXU EUROPE GROUP BUSINESS OVERVIEW
GENERAL
TXU Europe Group, which is an indirect subsidiary of TXU Europe
Limited, is the holding company for a group of companies engaged in a variety of
energy businesses in Europe. The management of these businesses is coordinated
to give TXU Europe Group access to many energy markets, to provide TXU Europe
Group's customers access to a range of energy products and to enable TXU Europe
Group to respond efficiently to changes in demand for and prices of energy
throughout Europe. TXU Europe Group's principal business operations are
electricity networks and energy businesses in the UK.
The networks business is the largest distributor of electricity in
England and Wales, with over 3 million customers in a service area covering
approximately 20,300 square kilometers in the east of England and parts of north
London.
TXU Europe Group's energy business is made up of:
. Eastern Trading, which coordinates and manages for TXU Europe
Group the price and volume risks associated with TXU Europe
Group's generation and electricity and gas retail businesses and
those of third parties;
. Energy Retail, TXU Europe Group's electricity and gas supply
operations, which is one of the largest retailers of electricity
in the UK, with approximately 3.1 million electricity customers of
Eastern Electricity and Eastern Energy Limited and 820,000
customers of Eastern Natural Gas as of October 31, 1999; and
. TXU Europe Power (formerly Eastern Generation), one of the largest
generators of electricity in the UK, which currently owns,
operates or has an interest in ten power stations representing
approximately 9.4% of the UK's total generating capacity as of
December 31, 1998.
TXU Europe Group also has interests in other parts of Europe, including
Scandinavia, Germany, the Czech Republic, The Netherlands, Poland and Spain, and
in four natural gas producing fields in the North Sea.
The electric operations of TXU Europe Group are highly seasonal with a
very substantial proportion of its profits earned in the winter months. The
purchase price for electricity in each half hour varies according to total
demand, the amount of generation capacity available but not needed and the
prices bid by generators. Consequently, the purchase price tends to be highest
during mid-week afternoons in winter, when demand is highest, or in late autumn,
when a significant number of power stations undergo scheduled maintenance.
Purchase prices are generally lowest during summer months. Seasonal variations
in results are likely to continue under revised trading arrangements that are
due to be introduced during 2000.
The energy retail, energy management and generation and networks
segments, the primary operating segments of TXU Europe Group, contributed 61%,
39% and 11%, respectively, of TXU Europe Group's revenues, before eliminating
sales among TXU Europe Group subsidiaries, during the last fiscal year. For
financial information by operating segment for the years ended March 31, 1997
and 1998, and for the period from April 1, 1998 through May 18, 1998, see Note
15 to the Consolidated Financial Statements of TXU Europe Group plc and
Subsidiaries included elsewhere in this prospectus. For financial information by
operating segment for the periods from formation on February 5, 1998 through
December 31, 1998 and from formation through March 31, 1999, see Note 17 to the
Consolidated Financial Statements of TXU Europe Limited and Subsidiaries
included elsewhere in this prospectus. That information has been prepared and
presented in accordance with Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information."
TXU EUROPE GROUP'S FLEXIBLE ENERGY PORTFOLIO CONCEPT
TXU Europe Group began as a regional electricity company, operating
what is now the largest electric networks and supply business in the UK. As the
UK energy market has become increasingly competitive, TXU Europe Group has been
a pioneer in the development of the flexible energy portfolio concept in the UK.
The growth in TXU Europe Group's electric generation and gas production assets
has provided the opportunity to hedge TXU Europe Group's retail electricity and
natural gas contracts and commitments to customers. Eastern Trading now has a
substantial portfolio of positions in physical assets and contracts with which
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it can supply electricity and gas to TXU Europe Group and other industry
participants. The physical positions are a natural hedge to the risks associated
with TXU Europe Group's retail operations. To the extent TXU Europe Group is
naturally hedged, TXU Europe Group can avoid the expenses of entering into
alternative hedging arrangements. However, the physical positions are not an
exact match with Eastern Trading's supply commitments to the customers.
Therefore Eastern Trading manages the remaining exposure through contracts by
adjusting the balance of supply and demand in TXU Europe Group's portfolio, by
varying power station and gas field output, by contracting with counterparties
and by adjusting trading prices to the retail operations. Some of these
arrangements are described under "Portfolio Management/Energy Trading" below.
Overall, Eastern Trading integrates all aspects of TXU Europe Group's
energy business. It coordinates TXU Europe Group's energy operations, taking
into account anticipated demand and the availability to TXU Europe Group of
electricity and natural gas from all sources, including generation, gas
production, and contracted supplies.
In carrying out these duties, Eastern Trading:
. Offers TXU Europe Group's and others' retail operations a range of
prices for electricity and gas on which the energy retailers may base
prices for the supply of that energy to end customers;
. Bids into the Pool both price and volume for TXU Europe Group's
generation, taking account of anticipated retail demand and the
overall contractual position;
. Manages purchases from the Pool for TXU Europe Group and others;
. Manages TXU Europe Group's contracts for differences and electricity
forward agreements; and
. Matches TXU Europe Group's gas assets and purchase contracts,
including access to gas storage, with anticipated demand, including
demand from TXU Europe Group's gas-fired generating plants, and buys
and sells gas in the event of an excess or shortfall.
Finally, TXU Europe Group is also forming various business alliances
with European power companies and expects to implement a similar strategy in
other parts of continental Europe as markets there open to competition.
STRATEGY FOR TXU EUROPE GROUP'S ENERGY BUSINESS
TXU Europe Group's strategy for the energy business is to increase TXU
Europe Group's UK market share in the retail sale of gas and electricity by
strengthening its existing positions in those markets. TXU Europe Group believes
that substantial economic and marketing benefits are derived from operating its
natural gas and electricity retailing business as a single unit. Competitive
markets provide opportunities for TXU Europe Group to expand its retail base
through superior marketing and a focus on service to customers. As the retail
base grows, TXU Europe Group's overall energy portfolio will be adapted to
manage the associated price and volume risks. Providing similar development and
management of portfolios to third parties that are other energy providers gives
TXU Europe Group additional opportunities to develop its customer base.
TXU Europe Group also plans additional growth in continental Europe.
TXU Europe Group expects competition to increase in European markets. As
opportunities arise, TXU Europe Group intends to expand its current European
presence by developing its European energy business similarly to what it has
done in the UK. This could be by direct acquisition or contractual arrangements.
As appropriate, TXU Europe Group aims to establish positions through interests
in physical assets or through contracts and trading. It expects to develop
distribution and retail customer bases through direct marketing and alliances,
or joint ventures, with businesses with existing customer bases. These steps
will enable TXU Europe Group to operate profitably in these markets by taking
advantage of price, weather, the timing of demands on the system or other
differentials between connected European markets, as it does in the UK.
TXU EUROPE POWER
TXU Europe Power is one of the largest generators of electricity in
the UK. Its share of total UK generating capacity is approximately 9.4%. It
currently owns, operates or has an interest in ten power stations in the UK.
TXU Europe Power also has a controlling interest in Nedalo (UK) Limited, the
largest supplier of small electrical combined heat and power plants, which are
those with less than 1.5 MW, in the UK.
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UK GENERATION FACILITIES
TXU Europe Group's current portfolio of power stations is predominately
a mix of combined cycle gas turbine and coal-fired stations. It represents both
plants which run throughout most of the year and plants which run only during
periods of high demand. TXU Europe Group's portfolio of power stations provides
flexibility in managing the price and volume risks of its energy contracts and
has enabled TXU Europe Group to diversify its fuel supply risk.
Information on TXU Europe Group's interests in power stations in the UK
is set out in the following table and discussed further below. In all cases
installed generating capacity is equal to registered generating capacity except
for Peterborough and King's Lynn, which have registered generating capacities of
405 MW and 380 MW, respectively, but installed generating capacities, as shown
below, of 360 MW and 340 MW, respectively.
- - - - ------------------ --------------------------- -------------- -------------
Installed
Capacity Date of earliest
Plant Type MW commissioning
- - - - ------------------ --------------------------- -------------- -----------------
West Burton Coal-fired 2,012 1967
Rugeley B Coal-fired 1,046 1972
Drakelow C Coal-fired 976 1965
Ironbridge Coal-fired 970 1970
High Marnham Coal-fired 945 1959
Peterborough Combined cycle gas turbine 360 1993
King's Lynn Combined cycle gas turbine 340 1997
Barking Combined cycle gas turbine 135(1) 1995
London-Citigen Combined heat and power 31 1992
Grimsby-MIC(2) Combined heat and power 15 1995
---------
Total 6,830
=========
(1) Represents TXU Europe Group's approximately 13.5% interest in a 1,000
MW plant.
(2) Located on the property of a customer.
West Burton, Rugeley B and Ironbridge. In June 1996, TXU Europe Group
-------------------------------------
assumed operational and commercial control, through a combination of lease and
outright purchase from National Power, of all of the assets and a portion of the
liabilities of the West Burton, Rugeley B and Ironbridge power stations. TXU
Europe Group holds a 99-year lease over the land, buildings and plant at each of
those power stations and has the right to purchase the freehold land after 50
years. Under the leases, TXU Europe Group was committed to make fixed payments
totalling (pound)737.5 million, of which (pound)337.5 million was paid at
commencement of the leases. The balance, together with interest at 7.75%, is
payable in 2001. Further payments of approximately (pound)6 per MWh, indexed to
inflation and linked to output levels from these stations, are also payable to
National Power through 2004. National Power has agreed in principle with the
Department of Trade and Industry to modify the payment terms to reduce TXU
Europe Group's output-linked payments by (pound)1.50 per MWh for four months of
the year. The specific terms of the modification are not yet agreed. The new
terms will not otherwise change TXU Europe Group's obligations under the leases.
The National Power leases have been characterized as capital leases under US
GAAP.
Drakelow C and High Marnham. TXU Europe Group has leased the land,
---------------------------
buildings and plant at the Drakelow C and High Marnham power stations from
PowerGen for 99 years, under agreements entered into in July 1996. PowerGen is
responsible for decommissioning costs if TXU Europe Group decides to close these
stations during the term of the leases. TXU Europe Group is committed to fixed
payments totalling (pound)230 million, subject to minor adjustments if aggregate
capacity is reduced. The payments, together with interest, are to be made in
installments, over eight years beginning in 1996. As with the National Power
leases, further output-related payments of approximately (pound)6 per MWh,
indexed to inflation, are payable to PowerGen for the first five years of
operation by TXU Europe Group. On November 25, 1998, the UK Secretary of State
for Trade and Industry confirmed that, as a condition for allowing PowerGen to
acquire East Midlands Electricity plc, he would require that the output-related
elements of these lease arrangements be terminated 15 months early. The
output-related payments to PowerGen will now terminate in March 2000.
Peterborough. The power station at Peterborough was developed and built
------------
as a joint venture between TXU Europe Group and Hawker Siddeley Power
(Peterborough) Limited between 1990 and 1993. TXU Europe Group acquired Hawker
Siddeley's interest in September 1994. Eastern Trading has secured contracts
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with natural gas suppliers to meet the station's natural gas requirements. The
Peterborough plant is operated and maintained on behalf of TXU Europe Group by a
third party contractor under a seven year contract which commenced in 1993.
King's Lynn. The 340 MW combined cycle gas turbine power station at
-----------
King's Lynn was constructed for TXU Europe Group under a contract which required
the contractor to provide a functioning power plant. The station began
commercial generation in December 1997 and is operated and maintained by TXU
Europe Group. Eastern Trading has secured contracts with natural gas suppliers
to meet the station's natural gas requirements.
Barking. TXU Europe Group has an interest of approximately 13.5% in a
-------
1,000 MW combined cycle gas turbine power station at Barking which was
constructed as a joint venture between TXU Europe Group and a number of other
companies and which became operational in 1995.
London-Citigen and Grimsby-MIC. In December 1998, Eastern Generation
------------------------------
acquired from BG plc two combined heat and power plants: a 15 MW combined heat
and power plant based on the Millennium Inorganic Chemicals site at Grimsby and
a 31 MW district heating and chilling plant, Citigen, in London.
Nedalo. TXU Europe Group owns 75% of Nedalo, which provides to
------
customers small scale combined heat and power equipment that can produce up to
1.5 electrical MW per single unit. Separate units can be grouped together. When
grouped together, the units can have a total output equal to the sum of the
outputs for the individual units. Approximately 70 MW of small scale combined
heat and power equipment is expected to be installed in the UK in 1999, and
Nedalo has approximately 70% of this market.
NON-UK GENERATION FACILITIES
Czech Republic. TXU Europe Group has invested (pound)27.8 million in an
--------------
interest of 83.7% in Teplarny Brno, a district heating and generation company
based in Brno, the second largest city in the Czech Republic. Teplarny Brno owns
oil and gas-fired plants that are capable of generating approximately 1,000 MW
of energy in the form of steam and hot water. This is sold principally to
industrial and residential customers. It also owns a 169 kilometer pipeline
network for distributing heat to customers' premises. Teplarny Brno also has an
electricity generation capacity of approximately 97 MW. The output is sold to
the regional electricity company. A combined cycle gas turbine plant is
currently undergoing final commissioning and will provide 86 MW of additional
heat capacity and 95 MW of additional electricity generating capacity. This
plant, which has a contract value of approximately (pound)31.6 million, is
now commissioned on gas.
Poland. TXU Europe Group has acquired 49% of Zamosc Energy Company, a
------
joint venture with the Polish regional distribution company, Zamejska Korporacja
Energetyczna SA, which was established to develop power plants in southeast
Poland. A 125 MW combined cycle gas turbine project is being developed at
Jaraslaw. The project is expected to cost approximately US$100 million, but the
financing has not yet been closed.
Finland. In November 1999, TXU Europe Group announced the formation of
-------
a joint venture company, called TXU Nordic Energy, with Pohjolan Voima Oy, or
PVO, Finland's second largest electricity generator. TXU Nordic Energy comprises
14.7% of PVO, equating to approximately 584 MW of PVO's thermal generating
capacity and existing wholesale trading positions. TXU Europe Group paid
approximately (pound)200 million for its share of the joint venture. The
formation of the joint venture is a part of TXU Europe Group's strategy to build
a European energy portfolio by working in partnership with other companies.
OTHER PROJECTS
In December 1997, the UK government stopped granting consents for the
construction of new gas-fired power stations pending adoption of the stricter
consents policy announced in an October 1998 policy statement on Energy Sources
for Power Generation. This policy has delayed the construction of some projects
by TXU Europe Group and its competitors. However, in December 1998, TXU Europe
Group received government consent to build a 215 MW combined heat and power
plant to provide heat and power to Shotton Paper on Deeside. In addition, in
July and September 1999, TXU Europe Group received government consent to modify
the Drakelow and Rugeley power stations to enable those power stations to be
fueled by gas in addition to coal, or by a combination of gas and oil.
TXU Europe Group continues to consider other new generation projects
and in April 1999 it announced that a one MW wind turbine in Northern Ireland
had successfully completed tests and had begun generating electricity.
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The UK government imposes on electricity suppliers an obligation to
purchase a portion of their requirements from renewable energy sources under the
non-fossil fuel obligation levy scheme. Renewable energy sources are those that
are not currently consumed faster than they are replenished. Renewable energy
sources include solar and wind power. As of September 30, 1999, TXU Europe Group
had entered into development agreements in the UK for 110 MW installed capacity
of on-shore wind projects under power purchase contracts that are awaiting
planning consents from local authorities. An agreement outlining the main terms
has been signed with joint developers for up to 100 MW of on-shore wind power in
Portugal and 65 MW of electricity to be produced from forest waste in the UK.
Additional opportunities for renewable energy projects and large and small scale
combined heat and power plants are being actively considered, together with
other conventional generating projects.
COMPETITION IN GENERATION
TXU Europe Group is one of the largest generators in the UK, with a
share of approximately 9.4% of the UK's total generation capacity registered as
of December 31, 1998.
TXU Europe Group's mix of generating plants enables it to operate in
the sectors of the market for both plants that run throughout most of the year
and plants that run only during periods of high demand, and to spread its fuel
risks.
The generation market will be affected by the outcome of the review of
energy sources by the UK government and the regulatory review of electricity
trading arrangements.
The UK government has initiated a program of reform in the electricity
market. The program involves:
. Reform of the electricity trading arrangements in England and Wales;
. Seeking practical opportunities for divestment of assets by major
coal-fired generators;
. Moving forward with competition in electricity supply for all
customers;
. Separating supply and distribution in electricity markets;
. Revising its policy relating to the construction of new gas-fired
generation facilities;
. Continuing to press for open energy markets in Europe.
One of the results of this program is that the major coal-fired
generators, National Power and PowerGen, are in the process of divesting
generating plants. AES Corp. is buying the 4,000 MW Drax coal-fired station from
National Power and Edison Mission Energy is acquiring the two 2,000 MW
coal-fired stations at Ferrybridge and Fiddlers Ferry from PowerGen. In
addition, construction of new gas-fired generating facilities is likely to
increase competition in the generation market. TXU Europe Group cannot predict
the impact these reforms will have on its financial position, results of
operations or cash flows.
ENERGY RETAILING
TXU Europe Group has integrated its electricity and gas retailing
operations into a single energy business.
The electricity retailing business involves the sale to customers of
electricity that is purchased from the Pool. Pool price risk is managed on
behalf of the retail business by Eastern Trading. The energy business is charged
a regulated price by transmission and distribution companies, including Eastern
Electricity, for the physical delivery of electricity.
Eastern Electricity supplies electricity to customers in all sectors of
the market and is one of the largest retailers of electricity in England and
Wales. Eastern's service area, which covers approximately 20,300 square
kilometers in the east of England and parts of north London, was one of four
areas in the first group to be fully opened for competition. At October 31,
1999, Eastern Electricity supplied electricity to approximately 2.7 million
customers, including approximately 2.6 million residential customers and 166,985
small businesses. Industrial and commercial customers accounted for
approximately 46% of Eastern Electricity's retail sales.
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Eastern Natural Gas is one of the largest suppliers of natural gas in
the UK. At October 31, 1999 TXU Europe Group's market share by volume was
estimated at approximately 7% of gas delivered to the competitive industrial
and commercial market. At October 31, 1999, it was supplying 820,000 customers
in the UK, ranging from residential households to large industrial companies.
In November 1998, TXU Europe Group announced a gas retailing joint
venture in Holland with Energie Noord West and an electricity trading and retail
joint venture with Lunds Energi in Sweden.
In June 1999, TXU Europe Group announced details of a program to
restructure the energy retailing business in order to be more cost effective in
the competitive energy markets. This program will result in the closure of two
principal offices with the loss of 300 permanent and 200 temporary positions and
a cost of approximately (pound)8.6 million. TXU Europe Group also intends to
seek new ways to access the energy markets and to form more partnerships with
the objective of reducing costs, improving access to customers and capitalizing
on emerging new markets like the internet.
COMPETITION IN ELECTRICITY RETAILING
TXU Europe Group is an active participant in the competitive UK
electricity market. The competitive market is made up of customers with maximum
annual demand of more than 100 kW. It typically includes large commercial and
industrial users. As of December 31, 1998, this market consisted of over 51,000
sites. TXU Europe Group estimates that this represents a market size of
approximately (pound)6 billion per year based upon electricity prices at that
date. In addition, TXU Europe Group estimates that more than 85% of these sites
are outside its authorized area, and that over 60% of its electricity sales to
the competitive market are to customers outside its authorized area. TXU Europe
Group had more than 13% of this market. TXU Europe Group competes in the
competitive market for customers with maximum annual demand of more than 100kW
on the basis of the quality of its customer service and by competitive pricing.
The largest suppliers in this market over the same period were PowerGen and
National Power.
Competition has been fully introduced for customers in all areas of
Great Britain. New entrants to the competitive market have been limited to
British Gas Trading Limited, Independent Energy and a small number of other
companies. TXU Europe Group competes nationally for residential and small
business customers and, by October 31, 1999, it was supplying 181,284 customers
outside its traditional service area and had agreed contracts with a further
60,000 residential customers. At the same date, approximately 410,881 customers
in TXU Europe Group's service area had transferred to other suppliers.
There is no assurance whether or not competition among suppliers of
electricity will adversely affect TXU Europe Group.
COMPETITION IN GAS SUPPLY BUSINESS
As a result of UK government action in recent years, the UK retail gas
supply market is open to competition. TXU Europe Group's main competitors are
Centrica plc and the gas marketing arms of some major oil companies. Further
competition is provided by a number of other electricity companies and smaller
gas suppliers which are independent of the major oil companies and which each
have a minor presence in the market.
TXU Europe Group intends to maintain a significant share of this market
through high-quality customer service and competitive pricing.
PORTFOLIO MANAGEMENT/ENERGY TRADING
Typically, holders of public electricity supply licenses issued under
the Electricity Act in connection with supply and distribution within an
authorized area in Great Britain are exposed to risk, as they are obliged to
supply electricity to their customers at stable prices but have to purchase
almost all the electricity necessary to supply those customers from the Pool at
prices that are constantly changing. The ownership of generating assets provides
a natural hedge against these risks; the use of financial instruments like
contracts for differences provide another hedging alternative.
A contract for differences is an agreement between two parties calling
for payments between the parties of amounts equal to the product of:
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. The difference in each settlement period between the Pool price and
the price, known as the strike price, specified in the contract for
differences and
. The amount of electricity provided for in that settlement period,
which is usually expressed in MW of demand.
Each settlement period is one-half hour. Contracts for differences effectively
fix the prices a supplier pays and a generator receives for electricity. If the
Pool price is lower than the price specified in the contract for differences for
the settlement period, the supplier pays the generator; and if the Pool price is
higher, the generator pays the supplier. In this way, contracts for differences
reduce the financial risk otherwise associated with the sale and purchase of
electricity through the Pool.
Eastern Trading coordinates TXU Europe Group's activities in
managing risk. It provides support to TXU Europe Group's energy retail
activities, taking into account its energy purchases and sales and its contract
portfolios, including TXU Europe Group's generating assets and natural gas
production interests. Eastern Trading is responsible for setting the
level of bids into the Pool for the output of each of TXU Europe Group's
generating stations, other than Barking and the combined heat and power plants.
Eastern Trading uses this method to coordinate the operation of TXU Europe
Group's generating stations with TXU Europe Group's fuel contract position and
its retail and wholesale energy sales portfolios to TXU Europe Group's best
advantage. It also coordinates the operation of TXU Europe Group's generating
stations, taking into consideration the relative prices in the energy markets.
Eastern Trading also earns revenue by providing risk management services to
other energy retailers to assist in managing their Pool/market price risk.
Eastern Trading manages TXU Europe Group's financial exposure to
fluctuations in electricity prices by:
. Managing its portfolio of contracts for differences;
. Bidding both price and volume for TXU Europe Group's generation
output, other than for the Barking plant and the combined heat and
power plants, into the Pool for each half hour of the day; and
. Deciding with the electricity retailing division of TXU Europe Group
on the volume and pricing of sales in the competitive and ex-franchise
markets.
The overall electricity position for each half hour of the day is
monitored by Eastern Trading with the goal of optimizing electricity purchases
and sales positions through the use of generation facilities, long and
short-term retail sales contracts and appropriate financial instruments. The
overall gas position is monitored in a similar way with additional opportunities
presented through the operation of gas-fired power stations, storage facilities
and the use of gas assets which are the source of electricity. Together, the
overall electricity and gas positions are managed by reference to risk exposure
limits that are monitored by a risk management team within TXU Europe Group. The
risk management team verifies that the trading instruments employed have been
approved for use by Eastern Trading and carries out credit checks on current and
proposed counterparties. TXU Europe Group's ability to manage that risk in the
future will depend, in part, on the terms of its supply contracts, the
continuation of an adequate market for hedging instruments and the performance
of its generating and gas assets which are the source of electricity.
In order to help meet the expected needs of its natural gas wholesale
and retail customers, including TXU Europe Group's power stations, TXU Europe
Group has entered into a variety of gas purchase contracts. As of December 31,
1998, the commitments under long-term purchase contracts amounted to an
estimated (pound)1.3 billion, covering periods of up to 16 years. Firm sales
commitments, including estimated power station usage, at the same date amounted
to an estimated (pound)3.0 billion, covering periods up to 18 years.
Eastern Trading also purchases coal, oil and natural gas for TXU Europe
Group's UK power stations and has equity interests in four natural gas-producing
fields in the North Sea. In July 1999, TXU Europe Group significantly expanded
its North Sea gas interests through the purchase of all of BHP Petroleum's
assets in the Southern North Sea for approximately (pound)102 million. In
December 1998, TXU Europe Group also agreed to purchase Monument Oil's share of
the Johnston field in the Southern North Sea for almost (pound)20 million. These
purchases would increase TXU Europe Group's interest in the Johnston field from
approximately 5.5% to 55%. The acquisition of Monument Oil's assets was approved
by the UK Department of Trade and Industry on October 20, 1999. Monument Oil is
now required to obtain consents from its partner companies under various
agreements relating to the Johnston field. Further agreements have been entered
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into which would increase TXU Europe Group's interest to 64.2%. These agreements
are subject to approval by the UK Department of Trade and Industry.
The energy management business also trades on the Nord Pool, the
electricity trading market in Scandinavia, and has recently acquired access to
up to 140 MW of hydro output in Norway for 55 years, for which TXU Europe Group
has paid an upfront fee of up to (pound)124 million. This agreement also
provides for TXU Europe Group to acquire an additional 47MW of hydropower in
Norway. In Spain, TXU Europe Group has acquired a 5% minority shareholding in
Hidroelectrica del Cantabrico, S.A. It has created a 50/50 joint venture trading
company with Hidroelectrica del Cantabrico, S.A., Synergia Trading S.A.,
covering the Iberian peninsula.
In September 1999, the energy management business established an office
in Geneva, Switzerland, which will coordinate European energy management and
development projects.
NETWORKS
ELECTRICITY DISTRIBUTION
TXU Europe Group's electricity networks business consists of the
ownership, management and operation of the electricity distribution network
within TXU Europe Group's authorized area. TXU Europe Group receives electricity
in England and Wales from National Grid. TXU Europe Group then distributes
electricity to end users connected to TXU Europe Group's power lines.
Almost all electricity customers in TXU Europe Group's authorized area,
whether franchise or competitive, are connected to and dependent upon TXU Europe
Group's distribution system. TXU Europe Group distributes approximately 32 TWh
of electricity annually to over three million customers, representing more than
seven million people. Most of the tangible fixed assets owned by TXU Europe
Group in the UK are currently employed in the electricity distribution business.
The distribution by TXU Europe Group of electricity in its authorized area is
regulated by its public electricity supply license, which, other than in
exceptional circumstances, is due to remain in effect until at least 2025.
PHYSICAL DISTRIBUTION SYSTEM
TXU Europe Group receives electricity from National Grid at 21 supply
points within its authorized area and three points in the authorized areas of
neighboring regional electricity companies. Most of this electricity is received
at 132kV. It is then distributed to customers through TXU Europe Group's system
of approximately 35,200 kilometers of overhead lines, 54,600 kilometers of
underground cable and numerous transformers and circuit breakers, through a
series of interconnected networks operating at successively lower voltages. TXU
Europe Group also receives electricity directly from generating stations located
in its authorized area and, from time to time, from customers' own generating
plants and connections with neighboring regional electricity companies.
At March 31, 1999, TXU Europe Group's electricity distribution system
network, excluding service connections to consumers, included overhead lines and
underground cables at the operating voltage levels indicated in the table below:
OVERHEAD LINES UNDERGROUND CABLES
OPERATING VOLTAGE (CIRCUIT KILOMETERS) (CIRCUIT KILOMETERS)
----------------- -------------------- --------------------
132kV................ 2,365 220
33kV................. 3,883 2,450
25kV................. 0 23
11kV................. 19,377 16,625
6.6kV................ 0 29
3kV.................. 0 21
LV................... 9,533 35,221
------ ------
Total.............. 35,158 54,589
====== ======
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In addition to the circuits referred to above, TXU Europe Group's
distribution facilities also include:
AGGREGATE CAPACITY
TRANSFORMERS NUMBER (MEGA VOLT AMPERES)
------------ ------ -------------------
132kV................ 230 13,306
33kV................. 869 10,360
11kV................. 61,406 14,719
------ ------
Total.............. 62,505 38,385
====== ======
AGGREGATE CAPACITY
SUBSTATION NUMBER (MEGA VOLT AMPERES)
---------- ------ -------------------
132kV................ 99 13,306
33kV................. 437 10,360
11kV................. 61,828 14,719
------ ------
Total.............. 62,364 38,385
====== ======
CUSTOMERS
Most of the revenue from use of the distribution system is from TXU
Europe Group's electricity retail operations. The rest is derived from holders
of second tier supply licenses in respect of the delivery of electricity to
their customers located in TXU Europe Group's authorized area.
The following table set out details of TXU Europe Group's customers and
electricity units distributed:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH 31,
---------------------------------------------------
1997 1998 1999
---------------------------------------------------
NUMBERS OF CUSTOMERS CONNECTED AT YEAR END
- - - - ------------------------------------------
<S> <C> <C> <C>
Residential.......................................... 2,868,090 2,891,970 2,957,943
Commercial, Industrial and Other..................... 254,245 263,502 268,208
---------- ------- -------
Total................................................ 3,122,335 3,155,472 3,226,151
========= ========= =========
ELECTRICITY DISTRIBUTED (GWH)
- - - - -----------------------------
Residential.......................................... 13,390 12,946 13,786
Commercial, Industrial and Other..................... 18,160 18,830 18,914
---------- ---------- ----------
Total................................................ 31,550 31,776 32,700
========== ========== ==========
</TABLE>
SYSTEM PERFORMANCE
The performance of all UK distribution networks is monitored and
publicly reported upon annually by the Office of Electricity Regulation covering
England, Wales and Scotland, now known as the Office of Gas and Electricity
Markets. According to the Office of Electricity Regulation covering England,
Wales and Scotland's Report on Distribution and Transmission System Performance
1997/98, TXU Europe Group achieved the best overall distribution system
performance, measured by number of faults per 100 kilometers of network, of all
the public electricity supply license holders in the year ended March 31, 1998.
For the year ended March 31, 1999, TXU Europe Group achieved a 25% reduction in
minutes lost per customer and an 18% reduction in interruptions per 100
customers compared to the year ended March 31, 1998. These improvements exceeded
the targets of 70 interruptions in a year per 100 customers and 66 minutes lost
in a year per customer that TXU Europe Group had declared for itself for the
year ended March 31, 2000.
DISTRIBUTION CHARGES AND PRICE CONTROL
The distribution charges levied by TXU Europe Group and the other
regional electricity companies consist of charges for use of the system and
charges for other services outside the scope of the price control, including
connection charges. Distribution and supply charges are regulated by conditions
in TXU Europe Group's public electricity supply license, which sets out a
formula for determining the maximum average charge per unit distributed in any
financial year. Sales of TXU Europe Group's electricity network business consist
primarily of charges for the use of its distribution system, most of which are
levied on TXU Europe Group's electricity retail business, being the largest
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<PAGE>
supplier from the network, and are passed through to its customers. Most of the
charges for the use of the distribution system are subject to distribution price
controls. See "UK Regulatory Matters--Networks Regulation-- Distribution Price
Regulation" below.
COMPETITION IN THE ELECTRICITY NETWORKS BUSINESS
At present, TXU Europe Group experiences little competition in the
operation of its electricity distribution system. In limited circumstances, some
customers may establish or increase capacity for their own generation by
becoming directly connected to National Grid or by establishing their own
generating capacity; they then avoid charges for the use of the distribution
system. TXU Europe Group does not currently consider this a significant threat
to its electricity networks business.
STRATEGY FOR THE ELECTRICITY NETWORKS BUSINESS
In support of TXU Europe Group's European integrated energy business
concept, the electricity networks business may evaluate growth opportunities
that enhance value. TXU Europe Group is also examining opportunities to manage
major third-party networks.
On December 14, 1999, TXU Europe Group and EDF London Investments plc,
a subsidiary of Electricite de France, entered into an arrangement for the
creation of an equally held joint venture company. Employees of the joint
venturers' subsidiaries, Eastern Electricity and London Electricity plc, will be
employed by the new joint venture company in the management, operation and
maintenance of those subsidiaries' respective electricity distribution networks.
The physical assets, as well as all operating licenses, will continue to be held
by Eastern Electricity and London Electricity plc, respectively. Applications
for regulatory and competition law clearances are being prepared. The joint
venture will begin operations once these clearances are obtained, which may be
as early as April 2000. By the time the joint venture starts operations, it is
expected that the combined workforce currently engaged by Eastern Electricity
and London Electricity plc will have been reduced by approximately 400. It is
anticipated that the workforce will be further reduced by at least a similar
number during the joint venture's first 18 months of operations.
The joint venture is expected to help offset the price reductions
mandated by the Office of Gas and Electricity Markets' recent distribution price
review by streamlining operations and reducing costs.
CZECH REPUBLIC
In October 1996, TXU Europe Group acquired an 11.6% minority interest
in Severomoravska Energetika a.s., a Czech electricity distribution and supply
company, as part of its plan to develop interests in companies that would
further its integrated energy strategy overseas. This interest was increased to
16.3% in March 1998.
FINLAND
TXU Europe Group announced in May 1999 that it had agreed to make an
investment in Savon Voima Oy, a regional electricity distributor in central
Finland. The investment will be a purchase of 36% of Savon Voima Oy's share
capital for a purchase price of (pound)42 million. Savon Voima Oy is currently
owned by 29 local municipalities. There are put options exercisable by the
municipalities which if exercised would automatically give TXU Europe Group a
controlling stake. The purchase is part of TXU Europe Group's overall strategy
to manage a flexible Scandinavian energy portfolio and to develop TXU Europe
Group's Scandinavian businesses working with local partners. The parties signed
the agreement for this investment in October 1999, and following the
satisfaction of certain conditions precedent, the purchase of this investment
is scheduled to be closed on November 30, 1999.
OTHER ACTIVITIES
In December 1998, TXU Europe Group sold its wholly-owned subsidiary,
Eastern Group Telecoms Limited, to NTL Incorporated for (pound)91 million. TXU
Europe Group's current strategic plan does not focus on telecommunications
activities.
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<PAGE>
EMPLOYEES
At December 31, 1998, TXU Europe Group had approximately 7,000
full-time employees. It is anticipated that there will be workforce reductions
in connection with Eastern Electricity's joint venture with EDF London
Investments plc. For further information, see "-Strategy for Electricity
Networks Business" above.
TXU Europe Group recognizes trade unions for collective bargaining
purposes, and approximately 54% of employees of TXU Europe Group's businesses
are union members. Union membership existed at TXU Europe Group when it was
privatized. However, the new companies set up by TXU Europe Group after
privatization have no obligations to recognize trade unions. Eastern
Natural Gas and Eastern Trading do not recognize trade unions, and most workers
in these businesses are employed under individual contracts. There have been no
industrial disputes or work stoppages at TXU Europe Group during the period
following its privatization in 1990.
UK REGULATORY MATTERS
The electricity industry in the UK, including TXU Europe Group, is
subject to regulation under, among other things, the Electricity Act and UK and
EU environmental legislation described below. TXU Europe Group is also subject
to existing UK and EU legislation on competition and regulation in its gas
business. TXU Europe Group has all of the necessary franchises, licenses and
certificates required to enable it to conduct its businesses. In addition, part
of any profit on disposal of assets vested in TXU Europe Group at the time of
its privatization is subject to recovery by the UK Secretary of State for Trade
and Industry until March 31, 2000.
TXU Europe Group expects proposals with respect to utility regulation
to be part of legislation that will be introduced in 2000. The implementation of
utility regulation could result in significant changes to the existing
regulatory regime. There can be no assurance regarding the potential impact of
regulatory changes, if any, on TXU Europe Group.
ENERGY REGULATION
GENERATION
Unless covered by an exemption, all electricity generators operating a
power station in the UK are required to have generation licenses. The conditions
attached to a generation license in the UK require the holder, among other
things, to be a member of the Pool and to submit the output of the power
station's generating units or turbines for central dispatch. Failure to comply
with any of the generation license conditions may subject the licensee to a
variety of sanctions, including enforcement orders by the Director General of
Electricity Supply and license revocation if an enforcement order is not
complied with.
The UK Secretary of State for Trade and Industry has power under the
Electricity Act to require generators operating power stations with a capacity
of not less than 50 MW to maintain stocks of fuel and other materials at power
stations. The UK Secretary of State for Trade and Industry has recently
completed a review of the level of fuel stocks held by generators in 1997. No
increase was required, but Pool rules were changed as of December 1997 to
penalize gas power plants that reduce output during times of insufficient plant
margins. TXU Europe Group does not anticipate that these changes will have a
material adverse effect on its results of operations.
In the UK each public electricity supply license limits the amount of
generation capacity in which each regional electricity company may hold an
interest without the prior consent of the Director General of Electricity
Supply. These "own-generation" limits currently restrict the participation by a
regional electricity company and its affiliates in generation to a level of
approximately 15% of the simultaneous maximum electricity demand in that
regional electricity company's authorized area at the time of privatization. TXU
Europe Group's limit is 1,000 MW. The Director General of Electricity Supply
stated in January 1996 that he would be prepared to consider a regional
electricity company's request to increase its own-generation capacity on the
condition that it accept explicit restrictions on the contracts it signs with
its own supply business. At a minimum, a regional electricity company would be
prohibited from entering into contracts to provide the additional own-generation
output to its franchise market. Following public consultation, the Director
General of Electricity Supply set out the basis on which consents for regional
electricity companies to acquire new generation capacity would be allowed. The
specific consent of the Director General of Electricity Supply to the leasing by
TXU Europe Group of approximately 6,000 MW of generating capacity from National
Power and PowerGen was later confirmed by the Office of Electricity Regulation
covering England, Wales and Scotland and is not subject to the above-noted
supply business restrictions. TXU Europe Group received government consent to
build a combined heat and power plant at Shotton in December 1998 and the
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<PAGE>
acquisition of additional generation capacity at Dowlais has been approved in
principle by the Director General of Electricity Supply.
ELECTRICITY RETAILING
Subject to specific exceptions, retail suppliers of electricity in the
ex-franchise market in the UK are required either to have a public electricity
supply license for an authorized area or to obtain a second tier supply license.
Public electricity supply license holders are required under the Electricity Act
to provide a supply of electricity upon request to any premises in their
authorized area, except in specified circumstances. Each public electricity
supply license holder is subject to various obligations under its public
electricity supply license. These include prohibitions on cross-subsidies among
its various regulated businesses and discrimination in respect of the supply of
customers. Each public electricity supply license holder is also required to
offer open access to its distribution network on non-discriminatory terms. This
obligation includes a requirement not to discriminate between its own supply
business and other users of its distribution system. Public electricity supply
license holders are subject to separate controls on the tariffs to ex-franchise
customers and in respect of distribution charges. The Office of Gas and
Electricity Markets is reviewing the distribution and supply price controls.
A supplier of electricity to the competitive market in the UK must
have, subject to specific exemptions, a second tier supply license or a public
electricity supply license for the service area in which customers are supplied.
ELECTRICITY SUPPLY PRICE REGULATION
Supply charges in the ex-franchise market are regulated by a maximum
price control that applies to each tariff in the residential and small business
customer market and effectively provides customers with price guarantees. On
April 1, 1998, TXU Europe Group's tariffs were reduced by 8.9%, before
adjustments for inflation. As provided in the formula, TXU Europe Group's
tariffs were reduced by a further 3%, before adjustments for inflation,
beginning April 1, 1999. There are no other changes in place for retail tariffs.
On October 8, 1999, the Office of Gas and Electricity Markets issued proposed
price adjustments for the electricity supply businesses. The Office of Gas
and Electricity Markets issued its final report on December 2, 1999, and the
supply price adjustments will become effective April 1, 2000.
As the ex-franchise market is opened to competition, supply price
restraints are no longer expected to be applicable to current franchise market
supply customers. However, the Director General of Electricity Supply has
indicated in his supply price restraint proposals published in October 1997,
that beginning April 1, 1998, price regulation would be put in place for supply
to all designated (residential and small business) customers whose annual
consumption is below 12,000 kWh within TXU Europe Group's authorized area, and
will remain in place until an adequate level of competition is established, and,
at least, until March 31, 2000.
GAS
The natural gas supply activities of TXU Europe Group are principally
regulated by the Director General of Gas Supply under the UK Gas Act 1986, as
amended by the UK Gas Act 1995 and by the conditions of TXU Europe Group's gas
licenses granted by the Director General of Gas Supply. Eastern Natural Gas
currently holds a gas supplier's license. TXU Europe Group's natural gas supply
business is not subject to price regulation. Subsidiaries of TXU Europe Group
currently hold a gas shipper's license and a public gas transporter's license.
ENERGY TRADING
Eastern Trading is permitted by the Financial Services Authority under
the Financial Services Act 1986 to deal in contracts for differences, including
futures and options. A subsidiary of Eastern Trading is a joint holder of
production licenses relating to its equity interests in four North Sea natural
gas fields.
NETWORKS REGULATION
DISTRIBUTION PRICE REGULATION
A formula determines the maximum average price per unit of electricity
distributed, in pence per kilowatt hour, that a regional electricity company is
entitled to charge. This price, when multiplied by the expected number of units
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<PAGE>
to be distributed, determines the expected distribution revenues of the regional
electricity company for the relevant year. The current Distribution Price
Control Formula, P x (1+(RPI-Xd)), is based on the following:
. P is the previous year's maximum average price per unit of electricity
distributed. 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 later 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 TXU Europe
Group's business costs, the RPI calculation may not accurately reflect
price changes affecting TXU Europe Group.
. The Xd factor is established by the Director General of Electricity
Supply each five years. It is based on an estimate of expected
efficiency gains during the next five years.
The formula permits regional electricity companies to retain part of their
additional revenues due to increased distribution of units and allows for a
pound sterling for pound sterling increase in operating profit for efficient
operations and reduction of expenses within a review period. In relation to the
next Distribution Price Control Formula review, scheduled to be implemented in
April 2000, the Director General of Electricity Supply may reduce any increase
in operating profit to the extent he determines it not to be a function of
efficiency savings and/or, if genuine efficiency savings have been made, he
determines that customers should benefit through lower prices in the future.
On August 12, 1999, the Office of Gas and Electricity Markets issued a
draft report, adjusted on October 8, 1999, proposing a range of substantial net
revenue reductions for the distribution businesses of all regional electricity
companies in the UK. The final Office of Gas and Electricity Markets report was
issued on December 2, 1999, and the distribution price adjustments will become
effective April 1, 2000.
Distribution costs vary according to the voltage at which consumers are
connected and the level of use of the distribution system at the time units are
distributed. Changes in the mix of units distributed at different voltage levels
and between peak and off-peak periods are reflected in the calculation of the
maximum average permitted charge per unit distributed by reference to a "basket"
of distribution categories.
Electricity distributed to extra high voltage premises is excluded from
the Distribution Price Control Formula, as are charges for specific additional
services including connection charges. Connection charges must be set at a level
which enables the licensee to recover no more than the appropriate proportion of
the costs incurred and no more than a reasonable rate of return on the capital
represented by those costs. Any dispute over connection charges may be
determined by the Director General of Electricity Supply. In addition, income
received in respect of exit charges related to National Grid that are incurred
by a regional electricity company and received through system charges is not
subject to distribution price control.
The Director General of Electricity Supply may propose amendments to
the Distribution Price Control Formula or any other terms of the license. In the
cases where a public electricity supply license holder is not willing to accept
modifications to the license conditions put forward by the Director General of
Electricity Supply, the normal process would be for the Director General of
Electricity Supply to refer the matter to Monopolies and Mergers Commission or,
after March 1, 2000, or its replacement, the Competition Commission for a
determination of whether continued operation without the proposed license
modifications is in the public interest.
ENVIRONMENTAL REGULATIONS AND EMISSIONS
TXU Europe Group's businesses are subject to numerous regulatory
requirements with respect to the protection of the environment. The electricity
generation industry in the UK is subject to a framework of national and EU
environmental laws which regulate the construction, operation and
decommissioning of generating stations. Under these laws, each generating
station operated by TXU Europe Group is required to have an authorization which
regulates its releases into the environment and seeks to minimize pollution of
the environment taken as a whole, having regard to the best available techniques
not entailing excessive cost. These authorizations are issued by the Environment
Agency which has the responsibility for regulating the impact of TXU Europe
Group's generating stations on the environment. The principal laws which have
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environmental implications for TXU Europe Group are the Electricity Act, the
Environmental Protection Act 1990 and the UK Environment Act 1995.
The Electricity Act requires TXU Europe Group 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 of
power stations with a capacity in excess of 50 MW or installation of overhead
power lines. Environmental assessments are required to be carried out in some
cases, including overhead line constructions at high voltages and generating
station developments. TXU Europe Group has produced Environmental Policy
Statements and Electricity Act Schedule 9 Statements which explain the manner in
which it complies with its environmental obligations.
Possible adverse health effects of electro-magnetic fields from various
sources, including transmission and distribution lines, have been the subject of
extensive worldwide scientific research. Over eighty independent and
authoritative scientific review bodies have concluded that the scientific
evidence to date does not establish that electro-magnetic fields cause adverse
human health effects. Even with no health effects established, it is possible
that the passage of legislation and changing regulatory standards could require
measures to mitigate electro-magnetic fields. These changes could result in
increased capital and operational costs. In addition, it is always possible for
lawsuits to be brought by plaintiffs alleging damages caused by electro-magnetic
fields. The National Radiological Protection Board is the body in the UK with
the statutory responsibility for advising on electro-magnetic fields. TXU Europe
Group fully complies with the guidance of the National Radiological Protection
Board.
TXU Europe Group has approximately 680 and 192 kilometers of
underground cables insulated with an oil-filled wrap which operate at 33kV and
132kV, respectively. This type of cable is in common use by utilities in the UK
and parts of continental Europe. These cables generally supply substantial
amounts of electricity to large substations in urban areas and to large
customers. Most of TXU Europe Group's cables are between 30 and 50 years old.
TXU Europe Group operates these cables in accordance with the Environment
Agency's Operating Code for Fluid-Filled Cables, monitoring and repairing both
gradual and substantial leaks that arise through age deterioration and damage by
a third party. TXU Europe Group has a program to reduce oil leakage and minimize
the possibility of pollution to watercourses and ground water. This involves
establishing a more effective standard procedure for dealing with cable leaks
and implementation of an effective monitoring system. TXU Europe Group also has
a plan for gradual replacement and refurbishment of these cables with more
modern solid cables in the future. TXU Europe Group believes that its existing
monitoring systems and planned replacement and refurbishment program effectively
minimize the risk of major environmental incidents or additional replacement
expenditures. TXU Europe Group could incur significant expenditures if it were
required to replace its fluid-filled cables, other than in the ordinary course
of business, pursuant to new or existing legislation; however, TXU Europe Group
is not aware of any plans of any governmental authority to impose that kind of
requirement.
The principal EU Directive affecting atmosphere emissions to the
environment currently in force is the Large Combustion Plants Directive. The
Large Combustion Plants Directive required the UK to reduce from 1980 levels its
sulfur dioxide (SO2) emissions from its existing plants by 60% by 2003 and
nitrogen oxides (NOx) emissions by 30% by 1998. The Large Combustion Plant
National Plan is the mechanism by which the Large Combustion Plants Directive
has been implemented in the UK and sets annual targets for reductions in
emissions for the electricity industry. Discussions are under way in the EU
regarding an update of the Large Combustion Plants Directive which will
introduce tighter emission controls as well as national limits for 2010. The UK
government has recently made a review of energy sources and electricity trading
arrangements and has made proposals regarding new limits for SO2 emissions to
apply in the period to 2005. The government is expected to propose tighter
controls on NOx emissions in the near future. TXU Europe Group is examining the
economic and practical implications of fitting a flue gas desulphurization plant
to its West Burton station to reduce the sulphur output of the plant; the flue
would operate beginning in autumn 2003.
At a local level, the UK's Air Quality Strategy provides set targets
for 2005 and places a duty on local authorities to review air quality with a
view to setting up action plans for management in places where targets are
unlikely to be met. When adverse meteorological conditions occur, some
generating stations might have to introduce measures to comply with these
targets, which could include installation of costly equipment or reduction of
the operating level of the stations.
In December 1997, the Conference of the Parties of the United Nations
Framework Convention on Climate Change adopted the Kyoto Protocol which
specifies targets and timetables to reduce greenhouse gas emissions. The UK is a
signatory to the Kyoto Protocol and this involves a 12% reduction in carbon
dioxide emissions by 2010 if the Protocol is ratified. TXU Europe Group is
unable to predict what impact the implementation of the Kyoto Protocol will have
on it, although the UK government is proposing to introduce a tax on the
business use of energy in order to reduce energy consumption.
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TXU Europe Group believes that it is currently in compliance with, has
taken, and intends to continue to take, measures to comply, in all material
respects, with the applicable law and government regulations for the protection
of the environment. There are no material legal or administrative proceedings
pending against TXU Europe Group with respect to any environmental matter.
Estimated capital expenditure on environmental control facilities is
(pound)2 million in the fourth quarter of 1999, (pound)43 million in 2000,
(pound)50 million in 2001, (pound)40 million in 2002, and (pound)35 million in
2003.
FOSSIL FUEL LEVY
All the regional electricity companies are obliged to obtain a
specified amount of generating capacity from renewable, or non-fossil fuel,
sources. Because electricity generated from renewable energy sources is
generally more expensive than electricity from fossil fuel plants, a non-fossil
fuel obligation levy has been instituted to reimburse the generators and the
regional electricity companies for the extra costs involved. The Director
General of Electricity Supply sets the rate of the non-fossil fuel obligation
levy annually. The current non-fossil fuel obligation 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.
UK AND EU FAIR COMPETITION LAW
TXU Europe Group is subject to the fair competition, or antitrust,
rules of both the UK and the EU.
The UK Fair Trading Act 1973 and the UK Competition Act 1980 both
regulate the activities of companies with market power. The UK Resale Price Act
1976 regulates resale prices and the UK Restrictive Trade Practices Act 1976
regulates price fixing agreement. UK competition law is in the process of reform
in accordance with the UK Competition Act 1998 which will become effective on
March 1, 2000. In broad terms, the UK Competition Act 1998 conforms to fair
trade laws at the EU level. It prohibits anti-competitive agreements and abuse
of dominant market position and introduces stricter enforcement and
investigative powers.
The Treaty of Rome contains provisions which prohibit anti-competitive
agreements and practices, including the abuse of a dominant position within the
EU or a substantial part of it. Penalties for violation of these provisions
include fines, third party damages and making infringing contractual provisions
unenforceable.
EU Directive 93/36 was implemented by the UK in December 1996 and
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. Disappointed suppliers and
contractors who believe they have suffered harm from a company's failure to
implement the correct procedures in awarding a contract are able to institute
proceedings in the English High Court. The European Commission also has a role
for ensuring compliance with EU procurement regulations.
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PROPERTIES
The principal properties owned or occupied by TXU Europe Limited's
continuing businesses are as follows:
<TABLE>
<CAPTION>
SITE AREA
(ACRES
TERM OF EXCEPT THE
PROPERTY OWNER/LEASEHOLDER INTEREST LEASE PRINCIPAL USE ADELPHI)
- - - - ------------------------------------ -------------------- --------- --------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
The Adelphi, London TXU Europe Group plc Leasehold 15 years Offices 14,905 sq.ft.
Bedford Eastern Electricity Freehold -- Offices and Depot 5.0
Carterhatch Lane, Enfield Eastern Electricity Freehold -- Offices and Depot 4.0
Milton, Cambridge Eastern Electricity Freehold -- Offices and Depot 24.0
Rayleigh Eastern Electricity Freehold -- Offices and Depot 7.8
Wherstead Park, Wherstead, Ipswich Eastern Electricity Freehold -- Offices 17.0
King's Lynn Power Station Anglian Power Freehold -- Power station 16.1
Generators Limited
Peterborough Power Station TXU Europe Power Freehold -- Power station 18.1
Drakelow C Power Station Eastern Merchant Leasehold 99 years Power station 177.0
Properties Limited
High Marnham Power Station Eastern Merchant Leasehold 99 years Power station 178.4
Properties Limited
Ironbridge Power Station Eastern Merchant Leasehold 99 years Power station 212.7
Properties Limited
Rugeley B Power Station Eastern Merchant Leasehold 99 years Power station 299.0
Properties Limited
West Burton Power Station Eastern Merchant Leasehold 99 years Power station 511.5
Properties Limited
</TABLE>
For information concerning TXU Europe Group's generating stations, see
- - - - -- "Generation" above.
LEGAL PROCEEDINGS
TXU Europe Limited is not involved in any legal or arbitration
proceedings which management believes will have a material adverse effect upon
TXU Europe Limited's business or financial position.
On May 19, 1998 a complaint was filed in the High Court of Justice in
London, Chancery Division, Patents Court, by Optimum Solutions Limited against
National Grid, Yorkshire Electricity Group plc, Eastern Electricity and Logica
Plc. Yorkshire Electricity and Eastern Electricity are both members of the Pool.
Optimum Solutions Limited alleges breach of confidence in respect of information
supplied in the context of the development of the trading arrangements for the
1998 liberalization of electricity supply in England and Wales, or Trading
Arrangements. Optimum Solutions Limited requests an unspecified amount of
damages relating to breach of contract, an unspecified amount of equitable
compensation for misuse of the confidential information and return of material
alleged to contain confidential information. It is alleged that the Pool has
made use of the confidential information in the development of the Trading
Arrangements and that Eastern Electricity made use of it in using the systems
developed by the Pool for trading purposes. The action against Eastern
Electricity is being strenuously defended.
In February 1997, the official government representative of pensioners
in the UK, the Pensions Ombudsman, made final determinations against National
Grid and its group trustees with respect to complaints by two pensioners in
National Grid's section of the Electricity Supply Pension Scheme relating to the
use of the pension fund surplus resulting from the March 31, 1992 actuarial
valuation of the National Grid section to meet costs arising from the payment of
pensions of early retirement upon reorganization or downsizing. These
determinations were set aside by the High Court on June 10, 1997, and the
arrangements made by National Grid and its group trustees in dealing with the
surplus were confirmed. The two pensioners appealed this decision, and judgment
has now been received. National Grid has announced an intention to make a
further, and final, appeal to the House of Lords. The appeal endorsed the
Pensions Ombudsman's determination that the corporation was not entitled to
unilaterally deal with any surplus. If a similar claim were to be made against
TXU Europe Group in relation to its use of actuarial surplus in its section of
the Electricity Supply Pension Scheme, it would vigorously defend the action,
ultimately through the courts. However, if a determination were finally to be
made against it and upheld in the courts, TXU Europe Group could have a
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potential liability to repay to its section of the Electricity Supply Pension
Scheme an amount estimated by TXU Europe Group to be up to (pound)45 million,
exclusive of any future applicable interest charges.
On January 25, 1999, the Hindustan Development Corporation issued
proceedings in the Arbitral Tribunal in Delhi, India against TEG claiming
damages of US$413 million for breach of contract following the termination of a
Joint Development Agreement dated March 20, 1997 relating to the construction,
development and operation of a lignite based thermal power plant at Barsingsar,
Rajasthan. TXU Europe Limited is vigorously defending this claim.
In November 1998, five complaints were filed in the High Court of
Justice in London, Queens Bench Division, Commercial Court, against subsidiaries
of TXU Europe Group by five of their former sales agencies. The agencies claim a
total (pound)104 million arising from the summary termination for the claimed
fundamental breach of their respective contracts in April 1998. The five
agencies are claiming damages for failure to give reasonable notice and for
compensation under the UK Commercial Agents Regulations 1994. These actions are
all being defended strenuously, and counterclaims have been filed.
TXU Europe Group cannot predict the outcome of these claims and counterclaims.
SECURITY OWNERSHIP
TXU Europe Limited is wholly-owned indirectly by TXU Corp. Funding is
wholly-owned indirectly by TXU Europe Limited. The following table shows the
number of shares of common stock of TXU Corp owned by the current directors of
TXU Europe Limited and Funding as of September 30, 1999.
The number of shares under "Phantom Stock Plans" represents share units
held in individual accounts in phantom stock plans of TXU Corp and TXU Europe
Group. Although the plans allow the units to be paid only in the form of cash,
investments in the units create essentially the same investment stake in the
performance of the common stock of TXU Corp as do investments in actual shares
of common stock.
<TABLE>
<CAPTION>
NUMBER OF SHARES
----------------------------------------------------------
BENEFICIALLY
NAME OWNED PHANTOM STOCK PLANS TOTAL
---- ------------ ------------------- -------
<S> <C> <C> <C>
Erle Nye 121,173 71,511 192,684
H. Jarrell Gibbs 35,098 29,907 65,005
Michael J. McNally 49,445 22,682 72,127
Robert A. Wooldridge 1,952 0 1,952
Philip G. Turberville 7,096 9,355 16,451
Paul C. Marsh 5,068 5,479 10,547
Derek C. Bonham 3,000 0 3,000
Directors of Funding and TXU Europe
Limited as a group (7 persons) 228,832 138,934 361,766
</TABLE>
The named individuals have sole voting and investment power for the
shares of common stock reported as beneficially owned. Ownership of that common
stock by each individual director and for all directors as a group constituted
less than 1% of the outstanding shares of TXU Corp.
MANAGEMENT OF TXU EASTERN FUNDING COMPANY
MANAGEMENT OF FUNDING
The following table lists information with respect to the management of
Funding as of September 30, 1999:
NAME AGE POSITION
---- --- --------
Erle Nye 62 Director
H. Jarrell Gibbs 61 Director
Michael J. McNally 45 Director
Robert A. Wooldridge 61 Director
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Philip G. Turberville 48 Director
Paul C. Marsh 41 Director
Erle Nye has been a director of Funding since February 1999. He has
served as a director and Chairman of the Board and Chief Executive of TXU Corp
since May 1997 and of TXU Gas Company since August 1997. He has also been a
director and Chairman of the Board and Chief Executive of TXU Electric Company
for more than the last five years. Mr. Nye is also a director of TXU Europe
Limited. In addition, Mr. Nye was President of TXU Corp from February 1987
through May 1995 and President and Chief Executive of TXU Corp from May 1995
through May 1997.
H. Jarrell Gibbs has served as a director of Funding since February
1999. He is Vice Chairman of TXU Corp and a director and Vice Chairman of the
Board of TXU Gas Company. Before that, Mr. Gibbs was the President of TXU
Electric Company and Vice President and Principal Financial Officer of TXU Corp.
Mr. Gibbs is also a director of TXU Europe Group and of TXU Europe Limited.
Michael J. McNally has served as a director of Funding since February
1999. He is the Executive Vice President and Chief Financial Officer of TXU
Corp. Before that, Mr. McNally was President of the Transmission Division of TXU
Electric Company; Executive Vice President of TXU Electric Company; Principal of
Enron Development Corporation; Managing Director of Industrial Services of Enron
Capital and Trade Resources; and President of Houston Pipe Line Company and
Enron Gas Liquids, Inc. Mr. McNally is also a director of TXU Electric Company,
TXU Gas Company and TXU Europe Limited.
Robert A. Wooldridge has been a director of Funding since February
1999. Mr. Wooldridge is a partner in the law firm Worsham, Forsythe & Wooldridge
L.L.P. in Dallas, Texas which provides legal services to TXU Europe Limited and
Funding, as well as TXU Corp and other subsidiaries of TXU Corp. Mr. Wooldridge
is also a director of TXU Gas Company and TXU Europe Limited.
Philip G. Turberville has served as a director of Funding since August
1999. Mr. Turberville has served as a director and the Chairman of the Board and
Chief Executive Officer of TXU Europe Group since January 4, 1999. Before that,
Mr. Turberville was President of the Europe Oil Products division of The Royal
Dutch Shell Group, where he had worked in a variety of roles providing him with
extensive international experience since 1976. Mr. Turberville is also a
director of TXU Europe Limited and TXU Europe Group.
Paul C. Marsh has served as a director of Funding since August 1999. He
has been with TXU Europe Group since October 1992 and has served as Finance
Director of TXU Europe Group since February 24, 1997. Before that, Mr. Marsh
worked in Ernst & Young's Corporate Advisory Services Division. Before that, Mr.
Marsh served as Finance Director in two medium sized private sales and trading
groups. Mr. Marsh is also a director of TXU Europe Limited and TXU Europe Group.
There is no family relationship between any of the above-named
directors. Funding has no executive officers other than its directors.
DIRECTOR COMPENSATION OF FUNDING
Mr. Wooldridge does not receive compensation for his services as a
director of Funding. The remaining directors of Funding listed above have
received, and will continue to receive, compensation in respect of services
performed by those persons as directors of Funding from their primary employer
which is either TXU Corp or another subsidiary of TXU Corp. These directors
receive no cash or non-cash compensation beyond that which they would otherwise
receive from TXU Corp or a TXU Corp subsidiary for the services performed by
them for those companies.
MANAGEMENT OF TXU EUROPE LIMITED
MANAGEMENT OF TXU EUROPE LIMITED
The following table lists information with respect to the management of
TXU Europe Limited as of September 30, 1999:
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NAME AGE POSITION
---- --- --------
Erle Nye 62 Director
H. Jarrell Gibbs 61 Director
Michael J. McNally 45 Director
Robert A. Wooldridge 61 Director
Philip G. Turberville 48 Director
Paul C. Marsh 41 Director
Derek C. Bonham 56 Director
Erle Nye has been a director of TXU Europe Limited since February 1998.
He has served as a director and Chairman of the Board and Chief Executive of TXU
Corp since May 1997 and of TXU Gas Company since August 1997. He has also been a
director and Chairman of the Board and Chief Executive of TXU Electric Company
for more than the last five years. Mr. Nye is also a director of Funding. In
addition, Mr. Nye was President of TXU Corp from February 1987 through May 1995
and President and Chief Executive of TXU Corp from May 1995 through May 1997.
H. Jarrell Gibbs has served as a director of TXU Europe Limited since
February 1998. He is Vice Chairman of TXU Corp and a director and Vice Chairman
of the Board of TXU Gas Company. Before that, Mr. Gibbs was the President of TXU
Electric Company and Vice President and Principal Financial Officer of TXU Corp.
Mr. Gibbs is also a director of TXU Europe Group and of Funding.
Michael J. McNally has served as a director of TXU Europe Limited since
February 1998. He is the Executive Vice President and Chief Financial Officer of
TXU Corp. Before that, Mr. McNally was President of the Transmission Division of
TXU Electric Company; Executive Vice President of TXU Electric Company;
Principal of Enron Development Corporation; Managing Director of Industrial
Services of Enron Capital and Trade Resources; and President of Houston Pipe
Line Company and Enron Gas Liquids, Inc. Mr. McNally is also a director of TXU
Electric Company, TXU Gas Company and Funding.
Robert A. Wooldridge has been a director of TXU Europe Limited since
February 1998. Mr. Wooldridge is a partner in the law firm Worsham, Forsythe &
Wooldridge L.L.P. in Dallas, Texas, which provides legal services to TXU Europe
Limited and Funding, as well as TXU Corp and other subsidiaries of TXU Corp. Mr.
Wooldridge is also a director of TXU Gas Company and Funding.
Philip G. Turberville has served as a director of TXU Europe Limited
since May 1999. Mr. Turberville has served as a director and the Chairman of the
Board and Chief Executive Officer of TXU Europe Group since January 4, 1999.
Before that, Mr. Turberville was President of the Europe Oil Products division
of The Royal Dutch Shell Group, where he had worked in a variety of roles
providing him with extensive international experience since 1976. Mr.
Turberville is also a director of Funding.
Paul C. Marsh has served as a director of TXU Europe Limited since May
1999. He has been with TXU Europe Group since October 1992 and has served as
Finance Director of TXU Europe Group since February 24, 1997. Before that, Mr.
Marsh worked in Ernst & Young's Corporate Advisory Services Division. Before
that, Mr. Marsh served as Finance Director in two medium sized private sales and
trading groups. Mr. Marsh is also a director of TXU Europe Group and Funding.
Derek C. Bonham has served as a director of TXU Europe Limited since
May 1999. He has served as Chairman of Imperial Tobacco Group PLC since October
1996. Before that, Mr. Bonham was Chairman of The Energy Group PLC from February
1997 through July 1998. Before that, Mr. Bonham served as Deputy Chairman and
Chief Executive of Hanson PLC from November 1993 through February 1997 and as
Chief Executive of Hanson PLC from April 1992 through November 1993. Mr. Bonham
is also a director of Glaxo Wellcome PLC, Imperial Tobacco Group PLC, Newsquest
PLC, Fieldens PLC and TXU Corp.
There is no family relationship between any of the above-named
directors. TXU Europe Limited has no executive officers other than its
directors.
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DIRECTOR COMPENSATION OF TXU EUROPE LIMITED
In the fiscal year ended December 31, 1998, the directors of TXU Europe
Limited did not receive any compensation in respect of their services performed
for TXU Europe Limited. Mr. Wooldridge did not receive compensation for his
services as a director of TXU Europe Limited. Messrs. Nye, Gibbs and McNally
received, and will continue to receive, compensation in respect of services
performed by those persons as directors of TXU Europe Limited from their primary
employer which is either TXU Corp or another US subsidiary of TXU Corp and an
affiliate of TXU Europe Limited. These directors received no cash or non-cash
compensation beyond that which they would have otherwise received from TXU Corp
or a TXU Corp subsidiary for the services performed by them for those companies.
During 1998 all persons performing the functions of executive officers of TXU
Europe Limited were directors of that company.
RELATIONSHIPS OF MANAGEMENT TO FUNDING AND
TXU EUROPE LIMITED AND RELATED TRANSACTIONS
Mr. Wooldridge is a partner in Worsham, Forsythe & Wooldridge, L.L.P.,
which provides legal services to Funding and TXU Europe Limited, as well as TXU
Corp and other subsidiaries of TXU Corp. These legal services were provided on
terms at least as favorable to those companies as could have been obtained from
others for comparable services.
MANAGEMENT OF TXU EUROPE GROUP PLC
The following table lists information with respect to the management of
TXU Europe Group as of September 30, 1999:
NAME AGE POSITION
---- --- --------
H. Jarrell Gibbs 61 Director
David J. H. Huber 49 Director
Edward B. Hyams 48 Director
Paul C. Marsh 41 Director
David W. Owens 47 Director
Philip G. Turberville 48 Director
H. Jarrell Gibbs has served as a director of TXU Europe Group since
July 2, 1998. He is Vice Chairman of TXU Corp and a director and Vice Chairman
of the Board of TXU Gas Company. Before that, Mr. Gibbs was the President of TXU
Electric Company and Vice President and Principal Financial Officer of TXU Corp.
Mr. Gibbs is also a director of Funding and TXU Europe Limited.
David J. H. Huber has been the Human Resources Director of TXU Europe
Group since September 1, 1997. Before that, Dr. Huber was the Human Resources
Director of Safeway Stores plc from 1988; before that, Dr. Huber was the Senior
Personnel Director at Burton Group plc from 1985.
Edward B. Hyams has served as a director of TXU Europe Group since
September 13, 1996, first as the Managing Director of its networks business and,
since May 1998, as the Managing Director, Generation. Before that, Mr. Hyams
served as Director of Engineering at Southern Electric plc from 1992.
Paul C. Marsh has been with TXU Europe Group since October 1992 and
has served as Finance Director of TXU Europe Group since February 24, 1997.
Before that, Mr. Marsh worked in Ernst & Young's Corporate Advisory Services
Division. Before that, Mr. Marsh served as Finance Director in two medium sized
private sales and trading groups. Mr. Marsh has also served as a director of TXU
Europe Limited since May 1999.
David W. Owens has been the Managing Director, Networks, since May 18,
1998. Before that, Mr. Owens served as Managing Director at ABB Power T&D
Limited from 1994. Before that, Mr. Owens held a number of senior positions at
GEC Alstom and GEC.
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Philip G. Turberville has served as a director and the Chairman of the
Board and Chief Executive Officer of TXU Europe Group since January 4, 1999.
Before that, Mr. Turberville was President of the Europe Oil Products division
of The Royal Dutch Shell Group, where he had worked in a variety of roles
providing him with extensive international experience since 1976. Mr.
Turberville has also served as a director of TXU Europe Limited since May 1999.
There is no family relationship among any of the above-named
directors.
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DESCRIPTION OF THE TOPRS
The TOPrS will be issued pursuant to the terms of the trust agreement.
The trust agreement will be qualified as an indenture under the Trust Indenture
Act. The Property Trustee, The Bank of New York, will act as trustee for the
TOPrS under the trust agreement for purposes of compliance with the provisions
of the Trust Indenture Act. Material terms and provisions of the TOPrS are
summarized below. A copy of the form of the trust agreement is filed as an
exhibit to the registration statement of which this prospectus is a part. You
should refer to the trust agreement, the Delaware Business Trust Act and the
Trust Indenture Act for provisions that may be important to you.
The TOPrS will be issued in fully registered form without coupons.
TOPrS will not be issued in bearer form. Investors may elect to hold
interests in the TOPrS through either DTC (in the Unites States) or Cedelbank
or Morgan Guaranty Trust Company of New York, Brussels Office, as operator of
Euroclear (in Europe) if they are participants of such systems, or indirectly
through organizations which are participants in such systems. See BOOK-ENTRY
ONLY ISSUANCE -- "The Depository Trust Company."
The trust agreement authorizes the Administrative Trustees of the trust
to issue the TOPrS, which represent undivided beneficial ownership interests in
the assets of the trust, and the control certificate. Title to the Preferred
Partnership Securities will be held by the Property Trustee for the benefit of
the holders of the TOPrS. The trust agreement does not permit the trust to
acquire any assets other than the Preferred Partnership Securities or the
issuance by the trust of any securities other than the TOPrS, the control
certificate or the incurrence of any indebtedness by the trust. The payment of
distributions out of money held by the trust, and payments out of money held by
the trust upon redemption of the TOPrS or liquidation of the trust, are
guaranteed by TXU Europe Limited to the extent described under DESCRIPTION OF
THE TRUST GUARANTEE. The Trust Guarantee will be held by The Bank of New York,
the Trust Guarantee Trustee, for the benefit of the holders of the TOPrS. The
Trust Guarantee does not cover payment of distributions when the trust does not
have sufficient available funds to pay such distributions. In the event the
trust does not have sufficient available funds to pay distributions, holders of
TOPrS will have the remedies described below under -- "Trust Enforcement
Events."
DISTRIBUTIONS
Distributions on the TOPrS will be made to the extent that the trust
has funds available for the payment of those distributions in the property
account. Amounts available to the trust for distribution to the holders of the
TOPrS will be limited to payments received by the trust from the partnership
with respect to the Preferred Partnership Securities or from TXU Europe Limited
under the Partnership Guarantee or the Trust Guarantee. Distributions on the
Preferred Partnership Securities will be paid only if, as and when declared in
the sole discretion of TXU Europe Limited, as the general partner of the
partnership. Pursuant to the limited partnership agreement, the general partner
is not obligated to declare distributions on the Preferred Partnership
Securities at any time, including upon or following a Partnership Enforcement
Event. See DESCRIPTION OF PREFERRED PARTNERSHIP SECURITIES -- "Partnership
Enforcement Events." If the Property Trustee, as the holder of the Preferred
Partnership Securities for the benefit of the holders of the TOPrS, receives
written notice of any determination by the general partner not to pay
distributions on the Preferred Partnership Securities, the Property Trustee
shall give notification of this determination to those holders.
Amounts payable on the Preferred Partnership Securities will be fixed
at a rate per annum of ___% of the stated liquidation amount of $25 per
Preferred Partnership Security. Amounts payable on Preferred Partnership
Securities which are not paid on the scheduled payment date will accumulate and
compound quarterly at a rate per annum equal to ____%. The term "amounts
payable" as used in this prospectus includes any compounded amounts unless
otherwise stated or the context otherwise requires. The amounts payable on
Preferred Partnership Securities for any period will be computed on the basis of
a 360-day year of twelve 30-day months and for any partial period will be
computed on the basis of the number of days elapsed in a 360-day year of twelve
30-day months.
Amounts payable on the Preferred Partnership Securities will be
cumulative, will accumulate from the date of initial issuance and will be
payable quarterly in arrears on each __________, __________, __________ and
__________, commencing __________, provided that, as noted above, the general
partner is not obligated to declare distributions on the Preferred Partnership
Securities at any time.
If quarterly distributions are made on the Preferred Partnership
Securities in the full fixed rate, the trust will have sufficient funds to pay
the holders of the TOPrS a quarterly cash distribution at the rate of ____% of
the liquidation amount of $25 per TOPrS per annum. For purposes of this
prospectus, the term "distributions" with respect to TOPrS for any period means
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the full expected quarterly amounts of $____ per $25 TOPrS per annum; in
addition, unpaid distributions shall be deemed to accumulate and compound
quarterly at a rate per annum equal to ____%, and "distributions" shall include
any such compounded amount unless otherwise stated or the context otherwise
requires.
Distributions on the TOPrS will be payable to the holders as they
appear on the books and records of the trust on the relevant record dates, which
will be one business day prior to the relevant payment dates. Distributions will
be paid through the Property Trustee who will hold amounts received in respect
of the Preferred Partnership Securities in the property account for the benefit
of the holders of the TOPrS. Subject to any applicable laws and regulations and
the provisions of the trust agreement, each payment will be made as described
under -- "Book-Entry Only Issuance -- The Depository Trust Company" below. If
the TOPrS do not remain in book-entry only form, the relevant record dates will
be the 15th day of the month of the relevant payment dates. If any date on which
distributions are payable on the TOPrS is not a business day, payment of the
distribution payable on that date will be made on the next succeeding day that
is a business day (without any interest or other payment in respect of the
distribution subject to the delay) except that, if the next business day is in
the next succeeding calendar year, the payment will be made on the immediately
preceding business day, (without any reduction in interest or other payments in
respect of such early payment) in each case with the same force and effect as if
made on the date the distribution was initially payable. A "business day" means
any day other than a day on which banking institutions in The City of New York
are authorized or required by law to close.
If distributions on TOPrS are not paid when regularly scheduled, the
accumulated distributions shall be paid to the holders of record of TOPrS as
they appear on the books and records of the trust on the record date with
respect to the payment date for the TOPrS, which will correspond to the payment
date fixed by the partnership with respect to the payment of cumulative
distributions payable in respect of the Preferred Partnership Securities not
declared for distribution and paid when regularly scheduled.
The assets of the partnership will consist only of subsidiary
debentures and eligible debt securities. To the extent that the issuers defer or
fail to make any payment in respect of the subsidiary debentures, or TXU Europe
Limited, as guarantor of the subsidiary debentures in which the partnership
invests, fails to make any payment under the guarantees, the partnership will
not have sufficient funds to pay and will not declare or pay distributions on
the Preferred Partnership Securities. If the partnership does not declare and
pay distributions on the Preferred Partnership Securities out of funds legally
available for distribution, the trust will not have sufficient funds to make
distributions on the TOPrS. In that event the Trust Guarantee will not apply to
those distributions until the trust has sufficient funds available to make those
distributions. See DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES --
"Distributions" and DESCRIPTION OF THE TRUST GUARANTEE. In addition, the
partnership may not have sufficient funds to pay current or liquidating
distributions on the Preferred Partnership Securities if:
. at any time that the partnership is receiving current
payments in respect of the securities held by the
partnership (including the subsidiary debentures), TXU
Europe Limited, as the general partner of the
partnership, in its sole discretion, does not declare
distributions on the Preferred Partnership Securities
and the partnership receives insufficient amounts from
its investments to pay the resulting additional
compounded distributions that will accumulate on any
unpaid distributions,
. the partnership reinvests the proceeds received from
the subsidiary debentures upon their redemption or at
their maturities in other subsidiary debentures or
eligible debt securities that do not generate income
sufficient to pay full quarterly distributions in
respect of the Preferred Partnership Securities at a
rate of ___% per annum or, if sufficient to pay those
distributions either in full or in part, the
partnership does not declare or make those
distributions, or
. the partnership reinvests the proceeds received from
the subsidiary debentures upon their redemption or at
their maturities in other subsidiary debentures that
are not guaranteed by TXU Europe Limited and those
debentures cannot be liquidated by the partnership for
an amount sufficient to pay those distributions in
full or, if sufficient to pay those distributions
either in full or, in part, the partnership does not
declare or make those distributions.
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TRUST ENFORCEMENT EVENTS
The occurrence, at any time, of:
. arrearages on scheduled distributions on the TOPrS, in the
full expected quarterly amount of $____ for each $25 TOPrS
(plus any accumulated and compounded distributions), that
exist for ____ consecutive quarterly distribution periods,
. a default by TXU Europe Limited in respect of any of its
obligations under the Trust Guarantee, or
. a partnership enforcement event under the limited
partnership agreement,
will constitute a trust enforcement event under the trust agreement
with respect to the TOPrS. See DESCRIPTION OF THE PREFERRED PARTNERSHIP
SECURITIES -- "Partnership Enforcement Events" for a description of the events
which will trigger the occurrence of a partnership enforcement event.
Upon the occurrence of a trust enforcement event:
(a) the Property Trustee, as the holder of the Preferred
Partnership Securities, will have the right to enforce the
terms of the Preferred Partnership Securities, including the
right to direct the special representative to enforce:
. the partnership's creditors' rights and other rights,
including the right to receive payments under the subsidiary
debentures and any of TXU Europe Limited's guarantees of
subsidiary debentures,
. the rights of the holders of the Preferred Partnership
Securities under the Partnership Guarantee and
. the rights of the holders of the Preferred Partnership
Securities to receive distributions only if and to the
extent declared out of funds legally available for payment
on the Preferred Partnership Securities, and
(b) the Trust Guarantee Trustee will have the right to enforce
the terms of the Trust Guarantee, including the right to
enforce the covenant restricting dividends, distributions
and other similar payments to others by TXU Europe Limited
and its finance subsidiaries.
If the Property Trustee fails to enforce its rights under the TOPrS
after a holder of TOPrS has made a written request, that holder of record of
TOPrS may directly institute a legal proceeding against the partnership or the
special representative to enforce the Property Trustee's rights under the
Preferred Partnership Securities without first instituting any legal proceeding
against TXU Europe Limited, the Property Trustee, the trust or any other person
or entity. In addition, for so long as the trust holds any Preferred Partnership
Securities, if the special representative fails to enforce its rights on behalf
of the partnership in the subsidiary debentures or TXU Europe Limited's
guarantees of subsidiary debentures after a holder of TOPrS has made a written
request, a holder of record of TOPrS may on behalf of the partnership directly
institute a legal proceeding against TXU Europe Limited or its subsidiaries that
have issued subsidiary debentures, without first instituting any legal
proceeding against the Property Trustee, the trust, the special representative,
the partnership or any other person. In any event, for so long as the trust is
the holder of any Preferred Partnership Securities, if a trust enforcement event
has occurred and is continuing and that trust enforcement event is attributable
to the failure of a subsidiary of TXU Europe Limited to make any required
payment when due on any subsidiary debenture or the failure of TXU Europe
Limited to make any required payment when due on any guarantee of a subsidiary
debenture, then a holder of TOPrS may on behalf of the partnership directly
institute a proceeding against the subsidiary of TXU Europe Limited with respect
to that subsidiary debenture or against TXU Europe Limited with respect to that
guarantee, in each case for enforcement of payment.
Under no circumstances, however, will the Property Trustee, the special
representative or any holder of TOPrS have authority to cause the general
partner to declare distributions on the Preferred Partnership Securities. As a
result, although the Property Trustee, the special representative or these
holders may be able to enforce the partnership's creditors' rights to accelerate
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and receive payments in respect of the subsidiary debentures and TXU Europe
Limited's guarantees of subsidiary debentures, the partnership would be entitled
to reinvest such payments in additional subsidiary debentures, subject to
satisfying the reinvestment criteria described under DESCRIPTION OF THE
PREFERRED PARTNERSHIP SECURITIES -- "Partnership Investments," and in eligible
debt securities, rather than declaring and making distributions on the Preferred
Partnership Securities.
TXU Europe Limited and the trust are each required to file annually
with the Property Trustee an officer's certificate as to its compliance with all
conditions and covenants under the trust agreement.
MANDATORY REDEMPTION
The Preferred Partnership Securities may be redeemed by the partnership
at the option of the general partner, in whole, or in part, from time to time at
any time on or after ______________ or at any time in certain circumstances, in
whole, upon the occurrence of a partnership special event. Upon the redemption
of the Preferred Partnership Securities, either at the option of the general
partner or in connection with a partnership special event, the proceeds from the
repayment will simultaneously be applied to redeem TOPrS having an aggregate
liquidation amount equal to the Preferred Partnership Securities redeemed at an
amount per TOPrS expected to be $25 plus accumulated and unpaid distributions
on those TOPrS; provided, that holders of the TOPrS will be given not less than
30 nor more than 60 days notice of the redemption. See DESCRIPTION OF THE
PREFERRED PARTNERSHIP SECURITIES -- "Optional Redemption."
TRUST SPECIAL EVENT REDEMPTION OR DISTRIBUTION
If, at any time, a "trust special event", which is either a trust tax
event or a trust investment company event, occurs and is continuing, the
Administrative Trustees will, unless the Preferred Partnership Securities are
redeemed in the limited circumstances described below, within 90 days following
the occurrence of that trust special event, elect to either (i) dissolve the
trust upon not less than 30 nor more than 60 days notice with the result that,
after satisfaction of creditors of the trust, if any, Preferred Partnership
Securities will be distributed on a pro rata basis to the holders of the TOPrS
in liquidation of those holders' interests in the trust; provided, however, that
if at the time there is available to the trust the opportunity to eliminate,
within that 90-day period, the trust special event by taking some ministerial
action, such as filing a form or making an election, or pursuing some other
similar reasonable measure which in the sole judgment of TXU Europe Limited has
or will cause no adverse effect on the trust, the partnership, TXU Europe
Limited or the holders of the TOPrS and will involve no material cost, the trust
will pursue that measure instead of dissolution or (ii) cause the TOPrS to
remain outstanding, provided that in the case of this clause (ii), TXU Europe
Limited will pay any and all costs or expenses (including any tax or
governmental charges) incurred by or payable by the trust attributable to the
trust special event.
If, in the case of the occurrence of a trust tax event described
below, (i) the Administrative Trustees have received an opinion of nationally
recognized independent tax counsel in the US or the UK, as applicable,
experienced in such matters that, as a result of the occurrence of the trust
tax event, there is more than insubstantial risk that interest payable by
one or more of the subsidiaries of TXU Europe Limited with respect to the
subsidiary debentures issued by those subsidiaries is not, or will not be,
deductible by that subsidiary for US federal or UK corporate income tax
purposes or (ii) TXU Europe Limited certifies to the Administrative Trustee that
Additional Amounts, as described under DESCRIPTION OF THE PREFERRED PARTNERSHIP
SECURITIES - "Partnership Investments," are, or will be, payable on subsidiary
debentures or with respect to any payments made under the guarantees of the
subsidiary debentures, in each case, even if the Preferred Partnership
Securities were distributed to the holders of the TOPrS in liquidation of such
holders' interests in the trust as described above, and further certifies that
it cannot avoid the requirement to pay such Additional Amounts by taking
reasonable steps available to it, then the general partner will have the right,
within 90 days following the occurrence of that trust tax event, to elect to
cause the partnership to redeem the Preferred Partnership Securities in whole,
but not in part, for cash upon not less than 30 nor more than 60 days notice and
promptly following that redemption, the TOPrS will be redeemed by the trust at a
redemption price that is expected to be $25 per TOPrS plus accumulated and
unpaid distributions on those TOPrS.
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"Trust tax event" means that TXU Europe Limited:
(A) has requested, received and delivered to the Administrative
Trustees an opinion of nationally recognized independent tax counsel in the US
or UK, as applicable, experienced in such matters to the effect that there has
been a tax action which means:
. an amendment to, change in or announced proposed change in
the laws (or any regulations thereunder) of the US, the UK
or any political subdivision or taxing authority thereof or
therein,
. a judicial decision interpreting, applying, or clarifying
such laws or regulations,
. an administrative pronouncement or action that represents an
official position, including a clarification of an official
position, of the governmental authority or regulatory body
making the administrative pronouncement or taking the
action, or
. a threatened challenge asserted in connection with an audit
of TXU Europe Limited or any of its affiliates, the
partnership, or the trust, or a threatened challenge
asserted in writing against any other taxpayer that has
raised capital through the issuance of securities that are
substantially similar to the subsidiary debentures, the
Preferred Partnership Securities, or the TOPrS,
which amendment or change is adopted or which proposed change, decision or
pronouncement is announced or which action, clarification or challenge occurs on
or after the date of this prospectus, which tax action relates to any of the
items described below in this paragraph, and that following the occurrence of
that tax action there is more than an insubstantial risk that:
. the trust is, or will be, subject to US federal income tax
or UK income tax or corporation tax with respect to income
accrued or received on the Preferred Partnership Securities,
. the trust is, or will be, subject to more than a de minimis
amount of other taxes, duties or other governmental charges,
. interest payable by a subsidiary of TXU Europe Limited with
respect to its subsidiary debentures is not, or will not be,
fully deductible by that subsidiary for US federal or UK
corporation tax purposes, or
(B) certifies to the Administrative Trustee that Additional Amounts, as
described under DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES "Partnership
Investments," are, or will be payable on subsidiary debentures or with respect
to any payments made under the guarantees of the subsidiary debentures the Trust
Guarantee or the Partnership Guarantee, and TXU Europe Limited further certifies
to the Administrative Trustee that it or any issuer of subsidiary debentures,
as the case may, be cannot avoid the requirement to pay such Additional Amounts
by taking reasonable steps available to it.
"Trust investment company event" means that TXU Europe Limited has
requested and received and shall have delivered to the Administrative Trustees
an opinion of nationally recognized independent legal counsel in the US
experienced in such matters to the effect that as a result of the occurrence on
or after the date of this prospectus of a change in law or regulation or a
change in interpretation or application of law or regulation by any legislative
body, court, governmental agency or regulatory authority, there is more than an
insubstantial risk that the trust is or will be considered an "investment
company" which is required to be registered under the Investment Company Act.
If the Preferred Partnership Securities are distributed to the holders
of the TOPrS, the depositor of the trust, will use its best efforts to cause the
Preferred Partnership Securities to be listed on the NYSE and the LSE or on such
other national securities exchange or similar organization as the TOPrS are then
listed or quoted.
On the date fixed for any distribution of Preferred Partnership
Securities, upon dissolution of the trust, (i) the TOPrS will no longer be
deemed to be outstanding and (ii) certificates representing TOPrS will be deemed
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to represent the Preferred Partnership Securities having a liquidation
preference equal to the stated liquidation amount of those TOPrS until those
certificates are presented to the depositor of the trust or its agent for
transfer or reissuance.
There can be no assurance as to the market price for the Preferred
Partnership Securities which may be distributed in exchange for TOPrS if a
dissolution and liquidation of the trust were to occur. Accordingly, the
Preferred Partnership Securities which an investor may subsequently receive on
dissolution and liquidation of the trust may trade at a discount to the price of
the TOPrS exchanged.
REDEMPTION PROCEDURES
The trust may not redeem fewer than all of the outstanding TOPrS unless
all accumulated and unpaid distributions have been paid on all TOPrS for all
quarterly distribution periods terminating on or prior to the date of
redemption.
Notice of redemption of TOPrS will be irrevocable. If the trust gives a
notice of redemption in respect of TOPrS, and if the partnership has paid to the
Property Trustee a sufficient amount of cash in connection with the related
redemption of the Preferred Partnership Securities, then, by 12:00 noon, New
York City time, on the redemption date, the trust will irrevocably deposit with
DTC, so long as the TOPrS are represented by global certificates held by DTC,
funds sufficient to pay the amount payable on redemption of all TOPrS and will
give DTC irrevocable instructions and authority to pay that amount to holders of
the TOPrS. See -- "Book-Entry Only Issuance --The Depository Trust Company." If
the TOPrS are held in certificated form, the Property Trustee will irrevocably
deposit with the paying agent for the TOPrS 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 upon
surrender of their certificates evidencing the TOPrS.
If notice of redemption has been given and funds are deposited as
required, then upon the date of the deposit, all rights of holders of such TOPrS
called for redemption will cease, except the right of the holders of such TOPrS
to receive the redemption price, but without interest on the redemption price,
and such TOPrS will cease to be outstanding. In the event that any date fixed
for redemption of TOPrS is not a business day, then payment of the amount
payable on that date will be made on the next succeeding day that is a business
day, without any interest or other payment in respect of the amount payable
subject to the delay, except that, if the next business day falls in the next
calendar year, the payment will be made on the immediately preceding business
day (without any reduction in interest or other payments in respect of such
early payments), in each case with the same force and effect as if made on such
date fixed for redemption. In the event that payment of the redemption price in
respect of TOPrS is improperly withheld or refused and not paid either by the
trust or by TXU Europe Limited pursuant to the Trust Guarantee described under
DESCRIPTION OF THE TRUST GUARANTEE, distributions on those TOPrS will continue
to accumulate from the original redemption date to the date of payment. The date
of payment will be considered the date fixed for redemption for purposes of
calculating the redemption price plus accumulated and unpaid distributions.
If fewer than all of the outstanding TOPrS are to be redeemed, the
TOPrS will be redeemed in accordance with the procedures of DTC. See --
"Book-Entry Only Issuance -- The Depository Trust Company." If the TOPrS do not
remain in book-entry only form and fewer than all of the outstanding TOPrS are
to be redeemed, the TOPrS shall be redeemed on a pro rata basis or pursuant to
the rules of any securities exchange on which the TOPrS are listed. The Property
Trustee shall promptly notify the transfer agent in writing of the TOPrS
selected for redemption and, in the case of any TOPrS selected for partial
redemption, the aggregate liquidation amount to be redeemed.
The Property Trustee promptly will notify the transfer agent in writing
of the TOPrS selected for redemption and, in the case of any TOPrS selected for
partial redemption, the aggregate liquidation amount to be redeemed.
Subject to the foregoing and applicable law, including, without
limitation, US federal securities laws, TXU Europe Limited or its affiliates may
at any time and from time to time purchase outstanding TOPrS by tender, in the
open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary liquidation, dissolution,
winding-up or termination of the trust, the holders of the TOPrS will be
entitled to receive out of the assets of the trust, after satisfaction of
liabilities to creditors, if any, a pro rata trust liquidation distribution in
cash or other immediately available funds in an amount equal to the assets of
the trust, unless, in connection with the trust liquidation, Preferred
Partnership Securities (which will have an aggregate liquidation preference
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equal to the aggregate stated liquidation amount of, a distribution rate
identical to the expected distribution rate of, and accumulated and unpaid
distributions equal to accumulated and unpaid distributions on the TOPrS) shall
be distributed on a pro rata basis to the holders of the TOPrS in exchange for
those TOPrS.
Under the trust agreement, the trust will terminate (i) upon the
bankruptcy of the depositor of the trust, (ii) upon the filing of a certificate
of dissolution or the equivalent with respect to the depositor, the filing of a
certificate of cancellation with respect to the trust after having obtained the
consent of at least a majority in liquidation amount of the TOPrS, voting
together as a single class, to file such certificate of cancellation, or the
revocation of the charter of the depositor and the expiration of 90 days after
the date of revocation without a reinstatement of the charter, (iii) upon the
distribution of all of the Preferred Partnership Securities upon the occurrence
of a trust special event, (iv) upon the entry of a decree of a judicial
dissolution of the depositor or the trust, or (v) upon the redemption of all the
TOPrS.
VOTING RIGHTS
Except as described in this prospectus, under the Delaware Business
Trust Act, the Trust Indenture Act and under DESCRIPTION OF THE TRUST GUARANTEE
- - - - -- "Amendments and Assignment," and as otherwise required by law and the trust
agreement, the holders of the TOPrS will have no voting rights.
Subject to the requirement of the Property Trustee obtaining a tax
opinion as set forth in the last sentence of this paragraph, the holders of a
majority in liquidation amount of the TOPrS have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Property Trustee, or 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, as holder of the Preferred Partnership Securities, to (i)
exercise the remedies available to it under the limited partnership agreement as
a holder of the Preferred Partnership Securities, including the right to direct
the special representative to exercise its rights in the manner described above
under -- "Trust Enforcement Events" and (ii) consent to any amendment,
modification, or termination of the limited partnership agreement or the
Preferred Partnership Securities where a consent is required; provided, however,
that where a consent or action under the limited partnership agreement would
require the consent or act of the holders of more than a majority of the
aggregate liquidation preference of the Preferred Partnership Securities
affected by that consent or action, only the holders of the percentage of the
aggregate stated liquidation amount of the TOPrS which is at least equal to the
percentage required under the limited partnership agreement may direct the
Property Trustee to give that consent or take that action on behalf of the
trust. See DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES -- "Voting
Rights." The Property Trustee will notify all holders of the TOPrS of any notice
of any partnership enforcement event received from the general partner with
respect to the Preferred Partnership Securities and the subsidiary debentures.
That notice will state that the partnership enforcement event also constitutes a
trust enforcement event. Except with respect to directing the time, method, and
place of conducting a proceeding for a remedy as described above, the Property
Trustee will be under no obligation to take any of the actions described in
clauses (i) or (ii) above unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that, as a result of such action, the
trust will not fail to be classified as a grantor trust for US federal income
tax purposes or as a transparent entity for UK taxation purposes and that after
the action each holder of TOPrS will continue to be treated as owning an
undivided beneficial ownership interest in the Preferred Partnership Securities.
In the event the consent of the Property Trustee, as the holder of the
Preferred Partnership Securities, is required under the agreement of limited
partnership with respect to any amendment, modification or termination of the
agreement of limited partnership, the Property Trustee shall request the
direction of the holders of the TOPrS with respect to such amendment,
modification or termination and shall vote with respect to such amendment,
modification or termination as directed by a majority in liquidation amount of
the TOPrS voting together as a single class; provided, however, that where a
consent under the agreement of limited partnership would require the consent of
the holders of more than a majority in aggregate liquidation preference of the
Preferred Partnership Securities, the Property Trustee may only give such
consent at the direction of the holders of at least the same proportion in
aggregate stated liquidation amount of the TOPrS. The Property Trustee shall not
take any action in accordance with the direction of the holders of the TOPrS
unless the Property Trustee has obtained an opinion of tax counsel to the effect
that such action is not inconsistent with the trust being classified as a
grantor trust for US federal income tax purposes or as a transparent entity for
UK taxation purposes.
A waiver of a partnership enforcement event with respect to the
Preferred Partnership Securities held by the Property Trustee will constitute a
waiver of the corresponding trust enforcement event.
Any required approval or direction of holders of TOPrS may be given at
a separate meeting of holders of TOPrS convened for that purpose or pursuant to
written consent. The Administrative Trustees will cause a notice of any meeting
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at which holders of TOPrS are entitled to vote, or of any matter upon which
action by written consent of those holders is to be taken, to be mailed to each
holder of record of TOPrS. Each notice will include the following information:
(i) the date of the meeting or the date by which action is to be taken, (ii) a
description of any resolution proposed for adoption at the meeting on which the
holders are entitled to vote or of the matters upon which written consent is
sought and (iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of TOPrS will be required for the
trust to redeem and cancel TOPrS or distribute Preferred Partnership Securities
in accordance with the trust agreement.
Notwithstanding that holders of TOPrS are entitled to vote or consent
under any of the circumstances described above, any of the TOPrS that are
beneficially owned at that time by TXU Europe Limited or any entity directly or
indirectly controlled by, or under direct or indirect common control with, TXU
Europe Limited, will not be entitled to vote or consent and will, for purposes
of that vote or consent, be treated as if those TOPrS were not outstanding;
provided, however, that persons, other than affiliates of TXU Europe Limited, to
whom TXU Europe Limited or any of its affiliates have pledged TOPrS may vote or
consent with respect to the pledged TOPrS under the terms of that pledge.
The procedures by which holders of TOPrS represented by global
certificates may exercise their voting rights are described below. See --
"Book-Entry Only Issuance -- The Depository Trust Company."
Holders of the TOPrS will have no rights to appoint or remove the
Administrative Trustees, who may be appointed, removed or replaced solely by the
Control Party.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE TRUST
The trust may not consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to, any corporation or other entity, except as
described below. The trust may, with the consent of a majority of the
Administrative Trustees and without the consent of the holders of the TOPrS, the
Property Trustee or the Delaware Trustee consolidate, amalgamate, merge with or
into, or be replaced by a trust organized under the laws of any State of the US;
provided, that:
. if the trust is not the survivor, the successor entity
either
-- expressly assumes all of the obligations of
the trust under the TOPrS or
-- substitutes for the TOPrS successor
securities having substantially the same
terms as the TOPrS, so long as these
successor securities rank the same as the
TOPrS rank with respect to distributions,
assets and payments,
. the depositor of the trust expressly acknowledges a trustee
of such successor entity possessing the same powers and
duties as the Property Trustee as the holder of the
Preferred Partnership Securities,
. the TOPrS or any successor securities are listed, or any
successor securities will be listed upon notification of
issuance, on any national securities exchange and other
organization on which the TOPrS are then listed or quoted,
. the merger, consolidation, amalgamation or replacement does
not cause the TOPrS, including any successor securities, to
be downgraded by any nationally recognized statistical
rating organization,
. the merger, consolidation, amalgamation or replacement does
not adversely affect the rights, preferences and privileges
of the holders of the TOPrS, including any successor
securities, in any material respect,
. the successor entity has a purpose substantially identical
to that of the trust,
. TXU Europe Limited guarantees the obligations of the
successor entity under the successor securities to the same
extent as provided by the Trust Guarantee and
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. prior to any merger, consolidation, amalgamation or
replacement, the depositor of the trust has received an
opinion of a nationally recognized independent counsel to
the trust in the US or UK, as applicable, experienced in
these matters to the effect that:
-- the merger, consolidation, amalgamation or
replacement is lawful and may be properly
undertaken by the trust and will not
materially adversely affect the rights,
preferences and privileges of the holders of
the TOPrS, including any successor
securities, in any material respect, other
than with respect to any dilution of the
holders' interest in the new entity,
-- following the merger, consolidation,
amalgamation or replacement, neither the
trust nor the successor entity will be
required to register as an investment
company under the Investment Company Act,
-- following the merger, consolidation,
amalgamation or replacement, the trust (or
the successor trust) will not be classified
as an association or a publicly traded
partnership taxable as a corporation for US
federal income tax purposes,
-- following the merger, consolidation,
amalgamation or replacement, the partnership
will not be classified as an association or
a publicly traded partnership taxable as a
corporation for US federal income tax
purposes or as a company for UK taxation
purposes,
-- following the merger, consolidation,
amalgamation or replacement, the trust will
not be classified as other than a
transparent entity for UK taxation
purposes.
In any event, the trust may not, except with the consent of holders of 100% in
liquidation amount of the TOPrS, consolidate, amalgamate, merge with or into, or
be replaced by any other entity or permit any other entity to consolidate,
amalgamate, merge with or into, or replace it, if the consolidation,
amalgamation, merger or replacement would cause the trust or the successor
entity to be classified as an association or a publicly traded partnership
taxable as a corporation for US federal income tax purposes.
MODIFICATION OF THE TRUST AGREEMENT
The trust agreement may be modified and amended if approved by a
majority of the Administrative Trustees, and in some circumstances the Property
Trustee and the Delaware Trustee, provided, that if any proposed amendment
provides for, or the Administrative Trustees otherwise propose to effect, (i)
any action that would materially adversely affect the powers, preferences or
special rights of the TOPrS, whether by way of amendment to the trust agreement
or otherwise or (ii) the dissolution, winding-up or termination of the trust
other than under the terms of the trust agreement, then the holders of the TOPrS
will be entitled to vote on the amendment or proposal and the amendment or
proposal will not be effective except with the approval of at least a majority
in liquidation amount of the TOPrS affected by the amendment or proposal.
The trust agreement may be amended by the Control Party and the
Administrative Trustees without the consent of the holders of the TOPrS to:
. cure any ambiguity,
. correct or supplement any provision in the trust agreement
that may be defective or inconsistent with any other
provision of the trust agreement,
. add to the covenants, restrictions or obligations of TXU
Europe Limited,
. conform to any change in the Investment Company Act, the
Trust Indenture Act or the rules or regulations of either of
those Acts,
. change the name of the trust, and
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. modify, eliminate and add to any provision of the trust
agreement to such extent as may be necessary or desirable;
provided that no such amendment shall have a material
adverse effect on the rights, preferences or privileges of
the holders of the TOPrS.
In any event, no amendment or modification may be made to the trust agreement if
that amendment or modification would (i) cause the trust to fail to be
classified as a grantor trust for US federal income tax purposes or as a
transparent entity for UK taxation purposes, (ii) cause the partnership to be
classified as an association or publicly traded partnership taxable as a
corporation for such purposes, (iii) reduce or otherwise adversely affect the
powers of the Property Trustee in contravention of the Trust Indenture Act or
(iv) cause the trust, the partnership or the Control Party to be deemed an
"investment company" which is required to be registered under the Investment
Company Act.
BOOK-ENTRY ONLY ISSUANCE -- THE DEPOSITORY TRUST COMPANY
DTC will act as securities depository for the TOPrS and, to the extent
distributed to the holders of TOPrS, the Preferred Partnership Securities. The
TOPrS will be issued only as fully-registered securities registered in the name
of DTC's nominee, Cede & Co. One or more fully-registered global certificates,
representing the total aggregate number of TOPrS, will be issued and will be
deposited with DTC or its custodian.
DTC is a New York clearing corporation and a clearing agency registered
under Section 17A of the Exchange Act. DTC holds securities for its
participants. DTC facilitates settlement transactions among its participants
through electronic computerized book-entry changes in participants' accounts.
This eliminates the need for physical movement of securities certificates. The
participants include securities brokers and dealers, banks, trust companies and
clearing corporations. DTC is owned by a number of its participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc., and the
National Association of Securities Dealers, Inc. Other indirect participants who
maintain a custodial relationship with a participant can use the DTC system. The
rules that apply to DTC and those using its systems are on file with the SEC.
DTC management is aware that some computer applications, systems, and
the like for processing data (systems) that are dependent upon calendar dates,
including dates before, on, or after January 1, 2000, may encounter "Year 2000
Problems." DTC has informed its participants and other members of the financial
community that it has developed and is implementing a program so that its
systems, as the same relate to the timely payment of distributions (including
principal and income payments) to securityholders, book-entry deliveries, and
settlement of trades within DTC, continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which is
complete, and a testing phase, which is expected to be completed within
appropriate time frames.
However, DTC's ability to perform properly its services is also
dependent upon other parties, including, but not limited to, issuers and their
agents, as well as third party vendors from whom DTC licenses software and
hardware, and third party vendors on whom DTC relies for information or the
provision of services, including telecommunication and electric utility service
providers, among others. DTC has informed the industry that it is contacting,
and will continue to contact, third party vendors from which DTC acquires
services to: (1) impress upon them the importance of such services being Year
2000 compliant; and (2) determine the extent of their efforts for Year 2000
remediation, and, as appropriate, testing, of their services. In addition, DTC
is in the process of developing such contingency plans as it deems appropriate.
DTC has established a Year 2000 Project Office and will provide
information concerning DTC's Year 2000 compliance to persons requesting that
information. The address is as follows: The Depository Trust Company, Year 2000
Project Office, 55 Water Street, New York, New York 10041. Telephone numbers for
the DTC Year 2000 Project Office are (212) 855-8068 and (212) 855-8881. In
addition, information concerning DTC's Year 2000 compliance can be obtained from
its web site at the following address: www.dtc.org.
According to DTC, the foregoing information with respect to DTC has
been provided to the industry for informational purposes only and is not
intended to serve as a representation, warranty, or contract modification of any
kind.
Purchases of TOPrS within the DTC system must be made by or through
participants, which will receive a credit for the TOPrS on DTC's records. The
ownership interest of each beneficial owner of TOPrS is in turn to be recorded
on the participants' 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
participants or indirect participants through which the beneficial owners
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purchased TOPrS. Transfers of ownership interests in the TOPrS are to be
accomplished by entries made on the books of participants and indirect
participants acting on behalf of beneficial owners. Beneficial owners will not
receive certificates representing their ownership interests in TOPrS, except in
the event that use of the book-entry system for the TOPrS is discontinued.
The laws of some jurisdictions require that purchasers of securities
take physical delivery of securities in definitive form. Those laws may impair
the ability to transfer beneficial interests in the TOPrS as represented by a
global certificate.
DTC has no knowledge of the actual beneficial owners of the TOPrS.
DTC's records reflect only the identity of the participants to whose accounts
the TOPrS are credited, which may or may not be the beneficial owners. The
participants and indirect participants will remain responsible for keeping
account of their holdings on behalf of their customers.
So long as DTC, or its nominee, is the registered owner or holder of a
global certificate representing TOPrS, DTC or its nominee, as the case may be,
will be considered the sole owner or holder of the TOPrS represented by that
global certificate for all purposes under the trust agreement and the TOPrS. No
beneficial owner of an interest in a global certificate will be able to transfer
that interest except in accordance with DTC's applicable procedures, in addition
to those provided for under the trust agreement.
DTC has advised TXU Europe Limited that it will take any action
permitted to be taken by a holder of TOPrS, including the presentation of TOPrS
for exchange as described below, only at the direction of one or more
participants to whose account the DTC interests in the global certificates are
credited and only in respect of the portion of the aggregate liquidation amount
of TOPrS as to which those participants have given directions. Also, if there is
a trust enforcement event under the TOPrS, DTC will exchange the global
certificates for certificated TOPrS, which it will distribute to its
participants in accordance with its customary procedures.
Conveyance of notices and other communications by DTC to participants,
by participants to indirect participants, and by 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 in respect of the TOPrS held in book-entry form will
be sent to Cede & Co. If less than all of the TOPrS are being redeemed, DTC will
determine the amount of the interest of each participant to be redeemed in
accordance with its procedures.
Although voting with respect to the TOPrS is limited, in those cases
where a vote is required, neither DTC nor Cede & Co. will itself consent or vote
with respect to TOPrS. Under its usual procedures, DTC would mail an Omnibus
Proxy to the trust as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those participants to whose
accounts the TOPrS are allocated on the record date, as identified in a listing
attached to the Omnibus Proxy.
Distributions on the TOPrS held in book-entry form will be made to DTC
in immediately available funds. DTC's practice is to credit 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 payments on the payment date. Payments by participants and indirect
participants to beneficial owners will be governed by standing instructions and
customary practices and will be the responsibility of those participants and
indirect participants and not of DTC, the trust or TXU Europe Limited, subject
to any statutory or regulatory requirements as may be in effect from time to
time. Payment of any distributions to DTC is the responsibility of the trust,
disbursement of the payments to participants is the responsibility of DTC, and
disbursement of the payments to the beneficial owners is the responsibility of
participants and indirect participants.
Except as described below, a beneficial owner of an interest in a
global certificate will not be entitled to receive physical delivery of TOPrS.
Accordingly, each beneficial owner must rely on the procedures of DTC to
exercise any rights under the TOPrS.
Although DTC has agreed to the foregoing procedures in order to
facilitate transfers of interests in the global certificates among participants
of DTC, DTC is under no obligation to perform or continue to perform such
procedures, and such procedures may be discontinued at any time. Neither TXU
Europe Limited nor the trust will have any responsibility for the performance by
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DTC or its participants or indirect participants under the rules and procedures
governing DTC. DTC may discontinue providing its services as securities
depository with respect to the TOPrS at any time by giving notice to the trust.
Under those circumstances, in the event that a successor securities depository
is not obtained, TOPrS certificates are required to be printed and delivered to
the Property Trustee. In addition, the trust, with the consent of TXU Europe
Limited, may decide to discontinue use of the system of book-entry transfers
through DTC or any successor depository. In that event, certificates for the
TOPrS will be printed and delivered to the Property Trustee. In each of the
above circumstances, TXU Europe Limited will appoint a paying agent with respect
to the TOPrS.
Investors may elect to hold interests in the TOPrS through either DTC
(in the United States) or Cedelbank or Morgan Guaranty Trust Company of New
York, Brussels Office, as operator of Euroclear (in Europe) if they are
participants of such systems, or indirectly through organizations which are
participants in such systems. Cedelbank and Euroclear will hold interests on
behalf of their participants through customers' securities accounts in
Cedelbank's and Euroclear's names on the books of their respective depositaries,
which in turn will hold such interests in customers' securities accounts in the
names of their respective depositaries (US Depositaries) on the books of DTC.
Citibank, N.A. will act as the US Depositary for Cedelbank and The Chase
Manhattan Bank will act as the US Depositary for Euroclear.
Cedelbank has advised us that it is incorporated under the laws of
Luxembourg as a professional depositary. Cedelbank holds securities for its
customers and facilitates the clearance and settlement of securities
transactions between Cedelbank customers through electronic book entry changes
in accounts of Cedelbank customers, thereby eliminating the need for physical
movement of certificates. Cedelbank provides to Cedelbank customers, among other
things, services for safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing.
Cedelbank interfaces with domestic markets in several countries. As a bank,
Cedelbank is subject to regulation by the Luxembourg Commission for the
Supervision of the Financial Section (Commission de Surveillance du Secteur
Financier). Cedelbank customers are recognized financial institutions around the
world, including underwriters, securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations and may include
the underwriters. Indirect access to Cedelbank is also available to others, such
as banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Cedelbank customer either directly or indirectly.
Distributions with respect to the TOPrS held beneficially through
Cedelbank will be credited to cash accounts of Cedelbank Customers in accordance
with its rules and procedures, to the extent received by the U.S. Depositary for
Cedelbank.
Euroclear has advised us that it was created in 1968 to hold securities
for participants of Euroclear (Euroclear Participants) and to clear and settle
transactions between Euroclear Participants through simultaneous electronic
book-entry delivery against payment, thereby eliminating the need for physical
movement of certificates and any risk from lack of simultaneous transfers of
securities and cash. Euroclear includes various other services, including
securities lending and borrowing and interfaces with domestic markets in several
countries. Euroclear is operated by the Brussels. Belgium office of Morgan
Guaranty Trust Company of New York (Euroclear Operator), under contract with
Euroclear Clearance Systems S.C., a Belgian cooperative corporation
(Cooperative). All operations are conducted by the Euroclear Operator, and all
Euroclear securities clearance accounts and Euroclear cash accounts are accounts
with the Euroclear Operator, not the Cooperative. The Cooperative establishes
policy for Euroclear on behalf of Euroclear Participants. Euroclear Participants
include banks (including central banks), securities brokers and dealers and
other professional financial intermediaries and may include the underwriters.
Indirect access to Euroclear is also available to other firms that clear through
or maintain a custodial relationship with a Euroclear Participant, either
directly or indirectly.
The Euroclear Operator is the Belgian branch of a New York banking
corporation which is a member bank of the Federal Reserve System. As such, it is
regulated and examined by the Board of Governors of the Federal Reserve System
and the New York State Banking Department, as well as the Belgian Banking
Commission.
Securities clearance accounts and cash accounts with the Euroclear
Operator are governed by the Terms and Conditions Governing Use of Euroclear and
the related Operating Procedures of the Euroclear System, and applicable Belgian
law (collectively, the Terms and Conditions). The Terms and Conditions govern
transfers of securities and cash within Euroclear, withdrawals of securities and
cash from Euroclear, and receipts of payments with respect to securities in
Euroclear. All securities in Euroclear are held on a fungible basis without
attribution of specific certificates to specific securities clearance accounts.
The Euroclear Operator acts under the Terms and Conditions only on behalf of
Euroclear Participants, and has no record of or relationship with persons
holding through Euroclear Participants.
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Distributions with respect to the TOPrS held beneficially through
Euroclear will be credited to the cash accounts of Euroclear Participants in
accordance with the Terms and Conditions, to the extent received by the U.S.
Depositary for Euroclear.
Euroclear has also advised us that investors that acquire, hold and
transfer interests in our Notes by book-entry through accounts with the
Euroclear Operator or any other securities intermediary are subject to the laws
and contractual provisions governing their relationship with their intermediary,
as well as the laws and contractual provisions governing the relationship
between such an intermediary and each other intermediary, if any, standing
between themselves and the global certificates representing the TOPrS.
Under Belgian law, the Euroclear Operator is required to pass on the
benefits of ownership in any interests in securities on deposit with it (such as
dividends, voting rights and other entitlements) to any person credited with
such interests in securities on its records.
PAYMENT AND PAYING AGENT
Payments in respect of the TOPrS represented by the global certificates
will be made to DTC, which will credit the relevant accounts at DTC on the
scheduled payment dates or, in the case of certificated securities, if any,
payments will be made by check mailed to the address of the holder entitled
thereto as such address shall appear on the register. The Bank of New York will
initially be the Paying Agent. The Paying Agent will be permitted to resign as
Paying Agent upon 30 days written notice to the Administrative Trustees. In the
event that The Bank of New York is no longer the Paying Agent, the
Administrative Trustees will appoint a successor to act as Paying Agent. The
successor will be a bank or trust company.
So long as the TOPrS are listed on the LSE, the trust will maintain a
Paying Agent in Luxembourg. Initially, that Paying Agent will be Kredietbank SA
Luxembourgeoise.
REGISTRAR AND TRANSFER AGENT
TXU Business Services Company will act as Registrar and Transfer Agent
for the TOPrS.
Registration of transfers of TOPrS will be effected without charge by
or on behalf of the trust, but upon payment, together with any indemnity as the
trust or TXU Europe Limited may require, in respect of any tax or other
governmental charges that may be imposed in relation to the transfer.
The trust will not be required to register or cause to be registered
the transfer of TOPrS after the TOPrS have been called for redemption.
NOTICES
So long as the TOPrS are listed on the LSE, notices will also be
published in a leading daily newspaper with general circulation in Luxembourg,
probably the Luxemburger Wort.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect
to the TOPrS, undertakes to perform only those duties as are provided in the
trust agreement and, after a default, will exercise the same degree of care as a
prudent individual would exercise in the conduct of his or her own affairs.
Subject to these provisions, the Property Trustee is under no obligation to
exercise any of the powers vested in it by the trust agreement at the request of
any holder of TOPrS, unless offered reasonable indemnity by the holder against
the costs, expenses and liabilities which might be incurred by the Property
Trustee in exercising those powers. The holders of TOPrS will not be required to
offer an indemnity in the event the holders, by exercising their voting rights,
direct the Property Trustee to take any action following a trust enforcement
event.
TXU Europe Limited and its affiliates maintain deposit accounts and
credit and liquidity facilities, conduct other banking transactions and
maintain various trust relationships with the Property Trustee. The Property
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Trustee also acts as trustee under the Trust Guarantee, the Partnership
Guarantee and the indentures under which the subsidiary debentures and TXU
Europe Limited's guarantee of the subsidiary debentures are issued.
GOVERNING LAW
The trust agreement and the TOPrS will be governed by, and construed in
accordance with, the internal laws of the State of Delaware.
MISCELLANEOUS
The Administrative Trustees are authorized and directed to conduct the
affairs of and to operate the trust in such a way that neither the trust nor the
Control Party will be deemed to be an "investment company" required to be
registered under the Investment Company Act or that the trust will not be
characterized as other than a grantor trust for US federal income tax purposes
or other than a transparent entity for UK taxation purposes. 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 the trust agreement that they determine in their discretion to be necessary
or desirable for those purposes as long as that action does not adversely affect
the interests of the holders of the TOPrS.
Holders of the TOPrS have no preemptive or similar rights.
DESCRIPTION OF THE TRUST GUARANTEE
Material terms and provisions of the Trust Guarantee that will be
executed and delivered by TXU Europe Limited for the benefit of the holders from
time to time of TOPrS are summarized below. A copy of the form of the Trust
Guarantee is filed as an exhibit to the registration statement of which this
prospectus is a part. The Trust Guarantee will be qualified as an indenture
under the Trust Indenture Act. The Bank of New York, as the Trust Guarantee
Trustee, will hold the Trust Guarantee for the benefit of the holders of the
TOPrS and will act as indenture trustee for the purposes of compliance with the
Trust Indenture Act. You should refer to the Trust Guarantee and the Trust
Indenture Act for provisions that may be important to you.
Under the Trust Guarantee, TXU Europe Limited will irrevocably agree,
on a subordinated basis and to the extent set forth in the Trust Guarantee, to
pay in full to the holders of the TOPrS, except to the extent paid by the trust,
as and when due, regardless of any defense, right of set-off or counterclaim
that the trust may have or assert, the following Trust Guarantee payments,
without duplication: (i) any accumulated and unpaid distributions on the TOPrS
to the extent the trust has funds available for payment, (ii) the redemption
price with respect to any TOPrS called for redemption by the trust, to the
extent the trust has funds available for payment and (iii) upon a voluntary or
involuntary dissolution, winding-up or termination of the trust, other than in
connection with the distribution of Preferred Partnership Securities to the
holders of TOPrS or the redemption of all of the TOPrS, the lesser of (a) the
aggregate of the liquidation amount and all accumulated and unpaid distributions
on the TOPrS to the date of payment and (b) the amount of assets of the trust,
after satisfaction of all liabilities, remaining available for distribution to
holders of TOPrS in liquidation of the trust. TXU Europe Limited's obligation to
make a Trust Guarantee payment may be satisfied by direct payment of the
required amounts by TXU Europe Limited to the holders of TOPrS or by causing the
trust to pay those amounts to the holders.
The Trust Guarantee will be a guarantee on a subordinated basis with
respect to the TOPrS from the time of issuance of the TOPrS but will only apply
to any payment of distributions or the redemption price, or to payments upon the
dissolution, winding-up or termination of the trust, to the extent the trust has
funds legally available for those payments. If the partnership fails to declare
distributions on Preferred Partnership Securities, the trust would lack
available funds for the payment of distributions or amounts payable on
redemption of the TOPrS or otherwise, and in that event holders of the TOPrS
would not be able to rely upon the Trust Guarantee for payment of those amounts.
Instead, holders of the TOPrS will have the remedies described in this
prospectus under DESCRIPTION OF THE TOPrS -- "Trust Enforcement Events,"
including the right to direct the Trust Guarantee Trustee to enforce the
covenant restricting dividends, distributions and other similar payments by TXU
Europe Limited and its finance subsidiaries. See -- "Covenants of TXU Europe
Limited" below.
The Trust Guarantee and the Partnership Guarantee, when taken together
with TXU Europe Limited's guarantees of the subsidiary debentures and TXU Europe
Limited's obligation to pay all fees and expenses of the trust and the
partnership, constitute a guarantee to the extent described in this prospectus
by TXU Europe Limited of the distribution, redemption and liquidation payments
payable to the holders of the TOPrS. Those guarantees do not apply, however, to
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current distributions by the partnership unless and until those distributions
are declared by the partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in the
partnership, each as more fully described under RISK FACTORS -- "The partnership
may have insufficient income or assets to pay distributions to the trust that
are sufficient to pay distributions on the TOPrS."
ADDITIONAL AMOUNTS
All payments made under the Trust Guarantee will be made without
withholding or deduction for any taxes or other governmental charges imposed by
a jurisdiction in which TXU Europe Limited was organized or is managed or
controlled or has a place of business, or any political subdivision or taxing
authority of that jurisdiction (each a Taxing Jurisdiction), unless the
withholding or deduction is required by law. If any required withholding or
deduction is made (Gross-Up Taxes), TXU Europe Limited will pay to each holder
of TOPrS such additional amounts as may be necessary so that the net amount
received by each holder of TOPrS after the withholding or deduction equals
the amount that the holder would have received absent the withholding or
deduction (Additional Amounts), except that no Additional Amounts will be
payable:
. to or for a holder who is liable for Gross-Up Taxes because
of the holder's connection with a Taxing Jurisdiction,
whether as a citizen, a resident or a national of the
jurisdiction or because the holder carries on a business or
maintains a permanent establishment there or is physically
present there (unless, in the case of the UK, that
connection arises solely as a result of the Control Party
being a UK resident);
. to or for a holder who presents a TOPrS required to be
presented for payment more than 30 days after the date on
which payment first becomes due, unless that holder would
have been entitled to those Additional Amounts by presenting
a TOPrS on the last day of the 30 day period;
. to or for a holder who presents a TOPrS, when presentation
is required, at any place other than in The City of New
York; or
. to or for a holder who would not be liable for the Gross-Up
Tax by making a declaration of non-residence or similar
claim for exemption to the relevant tax authority.
No Additional Amounts will be payable with respect to any TOPrS if the
beneficial owner would not have been entitled to that payment if that beneficial
owner had been the holder.
References in this prospectus to any payments under the Trust Guarantee
will include any Additional Amounts payable in connection with those payments.
COVENANTS OF TXU EUROPE LIMITED
TXU Europe Limited will covenant in the Trust Guarantee that, if:
. for any distribution period, full distributions on a
cumulative basis on any TOPrS, in a full expected quarterly
amount of $____ for each $25 TOPrS (plus any compounded
distributions), have not been paid,
. an investment event of default with respect to any
subsidiary debentures has occurred and is continuing, or
. TXU Europe Limited is in material and continuing default of
its obligations under the Trust Guarantee, the Partnership
Guarantee or any guarantee of subsidiary debentures,
then, during such period:
. TXU Europe Limited will not declare or pay dividends on,
make distributions with respect to, or redeem, purchase or
acquire, any of its issued share capital or comparable
equity interest, except for dividends or distributions in
shares of, or options, warrants or rights to subscribe for
or purchase shares of, its issued share capital, and
conversions or exchanges of common shares of one class into
common shares of another class, and
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. TXU Europe Limited will not make, permit any of its finance
subsidiaries to make, or make any payments that would enable
any finance subsidiary to make, any payment of any dividends
on, any distribution with respect to, or any redemption,
purchase or other acquisition of, or with respect to, any
preferred security or comparable equity interest of any
finance subsidiary. This limitation shall not apply to
payments necessary to enable the partnership to pay
Preferred Partnership Securities or the trust to pay
distributions on the TOPrS.
TXU Europe Limited will also covenant in the Trust Guarantee to ensure
that a wholly-owned subsidiary of TXU Europe Limited will retain the control
certificate, provided that certain successors that are permitted pursuant to the
trust agreement may succeed to the ownership of the control certificate.
EVENTS OF DEFAULT; ENFORCEMENT OF TRUST GUARANTEE
An event of default under the Trust Guarantee will occur upon the
failure of TXU Europe Limited to perform any of its payment or other obligations
under the Trust Guarantee.
The Trust Guarantee Trustee has the right to enforce the Trust
Guarantee on behalf of the holders of the TOPrS. The holders of a majority in
liquidation amount of the TOPrS have the right to direct the time, method and
place of conducting any proceeding for any remedy available to the Trust
Guarantee Trustee or to direct the exercise of any trust or power conferred upon
the Trust Guarantee Trustee under the Trust Guarantee. If the Trust Guarantee
Trustee fails to enforce its rights under the Trust Guarantee after a holder of
TOPrS has made a written request, that holder may institute a legal proceeding
directly against TXU Europe Limited to enforce the Trust Guarantee Trustee's
rights under the Trust Guarantee, without first instituting a legal proceeding
against the trust, the Trust Guarantee Trustee or any other person or entity. In
any event, if TXU Europe Limited has failed to make a guarantee payment under
the Trust Guarantee, a holder of TOPrS may directly institute a proceeding in
that holder's own name against TXU Europe Limited for enforcement of the Trust
Guarantee for such payment.
STATUS OF THE TRUST GUARANTEE; SUBORDINATION
The Trust Guarantee will constitute an unsecured obligation of TXU
Europe Limited and will rank subordinate and junior in right of payment to all
other liabilities of TXU Europe Limited, including the guarantees of subsidiary
debentures, other than those that are made to rank equally or made subordinate
by their terms to the Trust Guarantee. The Trust Guarantee will rank equally
with any preference share capital of TXU Europe Limited issued in the future and
with similar guarantees entered into by TXU Europe Limited in respect of any
preferred security of any other finance subsidiary. "Finance subsidiary" means
any subsidiary of TXU Europe Limited the principal purpose of which is to raise
capital for TXU Europe Limited by issuing securities that are guaranteed by TXU
Europe Limited and the proceeds of which are loaned to or invested in TXU Europe
Limited or one or more of its affiliates. Accordingly, the rights of the holders
of TOPrS to receive payments under the Trust Guarantee will be subject to the
rights of the holders of any obligations of TXU Europe Limited that are senior
in priority to the obligations under the Trust Guarantee. Since TXU Europe
Limited is a holding company, the Trust Guarantee will be effectively
subordinated to existing and future liabilities and preference share capital of
TXU Europe Limited's subsidiaries. The terms of the TOPrS provide that each
holder of TOPrS, by acceptance of the TOPrS, agrees to the subordination
provisions and other terms of the Trust Guarantee.
The Trust Guarantee will constitute a guarantee of payment and not of
collection. Therefore, the guaranteed party may directly institute a legal
proceeding against TXU Europe Limited to enforce its rights under the Trust
Guarantee without instituting a legal proceeding against any other person or
entity.
AMENDMENTS AND ASSIGNMENT
No approval of the holders of TOPrS will be required with respect to
any amendment to the Trust Guarantee that do not materially adversely affect the
rights, preferences or privileges of holders of TOPrS. In all other cases, the
Trust Guarantee may be amended only with the prior approval of the holders of at
least a majority in liquidation amount of all the outstanding TOPrS. The manner
of obtaining any such approval of holders of the TOPrS will be as set forth
under DESCRIPTION OF THE TOPrS -- "Voting Rights." All guarantees and agreements
contained in the Trust Guarantee will bind the successors, assigns, receivers,
trustees and representatives of TXU Europe Limited and will inure to the benefit
of the holders of the TOPrS then outstanding. Except in connection with any
permitted merger or consolidation of TXU Europe Limited with or into another
entity or any permitted sale, transfer or lease of TXU Europe Limited's assets
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to another entity in which the surviving corporation, if TXU Europe Limited is
not the surviving corporation, assumes TXU Europe Limited's obligations under
the Trust Guarantee, TXU Europe Limited may not assign its rights or delegate
its obligations under the Trust Guarantee without the prior approval of the
holders of at least a majority of the aggregate stated liquidation amount of the
TOPrS then outstanding.
TERMINATION OF THE TRUST GUARANTEE
The Trust Guarantee will terminate and be of no further force and
effect as to the TOPrS upon (i) full payment of the redemption price of all
TOPrS, (ii) distribution of the Preferred Partnership Securities held by the
trust to the holders of the TOPrS or (iii) full payment of the amounts payable
in accordance with the trust agreement upon liquidation of the trust. The Trust
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any holder of TOPrS must restore payment of any sum paid
under the TOPrS or the Trust Guarantee.
INFORMATION CONCERNING THE TRUST GUARANTEE TRUSTEE
The Trust Guarantee Trustee, prior to the occurrence of a default with
respect to the Trust Guarantee, undertakes to perform only such duties as are
specifically set forth in the Trust Guarantee and, after default with respect to
the Trust Guarantee, will exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
this provision, the Trust Guarantee Trustee is under no obligation to exercise
any of the powers vested in it by the Trust Guarantee at the request of any
holder of TOPrS unless it is offered reasonable indemnity against the costs,
expenses and liabilities that might be incurred by doing so.
GOVERNING LAW
The Trust Guarantee will be governed by, and construed in accordance
with, the internal laws of the State of New York.
DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES
All of the partnership interests in the partnership, other than the
Preferred Partnership Securities acquired by the trust, are owned directly by
TXU Europe Limited. Initially, TXU Europe Limited will be the general
partner of the partnership. The limited partnership agreement authorizes and
creates the Preferred Partnership Securities, which represent limited partner
interests in the partnership. The limited partner interests represented by the
Preferred Partnership Securities will have a preference with respect to
distributions and amounts payable on redemption or liquidation over the general
partner's interest in the partnership. Except as otherwise described in this
prospectus, the limited partnership agreement does not permit the issuance of
any additional partnership interests, or the incurrence of any indebtedness by
the partnership.
Material terms and provisions of the Preferred Partnership Securities
are summarized below. A copy of the limited partnership agreement is filed as an
exhibit to the registration statement of which this prospectus is a part. You
should refer to the form of the limited partnership agreement and the Delaware
Revised Uniform Limited Partnership Act for provisions that may be important to
you.
DISTRIBUTIONS
Holders of Preferred Partnership Securities will be entitled to receive
cumulative cash distributions if, as and when declared by the general partner in
its sole discretion out of assets of the partnership legally available for
payment. Amounts payable on each Preferred Partnership Security will be fixed at
a rate per annum of ____% of the stated liquidation preference of $25 per
Preferred Partnership Security. Amounts payable on Preferred Partnership
Securities which are not distributed on the scheduled payment date will
accumulate and compound quarterly at the rate per annum equal to ____%. Amounts
payable on Preferred Partnership Securities for any period will be computed on
the basis of a 360-day year of twelve 30-day months and for any partial period
will be computed on the basis of the number of days elapsed in a 360-day year of
twelve 30-day months.
Amounts payable on the Preferred Partnership Securities will be
cumulative, will accumulate from the date of original issuance and will be
scheduled to be payable quarterly in arrears on _________, _______, _________,
and _________ of each year, commencing ________, provided that, as noted above,
the general partner is not obligated to declare distributions on the Preferred
Partnership Securities at any time. For purposes of this prospectus, the
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term "distributions" with respect to Preferred Partnership Securities means
the distributions declared by the general partner in its sole discretion.
If distributions are not declared and paid when regularly scheduled, the
accumulated distributions shall be paid to the holders of record of Preferred
Partnership Securities as they appear on the books and records of the
partnership on the record date with respect to the payment date for the
Preferred Partnership Securities.
The partnership's earnings available for distribution to the holders of
the Preferred Partnership Securities will be limited to payments made on the
subsidiary debentures or TXU Europe Limited's guarantees of subsidiary
debentures and payments on eligible debt securities in which the partnership has
invested from time to time. See -- "Partnership Investments." To the extent that
the issuers of the subsidiary debentures defer or fail to make any payment in
respect of the subsidiary debentures or TXU Europe Limited fails to make any
payment in respect of its guarantees of subsidiary debentures, the partnership
will not have sufficient funds to pay and will not declare or pay distributions
on the Preferred Partnership Securities. In that event the Partnership Guarantee
will not apply to those distributions until the partnership has sufficient funds
available to make those distributions. See DESCRIPTION OF THE PARTNERSHIP
GUARANTEE. In addition, distributions on the Preferred Partnership Securities
may be declared and paid only as determined in the sole discretion of the
general partner of the partnership. If the partnership fails to declare and pay
distributions on the Preferred Partnership Securities out of funds legally
available for distribution, the Partnership Guarantee will not apply to those
distributions and the trust will not have sufficient funds to make distributions
on the TOPrS. In that event the Trust Guarantee will not apply to those
distributions until the trust has sufficient funds available to pay those
distributions. In addition, as described under RISK FACTORS -- "The partnership
may have insufficient income or assets to pay distributions to the trust that
are sufficient to pay distributions on the TOPrS," the partnership may not have
sufficient funds to pay current or liquidating distributions on the Preferred
Partnership Securities if:
. at any time that the partnership is receiving current
payments in respect of the securities held by the
partnership (including the subsidiary debentures), TXU
Europe Limited, as the general partner of the partnership,
in its sole discretion, does not declare distributions on
the Preferred Partnership Securities and the partnership
receives insufficient amounts from its investments to pay
the resulting additional compounded amounts payable that
will accumulate on any unpaid distributions,
. the partnership reinvests the proceeds received from the
subsidiary debentures upon their redemption or at their
maturities in other subsidiary debentures or eligible debt
securities that do not generate income sufficient to pay
full quarterly distributions in respect of the Preferred
Partnership Securities at a rate of ___% per annum or, if
sufficient to pay those distributions either in full or in
part, the partnership does not declare or make such
distributions, or
. the partnership reinvests the proceeds received from the
subsidiary debentures upon their retirement or at their
maturities in subsidiary debentures that are not guaranteed
by TXU Europe Limited and those debentures cannot be
liquidated by the partnership for an amount sufficient to
pay distributions in full or, if sufficient to pay those
distributions either in full or in part, the partnership
does not declare or make those distributions.
Distributions on the Preferred Partnership Securities will be payable
to the holders as they appear on the books and records of the partnership on the
relevant record dates, which, as long as the TOPrS remain, or, in the event that
the trust has been liquidated in connection with a trust special event and
Preferred Partnership Securities are distributed to holders of the TOPrS, the
Preferred Partnership Securities remain, in book-entry only form, will be one
business day prior to the relevant payment dates. In the event the TOPrS do not,
or in the event that the trust has been liquidated in connection with a trust
special event and Preferred Partnership Securities are distributed to holders of
the TOPrS, the Preferred Partnership Securities do not, remain in book-entry
only form, the relevant record dates will be the 15th day of the month of the
relevant payment dates. In the event that any date on which distributions are
payable on the Preferred Partnership Securities is not a business day, then
payment of the distribution payable on that date will be made on the next
succeeding day that is a business day without any interest or other payment in
respect of the distribution subject to the delay, except that, if the next
business day is in the next succeeding calendar year, the payment will be made
on the immediately preceding business day (without any reduction in interest or
other payments in respect of such early payment), in each case with the same
force and effect as if made on the date the distribution was initially payable.
PARTNERSHIP ENFORCEMENT EVENTS
If one or more of the following partnership enforcement events occurs
and is continuing:
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. arrearages on scheduled distributions on the Preferred
Partnership Securities shall exist for ____ consecutive
quarterly distribution periods,
. TXU Europe Limited is in default on any of its obligations
under the Partnership Guarantee or any guarantee of
subsidiary debentures or
. an investment event of default occurs and is continuing on
any subsidiary debentures,
then the Property Trustee, for so long as the Preferred Partnership Securities
are held by the Property Trustee, will have the right, or holders of the
Preferred Partnership Securities will be entitled by the vote of holders of a
majority in aggregate liquidation preference of Preferred Partnership
Securities:
. to enforce under the limited partnership agreement the terms
of the Preferred Partnership Securities, including the right
to appoint and authorize a special representative of the
partnership and the limited partners to enforce:
-- the partnership's creditors' rights and other rights,
including the right to receive payments under the
subsidiary debentures and any of TXU Europe Limited's
guarantees of subsidiary debentures,
-- the rights of the holders of the Preferred
Partnership Securities under the Partnership
Guarantee,
-- the rights of the holders of the Preferred
Partnership Securities to receive distributions, only
if and to the extent declared out of funds legally
available for payment, on the Preferred Partnership
Securities, and
-- the terms of the Partnership Guarantee, including the
right to enforce the covenant restricting dividend,
distribution and other similar payments to others by
TXU Europe Limited and its finance subsidiaries.
If the special representative fails to enforce its rights on behalf of
the partnership under the subsidiary debentures or TXU Europe Limited's
guarantees of subsidiary debentures after a holder of Preferred Partnership
Securities has made a written request, the holder of record of Preferred
Partnership Securities may directly institute a legal proceeding against TXU
Europe Limited or its subsidiaries that have issued subsidiary debentures to
enforce the rights of the special representative and the partnership in the
subsidiary debentures or TXU Europe Limited's guarantees of those debentures
without first instituting any legal proceeding against the special
representative, the partnership or any other person or entity. In any event, if
a partnership enforcement event has occurred and is continuing and that event is
attributable to the failure of a subsidiary of TXU Europe Limited to make any
required payment when due on any subsidiary debenture or the failure of TXU
Europe Limited to make any required payment when due on any guarantee of a
subsidiary debenture, then a holder of Preferred Partnership Securities may on
behalf of the partnership directly institute a proceeding against that
subsidiary of TXU Europe Limited with respect to that subsidiary debenture or
against TXU Europe Limited with respect to that guarantee, in each case for
enforcement of payment. A holder of Preferred Partnership Securities may also
bring a direct action against TXU Europe Limited to enforce that holder's right
under the Partnership Guarantee. See DESCRIPTION OF THE PARTNERSHIP GUARANTEE --
"Events of Default; Enforcement of Partnership Guarantee."
Under no circumstances, however, will the special representative, any
holder of Preferred Partnership Securities or any holder of TOPrS have authority
to cause the general partner to declare distributions on the Preferred
Partnership Securities. As a result, although the special representative or
these holders may be able to enforce the partnership's creditors' rights to
accelerate and receive payments in respect of the subsidiary debentures and TXU
Europe Limited's guarantees of subsidiary debentures, the partnership would be
entitled to reinvest those payments in additional subsidiary debentures, subject
to satisfying the reinvestment criteria described under -- "Partnership
Investments," and in eligible debt securities, rather than declaring and making
distributions on the Preferred Partnership Securities. The special
representative will not, by virtue of acting in the capacity of special
representative, be admitted as a general partner in the partnership or otherwise
be deemed to be a general partner in the partnership and will have no liability
for the debts, obligations or liabilities of the partnership.
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PARTNERSHIP INVESTMENTS
Approximately ___% of the initial proceeds from the issuance of the
Preferred Partnership Securities and the general partner's contemporaneous
capital contribution will be used by the partnership to purchase beneficial
interests in the subsidiary debentures and the remaining __% of those proceeds
will be used to purchase eligible debt securities. The purchase of beneficial
interests in the subsidiary debentures by the partnership will occur
contemporaneously with the issuance of the Preferred Partnership Securities.
The initial subsidiary debentures will be purchased by the partnership
from two or more subsidiaries of TXU Europe Limited. TXU Europe Limited
anticipates that approximately ___% of the initial proceeds will be used to
purchase debentures of Funding, and approximately ___% of the initial proceeds
will be used to purchase debentures of one or more other eligible subsidiaries
of TXU Europe Limited. Each subsidiary debenture is expected to have a term of
20 years and to provide for interest accruing from the date of original issuance
and payable on __________, __________, __________ and __________ of each year,
commencing _______________, at market rates for those subsidiary debentures. The
subsidiary debentures will be unsecured and subordinated debt obligations of the
relevant issuer.
The payment of interest on each of the subsidiary debentures may be
deferred at any time, and from time to time, by the relevant issuer for a period
not exceeding ____ consecutive quarters and, in any event, not beyond the
maturity date of the subsidiary debentures held by the partnership at that time.
If an issuer were to so defer the payment of interest, interest would continue
to accrue and compound at the stated interest rate on the subsidiary debenture.
The subsidiary debentures will contain covenants appropriate for unsecured and
subordinated debt securities issued or guaranteed by similar borrowers pursuant
to a public offering or private placement under Rule 144A of the Securities Act
of a comparable debt security, including a limitation on consolidation, merger
and sale or conveyance of assets. The subsidiary debentures will contain
redemption provisions that correspond to the redemption provisions applicable to
the Preferred Partnership Securities, including an option to redeem the
subsidiary debentures by the relevant issuer, in whole, at any time, or in part,
from time to time, on and after _______________, and, at any time, in whole,
following the occurrence of a partnership special event, in each case, in the
same manner described under -- "Optional Redemption" and -- "Partnership Special
Event Redemption." The initial subsidiary debentures, and any other subsidiary
debentures acquired by the partnership in the future, will also contain
customary events of default, or investment events of default, including events
of default for defaults in payments on such securities when due, provided that
no default shall occur upon a valid deferral of an interest payment by an
issuer, defaults in the performance of the relevant issuer's obligations under
its debenture and certain bankruptcy, insolvency or reorganization events,
subject to customary exceptions and grace periods. All subsidiary debentures
will contain a covenant customary for non-US issuers that the payments made on
the subsidiary debentures will be without withholding or deduction for taxes or
other governmental charges, unless required by law. The covenant will also
provide that if withholding or deduction is required with respect to payment
made on the subsidiary debentures, the issuers of the debentures will pay the
partnership Additional Amounts so that the partnership would receive the same
payments on those subsidiary debentures as if no withholding or deduction had
been made. This covenant will be similar in scope to the covenant that TXU
Europe Limited will agree to with respect to any payments made under the
Partnership Guarantee as described under DESCRIPTION OF THE PARTNERSHIP
GUARANTEE -- "Additional Amounts."
For a more detailed description of the subsidiary debentures to be
issued by Funding, see DESCRIPTION OF THE FUNDING DEBENTURES.
The payment of interest and principal when due and other payment terms
of the subsidiary debentures will be fully and unconditionally guaranteed on a
subordinated basis to the extent described under -- "Investment Guarantees" by
TXU Europe Limited for the benefit of the holders of the subsidiary debentures
and, accordingly, the holders of the Preferred Partnership Securities.
Approximately __% of the initial partnership proceeds will be invested
in eligible debt securities. "Eligible debt securities" means cash or book-entry
securities, negotiable instruments, or other securities of entities not
affiliated with TXU Europe Limited which evidence any of the following:
. any security issued or guaranteed as to principal or
interest by the US, or by a person controlled or supervised
by and acting as an instrumentality of the US Government
under authority granted by the US Congress, or any
certificate of deposit for any of the foregoing;
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. commercial paper issued pursuant to Section 3(a)(3) of the
Securities Act and having, at the time of the investment or
contractual commitment to invest therein, a rating from each
of Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., or S&P, and Moody's Investors
Service, Inc., or Moody's, in the highest investment rating
category granted by such rating agency and having a maturity
not in excess of nine months;
. demand deposits, time deposits and certificates of deposit
which are fully insured by the Federal Deposit Insurance
Corporation, or FDIC;
. repurchase obligations with respect to any security that is
a direct obligation of, or fully guaranteed by, the US
Government or any agency or instrumentality thereof, the
obligations of which are backed by the full faith and credit
of the US, in either case entered into with a depository
institution or trust company which is an eligible
institution, as defined below, and the deposits of which are
insured by the FDIC; and
. any other security which is identified as a permitted
investment of a finance subsidiary pursuant to Rule 3a-5
under the Investment Company Act at the time it is acquired
by the partnership.
"Eligible institution" means a depository institution organized under
the laws of the US or any one of the states of the US or the District of
Columbia (or any US branch of a foreign bank), (1) (i) which has either (A) a
long-term unsecured debt rating of AA or better by S&P and Aa or better by
Moody's or (B) a short-term unsecured debt rating or a certificate of deposit
rating of A-1+ by S&P and P-1 by Moody's and (ii) whose deposits are insured by
the FDIC or (2) (i) the parent of which has a long-term or short- term unsecured
debt rating which signifies investment grade and (ii) whose deposits are insured
by the FDIC.
The partnership may, from time to time and subject to the restrictions
described below, reinvest payments received with respect to the subsidiary
debentures and the eligible debt securities in additional subsidiary debentures
and eligible debt securities. As of the date of this prospectus, TXU Europe
Limited, as the general partner, does not intend to cause the partnership to
reinvest regularly scheduled, periodic payments of interest or dividends
received by the partnership in the manner described below, although there can be
no assurance that the general partner's intention in respect of such
reinvestments will not change in the future.
The fairness of specific terms of all subsidiary debentures, including
the initial subsidiary debentures, will be passed upon by an independent
financial advisor, which will be a nationally recognized accounting firm, bank
or investment banking firm that does not, who represents that its directors,
officers, employees and affiliates do not, have a direct or indirect material
equity interest in TXU Europe Limited or any of its affiliates.
The partnership may reinvest in additional subsidiary debentures only
if certain procedures and criteria are satisfied with respect to each subsidiary
debenture, including the satisfaction of the following conditions:
. the partnership did not hold debt securities of the issuer
of the proposed subsidiary debenture within the three-year
period ending on the date of such proposed investment;
. there was never a default on any debt obligation of, or
arrearages of dividends on preferred shares issued by, the
issuer of the proposed subsidiary debenture that was
previously or is currently owned by the partnership;
. the applicable terms and provisions with respect to the
proposed subsidiary debenture have been determined by the
independent financial advisor to be at least as favorable as
terms which could be obtained by the partnership in a public
offering or private placement under Rule 144A of the
Securities Act of a comparable security issued by the
relevant subsidiary either with or without a full and
unconditional guarantee of TXU Europe Limited, if any; and
. the subsidiary will not be deemed to be an investment
company by reason of Section 3(a) or 3(b) of the Investment
Company Act or is otherwise an eligible recipient of funds
directly or indirectly from the trust pursuant to an order
issued by the SEC.
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If the partnership is unable to reinvest payments and proceeds from subsidiary
debentures in additional subsidiary debentures meeting the above criteria, the
partnership may only invest such funds in eligible debt securities, subject to
restrictions of applicable law, including the Investment Company Act.
GUARANTEES OF SUBSIDIARY DEBENTURES
TXU Europe Limited will agree to execute and deliver a guarantee, on a
subordinated basis, for the benefit of the holders of the subsidiary debentures
and, therefore, the holders of the Preferred Partnership Securities, with
respect to each subsidiary debenture to the extent set forth below. The
guarantees of subsidiary debentures will be enforceable regardless of any
defense, right of set-off or counterclaim, except the defense of payment, that
TXU Europe Limited may have or assert. The guarantees of subsidiary debentures
will be full and unconditional guarantees, to the extent described below, with
respect to the applicable subsidiary debentures from the time of issuance. To
the extent that, as described above, the partnership invests in additional
subsidiary debentures, the determination as to whether those subsidiary
debentures will be guaranteed by TXU Europe Limited will be made at the date of
its issuance and will be based, among other things, upon its approval by the
independent financial advisor in accordance with the reinvestment criteria
described above.
The following payments will be subject to the guarantees without
duplication:
. Any accrued and unpaid interest required to be paid on the
subsidiary debentures; and
. Principal and premium, if any, plus all accrued and unpaid
interest and Additional Amounts, if any, required to be paid
on the subsidiary debentures at maturity, upon acceleration
or upon redemption.
The guarantees will contain a covenant customary for non-US guarantors
that the payments made on the guarantees will be without withholding or
deduction for taxes or other governmental charges unless required by law. The
covenant will also provide that if withholding or deduction is required with
respect to payments under the guarantees, TXU Europe Limited will agree to pay
the partnership Additional Amounts so that the partnership would receive the
same payments under the guarantees as if no withholding or deduction had been
made. This covenant will be similar in scope to the covenant that TXU Europe
Limited will agree to with respect to any payments made under the Partnership
Guarantee as described under DESCRIPTION OF THE PARTNERSHIP GUARANTEE --
"Additional Amounts."
The guarantees of subsidiary debentures will constitute guarantees of
payment and not of collection. Therefore, the guaranteed party may directly
institute a legal proceeding against TXU Europe Limited to enforce its rights
under the applicable guarantee of subsidiary debentures without instituting a
legal proceeding against any other person or entity. If no special
representative has been appointed to enforce any guarantee of subsidiary
debentures, the general partner has the right to enforce those guarantees on
behalf of the holders of the Preferred Partnership Securities. The holders of
not less than a majority in aggregate liquidation preference of the Preferred
Partnership Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available in respect of any guarantee
of subsidiary debentures, including the giving of directions to the general
partner or the special representative, as the case may be. If the general
partner or the special representative fails to enforce any guarantee of
subsidiary debentures as provided above, any holder of TOPrS may institute its
own legal proceeding to enforce that guarantee. No guarantee of subsidiary
debentures will be discharged except by payment in full of all amounts
guaranteed by that guarantee, without duplication of amounts already paid by the
relevant subsidiary.
Amendments and Assignment
No approval of holders of Preferred Partnership Securities will be
required with respect to any amendment to guarantees of subsidiary debentures
that does not adversely affect the rights of holders of Preferred Partnership
Securities. In all other cases, the guarantees of subsidiary debentures may be
amended only with the prior approval of the holders of not less than a majority
in liquidation preference of the outstanding Preferred Partnership Securities,
provided that for so long as the Property Trustee is the holder of the Preferred
Partnership Securities, no amendment will be effective without the prior written
approval of a majority in liquidation amount of the outstanding TOPrS. All
guarantees and agreements contained in the guarantees of subsidiary debentures
will bind the successors, assigns, receivers, trustees and representatives of
TXU Europe Limited and will inure to the benefit of the holders of Preferred
Partnership Securities. Except in connection with any permitted merger or
consolidation of TXU Europe Limited with or into another entity or any permitted
sale, transfer or lease of TXU Europe Limited's assets to another entity in
which the surviving corporation, if TXU Europe Limited is not the surviving
corporation, assumes TXU Europe Limited's obligations under the guarantees of
subsidiary debentures, TXU Europe Limited may not assign its rights or delegate
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its obligations under the guarantees of subsidiary debentures without the prior
approval of the holders of at least a majority of the aggregate stated
liquidation preference of the outstanding Preferred Partnership Securities
provided, however, that if the Property Trustee on behalf of the trust is the
holder of the Preferred Partnership Securities, any amendment or proposal
requiring the approval of the holders of a majority of the Preferred Partnership
Securities will not be effective without the prior or concurrent approval of the
holders of a majority in liquidation amount of the outstanding TOPrS having a
right to vote.
Status of the Guarantees of Subsidiary Debentures; Subordination
TXU Europe Limited's obligations under the guarantees of subsidiary
debentures will constitute unsecured obligations of TXU Europe Limited and will
rank subordinate and junior in right of payment to all other unsubordinated
liabilities of TXU Europe Limited and will rank equally with other subordinated
obligations of TXU Europe Limited that are not subordinated by their terms to
the guarantees of subsidiary debentures and with similar guarantees entered into
by TXU Europe Limited in respect of any subordinated debentures of any other
subsidiary. Accordingly, the rights of the holders of the subsidiary debentures
(initially the partnership) to receive payments under the guarantees of those
debentures will be subject to the rights of the holders of any obligations that
are senior in priority to the obligations under those guarantees. Since TXU
Europe Limited is a holding company, the guarantees will be effectively
subordinated to existing and future liabilities and preference share capital of
TXU Europe Limited's subsidiaries. The terms of the subsidiary debentures
provide that each holder of subsidiary debentures, by acceptance of the
subsidiary debentures, agrees to the subordination provisions and other terms of
the guarantees of subsidiary debentures.
Governing Law
The guarantees of subsidiary debentures will be governed by and
construed in accordance with the internal laws of the State of New York.
OPTIONAL REDEMPTION
The Preferred Partnership Securities are redeemable, at the option of
the general partner, in whole, at any time, or in part, from time to time, on
and after _______________, upon not less than 30 nor more than 60 days notice,
at an amount per Preferred Partnership Security equal to $25 plus accumulated
and unpaid distributions on the Preferred Partnership Securities. If the
partnership redeems Preferred Partnership Securities in accordance with their
terms, TOPrS will be mandatorily redeemed at that redemption price. If a partial
redemption would result in the delisting of the TOPrS, or if the trust is
liquidated in connection with a trust special event, or if a partial redemption
would result in the delisting of the Preferred Partnership Securities, the
partnership must redeem all of the Preferred Partnership Securities.
PARTNERSHIP SPECIAL EVENT REDEMPTION
If, at any time, a "partnership special event," which is either a
partnership tax event or a partnership investment company event, occurs and is
continuing, the general partner will, within 90 days following the occurrence of
that partnership special event, elect to either (i) redeem the Preferred
Partnership Securities in whole, but not in part, upon not less than 30 or more
than 60 days notice at a redemption price of $25 per Preferred Partnership
Security plus accumulated and unpaid distributions; provided, however, that, if
at the time there is available to the partnership the opportunity to eliminate,
within that 90-day period, the partnership special event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure that in the sole judgment of TXU Europe
Limited has or will cause no adverse effect on the partnership, the trust, TXU
Europe Limited or the holders of the Preferred Partnership Securities, the
general partner will pursue that measure instead of redemption; or (ii) cause
the Preferred Partnership Securities to remain outstanding, provided that in the
case of this clause (ii), the general partner will pay any and all costs and
expenses (including any tax or governmental charges) incurred by or payable
by the partnership attributable to the partnership special event.
"Partnership tax event" means that the general partner:
(A) has requested and received an opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that there has
been a tax action as described under DESCRIPTION OF THE TOPrS-- "Trust Special
Event Redemption or Distribution," which affects any of the events described
below in this paragraph and that there is more than an insubstantial risk that:
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. the partnership is, or will be, subject to US federal income
tax or UK income tax or corporation tax with respect to
income accrued or received on the subsidiary debentures or
the eligible debt securities,
. the partnership is, or will be, subject to more than a de
minimis amount of other taxes, duties or other governmental
charges,
. interest payable by a subsidiary of TXU Europe Limited with
respect to its subsidiary debentures is not, or will not be,
fully deductible by that subsidiary for US federal income
tax or UK corporation tax purposes, or
(B) certifies to the Administrative Trustee that Additional Amounts
would be payable on subsidiary debentures or with respect to any payments made
under the guarantees of the subsidiary debentures, the Trust Guarantee or the
Partnership Guarantee, and that the general partner cannot avoid the requirement
to pay such Additional Amounts by taking reasonable steps available to it.
"Partnership investment company event" means that the general partner
has requested and received an opinion of nationally recognized independent legal
counsel in the US experienced in such matters to the effect that as a result of
the occurrence on or after the date of this prospectus of a change in law or
regulation or a change in interpretation or application of law or regulation by
any legislative body, court, governmental agency or regulatory authority, there
is more than an insubstantial risk that the partnership is or will be considered
an "investment company" which is required to be registered under the Investment
Company Act.
REDEMPTION PROCEDURES
The partnership may not redeem fewer than all the outstanding Preferred
Partnership Securities unless all accumulated and unpaid distributions have been
paid on all Preferred Partnership Securities for all quarterly distribution
periods terminating on or prior to the date of redemption.
Notice of redemption of Preferred Partnership Securities will be
irrevocable. If the partnership gives a notice of redemption in respect of
Preferred Partnership Securities then, by 12:00 noon, New York City time, on the
redemption date, the partnership:
. if the Preferred Partnership Securities are represented by
global certificates held by DTC, will irrevocably deposit
with DTC funds sufficient to pay the applicable redemption
price and will give DTC irrevocable instructions and
authority to pay the redemption price in respect of those
Preferred Partnership Securities or
. if the Preferred Partnership Securities are held in
certificated form, will irrevocably deposit with the paying
agent for the Preferred Partnership Securities funds
sufficient to pay the applicable redemption price and will
give such paying agent irrevocable instructions and
authority to pay the redemption price to the holders of
Preferred Partnership Securities upon surrender of their
certificates evidencing the Preferred Partnership
Securities. See DESCRIPTION OF THE TOPrS -- "Book-Entry Only
Issuance -- The Depository Trust Company."
If notice of redemption has been given and funds deposited as required,
then upon the date of the deposit, all rights of holders of such Preferred
Partnership Securities called for redemption will cease, except the right of the
holders of such Preferred Partnership Securities to receive the redemption
price, but without interest on the redemption price, and such Preferred
Partnership Securities will cease to be outstanding. In the event that any date
fixed for redemption of Preferred Partnership Securities is not a business day,
then payment of the amount payable on that date will be made on the next
succeeding day that is a business day, without any interest or other payment in
respect of the amount payable subject to the delay, except that, if that
business day falls in the next calendar year, the payment will be made on the
immediately preceding business day (without any reduction in interest or other
payments in respect of such early payment), in each case with the same force and
effect as if made on such date fixed for redemption. In the event that payment
of the redemption price in respect of Preferred Partnership Securities is
improperly withheld or refused and not paid either by the partnership or by TXU
Europe Limited under the Partnership Guarantee described under DESCRIPTION OF
THE PARTNERSHIP GUARANTEE, distributions on those Preferred Partnership
Securities will continue to accumulate, from the original redemption date to the
date of payment.
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In the event that fewer than all of the outstanding Preferred
Partnership Securities are to be redeemed and the Preferred Partnership
Securities have been distributed to holders of the TOPrS, the Preferred
Partnership Securities will be redeemed in accordance with the procedures of
DTC. See -- "Book-Entry Only Issuance -- The Depository Trust Company." In the
event that the Preferred Partnership Securities do not remain in book-entry only
form after they are distributed to the holders of the TOPrS and fewer than all
of the outstanding Preferred Partnership Securities are to be redeemed, the
Preferred Partnership Securities shall be redeemed on a pro rata basis or
pursuant to the rules of any securities exchange on which the Preferred
Partnership Securities are listed.
Subject to the foregoing and applicable law, including, without
limitation, US federal securities laws, TXU Europe Limited or any of its
affiliates may at any time and from time to time purchase outstanding Preferred
Partnership Securities by tender, in the open market or by private agreement.
LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any voluntary or involuntary dissolution, winding-up or
termination of the partnership, the holders of the Preferred Partnership
Securities will be entitled to receive a partnership liquidation distribution
out of the assets of the partnership available for distribution to partners
after satisfaction of liabilities of creditors as required by the Delaware
Revised Uniform Limited Partnership Act, before any distribution of assets is
made to the general partner, an amount equal to, in the case of holders of
Preferred Partnership Securities, the aggregate of the stated liquidation
preference of $25 per Preferred Partnership Security plus accumulated and unpaid
distributions on the Preferred Partnership Securities to the date of payment.
Under the limited partnership agreement, the partnership will be
dissolved and its affairs will be wound up:
. upon the bankruptcy of the general partner,
. upon the assignment by the general partner of its entire
interest in the partnership when the assignee is not
admitted to the partnership as a general partner of the
partnership in accordance with the limited partnership
agreement, or the filing of a certificate of dissolution or
its equivalent with respect to the general partner, or the
revocation of the general partner's charter and the
expiration of 90 days after the date of notice to the
general partner of revocation without a reinstatement of its
charter, or if any other event occurs that causes the
general partner to cease to be a general partner of the
partnership under the Delaware Revised Uniform Limited
Partnership Act, unless the business of the partnership is
continued in accordance with that Act,
. if the partnership has redeemed or otherwise purchased all
the Preferred Partnership Securities,
. upon the entry of a decree of judicial dissolution or
. upon the written consent of all partners of the partnership.
VOTING RIGHTS
Except as provided below and under DESCRIPTION OF THE PARTNERSHIP
GUARANTEE -- "Amendments and Assignment" and as otherwise required by law and
the limited partnership agreement, the holders of the Preferred Partnership
Securities will have no voting rights.
Not later than 30 days after any partnership enforcement event occurs,
the general partner will convene a meeting for the purpose of appointing a
special representative. If the general partner fails to convene a meeting for
that purpose within the 30-day period, the holders of 10% in liquidation
preference of the outstanding Preferred Partnership Securities will be entitled
to convene a meeting. The provisions of the limited partnership agreement
relating to the convening and conduct of the meetings of the partners will apply
with respect to any meeting. In the event that, at any meeting convened to
appoint a special representative, holders of less than a majority in aggregate
liquidation preference of Preferred Partnership Securities entitled to vote for
the appointment of a special representative vote for an appointment, no special
representative will be appointed. Any special representative appointed will
cease to be a special representative of the partnership and the limited partners
if:
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. the partnership, or TXU Europe Limited under the terms of
the Partnership Guarantee, has paid in full all accumulated
and unpaid distributions on the Preferred Partnership
Securities,
. any investment event of default giving rise to the
partnership enforcement event has been cured, and
. TXU Europe Limited is in compliance with all its obligations
under the Partnership Guarantee and TXU Europe Limited, in
its capacity as the general partner, will continue the
business of the partnership without dissolution.
Notwithstanding the appointment of any special representative, TXU
Europe Limited will continue as general partner and will retain all rights under
the limited partnership agreement, including the right to declare, in its sole
discretion, the payment of distributions on the Preferred Partnership Securities
and the failure to declare distributions would not constitute a default under
the limited partnership agreement.
If any proposed amendment to the limited partnership agreement provides
for, or the general partner otherwise proposes to effect:
. any action that would materially adversely affect the
powers, preferences or special rights of the Preferred
Partnership Securities, whether by way of amendment to the
limited partnership agreement or otherwise, including,
without limitation, the authorization or issuance of any
limited partner interests in the partnership ranking, as to
participation in the profits or distributions or in the
assets of the partnership, senior to the Preferred
Partnership Securities, or
. the dissolution, winding-up or termination of the
partnership, other than in connection with the occurrence of
a partnership special event or as described under "Merger,
Consolidation or Amalgamation of the Partnership" below,
then the holders of outstanding Preferred Partnership Securities will be
entitled to vote on that amendment or proposal of the general partner, but not
on any other amendment or proposal, as a class, and that amendment or proposal
will not be effective except with the approval of the holders of a majority in
liquidation preference of the outstanding Preferred Partnership Securities
having a right to vote on the matter; provided, however, that if the Property
Trustee on behalf of the trust is the holder of the Preferred Partnership
Securities, any amendment or proposal requiring the approval of the holders of a
majority of the Preferred Partnership Securities will not be effective without
the prior or concurrent approval of the holders of a majority in liquidation
amount of the outstanding TOPrS having a right to vote.
Subject to certain exceptions, the holders of a majority in liquidation
preference of the Preferred Partnership Securities may waive any past
partnership enforcement event with respect to the Preferred Partnership
Securities. A waiver of an investment event of default by the special
representative, acting at the direction of the holders of the Preferred
Partnership Securities, constitutes a waiver of the corresponding partnership
enforcement event.
The general partner shall not:
. direct the time, method and place of conducting any
proceeding for any remedy available,
. waive any investment event of default that is waivable under
the subsidiary debentures,
. exercise any right to rescind or annul a declaration that
the principal of any subsidiary debentures is due and
payable,
. waive the breach by TXU Europe Limited of the covenant in
the Partnership Guarantee restricting dividends,
distributions and similar payments by TXU Europe Limited, or
. consent to any amendment, modification or termination of any
subsidiary debenture, where a consent is required from the
investor,
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without, in each case, obtaining the prior approval of the holders of at least a
majority in liquidation preference of the Preferred Partnership Securities;
provided, however, that if the Property Trustee on behalf of the trust is the
holder of the Preferred Partnership Securities, any waiver, consent or amendment
or other action will not be effective without the prior or concurrent approval
of the holders of a majority in liquidation amount of the outstanding TOPrS
having a right to vote. The general partner will not revoke any action
previously authorized or approved by a vote of the holders of the Preferred
Partnership Securities without the approval of that revocation by a majority in
liquidation preference of the outstanding Preferred Partnership Securities. The
general partner will notify all holders of the Preferred Partnership Securities
of any notice of an investment event of default received with respect to any
subsidiary debenture or guarantee of a subsidiary debenture.
Any required approval of holders of Preferred Partnership Securities
may be given at a separate meeting of holders of Preferred Partnership
Securities convened for that purpose, at a meeting of all of the partners in the
partnership or pursuant to written consent. The partnership will cause a notice
of any meeting at which holders of Preferred Partnership Securities are entitled
to vote, or of any matter upon which action by written consent of those holders
is to be taken, to be mailed to each holder of record of Preferred Partnership
Securities. Each notice will include the following (i) the date of the meeting
or the date by which the action is to be taken, (ii) a description of any
resolution proposed for adoption at the meeting on which the holders are
entitled to vote or of the matters upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
No vote or consent of the holders of Preferred Partnership Securities
will be required for the partnership to redeem and cancel Preferred Partnership
Securities in accordance with the limited partnership agreement.
Notwithstanding that holders of Preferred Partnership Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Partnership Securities at that time that are beneficially owned
by TXU Europe Limited or by any entity directly or indirectly controlled by, or
under direct or indirect common control with, TXU Europe Limited, will not be
entitled to vote or consent and will, for purposes of the vote or consent, be
treated as if they were not outstanding, provided, however, that persons (other
than affiliates of TXU Europe Limited) to whom TXU Europe Limited or any of its
affiliates have pledged Preferred Partnership Securities may vote or consent
with respect to those pledged Preferred Partnership Securities under the terms
of that pledge.
Holders of the Preferred Partnership Securities will have no rights to
remove or replace the general partner.
MERGER, CONSOLIDATION OR AMALGAMATION OF THE PARTNERSHIP
The partnership 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 body, except as
described below. The partnership may, without the consent of the holders of the
Preferred Partnership Securities, 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:
. the successor entity either:
-- expressly assumes all of the obligations of the
partnership under the Preferred Partnership
Securities or
-- substitutes for the Preferred Partnership
Securities other successor partnership securities
having substantially the same terms as the
Preferred Partnership Securities so long as these
successor partnership securities 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,
. the issuers of subsidiary debentures expressly acknowledge
the successor entity as the holder of the subsidiary
debentures, or if the holder of the subsidiary debentures is
a depositary, then this depositary expressly acknowledges
the successor entity as the registered owner of the
beneficial interest in the subsidiary debentures,
. the Preferred Partnership Securities or any successor
partnership securities are listed, or any successor
partnership securities will be listed upon notification of
issuance, on any national securities exchange and other
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organization on which the Preferred Partnership Securities,
are then listed,
. the merger, consolidation, amalgamation or replacement does
not cause the TOPrS or, in the event that the trust has been
liquidated in connection with a trust special event, the
Preferred Partnership Securities, including any successor
partnership securities, to be downgraded by any nationally
recognized statistical rating organization,
. the merger, consolidation, amalgamation or replacement does
not adversely affect the powers, preferences and other
special rights of the holders of the TOPrS or the Preferred
Partnership Securities, including any successor partnership
securities, in any material respect other than, in the case
of the Preferred Partnership Securities, with respect to any
dilution of the holders' interest in the new resulting
entity,
. the successor entity has a purpose substantially identical
to that of the partnership,
. prior to the merger, consolidation, amalgamation or
replacement, TXU Europe Limited has received an opinion of
nationally recognized independent counsel to the partnership
in the US or UK, as applicable, experienced in these matters
to the effect that
-- the successor entity will be treated as a
partnership (and not a publicly-traded
partnership) for US federal income tax
purposes,
-- the merger, consolidation, amalgamation or
replacement would not cause the trust to be
classified as an association taxable as a
corporation for US federal income tax purposes,
-- following the merger, consolidation, amalgamation
or replacement, TXU Europe Limited and that
successor entity will be in compliance with the
Investment Company Act without registering as an
investment company,
-- the merger, consolidation, amalgamation or
replacement will not adversely affect the limited
liability of the holders of the Preferred
Partnership Securities, (or the successor
partnership securities), and
-- following the merger, consolidation, amalgamation
or replacement, the trust will not be classified
as other than a transparent entity for UK income
tax purposes.
. TXU Europe Limited guarantees the obligations of the
successor entity under the successor partnership securities
at least to the same extent as provided by the Partnership
Guarantee.
BOOK-ENTRY AND SETTLEMENT
If the Preferred Partnership Securities are distributed to holders of
TOPrS in connection with the involuntary or voluntary dissolution, winding-up or
liquidation of the trust as a result of the occurrence of a trust special event,
the Preferred Partnership Securities will be issued in the form of one or more
global certificates registered in the name of DTC, as the depository, or, its
nominee. For a description of DTC and the specific terms of the depository
arrangements, see DESCRIPTION OF THE TOPrS -- "Book-Entry Only Issuance -- The
Depository Trust Company." As of the date of this prospectus, the description of
DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the TOPrS would apply in all
material respects to any Preferred Partnership Securities represented by one or
more global certificates.
REGISTRAR, TRANSFER AGENT AND PAYING AGENT
The general partner will act as registrar, transfer agent and paying
agent for the Preferred Partnership Securities for so long as the Preferred
Partnership Securities are held by the trust or, if the trust has been
liquidated in connection with a trust special event, for so long as the
Preferred Partnership Securities remain in book-entry only form. In the event
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the Preferred Partnership Securities are distributed in connection with a trust
special event and the book-entry system for the Preferred Partnership Securities
is discontinued, it is anticipated that TXU Business Services Company will act
as transfer agent and registrar and The Bank of New York or one of its
affiliates will act as paying agent for the Preferred Partnership Securities.
Registration of transfers of Preferred Partnership Securities will be
effected without charge by or on behalf of the partnership, but upon payment,
together with any indemnity as the partnership or the general partner may
require, in respect of any tax or other governmental charges that may be imposed
in relation to the transfer.
The partnership will not be required to register or cause to be
registered the transfer of Preferred Partnership Securities after the Preferred
Partnership Securities have been called for redemption.
GOVERNING LAW
The limited partnership agreement and the Preferred Partnership
Securities will be governed by, and construed in accordance with, the internal
laws of the State of Delaware.
MISCELLANEOUS
The general partner is authorized and directed to conduct its affairs
and to operate the partnership in such a way that:
. the partnership will not be deemed to be an "investment
company" required to be registered under the Investment
Company Act,
. the subsidiary debentures will be treated as indebtedness
of their issuers for US federal and UK corporate income tax
purposes, and
. the partnership will not be treated as an association or as
a "publicly traded partnership" (within the meaning of
Section 7704 of the US Internal Revenue Code) taxable as a
corporation.
In this connection, the general partner is authorized to take any
action, not inconsistent with applicable law, the certificate of limited
partnership of the partnership or the limited partnership agreement, that the
general partner determines in its discretion to be necessary or desirable for
those purposes as long as that action does not adversely affect the interests of
the holders of the Preferred Partnership Securities.
Holders of the Preferred Partnership Securities have no preemptive or
similar rights.
DESCRIPTION OF THE PARTNERSHIP GUARANTEE
Material terms and provisions of the Partnership Guarantee that will be
executed and delivered by TXU Europe Limited for the benefit of the holders from
time to time of Preferred Partnership Securities are summarized below. A copy of
the Partnership Guarantee is filed as an exhibit to the registration statement
of which this prospectus is a part. The Partnership Guarantee will be qualified
as a trust indenture under the Trust Indenture Act. The Bank of New York , as
Partnership Guarantee Trustee, will hold the Partnership Guarantee for the
benefit of the holders of Preferred Partnership Securities and will act as
indenture trustee for the purposes of compliance with the Trust Indenture Act.
You should refer to the Partnership Guarantee and the Trust Indenture Act for
provisions that may be important to you.
Under the Partnership Guarantee, TXU Europe Limited will irrevocably
agree, on a subordinated basis to the extent set forth in the Partnership
Guarantee, to pay in full to the holders of the Preferred Partnership
Securities, except to the extent paid by the partnership, as and when due,
regardless of any defense, right of set-off or counterclaim that the partnership
may have or assert, the following Partnership Guarantee payments, without
duplication: (i) any accumulated and unpaid distributions that have been
declared on the Preferred Partnership Securities out of funds legally available
for payment, (ii) the redemption price with respect to any Preferred Partnership
Securities called for redemption by the partnership out of funds legally
available for payment, and (iii) upon a voluntary or involuntary dissolution,
winding up or termination of the partnership, the lesser of (a) the aggregate of
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the liquidation preference and all accumulated and unpaid distributions on the
Preferred Partnership Securities to the date of payment and (b) the amount of
assets of the partnership, after satisfaction of all liabilities, remaining
available for distribution to holders of Preferred Partnership Securities in
liquidation of the partnership. TXU Europe Limited's obligation to make a
Partnership Guarantee payment may be satisfied by direct payment of the required
amounts by TXU Europe Limited to the holders of Preferred Partnership Securities
or by causing the partnership to pay those amounts to the holders.
The Partnership Guarantee will be a guarantee on a subordinated basis
with respect to the Preferred Partnership Securities from the time of issuance
of the Preferred Partnership Securities but will not apply to any payment of
distributions or redemption price, or to payments upon the dissolution,
winding-up or termination of the partnership, except to the extent the
partnership has funds legally available for payment. If issuers of subsidiary
debentures or TXU Europe Limited as the guarantor of the subsidiary debentures
fail to make any payment in respect of those debentures or, if applicable,
guarantees, the partnership may not declare or pay distributions on the
Preferred Partnership Securities. In that event, holders of the Preferred
Partnership Securities would not be able to rely upon the Partnership Guarantee
for payment of those amounts. Instead, holders of the Preferred Partnership
Securities will have the remedies described herein under DESCRIPTION OF THE
PREFERRED PARTNERSHIP SECURITIES -- "Partnership Enforcement Events," including
the right to direct the general partner or the special representative, as the
case may be, to enforce the covenant restricting dividends, distributions and
similar payments by TXU Europe Limited and its finance subsidiaries. See --
"Covenants of TXU Europe Limited" below.
The Partnership Guarantee, when taken together with TXU Europe
Limited's guarantees of the subsidiary debentures and TXU Europe Limited's
obligation to pay all fees and expenses of the trust and the partnership,
constitute a guarantee to the extent described in this prospectus by TXU Europe
Limited of the distribution, redemption and liquidation payments payable to the
holders of the TOPrS. Those guarantees do not apply, however, to current
distributions by the partnership unless and until those distributions are
declared by the partnership out of funds legally available for payment or to
liquidating distributions unless there are assets available for payment in the
partnership.
ADDITIONAL AMOUNTS
All payments made under the Partnership Guarantee will be made without
withholding or deduction for any taxes or other governmental charges imposed by
a jurisdiction in which TXU Europe Limited was organized or is managed or
controlled or has a place of business, or any political subdivision or taxing
authority of that jurisdiction (each a Taxing Jurisdiction), unless the
withholding or deduction is required by law. If any required withholding or
deduction is made (Gross-Up Taxes), TXU Europe Limited will pay to each holder
of Preferred Partnership Securities such additional amounts as may be necessary
so that the net amount received by each holder of Preferred Partnership
Securities after the withholding or deduction equals the amount that the holder
would have received absent the withholding or deduction (Additional Amounts),
except that, only in the event the Preferred Partnership Securities are
distributed to the holders of the TOPrS in liquidation of the trust, no
Additional Amounts will be payable:
. to or for a holder who is liable for Gross-Up Taxes because
of the holder's connection with a Taxing Jurisdiction,
whether as a citizen, a resident or a national of such
jurisdiction or because the holder carries on a business or
maintains a permanent establishment there or is physically
present there;
. to or for a holder who presents a Preferred Partnership
Security required to be presented for payment more than 30
days after the date on which payment first becomes due,
unless that holder would have been entitled to those
Additional Amounts by presenting a Preferred Partnership
Security on the last day of the 30 day period;
. to or for a holder who presents a Preferred Partnership
Security, when presentation is required, at any place other
than in The City of New York; or
. to or for a holder who would not be liable for the Gross-Up
Tax by making a declaration of non-residence or similar
claim for exemption to the relevant tax authority.
Following the distribution of Preferred Partnership Securities to the
holders of TOPrS upon liquidation of the trust, no Additional Amounts will be
payable with respect to any Preferred Partnership Security if the beneficial
owner would not have been entitled to that payment if that beneficial owner had
been the holder.
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References in this prospectus to any payments under the Partnership
Guarantee will include any Additional Amounts payable in connection with those
payments.
COVENANTS OF TXU EUROPE LIMITED
TXU Europe Limited will covenant in the Partnership Guarantee that if:
. for any distribution period, full distributions on a
cumulative basis on any Preferred Partnership Securities
have not been distributed,
. an investment event of default with respect to any
subsidiary debentures has occurred and is continuing or
. TXU Europe Limited is in material and continuing default of
its obligations under the Trust Guarantee, the Partnership
Guarantee or any guarantee of subsidiary debentures,
then, during such period:
. TXU Europe Limited will not declare or pay dividends on,
make distributions with respect to, or redeem, purchase
or acquire any of its issued share capital or comparable
equity interest, except for dividends or distributions in
shares of, or options, warrants or rights to subscribe for
or purchase shares of, its issued share capital, and
conversions or exchanges of common shares of one class into
common shares of another class, and
. TXU Europe Limited will not make, permit any of its finance
subsidiaries to make, or make any payments that would enable
any finance subsidiary to make, any payment of any dividends
on, any distribution or liquidation payments with respect
to, or any redemption, purchase or other acquisition of, any
preferred security or comparable equity interest of any
finance subsidiary. This limitation shall not apply to
payments necessary to enable the partnership to pay
Preferred Partnership Securities or the trust to pay
distributions on the TOPrS, or a subsidiary to make payments
on subsidiary debentures.
TXU Europe Limited will also covenant in the Partnership Guarantee to
maintain, directly or indirectly, ownership of 100% of the general partner's
interest in the partnership.
EVENTS OF DEFAULT; ENFORCEMENT OF PARTNERSHIP GUARANTEE
An event of default under the Partnership Guarantee will occur upon the
failure of TXU Europe Limited to perform any of its payment or other obligations
under the Partnership Guarantee.
The holders of a majority in liquidation amount of the Preferred
Partnership Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Partnership Guarantee
Trustee or the special representative in respect of the Partnership Guarantee or
to direct the exercise of any trust or power conferred under the Partnership
Guarantee. If a special representative has been appointed, this special
representative may enforce the rights of the holders of the Preferred
Partnership Securities under the Partnership Guarantee. If the special
representative or the Partnership Guarantee Trustee fails to enforce its rights
under the Partnership Guarantee, after a holder of Preferred Partnership
Securities has made a written request, that holder of Preferred Partnership
Securities may institute a legal proceeding directly against TXU Europe Limited
to enforce the rights under the Partnership Guarantee without first instituting
a legal proceeding against the partnership, the special representative or any
other person or entity. In any event, if TXU Europe Limited has failed to make a
guarantee payment required by the Partnership Guarantee, a holder of Preferred
Partnership Securities may directly institute a proceeding against TXU Europe
Limited for enforcement of the Partnership Guarantee for such payment.
STATUS OF THE PARTNERSHIP GUARANTEE; SUBORDINATION
The Partnership Guarantee will constitute an unsecured obligation of
TXU Europe Limited and will rank subordinate and junior in right of payment to
all other liabilities of TXU Europe Limited, including the guarantees of
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subsidiary debentures, other than those that are made to rank equally or made
subordinate by their terms to the Partnership Guarantee. The Partnership
Guarantee will rank equally with any preference share capital of TXU Europe
Limited issued in the future and with similar guarantees entered into by TXU
Europe Limited in respect of any preferred security of any other finance
subsidiary. Accordingly, the rights of the holders of Preferred Partnership
Securities to receive payments under the Partnership Guarantee will be subject
to the rights of the holders of any obligations of TXU Europe Limited that are
senior in priority to the obligations under the Partnership Guarantee. Since TXU
Europe is a holding company, the Partnership Guarantee will be effectively
subordinated to existing and future liabilities and preference share capital of
TXU Europe's subsidiaries. The limited partnership agreement provides that each
holder of Preferred Partnership Securities, by acceptance of the Preferred
Partnership Securities, agrees to the subordination provisions and other terms
of the Partnership Guarantee.
The Partnership Guarantee will constitute a guarantee of payment and
not of collection. Therefore, the guaranteed party may directly institute a
legal proceeding against TXU Europe Limited to enforce its rights under the
Partnership Guarantee without instituting a legal proceeding against any other
person or entity.
The Partnership Guarantee will be deposited with the Partnership
Guarantee Trustee to be held for the benefit of the holders of the Preferred
Partnership Securities. In the event of the appointment of a special
representative to, among other things, enforce the Partnership Guarantee, the
special representative may take possession of the Partnership Guarantee for that
purpose. If no special representative has been appointed to enforce the
Partnership Guarantee, the Partnership Guarantee Trustee has the right to
enforce the Partnership Guarantee on behalf of the holders of the Preferred
Partnership Securities.
AMENDMENTS AND ASSIGNMENT
No approval of the holders of Preferred Partnership Securities will be
required with respect to any amendments to the Partnership Guarantee that do not
adversely affect the rights, preferences or privileges of holders of Preferred
Partnership Securities. In all other cases, the Partnership Guarantee may be
amended only with the prior approval of the holders of not less than a majority
in liquidation preference of the outstanding Preferred Partnership Securities;
provided, however, that if the Property Trustee on behalf of the trust is the
holder of the Preferred Partnership Securities, any amendment or proposal
requiring the approval of the holders of a majority of the Preferred Partnership
Securities will not be effective without the prior or concurrent approval of the
holders of a majority in liquidation amount of the outstanding TOPrS having a
right to vote. All guarantees and agreements contained in the Partnership
Guarantee will bind the successors, assigns, receivers, trustees and
representatives of TXU Europe Limited and will inure to the benefit of the
holders of the Preferred Partnership Securities then outstanding. Except in
connection with any permitted merger or consolidation of TXU Europe Limited with
or into another entity or any permitted sale, transfer or lease of TXU Europe
Limited's assets to another entity in which the surviving corporation, if TXU
Europe Limited is not the surviving corporation, assumes TXU Europe Limited's
obligations under the Partnership Guarantee, TXU Europe Limited may not assign
its rights or delegate its obligations under the Partnership Guarantee without
the prior approval of the holders of at least a majority of the aggregate stated
liquidation preference of the Preferred Partnership Securities then outstanding.
TERMINATION OF THE PARTNERSHIP GUARANTEE
The Partnership Guarantee will terminate and be of no further force and
effect as to the Preferred Partnership Securities upon (i) full payment of the
redemption price of all Preferred Partnership Securities or (ii) full payment of
the amounts payable in accordance with the limited partnership agreement upon
liquidation of the partnership. The Partnership Guarantee will continue to be
effective or will be reinstated, as the case may be, if at any time any holder
of Preferred Partnership Securities must in accordance with the Delaware Revised
Uniform Limited Partnership Act restore payment of any sums paid under the
Preferred Partnership Securities or the Partnership Guarantee. The Delaware
Revised Uniform Partnership Act provides that a limited partner of a limited
partnership who wrongfully receives a distribution may be liable to the limited
partnership for the amount of such distribution.
INFORMATION CONCERNING THE PARTNERSHIP GUARANTEE TRUSTEE
The Partnership Guarantee Trustee, prior to the occurrence of a default
with respect to the Partnership Guarantee, undertakes to perform only such
duties as are specifically set forth in the Partnership Guarantee and, after
default with respect to the Partnership Guarantee, will exercise the same degree
of care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to this provision, the Partnership Guarantee Trustee is under
no obligation to exercise any of the powers vested in it by the Partnership
Guarantee at the request of any holder of Preferred Partnership Securities
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unless it is offered reasonable indemnity against the costs, expenses and
liabilities that might be incurred by doing so.
GOVERNING LAW
The Partnership Guarantee will be governed by, and construed in
accordance with, the internal laws of the State of New York.
DESCRIPTION OF THE FUNDING DEBENTURES
A portion of the subsidiary debentures will be junior subordinated
debentures issued by Funding. The Funding debentures will be issued under a
subordinated indenture among Funding, TXU Europe Limited and The Bank of New
York, as trustee. The indenture will include a full, unconditional and
irrevocable subordinated guarantee of the Funding debentures by TXU Europe
Limited.
Certificates for the Funding debentures in bearer form will be held by
The Bank of New York as depositary under a deposit agreement. Beneficial
interests in the Funding debentures will be registered in the name of the
partnership. Specific terms of each series of the Funding debentures will be
described in an officer's certificate delivered to the trustee. Material terms
of the Funding debentures and the indenture are summarized below. You should
read the indenture, the Trust Indenture Act, the officer's certificate and the
deposit agreement for a more complete description. Copies of the indenture, the
officer's certificate and the deposit agreement are available upon request to
the trustee or depositary. Whenever particular provisions or defined terms in
the indenture are referred to under this DESCRIPTION OF THE FUNDING DEBENTURES,
those provisions or defined terms are incorporated by reference in this
prospectus. For your convenience, we indicate sections of the indenture where
they are described.
Each series of debt securities issued under the indenture will be
unsecured and subordinated obligations of Funding. Funding is a financing
company whose sole source of funds is payment on loans it makes to TXU Europe
Limited. The Funding debentures will be fully, unconditionally and irrevocably
guaranteed by TXU Europe Limited as to payment of principal, premium, if any,
and interest and any Additional Amounts (as described below), and the guarantee
will be an unsecured and subordinated obligation of TXU Europe Limited. See
DESCRIPTION OF THE PREFERRED PARTNERSHIP SECURITIES -- "Guarantees of Subsidiary
Debentures." The indenture does not limit the aggregate amount of indebtedness
that Funding, TXU Europe Limited or TXU Europe Limited's subsidiaries may issue
or the number of series or amount of subordinated debt securities that may be
issued under the indenture.
The covenants contained in the indenture will not afford beneficial
owners of the Funding debentures protection in the event of a highly-leveraged
transaction involving Funding or TXU Europe Limited.
PAYMENT OF INTEREST AND PRINCIPAL
Interest on each series of Funding debentures will:
. Be payable in US dollars at the rate per annum specified in
the title of the series;
. Be computed on the basis of a 360-day year of twelve 30-day
months, and for any period shorter than a month, on the
basis of the actual number of days elapsed;
. Be payable quarterly in arrears on ________, _________,
________ and _________beginning ___________ unless Funding
defers the payment of interest as described below under
"Option to Defer Interest Payment Period";
. Originally accrue from, and include _________, 1999, the
date of initial issuance; and
. Be payable on overdue interest to the extent permitted by
law at the same rate as interest is payable on principal.
If any payment date is not a business day, payment will be made on the
next business day, and no interest or other payment will result from the delay.
With respect to payments, a business day is a day, other than a Saturday, Sunday
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or a day on which banking institutions and trust companies are generally
authorized or required to remain closed in the place of payment.
The Bank of New York is paying agent for the Funding debentures in The
City of New York. So long as the Funding debentures are listed on the LSE,
Funding will maintain a paying agent in Luxembourg. Initially that paying agent
will be Kredietbank SA Luxembourgeoise.
Interest on each Funding debenture will be paid to the bearer on each
interest payment date, at maturity or upon redemption. If interest has not been
paid when due on any Funding debenture, the defaulted interest may be payable to
the bearer. (Indenture, Section 307).
The Funding debentures will mature on ____________, 2019.
The principal of and interest on the Funding debentures at maturity
will be payable, at their principal amount, upon presentation of the Funding
debentures at the office of a paying agent. Funding may change the place of
payment on the Funding debentures, appoint one or more additional paying agents,
including Funding, and may remove any paying agent, all at its discretion so
long as there is a paying agent in The City of New York and, while the Funding
debentures are listed on the LSE, in Luxembourg.
DENOMINATIONS
The Funding debentures will be payable only in US dollars. The Funding
debentures and beneficial interests in them will be issued, and may be
transferred, only in principal amounts of $25 and in multiples of $25.
FORM, BOOK-ENTRY PROCEDURES
INTRODUCTION
Beneficial interests in the Funding debentures will be registered in
the name of the partnership. The Funding debentures in which beneficial
interests are sold will be issued in the form of one or more Funding debentures
in bearer form. Upon issuance, the trustee will authenticate and deliver the
Funding debentures to The Bank of New York, which will hold those Funding
debentures as depositary for the benefit of the partnership under the deposit
agreement. The depositary will issue to the partnership, in respect of each
Funding debenture, one or more certificateless book-entry interests, which
together will represent a 100% beneficial interest in the Funding debentures.
The Funding debentures will be held in bearer form by the depositary and
certificateless book-entry interests representing beneficial ownership of these
Funding debentures will be held by, or on behalf of, the partnership.
Under the deposit agreement, the bearer Funding debentures may be
transferred only as a whole and, with Funding's consent, by the depositary or
its nominee to the depositary or to a successor depositary or nominee.
For so long as the depositary or its nominee is the holder of the
Funding debentures, the depositary or its nominee will be considered the sole
owner of the Funding debentures for all purposes under the indenture.
PAYMENTS ON THE FUNDING DEBENTURES
Payments on the Funding debentures will be made by Funding through the
trustee or other paying agent to the depositary as the holder of Funding
debentures. The depositary will, in turn, make payments in the same amounts to
the partnership.
Neither Funding, TXU Europe Limited, the trustee nor any paying agent
will have any responsibility for payments made or to be made by the depositary
to the partnership in respect of the Funding debentures or the book-entry
interests in them, including any payments of Additional Amounts.
REDEMPTION OF BOOK-ENTRY INTERESTS
If any Funding debentures are redeemed, the depositary will deliver the
amount received by it to the partnership.
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If all the Funding debentures are redeemed, the depositary will
surrender the Funding debentures of that series to the trustee or the paying
agent in Luxembourg for cancellation. The depositary will cancel the book-entry
interests issued with respect to those Funding debentures. If there is a partial
redemption, the depositary will surrender the related Funding debenture to the
trustee or the paying agent in Luxembourg for reduction of principal amount by
endorsement on the reverse of the Funding debenture or in exchange for a
substitute Funding debenture in a reduced principal amount. The depositary will
record on its books a corresponding reduction in the principal amount of the
book-entry interests issued with respect to the Funding debenture.
REPORTS AND NOTICES
Notices to holders of the Funding debentures listed on the Luxembourg
Stock Exchange will be published in a leading daily newspaper having general
circulation in Luxembourg, probably the Luxemburger Wort. The depositary will
promptly send to the partnership a copy of any notices, reports and other
communications received by it relating to Funding, the Funding debentures or the
book-entry interests.
AMENDMENT AND TERMINATION OF DEPOSIT AGREEMENT
The deposit agreement may be amended by Funding and the depositary
without the consent of the partnership:
. To cure any defect, omission, inconsistency or ambiguity;
. To add covenants and agreements of Funding or the
depositary;
. To assign the depositary's rights and duties to a qualified
successor;
. To conform the deposit agreement to the requirements of the
Securities Act, the Exchange Act, the Investment Company Act
of 1940 or the Trust Indenture Act or any other applicable
securities laws;
. To modify the deposit agreement in connection with an
amendment to the indenture that does not require the consent
of the partnership; or
. To amend or supplement the deposit agreement in any way
which, in the opinion of counsel acceptable to Funding, is
not materially adverse to the partnership or inconsistent
with the deposit agreement itself.
Otherwise, no amendment that materially adversely affects the
partnership may be made to the deposit agreement without the consent of the
partnership.
The deposit agreement will cease to be of further effect when the
indenture has been satisfied and discharged or:
. All sums payable by Funding under the deposit agreement have
been paid; and
. The deposit agreement has been satisfied and discharged.
RESIGNATION OF DEPOSITARY
The depositary may resign upon 60 days' written notice to Funding and
the partnership. The resignation of the depositary will become effective upon
acceptance of a successor depositary to similar arrangements. If no successor
has been appointed by Funding within 120 days, then the [depositary may deliver
the Funding debentures to the partnership].
OBLIGATION OF DEPOSITARY
The depositary will undertake to perform only those duties specifically
described in the deposit agreement and, subject to exceptions described in the
deposit agreement, will assume no obligation under the deposit agreement other
than for its own bad faith, negligence or willful misconduct in the performance
of its duties under the deposit agreement.
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OPTIONAL REDEMPTION
On and after _______, ____, the Funding debentures will be redeemable
as a whole at any time or in part from time to time, at the option of Funding,
at a redemption price of 100% of the unpaid principal amount, plus any unpaid
and accrued interest and any Additional Amounts. In addition, following the
occurrence of a partnership special event, the Funding debentures will be
redeemable as a whole, at the option of Funding, at a redemption price of 100%
of the unpaid principal amount, plus any unpaid and accrued interest and any
Additional Amounts.
The trustee will give notice to the holders of any optional redemption
of Funding debentures, not less than 30 nor more than 60 days before that
redemption. All notices of redemption will state the redemption date and the
redemption price plus accrued and unpaid interest. If less than all the Funding
debentures are to be redeemed, the notice will identify those to be redeemed and
the portion of the principal amount of the Funding debentures to be redeemed in
part. The notice will state that on the redemption date, subject to the
debenture trustee's receipt of the redemption monies, the redemption price plus
accrued and unpaid interest will become due and payable on each Funding
debenture to be redeemed and that interest will cease to accrue on and after
that date. It will name the place or places where the Funding debentures are to
be surrendered for payment of the redemption price plus accrued and unpaid
interest (Indenture, Section 404).
OPTION TO DEFER PAYMENT OF INTEREST
Funding may defer the payment of interest at any time, and from time to
time, on the Funding debentures for a period not exceeding ___ consecutive
quarters and, in any event, not beyond the maturity of the Funding debentures
(Indenture, Section 311). Interest would, however, continue to accrue and
compound at the stated interest rate.
Funding will give the partnership and the trustee notice of its
election to defer interest payments before the earlier of (1) one business day
before the record date for the distribution which would occur if Funding did not
make the election to defer or (2) the date Funding is required to give notice to
the LSE or any other applicable self-regulatory organization of the record date.
SUBORDINATION
The Funding debentures will be subordinate and junior in right of
payment to all Senior Indebtedness of Funding (Indenture, Section 1601). No
payment of the principal of the Funding debentures, including redemption and
sinking fund payments, or interest on the Funding debentures may be made until
all holders of Senior Indebtedness have been paid, if any of the following
occurs:
. Specified events of bankruptcy, insolvency or reorganization
of Funding;
. Any Senior Indebtedness is not paid when due and that
default continues without waiver;
. Any other default has occurred and continues without waiver,
permitting the holders of Senior Indebtedness to accelerate
the maturity of that indebtedness; or
. The maturity of any other series of subordinated debentures
under the subordinated indenture has been accelerated,
because of an Event of Default under the subordinated
indenture which remains uncured (Indenture, Section 1602).
Upon any distribution of assets of Funding to creditors in connection
with any insolvency, bankruptcy or similar proceeding, all principal of, and
premium, if any, and interest due or to become due on all Senior Indebtedness
must be paid in full before the holders of the Funding debentures are entitled
to receive or retain any payment (Indenture, Section 1604).
Senior Indebtedness is defined in the indenture to include all notes
and other obligations including guarantees of Funding for borrowed money that is
not subordinate or junior in right of payment to any other indebtedness of
Funding unless by its terms it is equal in right of payment to the Funding
debentures. The obligations of Funding under the Funding debentures will not be
deemed to be Senior Indebtedness (Indenture, Section 101).
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The indenture does not limit the aggregate amount of Senior
Indebtedness that may be issued. As of September 30, 1999 Funding had
approximately $1.5 billion principal amount of indebtedness for borrowed money
constituting Senior Indebtedness.
ADDITIONAL AMOUNTS
All payments made on the Funding debentures or under the related TXU
Europe Limited guarantee will be made without withholding or deduction for any
taxes or other governmental charges imposed by a jurisdiction in which Funding
or TXU Europe Limited is organized or managed or controlled or has a place of
business, or any political subdivision or taxing authority of that jurisdiction
(each a Taxing Jurisdiction), unless the withholding or deduction is required
by law. If any required withholding or deduction is made (Gross-Up Taxes),
Funding or TXU Europe Limited will pay to each holder of Funding debentures
additional amounts as may be necessary so that the net amount received by each
holder of Funding debentures after the withholding or deduction equals the
amount that the holder would have received absent that withholding or deduction
(Additional Amounts).
References in this prospectus to any payments under the related TXU
Europe Limited guarantee will include any Additional Amounts payable in
connection with the guarantee.
DEFEASANCE
Funding and TXU Europe Limited will be discharged from their
obligations on the Funding debentures or any other series of debt securities
issued under the indenture when either of them deposits with the trustee cash or
government securities sufficient to pay the principal, interest, any premium and
any other sums when due on or before the stated maturity date or a redemption
date for that series of debt securities (Indenture, Section 701). Funding and
TXU Europe Limited will continue to be liable for any shortfall in the funds
deposited unless they have provided an opinion of counsel that the discharge of
their obligations will not create an adverse US tax effect for the holders.
CONSOLIDATION, MERGER, AND SALE OF ASSETS
Under the terms of the indenture, neither Funding nor TXU Europe
Limited may consolidate with or merge into any other entity or convey, transfer
or lease its properties and assets substantially as an entirety to any entity,
unless:
. The surviving or successor entity is organized under the
laws of any jurisdiction and validly existing under the laws
of that jurisdiction and it expressly assumes the
obligations of Funding or TXU Europe Limited, as the case
may be, on all debt securities, the guarantee and under the
indenture;
. Immediately after giving effect to the transaction, no Event
of Default and event which, after notice or lapse of time or
both, would become an Event of Default, will have occurred
and be continuing; and
. Funding or TXU Europe Limited, as the case may be, will have
delivered to the trustee a certificate of an officer and an
opinion of counsel as provided in the indenture (Indenture,
Section 1101).
The indenture does not restrict Funding or TXU Europe Limited from
entering into a merger in which Funding or TXU Europe Limited, as the case may
be, is the surviving entity (Indenture, Section 1103).
EVENTS OF DEFAULT
"Event of Default," when used in the indenture with respect to a
particular series of debt securities issued under the indenture, including the
Funding debentures, means any of the following has occurred:
. Failure to pay interest on that series within 30 days after
it is due;
. Failure to pay the principal of or any premium on that
series when due (subject to Funding's right to defer such
payment);
. Failure to perform or remedy any breach of any other
covenant in the indenture, other than a covenant that does
not relate to that series of debt securities, that continues
for 90 days after Funding or TXU Europe Limited receives
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written notice from the trustee, or Funding or TXU Europe
Limited and the trustee receive a written notice from the
holders of 25% or more in principal amount of the debt
securities of that series;
. The guarantee of that series becomes ineffective or is
disaffirmed by TXU Europe Limited;
. Specified events in bankruptcy or insolvency of Funding or
TXU Europe Limited; or
. Failure to pay Additional Amounts on that series within 30
days after it is due (Indenture, Section 801).
An Event of Default for a particular series of debt securities does not
necessarily constitute an Event of Default for any other series of debt
securities issued under the indenture. The trustee will give notice to the
holders of debt securities of the relevant series of any default known to the
trustee in the manner and to the extent required by the Trust Indenture Act,
unless cured or waived, in respect to payment of that series, effectiveness of
the guarantee, payment of indebtedness of Funding, TXU Europe Limited or a
subsidiary of TXU Europe Limited, or bankruptcy or insolvency of Funding, TXU
Europe Limited or any subsidiary of TXU Europe Limited. The trustee will not
give notice to the holders of debt securities of any other default known to the
trustee until at least 45 days after the occurrence of the default (Indenture,
Section 902).
REMEDIES
If an Event of Default with respect to fewer than all the series of
debt securities occurs and continues, the trustee or the holders of at least 25%
in principal amount of the debt securities of the affected series may declare
the entire principal amount of all the debt securities of that series, together
with accrued interest, to be due and payable immediately. However, if the Event
of Default applies to all outstanding debt securities under the indenture, only
the trustee or holders of at least 25% in principal amount of all outstanding
debt securities of all series, voting as one class, and not the holders of any
one series, may make that declaration of acceleration (Indenture, Section 802).
At any time after a declaration of acceleration with respect to the
debt securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the trustee, the Event of Default
giving rise to the declaration of acceleration will be considered waived, and
the declaration and its consequences will be considered rescinded and annulled,
if Funding or TXU Europe Limited has paid or deposited with the trustee a sum
sufficient to pay:
. All overdue interest on all debt securities of the series;
. The principal of and premium, if any, on any debt securities
of the series which have otherwise become due and interest
that is currently due;
. To the extent permitted by law, interest on overdue
interest;
. All amounts due to the trustee under the indenture; and
. Any other Event of Default with respect to the debt
securities of that series has been cured or waived as
provided in the indenture (Indenture, Section 802).
There is no automatic acceleration, even in the event of bankruptcy,
insolvency or reorganization of Funding or TXU Europe Limited.
Other than its duties in case of an Event of Default, the trustee is
not obligated to exercise any of its rights or powers under the indenture at the
request, order or direction of any of the holders, unless the holders offer the
trustee a reasonable indemnity. If they provide this reasonable indemnity, the
holders of a majority in principal amount of any series of debt securities will
have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any power conferred upon
the trustee. However, if the Event of Default relates to more than one series,
only the holders of a majority in aggregate principal amount of all affected
series will have the right to give this direction. The trustee is not obligated
to comply with directions that conflict with law or other provisions of the
indenture (Indenture, Section 812).
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No holder of debt securities of any series will have any right to
institute any proceeding under the indenture, or any remedy under the indenture,
unless:
. The holder has previously given to the trustee written
notice of a continuing Event of Default;
. The holders of a majority in aggregate principal amount of
the outstanding debt securities of all series in respect of
which an Event of Default has occurred and is continuing
have made a written request to the trustee, and have offered
reasonable indemnity to the trustee, to institute
proceedings;
. The trustee has failed to institute any proceeding for 60
days after notice; and
. The holders of a majority in aggregate principal amount of
all series in default have not given the trustee direction
inconsistent with the written request within that 60 day
period (Indenture, Section 807).
However, these limitations do not apply to a suit by a holder of a debt
security for payment of the principal, premium, if any, or interest or
Additional Amounts, if any, due on the debt security on or after the applicable
due date (Indenture, Section 808).
TXU Europe Limited will provide to the trustee an annual statement by
an appropriate officer as to compliance with all conditions and covenants under
the indenture (Indenture, Section 606).
ENFORCEMENT OF RIGHTS BY HOLDERS OF PREFERRED PARTNERSHIP SECURITIES
If the special representative fails to enforce its rights on behalf of
the partnership in the Funding debentures or TXU Europe Limited's guarantee of
Funding debentures after a holder of Preferred Partnership Securities has made a
written request, the holder of record of Preferred Partnership Securities may
directly institute a legal proceeding against TXU Europe Limited or Funding to
enforce the rights of the special representative and the partnership in the
Funding debentures or TXU Europe Limited's guarantees of those debentures
without first instituting any legal proceeding against the special
representative, the partnership or any other person or entity. In any event, if
a partnership enforcement event has occurred and is continuing and that event is
attributable to the failure of Funding to make any required payment when due on
any Funding debenture or the failure of TXU Europe Limited to make any required
payment when due on any guarantee of a Funding debenture, then a holder of
Preferred Partnership Securities may on behalf of the partnership directly
institute a proceeding against Funding with respect to that Funding debenture or
against TXU Europe Limited with respect to that guarantee, in each case for
enforcement of payment.
ENFORCEMENT OF RIGHTS BY HOLDERS OF TOPRS
In addition, for so long as the trust holds any Preferred Partnership
Securities, if the special representative fails to enforce its rights on behalf
of the partnership in the Funding debentures or TXU Europe Limited's guarantee's
of Funding debentures after a holder of TOPrS has made a written request, a
holder of record of TOPrS may on behalf of the partnership directly institute a
legal proceeding against Funding, without first instituting any legal proceeding
against the Property Trustee, the trust, the special representative, the
partnership or any other person. In any event, for so long as the trust is the
holder of any Preferred Partnership Securities, if a trust enforcement event has
occurred and is continuing and that trust enforcement event is attributable to
the failure of Funding to make any required payment when due on any Funding
debenture or the failure of TXU Europe Limited to make any required payment when
due on any guarantee of a Funding debenture, then a holder of TOPrS may on
behalf of the partnership directly institute a proceeding against Funding with
respect to that Funding debenture or against TXU Europe Limited with respect to
that guarantee, in each case for enforcement of payment.
MODIFICATION AND WAIVER
Without the consent of any holder of debt securities, Funding, TXU
Europe Limited and the trustee may enter into one or more supplemental
indentures for any of the following purposes:
. To evidence the assumption by any permitted successor of the
covenants of Funding or TXU Europe Limited in the indenture
and in the debt securities;
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. To add additional covenants of Funding or TXU Europe Limited
or to surrender any right or power of Funding or TXU Europe
Limited under the indenture;
. To add additional Events of Default;
. To change or eliminate or add any provision to the
indenture; provided, however, if the change, elimination or
addition will adversely affect the interests of the holders
of debt securities of any series in any material respect,
that change, elimination or addition will become effective
only:
(1) when the consent of the holders of debt securities
of that series has been obtained in accordance
with the indenture; or
(2) when no debt securities of the affected series
remain outstanding under the indenture;
. To provide collateral security for all but not
part of the debt securities;
. To establish the form or terms of debt securities
of any other series or any guarantees as permitted
by the indenture;
. To provide for the issuance of additional bearer
securities and related coupons, if any;
. To evidence and provide for the acceptance of
appointment of a separate or successor trustee;
. To provide for the procedures required for use of
a noncertificated system of registration for the
debt securities of all or any series;
. To change any place where principal, premium, if
any, and interest will be payable, debt securities
may be surrendered for registration of transfer or
exchange and notices to Funding and TXU Europe
Limited may be served; or
. To cure any ambiguity or inconsistency or to make
any other provisions with respect to matters and
questions arising under the indenture; provided
that the action will not adversely affect the
interests of the holders of debt securities of any
series in any material respect (Indenture, Section
1201).
The holders of a majority in aggregate principal amount of the debt
securities of all series then outstanding may waive compliance by Funding and
TXU Europe Limited with some restrictive provisions of the indenture (Indenture,
Section 607). The holders of a majority in aggregate principal amount of the
debt securities of one or more but less than all series or tranches then
outstanding may waive compliance by Funding and TXU Europe Limited with some
restrictive provisions of the indenture with respect to those series or tranches
(Indenture, Section 607). The holders of not less than a majority in principal
amount of the outstanding debt securities of any series may waive any past
default under the indenture with respect to that series, except a default in the
payment of principal, premium, if any, or interest or Additional Amounts, if
any, and some covenants and provisions of the indenture that cannot be modified
or amended without the consent of the holder of each outstanding debt security
of the series affected (Indenture, Section 813).
If the Trust Indenture Act of 1939 is amended after the date of the
indenture to require changes to the indenture, the indenture will be deemed to
be amended so as to conform to that amendment of that Act. Funding, TXU Europe
Limited and the trustee may, without the consent of any holders of any debt
securities, enter into one or more supplemental indentures to evidence the
amendment (Indenture, Section 1201).
The consent of the holders of a majority in aggregate principal amount
of the debt securities of all series then outstanding is required for all other
modifications to the indenture. However, if less than all of the series of debt
securities outstanding are directly affected by a proposed supplemental
indenture, then the consent only of the holders of a majority in aggregate
principal amount of all series that are directly affected will be required. No
amendment or modification may:
. Change the stated maturity of the principal of, or any installment of
principal of or interest on, any debt security, or reduce the
principal amount of any debt security or its rate of interest or
change the method of calculating the interest rate or reduce any
premium payable upon redemption, or change the currency in which
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payments are made, or impair the right to institute suit for the
enforcement of any payment on or after the stated maturity of any debt
security, without the consent of the holder;
. Reduce the percentage in principal amount of the outstanding debt
securities of any series whose consent is required for any
supplemental indenture or any waiver of compliance with a provision of
the indenture or any default under the indenture and its consequences,
or reduce the requirements for quorum or voting, without the consent
of all the holders of the series; or
. Modify some of the provisions of the indenture relating to
supplemental indentures, waivers of specified covenants and waivers of
past defaults with respect to the debt securities of any series,
without the consent of the holder of each outstanding debt security
affected by the modification or waiver (Indenture, Section 1202).
A supplemental indenture which changes the indenture solely for the
benefit of one or more particular series of debt securities, or modifies the
rights of the holders of debt securities of one or more series, will not affect
the rights under the indenture of the holders of the debt securities of any
other series (Indenture, Section 1202).
The indenture provides that debt securities owned by Funding, TXU
Europe Limited or anyone else required to make payment on the debt securities
will be disregarded and considered not to be outstanding in determining whether
the required holders have given a request or consent.
Funding or TXU Europe Limited may fix in advance a record date to
determine the holders entitled to give any request, demand, authorization,
direction, notice, consent, waiver or other act of the holders, but neither
Funding or TXU Europe Limited will have any obligation to do so. If a record
date is fixed for that purpose, the request, demand, authorization, direction,
notice, consent, waiver or other act of the holders may be given before or after
the record date, but only the holders of record at the close of business on that
record date will be considered holders for the purposes of determining whether
holders of the required percentage of the outstanding debt securities have
authorized or agreed or consented to the request, demand, authorization,
direction, notice, consent, waiver or other act of the holders. For that
purpose, the outstanding debt securities will be computed as of the record date.
Any request, demand, authorization, direction, notice, consent, election, waiver
or other act of a holder will bind every future holder of the same debt
securities and the holder of every debt security issued upon the registration of
transfer of or in exchange of these debt securities. A transferee will be bound
by acts of the trustee, Funding or TXU Europe Limited taken in reliance on those
requests or directions, whether or not notation of the action is made upon the
debt security (Indenture, Section 104).
RESIGNATION OF A TRUSTEE
A trustee may resign at any time by giving written notice to Funding
and TXU Europe Limited or may be removed at any time by act of the holders of a
majority in principal amount of all outstanding series of debt securities and
notice of that act has been delivered to the trustee, Funding and TXU Europe
Limited. No resignation or removal of a trustee and no appointment of a
successor trustee will be effective until the acceptance of appointment by a
successor trustee. So long as no Event of Default or event which, after notice
or lapse of time, or both, would become an Event of Default has occurred and is
continuing and except with respect to a trustee appointed by act of the holders,
if Funding and TXU Europe Limited deliver to the trustee resolutions of their
Boards of Directors appointing a successor trustee and that successor has
accepted the appointment in accordance with the terms of the indenture, the
trustee will be deemed to have resigned and the successor will be deemed to have
been appointed as trustee in accordance with the indenture (Indenture, Section
910).
NOTICES
Notices to holders of bearer Funding debentures will be given as
provided for in the Funding debentures. The depositary will forward these
notices to the partnership (Indenture, Section 106). So long as the Funding
debentures are listed on the LSE, notices will also be published in a leading
daily newspaper with general circulation in Luxembourg, probably the Luxemburger
Wort.
TITLE
Funding, TXU Europe Limited, the trustee, and any agent of Funding, TXU
Europe Limited or the trustee, will treat the bearer as the absolute owner of
the Funding debentures (Indenture, Section 308).
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GOVERNING LAW
The indenture, the deposit agreement, the Funding debentures and the
guarantee will be governed by, and construed in accordance with, the laws of the
State of New York (Indenture, Section 112).
REGARDING THE TRUSTEE
The trustee under the indenture is The Bank of New York. The Bank of
New York is also depositary under the deposit agreement and will act as Property
Trustee, Partnership Guarantee Trustee and Trust Guarantee Trustee. TXU Europe
Limited and some of its affiliates also maintain various banking and trust
relationships with The Bank of New York.
MEETINGS OF HOLDERS OF FUNDING DEBENTURES
The indenture contains provisions for the calling of meetings of
holders of one or more series of the Funding debentures to consider matters
affecting their interest, including consents or waivers or other actions by the
holders. See -- "Modification and Waiver" and "Remedies." The trustee may call a
meeting of holders of one or more series at any time. The trustee will call a
meeting at the request of Funding, TXU Europe Limited or the holders of 33% in
aggregate principal amount of the Funding debentures of one or more series,
considered as one class. Notice of the meeting will be given to the holders of
the Funding debentures of the affected series not less than 21 nor more than 180
days before the date of the meeting. The holders of a majority in principal
amount of the Funding debentures of the affected series, considered as one
class, will constitute a quorum at the meeting. Attendance at a meeting may be
in person or by proxy.
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MATERIAL INCOME TAX CONSIDERATIONS
UK TAX CONSIDERATIONS
The following is a summary of current law and practice relating to the
UK income tax treatment of interest on the subsidiary debentures to be issued
by TXU Eastern Funding Company, in the form of the Funding debenture, and
subsidiary debentures issued in the same form as the Funding debenture where
the interest has a UK source, where the TOPrS are held and beneficially owned
by persons who are not residents of the UK for taxation purposes. The UK tax
position in the case of a UK resident holder of the TOPrS 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 TOPrS will not be offered to UK resident persons.
Prospective investors who may be taxable in the UK because they are UK
residents or carry on a trade, profession or vocation in the UK to which a
holding of TOPrS is attributable or who may be unsure as to their tax position
should seek their own professional advice.
ISSUER/PAYING AGENT WITHHOLDING TAX
The subsidiary debentures will constitute "quoted Eurobonds" within the
meaning of section 124 of the Income and Corporation Taxes Act 1988 ("the Act")
as long as they continue to be in bearer form and are listed on a "recognised
stock exchange" within the meaning of section 841 of the Act. The LSE is a
"recognised stock exchange" for these purposes. Accordingly, payments of
interest on the subsidiary debentures when they are listed on the Luxembourg
Stock Exchange may be made without withholding or deduction for, or on account
of, UK income tax where payment is made by or through a person outside the UK,
or where the payment is made by or through a person in the UK and either:
(1) the beneficial owner of the subsidiary debentures and of the
interest on those notes is not resident in the UK, or
(2) the subsidiary debentures are held in a "recognised clearing
system";
and a declaration to that effect in the required form has been given to the
paying agent and the UK Inland Revenue has not issued a direction that it
considers that no exemption from the requirement to withhold or deduct applies.
Where these conditions are not satisfied, whether or not payment is
made through a paying agent, interest on the subsidiary debentures will be
paid after deduction of UK income tax at the lower rate, which is, currently,
20%, unless the Inland Revenue has previously directed, in relation to a
particular holder of subsidiary debentures, that payment should be made free of
that deduction or subject to a reduced deduction by virtue of relief being
available to the holder of those subsidiary debentures under the provisions
of any applicable double taxation treaty.
So long as the subsidiary debentures are held by the partnership, it
is intended that the partnership will collect payments of interest on the
subsidiary debentures from a paying agent in New York or Luxembourg.
COLLECTING AGENT WITHHOLDING TAX
A person, referred to in this summary as a collecting agent, in the UK
who, in the course of a trade or profession, either:
(a) acts as custodian of the subsidiary debentures and receives
interest on the subsidiary debentures, or directs that
interest on the subsidiary debentures be paid to another
person, or consents to payment of interest on the subsidiary
debentures being made to another person;
(b) collects or secures payment of, or receives interest on, the
subsidiary debentures for another person, including the holder
of such subsidiary debentures; or
(c) acts for another person in arranging to collect or secure
payment of interest on the subsidiary debentures, except by
means solely of clearing a check or arranging for the clearing
of a check, will be required to withhold UK income tax at the
lower rate (currently 20%) unless certain statutory exceptions
apply.
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The partnership does not intend to appoint a UK collecting agent in
respect of the interest payments on the subsidiary debentures.
TAXATION OF UK SOURCE INCOME
For the purposes of UK income tax, interest on the subsidiary
debentures should be regarded as income to which holders of TOPrS are entitled
as it arises on the subsidiary debentures. However, notwithstanding that the
income arising to the holder of a TOPrS may have a UK source, where interest
on the subsidiary debentures is paid without withholding or deduction for, or
on account of, UK income tax it should not fall to be taxed in the hands of
either the trust or any beneficial owner of the TOPrS who is neither resident
in the UK nor carrying on a trade in the UK to which the holding of the TOPrS
is attributable.
US INCOME TAX CONSIDERATIONS
The following summary describes material US federal income tax
consequences of the acquisition, ownership and disposition of the TOPrS and
represents the opinion of Thelen Reid & Priest LLP, counsel to TXU Europe
Limited, the partnership, and the trust. Except where noted, it deals only with
TOPrS held as capital assets within the meaning of section 1221 of the US
Internal Revenue Code of 1986, as amended (Code), and does not deal with special
situations, such as those of dealers in securities or currencies, financial
institutions, tax-exempt entities, life insurance companies, persons holding the
TOPrS as part of a hedging or conversion transaction or a straddle, persons who
have a functional currency other than the US dollar, or persons who are not US
holders, as defined below. In addition, this discussion does not address the tax
consequences to persons who purchase TOPrS other than pursuant to their original
issuance and distribution. Furthermore, the discussion below is based upon the
Code, existing and proposed Treasury regulations promulgated under the Code, and
current administrative rulings and judicial decisions under the Code and
regulations, all of which are subject to change, possibly on a retroactive
basis, so as to result in US federal income tax consequences different from
those discussed below.
As used in this prospectus, a US holder means a holder of a beneficial
interest in TOPrS that is (i) a citizen or resident of the US, (ii) a
corporation, partnership or other entity created or organized in or under the
laws of the US or any political subdivision of the US, (iii) an estate the
income of which is subject to US federal income taxation regardless of its
source, or (iv) a trust the administration of which is subject to the primary
supervision of a court within the US and for which one or more US persons have
the authority to control all substantial decisions.
PROSPECTIVE HOLDERS OF BENEFICIAL INTERESTS IN TOPRS ARE ADVISED TO
CONSULT WITH THEIR TAX ADVISORS AS TO THE US FEDERAL INCOME TAX CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF TOPRS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES, AS WELL AS THE EFFECT OF ANY STATE, LOCAL OR OTHER TAX LAWS.
CLASSIFICATION OF THE TRUST
Thelen Reid & Priest LLP is of the opinion that, under current law, and
based on certain representations, facts and assumptions set forth in its
opinion, the trust will be classified for US federal income tax purposes as a
grantor trust and not as an association taxable as a corporation. Accordingly,
for US federal income tax purposes, each holder of TOPrS will be considered the
owner of an undivided interest in the Preferred Partnership Securities held by
the trust, and each holder will be required to include in its gross income its
distributive share of income attributable to the partnership, which generally
will be equal to such holder's allocable share of amounts accrued on the
Preferred Partnership Securities. No amount included in income with respect to
the TOPrS will be eligible for the corporate dividends-received deduction.
CLASSIFICATION OF THE PARTNERSHIP
Thelen Reid & Priest LLP is of the opinion that, under current law, and
based on certain representations, facts and assumptions set forth in its
opinion, the partnership will be classified for US federal income tax purposes
as a partnership and not as an association or publicly traded partnership
taxable as a corporation.
Thelen Reid & Priest LLP's opinion is based on certain factual
assumptions relating to the organization and operation of the partnership and is
conditioned upon certain representations made by the general partner and the
partnership as to factual matters, such as the organization and the operation of
the partnership and the type and frequency of investments made by the
partnership.
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The general partner has represented that it intends to operate the
partnership in a manner such that it will continue to constitute a partnership
for all future taxable periods in which any Preferred Partnership Securities
remain outstanding. In particular, pursuant to the limited partnership
agreement, the general partner is prohibited from taking any action that would
cause the Partnership to constitute a publicly traded partnership taxable as a
corporation under section 7704(a) of the Code. Accordingly, it is expected that
the partnership will continue to qualify as a partnership, and therefore will
not constitute a publicly traded partnership taxable as a corporation, for all
taxable years in which the Preferred Partnership Securities remain outstanding.
CLASSIFICATION OF THE SUBSIDIARY DEBENTURES
The partnership, TXU Europe Limited, the subsidiaries of TXU Europe
Limited that issue subsidiary debentures and the holders of the TOPrS (by
acceptance of a beneficial interest in a TOPrS) will agree to treat the
subsidiary debentures as indebtedness of the relevant issuer for US federal
income tax purposes. In connection with the issuance of the initial subsidiary
debentures, Thelen Reid & Priest LLP will issue its opinion, based on the
reasoning contained therein, that under current law, and based on certain
representations, facts and assumptions set forth in such opinion, the subsidiary
debentures will be classified as indebtedness of the relevant issuer for US
federal income tax purposes.
PARTNERSHIP INCOME
A holder's distributive share of income attributable to the partnership
generally will be substantially equal to the amount of such holder's allocable
share of the cash distributions that accumulate with respect to the TOPrS.
Accordingly, if quarterly distributions on the TOPrS are paid currently, the
amount of income recognized by a holder during a taxable year generally will be
substantially equal to the cash distributions received by the holder with
respect to its TOPrS.
The nature and timing of the income that is allocated to holders of
TOPrS will, however, depend on the US federal income tax characterization of the
investments held by the partnership during the period in question. Because the
partnership will be an accrual basis taxpayer for US federal income tax
purposes, income will accrue on the TOPrS and will be allocated to holders of
TOPrS on a daily accrual basis, generally at a rate that is expected to be equal
to (and that will not be greater than) the distribution rate on the TOPrS,
regardless of the holders' method of accounting. Actual cash distributions on
the TOPrS will not, however, be separately reported as taxable income to the
holders at the time they are received.
If distributions on the Preferred Partnership Securities are not made
currently, the corresponding distributions on the TOPrS will not be made
currently. Because the partnership is an accrual basis taxpayer it can be
expected that during a period in which interest payments on the subsidiary
debentures or other partnership investments or distributions on the Preferred
Partnership Securities are deferred (for whatever reason), holders will
generally recognize income in advance of their receipt of any cash distributions
with respect to their TOPrS. The amount of income that will be allocated to
holders of TOPrS during any such deferral period will equal their pro rata share
of the amount of distributions accruing on the Preferred Partnership Securities
during such deferral period.
RECEIPT OF PREFERRED PARTNERSHIP SECURITIES UPON LIQUIDATION OF THE TRUST
Under certain circumstances, as described under the caption DESCRIPTION
OF THE TOPrS -- "Trust Special Event Redemption or Distribution", Preferred
Partnership Securities may be distributed to holders of TOPrS in exchange for
their TOPrS and in liquidation of the trust. Unless the liquidation of the trust
occurs as a result of the trust being subject to US federal income tax with
respect to income accrued or received on the Preferred Partnership Securities,
such a distribution to holders would, for US federal income tax purposes, be
treated as a nontaxable event to each holder, each holder would receive an
aggregate tax basis in the Preferred Partnership Securities equal to such
holder's aggregate tax basis in its TOPrS, and each holder's holding period in
the Preferred Partnership Securities so received in liquidation of the trust
would include the period during which the TOPrS were held by such holder. If,
however, the liquidation of the trust were to occur because the trust was
subject to US federal income tax with respect to income accrued or received on
the Preferred Partnership Securities, the distribution of Preferred Partnership
Securities to holders by the trust would likely be a taxable event to each
holder, and each holder would recognize gain or loss as if the holder had
exchanged its TOPrS for the Preferred Partnership Securities it received upon
the liquidation of the trust in a taxable exchange. Such gain or loss would be
equal to the difference between the holder's aggregate tax basis in its TOPrS
surrendered in the exchange and the aggregate fair market value of the Preferred
Partnership Securities received in the exchange.
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REDEMPTION OF TOPRS FOR CASH
Under certain circumstances, as described under the caption DESCRIPTION
OF THE TOPrS -- "Mandatory Redemption", DESCRIPTION OF THE TOPrS -- "Trust
Special Event Redemption or Distribution" and DESCRIPTION OF THE PREFERRED
PARTNERSHIP SECURITIES -- "Partnership Special Event Redemption", the general
partner may cause the partnership to redeem the Preferred Partnership Securities
for cash, in which event the trust shall simultaneously apply the proceeds of
such redemption to redeem the TOPrS. Under current law, such a redemption would
constitute, for US federal income tax purposes, a taxable disposition, and a
holder would recognize gain or loss as if it had sold its proportionate interest
in the redeemed Preferred Partnership Securities for an amount of cash equal to
the proceeds received upon redemption. See " -- Disposition of TOPrS".
DISPOSITION OF TOPRS
A holder that sells TOPrS will recognize gain or loss equal to the
difference between the amount realized on the sale of the TOPrS and the holder's
adjusted tax basis in such TOPrS. Such gain or loss will be a capital gain or
loss and will be a long-term capital gain or loss if the TOPrS have been held
for more than one year at the time of the sale.
A holder's tax basis in its TOPrS generally will equal the amount paid
by the holder for its TOPrS, increased by the amount includible in income by
such holder with respect to its TOPrS, and reduced by the amount of cash or
other property distributed to such holder with respect to its TOPrS. A holder
who acquires TOPrS at different prices may be required to maintain a single
aggregate adjusted tax basis in all of its TOPrS and, upon sale or other
disposition of some of its TOPrS, to allocate a pro rata portion of the
aggregate tax basis to the TOPrS sold (rather than maintaining a separate tax
basis in each TOPrS for purposes of computing gain or loss on a sale of that
trust security).
PARTNERSHIP ANTI-ABUSE RULES
The US Department of Treasury has promulgated regulations under section
701 of the Code that generally permit it to recast a transaction or disregard a
partnership if a partnership is formed or availed of in connection with a
transaction a principal purpose of which is to reduce substantially the present
value of the partners' aggregate US federal tax liability in a manner that is
inconsistent with the intent of the partnership provisions of the Code, or to
treat a partnership as an aggregate of its partners as appropriate to carry out
the purpose of any provision of the Code or the Treasury regulations thereunder.
The partnership has been formed for, and will engage in, activities typical for
partnerships. Although there is no precedent that applies to the transactions
contemplated herein, Thelen Reid & Priest LLP has advised TXU Europe Limited,
the partnership and the trust, and each of TXU Europe, the partnership and the
trust believe, that the partnership is not of a type intended to fall within the
scope of these regulations.
INFORMATION REPORTING AND BACKUP WITHHOLDING
To the extent required by law, income on the TOPrS will be reported to
US holders on Form 1099, which should be mailed to the holders by January 31
following each calendar year.
Payment of the proceeds from the disposition of the TOPrS to or through
the US office of a broker is subject to information reporting unless the US
holder establishes an exemption from information reporting.
Payments made in respect of, and proceeds from the sale of, the TOPrS
may be subject to "backup withholding" tax at a rate of 31% if the US holder
fails to comply with identification requirements prescribed by the Code and
regulations, or has previously failed to report in full dividend and interest
income, or does not otherwise establish its entitlement to an exemption. Any
withheld amounts generally will be refunded or allowed as a credit against the
US holder's US federal income tax liability, provided that information required
by the Code and regulations is furnished to the US Internal Revenue Service.
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UNDERWRITING
Subject to the terms and conditions set forth in an underwriting
agreement, the trust has agreed to sell to each of the underwriters named below,
and each of the underwriters, for whom Merrill Lynch, Pierce, Fenner & Smith
Incorporated is acting as representative, has severally agreed to purchase the
number of TOPrS set forth opposite its name below. In the underwriting
agreement, the several underwriters have agreed, subject to the terms and
conditions in the underwriting agreement, to purchase all the TOPrS offered if
any of the TOPrS are purchased. In the event of default by an underwriter, the
underwriting agreement provides that, in certain circumstances, the purchase
commitments of the non-defaulting underwriters may be increased or the
underwriting agreement may be terminated.
Underwriters Number of TOPrS
------------ -----------------
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.................... ----------------
Total............................... =================
COMMISSION AND DISCOUNTS
The underwriters propose to offer the TOPrS to the public at the public
in the United States offering price set forth on the cover page of this
prospectus, and, to certain dealers at that price less a concession not in
excess of $.___ per TOPrS. The underwriters may allow, and those dealers may
reallow, a discount not in excess of $.___ per TOPrS to certain brokers and
dealers. After the TOPrS are released for sale to the public, the offering
price, concession and discount may be changed.
In view of the fact that the proceeds of the sale of the TOPrS will
ultimately be used to purchase the debentures of Funding and other eligible
subsidiaries of TXU Europe Limited, the underwriting agreement provides that TXU
Europe Limited will pay as compensation to the underwriters an amount in
immediately available funds of $____________ for the accounts of the several
underwriters.
LISTING
The trust will apply to have the TOPrS listed on the NYSE and the LSE.
Trading of the TOPrS on the NYSE is expected to commence within a 30-day period
after the initial delivery of the TOPrS. The representative has advised the
trust that it intends to make a market in the TOPrS prior to the commencement of
trading on the NYSE. The representative will have no obligation to make a market
in the TOPrS, however, and may cease market-making activities, if commenced, at
any time.
Before this offering there has been no public market for the TOPrS. In
order to meet one of the requirements for listing the TOPrS on the NYSE, the
underwriters will undertake to sell lots of 100 or more TOPrS to a minimum of
400 beneficial holders, that there will be at least one million TOPrS
outstanding and that the TOPrS will have a minimum market value of $4,000,000.
PRICE STABILIZATION, SHORT POSITIONS AND PENALTY BIDS
In connection with the offering, the underwriters are permitted to
engage in certain transactions that stabilize the market price of the TOPrS.
Such transactions consist of bids or purchases for the purpose of pegging,
fixing or maintaining the market price of the TOPrS. If an underwriter creates a
short position in the TOPrS in connection with the offering, i.e., if it sells
more TOPrS than are set forth on the cover page of this prospectus, the
underwriter may reduce that short position by purchasing TOPrS in the open
market. In general, purchases of a security for the purpose of stabilization or
to reduce a short position could cause the price of the security to be higher
than it might be in the absence of such purchases.
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The underwriters may also impose a penalty bid on certain underwriters
and selling group members. This means that if an underwriter purchases TOPrS in
the open market to reduce the underwriter's short position or to stabilize the
price of the TOPrS, they may reclaim the amount of the selling concession from
the underwriters and selling group members who sold those TOPrS as part of the
offering. The imposition of a penalty bid might have an effect on the price of a
security to the extent that it were to discourage resales of the security.
Neither the trust, TXU Europe Limited nor any of the underwriters makes
any representation or prediction as to the direction or magnitude of any effect
that the transactions described above may have on the price of the TOPrS. In
addition, neither the trust, TXU Europe Limited nor any of the underwriters
makes any representation that the underwriters will engage in these transactions
or that these transactions, once commenced, will not be discontinued without
notice.
SELLING RESTRICTIONS
United Kingdom
In addition to the above, each underwriter has represented and agreed
in the underwriting agreement that:
It has not offered or sold and prior to the date six months after the
date of issue of the TOPrS will not offer or sell any TOPrS 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, as amended;
It has complied and will comply with all applicable provisions of the
Financial Services Act 1986 with respect to anything done by it in relation to
the TOPrS in, from or otherwise involving the UK; and
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 issue of the TOPrS 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 the document may otherwise lawfully be issued or passed on.
MISCELLANEOUS
The trust, TXU Europe Limited, Funding and the partnership have agreed
to indemnify the underwriters against, or contribute to payments that the
underwriters may be required to make in respect of, certain liabilities,
including liabilities under the Securities Act.
Certain of the underwriters and their affiliates engage in transactions
with, and perform services for, TXU Europe Limited and its affiliates in the
ordinary course of business and have engaged, and may in the future engage, in
commercial banking and investment banking transactions with TXU Europe Limited
and its affiliates.
EXPERTS
The consolidated financial statements of TXU Europe Limited (formerly
known as TXU Eastern Holdings Limited) and Subsidiaries as of December 31, 1998
and March 31, 1999 and for the periods from formation (February 5, 1998) through
December 31, 1998 and from formation through March 31, 1999; the consolidated
financial statements of Eastern Group plc as of March 31, 1998, for the years
ended March 31, 1997 and March 31, 1998, and for the period from April 1, 1998
through May 18, 1998; and the financial statements of Energy Group Overseas B.V.
as of March 31, 1998 and for the periods from October 8, 1997 through March 31,
1998 and April 1, 1998 through May 18, 1998 included in this prospectus have
been audited by PricewaterhouseCoopers, independent accountants, as stated in
their reports included in this prospectus, and have been included in this
prospectus in reliance upon the reports of PricewaterhouseCoopers given
upon their authority as experts in accounting and auditing.
The provisions of the United Kingdom Companies Act of 1985 and the New
Articles of Association of TXU Europe Limited, adopted on May 22, 1998, provide
PricewaterhouseCoopers with indemnification rights. PricewaterhouseCoopers
acknowledges that such indemnification is deemed to be unenforceable under
United States securities laws. PricewaterhouseCoopers confirms that no actual
indemnification has been provided or sought and that no indemnification will be
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sought in the future from TXU Europe Limited until Deloitte & Touche, as
successor auditors, issues a report on TXU Europe Limited, which is included in
a filing with the Securities and Exchange Commission.
The financial statements of the trust and the partnership included in
this prospectus have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their reports included in this prospectus, and have been
included in this prospectus in reliance upon the reports of Deloitte & Touche
LLP given upon their authority as experts in accounting and auditing.
The statements made as to matters of law and legal conclusions in this
prospectus under MATERIAL INCOME TAX CONSIDERATIONS -- "UK Tax Considerations"
have been reviewed by Norton Rose, London, England, and are included in this
prospectus in reliance upon the opinion of that firm given upon their authority
as experts. The statements made as to matters of law and legal conclusions in
this prospectus under MATERIAL INCOME TAX CONSIDERATIONS -- "US Income Tax
Considerations" have been reviewed by Thelen Reid & Priest LLP, New York, New
York, and are included in this prospectus in reliance upon the opinion of that
firm given upon their authority as experts.
LEGALITY
Matters of Delaware law relating to the legality of the TOPrS, the
validity of the trust agreement, the formation of the trust and the partnership
and the legality of the Preferred Partnership Securities are being passed upon
by Richards, Layton & Finger, P.A., Wilmington, Delaware, special Delaware
counsel to the trust, the partnership, TXU Europe Limited and Funding. The
legality of the Trust Guarantee, the Partnership Guarantee, the subsidiary
debentures and the guarantees with respect to the subsidiary debentures will be
passed upon on behalf of the trust, the partnership, TXU Europe Limited and
Funding by E.J. Lean, General Counsel to TXU Europe Limited and Funding, by
Worsham, Forsythe & Wooldridge, L.L.P., Dallas, Texas and by Thelen Reid &
Priest LLP, New York, New York. All matters concerning the incorporation of TXU
Europe Limited and Funding and all other matters of UK law relating to TXU
Europe Limited and Funding will be passed upon by E.J. Lean. Certain legal
matters will be passed upon on behalf of the underwriters by Winthrop, Stimson,
Putnam & Roberts, New York, New York, counsel to the underwriters. Thelen Reid &
Priest LLP, Worsham, Forsythe & Wooldridge, L.L.P. and Winthrop, Stimson, Putnam
& Roberts may rely on the opinion of Richards, Layton & Finger, P.A. as to
matters of Delaware law and on the opinion of E.J. Lean as to matters of English
law. At September 30, 1999, members of the firm of Worsham, Forsythe &
Wooldridge, L.L.P. owned approximately 41,000 shares of the common stock of TXU
Corp, the parent company of TXU Europe Limited.
NATURE OF FINANCIAL INFORMATION
The financial information in this prospectus in respect of TXU Europe
Limited and TXU Europe Group included in SUMMARY -- "Selected Financial
Information," CAPITALIZATION and MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS does not constitute statutory
accounts under Section 240 of the UK Companies Act 1985. Statutory accounts of
TXU Europe Group for the fiscal year ended March 31, 1998 to which a portion of
that financial information relates have been delivered to the Registrar of
Companies in England and Wales. The auditors of TXU Europe Group have made a
report under Section 236 of the Companies Act on the statutory accounts for that
fiscal year which was not qualified within the meaning of Section 262 of the
Companies Act and did not contain a statement made under Section 237(2) or
237(3) of the Companies Act.
WHERE YOU CAN FIND MORE INFORMATION
TXU Europe Limited is required to file reports under the Securities
Exchange Act of 1934 and will file those reports with the SEC. These SEC filings
will be available to the public over the Internet at the SEC's website at
http://www.sec.gov. You will also be able to read and copy any of these SEC
filings at the SEC's public reference rooms in Washington, D.C., New York, New
York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. In addition, these filings will be
available free of charge at the offices of the paying agent in Luxembourg.
No separate financial statements of Funding are included in this
prospectus. TXU Europe Limited and Funding do not consider that those financial
statements would be material to holders of TOPrS because (1) Funding is a
recently incorporated company that has no operating history and no independent
operations, and (2) Funding was formed for the sole purpose of providing
financing for the operations of TXU Europe Limited and its subsidiaries.
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LUXEMBOURG STOCK EXCHANGE AND OTHER INFORMATION
LISTING
A notice relating to the issue of the TOPrS (Notice Legale) as well as
the Certificate of Trust and the trust agreement of TXU Europe Capital I, the
limited partnership agreement of TXU Europe Funding I, L.P., the Memorandum and
Articles of Association of Funding, the Memorandum and Articles of Association
of TXU Europe Limited have been lodged with the Chief Registrar of the District
Court of Luxembourg (Greffier en chef du Tribunal d'Arrondissement de et a
Luxembourg) where these documents may be examined and copies obtained.
EUROCLEAR AND CEDELBANK
The TOPrS have been accepted for clearance through Cedelbank and
Euroclear. The Common Code number for the TOPrS is o and the ISIN number is o.
AUTHORIZATION
The trust by its terms authorizes the issuance of the TOPrS. TXU Europe
Limited was authorized to issue the guarantee by resolution of its Board of
Directors on ______ __, 1999.
SIGNIFICANT OR MATERiAL CHANGE
Except as disclosed in this prospectus, there has been no significant
change in the financial or trading position of (1) the trust since its
formation, (2) the partnership since its formation, (3) Funding since its
incorporation, (4) TXU Europe Limited since its incorporation and (5) TXU Europe
Group and its consolidated subsidiaries since September 30, 1999, the date of
the last published consolidated accounts of those companies. Since those dates,
except as disclosed in this prospectus, there has been no material adverse
change in the financial position or prospects of Funding, TXU Europe Limited or
TXU Europe Group and its subsidiaries.
LITIGATION
Neither the trust, the partnership, Funding nor TXU Europe Limited is
involved in any litigation or arbitration proceedings which are material in the
context of the issue of the TOPrS nor, so far as the trust, the partnership,
Funding or TXU Europe Limited is aware, is any such litigation or arbitration
pending or threatened.
AUDITORS
Neither the trust, the partnership nor Funding has published any
financial statements since their respective dates of incorporation or formation,
as the case may be.
TXU Europe Limited produced its first audited financial statements on
March 3, 1999.
The following additional audited financial statements for TXU Europe
Limited are included in this prospectus:
(1) for the period from formation through December 31, 1998; and
(2) for the period from formation through March 31, 1999.
The financial information in respect of TXU Europe Group and its
subsidiaries as of March 31, 1998 and for the two year period then ended, that
is contained in this document does not constitute statutory accounts within the
meaning of Section 240 of the Companies Act. Statutory accounts for each of the
two years in the two year period ended March 31, 1998 have been delivered to the
Registrar of Companies in England and Wales, and Price Waterhouse gave an
unqualified report on those accounts, without any statement under Section 237(2)
or (3) of the Companies Act.
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DOCUMENTS AVAILABLE
Copies of the following documents may be inspected at, and, in the case
of the financial statements referred to in clause (v) below, obtained from, the
offices of the paying agent for the TOPrS in Luxembourg during usual business
hours on any weekday (Saturdays and public holidays excepted) so long as any of
the TOPrS remain outstanding:
(i) the certificate of trust and the trust agreement (which
contains the forms of TOPrS);
(ii) the limited partnership agreement of the partnership;
(iii) the Memorandum and Articles of Association of Funding;
(iv) the Memorandum and Articles of Association of TXU Europe
Limited;
(v) the latest annual consolidated financial statements of TXU
Europe Limited and interim financial statements of TXU
Europe Limited, which are expected to be available on a
quarterly basis; financial statements of Funding are not
prepared or published, nor are they expected to be prepared
or published in the future (if, in the future, Funding is
required to prepare and publish financial statements, those
financial statements will be also be available at the
offices of the paying agent for the exchange senior notes in
Luxembourg); and
(vi) the latest annual financial statements of the trust and the
partnership.
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INDEX TO FINANCIAL STATEMENTS
TXU EUROPE LIMITED (formerly known as TXU EASTERN HOLDINGS LIMITED) AND
SUBSIDIARIES (Successor Company) Page
----
Report of Independent Accountants...........................................F-3
Financial Statements:
Consolidated balance sheets as of December 31, 1998 and as
of March 31, 1999.................................................F-4
Statements of consolidated income for the period from
formation through December 31, 1998 and for the period
from formation through March 31, 1999.............................F-6
Statements of consolidated comprehensive income for the
period from formation through December 31, 1998 and for
the period from formation through March 31, 1999..................F-7
Statements of consolidated common stock equity for the
period from formation through December 31, 1998 and for the
period from formation through March 31, 1999......................F-8
Statements of consolidated cash flows for the period from
formation through December 31, 1998 and for the period
from formation through March 31, 1999.............................F-9
Notes to the consolidated financial
statements..................................................F-11
EASTERN GROUP plc (now known as TXU EUROPE GROUP plc) AND SUBSIDIARIES
(Predecessor Company)
Report of Independent Accountants...........................................F-35
Financial Statements:
Consolidated balance sheet as of March 31,
1998........................................................F-36
Statements of consolidated income for the years ended
March 31, 1997 and 1998 and for the period from April 1,
1998 through May 18, 1998.........................................F-38
Statements of consolidated comprehensive income for the years
ended March 31, 1997 and 1998 and for the period from
April 1, 1998 through May 18, 1998................................F-39
Statements of consolidated common stock equity for the years
ended March 31, 1997 and 1998 and for the period from
April 1, 1998 through May 18, 1998................................F-40
Statements of consolidated cash flows for the years ended
March 31, 1997 and 1998 and for the period from April 1,
1998 through May 18, 1998.........................................F-41
Notes to the consolidated financial
statements..................................................F-42
ENERGY GROUP OVERSEAS B.V.
Report of Independent Accountants...........................................F-62
Financial Statements:
Balance Sheet as of March 31,
1998........................................................F-63
Statements of income for the periods from formation through
March 31, 1998 and from April 1, 1998 through May 18, 1998........F-64
Statements of comprehensive income for the periods from
formation through March 31, 1998 and from April 1, 1998
through May 18, 199...............................................F-65
Statements of common stock equity for the periods from
formation through March 31, 1998 and from April 1, 1998
through May 18, 1998..............................................F-66
Statements of cash flows for the periods from formation
through March 31, 1998 and from April 1, 1998 through
May 18, 1998......................................................F-67
Notes to the financial statements..................................F-68
TXU EUROPE CAPITAL I
Independent Auditors'Report.................................................F-71
Balance Sheet......................................................F-72
Notes to balance sheet.............................................F-72
F-1
<PAGE>
TXU EUROPE FUNDING I, L.P.
Independent Auditor's Report................................................F-73
Balance Sheet......................................................F-74
Notes to balance sheet.............................................F-74
TXU EUROPE LIMITED AND SUBSIDIARIES
Financial Statements:
Unaudited condensed consolidated balance sheet as of
September 30, 1999................................................F-75
Unaudited condensed statements of consolidated income of the
Predecessor Company for the period from January 1,
1998 through May 18, 1998 and of the Successor Company
for the period from formation through September 30,
1998 and for the nine months ended September 30, 1999........F-77
Unaudited condensed statements of consolidated comprehensive
income of the Predecessor Company for the period from
January 1, 1998 through May 18, 1998 and of the Successor
Company for the period from formation through September
30, 1998 and for the nine months ended September 30, 1999....F-78
Unaudited condensed statements of consolidated cash
flows of the Predecessor Company for the period from
January 1, 1998 through May 18, 1998 and of the Successor
Company for the period from formation through September
30, 1998 and for the nine months ended September 30, 1999....F-79
Notes to the unaudited condensed consolidated financial
statements..................................................F-80
TXU EUROPE LIMITED
Unaudited condensed combined pro forma statement of income
from continuing operations for the year ended December
31, 19........................................................P-1
Notes to unaudited condensed combined pro forma statement of
income.......................................................P-3
The financial statement schedules are omitted because of the absence of the
conditions under which they are required or because the information is included
in the consolidated financial statements or the notes thereto.
F-2
<PAGE>
PRICEWATERHOUSECOOPERS
- - - - --------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
1 Embankment Place
London WC2N 6NN
Telephone +44 (0) 171 583 5000
Facsimile +44 (0) 171 822 4652
Report of Independent Accountants
---------------------------------
To the Board of Directors and Shareholders of TXU Europe Limited (formerly
known as TXU Eastern Holdings Limited) and Subsidiaries
In our opinion, the accompanying consolidated balance sheets and the related
statements of consolidated income, of comprehensive income, of common stock
equity and of cash flows present fairly, in all material respects, the financial
position of TXU Europe Limited (formerly known as TXU Eastern Holdings Limited)
and Subsidiaries at December 3l, 1998 and March 31, 1999, and the results
of their operations and their cash flows for the periods from formation
(February 5, 1998) to December 31, 1998 and from formation to March 31, 1999 in
conformity with accounting principles generally accepted in the United States.
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 of these statements in accordance
with generally accepted auditing standards in the United Kingdom which do not
differ significantly with those in the United States and which 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, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PricewaterhouseCoopers
London, England
June 30, 1999
PricewaterhouseCoopers is the successor partnership to the UK firms of Price
Waterhouse and Coopers & Lybrand. The principal place of business of
PricewaterhouseCoopers and its associate partnerships, and of Coopers & Lybrand,
is 1 Embankment Place, London WC2N 6NN. The principal place of business of Price
Waterhouse is Southwark Towers, 32 London Bridge Street, London SE1 9SY. Lists
of the partners' names are available for inspection at those places.
All partners in the associate partnerships are authorised to conduct business as
agents of, and all contracts for services to clients are with,
PricewaterhouseCoopers. PricewaterhouseCoopers is authorised by the Institute of
Chartered Accountants in England and Wales to carry on investment business.
F-3
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
CONSOLIDATED BALANCE SHEETS
((pound) million)
<TABLE>
<CAPTION>
As of As of
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Assets
Property, plant and equipment, net 2,676 2,516
----- -----
Current assets
Cash and cash equivalents 467 414
Accounts receivable (net of allowance for uncollectible accounts
of (pound)22 million and (pound)17 million at December 31, 1998 and
March 31, 1999, respectively) 585 619
Inventories:
Materials and supplies 25 23
Fuel stock 116 97
Prepayments 40 22
ACT recoverable 30 30
Other current assets 40 29
----- -----
Total current assets 1,303 1,234
----- -----
Investments
Restricted cash 717 730
Other 233 284
----- -----
Total investments 950 1,014
----- -----
Deferred debits
Goodwill (net of accumulated amortization of (pound)52 million and (pound)73
million at December 31, 1998 and March 31, 1999, respectively) 3,209 3,451
Prepayments for pensions 257 259
Other deferred debits 134 109
----- -----
Total deferred debits 3,600 3,819
----- -----
Total assets 8,529 8,583
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
CONSOLIDATED BALANCE SHEETS
((pound) million, except for number of shares and par value)
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Capitalization and liabilities
Capitalization
Common stock (3,000,000,000 shares at US$1 par and 100 deferred
shares at (pound)1 par authorized) 2,455,705,299 shares and 100
deferred shares issued and outstanding 1,467 1,467
Retained earnings 76 125
Accumulated other comprehensive loss (8) (11)
------ ------
Total common stock equity 1,535 1,581
------ ------
Minority interest 190 200
------ ------
Note payable to TXU Corp 682 682
Long-term debt, less amounts due currently 3,629 3,754
------ ------
Total long-term debt 4,311 4,436
------ ------
Total capitalization 6,036 6,217
------ ------
Current liabilities
Notes payable - banks 238 53
Long-term debt due currently 382 486
Short-term loans on accounts receivable 300 300
Accounts payable:
Affiliates 7 7
Other 532 403
Taxes accrued 162 213
Interest accrued 53 16
Other current liabilities 17 56
------ ------
Total current liabilities 1,691 1,534
------ ------
Deferred credits and other noncurrent liabilities
Deferred income taxes, net 321 334
Provision for unfavorable contracts 250 248
Due to affiliates 33 45
Other deferred credits and noncurrent liabilities 198 205
------ ------
Total deferred credits and other noncurrent liabilities 802 832
------ ------
Commitments and contingencies (Notes 12 and 13) -- --
Total capitalization and liabilities 8,529 8,583
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
STATEMENTS OF CONSOLIDATED INCOME
((pound) million)
<TABLE>
<CAPTION>
Period from formation Period from formation
through through
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Operating revenues 2,165 3,338
Costs and expenses
Purchased power 961 1,480
Gas purchased for resale 367 646
Operation and maintenance 379 526
Depreciation and amortization 144 202
----- -----
Total operating expenses 1,851 2,854
----- -----
Operating income 314 484
Other income - net 46 47
----- -----
Income before interest, income taxes and minority interest 360 531
Interest income 64 78
Interest expense, net of capitalized interest of (pound)4
million and (pound)5 million for the periods from formation
through December 31, 1998 and March 31, 1999,
respectively 269 356
----- -----
Income before income taxes and minority interest 155 253
Income tax expense 67 106
----- -----
Income before minority interest 88 147
Minority interest 11 21
----- -----
Net income 77 126
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
((pound) million)
<TABLE>
<CAPTION>
Period from formation Period from formation
through December 31, 1998 through March 31, 1999
------------------------- ----------------------
<S> <C> <C>
Net income 77 126
Other comprehensive income
Unrealized loss on securities classified as available for sale (8) (11)
Cumulative translation adjustment -- --
---- ----
Comprehensive income 69 115
==== ====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-7
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
STATEMENTS OF CONSOLIDATED COMMON STOCK EQUITY
((pound) million)
<TABLE>
<CAPTION>
Period from formation through December 31, 1998
-----------------------------------------------
Common Retained Accumulated Other
Stock Earnings Comprehensive Loss
------------ -------- ------------------
<S> <C> <C> <C>
Balance at February 5, 1998 -- -- --
Net income -- 77 --
Cash dividends -- (1) --
Stock issued (2,456 million shares) 1,467 -- --
Unrealized loss on securities classified as available for sale -- -- (8)
Cumulative translation adjustment -- -- --
----- ----- -----
Balance at December 31, 1998 1,467 76 (8)
===== ===== =====
<CAPTION>
Period from formation through March 31, 1999
-----------------------------------------------
Common Retained Accumulated Other
Stock Earnings Comprehensive Loss
------------ -------- ------------------
<S> <C> <C> <C>
Balance at February 5, 1998 -- -- --
Net income -- 126 --
Cash dividends -- (1) --
Stock issued (2,456 million shares) 1,467 -- --
Unrealized loss on securities classified as available for sale -- -- (11)
Cumulative translation adjustment -- -- --
----- ----- -----
Balance at March 31, 1999 1,467 125 (11)
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
STATEMENTS OF CONSOLIDATED CASH FLOWS
((pound) million)
<TABLE>
<CAPTION>
Period from formation Period from formation
through through
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Cash flows - operating activities
Net income 77 126
Adjustments to reconcile net income to cash provided by
operating activities:
Depreciation and amortization 144 202
Amortization of discount on long-term debt (5) (6)
Deferred income taxes 24 35
Net gain on sale of businesses (13) (12)
Minority interest 11 21
Undistributed equity in earnings of TEG (2) (2)
Changes in operating assets and liabilities:
Accounts receivable (138) (173)
Inventories (26) (7)
Prepayments and other assets (7) (16)
Accounts payable
Affiliates 7 7
Other 198 73
Interest accrued 40 1
Taxes accrued (95) (77)
Other liabilities (211) (173)
Due to affiliates 33 45
------ ------
Cash provided by operating activities 37 44
------ ------
Cash flows - investing activities
Acquisition of TEG, net of cash acquired of (pound)2,011 million (1,432) (1,444)
Capital expenditures (207) (230)
Purchase of Citigen (London) Ltd and BG Cogen Ltd (14) (14)
Proceeds from sale of businesses 60 63
Investment in Svartisen (124) (124)
Investment in marketable securities (36) (36)
Other investments (14) (73)
------ ------
Cash used in investing activities (1,767) (1,858)
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
STATEMENTS OF CONSOLIDATED CASH FLOWS (continued)
((pound) million)
<TABLE>
<CAPTION>
Period from formation Period from formation
through through
December 31, 1998 March 31, 1999
----------------- --------------
<S> <C> <C>
Cash flows - financing activities
Net borrowings under the:
Acquisition facility 1,821 1,821
Interim facility 243 243
Other long-term debt 66 360
Issuance of common stock to parent 1,467 1,467
Retirements of :
Acquisition facility (1,071) (1,071)
Interim facility (243) (243)
Loan notes (9) (9)
Other long-term debt (174) (242)
Change in notes payable - banks 168 (27)
Change in minority interest 166 166
Retirements of advances from TXU Corp (200) (200)
Debt financing cost (36) (36)
Dividends paid (1) (1)
------ ------
Cash provided by financing activities 2,197 2,228
------ ------
Net change in cash and cash equivalents 467 414
Cash and cash equivalents - beginning balance -- --
------ ------
Cash and cash equivalents - ending balance 467 414
====== ======
Supplemental cash flow disclosures:
Cash paid for interest 223 310
Cash paid for income taxes 137 148
Non-cash transactions
Investment received in consideration for sale of EG
Telecoms 22 22
Consolidation of debt and related investment on
cross-border leases 170 170
Issuance of loan notes upon acquisition of TEG 85 85
Advances from TXU Corp upon acquisition of TEG 882 882
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
The business and operations of TXU Europe Limited (formerly known as TXU
Eastern Holdings Limited) and Subsidiaries (the Company) are divided into
three principal segments, as follows:
(i) The energy retail business which supplies electricity and gas to
national domestic, industrial and commercial customers in the United
Kingdom;
(ii) The energy management and generation business which manages an
integrated portfolio of generation assets, physical gas assets and
contracts; and
(iii) The networks business which owns, manages and operates the
electricity distribution system.
These businesses are carried out primarily in the United Kingdom with
interests increasingly being developed throughout the rest of Europe.
Formation
The Company is a holding company that owns 90% of the outstanding common
stock of TXU Finance (No. 2) Limited (TXU Finance) which in turn owns 100%
of the common stock of TXU Acquisitions Limited (TXU Acquisitions).
The Company was incorporated as a private limited company on February 5,
1998. Through a series of restructurings and capital transactions
subsequent to its formation, the Company became an indirect, wholly owned
subsidiary of Texas Utilities Company, doing business as TXU Corp (TXU).
The "period from formation through December 31, 1998" referred to in these
financial statements represents February 5, 1998 through December 31, 1998,
inclusive. The "period from formation through March 31, 1999" referred to
in these financial statements represents February 5, 1998 through March 31,
1999, inclusive. From March 1998 to May 18, 1998 the Company, through TXU
Acquisitions, had acquired an equity interest in The Energy Group PLC (TEG)
of approximately 22%, which resulted in the recognition of equity income of
(pound)2 million, which is reflected in "Other Income-net" in the Statement
of Consolidated Income.
The Company has two classes of shares outstanding, ordinary and deferred.
Both classes are held by wholly owned subsidiaries of TXU. Ordinary shares
have voting rights.
In May 1998, the Company's share capital was redenominated from pounds
sterling into US dollars. The sterling-denominated ordinary shares were
reclassified as deferred shares and the new US dollar denominated
ordinary shares were issued. The deferred shares have no rights to vote or
receive dividends. Upon liquidation, holders of deferred shares are
entitled to receive (pound)1 per share only after holders of ordinary
shares are paid (pound)100 million per share. In addition, all of the
deferred shares may be repurchased for the sum of (pound)1.
Purchase Accounting
As of May 19, 1998, TXU Acquisitions acquired control of TEG. This business
combination was accounted for as a purchase. Substantially all of TEG's
continuing operations are conducted through Eastern Group plc (Eastern),
one of the largest integrated electricity and gas groups in the United
Kingdom. Also on May 19, 1998, TEG sold its United States and Australian
coal businesses and United States energy marketing operations (Peabody
Sale). The "TEG Businesses Acquired" refers to TEG, exclusive of the
operations sold in the Peabody Sale.
The total purchase consideration for the TEG Businesses Acquired was
approximately (pound)4.4 billion. The excess of the purchase consideration
plus acquisition costs over the net fair value of tangible and identifiable
F-11
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
1. Description of Business (continued)
intangible assets acquired and liabilities assumed resulted in goodwill of
(pound)3.5 billion, which is being amortized over 40 years.
In addition to the cash offer, shareholders of TEG were offered a share
alternative, which gave them the option to exchange their TEG shares for
shares of TXU common stock and a loan note option. TXU Acquisitions
exchanged 37,316,884 shares of TXU common stock for the 105,117,980 TEG
shares tendered by those who elected the share alternative, and paid cash
or issued loan notes in exchange for the remainder of TEG shares. TXU
Acquisitions acquired from TXU the shares of TXU common stock exchanged for
TEG shares by issuing a term note to TXU for (pound)882 million, the value
of the TXU common stock.
The allocation of the TEG purchase price to the assets and liabilities
assumed is as follows:
((pound) million)
Assets:
Property plant and equipment 2,624
Cash 2,011
Current assets 751
Investments 593
Deferred debits 565
Liabilities
Long-term debt (2,898)
Current liabilities (1,386)
Deferred credits and other non-current (1,060)
Minority interest (13)
-------
Net assets acquired 1,187
Goodwill 3,261
-------
Total purchase price 4,448
=======
2. Basis of Presentation and Significant Accounting Policies
The consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States (US GAAP).
Consolidation - The consolidated financial statements include the accounts
of the Company and all majority owned subsidiaries. Minority interest
represents the minority shareholders' proportionate share in the equity or
income of the Company's majority-owned subsidiaries.
All significant intercompany items and transactions have been eliminated in
consolidation. Investments in significant unconsolidated affiliates are
accounted for by the equity method.
Use of estimates - The preparation of the Company's consolidated financial
statements, in conformity with US GAAP, requires management to make
estimates and assumptions about future events that affect the reporting and
disclosure of assets and liabilities at the balance sheet dates and the
reported amounts of revenue and expense during the period covered by the
consolidated financial statements. In the event estimates and/or
assumptions prove to be different from actual amounts, adjustments are made
in subsequent periods to reflect more current information.
F-12
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
Presentation - Certain December 31, 1998 amounts have been restated to
conform to the March 31, 1999 presentation.
Cash and cash equivalents - Cash equivalents consist of highly liquid
investments, which are readily convertible into cash and have maturities of
three months or less.
Accounts receivable - A provision for uncollectible accounts of (pound)11
million and (pound)13 million was recorded during the period from formation
through December 31, 1998 and the period from formation through March 31,
1999, respectively. The Company did not realize any material recoveries
during the period from formation through December 31, 1998 or the period
from formation through March 31, 1999. The Company wrote-off accounts
receivable of (pound)3 million and (pound)10 million during the period from
formation through December 31, 1998 and the period from formation through
March 31, 1999, respectively.
Inventories - Inventories consist of fuel stock, material and supplies, and
are stated at the lower of cost or net realizable value. The cost of
inventories is determined using a weighted average cost method.
Capitalized interest - Interest is capitalized on major capital
expenditures during the period of construction.
Property, plant and equipment - Property, plant and equipment are stated at
cost less accumulated depreciation. The cost of additions, improvements,
and interest on construction are capitalized, while maintenance and repairs
are charged to expense when incurred.
Leased generating stations meeting certain criteria and related equipment
are capitalized and the present value of the related lease payments is
recorded as a liability. Depreciation of capitalized lease assets is
computed on the straight-line basis over the shorter of the estimated
remaining useful life of the asset or the lease term.
Depletion of gas reserves is charged on a unit-of-production basis, based
on an assessment of proven reserves. Depreciation of all other property,
plant and equipment, is determined on the straight-line method over
estimated useful lives of the assets as follows:
Electricity generating station assets 30 years
Electricity generating station Shorter of Lease period or
assets under capital lease estimated remaining useful life
Electricity distribution system assets 40 years (3% per annum for first
20 years and 2% per annum for
last 20 years)
Buildings Up to 60 years
Leasehold improvements Shorter of remaining lease term
or estimated useful life
Plant and equipment Up to 10 years
Customer contributions to the construction of electricity distribution
system assets are amortized to income over a forty-year period, at a rate
of 3% per year for the first 20 years and 2% per year for the last 20
years. The unamortized amount of these contributions is deducted from
property, plant and equipment.
Upon sale, retirement, abandonment or other disposition of property, the
cost and related accumulated depreciation are eliminated from the accounts
and any gain or loss is reflected in income.
The United Kingdom Government is entitled to claim a portion of any gain
realized by the Company on certain property disposals made up to March 31,
2000. Provisions for such claims are made when an actual disposal occurs.
F-13
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
Provision is made for abandonment costs relating to gas fields. Such
provisions are determined in accordance with local conditions and
requirements, and on the basis of costs estimated at the respective balance
sheet date. These costs are expensed on a unit-of-production basis.
The Company early adopted Statement of Position 98-1, "Accounting for the
costs of computer software developed or obtained for internal use" (SOP
98-1) beginning on May 19, 1998. Their costs are being amortized over a
five year period.
Valuation of long-lived assets - The Company periodically evaluates the
carrying value of long-lived assets to be held and used, including
goodwill, when events and circumstances warrant such a review. The carrying
value of a long-lived asset is considered impaired when the projected
undiscounted cash flows from such asset is separately identifiable and is
less than its carrying value. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair market value of the
long-lived asset. Fair market value is determined primarily utilizing the
anticipated cash flows discounted at a rate commensurate with the risk
involved.
Goodwill - Goodwill is capitalized and amortized over 40 years using the
straight-line method. The Company reviews the goodwill recoverability
period on a regular basis.
Derivative financial instruments - In order to qualify for hedge
accounting, the following criteria must be met: the item being hedged
exposes the Company to price risk, it is probable that the hedge will
substantially offset this risk, and it has been designated as a hedge by
management.
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets or liabilities and are ultimately
recognized in income. Gains and losses related to qualifying hedges of firm
commitments or anticipated transactions are deferred and are recognized in
income or as adjustments of carrying amounts when the hedged transactions
occurs. The cash flows related to derivative financial instruments are
recorded in the same manner as the cash flow related to the item being
hedged. In the event that an overall analysis of the firm commitments
being hedged indicates that the Company is in a net loss position, a
provision is made for these anticipated losses. Transactions that are
entered into that do not meet the criteria for hedge accounting are marked
to market on the balance sheet at the period end, and the unrealized gain
or loss is recognized in the Statement of Consolidated Income for that
period.
Revenue recognition - Electricity and gas sales revenues are recognized
when services are provided to customers and include an estimate for
unbilled revenues, or the value of electricity and gas consumed by
customers between the date of their last meter reading and the period-end
date. Operating revenues are stated exclusive of value added tax, but
inclusive of the fossil fuel levy.
Other income - net consists of the following for the periods indicated:
Formation through Formation through
December 31, 1998 March 31, 1999
----------------- -----------------
((pound) million)
Dividends from cost investments 5 6
Gain on the sale of Eastern Group
Telecoms 13 13
Dividends from marketable securities
purchased and sold during the
period from formation through
December 31, 1998 26 26
Undistributed equity in earnings of
TEG 2 2
-- --
Total 46 47
== ==
F-14
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
Restructuring costs - Restructuring costs relate to voluntary termination
benefits and are recorded in Operation and Maintenance expense in the
Statement of Consolidated Income in the period in which the employee
accepts the offer and the amount can be reasonably estimated. The Company
has established voluntary retirement plans to progressively reduce manpower
levels.
Foreign currencies - Assets and liabilities of foreign subsidiaries are
translated at the exchange rate on the balance sheet date. Revenues, costs
and expenses are translated at average rates of exchange prevailing during
the period. Translation adjustments resulting from this process are charged
or credited to the cumulative currency translation adjustment account in
common stock equity. Gains and losses on foreign currency transactions are
included in nonoperating expenses on the Statement of Consolidated Income.
Income taxes - Income tax expense includes United Kingdom and other
national income taxes. The Company intends to reinvest the earnings of its
foreign subsidiaries into those businesses. Accordingly, no provision has
been made for taxes which would be payable if such earnings were
distributed to the Company.
Advance Corporation Tax (ACT) recoverable represents the amount of tax paid
or payable on outgoing dividends paid and proposed which can be set off
against a corporation tax liability arising currently or in the future,
thereby reducing current tax expense.
Deferred income taxes are determined under the liability method. Deferred
income taxes represent liabilities to be paid or assets to be received in
the future and reflect the tax consequences on future years of temporary
differences between the tax bases of assets and liabilities and their
financial reporting amounts. Future tax rate changes would affect those
deferred tax liabilities or assets in the period when the tax rate change
is enacted.
Future tax benefits, such as net operating loss carryforwards, are
recognized to the extent that realization of such benefits is more likely
than not.
Marketable securities - The Company has classified all of its marketable
securities as available for sale. Available for sale securities are carried
at fair value with the unrealized gains and losses reported as a component
of accumulated other comprehensive income in common stock equity. Declines
in fair value that are other than temporary are reflected in the Statement
of Consolidated Income.
Appraisal and development expenditure of gas fields - Appraisal
expenditures are accounted for under the successful efforts method. General
seismic and other costs are expensed as incurred.
Ceiling test - The capitalized costs of gas fields under evaluation, under
development or in production are assessed each year on a field-by-field
basis. To the extent that the future net revenues from the remaining
commercial reserves, or, in the case of prospects under evaluation, the
estimated potential commercial reserves, are less than the net capitalized
costs of the field, a charge is made to the Statement of Consolidated
Income.
New accounting standards - Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was originally to be effective for fiscal years beginning
after June 15, 1999. This statement requires that all derivative financial
instruments be recognized as either assets or liabilities on the balance
sheet at their fair values and that accounting for the changes in their
fair values is dependent upon the intended use of the derivatives and their
resulting designations. The new standard will supersede or amend existing
standards that deal with hedge accounting and derivatives. The Company has
not determined the effect that adopting this standard will have on its
consolidated financial statements. On May 19, 1999, the Financial
Accounting Standards Board decided that it would amend
F-15
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
SFAS No. 133, and defer its effective date to all fiscal quarters of
all fiscal years beginning after June 15, 2000.
The Emerging Issues Task Force (EITF) has issued No. 98-10 "Accounting for
Energy Trading and Risk Management Activities", which is effective for
fiscal years beginning after December 15, 1998. EITF 98-10 requires that
contracts for energy commodities which are entered into under trading
activities should be marked to market with the gains and losses shown net
in the income statement. As the Company's fiscal year ends on December 31,
the Company adopted EITF 98-10 effective January 1, 1999 for the fiscal
year ending December 31, 1999. As the Company is not primarily involved in
trading activities, EITF 98-10 has not had a material impact on the
consolidated financial statements upon adoption.
3. Property, Plant and Equipment
Property, plant and equipment, stated at cost less accumulated
depreciation, consisted of:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
((pound)million) ((pound)million)
<S> <C> <C>
Electricity distribution system 1,143 1,142
Electricity generating stations 1,262 1,124
Upstream gas assets 35 35
Other land and buildings 100 102
Plant and equipment 225 239
Accumulated depreciation (89) (126)
----- -----
Net property, plant and equipment 2,676 2,516
===== =====
</TABLE>
Depreciation expense for the period from formation through December 31,
1998 was (pound)92 million and for the period from formation through March
31, 1999 was (pound)129 million.
Electricity generating stations and plant and equipment include assets
under capital leases as follows:
December 31, 1998 March 31, 1999
((pound)million) ((pound)million)
---------------- ---------------
Cost 913 835
Accumulated depreciation (25) (36)
----- -----
Net book value 888 799
===== =====
Capitalized software costs totalling (pound)14 million are included in
plant and equipment as of December 31, 1998 and March 31, 1999.
Amortization expense relating to software costs of (pound)1 million has
been recorded in the period from formation through March 31, 1999. No
amortization expense was recorded in the period to December 31, 1998.
4. Restricted Cash
At December 31, 1998 and at March 31, 1999, (pound)408 million of deposits
has been used to cash-collateralize existing future lease obligations to
certain banks related to the funding of the leases of three power stations
from National Power PLC (see Note 9). Additionally, (pound)309 million and
(pound)317 million at December 31, 1998 and March 31, 1999, respectively,
have been used to cash-collateralize existing future lease obligations
arising from a cross-border leasing arrangement on two other power stations
(Note 9). When the Company invested in Eastern Norge Kobbelv AS (Kobbelv)
(see Note 5), it was required to place on restricted deposit (pound)5
million, which is also included in restricted cash at March 31, 1999.
F-16
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Investments
Marketable investments are classified as available for sale, and are
considered non-current based upon management's intentions in holding the
investments. Marketable investments consisted of the following two
investments:
<TABLE>
<CAPTION>
Cost Fair market value Unrealized gain/(loss)
-------------------------- ------------------------- ---------------------------
December 31, March 31, December 31, March 31, December 31, March 31,
((pound)million) 1998 1999 1998 1999 1998 1999
------------ --------- ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
SME 28 23 13 11 (15) (12)
HC 56 53 63 54 7 1
------ ------ ------ ------ ------ ------
84 76 76 65 (8) (11)
====== ====== ====== ====== ====== ======
</TABLE>
At December 31, 1998 and March 31, 1999, the Company held a 16% investment
in Severomoravska Energetika (SME), which is listed in the Czech Republic.
At December 31, 1998 and March 31, 1999, the Company held a 5% investment
in Hidroelectrica del Cantabrico (HC), which is listed in Spain. As the
Company does not have the ability to exercise significant influence over
either SME's or HC's operating and financial policies, these investments
have been accounted for as marketable securities and accordingly have been
marked to market at December 31, 1998 and March 31, 1999.
Non-marketable investments at December 31, 1998 and March 31, 1999 consist
principally of an investment of (pound)124 million in Eastern Norge
Svartisen AS (Svartisen) consisting of the offtake generated from water
rights in hydro-electric power plants in Norway over the next 55 years,
commencing in 1998. In February of 1999, the Company invested (pound)27
million in Kobbelv which also consists of the offtake generated from water
rights in hydro-electric power plants over the next 55 years. The carrying
value at December 31, 1998 and March 31, 1999 of an investment in the
preferred stock of NTL Incorporated (NTL Inc.), the acquiror of the
Company's telecoms business, which was received as a portion of the
consideration for the sale (Note 15) was (pound)22 million. The remaining
(pound)11 million at December 31, 1998 and (pound)46 million at March 31,
1999 consist of other investments.
There were no sales of marketable securities during the period from
formation through December 31, 1998 and March 31, 1999.
6. Pensions
The majority of Eastern employees are members of the Electricity Supply
Pension Scheme (ESPS) which provides pensions of a defined benefit nature
for employees throughout the England and Wales Electricity Supply Industry.
The ESPS operates on the basis that there is no cross-subsidy between
employers and the financing of Eastern's pension liabilities is therefore
independent of the experience of other participating employers. The assets
of the ESPS are held in a separate trustee-administered fund and consists
principally of United Kingdom and European equities, United Kingdom
property holdings and cash. The pension cost relating to the Eastern
portion of the ESPS is assessed in accordance with the advice of
independent qualified actuaries using the projected unit method. The
benefits under these plans are primarily based on years of service and
compensation levels as defined under the respective plan provisions.
As part of the purchase accounting for TEG, the accrued pension liabilities
were adjusted to recognize all previously unrecognized gains or losses
arising from past experience.
The Company determined the additional pension expense for the three months
from January 1, 1999 through March 31, 1999 based on forecasted expense
from the December 31, 1998 actuary report.
F-17
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Pensions (continued)
<TABLE>
<CAPTION>
Period from Period from
formation through formation through
December 31, 1998 March 31, 1999
----------------- --------------
Change in benefit obligation: ((pound) million)
- - - - ----------------------------
<S> <C> <C>
Benefit obligation at beginning of period 882 882
Service cost 7 11
Interest cost 33 46
Plan participants' contributions 5 7
Plan amendment 7 7
Actuarial loss 82 23
Benefits paid (31) (44)
Net transfer of obligations to other plans -- (27)
---------- ----------
Ending benefit obligation 985 905
========== ==========
Change in plan assets:
- - - - ---------------------
Fair value of plan assets at beginning of period 1,130 1,130
Actual return on plan assets (25) 38
Employer contribution 3 7
Plan participants contributions 5 7
Benefits paid (31) (44)
Net transfer of assets to other plans -- (28)
---------- ----------
Ending fair value of plan assets 1,082 1,110
========== ==========
Funded Status:
- - - - --------------
Funded status 97 205
Unrecognized net actuarial loss 153 47
Unrecognized prior service cost 7 7
---------- ----------
Prepaid benefit cost 257 259
========== ==========
Weighted average assumptions:
- - - - ----------------------------
Discount rate 5.5% 5.5%
Expected return on plan assets 6.0% 6.0%
Rate of compensation increase 3.5% 3.5%
Components of net periodic pension (benefit):
- - - - --------------------------------------------
Service cost 7 11
Interest cost 33 46
Expected return on plan assets (45) (61)
Net amortization -- 1
---------- ----------
Net periodic pension benefit (5) (3)
========== ==========
</TABLE>
The transfer of assets of (pound)28 million in the period to March 31, 1999
and the related transfer of benefit obligations of (pound)27 million relate
to the sale of the contracting business which occurred in January of 1998.
F-18
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Taxation
The components of income tax expense are as follows:
Period from Period from
formation through formation through
December 31, 1998 March 31, 1999
----------------- --------------
((pound)million) ((pound)million)
Current:
United Kingdom 24 51
United States 18 19
Other Countries 1 1
------- -------
43 71
Deferred:
United Kingdom 24 35
------- -------
Total income tax expense 67 106
======= =======
Significant components of the Company's deferred tax assets and liabilities
are as follows:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
((pound)million) ((pound)million)
<S> <C> <C>
Deferred tax assets:
Leased assets (353) (387)
Tax loss carryforwards (9) (9)
Provision for unfavorable contracts (75) (74)
Other (54) (85)
------ ------
Total deferred tax assets (491) (555)
Valuation allowance for deferred tax assets 138 187
------ ------
Net deferred tax assets (353) (368)
------ ------
Deferred tax liabilities:
Excess of book value over taxation value of fixed
assets 281 292
Leased assets 334 326
Other 59 84
------ ------
Total deferred tax liabilities 674 702
------ ------
Net deferred tax liabilities 321 334
====== ======
</TABLE>
The recognized deferred tax asset is based upon the expected future
utilization of net operating loss carryforwards and the reversal of other
temporary differences. For financial reporting purposes, the Company has
recognized a valuation allowance for those benefits for which realization
does not meet the more likely than not criteria. The valuation allowance
has been recognized in respect of leased assets. The Company continually
reviews the adequacy of the valuation allowance and is recognizing these
benefits only as reassessment indicates that it is more likely than not
that the benefits will be realized.
There was no valuation allowance at formation (February 5, 1998). At the
date of acquisition of TEG (May 19, 1998), a valuation allowance of
(pound)130 million, was established for the deferred tax asset for the
book/tax capital asset related to leased assets. The valuation allowance
was increased by (pound)8 million in the
F-19
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Taxation (continued)
period from May 19, 1998 to December 31, 1998, resulting in a balance of
(pound)138 million at December 31, 1998. For the period from May 19, 1998
to March 31, 1999, the valuation allowance increased by (pound)57 million,
resulting in a balance of (pound)187 million at March 31, 1999.
Income before income taxes:
<TABLE>
<CAPTION>
Period from Period from
formation through formation through
December 31, 1998 March 31, 1999
----------------- --------------
((pound)million) ((pound)million)
<S> <C> <C>
United Kingdom 103 198
United States 51 54
Other Countries 1 1
-------- --------
Total income before income taxes and minority interest 155 253
======== ========
</TABLE>
United Kingdom income tax expense at the statutory tax rate is reconciled
below to the actual income tax expense:
<TABLE>
<CAPTION>
Period from Period from
formation through formation through
December 31, 1998 March 31, 1999
----------------- --------------
((pound)million) ((pound)million)
<S> <C> <C>
Tax at United Kingdom statutory rate (31%) 48 78
Non-deductible goodwill 16 22
Effect of overseas tax rates 2 2
Effect of tax rate on United Kingdom dividends (4) (4)
Tax rate change (8) (8)
Movement in valuation allowance charged to expense 8 11
Non-deductible expenses 5 5
-------- --------
Income tax expense 67 106
======== ========
</TABLE>
As at December 31, 1998 and March 31, 1999, the Company has net operating
loss carryforwards of (pound)9 million that are available to offset future
taxable income. The net operating loss carryforwards have no expiration
date.
On July 31, 1998, legislation was enacted that decreased the United Kingdom
statutory income tax rate on companies by 1% with effect from April 1,
1999. In accordance with the provisions of Statement of Financial
Accounting Standards No. 109, the assets and liabilities for deferred
income taxes were adjusted to reflect the expected reversal of certain
temporary differences at the lower income tax rate.
The tax effect of the components included in accumulated other
comprehensive income for the period from formation through December 31,
1998 was a benefit of (pound)2 million and for the period from formation
through March 31, 1999 was a benefit of (pound)6 million.
F-20
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
8. Related Party Transactions
As part of the funding for the acquisition of TEG, TXU provided shares of
its common stock in exchange for a two year term note from TXU Acquisitions
in the amount of (pound)882 million that matures in May 2000 with an
interest rate of 6.7% per annum. In December 1998, (pound)200 million of
this note was repaid, leaving an outstanding balance of (pound)682 million
at both December 31, 1998 and March 31, 1999 (see Note 19). The interest on
the two year term note is due at maturity, and the "Due to affiliates"
balance at December 31, 1998 and March 31, 1999 reflects (pound)33 million
and (pound)45 million, respectively, of accrued interest.
The 10% holding in TXU Finance of (pound)177 million and (pound)187 at
December 31, 1998 and March 31, 1999 respectively, which is held by a
wholly owned subsidiary of TXU, has been included in "Minority interest".
At December 31, 1998 and March 31, 1999 the balance of (pound)7 million in
the "Accounts payable - Affiliate" account arises from payments of amounts
by TXU on behalf of the Company.
9. Notes Payable and Long-term Debt
Weighted average interest rates at December 31, 1998 and March 31, 1999 on
notes payable to banks is 8.98% and 13.8%, respectively.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
----------------- --------------
((pound)million) ((pound)million)
<S> <C> <C>
Notes and Bonds:
$200 million 7.425% guaranteed notes due 2017 121 124
$300 million 7.55% guaranteed notes due 2027 181 186
(pound)350 million 8.375% bonds due 2004 363 362
(pound)200 million 8.5% bonds due 2025 237 237
(pound)200 million 8.75% bonds due 2012 229 229
Other:
Sterling Credit Agreement (See Note 10) 801 983
Rent factoring loans (weighted average interest rate of
7.35%, due 1999-2001) 649 595
Other unsecured loans, due in installments (weighted
average rates range from 4.95% - 10.8%) 139 164
Capital leases 982 1,043
Note payable to TXU, 6.7% term note due 2000 (see Note 19) 682 682
Cross-border leases 309 317
-------- --------
Total long-term debt 4,693 4,922
Less current portion 382 486
-------- --------
Long-term debt, less amounts due currently 4,311 4,436
======== ========
</TABLE>
The $200 million and $300 million notes due in 2017 and 2027, respectively,
are guaranteed by TEG and the Company.
Rent factoring loans - Certain subsidiaries of Eastern entered into an
agreement with commercial banks whereby future intra-group rental payments
receivable were assigned to these banks in return for a capital sum.
(pound)408 million of the capital sums at both December 31, 1998 and March
31, 1999 have been deposited to cash collateralize existing future lease
obligations to certain banks related to the funding of the leases of three
power stations leased from National Power (see Note 4).
F-21
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Notes Payable and Long-term Debt (continued)
Long-term debt balances are denominated in the following currencies:
December 31, March 31,
1998 1999
-------- --------
((pound)million) ((pound)million)
Sterling 4,044 4,232
United States dollars 611 627
Other 38 63
-------- --------
Total long-term debt 4,693 4,922
======== ========
(pound)100 million of the (pound)350 million 8.375% bonds included in
long-term debt has been converted into floating rate debt by way of
interest rate swaps, which expire in the year 2004.
Long-term debt, excluding capital lease balances, is repayable as follows:
Year Ending Year Ending
December 31, March 31,
------------ ---------
((pound)million) ((pound)million)
1999 222 --
2000 919 225
2001 190 924
2002 24 128
2003 801 1,004
2004 362 362
Thereafter 1,193 1,236
------- -------
3,711 3,879
Capital leases 982 1,043
------- -------
Total long-term debt 4,693 4,922
======= =======
F-22
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Notes Payable and Long-term Debt (continued)
Capital lease obligations - As at December 31, 1998 and March 31, 1999,
future minimum lease payments for assets under capital leases, together
with the present value of minimum lease payments, were:
<TABLE>
<CAPTION>
Year Ending Year Ending
December 31 March 31
----------- --------
((pound)million) ((pound)million)
<S> <C> <C>
1999 48 --
2000 50 53
2001 461 54
2002 17 465
2003 16 21
2004 16 19
Thereafter 67 204
------ ------
Total future minimum lease payments 675 816
Less amounts representing interest (105) (177)
------ ------
Present value of future minimum lease payments 570 639
------ ------
Current 46 50
Non-current 524 589
------ ------
Total 570 639
====== ======
</TABLE>
Substantially all of the capital lease obligations relate to coal-fired
power stations. Additional payments of approximately (pound)6 per megawatt
hour (indexed from 1996 prices) linked to output levels from the stations
are payable for the first seven years of their operation by Eastern
(operations commenced in 1996). In accounting for the acquisition of TEG, a
liability for the estimated probable additional payments linked to output
levels for coal-fired generating stations was established. At December 31,
1998 and March 31, 1999, the balance of the liability of (pound)412 million
and (pound)404 million, respectively, is included with capital lease
obligations, of which (pound)114 million and (pound)211 million are
classified as current, respectively.
The lease agreement for three of the coal-fired power stations contains a
purchase option of (pound)1 in 2046. The lease is for a total of
ninety-nine years.
In the period ended March 31, 1999, the Company entered into a capital
lease relating to the King's Lynn Power Station with a present value
obligation amount of (pound)68 million over the next 25 years.
Cross-border leases - Certain subsidiaries of Eastern have entered into
cross-border lease transactions in respect of two power stations that are
wholly owned by the Company. The Company has retained control of the power
stations and their output and is responsible for their operations. The debt
arising on the cross-border leases is fully collaterized by restricted cash
on deposit (see Note 4).
The Company's debt agreements contain certain covenants with which they
must comply, including leverage ratios, levels of net assets and interest
coverage covenants. At December 31, 1998 and March 31, 1999, the Company
was in compliance with all such covenants.
F-23
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Lines of Credit and Other Credit Facilities
Lines of credit - At December 31, 1998, the Company, TXU Finance, TXU
Acquisitions and TEG had a joint sterling-denominated line of credit with a
group of banking institutions under a credit facility agreement (Sterling
Credit Agreement). At December 31, 1998, the Sterling Credit Agreement
provided for borrowings of up to (pound)1,525 million, of which (pound)351
million was available for use. The Sterling Credit Agreement had two
facilities - Acquisition and Revolving Credit. The Sterling Credit
Agreement bears interest at LIBOR plus 1.25%. The Company has entered into
various interest rates swaps as required by the Sterling Credit Agreements.
The Acquisition Facility provides for borrowings aggregating (pound)825
million outstanding at any one time and terminates March 2, 2003.
Borrowings under this facility provided financing to acquire TEG and pay
acquisition-related expenses. As part of this facility, (pound)75 million
has been allocated to financing the repayment of outstanding loan notes
issued upon acquisition.
The Revolving Credit Facility provides for borrowings aggregating
(pound)450 million outstanding at any one time and terminates March 2,
2003. A separate Eastern Electricity Revolving Credit Facility provides for
borrowings of up to (pound)250 million which can be used by Eastern
Electricity plc for general corporate purposes.
At December 31, 1998, (pound)750 million was borrowed under the Acquisition
Facility, (pound)51 million was borrowed under the Revolving Credit
Facility and (pound)180 million was borrowed under the Eastern Electricity
Revolving Credit Facility. The amounts outstanding under the Acquisition
Facility and Revolving Credit Facility represent long-term debt. There are
letters of credit associated with the Sterling Credit Agreement.
Obligations of commercial banks under standby letters of credit totalled
(pound)118 million at December 31, 1998 which, together with the (pound)51
million of borrowings reduced the amounts available for use under the
Revolving Credit Facility to (pound)281 million at December 31, 1998.
Borrowings under the Eastern Electricity Revolving Credit Facility are
classified as short-term debt.
The Sterling Credit Agreement was amended in March 1999. The amended
Sterling Credit Agreement provides for borrowings of up to (pound)1.275
billion and has two facilities: a (pound)750 million term facility which
will terminate on March 2, 2003 and a (pound)525 million revolving credit
facility which has a (pound)200 million 364-day tranche (Tranche A) and a
(pound)325 million tranche which terminates March 2, 2003 (Tranche B). The
Company and TXU Finance currently are the only permitted borrowers under
the amended Sterling Credit Agreement. The amended Sterling Credit
Agreement allows for borrowings at various interest rates based on the
prevailing rates in effect in the countries in which the borrowings
originate. As of March 31, 1999, (pound)750 million of borrowings were
outstanding under the term facility, and approximately (pound)233 million
were outstanding under Tranche B (see Note 19). In addition, letters of
credit totalling $61 million ((pound)38 million) were issued under Tranche
A and letters of credit totalling $137 million ((pound)85 million) were
issued under Tranche B. The amended Sterling Credit Agreement is unsecured.
There were no borrowings outstanding at March 31, 1999 under the Eastern
Electricity Revolving Credit Facility.
Promissory note program - The Company has a one year promissory note
program issued within the Czech Republic which has been utilized to fund
its investment in SME and Teplarny Brno a.s. The note bears interest at an
annual rate determined on the date of issuance based on PRIBOR plus 0.7%,
which was 13.89%. At December 31, 1998 and March 31, 1999, (pound)58
million and (pound)52 million, respectively, was outstanding under the
promissory note program.
Short-term loan on accounts receivable - Eastern has facilities with a
financial institution whereby it may, from time to time, borrow funds from
the financial institution. Outstanding borrowings under the agreements may
not exceed certain levels and are collateralized by portions of Eastern
Group's trade accounts receivable. At December 31, 1998 and March 31, 1999,
Eastern had borrowed (pound)300 million
F-24
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
10. Lines of Credit and Other Credit Facilities (continued)
under these facilities. The loan bears interest at an annual rate of based
on commercial paper rates plus 0.225%, which at December 31, 1998 and March
31, 1999 was 6.53% and 5.7%, respectively.
Letters of credit - At December 31, 1998 the Company had outstanding
letters of credit totalling (pound)121 million, (pound)118 million of which
was outstanding under the Revolving Credit Facility discussed above. At
March 31, 1999 the Company had outstanding letters of credit totalling
(pound)126 million, (pound)123 million of which was outstanding under the
amended Sterling Credit Agreement discussed above.
11. Provision for Unfavorable Contracts
As part of the purchase accounting for TEG, the Company has made provisions
for certain unfavorable long-term gas and electricity purchase contracts.
The electricity provision relates to two contracts that expire in 2009,
while the gas provision relates to eight contracts that expire in 2011.
During the period from formation through December 31, 1998 and the period
from formation through March 31, 1999, (pound)74 million and (pound)76
million, respectively, of the provision was released to offset expenses
recognized on purchases under unfavorable electricity and gas contacts. Of
the amounts recognized in the Statement of Consolidated Income, (pound)41
million, which is net of a release payment of (pound)24 million, was
related to one gas contract from which the Company negotiated in November
1998. Negotiations for release under the contract were not under
consideration at the purchase date.
12. Commitments
The Company evaluates its position relative to asserted and unasserted
claims, loss-making purchase commitments or future commitments and makes
provisions as needed.
The Company's investment in Svartisen (the offtake generated by water
rights in hydro-electric power plants in Norway) requires coverage of
approximately 31.2% of the costs incurred in relation to the operation of
the power plant, as well as a portion of the maintenance costs, property
tax, and feeding costs (defined as fixed charges such as connection and
capacity charges and volume related charges such as an energy charge) for
55 years, beginning in 1998. The electricity generated from the
hydro-electric plants will be sold into the Norwegian power pool, from
which the Company will receive income.
Gas take-or-pay contracts - The Company is party to various types of
contracts for the purchase of gas. Almost all include "take-or-pay"
obligations under which the buyer agrees to pay for a minimum quantity of
gas in a year. In order to help meet the expected needs of its wholesale
and retail customers, the Company has entered into a range of gas purchase
contracts. As at December 31, 1998 and March 31, 1999, the commitments
under long-term gas purchase contracts amounted to an estimated (pound)1.3
billion covering periods up to 16 years forward. Management does not
consider it likely, on the basis of the Company's current expectations of
demand from its customers as compared with its take-or-pay obligations
under such purchase contracts, that any material payments will become due
from the Company for gas not taken.
Coal contracts - In November 1998, the Company agreed to two coal purchase
agreements with a supplier, supplementing the 12 million tons the Company
had previously contracted to take from said supplier between 1998 and 2001.
The first agreement is for 25 million tons in total between 1998 and 2003.
The second agreement is for 21 million tons in total between 2003 and 2009.
Total committed purchases under these contracts were approximately
(pound)1.4 billion and (pound)1.3 billion at December 31, 1998 and March
31, 1999, respectively.
F-25
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
12. Commitments (continued)
Rental commitments - The future minimum rental commitments under
non-cancellable operating leases were as follows:
Year ending Year Ending
December 31, March 31,
------------ ---------
((pound)million) ((pound)million)
1999 53 53
2000 36 36
2001 37 37
2002 34 34
2003 30 30
Thereafter 27 27
------- -------
Total 217 217
======= =======
The operating lease commitments relate to coal-fired power stations.
Additional variable payments of approximately (pound)6 per megawatt hour
(indexed to 1996 prices) linked to output levels from these stations are
payable through 2000, the first four years of the lease agreement, by the
Company.
Rental expense for operating leases amounted to (pound)16 million and
(pound)25 million for the periods ended December 31, 1998 and March 31,
1999, respectively. Rental expense for operating leases during the periods
ended December 31, 1998 and March 31, 1999 includes (pound)10 million and
(pound)14 million, respectively, of minimum lease payments and (pound)6
million and (pound)11 million, respectively, of variable lease payments.
Other commitments - In December 1998 the Company agreed to purchase various
assets in the North Sea from Monument Oil for (pound)20 million. The assets
comprise a 20% stake in the Johnston field plus a number of non-producing
gas discoveries and prospects. In November 1998, the Company reached an
agreement to purchase all of BHP Petroleum's assets in the North Sea for
(pound)102 million. The assets comprise a 30% stake in the Johnston field,
an 18% stake in Ravenspurn North field plus a number of non-producing gas
discoveries and prospects in a total of seven exploration licenses. Both
transactions are subject to approval from the Department of Trade and
Industry and consents from other parties participating in the fields.
13. Contingencies
The Company is subject to business risks that are actively managed to limit
exposures.
In February 1997, the official government representative of pensioners
(Pensions Ombudsman) made a determination against the National Grid Company
plc (National Grid) and its group trustees with respect to complaints by
two pensioners in National Grid's section of the ESPS relating to the use
of the pension fund surplus resulting from the March 31, 1992 actuarial
valuation of the National Grid section to meet certain costs arising from
the payment of pensions on early retirement upon reorganization or
downsizing. These determinations were set aside by the High Court on June
10, 1997 and the arrangements made by National Grid and its group trustees
in dealing with the surplus were confirmed. The two pensioners have now
appealed against this decision and judgment has now been received although
a final order is awaited. The appeal was allowed endorsing the Pensions
Ombudsman's determination that the corporation was not entitled to
unilaterally deal with any surplus. If a similar complaint were to be made
against Eastern in relation to its use of actuarial surplus in its section
of the ESPS, it would vigorously defend the action, ultimately through the
courts. However, if a determination were finally to be made against it and
upheld by the courts, Eastern could have a potential liability to repay to
its section of the ESPS an amount estimated by the Company to be up to
(pound)45 million (exclusive of any future applicable interest charges).
F-26
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Contingencies (continued)
On May 19, 1998 a complaint was filed by Optimum Solutions Limited against
National Grid, Yorkshire Electricity Group plc, Eastern Electricity and
Logica Plc. Yorkshire Electricity and Eastern Electricity are both members
of the electricity trading market in England and Wales (the Pool). Optimum
Solutions Limited alleges breach of confidence in respect of information
supplied in the context of the development of the trading arrangements for
the 1998 liberalization of electricity supply in England and Wales, or
Trading Arrangements. Optimum Solutions Limited requests an unspecified
amount of damages relating to breach of contract, an unspecified amount of
equitable compensation for misuse of the confidential information and
return of material alleged to contain confidential information. It is
alleged that the Pool has made use of the confidential information in the
development of the Trading Arrangements and that Eastern Electricity made
use of it in using the system developed by Pool for trading purposes. The
action against Eastern Electricity is being strenuously defended. The
Company cannot predict the outcome of this proceeding.
On January 25, 1999, the Hindustan Development Corporation issued
proceedings in the Arbitral Tribunal in Delhi, India against TEG claiming
damages of US$413 million for breach of contract following the termination
of a Joint Development Agreement dated March 20, 1997 relating to the
construction, development and operation of a lignite based thermal power
plant at Barsingsar, Rajasthan. The Company is vigorously defending this
claim. The Company cannot predict the outcome of this proceeding.
In November 1998, five complaints were filed against subsidiaries of
Eastern by five of their former sales agencies. The agencies claim a total
of (pound)104 million arising from the summary termination for the claimed
fundamental breach of their respective contracts in April 1998. The five
agencies are claiming damages for failure to give reasonable notice for
compensation under the UK Commercial Agents Regulations 1994. These actions
are all being defended strenuously, and counterclaims have been filed. The
Company cannot predict the outcome of these claims and counterclaims.
General - In addition to the above, the Company and its subsidiaries are
involved in various legal and administrative proceedings arising in the
ordinary course of its business. The Company believes that all such
lawsuits and resulting claims would not have a material effect on its
financial position, results of operation or cash flows.
Financial Guarantees - TEG has guaranteed up to $110 million ((pound)65
million at December 31, 1998 and (pound)68 million at March 31, 1999) of
certain liabilities that may be incurred and payable by the purchasers of
the businesses sold in the Peabody Sale with respect to the Peabody Holding
Company Retirement Plan for Salaried Employees, the Powder River Coal
Company Retirement Plan and the Peabody Coal UMWA Retirement Plan, subject
to certain specified conditions.
TEG entered into various guarantees of obligations of affiliates of its
former subsidiary Citizens Power LLC, arising under power purchase
agreements and note purchase agreements in connection with various Citizens
Power energy restructuring projects, as well as various indemnity
agreements in connection with such projects. The Company and TEG continue
to be the guarantor or the indemnifying party, as the case may be, under
these various agreements. In connection with the acquisition, letters of
credit were issued under the Sterling Credit Facility in the amount of $198
million ((pound)118 million at December 31, 1998 and (pound)123 million at
March 31, 1999) to support certain debt financings associated with these
restructuring projects (see Note 19).
As a consequence of a restructuring whereby a subsidiary of TXU
Acquisitions transferred Eastern to another wholly-owned subsidiary of TXU
Acquisitions, the Company and certain other affiliated United Kingdom
subsidiaries of TXU may be required to make certain adjustments to the
guarantees, which the Directors of the Company do not currently expect to
have a material adverse impact on the Company.
F-27
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
14. Employee Share Plans
During 1998, the Company instituted the Eastern Group Long Term Incentive
Plan (LTIP) which is administered by a remuneration committee. Awards of
"phantom stock" in TXU under the LTIP may be made available to the
management group, senior managers and salaried directors of Eastern.
Participants of the LTIP receive awards based on the number of shares that
a specified percentage of their annual basic pay could purchase, using the
stock price of TXU at or around the date of grant. For grants during the
periods May 19, 1998 through December 31, 1998 and May 19, 1998 through
March 31, 1999, the stock price of TXU at May 19, 1998 was utilized. There
were no grants between February 5, 1998 and May 18, 1998, inclusive.
Awards are subject to achieving certain performance criteria. There is a
deferral period from the end of the financial period in which the awards
were granted for which the participants must remain with the Company before
becoming vested in their awards. For the awards granted in 1998, the
deferral period for directors is one year. For the management group and
senior managers, one-half of the awards will vest on January 1, 2000, with
the balance of the awards vesting on January 1, 2001. For the awards
granted in 1999, the deferral period for directors is one year and for the
management group and senior managers is two years.
At the end of the deferral period, the Company shall pay to the
participant, in cash, an amount equal to the higher of the stock price of
TXU at the end of the deferral period, or a guaranteed price. The
guaranteed price is the stock price used to calculate the awards granted,
adjusted for interest at 6% compounded annually up to the date of payment.
The Company granted 145,878 awards with an exercise price of (pound)0 on
September 1, 1998, of which 1,785 lapsed due to participants leaving the
Company prior to December 31, 1998, with an additional 8,216 lapses in the
period from January 1, 1999 through March 31, 1999. Additionally, the
Company granted 178,276 awards with an exercise price of (pound)0 on
January 1, 1999. None of the 144,093 or 314,153 awards outstanding at
December 31, 1998 or March 31, 1998, respectively, were exercisable due to
the vesting criteria. The weighted average remaining contractual life of
awards outstanding at December 31, 1998 was 17 months and at March 31, 1999
was 23 months. At December 31, 1998 and March 31, 1999, the closing market
price of TXU Corp common stock was $46.69 ((pound)28.13) and $42.00
((pound)26.09), respectively, per share.
Compensation expense recognized under the plan for the periods ended
December 31, 1998 and March 31, 1999 were (pound)1 million and (pound)2
million, respectively. The Company applies Accounting Principles Board
Opinion No. 25 "Accounting for Stock Issued to Employees" and related
Interpretations in accounting for its employee share plans. Had
compensation costs for the LTIP been determined in accordance with
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation", there would be no difference in the compensation
expense recognized.
15. Disposal and Acquisitions
On December 22, 1998, the Company disposed of Eastern Group Telecoms. The
Company recorded a gain relating to the disposal of (pound)13 million. In
consideration for the business, the Company received cash of (pound)60
million and an investment in the preferred stock of the purchaser, NTL
Inc., with a carrying value of (pound)22 million. The investment is not
traded on any stock exchange and is not convertible into cash until July
2000, but the value has been guaranteed by NTL Inc.
On December 19, 1998, the Company acquired two combined heat and power
companies from British Gas plc for total consideration of (pound)14
million. Citigen (London) Limited is a cogeneration company using two 16
megawatt gas diesel engines to supply electricity, district heating and
chilled water to customers in the City of London. BG Cogen Limited uses a
15 megawatt cogeneration plant to supply steam and electricity to
Millennium Inorganic Chemicals.
F-28
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Dividend Restrictions
Certain debt instruments of the Company contain provisions that, under
certain conditions, restrict distributions on or acquisitions of common
stock. At December 31, 1998 and March 31, 1999 retained earnings was not
restricted as a result of such provisions.
17. Segments
The segments have been identified on the basis of the underlying nature of
the business and its customer base and the corresponding skill sets
required, e.g., engineering, portfolio management and customer services.
The energy retail business segment provides electricity and gas to United
Kingdom national domestic, industrial and commercial users. It also has
commenced retailing joint ventures in continental Europe. The energy
management and generation business segment manages an integrated portfolio
of contracts and physical gas and generation assets. The contracts include
supplying the energy retail business with electricity and gas as well as
contracts with third party energy retailers, traders and wholesalers. The
networks business segment owns and manages the electricity distribution
system and its principal customer base is energy retail and other
electricity suppliers. The other category consists of two operating
segments, metering and telecoms which fall below the quantitative
thresholds for determining reportable segments.
As set out below, contribution for each segment is defined as operating
profit on a UK GAAP basis before exceptional and extraordinary items, but
after a notional charge for the cost of capital. Capital/investment
expenditure includes all items of capital and investment expenditures
including the European equity investment, but the figure excludes proceeds
on the sale of investments. The cost of capital is calculated as 0.5% per
month on working capital and is eliminated on consolidation. Overhead
costs, such as those incurred by the Company at head office and core costs
related to information technology, are not allocated amongst the segments.
<TABLE>
<CAPTION>
Period from formation through Period from formation through
December 31, 1998 March 31, 1999
----------------------------- ------------------------------
Capital/ Capital/
investment investment
Contribution expenditure Contribution expenditure
------------ ----------- ------------ -----------
((pound)million) ((pound)million)
<S> <C> <C> <C> <C>
Energy retail (13) 21 (31) 22
Energy management and generation 121 61 264 99
Networks 100 82 157 109
Other 18 17 20 18
-------- -------- -------- --------
226 181 410 248
Cost of capital elimination 86 -- 118 --
Unallocated corporate costs (17) 214 (40) 229
-------- -------- -------- --------
Total (UK GAAP) 295 395 488 477
-------- -------- -------- --------
Purchase accounting and US GAAP
adjustments 57 -- 35 --
Unallocated restructuring costs (22) -- (22) --
Unallocated investment income 30 -- 30 --
-------- -------- -------- --------
Income before interest, income
taxes and minority interest 360 -- 531 --
======== ======== ======== ========
</TABLE>
F-29
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. Segments (continued)
Revenues are attributed to countries based on location of customers. There
are no revenues for transactions with a single external customer that are
10% or more of the Company's revenue. The Pool is not considered by the
Company to be an external customer, as all electricity generated is sold
into the Pool and is subsequently repurchased from the Pool for resale.
Revenues billed by energy retail for the other segments are presented as
revenues of the other segments.
Period from Period from
formation through formation through
December 31, 1998 March 31, 1999
Revenues Revenues
-------- --------
((pound) million)
Energy retail 1,036 1,609
Energy management and generation 845 1,322
Networks 253 374
Other 31 33
------ ------
Total 2,165 3,338
====== ======
<TABLE>
<CAPTION>
Period from formation through Period from formation through
December 31, 1998 March 31, 1999
---------------------------------- ----------------------------------
Revenues Long-lived assets Revenues Long-lived assets
-------- ----------------- -------- -----------------
((pound) million)
<S> <C> <C> <C> <C>
United Kingdom 2,150 2,606 3,303 2,455
Other countries 15 70 35 61
------- -------- -------- -------
Total 2,165 2,676 3,338 2,516
======= ======== ======== =======
</TABLE>
18. Derivative and Financial Instruments
The Company uses derivative financial instruments for purposes other than
trading and does so to reduce its exposure to fluctuations in electricity
prices, gas prices, interest rates and foreign exchange rates. Derivative
financial instruments used by the Company include contracts for
differences, electricity forward agreements, interest rate swaps, interest
forward rate agreements, options, gas swaps futures and foreign exchange
forward contracts.
Electricity price risk management - Electricity forward contracts are
primarily used by the Company to hedge future changes in electricity
prices. Almost all electricity generated in England and Wales must be sold
to the Pool, and electricity suppliers must likewise generally buy
electricity from the Pool for resale to their customers. The Pool is
operated under a Pooling and Settlement Agreement to which all licensed
generators and suppliers of electricity in Great Britain are party. These
trading arrangements are currently under review by the United Kingdom
government.
The Company enters into electricity forward contracts to assist in the
management of its exposure to fluctuations in electricity pool prices. The
contracts bought and sold are contracts for differences (CfDs) and
electricity forward agreements (EFAs) that fix the price of electricity for
an agreed quantity and duration by reference to an agreed strike price.
EFAs are similar in nature to CfDs, except that they tend to last for
shorter time periods and are based on standard industry terms rather than
being individually negotiated. Long-term CfDs are in place to hedge a
portion of the electricity to be purchased through to 2009. Such CfDs
represent an annual commitment of approximately five terawatt hours (TWh),
declining on a linear basis to approximately two TWh by 2005 and finally
expiring in 2010. There are no similar long-term commitments under EFAs.
The impact of changes in the market value of these contracts, which serve
as hedges, is deferred until the related transaction is completed.
F-30
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
18. Derivative and Financial Instruments (continued)
The fair value of outstanding CfDs and EFAs at December 31, 1998 and March
31, 1999 was (pound)61 million and (pound)48 million, respectively,
calculated as the difference between the expected value of the CfDs or
EFAs, based on their known strike price and known volume, and the current
market value, based on an estimate of forward prices for the CfD or EFA
term. It should be noted that the market for the CfDs and EFAs has not been
liquid to date and there is no readily identifiable market through which
the majority of CfDs or EFAs could be realized through an exchange. No
easily definable forward price curve exists for the duration and shape of
the CfDs or EFAs that would be agreed generally.
Gas swaps and futures - In the gas retail business, the Company sells fixed
price contracts to customers and supplies the customer through a portfolio
of gas purchase contracts and other wholesale contracts. The overall net
exposure of the Company to the gas spot market is managed by using gas
swaps and futures.
Interest rate management - Interest rate swaps and forward rate agreements
are used by the Company to convert between fixed rates and floating rates
as required. Gains and losses from interest rate swaps and forward rate
agreements are accrued over the contract period. At December 31, 1998 and
March 31, 1999, the Company held two interest rate swaps which convert
(pound)100 million of the (pound)350 million 8.375% bonds due 2004 into
floating rate debt; (pound)35 million is based on LIBOR and (pound)65
million is based on LIBOR less 0.7625%.
At December 31, 1998 and March 31, 1999, the Company had various interest
rate swaps as required by the Sterling Credit Agreement. The Sterling
Credit Agreement requires that one-half of the borrowings under these
facilities be swapped from a floating to a fixed interest rate with a
maturity of at least two years from July 28, 1998. The aggregate notional
amount of these interest rate swaps entered into is (pound)800 million,
with an average maturity of six years and average fixed rates of 6.58% and
6.54% at December 31, 1998 and March 31, 1999, respectively.
In addition, the Company has various other interest rate swaps on
subsidiary borrowings with a notional amount of (pound)48 million to swap
floating rate interest to fixed rates, a portion of which matures in 2002
and the remaining portion matures in 2008.
Forward rate agreements totalling (pound)531 million and (pound)355 million
for a maximum duration of less than one year to swap floating rate deposits
into fixed rates were outstanding at December 31, 1998 and March 31, 1999,
respectively.
Foreign currency risk management - The Company has exposure to foreign
currency movements and uses derivative financial instruments to manage this
exposure (principally on US$ denominated debt interest payments and
investments in European countries). The instruments used are forward
purchase contracts and options. The policy with regard to any such
exposures is to match assets owned in foreign countries with borrowings in
that same currency. Where there are firm commitments to purchase goods in a
foreign currency then forward contracts or options are used to fix the
exchange rate. At December 31, 1998, there were US$ options outstanding of
$10 million (at put rates of $1.57) and US$ options outstanding of $10
million (at call rates of $1.60). All of these contracts matured in the
period ended March 31, 1999.
The Company has entered into contracts to fix the exchange rate on the
interest payments to be made under the US$ denominated debt. For the $200
million 7.425% notes due 2017, the Company has entered into a contract
which sets the exchange rate between sterling and US$ at 1.605 over the
life of the debt. For the $300 million 7.55% notes due 2027, the Company
has entered into a contract which sets the exchange rate between sterling
and US$ at 1.625 over the life of the debt.
Concentrations and credit risk - The Company's financial instruments that
are exposed to concentrations of credit risk consist primarily of cash
equivalents, trade receivables and derivative contracts.
F-31
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
18. Derivative and Financial Instruments (continued)
The Company only deposits cash with banks that have a rating in excess of
AA or invests in commercial paper from issuers with ratings of A1 or P1.
Maximum limits are set for each bank based on their ratings and also
maximum limits are set for each country.
The Company's trade receivables result primarily from its gas and
electricity retail operations and reflect a broad customer base including
industrial, commercial and domestic customers.
Credit risk relates to the risk of loss that the Company would incur as a
result of non-performance by counterparties to their respective derivative
instruments. The Company maintains credit policies with regard to its
counterparties that management believes significantly minimize overall
credit risk. The Company generally does not obtain collateral to support
the agreements but establishes credit limits and monitors the financial
viability of counterparties and believes its credit risk is minimal on
these transactions. The extent of this exposure varies with the prevailing
interest and currency rates and was not material throughout the period.
Approximately 54% by volume of the Company's CfDs and EFAs traded in the
periods ended December 31, 1998 and March 31, 1999 were contracted with two
primary counterparties. The risk of loss to the Company arising from
non-performance by these counterparties is considered unlikely.
Fair value of financial instruments - The carrying amount and fair value of
the material financial instruments used by the Company are as follows:
<TABLE>
<CAPTION>
December 31, 1998 March 31, 1999
---------------------- ----------------------
((pound)million) ((pound)million)
Carrying Fair Carrying Fair
Amount Value Amount Value
------ ----- ------ -----
<S> <C> <C> <C> <C>
Assets
Other investments 233 233 284 284
Cash and cash equivalents 467 467 414 414
Restricted cash 717 717 730 730
Liabilities
Notes payable - banks (current) 238 238 53 53
Note payable to TXU 682 682 682 682
Total long-term debt, excluding capital leases 3,029 3,096 3,197 3,272
Short term loans on accounts receivable 300 300 300 300
Other financial instruments -
favorable/(unfavorable)
Interest rate swaps -- (31) -- (42)
Foreign exchange contracts -- (18) -- (21)
Gas swaps -- (2) -- --
CfDs and EFAs -- 61 -- 48
Financial guarantees and letters of credit -- (186) -- (194)
</TABLE>
F-32
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
18. Derivative and Financial Instruments (continued)
The following methods and assumptions were used to determine the above fair
values:
(i) The fair value of other investments is estimated based on quoted
market prices where available and other estimates.
(ii) The carrying amounts of cash and cash equivalents, restricted cash,
notes payable - banks, short term loans on accounts receivable and the
notes payable to TXU approximate their fair values because of the
short maturity of these instruments.
(iii) The fair value of long term debt varies with market conditions and is
estimated based on current rates for similar financial instruments
offered to the Company.
(iv) The fair value of the interest rate swaps is based on the cancellation
value of each swap agreement independently calculated by reference to
the forward sterling interest rate curve for the unexpired portion of
the swap.
(v) The fair value of foreign exchange contracts is based upon valuations
provided by the counterparty.
(vi) The fair value of the gas swaps is based on the net present value of
discounted future cash flows in accordance with underlying gas forward
curves.
(vii) The fair value of the CfDs and EFAs is based upon a discounted cash
flow analysis using an estimate of forward prices in the Pool.
(viii) The fair value of financial guarantees and letters of credit is
based upon fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date.
19. Subsequent Events
On May 13, 1999, TXU Eastern Funding Company issued US$1.5 billion
((pound)915 million) worth of Senior Notes which are guaranteed by the
Company in three tranches; US$350 million ((pound)214 million), 6.15% due
May 15, 2002, US$650 million ((pound)396 million), 6.45% due May 15, 2005,
and US$500 million ((pound)305 million), 6.75% due May 15, 2009. The
proceeds of this issuance were used to repay the note payable to TXU and to
reduce borrowings under the Sterling Credit Agreement and for other
corporate purposes. Shortly thereafter, the Company entered into various
interest rate and currency swaps that in effect changed the interest rate
on the borrowings from fixed to variable based on LIBOR, and fixed the
principal amount to be repaid in sterling.
On May 5, 1999, the Company announced it is to pay (pound)42 million for
a 36% interest in Savon Voima Oy (SVO). This agreement includes an
option which allows the majority shareholders of SVO to require the
Company to purchase the remaining 64% interest in SVO at prices
that are based upon a multiple of the original purchase price for the
first three years. After three years the purchase price is based
upon a calculation which considers SVO's results of operations, as
well as cash and cash equivalents and long-term debt balances on hand
at the date the option is exercised. The option may be exercised at
any time by the majority shareholders and does not expire.
On May 18, 1999, $198 million in letters of credit issued under the
Sterling Credit Agreement/Revolving Credit Facility matured and were not
renewed.
F-33
<PAGE>
TXU Europe Limited (formerly known as TXU Eastern Holdings Limited) and
Subsidiaries (Successor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
19. Subsequent Events (continued)
Eastern has facilities with Citibank N.A. to provide financing through
trade accounts receivable whereby Eastern Electricity may sell up to
(pound)300 million of its electricity receivables and, beginning June 11,
1999, TXU Finance (No. 2) Limited may borrow up to an aggregate of (pound)
275 million, collateralized by additional receivables of Eastern
Electricity, through a short-term note issue arrangement. The program has
an overall program limit of (pound)550 million. Through March 31, 1999, the
electricity receivable financings were in the form of short-term loans
collateralized by Eastern's trade accounts receivable. Subsequent to March
31, 1999, the program was restructured so that a portion of the receivables
are sold outright rather than being used to collateralize short-term
borrowings. Eastern Electricity continually sells additional receivables to
replace those collected. At June 30, 1999, accounts receivable of Eastern
were reduced by (pound)255 million to reflect the sales of the receivables
under the new program. An additional (pound)45 million of receivables
remain as collateral for short-term loans. At June 30, 1999, TXU Finance
(No. 2) Limited had borrowed (pound)150 million through the note issue
arrangement. The borrowings by Eastern Electricity and TXU Finance (No. 2)
Limited bear interest at an annual rate based on commercial paper rates
plus 0.225%, which was 5.225% at June 30, 1999.
F-34
<PAGE>
PRICEWATERHOUSECOOPERS
- - - - ------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
No 1 London Bridge
London SE1 9QL
Telephone +44 (0) 171 939 3000
Facsimile +44 (0) 171 403 5265
Report of Independent Accountants
---------------------------------
To the Board of Directors and Shareholders of Eastern Group plc and Subsidiaries
In our opinion, the accompanying consolidated balance sheet and the related
statements of consolidated income, of comprehensive income, of common stock
equity and of cash flows present fairly, in all material respects, the financial
position of Eastern Group plc and Subsidiaries at March 3l, 1998, and the
results of their operations and their cash flows for the years ended March 31,
1997 and March 31, 1998 and for the period from April 1, 1998 through May 18,
1998 in conformity with accounting principles generally accepted in the United
States. 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 of these statements in
accordance with generally accepted auditing standards in the United Kingdom
which do not differ significantly with those in the United States and which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers
London, England
April 26, 1999
PricewaterhouseCoopers is the successor partnership to the UK firms of Price
Waterhouse and Coopers & Lybrand. The principal place of business of
PricewaterhouseCoopers and its associate partnerships, and of Coopers & Lybrand,
is 1 Embankment Place, London WC2N 6NN. The principal place of business of Price
Waterhouse is Southwark Towers, 32 London Bridge Street, London SE1 9SY. Lists
of the partners' names are available for inspection at those places.
All partners in the associate partnerships are authorised to conduct business as
agents of, and all contracts for services to clients are with,
PricewaterhouseCoopers. PricewaterhouseCoopers is authorised by the Institute of
Chartered Accountants in England and Wales to carry on investment business.
F-35
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
CONSOLIDATED BALANCE SHEET
((pound) million)
<TABLE>
<CAPTION>
As of
March 31, 1998
--------------
<S> <C>
Assets
Property, plant and equipment, net 2,365
-----
Current assets
Cash and cash equivalents 714
Accounts receivable (net of allowance for uncollectable accounts of (pound)13 million) 529
Inventories
Materials and supplies 23
Fuel stock 100
Prepayments 4
ACT recoverable 22
Other current assets 3
-----
Total current assets 1,395
-----
Investments
Restricted cash 547
Other 42
-----
Total investments 589
-----
Deferred debits
Goodwill (net of accumulated amortization of (pound)82 million) 1,222
Prepayments for pensions 150
Other deferred debits 105
-----
Total deferred debits 1,477
-----
Total assets 5,826
=====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-36
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
CONSOLIDATED BALANCE SHEET
((pound) million)
As of
March 31, 1998
--------------
Capitalization and liabilities
Capitalization
Contributed capital 2,603
Retained deficit (794)
Accumulated other comprehensive loss (7)
------
Total common stock equity 1,802
------
Minority interest 6
------
Long-term debt, less amounts due currently 1,976
------
Total capitalization 3,784
------
Current liabilities
Notes payable - banks 57
Long-term debt due currently 228
Short-term loans on accounts receivable 300
Accounts payable 218
Taxes accrued 182
Interest accrued 39
Other current liabilities 292
------
Total current liabilities 1,316
------
Deferred credits and other noncurrent liabilities
Deferred income taxes, net 434
Other deferred credits and noncurrent liabilities 292
------
Total deferred credits and other noncurrent liabilities 726
------
Commitments and contingencies (Notes 11 and 12) --
Total capitalization and liabilities 5,826
======
The accompanying notes are an integral part of these consolidated financial
statements.
F-37
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
STATEMENTS OF CONSOLIDATED INCOME
((pound) million)
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
<S> <C> <C> <C>
Operating revenues 2,984 3,475 425
Costs and expenses
Purchased power 1,600 1,703 202
Gas purchased for resale 368 514 85
Operation and maintenance 557 806 123
Depreciation and amortization 161 185 26
------ ------ ------
Total operating expenses 2,686 3,208 436
------ ------ ------
Operating income (loss) 298 267 (11)
Other income - net 5 10 1
------ ------ ------
Income (loss) before interest, income taxes and minority
interest 303 277 (10)
Interest income 40 76 12
Interest expense, net of capitalized interest 128 202 28
------ ------ ------
Income (loss) before income taxes and minority interest 215 151 (26)
Income tax expense (benefit) 304 189 (5)
------ ------ ------
Loss before minority interest (89) (38) (21)
Minority interest (1) -- --
------ ------ ------
Net loss (90) (38) (21)
====== ====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-38
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
((pound) million)
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
<S> <C> <C> <C>
Net loss (90) (38) (21)
Other comprehensive loss:
Unrealized loss on securities classified as available
for sale (5) (2) (3)
-------- -------- --------
Comprehensive loss (95) (40) (24)
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-39
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
STATEMENTS OF CONSOLIDATED COMMON STOCK EQUITY
((pound) million)
<TABLE>
<CAPTION>
Accumulated
other
Contributed Retained comprehensive
capital deficit income
------- ------- ------
<S> <C> <C> <C>
Balance at April 1, 1996 2,518 (326) --
Net loss for year ended March 31, 1997 -- (90) --
Cash dividends for the year ended March 31, 1997 -- (140) --
Tax relief received from Parent 68 -- --
Unrealized loss on securities classified as available for
sale for the year ended March 31, 1997 -- -- (5)
----- ----- -----
Balance at March 31, 1997 2,586 (556) (5)
----- ----- -----
Balance at April 1, 1997 2,586 (556) (5)
Net loss for the year ended March 31, 1998 -- (38) --
Cash dividends for the year ended March 31, 1998 -- (200) --
Tax relief received from Parent 17 -- --
Unrealized loss on securities classified as available for
sale for the year ended March 31, 1998 -- -- (2)
----- ----- -----
Balance at March 31, 1998 2,603 (794) (7)
----- ----- -----
Balance at April 1, 1998 2,603 (794) (7)
Net loss for the period from April 1, 1998 through May 18, 1998 -- (21) --
Unrealized loss on securities classified as available for
sale for the period from April 1, 1998 through May 18, 1998 -- -- (3)
----- ----- -----
Balance at May 18, 1998 2,603 (815) (10)
===== ===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-40
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
STATEMENTS OF CONSOLIDATED CASH FLOWS
((pound) million)
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
<S> <C> <C> <C>
Cash flows - operating activities
Net loss (90) (38) (21)
Adjustments to reconcile net loss to cash provided by
operating activities:
Gain on disposal of assets (8) (5) --
Depreciation and amortization 161 185 26
Minority interest 1 -- --
Deferred income taxes 251 (24) (7)
Changes in operating assets and liabilities:
Accounts receivable (126) 78 65
Inventories (81) (25) 10
Prepayments and other assets (9) 8 (4)
Accounts payable 106 (82) 6
Interest accrued 35 4 27
Taxes accrued (53) 101 2
Other liabilities 105 139 (30)
------- ------- -------
Cash provided by operating activities 292 341 74
------- ------- -------
Cash flows - investing activities
Capital expenditures (204) (254) (51)
Proceeds from sales of assets 25 30 --
Investment in marketable securities (29) (3) (27)
Other investments (21) (7) --
------- ------- -------
Cash used in investing activities (229) (234) (78)
------- ------- -------
Cash flows - financing activities
Borrowings under long-term debt 692 240 --
Retirements of long-term debt (468) (215) --
Change in notes payable - banks (389) (4) 16
Receivable financing -- 300 --
Debt financing cost (11) -- --
Dividends paid (140) (200) --
------- ------- -------
Cash (used in) provided by financing activities (316) 121 16
------- ------- -------
Net change in cash and cash equivalents (253) 228 12
------- ------- -------
Cash and cash equivalents - beginning balance 739 486 714
------- ------- -------
Cash and cash equivalents - ending balance 486 714 726
------- ------- -------
Supplemental cash flow disclosures:
Cash paid for interest 93 198 5
Cash paid for income taxes 18 90 --
Non-cash transactions:
Record capital lease and related obligations 705 -- --
Consolidation of debt and related investment on
cross-border leases 408 139 --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-41
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business
The business and operations of Eastern Group plc and Subsidiaries (Eastern)
are divided into three principal segments, as follows:
(i) The energy retail business which supplies electricity and gas to
national domestic, industrial and commercial customers in the United
Kingdom;
(ii) The energy management and generation business which manages an
integrated portfolio of generation assets, physical gas assets and
contracts; and
(iii) The networks business which owns, manages and operates the
electricity distribution system.
These businesses are carried out primarily in the United Kingdom with
interests increasingly being developed throughout the rest of Europe.
Prior to May 19, 1998, Eastern was owned by The Energy Group PLC (TEG). On
May 19, 1998, TXU Acquisitions Limited, a subsidiary of TXU Corp, acquired
control of TEG (see Note 17).
2. Basis of Presentation and Significant Accounting Policies
The consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States (US GAAP).
Consolidation - The consolidated financial statements include the accounts
of Eastern and all majority owned subsidiaries. Minority interest
represents the minority shareholders' proportionate share in the equity or
income of Eastern's majority-owned subsidiaries.
All significant intercompany items and transactions have been eliminated in
consolidation. Investments in significant unconsolidated affiliates are
accounted for by the equity method.
Use of estimates - The preparation of Eastern's consolidated financial
statements, in conformity with US GAAP, requires management to make
estimates and assumptions about future events that affect the reporting and
disclosure of assets and liabilities at the balance sheet dates and the
reported amounts of revenue and expense during the period covered by the
consolidated financial statements. In the event estimates and/or
assumptions prove to be different from actual amounts, adjustments are made
in subsequent periods to reflect more current information.
Cash and cash equivalents - Cash equivalents consist of highly liquid
investments, which are readily convertible into cash and have maturities of
three months or less.
Accounts receivable - A provision for uncollectible accounts of (pound)1
million, (pound)11 million and (pound)2 million was recorded during the
years ended March 31, 1997 and 1998 and the period from April 1, 1998
through May 18, 1998, respectively. Eastern did not realize any material
recoveries during the years ended March 31, 1997 and 1998 or the period
from April 1, 1998 through May 18, 1998. Eastern wrote-off accounts
receivable of (pound)1 million, (pound)10 million and (pound)1 million
during the years ended March 31, 1997 and 1998 and the period from April 1,
1998 through May 18, 1998, respectively.
Inventories - Inventories consist of fuel stock, material and supplies, and
are stated at the lower of cost or net realizable value. The cost of
inventories is determined using a weighted average cost method.
F-42
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
Capitalized interest - Interest is capitalized on major capital
expenditures during the period of construction.
Property, plant and equipment - Property, plant and equipment are stated at
cost less accumulated depreciation. The cost of additions, improvements,
and interest on construction are capitalized, while maintenance and repairs
are charged to expense when incurred.
Leased generating stations meeting certain criteria and related equipment
are capitalized and the present value of the related lease payments is
recorded as a liability. Depreciation of capitalized lease assets is
computed on the straight-line basis over the shorter of the estimated
remaining useful life of the asset or the lease term.
Depletion of gas reserves is charged on a unit-of-production basis, based
on an assessment of proven reserves. Depreciation of all other property,
plant and equipment is determined on the straight-line method over
estimated useful lives of the assets as follows:
Electricity generating station assets 30 years
Electricity generating station Shorter of lease period or
assets under capital lease estimated remaining useful life
Electricity distribution 40 years (3% per annum for first
system assets 20 years and 2% per annum for last
20 years)
Buildings Up to 60 years
Leasehold improvements Shorter of remaining lease term or
estimated useful life
Plant and equipment Up to 10 years
Customer contributions to the construction of electricity distribution
system assets are amortized to income over a forty-year period, at a rate
of 3% per year for the first 20 years and 2% per year for the last 20
years. The unamortized amount of these contributions is deducted from
property, plant and equipment.
Upon sale, retirement, abandonment or other disposition of property, the
cost and related accumulated depreciation are eliminated from the accounts
and any gain or loss is reflected in income.
The United Kingdom Government is entitled to claim a portion of any gain
realized by Eastern on certain property disposals made up to March 31,
2000. Provisions for such claims are made when an actual disposal occurs.
Provision is made for abandonment costs relating to gas fields. Such
provisions are determined in accordance with local conditions and
requirements, and on the basis of costs estimated at the respective balance
sheet date. These costs are expensed on a unit-of-production basis.
Valuation of long lived assets - Eastern periodically evaluates the
carrying value of long-lived assets to be held and used, including
goodwill, when events and circumstances warrant such a review. The carrying
value of a long-lived asset is considered impaired when the projected
undiscounted cash flows from such asset is separately identifiable and is
less than its carrying value. In that event, a loss is recognized based on
the amount by which the carrying value exceeds the fair market value of the
long-lived asset. Fair market value is determined primarily utilizing the
anticipated cash flows discounted at a rate commensurate with risk
involved.
Goodwill - Goodwill is capitalized and amortized over 40 years using the
straight-line method. Eastern reviews the goodwill recoverability period on
a regular basis. Amortization expense for each of the years ended March 31,
1997 and 1998 was (pound)33 million and for the period from April 1, 1998
through May 18, 1998 was (pound)4 million.
Derivative financial instruments - In order to qualify for hedge
accounting, the following criteria must be met: the item being hedged
exposes Eastern to price risk, it is probable that the hedge will
substantially offset this risk, and it has been designated as a hedge by
management.
F-43
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
Gains and losses on hedges of existing assets or liabilities are included
in the carrying amounts of those assets or liabilities and are ultimately
recognized in income. Gains and losses related to qualifying hedges of firm
commitments or anticipated transactions are deferred and are recognized in
income or as adjustments of carrying amounts when the hedged transaction
occurs. The cash flows related to derivative financial instruments are
recorded in the same manner as the cash flow related to the item being
hedged. In the event that an overall analysis of the firm commitments being
hedged indicates that Eastern is in a net loss position, a provision is
made for these anticipated losses. Transactions that are entered into that
do not meet the criteria for hedge accounting are marked to market on the
balance sheet at the period end, and the unrealized gain or loss is
recognized in the Statement of Consolidated Income for that period.
Revenue recognition - Electricity and gas sales revenues are recognized
when services are provided to customers and include an estimate for
unbilled revenues, or the value of electricity and gas consumed by
customers between the date of their last meter reading and the period-end
date. Operating revenues are stated exclusive of value added tax, but
inclusive of the fossil fuel levy.
Restructuring costs - Restructuring costs relate to voluntary termination
benefits and are recorded in Operation and Maintenance expense in the
Statement of Consolidated Income in the period in which the employee
accepts the offer and the amount can be reasonably estimated. Eastern has
established voluntary retirement plans to progressively reduce manpower
levels.
Foreign currencies - Assets and liabilities of foreign subsidiaries are
translated at the exchange rate on the balance sheet date. Revenues, costs
and expenses are translated at average rates of exchange prevailing during
the period. Translation adjustments resulting from this process are charged
or credited to the cumulative currency translation adjustment account in
common stock equity. Gains and losses on foreign currency transactions are
included in the Statement of Consolidated Income.
Income taxes - Income tax expense includes United Kingdom and other
national income taxes. Eastern intends to reinvest the earnings of its
foreign subsidiaries into those businesses. Accordingly, no provision has
been made for taxes which would be payable if such earnings were
distributed to Eastern.
Advance Corporation Tax (ACT) recoverable represents the amount of tax paid
or payable on outgoing dividends paid and proposed which can be set off
against a corporation tax liability arising currently or in the future,
thereby reducing current tax expense.
Deferred income taxes are determined under the liability method. Deferred
income taxes represent liabilities to be paid or assets to be received in
the future and reflect the tax consequences on future years of temporary
differences between the tax bases of assets and liabilities and their
financial reporting amounts. Future tax rate changes would affect those
deferred tax liabilities or assets in the period when the tax rate change
is enacted. Future tax benefits, such as net operating loss carryforwards,
are recognized to the extent that realization of such benefits is more
likely than not.
Marketable securities - Eastern has classified all of its marketable
securities as available for sale. Available for sale securities are carried
at fair value with the unrealized gains and losses reported as a component
of accumulated other comprehensive income in common stock equity. Declines
in fair value that are other than temporary are reflected in the Statement
of Consolidated Income.
Appraisal and development expenditure of gas fields - Appraisal
expenditures are accounted for under the successful efforts method. General
seismic and other costs are expensed as incurred.
Ceiling test - The capitalized costs of gas fields under evaluation, under
development or in production are assessed each year on a field-by-field
basis. To the extent that the future net revenues from the remaining
commercial reserves, or, in the case of prospects under evaluation, the
estimated potential commercial reserves, are less than the net capitalized
costs of the field, a charge is made to the profit and loss account.
F-44
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. Basis of Presentation and Significant Accounting Policies (continued)
New accounting standards - Statement of Financial Accounting Standards
(SFAS) No. 133, "Accounting for Derivative Instruments and Hedging
Activities," was to be effective for fiscal years beginning after June 15,
1999. This statement requires that all derivative financial instruments be
recognized as either assets or liabilities on the balance sheet at their
fair values and that accounting for the changes in their fair values is
dependent upon the intended use of the derivatives and their resulting
designations. The new standard will supersede or amend existing standards
that deal with hedge accounting and derivatives. Eastern has not determined
the effect that adopting this standard will have on its consolidated
financial statements.
The Emerging Issues Task Force (EITF) has issued No. 98-10 "Accounting for
Energy Trading and Risk Management Activities" which is effective for
fiscal years beginning after December 15, 1998. EITF 98-10 requires that
contracts for energy commodities which are entered into under trading
activities should be marked to market with the gains and losses shown net
in the income statement. As Eastern is not primarily involved in trading
activities, EITF 98-10 should not have a material impact on the
consolidated financial statements upon adoption.
3. Property, Plant and Equipment
Property, plant and equipment, stated at cost less accumulated
depreciation, consisted of:
March 31, 1998
((pound) million)
-----------------
Electricity distribution system 1,567
Electricity generating stations 1,154
Upstream gas assets 45
Other land and buildings 102
Plant and equipment 360
Accumulated depreciation (863)
--------
Net property, plant and equipment 2,365
========
Depreciation expense for the years ended March 31, 1997 and 1998 was
(pound)128 million and(pound)152 million, respectively, and for the period
from April 1, 1998 through May 18, 1998 was (pound)22 million.
Electricity generating stations and plant and equipment include assets
under capital leases as follows:
March 31, 1998
((pound) million)
-----------------
Cost 839
Less accumulated depreciation (126)
--------
Net book value 713
========
4. Restricted Cash
At March 31, 1998, (pound)408 million of deposits has been used to
cash-collateralize existing future lease obligations to certain banks
related to the funding of the leases of three power stations from National
Power PLC (Note 9). Additionally (pound)139 million at March 31, 1998 has
been used to cash-collateralize existing future lease obligations arising
from a cross-border leasing arrangement on two other power stations (Note
9).
F-45
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
5. Investments
Marketable investments are classified as available for sale, and are
considered non-current based upon management's intentions in holding the
investments. Marketable investments consisted of:
Fair market Unrealized
March 31, 1997 Cost value gain/(loss)
-------- ----------- ----------
((pound)million)
SME 29 24 (5)
----- ----- -----
29 24 (5)
===== ===== =====
Fair market Unrealized
March 31, 1998 Cost value gain/(loss)
-------- ----------- ----------
((pound)million)
SME 25 18 (7)
HC 3 3 -
----- ----- -----
28 21 (7)
===== ===== =====
Fair market Unrealized
May 18, 1998 Cost value gain/(loss)
-------- ----------- ----------
((pound)million)
SME 35 25 (10)
HC 20 20 -
----- ----- -----
55 45 (10)
===== ===== =====
At March 31, 1998 Eastern held an 11.8% investment in Severomoravska
Energetika (SME), which is listed in the Czech Republic. During the period
from April 1, 1998 through May 18, 1998, Eastern's Investment in SME
increased to 16%. During the year ended March 31, 1998, Eastern acquired a
1.8% investment in Hidroelectrica del Cantabrico (HC), which is listed in
Spain. As Eastern does not have the ability to exercise significant
influence over either SME's or HC's operating and financial policies, these
investments have been accounted for as marketable securities and
accordingly have been marked to market at March 31, 1997 and 1998 and May
18, 1998.
There were no sales of marketable securities in the two year period ended
March 31, 1998, or from April 1, 1998 through May 18, 1998.
At March 31, 1998 Eastern held an additional (pound)21 million in other
investments.
6. Pensions
The majority of Eastern's employees are members of the Electricity Supply
Pension Scheme (ESPS) which provides pensions of a defined benefit nature
for employees throughout the England and Wales Electricity Supply Industry.
The ESPS operates on the basis that there is no cross-subsidy between
employers and the financing of Eastern's pension liabilities is therefore
independent of the experience of other participating employers. The assets
of the ESPS are held in a separate trustee-administered fund and consists
principally of United Kingdom and European equities, United Kingdom
property holdings and cash. The pension cost relating to the Eastern
portion of the ESPS is assessed in accordance with the advice of
independent qualified actuaries using the projected unit method. The
benefits under these plans are primarily based on years of service and
compensation levels as defined under the respective plan provisions.
The assets of the Electricity Supply Pension Scheme are held in a separate
trustee administered fund and consist principally of United Kingdom and
European equities, United Kingdom property holdings and cash.
F-46
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Pensions (continued)
Eastern has adopted SFAS No. 132, "Employer's Disclosure about Pensions and
other Post-retirement Benefits" for the year ended March 31, 1998.
Year ended
Change in benefit obligations March 31, 1998
- - - - ----------------------------- --------------
((pound) million)
Benefit obligation at beginning of year 702
Service cost 9
Interest cost 53
Plan participants' contributions 7
Termination liability 15
Actuarial loss 100
Benefits paid (51)
------
Benefit obligation at end of year 835
======
Change in plan assets:
- - - - ---------------------
Fair value of plan assets at beginning of year 874
Actual return on plan assets 285
Employer contribution 14
Plan participants' contributions 7
Benefits paid (51)
------
Fair value of plan assets at end of year 1,129
======
Funded Status:
- - - - -------------
Funded status 294
Unrecognized net actuarial gain (151)
Unrecognized prior service cost 7
------
Prepayments for pensions 150
======
F-47
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. Pensions (continued)
Weighted average assumptions:
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
% % %
<S> <C> <C> <C>
Expected long-term rate of return on assets 8.5 7.0 7.0
Rate of salary increases 5.0 4.0 4.0
Discount rate 8.0 7.0 6.5
</TABLE>
Components of net periodic pension benefit:
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
((pound) million)
<S> <C> <C> <C>
Service cost-benefits earned during the period 9 9 1
Interest cost on projected benefit obligations 58 53 7
Expected return on plan assets (75) (69) (10)
Net amortization and deferral -- 1 --
------ ------ ------
Net periodic benefit (8) (6) (2)
====== ====== ======
</TABLE>
During 1997 and 1998 special retirement programs were offered to encourage
early retirements among certain employees which resulted in additional
pension cost of (pound)12 million and (pound)15 million in the years ended
March 31, 1997 and 1998, respectively.
7. Taxation
The components of income tax expense are as follows:
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
((pound) million)
<S> <C> <C> <C>
Current:
United Kingdom 53 213 2
------- ------ ------
Deferred:
United Kingdom 251 (24) (7)
------- ------ ------
Total income tax expense/(benefit) 304 189 (5)
======= ====== ======
</TABLE>
F-48
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Taxation (continued)
Income/(loss) before income taxes is as follows:
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
((pound) million)
<S> <C> <C> <C>
United Kingdom 212 157 (27)
Other countries 3 (6) 1
------ ------ ------
Total income/(loss) before income taxes and
minority interest 215 151 (26)
====== ====== ======
</TABLE>
Significant components of Eastern's deferred tax assets and liabilities at
March 31, 1998 are as follows:
As at
March 31, 1998
--------------
((pound) million)
Deferred tax assets
Tax loss carry forwards (1)
Leased assets (450)
Other (98)
-------
Total deferred tax assets (549)
Valuation allowance for deferred tax assets 165
-------
Net deferred tax assets (384)
-------
Deferred tax liabilities
Excess of book value over taxation value of fixed assets 274
Leased assets 507
Other 37
-------
Total deferred tax liabilities 818
-------
Net deferred tax liabilities 434
=======
All of the net deferred tax liabilities are non-current.
The recognized deferred tax asset is based upon the expected future
utilization of net operating loss carryforwards and the reversal of other
temporary differences. For financial reporting purposes, Eastern has
recognized a valuation allowance for those benefits for which realization
does not meet the more likely than not criteria. The valuation allowance
has been recognized in respect of leased assets. Eastern continually
reviews the adequacy of the valuation allowance and is recognizing these
benefits only as reassessments indicate that it is more likely than not
that the benefits will be realized. The valuation allowance increased by
(pound)18 million in the year ended March 31, 1998.
F-49
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
7. Taxation (continued)
United Kingdom income tax expense at the statutory tax rate (33% at March
31, 1997 and 31% at March 31, 1998 and May 18, 1998) is reconciled below to
the actual income tax expense:
<TABLE>
<CAPTION>
Period from
April 1, 1998
Year ended Year ended through
March 31, 1997 March 31, 1998 May 18, 1998
-------------- -------------- ------------
((pound) million)
<S> <C> <C> <C>
Tax at United Kingdom statutory rate 71 47 (8)
Windfall tax -- 112 --
Non-deductible goodwill 10 10 1
Effect of tax rate on United Kingdom dividends (2) (2) --
Movement in valuation allowance 147 18 2
Leasing transaction 93 -- --
Tax rate change (13) -- --
Profit on disposal taxed at lower rates (5) (1) --
Non-deductible expenses 2 3 --
Other 1 2 --
---- ---- ----
Income tax expense/ (benefit) 304 189 (5)
==== ==== ====
</TABLE>
For the year ended March 31, 1998, a windfall tax was levied on Eastern
according to a formula contained in the UK Finance (No. 2) Act 1997. The
liability to the tax was assessed at (pound)112 million of which half was
paid on December 1, 1997 and the balance was paid on December 1, 1998.
As at March 31, 1998 Eastern had net operating loss carryforwards of
(pound)1 million that are available to offset future taxable income. The
net operating loss carryforwards have no expiration date.
The tax effect of components included in accumulated other comprehensive
income was a benefit of (pound)2 million in the year ended March 31, 1997,
a benefit of (pound)1 million in the year ended March 31, 1998 and a
benefit of (pound)1 million for the period from April 1, 1998 through May
18, 1998.
8. Related Party Transactions
At March 31, 1998 Eastern was owed(pound)0.4 million by TEG, which arose
from payments of salary expenses by Eastern on behalf of TEG.
F-50
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Notes Payable and Long-term Debt
Weighted average interest rate at March 31, 1998 on notes payable to banks
was 13.2%.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, 1998
--------------
((pound) million)
<S> <C>
Notes and Bonds:
(pound)350 million 8.375% bonds due 2004 350
(pound)200 million 8.5% bonds due 2025 200
(pound)200 million 8.75% bonds due 2012 200
Other:
Rent factoring loans (weighted average interest rate of 7.35%, due 1999-2001) 804
Other unsecured loans, due in instalments 8.9% - 18.3% 50
Capital leases 461
Cross-border leases 139
-------
Total long-term debt 2,204
Less current portion 228
-------
Long-term debt, less amounts due currently 1,976
=======
</TABLE>
(pound)100 million of the (pound)350 million 8.375% bonds included in
long-term debt has been converted into floating rate debt by way of
interest rate swaps, which expire in the year 2004.
Rent factoring loans - Certain subsidiaries of Eastern entered into an
agreement with commercial banks whereby future intra-group rental payments
receivable were assigned to these banks in return for a capital sum.
(pound)408 million of the capital sum has been deposited to cash
collateralize existing future lease obligations to certain banks related to
the funding of the leases of three power stations leased from National
Power.
On December 17, 1997 a subsidiary of Eastern issued a (pound)21 million
floating rate (18.26% at March 31, 1998) bond in the Czech Republic.
Long-term debt balances are denominated in the following currencies:
March 31, 1998
--------------
((pound) million)
Sterling 2,044
United States dollars 139
Other 21
-------
Total long-term debt 2,204
=======
There was no capitalized interest for the year ended March 31, 1998, or for
the period from April 1, 1998 through May 18, 1998. Capitalized interest
for the year ended March 31, 1997 was (pound)11 million.
F-51
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Notes Payable and Long-term Debt (continued)
Long-term debt, excluding capital lease balances, is repayable as follows:
Year Ending
March 31
--------
1999 213
2000 225
2001 242
2002 127
2003 21
Thereafter 915
-------
1,743
Capital leases 461
-------
Total long-term debt 2,204
=======
Capital lease obligations - As at March 31, 1998, future minimum lease
payments for assets under capital leases, together with the present value
of minimum lease payments, were:
Year Ending
March 31
--------
((pound) million)
1999 16
2000 16
2001 17
2002 542
2003 17
Thereafter 98
--------
Total future minimum lease payments 706
Less amounts representing interest (245)
--------
Present value of future minimum lease payments 461
--------
Current 15
Non-current 446
--------
Total 461
========
Substantially all of the capital lease obligations relate to coal-fired
power stations. Additional payments of approximately (pound)6 per megawatt
hour (indexed from 1996 prices) linked to output levels from the stations
are payable for the first seven years of their operation by Eastern
(operations commenced in 1996).
The lease agreement for three of the coal-fired power stations contains a
purchase option of(pound)1 in 2046. The lease is for a total of ninety-nine
years.
Cross-border leases - The debt arising on the cross-border leases is fully
collaterized by restricted cash on deposit (see Note 4). Certain
subsidiaries of Eastern have entered into cross-border lease transactions
in respect of two power stations that are wholly owned by Eastern. Eastern
has retained control of the power stations and their output and is
responsible for their operations.
F-52
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
9. Notes Payable and Long-term Debt (continued)
Eastern's debt agreements contain certain covenants with which they must
comply, including leverage ratios, levels of net assets and interest cover
covenants. At March 31, 1998, Eastern was in compliance with all covenants.
10. Lines of Credit and Other Credit Facilities
Credit facility - At March 31, 1998 Eastern had a five year committed
revolving credit borrowing facility amounting to (pound)350 million with
interest based on LIBOR plus 0.23% which at March 31, 1998 was 7.86%.
Promissory note program - Eastern has a one year promissory note program
issued within the Czech Republic which has been utilized to fund its
investment in SME and Teplarny Brno a.s. The note bears interest at an
annual rate of PRIBOR plus 0.7% which at March 31, 1998 was 18.3%.
Short-term loan on accounts receivable - Eastern has facilities with a
financial institution whereby it may, from time to time, borrow funds from
the financial institution. Outstanding borrowings under the agreements may
not exceed certain levels and are collateralized by portions of Eastern's
trade accounts receivable. At March 31, 1998, Eastern had borrowed
(pound)300 million under these facilities. The loan bears interest at an
annual rate based upon commercial paper rates plus 0.225% which at March
31, 1998 was 7.6%.
11. Commitments
Eastern evaluates its position relative to asserted and unasserted claims,
loss-making purchase commitments or future commitments and makes provisions
as needed.
Eastern's investment in Svartisen (the offtake generated by water rights in
hydro-electric power plants in Norway) requires coverage of approximately
31.2% of the costs incurred in relation to the operation of the power
plant, as well as a portion of the maintenance costs, property tax, and
feeding costs (defined as fixed charges such as connection and capacity
charges and volume related charges such as an energy charge) for 55 years,
beginning in 1998. The electricity generated from the hydro-electric plants
will be sold into the Norwegian power pool, from which Eastern will receive
income.
Gas take-or-pay contracts - Eastern is a party to various types of
contracts for the purchase of gas. Almost all include "take-or-pay"
obligations under which the buyer agrees to pay for a minimum quantity of
gas in a year. In order to help meet the expected needs of its wholesale
and retail customers, Eastern has entered into a range of gas purchase
contracts. As at March 31, 1998, the commitments under long-term gas
purchase contracts amounted to an estimated (pound)2.8 billion, covering
periods up to 16 years forward. Management does not consider it likely, on
the basis of Eastern's current expectations of demand from its customers as
compared with its take-or-pay obligations under such purchase contracts,
that any material payments will become due from Eastern for gas not taken.
F-53
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
11. Commitments (continued)
Rental commitments - The future minimum rental commitments under
non-cancellable operating leases were as follows:
Year ending
December 31
-----------
Period from May 19, 1998 through December 31, 1998 34
1999 53
2000 36
2001 37
2002 34
2003 30
Thereafter 27
------
Total 251
======
The operating lease commitments relate to coal-fired power stations.
Additional variable payments of approximately (pound)6 per megawatt hour
(indexed to 1996 prices) linked to output levels from these stations are
payable through 2000, the first four years of the lease agreement, by
Eastern.
Rental expense for operating leases amounted to (pound)49 million and
(pound)77 million for the years ended March 31, 1997 and 1998,
respectively. Rental expense for operating leases for the years ended March
31, 1997 and March 31, 1998 include (pound)32 million and (pound)42
million, respectively, of minimum lease payments and (pound)17 million and
(pound)35 million, respectively, of variable lease payments, based on
output. Rental expense for operating leases amounted to (pound)10 million
for the period ended May 18, 1998. Rental expense for operating leases
during the period to May 18, 1998 includes (pound)6 million of minimum
lease payments and (pound)4 million of variable lease payments, based upon
output.
12. Contingencies
Eastern is subject to business risks that are actively managed against
exposures.
In February 1997, the official government representative of pensioners
(Pensions Ombudsman) made a determination against the National Grid Company
plc (National Grid) and its group trustees with respect to complaints by
two pensioners in National Grid's section of the ESPS relating to the use
of the pension fund surplus resulting from the March 31, 1992 actuarial
valuation of the National Grid section to meet certain costs arising from
the payment of pensions on early retirement upon reorganization or
downsizing. These determinations were set aside by the High Court on June
10, 1997 and the arrangements made by National Grid and its group trustees
in dealing with the surplus were confirmed. The two pensioners have now
appealed against this decision and judgment has now been received although
a final order is awaited. The appeal was allowed endorsing the Pensions
Ombudsman's determination that the corporation was not entitled to
unilaterally deal with any surplus. If a similar complaint were to be made
against Eastern in relation to its use of actuarial surplus in its section
of the ESPS, it would vigorously defend the action, ultimately through the
courts. However, if a determination were finally to be made against it and
upheld by the courts, Eastern could have a potential liability to repay to
its section of the ESPS an amount estimated by Eastern to be up to
(pound)45 million (exclusive of any future applicable interest charges).
General - In addition to the above, Eastern is involved in various legal
and administrative proceedings arising in the ordinary course of its
business. Eastern believes that all such lawsuits and resulting claims
would not have a material effect on its financial position, results of
operation or cash flows.
F-54
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Employee Share Plans
TEG had the following employee share plans in which Eastern's employees
participated for the two year period ended March 31, 1998 and for the
period from April 1, 1998 through May 18, 1998:
(a) The Energy Group Sharesave Scheme which was available to the United
Kingdom-based employees of Eastern and those directors who devoted
more than 25 hours a week to their duties. Employees who participated
in this scheme had to enter into a monthly savings contract, for
either a three or five year period. The exercise price for the three
year Sharesave Scheme was based on a 15% discount of the TEG stock
price on February 25, 1997 (date of original grant) and the five year
Sharesave Scheme exercise price was based on a 20% discount.
(b) The Energy Group Executive Share Option Scheme which was administered
by the Remuneration Committee of the Board of Directors of TEG (the
Remuneration Committee) was available at its discretion to employees
and those directors who devote more than 25 hours a week to their
duties. Eligible participants under this plan were granted options to
acquire shares with an exercise price equal to the February 25, 1997
(date of grant) TEG stock price, which were not exercisable for three
years.
(c) The Energy Group Long-term Incentive Plan operated in conjunction with
Eastern's Employee Benefit Trust. The plan was supervised and
administered by the Remuneration Committee. The Plan could be made
available to all employees and directors at the discretion of the
Remuneration Committee, but it was in practice limited to the
executive directors and certain senior executives of Eastern. Awards
under this plan required a certain level of achievement of total
shareholder return, normally calculated over three years, before they
vested.
The movements in share options outstanding during the year ended March 31,
1998 and the period ended May 18, 1998 were:
<TABLE>
<CAPTION>
Weighted
average As at As at As at
fair value Exercise March 31 March 31, Exercise/ May 18,
of options price 1997 Exercised Lapsed Granted 1998 Lapsed Granted 1998
---------- ----- ---- --------- ------ ------- ---- ------ ------- ----
(pence) (pence)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Executive
Share Options 73 547 774,416 10,958 38,353 -- 725,105 -- -- 725,105
Sharesave
Scheme - 3 year 109.8 465 19,455 -- -- 233,466 252,921 -- 29,183 282,104
Sharesave
Scheme - 5 year 133.3 438 73,254 -- -- 879,052 952,306 -- 36,627 988,933
Long-term
Incentive Plan 465 -- 486,926 -- 33,951 -- 452,975 -- -- 452,975
</TABLE>
No options lapsed or were exercised prior to March 31, 1997.
With the exception of the Sharesave Schemes, the options listed above were
all granted between February 25, 1997 and March 31, 1997. The granted
options for the Sharesave Schemes reflect additional amounts saved by
participants during the respective period.
Since May 18, 1998 all options or awards then outstanding under the
employee share plans described in (a) to (c) above have, as a consequence
of the takeover of Eastern by TXU Corp (see Note 17), either been
exercised, waived or surrendered for a cash cancellation payment by TXU
Corp or lapsed.
Eastern recorded compensation expense relating to the employee share plans
of (pound)0.1 million in the year to March 31, 1997, (pound)2 million in
the year to March 31, 1998 and (pound)0.3 million in the period from April
1, 1998 to May 18, 1998.
Eastern determined the potential impact of SFAS No. 123, "Accounting For
Stock-Based Compensation" with regard to the recognition of compensation
expense. Under SFAS 123, compensation expense is
F-55
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Employee Share Plans (continued)
determined based upon the fair value at the grant date for awards. Had
compensation expense for Eastern share option schemes been determined
based upon the methodology prescribed under SFAS 123, Eastern's loss
would not have been affected in the year ended March 31, 1997, would have
been (pound)500,000 lower in the year ended March 31, 1998 and would have
been (pound)125,000 lower in the period ended May 18, 1998. The fair
value of the options granted are estimated using the Black Scholes
model.
The following weighted-average assumptions were assumed in determining the
fair value of options for the Executive Share Option Scheme: exercise price
is equal to the fair value of the stock on the grant date; risk-free
interest rate is 5.31%; expected lives of 2 years and remaining contract
life of 5.5 years; expected volatility of 27.3% and a dividend yield of
5.48%. The same assumptions were used in determining the compensation cost
as of the grant date for the Long-term Incentive Plan and the Sharesave
Schemes for the risk free interest rate, expected volatility and dividend
yield. For the 5 year Sharesave Scheme the exercise price is 80% of the
stock price at date of grant and a contract life of 4.3 years. For the 3
year Sharesave Scheme the exercise price is 85% of the stock price at date
of grant and a contract life of 2.3 years. For the Long-term Incentive Plan
the exercise price is nil and the expected life is 3 years.
14. Dividend Restrictions
Certain debt instruments of Eastern contain provisions that, under certain
conditions, restrict distributions on or acquisitions of common stock. At
March 31, 1998 retained earnings were not restricted as a result of such
provisions.
15. Segmental Information
The segments have been identified on the basis of the underlying nature of
the business and its customer base and the corresponding skill sets
required, e.g., engineering, portfolio management and customer services.
The energy retail business segment provides electricity and gas to United
Kingdom national domestic, industrial and commercial users. It also has
commenced retailing joint ventures in continental Europe. The energy
management and generation business segment manages an integrated portfolio
of contracts and physical gas and generation assets. The contracts include
supplying the energy retail business with electricity and gas as well as
contracts with third party energy retailers, traders and wholesalers. The
networks business segment owns and manages the electricity distribution
system and its principal customer base is energy retail and other
electricity suppliers. The other category consists of two operating
segments, metering and telecoms which fall below the quantitative
thresholds for determining reportable segments.
As set out below, contribution for each segment is defined as operating
profit on a UK GAAP basis before exceptional and extraordinary items, but
after a notional charge for the cost of capital. Capital/investment
expenditure includes all items of capital and investment expenditures
including the European equity investment. The cost of capital is calculated
as 0.5% per month on working capital and is eliminated on consolidation.
Overhead costs, such as those incurred by Eastern at head office and core
costs related to information technology are not allocated among the
segments.
F-56
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Segmental Information (continued)
<TABLE>
<CAPTION>
Period from April 1,
Year ended March 31, 1998 through May 18, 1998
------------------------------------------------------- --------------------------
1997 1998
-------------------------- ---------------------------
Capital/ Capital/ Capital/
Investment Investment Investment
Contribution expenditure Contribution expenditure Contribution expenditure
------------ ----------- ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
Energy retail (8) 16 (52) 42 (5) 6
Energy management and
generation 103 60 180 44 (13) 6
Networks 165 147 189 120 21 31
Other -- -- -- 32 (3) 35
--------- --------- --------- --------- --------- ---------
260 223 317 238 -- 78
Cost of capital elimination 151 -- 125 -- 17 --
Unallocated corporate costs (40) 31 (11) 26 (28) --
--------- --------- --------- --------- --------- ---------
Total (UK GAAP) 371 254 431 264 (11) 78
--------- --------- --------- --------- --------- ---------
Purchase accounting and
US GAAP adjustments (61) -- (70) -- -- --
Unallocated contract costs -- -- (68) -- -- --
Unallocated restructuring
costs (20) -- (20) -- -- --
Unallocated investment
income 13 -- 4 -- 1 --
--------- --------- --------- --------- --------- ---------
Income (loss) before
interest, income
taxes and minority
interest 303 -- 277 -- (10) --
========= ========= ========= ========= ========= =========
</TABLE>
Revenues are attributed to countries based on location of customers. There
are no revenues for transactions with a single external customer that are
10% or more of Eastern's revenue. The electricity trading market in England
and Wales (the Pool) is not considered by Eastern to be an external
customer, as all electricity generated is sold into the Pool and is then
repurchased from the Pool for subsequent resale. Revenues billed by energy
retail for the other segments are presented as revenues of the other
segments.
<TABLE>
<CAPTION>
Revenues for
Revenues for the from
year ended March 31, April 1, 1998
-------------------------------- through
1997 1998 May 18, 1998
------------- --------------- ----------------
((pound)million) ((pound)million) ((pound)million)
<S> <C> <C> <C>
Energy retail 1,568 1,655 205
Energy management and generation 952 1,337 165
Networks 420 414 53
Other 44 69 2
------- ------- ------
Total 2,984 3,475 425
======= ======= ======
</TABLE>
F-57
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
15. Segmental Information (continued)
<TABLE>
<CAPTION>
Revenues for
the period
Revenues for the from
year ended March 31, April 1, 1998
-------------------------------- through
1997 1998 May 18, 1998
------------- --------------- ----------------
((pound)million) ((pound)million) ((pound)million)
<S> <C> <C> <C>
United Kingdom 2,966 3,447 422
Other countries 18 28 3
------- ------- ------
Total 2,984 3,475 425
======= ======= ======
</TABLE>
Long-lived
assets at
March 31, 1998
--------------
((pound) million)
United Kingdom 2,314
Other countries 51
-------
Total 2,365
=======
16. Derivative and Financial Instruments
Eastern uses derivative financial instruments for purposes other than
trading and does so to reduce its exposure to fluctuations in electricity
prices, gas prices, interest rates and foreign exchange rates. Derivative
financial instruments used by Eastern include contracts for differences,
electricity forward rate contracts, interest rate swaps, interest forward
rate agreements, options, gas swaps futures and foreign exchange forward
contracts.
Electricity price risk management - Electricity forward contracts are
primarily used by Eastern to hedge future changes in electricity prices.
Almost all electricity generated in England and Wales must be sold to the
Pool, and electricity suppliers must likewise generally buy electricity
from the Pool for resale to their customers. The Pool is operated under a
Pooling and Settlement Agreement to which all licensed generators and
suppliers of electricity in Great Britain are party. These trading
arrangements are currently under review by the United Kingdom government.
Eastern enters into electricity forward contracts to assist in the
management of its exposure to fluctuations in electricity pool prices. The
contracts bought and sold are contracts for differences (CfDs) and
electricity forward agreements (EFAs) that fix the price of electricity for
an agreed quantity and duration by reference to an agreed strike price.
EFAs are similar in nature to CfDs, except that they tend to last for
shorter time periods and are based on standard industry terms rather than
being individually negotiated. Long-term CfDs are in place to hedge a
portion of the electricity to be purchased through to 2009. Such CfDs
represent an annual commitment of approximately five terawatt hours (TWh),
declining on a linear basis to approximately two TWh by 2005 and finally
expiring in 2010. There are no similar long-term commitments under EFAs.
The impact of changes in the market value of these contracts, which serve
as hedges, is deferred until the related transaction is completed.
F-58
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Derivative and Financial Instruments (continued)
The fair value of outstanding CfDs and EFAs at March 31, 1998 was (pound)29
million, calculated as the difference between the expected value of the
CfDs or EFAs, based on their known strike price and known volume, and the
current market value, based on an estimate of forward prices for the CfD or
EFA term. It should be noted that the market for the CfDs and EFAs has not
been liquid to date and there is no readily identifiable market through
which the majority of CfDs or EFAs could be realized through an exchange.
No easily definable forward price curve exists for the duration and shape
of the CfDs or EFAs that would be agreed generally.
Gas swaps and futures - In the gas retail business, Eastern sells fixed
price contracts to customers and supplies the customer through a portfolio
of gas purchase contracts and other wholesale contracts. The overall net
exposure of Eastern to the gas spot market is managed by using gas swaps
and futures.
Interest rate management - Interest rate swaps and forward rate agreements
are used by Eastern to convert between fixed rates and floating rates as
required. Gains and losses from interest rate swaps and forward rate
agreements are accrued over the contract period. The interest rate swaps
held by Eastern as at March 31, 1998 are comprised of two swaps to convert
(pound)100 million of the (pound)350 million 8.375% bonds due 2004 into
floating rate debt; (pound)35 million is based on LIBOR and (pound)65
million is based on LIBOR less 0.7625%.
Forward rate agreements totalling (pound)865 million for a maximum duration
of one year to swap floating rate deposits into fixed rates were
outstanding at March 31, 1998.
Foreign currency risk management - Eastern has exposure to foreign currency
movements and uses derivative financial instruments to manage this exposure
(principally investments in European countries). The instruments used are
forward purchase contracts and options. The policy with regard to any such
exposures is to match assets owned in foreign countries with borrowings in
that same currency. Where there are firm commitments to purchase goods in a
foreign currency then forward contracts or options are used to fix the
exchange rate. There were no material foreign exchange forward contracts
outstanding at March 31, 1998.
Concentrations and credit risk - Eastern's financial instruments that are
exposed to concentrations of credit risk consist primarily of cash
equivalents, trade receivables and derivative contracts.
Eastern only deposits cash with banks that have a rating in excess of AA or
invests in commercial paper from issuers with ratings of A1 or P1. Maximum
limits are set for each bank based on their ratings and also maximum limits
are set for each country.
Eastern's trade receivables result primarily from its gas and electricity
retail operations and reflect a broad customer base including industrial,
commercial and domestic customers.
Approximately 38 per cent by volume of all of Eastern's CfDs and EFAs in
the year ended March 31, 1998 were contracted with two primary
counterparties.
Credit risk relates to the risk of loss that Eastern would incur as a
result of non-performance by counterparties to their respective derivative
instruments. Eastern maintains credit policies with regard to its
counterparties that management believes significantly minimize overall
credit risk. Eastern generally does not obtain collateral to support the
agreements but establishes credit limits and monitors the financial
viability of counterparties and believes its credit risk is minimal on
these transactions. The extent of this exposure varies with the prevailing
interest and currency rates and was not material throughout the periods
presented.
F-59
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
16. Derivative and Financial Instruments (continued)
At March 31, 1998, no single bank was party to more than (pound)100 million
nominal value of such agreements. Eastern believes the risk of
nonperformance by counterparties is minimal.
Fair value of financial instruments
The carrying amounts and fair values of the material financial instruments
of Eastern are as follows:
<TABLE>
<CAPTION>
As at March 31, 1998
------------------------
Carrying Fair
amount value
-------- -----
((pound) million)
<S> <C> <C>
Assets
Other investments 42 42
Restricted cash investments 547 547
Cash and equivalents 714 714
Liabilities
Notes payable - banks 57 57
Short-term loans on accounts receivable 300 300
Total long-term debt, excluding capital leases 1,743 1,827
Other financial instruments - favorable/(unfavorable)
Interest rate swaps -- 11
Foreign exchange contracts -- (1)
Gas swaps -- 21
CfDs and EFAs -- 29
Financial guarantees and letters of credit -- (2)
</TABLE>
The following methods and assumptions were used to determine the above fair
values:
(i) The fair value of fixed asset investments is estimated based on quoted
market prices where available and other estimates;
(ii) The carrying amounts of current asset investments, short-term
deposits, cash and bank overdrafts, etc. approximate their fair values
because of the short maturity of these instruments;
(iii) The fair value of the investment bonds is based on their quoted
mid-market prices and excludes the value of the interest rate swaps;
(iv) The fair value of the interest rate swaps is based on the cancellation
value of each swap quoted by the relevant bank counterparty;
(v) The fair value of foreign exchange contracts is based upon valuations
provided by the counterparty;
(vi) The fair value of the gas swaps is based on the net present value of
discounted future cash flows in accordance with the underlying gas
forward curve;
(vii) The fair value of the CfDs and EFAs is based upon a discounted cash
flow analysis using an estimate of forward prices in the Pool;
(viii) The fair value of financial guarantees and letters of credit is
based upon fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the obligations
with the counterparties at the reporting date.
F-60
<PAGE>
Eastern Group plc and Subsidiaries (Predecessor Company)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)
17. Subsequent Events
As of May 19, 1998, TXU Acquisitions Limited (TXU Acquisitions), a wholly
owned subsidiary of TXU Corp, acquired control of TEG. This business
combination was accounted for as a purchase. During the period between
February 5, 1998 and May 18, 1998, TXU Acquisitions had acquired a 22%
interest in TEG. Substantially all of TEG's continuing operations are
conducted through Eastern. The acquisition of TEG by TXU Acquisitions
resulted in the replacement of the five year committed revolving credit
facility, amounting to (pound)350 million, with revolving borrowing
facilities of (pound)700 million, of which (pound)250 million is a stand
alone facility for the exclusive use of Eastern and a revolving credit
facility under which the current holding company of Eastern may borrow up
to (pound)450 million for general corporate purposes.
F-61
<PAGE>
PRICEWATERHOUSECOOPERS
- - - - ------------------------------------------------------------------------------
PRICEWATERHOUSECOOPERS
No 1 London Bridge
London SE1 9QL
Telephone +44 (0) 171 939 3000
Facsimile +44 (0) 171 403 5265
Report of Independent Accountants
---------------------------------
To the Board of Directors and Shareholders of Energy Group Overseas B.V.
In our opinion, the accompanying balance sheet and the related statements of
income, of comprehensive income, of common stock equity and of cash flows
present fairly, in all material respects, the financial position of Energy Group
Overseas B.V. at March 3l, 1998 and the results of its operations and its cash
flows for the period from formation (October 8, 1997) to March 31, 1998 and from
April 1, 1998 to May 18, 1998 in conformity with accounting principles generally
accepted in the United States. These financial statements are the responsibility
of Overseas' management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards in the
United Kingdom which do not differ significantly with those in the United States
and which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers
London, England
April 26, 1999
PricewaterhouseCoopers is the successor partnership to the UK firms of Price
Waterhouse and Coopers & Lybrand. The principal place of business of
PricewaterhouseCoopers and its associate partnerships, and of Coopers & Lybrand,
is 1 Embankment Place, London WC2N 6NN. The principal place of business of Price
Waterhouse is Southwark Towers, 32 London Bridge Street, London SE1 9SY. Lists
of the partners' names are available for inspection at those places.
All partners in the associate partnerships are authorised to conduct business as
agents of, and all contracts for services to clients are with,
PricewaterhouseCoopers. PricewaterhouseCoopers is authorised by the Institute of
Chartered Accountants in England and Wales to carry on investment business.
F-62
<PAGE>
Energy Group Overseas B.V.
BALANCE SHEET
((pound) thousand)
<TABLE>
<CAPTION>
As of
March 31, 1998
--------------
<S> <C>
Current Assets:
Cash and cash equivalents 5
Interest receivable 10,049
Unamortized debt issue costs 2,552
Prepaid expenses 2
-------
12,608
-------
Long-term loan to Related Party Obligor 297,053
-------
Total assets 309,661
=======
Current Liabilities:
Interest payable 9,883
Corporation tax 55
Accrued expenses 1
-------
9,939
Long-term Debt:
Guaranteed Notes (net of unamortized discount of (pound)576) 296,477
Unearned income related to amortization of discount and debt issue costs 3,128
-------
299,605
-------
Common Stock Equity:
Common stock 13
Retained earnings 104
Accumulated other comprehensive income --
-------
117
-------
Total liabilities and common stock equity 309,661
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-63
<PAGE>
Energy Group Overseas B.V.
STATEMENTS OF INCOME
((pound) thousand)
<TABLE>
<CAPTION>
Period from Period from
formation through April 1 through
March 31, 1998 May 18, 1998
-------------- ------------
<S> <C> <C>
Financial income/(charges)
Interest expense on Guaranteed Notes (10,099) (3,209)
Interest income from related party 10,268 3,263
Amortization of discount (13) (4)
Amortization of debt issue costs (48) (15)
Amortization income charged to Related Party Obligor 61 19
------- -------
169 54
------- -------
General and administrative expenses (6) (5)
------- -------
Profit before taxation 163 49
Tax expense (59) (18)
------- -------
Net income 104 31
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-64
<PAGE>
Energy Group Overseas B.V.
STATEMENTS OF COMPREHENSIVE INCOME
((pound) thousand)
Period from Period from
formation through April 1 through
March 31, 1998 May 18, 1998
-------------- ------------
Net income 104 31
Other comprehensive income:
Cumulative translation adjustment -- 3
----- -----
Comprehensive income 104 34
===== =====
The accompanying notes are an integral part of these financial statements.
F-65
<PAGE>
Energy Group Overseas B.V.
STATEMENTS OF COMMON STOCK EQUITY
((pound) thousand)
<TABLE>
<CAPTION>
Accumulated other
Retained comprehensive
Common stock earnings income
------------ -------- ------
<S> <C> <C> <C>
Balance at October 8, 1997 -- -- --
Stock (40,000 shares) issued 13 -- --
Net income for the period from formation through
March 31, 1998 -- 104 --
Cumulative translation adjustment -- -- --
------- ------- -------
Balance at March 31, 1998 13 104 --
======= ======= =======
Balance at April 1, 1998 13 104 --
Net income for the period from April 1 through -- 31 --
May 18, 1998
Cumulative translation adjustment -- -- 3
------- ------- -------
Balance at May 18, 1998 13 135 3
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-66
<PAGE>
Energy Group Overseas B.V.
STATEMENTS OF CASH FLOWS
((pound) thousand)
<TABLE>
<CAPTION>
Period from Period from April
formation through 1 through
March 31, 1998 May 18, 1998
-------------- ------------
<S> <C> <C>
Cash flows - operating activities:
Net income 104 31
Change in interest receivable (10,268) (3,262)
Change in prepaid expenses (2) --
Change in interest payable 10,099 (8,064)
Change in corporation tax payable 59 18
Change in accrued expenses 1 4
--------- ---------
Total cash flow used by operating activities (7) (11,273)
--------- ---------
Cash flows - investing activities -- --
Cash flows - financing activities:
Issuance of common stock: 13 --
Proceeds from Guaranteed Note offering 305,765 --
Long term loan to Related Party Obligor (305,765) --
Proceeds on loan from Related Party Obligor -- 11,272
--------- ---------
Total cash flow from financing activities 13 11,272
--------- ---------
Effect of exchange rate changes on cash (1) --
--------- ---------
Net change in cash and cash equivalents 5 (1)
Cash and cash equivalents - beginning balance -- 5
--------- ---------
Cash and cash equivalents - ending balance 5 4
========= =========
Supplemental cash flow disclosures:
Cash paid for interest -- 11,272
Cash paid for income taxes -- --
</TABLE>
The accompanying notes are an integral part of these financial statements
F-67
<PAGE>
Energy Group Overseas B.V.
NOTES TO THE FINANCIAL STATEMENTS
1. Description of business and summary of significant accounting policies
General -- Energy Group Overseas B.V. (Overseas) is a private limited
liability company established in Amsterdam on October 8, 1997. Overseas, a
consolidated subsidiary of The Energy Group (TEG), issued on October 10,
1997 US$ 500 million aggregate principal amount of notes guaranteed by TEG
(Guaranteed Notes).
The Financial Statements have been prepared in conformity with accounting
principles generally accepted in the United States (US GAAP).
Foreign currencies -- All assets and liabilities expressed in currencies
other than US Dollars (US$), Overseas' functional currency, have been
translated into US Dollars at the rates of exchange approximating those at
the date of the transactions. Resulting exchange differences are recognized
in the profit and loss account. The financial statements have been
translated from US Dollars to British pounds sterling ((pound)) utilizing
the exchange rate prevailing at the period end for the balance sheet and at
the average rate for the period for all profit and loss accounts. Any
difference in the translation process has been recorded as accumulated
other comprehensive income in the common stock equity section of the
balance sheet.
Amortization of debt issue costs -- The discount and debt issue costs
relating to the issuance of the Guaranteed Notes have been deferred and are
being amortized on a straight line basis over the life of the debt, which
does not differ significantly from the interest method.
Use of estimates -- The preparation of Overseas' financial statements, in
conformity with US GAAP, requires management to make estimates and
assumptions about future events that affect the reporting and disclosure of
assets and liabilities at the balance sheet dates and the reported amounts
of revenue and expense during the period covered by the financial
statements. In the event estimates and/or assumptions prove to be different
from actual amounts, adjustments are made in subsequent periods to reflect
more current information.
Cash and cash equivalents -- Cash equivalents consist of highly liquid
investments, which are readily convertible into cash and have maturities of
three months or less.
Income taxes -- Deferred income taxes are determined under the liability
method. Deferred income taxes represent liabilities to be paid or assets to
be received in the future and reflect the tax consequences on future years
of temporary differences between the tax bases of assets and liabilities
and their financial reporting amounts. Future tax rate changes would affect
those deferred tax liabilities or assets in the period when the tax rate
change is enacted.
Future tax benefits, such as net operating loss carryforwards, are
recognized to the extent that realization of such benefits is more likely
than not.
Dividends -- Dutch law prescribes that no dividends can be declared until
all losses, if any, have been recovered.
2. Guaranteed Notes
On October 10, 1997, Overseas issued US$ 500 million aggregate principal
amount of Guaranteed Notes. The Guaranteed Notes were issued in two series;
US$ 200 million 7.375% Notes due 2017 and US$ 300 million Notes 7.50% due
2027. The Guaranteed Notes are unconditionally guaranteed by TEG. Interest
is payable semi-annually in arrears on April 15 and October 15 in each
year, beginning April 1998. No principal payments on either series are due
until the Guaranteed Notes are due.
F-68
<PAGE>
Energy Group Overseas B.V.
NOTES TO THE FINANCIAL STATEMENTS (continued)
3. Common stock equity
The authorized share capital of Overseas consists of 200,000 ordinary
shares of NLG 1 each. As at March 31, 1998, 40,000 shares ((pound)13,000)
were issued and fully paid up. All shares are held by a wholly owned
subsidiary of TEG.
4. Related party transactions
At March 31, 1998, Overseas had a long-term loan to a wholly-owned
subsidiary of TEG (Related Party Obligor) of (pound)297,053,000. The
long-term loan balance equals the principal amount of the Guaranteed Notes.
Overseas had interest receivable from the Related Party Obligor relating to
the long-term loan of (pound)10,049,000 at March 31, 1998. Interest income
of (pound)10,268,000 and (pound)3,263,000 for the periods ended March 31,
1998 and May 18, 1998, respectively, was attributable to interest earned on
the long-term loan to the Related Party Obligor. Additional funding in the
amount of (pound)11,272,000 was received from the Related Party Obligor in
April of 1998.
Overseas will at all times earn a net spread of 12.5 basis points between
the rate Overseas pays on the Guaranteed Notes and the rate Overseas
charges the Related Party Obligor.
Additionally, the Related Party Obligor has agreed to discharge and
indemnify Overseas for the costs incurred by Overseas in issuing the
Guaranteed Notes. The amortization charges shown in the statement of income
are directly offset by the amortization income charged to the Related Party
Obligor. The (pound)3,128,000 balance at March 31, 1998 represents the
remaining unamortized discount and debt issue costs which will be
recognized in the statement of income over the life of the Guaranteed
Notes.
5. Taxes
All profit before tax is taxed in The Netherlands.
A minimum taxable income, calculated as the 12.5 basis point spread between
interest income and interest expense, must be utilized for determination of
income tax expense if it exceeds Overseas' pre-tax income.
During the period from April 1, 1998 through May 18, 1998, additional tax
expense was incurred as the minimum taxable income exceeded actual pre-tax
income. Any benefit from additional tax expense relating to the minimum
taxable income can be carried forward for a three year period. Overseas has
provided for a full valuation reserve against the deferred tax asset of
(pound)2,000 at May 18, 1998 as it is more likely than not that the benefit
will not be recognized.
During the period ended March 31, 1998, the Dutch statutory rate for income
under NGL 100,000 was decreased by 1% from 36% for income earned through
December 31, 1997 to 35% for income earned on or after January 1, 1998.
There was no change in the statutory rate for income over NGL 100,000.
Period from Period from
formation April 1, 1998
through through
March 31, 1998 May 18, 1998
-------------- ------------
((pound) thousand)
Tax at Dutch statutory rate on pre-tax income 59 16
Movement on valuation allowance -- 2
------ ------
Tax expense 59 18
====== ======
F-69
<PAGE>
Energy Group Overseas B.V.
NOTES TO THE FINANCIAL STATEMENTS (continued)
6. Fair value of financial instruments
The carrying amount and fair value of the material financial instruments
used by Overseas are as follows:
As of March 31, 1998
-----------------------------
Carrying Fair
amount value
-------- -------
((pound) thousand)
Guaranteed Notes 296,477 306,388
Long-term loan to Related Party Obligor 297,053 306,981
The fair value of the Guaranteed Notes and the long-term loan to the
Related Party Obligor varies with market conditions and is estimated based
on trading levels at March 31, 1998.
The carrying amounts of all other assets and liabilities approximate their
fair values because of the short maturity of these instruments.
7. Subsequent events
On May 19, 1998 TXU Acquisitions Limited (TXU Acquisitions), a wholly-owned
subsidiary of Texas Utilities Company, now doing business as TXU Corp,
acquired control of TEG. On October 9, 1998, due to a downgrading of the
credit rating on the Guaranteed Notes, the interest rate on both series of
Guaranteed Notes increased by five basis points. Overseas will continue to
maintain its 12.5 basis point spread. In October 1998, in connection with a
restructuring of TEG and its subsidiaries, Overseas and its direct holding
company were sold to another wholly-owned subsidiary of TXU Acquisitions
and that subsidiary assumed the obligations of the Related Party Obligor
under the long-term intercompany loan. In addition, TXU Eastern Holdings
Limited, an indirect 90% holding company of TXU Acquisitions, guaranteed
the Guaranteed Notes.
F-70
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Trustees of TXU Europe Capital I
We have audited the accompanying balance sheet of TXU Europe Capital I
(the "Trust") as of November 22, 1999 (date of incorporation). This balance
sheet is the responsibility of the Trust's management. Our responsibility is to
express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Trust as of November 22, 1999, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
November 22, 1999
Dallas, Texas
F-71
<PAGE>
BALANCE SHEET OF
TXU EUROPE CAPITAL I
November 22, 1999
-----------------
Assets...........................................$ 0
===
Trust Originated Preferred Securities............$ 0
===
NOTES TO BALANCE SHEET OF TXU EUROPE CAPITAL I
TXU Europe Capital I (the "Trust") is a statutory business trust formed
on November 22, 1999 under the laws of the State of Delaware for the exclusive
purposes of (i) issuing Trust Originated Preferred Securities ("TOPrS")
representing undivided beneficial ownership interests in the assets of the
Trust, (ii) purchasing Preferred Partnership Securities (the "Preferred
Partnership Securities") representing the limited partnership interests of TXU
Europe Funding I, L.P. (the "Partnership") with the proceeds from the sale of
the TOPrS, and (iii) engaging in only those other activities necessary or
incidental thereto. The Trust has a perpetual existence, subject to certain
termination events as provided in the Declaration of Trust under which it was
formed. Subsequent to November 22, 1999, the Trust intends to issue and sell its
TOPrS in a public offering. No TOPrS have been issued as of November 22, 1999.
The proceeds from the Trust's sale of the TOPrS will be used to
purchase the Partnership Preferred Securities from the Partnership. Holders of
the TOPrS will have limited voting rights and will not be entitled to vote to
appoint, remove or replace, or to increase or decrease the number of, Trustees,
which voting rights are vested exclusively in the holder of a control
certificate.
TXU Europe Limited (the "Company") will be obligated to pay
compensation to the underwriters of the offering of the TOPrS. The Company
will pay all fees and expenses related to the organization and operations of
the Trust (including any taxes, duties, assessments or governmental charges of
whatever nature (other than withholding taxes) imposed by the United States of
any other domestic taxing authority upon the Trust) and the offering of the
TOPrS and be responsible for all debts and other obligations of the Trust
(other than the TOPrS). The Company will also agree to indemnify the trustees
and certain other persons.
F-72
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the General Partner and Initial Limited Partner of TXU Europe Funding I, L.P.
We have audited the accompanying balance sheet of TXU Europe Funding I,
L.P. (the "Partnership") as of November 22, 1999 (date of incorporation). This
balance sheet is the responsibility of the Partnership's management. Our
responsibility is to express an opinion on this balance sheet based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the balance sheet is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the balance sheet. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall balance sheet presentation. We
believe that our audit of the balance sheet provides a reasonable basis for our
opinion.
In our opinion, such balance sheet presents fairly, in all material
respects, the financial position of the Partnership as of November 22, 1999, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
November 22, 1999
Dallas, Texas
F-73
<PAGE>
BALANCE SHEET OF
TXU EUROPE FUNDING I, L.P.
BALANCE SHEET
NOVEMBER 22, 1999
Assets................................................................$ 0
======
Partnership Securities
Limited partner interest................................... $ 85
General partner interest................................... 15
------
$ 100
Less: Receivables from partners for subsribed partnershp interests ... (100)
------
Partnership Equity.................................................... 0
======
NOTES TO BALANCE SHEET OF TXU EUROPE FUNDING I, L.P.
TXU Europe Funding I, L.P. (the "Partnership") is a limited partnership
that was formed under the Delaware Revised Uniform Limited Partnership Act on
November 22, 1999, for the exclusive purposes of purchasing certain eligible
debt instruments of TXU Europe Funding ("Funding") and one or more subsidiaries
of TXU Europe Limited (the "Company") with the proceeds from the sale of
Preferred Partnership Securities (the "Preferred Partnership Securities") to TXU
Europe Capital I (the "Trust") and a capital contribution from the Company in
exchange for the general partnership interest in the Partnership (collectively,
the "Partnership Proceeds").
Except as provided in the forms of Amended and Restated Limited
Partnership Agreement and Preferred Partnership Securities Guarantee Agreement,
and as otherwise provided by law, the holders of the Preferred Partnership
Securities will have no voting rights.
The Partnership Proceeds will be used initially to purchase debt
instruments from Funding and one or more eligible subsidiaries of the Company,
and other eligible debt securities. The Partnership will have a perpetual
existence subject to certain termination events. The Company serves as the sole
general partner of the Partnership. The Company, in its capacity as general
partner of the Partnership, has agreed to pay all fees and expenses related to
the organization and operations of the Partnership (including any taxes, duties,
assessments or government charges of whatever nature (other than withholding
taxes) imposed by the United States or any other domestic taxing authority upon
the Partnership) and the offering of the Preferred Partnership Securities and be
responsible for all debts and other obligations of the Partnership (other than
with respect to the Preferred Partnership Securities). The General Partner will
agree to indemnify certain officers and agents of the Partnership.
F-74
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) ((POUND) MILLION)
SEPTEMBER 30, 1999
(UNAUDITED)
ASSETS
Property, plant and equipment, net 2,678
----------
Current assets
Cash and cash equivalents 361
Accounts receivable (net of allowance
for uncollectible accounts) 318
Inventories 130
Other current assets 108
----------
Total current assets 917
----------
Investments
Restricted cash 724
Other 279
----------
Total investments 1,003
----------
Other Assets
Goodwill (net of accumulated
amortization: (pound)116 million) 3,408
Prepayments for pensions 255
Deferred debits 168
----------
Total other assets 3,831
----------
TOTAL ASSETS 8,429
==========
See Notes to Condensed Consolidated Financial Statements.
F-75
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) ((POUND) MILLION, EXCEPT FOR NUMBER OF SHARES AND PAR VALUE)
SEPTEMBER 30, 1999
---------------------
(UNAUDITED)
CAPITALIZATION AND LIABILITIES
Capitalization
Common stock (authorized - 3,000,000,000
shares at US$1 par and 100 deferred
shares at (pound)1 par; outstanding -
2,455,705,299 shares and 100 deferred
shares issued and outstanding) 1,467
Retained earnings 147
Accumulated other comprehensive loss (7)
--------
Total common stock equity 1,607
Minority interest 197
Long-term debt, less amounts due currently 4,495
--------
TOTAL CAPITALIZATION 6,299
--------
Current liabilities
Notes payable - banks 64
Long-term debt due currently 383
Short-term loans 93
Accounts payable 411
Taxes accrued 203
Other current liabilities 242
--------
Total current liabilities 1,396
--------
Deferred credits and other noncurrent liabilities
Deferred income taxes 368
Provision for unfavorable contracts 226
Other deferred credits and noncurrent liabilities 140
--------
Total deferred credits and noncurrent liabilities 734
--------
Contingencies (Note 8) -
TOTAL CAPITALIZATION AND LIABILITIES 8,429
========
See Notes to Condensed Consolidated Financial Statements.
F-76
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(UNAUDITED) ((POUND) MILLION)
SUCCESSOR PREDECESSOR
---------------------------------- ------------
PERIOD FROM PERIOD FROM
FORMATION JANUARY 1,
NINE MONTHS THROUGH 1998
ENDED SEPTEMBER 30, THROUGH
SEPTEMBER 30, 1999 1998 MAY 18, 1998
------------------ ------------ ------------
Operating revenues 2,686 939 1,563
------------------ ------------ ------------
Costs and expenses
Purchased power 1,162 420 743
Gas purchased for resale 602 154 281
Operation and maintenance 385 228 375
Depreciation and other 119 53 73
amortization
Amortization of goodwill 64 31 -
------- ------- --------
Total operating expenses 2,332 886 1,472
------- ------- --------
Operating income 354 53 91
Other income - net 5 28 1
------- ------- --------
Income before interest, 359 81 92
income taxes and
minority interest
Interest income 46 46 35
Interest expense 259 174 76
------- ------- --------
Income (loss) before income 146 (47) 51
taxes and
minority interest
Income tax expense (benefit) 68 (19) 35
------- ------- --------
Income (loss) before minority 78 (28) 16
interest
Minority interest 7 (3) -
------- ------- --------
Net income (loss) 71 (25) 16
======= ======= ========
See Notes to Condensed Consolidated Financial Statements.
F-77
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME (UNAUDITED)
((POUND) MILLION)
SUCCESSOR PREDECESSOR
----------------------------- ------------
PERIOD FROM
NINE PERIOD FROM JANUARY 1,
MONTHS FORMATION 1998
ENDED THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, MAY 18,
1999 1998 1998
------------- ------------- ------------
Net income (loss) 71 (25) 16
Other comprehensive income
Net change during period:
Unrealized gain (loss)
on securities
classified as available
for sale 1 (8) (4)
Currency translation
adjustments - - -
------- ------- ------
Comprehensive income (loss) 72 (33) 12
======= ======= ======
See Notes to Condensed Consolidated Financial Statements.
F-78
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED)
((POUND) MILLION)
PERIOD FROM
NINE PERIOD FROM JANUARY 1,
MONTHS FORMATION 1998
ENDED THROUGH THROUGH
SEPTEMBER 30, SEPTEMBER 30, MAY 18,
1999 1998 1998
------------- ------------- ------------
OPERATING ACTIVITIES
Net income (loss) 71 (25) 16
Adjustments to reconcile net
income (loss) to cash provided
by operating activities:
Depreciation and amortization 183 83 73
Deferred income taxes 45 7 (43)
Minority interest 7 (3) -
Changes in operating assets
and liabilities 216 53 109
Other (75) (103) (1)
------------- ------------- ------------
Cash provided by operating
activities 447 12 154
------------- ------------- ------------
INVESTING ACTIVITIES
Acquisition of TEG (net of
cash acquired of
(pound)2,011 - (1,432)
Capital expenditures (286) (117) (112)
Investments (61) (20) (30)
Other - - 3
------------- ------------- ------------
Cash used in investing
activities (347) (1,569) (139)
------------- ------------- ------------
FINANCING ACTIVITIES
Net borrowings under the:
Senior notes 921 - -
Term facility 750 - -
Revolving credit facility 240 - -
Acquisition facility - 1,656 -
Interim facility - 243 -
Other long-term debt 115 - 6
Issuance of common stock to parent - 1,467 -
Retirements of:
Acquisition facility (750) - -
TXU Corp note payable (682) - -
Revolving credit facility (109) -
Other long-term debt (307) (109) (50)
Change in notes payable - banks (376) 40 21
Receivable financing - - 150
Change in minority interest - 166 -
Debt financing cost (8) (36) -
Dividends paid - - (100)
------------- ------------- ------------
Cash provided by (used in)
financing activities (206) 3,427 27
------------- ------------- ------------
Net change in cash and cash
equivalents (106) 1,870 42
------------- ------------- ------------
Cash and cash equivalents -
beginning balance 467 - 684
------------- ------------- ------------
Cash and cash equivalents -
ending balance 361 1,870 726
============= ============= ============
NON-CASH TRANSACTIONS:
Issuance of loan notes - 85 -
Advances from TXU Corp - 844 -
Cross border lease financing - (163) -
See Notes to Condensed Consolidated Financial Statements.
F-79
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ACQUISITIONS
Acquisition of The Energy Group PLC by TXU Corp
TXU Europe Limited, formerly known as TXU Eastern Holdings Limited was
incorporated as a private limited company on February 5, 1998. Through a series
of restructurings and capital transactions subsequent to its formation, TXU
Europe Limited became an indirect, wholly owned subsidiary of Texas Utilities
Company, which is doing business as TXU Corp (TXU). TXU Europe Limited is a
holding company that owns 90% of the outstanding common stock of TXU Finance
(No. 2) Limited (TXU Finance) which in turn owns 100% of the common stock of TXU
Acquisitions Limited (TXU Acquisitions). On May 19, 1998, TXU Acquisitions
gained control of The Energy Group PLC (TEG), the former holding company of TXU
Europe Group plc (formerly Eastern Group plc), after all conditions to its offer
for all of the ordinary shares of TEG were satisfied or waived. Immediately
before such acquisition, subsidiaries of TEG completed the sale of TEG's former
coal and power trading interests in the United States (US) and Australia
(Peabody Sale).
TXU Europe Limited's acquisition of TEG through TXU Acquisitions was accounted
for as a purchase in accordance with US generally accepted accounting
principles. Accordingly, the results of operations of TXU Europe Limited and
other subsidiaries of TEG acquired by TXU Europe Limited have been consolidated
into the results of operations of TXU Europe Limited since acquisition on
May 19, 1998. The total purchase consideration for the TEG businesses acquired
was approximately L 4.4 billion. At the date of the acquisition, TEG had assets
of L 6.0 billion, including cash of L 2.0 billion, and liabilities of
L 4.5 billion, including debt of L 2.9 billion. The excess of the purchase
consideration plus acquisition costs over the net fair value of tangible and
identifiable intangible assets acquired and liabilities assumed resulted in
goodwill of L 3.5 billion, which is being amortized over 40 years. From March
1998 to May 18, 1998, TXU Europe Limited, through TXU Acquisitions, had acquired
an equity interest in TEG of approximately 22%, resulting in the recognition of
equity income of L 2 million, which is reflected in "Other Income-net" in the
Condensed Statement of Consolidated Income.
On November 9, 1999, name changes were announced for certain subsidiaries within
TXU Europe Limited to reflect the increasing importance of European investments.
Eastern Group plc was renamed TXU Europe Group plc (TXU Europe Group) and its
subsidiary, Eastern Generation Limited, was renamed TXU Europe Power Limited.
TXU Europe Group's subsidiary, Eastern Power & Energy Trading Limited, will be
renamed TXU Europe Energy Trading Limited by January 2000. TXU Europe Group's
retail and networks businesses will continue operating under the Eastern brand
name.
For financial reporting purposes, TXU Europe Group is considered the predecessor
company to TXU Europe.
In September 1999, TXU Europe Limited announced that it was forming a joint
venture with certain shareholders of Pohjolan Voima Oy (PVO), Finland's second
largest electricity generator. As part of the transaction, TXU Europe Limited
contributed approximately L 200 million for an 81% ownership interest in
the joint venture company on November 5, 1999. The joint venture will acquire
rights to the output from approximately 600 megawatts (MW) of PVO's thermal
generating capacity. The transaction consists of the purchase by the joint
venture company of "C" class PVO shares, equal to 15% of PVO, and most of a
wholesale trading business owned by the industrial shareholders of PVO. TXU
Europe Limited's interests in Finland also include the previously announced
agreement to acquire a 36% stake in Savon Voima Oy, Finland's seventh largest
electricity distributor.
2. SIGNIFICANT ACCOUNTING POLICIES
The condensed consolidated financial statements of TXU Europe Limited have been
prepared in accordance with US generally accepted accounting principles and on
the same basis as the audited financial statements as of and for the period
F-80
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
from formation through December 31, 1998, included in the Registration Statement
(Nos. 333-82307 and 333-82307-01) on Form S-4 filed by TXU Europe Limited and
its subsidiary, TXU Eastern Funding Company, under the Securities Act of 1933
with the Securities and Exchange Commission and declared effective on
November 9, 1999. In the opinion of TXU Europe Limited's management, all
adjustments (consisting of only normal recurring accruals) necessary for a fair
presentation of the results of operations and financial position have been
included herein. Certain information and footnote disclosures normally included
in annual consolidated financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to the rules
and regulations of the Securities and Exchange Commission.
TXU Europe Limited defers the effect of changes in the market value of
derivative financial instruments for contracts for differences and electricity
forward agreements, which are used to hedge firm commitments to the period when
the related transaction is completed. In the event that an overall analysis of
the firm commitments being hedged indicates that TXU Europe Limited is in a net
loss position, a provision is made for these anticipated losses. Transactions
that are entered into that do not meet the criteria for hedge accounting are
marked to market on the balance sheet at period end, and the unrealized gain or
loss is recognized in income for that period.
3. SHORT-TERM FINANCING
REVOLVING CREDIT AGREEMENT -- Eastern Electricity has a separate revolving
credit facility of up to L 250 million, terminating March 2, 2003, which
provides for short-term borrowings to be used for Eastern Electricity's general
corporate purposes. No borrowings were outstanding at September 30, 1999 under
this facility.
PROMISSORY NOTE PROGRAM -- TXU Europe Limited has a one-year promissory note
program issued within the Czech Republic, which has been utilized to fund its
investments in Severomoravska Energetika a.s., a Czech electricity distribution
and supply company, and Teplarny Brno a.s. , a Czech district heating and
generation company. At September 30, 1999, L 62 million was outstanding under
the promissory note program. The interest rate on the note was reset in August
1999 and bears interest at an annual rate based on PRIBOR plus 0.7% which was
7.34% at September 30, 1999.
ACCOUNTS RECEIVABLE -- TXU Europe Group has facilities with Citibank N.A. to
provide financing through trade accounts receivable whereby Eastern Electricity
may sell up to L 300 million of its electricity receivables and, beginning June
11, 1999, TXU Finance may borrow up to an aggregate of L 275 million, which for
accounting purposes is collateralized by additional receivables of Eastern
Electricity, through a short-term note issue arrangement. The program has an
overall program limit of L 550 million.
Consistent with US generally accepted accounting principles, through March 31,
1999, the electricity receivable financings were in the form of short-term loans
collateralized by Eastern Electricity's trade accounts receivable. Subsequent to
March 31, 1999, the program was restructured so that a portion of the
receivables are sold outright rather than being used to collateralize short-term
borrowings. Eastern Electricity continually sells additional receivables to
replace those collected. At September 30, 1999, accounts receivable of Eastern
Electricity of L 207 million had been sold under the new program. An additional
L 93 million of receivables remain as collateral for short-term loans. The
borrowings by Eastern Electricity bear interest at an annual rate based on
commercial paper rates plus 0.225%, which was 5.3% at September 30, 1999.
4. LONG-TERM DEBT
LINES OF CREDIT -- At September 30, 1999, TXU Europe Limited and TXU Finance had
a joint sterling-denominated line of credit with a group of banking institutions
under a credit facility agreement (Sterling Credit Agreement). The Sterling
Credit Agreement, as amended in March 1999, provides for borrowings of up to
L 1.275 billion and has two facilities: a L 750 million term facility which
will terminate on March 2, 2003 and a L 525 million revolving credit facility
which has a L 200 million 364-day tranche (Tranche A) and a L 325 million
tranche which terminates March 2, 2003 (Tranche B). TXU Europe Limited and TXU
Finance currently are the only permitted borrowers under the amended Sterling
Credit Agreement. The amended Sterling Credit Agreement allows for borrowings
in various currencies with interest rates based on the prevailing
rates in effect in the countries in which the borrowings originate. As of
September 30, 1999, L 750 million of borrowings were outstanding under the term
facility at an interest rate of 5.98%, and approximately L 182 million of non-UK
borrowings were outstanding under Tranche B at a weighted average interest rate
of 5.59%.
F-81
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
In May 1999, a subsidiary of TXU Europe Limited issued US$1.5 billion (L 921
million) of Senior Notes in three series: US$350 million (L 215 million) at
6.15% due May 15, 2002; US$650 million (L 399 million) at 6.45% due May 15,
2005; and US$500 million (L 307 million) at 6.75% due May 15, 2009. The proceeds
of this issuance were used to reduce indebtedness incurred in connection with
the acquisition of TEG, to reduce borrowings under the Sterling Credit Agreement
and for other corporate purposes. Shortly thereafter, TXU Europe Limited entered
into various interest rate and currency swaps that in effect changed the
interest rate on the borrowings from fixed to variable based on LIBOR and fixed
the principal amount to be repaid in sterling. The fair value of the new Senior
Notes was US$1.4 billion (L 0.9 billion) at September 30, 1999.
On October 14, 1999, TXU Europe Limited entered into additional swaps that in
effect changed the interest rate on the borrowings to a fixed rate payable in
sterling.
On October 5, 1999, a subsidiary of TXU Europe Limited issued L 77 million in
Norwegian bonds due October 5, 2029, at a fixed rate of 7.25%. The net proceeds
were used to pay down a portion of the Tranche B borrowings which had been used
to finance certain asset purchases in Norway. On November 8, 1999, TXU Europe
Limited borrowed approximately L 200 million on the Tranche B facility. The net
proceeds were used to finance the acquisition of the interest in the PVO joint
venture.
5. SEGMENTS
<TABLE>
<CAPTION>
NINE MONTHS PERIOD FROM FORMATION PERIOD FROM JANUARY 1,
ENDED THROUGH 1998 THROUGH
SEPTEMBER 30, 1999 SEPTEMBER 30, 1998 MAY 18, 1998
-------------------------- -------------------------- --------------------------
REVENUES CONTRIBUTION REVENUES CONTRIBUTION REVENUES CONTRIBUTION
-------- ------------ -------- ------------- -------- -------------
(POUND MILLION) (POUND MILLION) (POUND MILLION)
<S> <C> <C> <C> <C> <C> <C>
Energy retail 1,197 (48) 456 (34) 628 (26)
Energy management and generation 1,167 171 320 22 764 91
Networks 317 127 140 50 168 76
Other 5 2 23 6 3 (2)
Cost of capital elimination - 103 - 46 - 50
Unallocated corporate costs - (50) - (64) - (42)
----- --- --- --- ----- ---
Total (UK GAAP) 2,686 305 939 26 1,563 147
----- --- --- --- ----- ---
Purchase accounting and US GAAP
adjustments - 54 - 55 - (55)
----- --- --- --- ----- ---
Income before interest, income
taxes and minority interest - 359 - 81 - 92
===== === === === ===== ===
</TABLE>
As set out above, contribution is defined as operating and other income
after a notional charge for the cost of capital.
6. DERIVATIVE INSTRUMENTS
TXU Europe Limited is exposed to a number of different market risks including
changes in gas and electricity prices, interest rates and foreign currency
exchange rates. TXU Europe Limited has developed a control framework of
policies and procedures to monitor and manage the exposures arising from
volatility in these markets. To implement these policies and procedures, TXU
Europe Limited enters into various derivative instruments for hedging purposes.
Both the energy management and the treasury operations make use of those
instruments, but only well understood derivative instruments are authorized for
use.
F-82
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
TXU Europe Limited enters into derivative instruments, including options, swaps,
futures and other contractual commitments to manage market risks related to
changes in interest rates, foreign currency exchange rates and commodity
prices. TXU Europe Limited's participation in derivative transactions has
primarily been designated for hedging purposes and is not held or issued for
trading purposes. TXU Europe Limited's energy marketing activities in Europe,
through Eastern Power & Energy Trading Limited (EPET), are currently being
expanded with the relocation of EPET's primary operations to Geneva,
Switzerland, and are still in the process of being developed. Energy trading
activity for the periods ended September 30, 1999 is not material.
INTEREST RATE RISK MANAGEMENT -- At September 30, 1999, TXU Europe Limited had
various interest rate swaps in effect with an aggregate notional amount of
US$1.5 billion (L 921 million) that convert the fixed rate Senior Notes to
floating rate based on LIBOR. These swaps mature on the dates of the underlying
notes, have a weighted average pay rate of 5.99% and had a fair value of L 15
million at September 30, 1999. TXU Europe Limited also had various other
interest rate swaps as required by the Sterling Credit Agreement and to hedge
certain of its borrowings from a variable to a fixed rate. The aggregate
notional amount of these interest rate swaps was L 848 million with an average
maturity of six years and an average fixed rate of 6.7%. Forward rate agreements
totaling L 195 million for a maximum duration of less than one year to swap
floating rate deposits into fixed rates were outstanding at September 30, 1999.
In October 1999, TXU Europe Limited entered into an interest rate swap to
convert a notional amount of L 250 million of variable rate debt to a weighted
average fixed rate of 6.39%.
FOREIGN CURRENCY RISK MANAGEMENT -- TXU Europe Limited has currency swaps
which effectively fix the principal amount of the US$1.5 billion of Senior Notes
to be repaid in sterling. In August 1999, TXU Europe Limited entered into a
forward foreign currency contract to acquire US$200 million and US$300 million
in October 2017 and October 2027, respectively, for approximately L 218 million
to settle the original US dollar-denominated debt of TEG. The difference between
the forward rate and the spot rate at inception of the contract (a foreign
currency gain of approximately L 92 million) will be amortized to income over
the life of the contract. At September 30, 1999, TXU Europe Limited had various
other foreign currency swaps, options and exchange contracts in effect, the
terms and amounts of which had not significantly changed from December 31, 1998.
7. REGULATION AND RATES
Electricity distribution and supply businesses in England and Wales are subject
to price controls. The regulation of distribution and supply charges is
currently subject to review by the Office of Gas and Electricity Markets
covering England, Wales and Scotland (OFGEM). Since the implementation of the
initial price controls in 1990, there have been two reviews of the supply price
control, effective for the periods from April 1, 1994 to March 31, 1998 and from
April 1, 1998 to March 31, 2000. These reviews have resulted in reduced
distribution and supply prices, but because related costs have also been
reduced, the effect on TXU Europe Limited has not been material. On August 12,
1999, OFGEM issued a draft report, adjusted on October 8, 1999, proposing a
range of substantial revenue reductions for the distribution businesses of all
regional electricity companies in the UK. OFGEM also issued its proposed price
adjustments for the electricity supply business on October 8, 1999. The final
OFGEM report is expected at the end of November 1999 and both the distribution
and supply price adjustments are expected to become effective April 1, 2000. TXU
Europe Limited is analyzing the draft proposals and cannot predict at this time
either the final price adjustments that will be applicable to TXU Europe Group
or the ultimate impact of such adjustments on TXU Europe Limited's financial
position, results of operations or cash flows.
8. CONTINGENCIES
In February, 1997 the official government representative of pensioners (Pensions
Ombudsman) made final determinations against the National Grid Company plc
(National Grid) and its group trustees with respect to complaints by two
pensioners in National Grid's section of the Electric Supply Pension Scheme
(ESPS) relating to the use of the pension fund surplus resulting from the
March 31, 1992 actuarial valuation of the National Grid section to meet certain
costs arising from the payment of pensions on early retirement upon
reorganization or downsizing. These determinations were set aside by the High
Court on June 10, 1997, and the arrangements made by National Grid and its group
trustees in dealing with the surplus were confirmed. The two pensioners have
appealed this decision and judgment has now been received. The appeal endorsed
the Pensions Ombudsman's determination that the corporation was not entitled to
unilaterally deal with any surplus. National Grid has announced their intention
to appeal to the House of Lords, although no formal application has been made.
If a similar complaint were to be made against TXU Europe Group in relation to
its use of actuarial surplus in its section of the ESPS, it would vigorously
defend the action, ultimately through the courts. However, if a determination
were finally to be made against it and upheld by the courts, TXU Europe Group
could have a potential liability to repay to its section of the ESPS an amount
estimated by TXU Europe Group to be up to L 45 million (exclusive of any future
applicable interest charges).
F-83
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
On May 19, 1998 a complaint was filed by Optimum Solutions Limited against
National Grid, Yorkshire Electricity Group plc, Eastern Electricity and Logica
Plc. Yorkshire Electricity and Eastern Electricity are both members of the
electricity trading market in England and Wales (the Pool). Optimum Solutions
Limited alleges breach of confidence in respect of information supplied in the
context of the development of the trading arrangements for the 1998
liberalization of electricity supply in England and Wales, or Trading
Arrangements. Optimum Solutions Limited requests an unspecified amount of
damages related to breach of contract, an unspecified amount of equitable
compensation for misuse of the confidential information and return of material
alleged to contain confidential information. It is alleged that the Pool has
made use of the confidential information in the development of the Trading
Arrangements and that Eastern Electricity made use of it in using the system
developed by the Pool for trading purposes. The action against Eastern
Electricity is being strenuously defended. TXU Europe Limited cannot predict the
outcome of this proceeding.
In November 1998, five complaints were filed against subsidiaries of TXU
Europe Limited by five of their former sales agencies. The agencies claim a
total of L 104 million arising from the summary termination for the claimed
fundamental breach of their respective contracts in April 1998. The five
agencies are claiming damages for failure to give reasonable notice for
compensation under the UK Commercial Agents Regulations 1994. These actions are
all being defended strenuously, and counterclaims have been filed. TXU Europe
Limited cannot predict the outcome of these claims and counterclaims.
On January 25, 1999, the Hindustan Development Corporation issued proceedings
in the Arbitral Tribunal in Delhi, India against TEG claiming damages of US$413
million (L 253 million) for breach of contract following the termination of a
Joint Development Agreement dated March 20, 1997 relating to the construction,
development and operation of a lignite based thermal power plant at Barsingsar,
Rajasthan. TXU Europe Limited is vigorously defending this claim. TXU Europe
Limited cannot predict the outcome of this proceeding.
GENERAL -- In addition to the above, TXU Europe Limited and its subsidiaries are
involved in various legal and administrative proceedings arising in the ordinary
course of its business. TXU Europe Limited believes that all such lawsuits and
resulting claims would not have a material effect on its financial position,
results of operation or cash flows.
FINANCIAL GUARANTEES -- TEG has guaranteed up to US$110 million (L 67 million
at September 30, 1999) of certain liabilities that may be incurred and payable
by the purchasers of the US and Australian coal businesses and US energy
marketing operations sold in the Peabody Sale with respect to the Peabody
Holding Company Retirement Plan for Salaried Employees, the Powder River Coal
Company Retirement Plan and the Peabody Coal United Mine Workers Association
Retirement Plan, subject to certain specified conditions.
TEG entered into various guarantees of obligations of affiliates of its
former subsidiary, Citizens Power LLC, arising under power purchase agreements
and note purchase agreements in connection with various Citizens Power energy
restructuring projects, as well as various indemnity agreements in connection
with such projects. TXU Europe Limited and TEG continue to be the guarantor or
the indemnifying party, as the case may be, under these various agreements. In
connection with the acquisition, letters of credit were issued under the
Sterling Credit Facility in the amount of US$198 million (L 125 million) to
support certain debt financings associated with these restructuring projects.
The letters of credit matured in May 1999 and were not renewed.
As a consequence of a restructuring whereby a subsidiary of TXU Acquisitions
transferred TXU Europe Group to another wholly-owned subsidiary of TXU
Acquisitions, TXU Europe Limited and certain other affiliated UK
F-84
<PAGE>
TXU EUROPE LIMITED AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
subsidiaries of TXU may be required to make certain adjustments to the
guarantees. The Directors of TXU Europe Limited do not currently expect this to
have a material adverse impact on TXU Europe Limited.
F-85
<PAGE>
TXU EUROPE LIMITED (FORMERLY KNOWN AS TXU EASTERN HOLDINGS LIMITED)
UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
As of May 19, 1998, TXU Acquisitions Limited (TXU Acquisitions), an
indirect wholly-owned subsidiary of Texas Utilities Company (now doing business
as and referred to herein as TXU Corp), acquired control of The Energy Group PLC
(now known as Energy Holdings (No. 3) Limited) (TEG). TXU Europe Limited
(formerly known as TXU Eastern Holdings Limited) (the Company), an indirect
wholly-owned subsidiary of TXU Corp, indirectly owns 90% of TXU Acquisitions,
and another indirect wholly-owned subsidiary of TXU Corp owns the remaining
10%.
Immediately prior to the purchase of TEG by TXU Acquisitions, subsidiaries
of TEG completed the sale of TEG's US and Australian coal businesses and US
energy marketing operations (Peabody Sale). The TEG businesses acquired,
exclusive of those operations sold in the Peabody Sale, are referred to as the
"TEG Businesses Acquired", and include Eastern Group plc (Eastern) and Energy
Group Overseas B.V., a finance subsidiary (Overseas).
The following unaudited condensed combined pro forma statement of income
for the year ended December 31, 1998 (the Pro Forma Statement of Income) has
been prepared from, and should be read in conjunction with, the historical
consolidated financial statements and notes thereto of the Company, Eastern and
Overseas included elsewhere in this prospectus. The Pro Forma Statement of
Income assumes that the acquisition of the TEG Businesses Acquired occurred
on January 1, 1998. The historical information included in the Pro Forma
Statement of Income has been prepared in accordance with US GAAP.
The acquisition of TEG by TXU Acquisitions was accounted for as a purchase.
The Pro Forma Statement of Income includes the effects of fair value and
purchase accounting adjustments.
The Pro Forma Statement of Income combines the unaudited historical
condensed statements of consolidated income of Eastern and Overseas for the
three months ended March 31, 1998 and the audited historical statements of
consolidated income (loss) of Eastern and Overseas for the period from April 1,
1998 to May 18, 1998 with the audited historical statement of consolidated
income of the Company for the period from formation to December 31, 1998 and
gives effect to the pro forma adjustments described in the Notes hereto. The pro
forma adjustments reflect estimates made by the Company and assumptions it
believes to be reasonable. The Pro Forma Statement of Income includes an
estimate of the financing charge as if the acquisition financing had been in
place for the whole period. The pro forma information has not taken into account
any significant changes in future operating activities that may occur as a
result of the acquisition.
P-1
<PAGE>
TXU EUROPE LIMITED (FORMERLY KNOWN AS TXU EASTERN HOLDINGS LIMITED)
The Unaudited Condensed Combined Pro Forma Statement of Income is provided
for illustrative purposes only and does not purport to represent what the actual
results of operations would have been if the purchase had occurred on January 1,
1998, nor is it necessarily indicative of future operating results.
<TABLE>
<CAPTION>
TEG Business Acquired The Company
--------------------------------- --------------------------------------------------
Historical Historical Pro Forma
--------------------------------- ------------ -------------------------------
Period from
Three Month Period from Formation to Year ended
ended April 1 to May December 31, Pro forma December 31,
March 31, 1998 18, 1998 1998 Adjustments 1998
-------------- -------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Operating revenues 1,100 425 2,165 0 3,690
Costs and expenses 996 436 1,851 (101)(a) 3,182
------ ------ ------ ------ ------
Operating income (loss) 104 (11) 314 101 508
Other income (deductions) 4 1 46 (20)(b) 31
Interest income 23 12 64 (24)(c) 75
Interest expense (60) (31) (269) (56)(d) (416)
------ ------ ------ ------ ------
Income (loss) before income
taxes 71 (29) 155 1 198
Income tax expense
(benefit) 30 (6) 67 -- 91
------ ------ ------ ------ ------
Income (loss) before
minority interest 41 (23) 88 1 107
Minority interest -- -- 11 2(e) 13
------ ------ ------ ------ ------
Net income (loss) 41 (23) 77 (1) 94
====== ====== ====== ====== ======
</TABLE>
See Notes to Unaudited Condensed Combined Pro Forma Statement of Income.
P-2
<PAGE>
TXU EUROPE LIMITED (FORMERLY KNOWN AS TXU EASTERN HOLDINGS LIMITED)
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF INCOME
The amounts for the TEG Businesses Acquired are comprised of the following:
<TABLE>
<CAPTION>
Three Months Ended March 31, 1998 Period from April 1 through May 18, 1998
------------------------------------------- ------------------------------------------
Eastern Overseas Other(1) Total Eastern Overseas Other(1) Total
------- -------- -------- ----- ------- -------- -------- -----
((pound) million)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Operating revenues 1,100 -- -- 1,100 425 -- -- 425
Operating expenses 996 -- -- 996 436 -- -- 436
------ ------ ------ ------ ------ ------ ------ ------
Operating income
(loss) 104 -- -- 104 (11) -- -- (11)
Other income 4 -- -- 4 1 -- -- 1
Interest income 23 6 (6) 23 12 3 (3) 12
Interest expense (54) (6) -- (60) (28) (3) -- (31)
------ ------ ------ ------ ------ ------ ------ ------
Income (loss)
before income taxes 77 -- (6) 71 (26) -- (3) (29)
Income tax expense
(benefit) 32 -- (2) 30 (5) -- (1) (6)
------ ------ ------ ------ ------ ------ ------ ------
Net income (loss) 45 -- (4) 41 (21) -- (2) (23)
====== ====== ====== ====== ====== ====== ====== ======
</TABLE>
(1) Other represents the elimination of intercompany interest income on a
long-term loan between Overseas and another subsidiary of TEG.
Summary of Pro Forma Adjustments:
(a) Costs and expenses
((pound) million)
(1) Unfavorable electricity and gas contracts (29)
(2) Fair value of leased assets (10)
(3) Leases (86)
(4) Goodwill amortization 24
------
Total (101)
(1) Represents reversal of operating expenses, primarily for electricity and gas
purchases, recorded by Eastern, to the extent that a liability for the present
value of unfavorable commitments, obligations and contracts is made in purchase
accounting.
(2) Represents impact of purchase accounting adjustments relating to the
fair value of leased assets.
(3) Represents impact of purchase accounting adjustments relating to the
establishment of long-term debt associated with payments, both fixed and those
considered virtually certain, under the lease terms ((pound)61 million) and
adjustment for the amortization of operating lease payments and capitalized
leases over the revised estimated economic life of power plants under
lease ((pound)25 million). Alternative operating methodologies
employed by TXU Corp extend the estimated economic life of the plants by ten
years.
(4) Goodwill recorded by the Company from the acquisition totals approximately
(pound)3.5 billion. Annual amortization over the 40-year life is (pound)88
million of which (pound)52 million was recorded during the period from May 19 to
December 31, 1998. The net pro forma amortization for the period to acquisition
is (pound)36 million which is (pound)24 million greater than amortization
recorded by Eastern of (pound)12 million.
P-3
<PAGE>
TXU EUROPE LIMITED (FORMERLY KNOWN AS TXU EASTERN HOLDINGS LIMITED)
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF INCOME
(CONTINUED)
(b) Other income/deductions
((pound) million)
(1) Equity in net income of TEG (2)
(2) Earnings on portion of Peabody Sale
proceeds invested in tax efficient scheme (18)
-----
Total (20)
=====
(1) Represents reversal of equity in net income of TEG of(pound)2 million
recorded by the Company for its approximate 22% interest for the period March
through May 18, 1998.
(2) Represents reversal of earnings of (pound)18 million recorded by the Company
on the portion of the Peabody Sale proceeds invested in a short-term investment.
These proceeds have been used to reduce Acquisition debt for the entire period
presented in the pro forma statement of income.
((pound) million)
(c) Interest income (24)
=====
Represents reversal of interest earnings on the remaining Peabody Sale
proceeds invested in cash. These proceeds have been used to reduce Acquisition
debt for the entire period presented in the pro forma statement of income.
(d) Interest expense
((pound) million)
(1) Interest and fees on Acquisition debt (50)
(2) Interest on unfavorable commitments,
obligations and unfavorable contracts (8)
(3) Amortization of discount on fair value
of debt at acquisition 2
------
Total (56)
======
(1) The annual pro forma interest expense on debt issued in the
acquisition is (pound)120 million consisting of interest on the Acquisition
facility of (pound)55 million (calculated based on the fixed interest rate
of 7.8% paid by the Company pursuant to a related interest rate swap), on
the intercompany note to TXU Corp of (pound)59 million (calculated at the
actual fixed interest rate of 6.7%) and on loan notes of (pound)6 million
(calculated based upon an assumed interest rate of 7.2%). Interest on the
loan notes is paid at a variable rate based on LIBOR minus .5%. A 1/8%
variance of the interest rate on the loan notes would change the annual
interest by (pound)0.1 million. Pro forma annual amortization of financing
fees on the Acquisition debt is (pound)12 million. Interest and other
charges incurred for the period from formation to December 31, 1998 total
(pound)82 million. The net pro forma increase in interest expense is
(pound)50 million.
(2) Represents pro forma annual interest on the present value of
unfavorable commitments, obligations and unfavorable contracts of (pound)13
million, less (pound)12 million incurred for the period to
December 31, 1998 plus (pound)7 million on imputed interest for a capital
lease.
(3) Represents amortization of fair value adjustment to debt at
acquisition of (pound)2 million.
(e) Represents minority interest on net earnings of TEG Businesses Acquired and
pro forma adjustments.
The Company's total investment to acquire TEG was (pound)4,448 million.
P-4
<PAGE>
TXU EUROPE LIMITED (FORMERLY KNOWN AS TXU EASTERN HOLDINGS LIMITED)
NOTES TO UNAUDITED CONDENSED COMBINED PRO FORMA STATEMENT OF INCOME
(CONTINUED)
((pound) million)
The investment was funded as follows:
Borrowings repaid with cash from Peabody Sale received by TEG 1,314
prior to the Acquisition
Proceeds from common stock issued to TXU Corp 1,467
Borrowings under Acquisition facilities 700
Note issued to TXU Corp for TEG ordinary shares acquired by 882
TXU Corp in the Share Alternative
Loan notes 85
------
Total 4,448
======
TXU Corp issued 37,316,884 shares of TXU Corp common stock which TXU
Acquisitions offered to TEG shareholders as part of its Share Alternative.
105,117,980 of TEG ordinary shares outstanding were tendered by TEG shareholders
and exchanged for TXU Corp common stock. TXU Acquisitions acquired the shares of
TXU Corp common stock from TXU Corp by the issuance of an intercompany note for
(pound)882 million bearing interest at 6.7% per annum.
P-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
REGISTERED OFFICE OF FUNDING OFFICE OF THE TRUST AND THE PARTNERSHIP REGISTERED OFFICE OF TXU EUROPE LIMITED
The Adelphi 1601 Bryan Street The Adelphi
1-11 John Adam Street Dallas, Texas 75201 1-11 John Adam Street
London London
WC2N 6HT WC2N 6HT
TRUSTEE AND PAYING AGENT REGISTRAR AND TRANSFER AGENT LUXEMBOURG PAYING AGENT AND TRANSFER
THE BANK OF NEW YORK TXU BUSINESS SERVICES COMPANY AGENT
101 Barclay Street 1601 Bryan Street KREDIETBANK SA LUXEMBOURGEOISE
New York, New York 10286 Dallas, Texas 75201 43, Boulevard Royal L-2955
Luxembourg
LEGAL ADVISORS
To the Issuers as to US law
THELEN REID & PRIEST LLP WORSHAM, FORSYTHE & WOOLDRIDGE L.L.P. RICHARDS, LAYTON & FINGER, P.A.
40 West 57th Street 1601 Bryan Street One Rodney Square
New York, New York 10019 Dallas, Texas 75201 P.O. Box 551
Wilmington, Delaware 19899
To the Issuers as to English law To the Issuers as to UK tax law
E.J. LEAN
TXU Europe Group NORTON ROSE
Wherstead Park Kempson House
Ipswich, Suffolk Camomile Street
IP9 2AQ London EC3A 7AN
To the Underwriters as to US law To the Underwriters as to UK tax law
WINTHROP, STIMSON, PUTNAM
& ROBERTS FRESHFIELDS
One Battery Park Plaza 65 Fleet Street
New York, New York 10004 London EC4Y 1HS
AUDITORS
DELOITTE & TOUCHE
Hill House
1 Little New Street
London EC4A 3TR
LUXEMBOURG LISTING AGENT
KREDIETBANK SA LUXEMBOURGEOISE
43, Boulevard Royal L-2955
Luxembourg
</TABLE>
<PAGE>
===========================================================================
20,000,000 Preferred Trust Securities
TXU EUROPE CAPITAL I
% Trust Originated Preferred SecuritiesSM ("TOPrSSM")
Liquidation Amount $25 per TOPrS
Guaranteed to the extent described in this prospectus by
TXU EUROPE LIMITED
----------
PROSPECTUS
----------
MERRILL LYNCH & CO.
, 1999
===========================================================================
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses payable by the registrants in
connection with the issuance and distribution of the securities to be
registered.
Filing fee - Securities and Exchange Commission $132,000
Fees of Trustee 30,000*
Fees of Registrants' counsel 800,000*
Auditors' fees 50,000*
Rating Agencies' fees 100,000*
Printing, including registration statement, prospectuses,
exhibits, etc 100,000*
Fees of NYSE 50,000*
Miscellaneous 56,000*
-------
Total Expenses $1,318,000
*Estimated ===========
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under English law, directors are entitled to an indemnity out of the assets
of the company for liabilities incurred by them in the proper management of the
company's business, other than for wrongful or unauthorized acts. However,
Section 310 Companies Act 1985 makes void any agreement by a company, whether
contained in a company's articles of association or elsewhere, to indemnify any
director or officer against, or hold him exempt from, any liability which would
otherwise attach to him as a consequence of any illegal act, negligence,
default, breach of duty or breach of trust of which he may be guilty in relation
to the company.
There are certain exceptions to that general rule:
(1) A company is not prevented from purchasing and maintaining
insurance for any director, officer or auditor against
liability; and
(2) A company may indemnify any director, officer or auditor
against any liability incurred by him in successfully
defending civil or criminal proceedings or in successfully
applying for judicial relief from liability in the case of
honest and reasonable conduct under the Companies Act 1985
(i.e., actions under section 727 Companies Act 1985).
Indemnification with respect to (2) may be done by including Regulation 118 of
Table A in a company's articles. Regulation 118 states that:
"subject to the provisions of the Act but without prejudice to any
indemnity to which a director may otherwise be entitled, every director
or other officer or auditor of the company shall be indemnified out of
the assets of the company against any liability incurred by him in
defending any proceedings, whether civil or criminal in which judgment
is given in his favour or in which he is acquitted or in connection
with any application in which relief is granted to him by the court
from liability for negligence, default, breach of duty, or breach of
trust in relation to the affairs of the company."
Article 15 of the Articles of Association of TXU Eastern Funding Company
provides as follows:
"Every Director or other officer of the Company shall be indemnified
out of the assets of the Company against all losses or liabilities
which he may sustain or incur in or about the execution of the duties
of his office or otherwise in relation thereto, including any liability
incurred by him in defending any proceedings, whether civil or
criminal, in which judgment is given in his favour or in which he is
acquitted or in connection with any application under the Act in which
relief is granted to him by the Court, and no Director or other officer
shall be liable for any loss, damage or misfortune which may happen to
or be incurred by the Company in the execution of the duties of his
office or in relation thereto. This Regulation shall have effect only
in so far as its provisions are not avoided by Section 310 of the
Companies Act 1985. Regulation 118 in Table A shall not apply to the
Company."
II-1
<PAGE>
Article 11.1 of the New Articles of Association of TXU Europe Limited (formerly
TXU Eastern Holdings Limited) provides as follows:
"Subject to the provisions of, and so far as may be consistent with,
the Statutes, but without prejudice to any indemnity to which a
director may be otherwise entitled, every director, auditor, secretary
or other officer of the company shall be entitled to be indemnified by
the company against all costs, charges, losses, expenses and
liabilities incurred by him in the execution and/or discharge of his
duties and/or the exercise of his powers and/or otherwise in relation
to or in connection with his duties, powers or office including
(without prejudice to the generality of the foregoing) any liability
incurred by him in defending any proceedings, civil or criminal, which
relate to anything done or omitted or alleged to have been done or
omitted by him as an officer or employee of the company and in which
judgment is given in his favour (or the proceedings are otherwise
disposed of without any finding or admission of any material breach of
duty on his part) or in which he is acquitted or in connection with any
application under any statute for relief from liability in respect of
any such act or omission in which relief is granted to him by the
Court."
Pursuant to Section 11.04 of the form of Amended and Restated Trust Agreement to
be entered into among TXU Europe Limited, as Depositor and The Bank of New York,
as Trustee, any Administrative Trustee, any Affiliate of any Administrative
Trustee, any officers, directors, shareholders, members, partners, employees,
representatives or agents of any Administrative Trustee, or any officer,
director, shareholder, member, partner, employee, representative or agent of the
Trust or its Affiliates (each, a "Company Indemnified Person") is indemnified as
follows:
(a) (i) To the fullest extent permitted by applicable law, the
Depositor shall indemnify and hold harmless any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action
by or in the right of the Trust) by reason of the fact that he is or
was a Company Indemnified Person against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall
not, of itself, create a presumption that the Company Indemnified
Person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had reasonable
cause to believe that his conduct was unlawful.
(ii) The Depositor shall indemnify, to the fullest
extent permitted by law, any Company Indemnified Person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Trust to procure a
judgment in its favor by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense
or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best
interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust
unless and only to the extent that the Court of Chancery of Delaware or
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of
all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which such Court of Chancery or
such other court shall deem proper.
Pursuant to Section 11.9 of the form of Amended and Restated Agreement of
Limited Partnership of TXU Europe Funding I, L.P. the General Partner, any
Special Representative, any Affiliate of the General Partner or any Special
Representative or any officers, directors, shareholders, members, partners,
employees, representatives or agents of the General Partner or any Special
Representative, or any of their respective Affiliates, or any employee or agent
of the Partnership or its Affiliates (each, a "Partnership Indemnified Person")
is indemnified as follows:
(a) To the fullest extent permitted by applicable law, the
Partnership shall indemnify and hold harmless each Partnership
Indemnified Person from and against any loss, damage or claim incurred
II-2
<PAGE>
by such Partnership Indemnified Person by reason of any act or omission
performed or omitted by such Partnership Indemnified Person in good
faith on behalf of the Partnership and in a manner such Partnership
Indemnified Person reasonably believed to be within the scope of
authority conferred on such Partnership Indemnified Person by this
Agreement, except that no Partnership Indemnified Person shall be
entitled to be indemnified in respect of any loss, damage or claim
incurred by such Partnership Indemnified Person by reason of negligence
or willful misconduct with respect to such acts or omissions; provided,
however, that any indemnity under this Section 11.9 shall be provided
out of and to the extent of Partnership assets only, and no Partnership
Covered Person shall have any personal liability on account thereof.
(b) To the fullest extent permitted by applicable law,
expenses (including legal fees) incurred by a Partnership Indemnified
Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by the Partnership prior to the
final disposition of such claim, demand, action, suit or proceeding
upon receipt by the Partnership of an undertaking by or on behalf of
the Partnership Indemnified Person to repay such amount if it shall be
determined that the Partnership Indemnified Person is not entitled to
be indemnified as authorized in Section 11.9(a).
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
On May 13, 1999, TXU Eastern Funding Company issued and sold beneficial
interests in $350,000,000 aggregate principal amount of its 6.15% senior notes,
$650,000,000 aggregate principal amount of its 6.45% senior notes and
$500,000,000 aggregate principal amount of its 6.75% senior notes to a group of
initial purchasers led by Lehman Brothers Inc. and Morgan Stanley & Co.,
Incorporated. The senior notes are fully and unconditionally guaranteed by TXU
Europe Limited. The offering of the senior notes was exempt from registration
pursuant to Section 4(2) under the Securities Act. The initial purchasers of the
senior notes resold beneficial interests in the senior notes to qualified
institutional buyers under Rule 144A and to non-US persons under Regulation S.
At the same time, TXU Eastern Funding Company and TXU Europe Limited agreed, in
a registration rights agreement with the initial purchasers, to proceed with
efforts to exchange the senior notes for exchange senior notes registered under
the Securities Act. The exchange was completed on December 17, 1999.
II-3
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
1 - Form of Underwriting Agreement.
3(a) 333-82307 3(a) - Memorandum of Association of TXU Eastern Funding
and 333-82307-1 Company.
3(b) 333-82307 3(b) - Articles of Association of TXU Eastern Funding
and 333-82307-1 Company.
3(c) 333-82307 3(c) - Memorandum of Association of TXU Europe Limited.
and 333-82307-1
3(d) 333-82307 3(d) - New Articles of Association of TXU Europe Limited.
and 333-82307-1
3(e) - Trust Agreement of TXU Europe Capital I, dated as
of November 22, 1999.
3(f) - Certificate of Trust of TXU Europe Capital I, dated
November 22, 1999.
3(g) - Partnership Agreement of TXU Europe Funding I,
L.P., dated as of November 22, 1999.
3(h) - Certificate of Limited Partnership of TXU Europe
Funding I, L.P., dated November 22, 1999.
4(a) - Form of Amended and Restated Trust Agreement of TXU
Europe Capital I.
4(b) - Form of Amended and Restated Partnership Agreement
of TXU Europe Funding I, L.P.
4(c) - Form of Preferred Trust Securities Guarantee.
4(d) - Form of Preferred Partnership Securities Guarantee.
4(e) - Form of Subordinated Indenture of Funding.
4(f) - Form of officer's certificate establishing the
terms of the Funding debentures, with the form of
debentures attached thereto.
4(g) - Form of Subordinated Indenture of subsidiaries.
4(h) - Form of Deposit Agreement.
4(i) 333-82307 4(a) - Indenture (For Unsecured Debt Securities) dated May
and 333-82307-1 1, 1999.
4(j) 333-82307 4(d) - Officer's Certificate establishing 6.15% senior
and 333-82307-1 notes due May 15, 2002 and 6.15% exchange senior
notes due May 15, 2002, with the forms of notes
attached thereto.
4(k) 333-82307 4(c) - Officer's Certificate establishing 6.45% senior
and 333-82307-1 notes due May 15, 2005 and 6.45% exchange senior
notes due May 15, 2005, with the forms of notes
attached thereto.
4(l) 333-82307 4(d) - Officer's Certificate establishing 6.75% senior
and 333-82307-1 notes due May 15, 2009 and 6.75% exchange senior
notes due May 15, 2009 with the forms of notes
attached thereto.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
4(m) 333-82307 4(f) - Deposit Agreement with respect to the senior notes
and 333-82307-1 and the exchange senior notes.
5(a) - Opinion of E.J. Lean, general counsel to TXU Europe
Funding Company and TXU Europe Limited.
5(b) - Opinion of Worsham, Forsythe & Wooldridge, L.L.P.,
US counsel to TXU Eastern Funding Company, TXU Europe
Limited, TXU Europe Capital I and, TXU Europe Funding
I, L.P.
5(c) - Opinion of Thelen Reid & Priest LLP, special US
and counsel to TXU Eastern Funding Company, TXU Europe
8(a) Limited, TXU Europe Capital I and TXU Europe Funding
I, L.P.
5(d) - Opinion of Richards, Layton and Finger, P.A.,
Delaware counsel to TXU Europe Funding Company, TXU
Europe Limited, TXU Europe Capital I and TXU Europe
Funding I, L.P.
8(b) - Opinion of Norton Rose, English legal advisers to
TXU Eastern Funding Company and TXU Europe Limited,
TXU Europe Capital I and TXU Europe Funding I, L.P.
10(a) 1-12833 10(a) - Facilities Agreement for(pound)1,275,000, Credit
Form 10-Q Facilities, dated March 24, 1999, among TXU Europe
(Quarter ended Limited, TXU Finance (No. 2) Limited, TXU
March 31, 1999) Acquisitions Limited, Chase Manhattan Bank plc,
Lehman Brothers International (Europe), Merrill
Lynch Capital
Corporation other banks named therein.
10(b) 1-12833 99(a) - Facility Agreement for(pound)250,000,000 Revolving
Form 10-Q Credit Facility, dated May 21, 1998, among Eastern
(Quarter ended Electricity plc (EE), and Chase Manhattan plc, Lehman
September 30, 1998) Brothers International and Merrill Lynch Capital
Corporation as Joint Lead Arrangers, and The Chase
Manhattan Bank, Lehman Commercial Paper Inc. and
Merrill Lynch Capital Corporation as Underwriters.
10(c) 333-8008 and 4.1 - Indenture, dated as of October 16, 1997, among
333-8008-1 Energy Group Overseas B.V. (EGO), The Energy Group
PLC and The Bank of New York, as Trustee.
10(d) 333-8008 and 4.2 - Form of 7.375% Series B Guaranteed note of EGO due
333-8008-1 2017.
10(e) 333-8008 and 4.3 - Form of 7.500% Series B Guaranteed note of EGO due
333-8008-1 2027.
10(f) 1-14576 3.10 - Deed of Assignment of Rents, dated as of October
Form 20-F, dated 28, 1996, among EMPL (EMPL), Eastern Group Finance
January 27, 1997 Limited, Barclays Bank PLC (as agent) and the banks
listed therein.
10(g) 1-14576 3.12 - Guarantee and Indemnity Deed, dated as of October
Form 20-F, dated 28, 1996, among Eastern Group plc (Eastern), Eastern
January 27, 1997 Generation Limited (EGL), EE, Barclays Bank PLC,
Barclays De Zoete Wedd Limited, and the other bank
listed therein.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
10(h) 333-82307 10(f)-2 - Amendment dated July 17, 1998 to the Guarantee and
and 333-82307-1 Indemnity Deed, dated as of October 28, 1996, among
Eastern, EGL, EE, Barclays Bank PLC,
Barclays De Zoete Wedd Limited, and
the other banks listed therein.
10(i) 333-82307 10(f)-3 - Amendment dated March 11, 1999 to the Guarantee and
and 333-82307-1 Indemnity Deed dated as of October 28, 1996 (as
amended and restated on July 17, 1998), among Eastern, EGL,
EE, Barclays Bank Barclays De Zoete Wedd Limited,
and the other banks listed therein/
10(j) 1-14576 3.11 - Standby Credit Facility Agreement, dated as of
Form 20-F, dated October 28, 1996, among EMPL and Eastern Merchant
January 27, 1997 Generation Limited (EMGL) (as borrowers), Eastern and
EGL (as guarantors), EE, The Industrial Bank of Japan,
Limited (as arranger and agent), The Bank of Nova Scotia, the
Dai-ichi Kangyo Bank, Limited, The Royal Bank of
Scotland plc and Societe Generale (as co-arrangers), and
the financial institutions listed therein.
10(k) 333-82307 10(g)-1 - Supplemental Agreement dated July 17, 1998 to the
and 333-82307-1 Standby Credit Facility dated October 28, 1996 among
EMPL and EMGL (as borrowers), Eastern and EGL (as guarantors), EE,
Barclays Capital and The Royal Bank of Scotland plc (as arrangers),
The Bank of Nova Scotia, Bayerische Landesbank Girozentrale, The
Dai-Ichi Kangyo Bank, Limited, Den Danske Bank Aktieselskab,
Nationsbank, N.A., Royal Bank of Canada Europe Limited, The
Toronto-Dominion Bank and Westdeutsche Landesbank Girozentrale (as
co-arrangers), The Royal Bank of Scotland plc (as agent), and the
financial institutions listed therein.
10(l) 333-82307 10(g)-2 - Amendment dated March 11, 1999 to the Supplemental and 333-82307-1
Agreement dated July 17, 1998 to the Standby Credit Facility dated
October 28, 1996 among EMPL and EMGL (as borrowers), Eastern and
EGL (as guarantors), EE, Barclays Capital and The Royal Bank of
Scotland plc (as arrangers), The Bank of Nova Scotia, Bayerische
Landesbank Girozentrale, The Dai-Ichi Kangyo Bank, Limited, Den
Danske Bank Aktieselskab, Nationsbank, N.A., Royal Bank of Canada
Europe Limited, The Toronto-Dominion Bank and Westdeutsche Landesbank
Girozentrale (as co-arrangers), The Royal Bank of Scotland plc (as
agent), and the financial institutions listed therein.
10(m) 333-82307 10(h) - Pooling and Settlement Agreement dated 30 March
and 333-82307-1 1990, as amended as of 15 April 1999, among EE, National Grid
Company plc and other parties.
10(n) 333-82307 10(i) - Master Connection and Use of System Agreement dated
and 333-82307-1 as of 30 March 1990 among the National Grid Company plc and its users
(including EE).
10(o) 333-82307 10(j) - Lease of land and premises known as West Burton,
and 333-82307-1 Ironbridge and Rugeley B Power Stations dated 27 June 1996 from
National Power PLC to EMPL and Eastern.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
10(p) 333-82307 10(k) - Sublease of land and premises known as West Burton,
and 333-82307-1 Ironbridge and Rugeley B Power Stations dated 27 June 1996 from EMPL
to EMGL and Eastern.
10(q) 333-82307 10(l) - Lease of commercial premises at High Marnham,
and 333-82307-1 Newark, Nottinghamshire dated 2 July 1996 between
PowerGen plc and EMPL.
10(r) 333-82307 10(m) - Underlease of commercial premises at High Marnham,
and 333-82307-1 Newark, Nottinghamshire dated 2 July 1996 between
EMPL and EMGL.
10(s) 333-82307 10(n) - Lease of commercial premises at Drakelow,
and 333-82307-1 Burton-on-Trent, Staffordshire dated 2 July 1996
between PowerGen plc and EMPL.
10(t) 333-82307 10(o) - Underlease of commercial premises at Drakelow,
and 333-82307-1 Burton-on-Trent, Staffordshire dated 2 July 1996
between EMPL and EMGL.
12(a) 333-82307 12(a) - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-01 for TXU Europe Limited for the periods from formation
through December 31, 1998 and March 31, 1999.
12(b) - Computation of Ratio of Earnings to Fixed Charges
for TXU Europe Limited including the period from formation
through September 30, 1998 and nine months ended
September 30, 1999.
12(c) 333-82307 12(b) - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-1 for TXU Europe Group plc and Subsidiaries (US GAAP
basis).
12(d) 333-82307 12(b)-1 - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-1 for TXU Europe Group plc and Subsidiaries (US GAAP
basis) including the period from January 1, 1998 through May
18, 1998.
12(e) 333-82307 12(c) - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-1 for Earnings to Fixed Charges for TXU Europe Group
plc and Subsidiaries (UK GAAP basis).
21(a) - Material subsidiaries of TXU Europe Limited.
23(a) - Consent of PricewaterhouseCoopers.
23(b) - Consent of Deloitte & Touche LLP.
23(c) - Consent of E. J. Lean (included in Opinion filed as
Exhibit 5(a) hereto).
23(d) - Consent of Worsham, Forsythe & Wooldridge, L.L.P.
(included in Opinion filed as Exhibit 5(b) hereto).
23(e) - Consent of Thelen Reid & Priest LLP (included in
Opinion filed as Exhibits 5(c) and 8(a) hereto).
23(f) - Consent of Richards, Layton and Finger, P.A.
(included in Opinion filed as Exhibit 5(d) hereto).
23(g) - Consent of Norton Rose (included in Opinion filed
as Exhibit 8(b) hereto).
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
24(a) - Power of Attorney for TXU Eastern Funding Company
(see page II-11).
24(b) - Power of Attorney for TXU Europe Limited (see page
II-12).
25(a) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the Indenture of TXU Europe
Limited and TXU Eastern Funding Company.
25(b) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the Indentures of TXU Europe
Limited and issuers of subsidiary debentures.
25(c) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the Amended and Restated
Trust Agreement of TXU Europe Capital I.
25(d) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the TXU Europe Limited
Guarantee relating to TXU Europe Capital I Preferred
Trust Securities.
25(e) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the TXU Europe Limited
Guarantee relating to TXU Europe Funding I, L.P.
Preferred Partnership Securities.
27(a) - Financial Data Schedule.
</TABLE>
- - - - -------------------
* Incorporated herein by reference.
II-8
<PAGE>
ITEM 17. UNDERTAKINGS.
a. The undersigned registrant hereby undertakes:
(1) That, insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant to
the provisions described under Item 14 above, or otherwise,
the registrant has been advised that in the opinion of the
Securities and Exchange commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(2) For purpose of determining 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
registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under
the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared
effective.
(3) That, for purposes 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
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-9
<PAGE>
POWER OF ATTORNEY
Each director and/or officer of the registrant whose signature appears
below hereby appoints the Agents for Service named in this registration
statement, and each of them severally, as his attorney-in-fact to sign in his
name and behalf, in any and all capacities stated below, and to file with the
Securities and Exchange Commission, any and all amendments, including
post-effective amendments, to this registration statement, and the registrant
hereby also appoints each such Agent for Service as its attorney-in-fact with
like authority to sign and file any such amendments in its name and behalf.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas,
State of Texas on December 22, 1999.
TXU Eastern Funding Company
By /s/ Robert A. Wooldridge
--------------------------------------
Name: Robert A. Wooldridge
Title: Director and duly appointed
Attorney for the registrant
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ Erle Nye Principal Executive December 22, 1999
- - - - ------------------------------------ Officer and Director
(Erle Nye)
/s/ Michael J. McNally Principal Financial December 22, 1999
- - - - ------------------------------------ Officer, Principal
(Michael J. McNally) Accounting Officer and
Director
/s/ H. Jarrell Gibbs Director December 22, 1999
- - - - ------------------------------------
(H. Jarrell Gibbs)
/s/ Robert A. Wooldridge Director December 22, 1999
- - - - ------------------------------------
(Robert A. Wooldridge)
/s/ Robert J. Reger, Jr. Authorized Representative December 22, 1999
- - - - --------------------------------- in the United States
(Robert J. Reger, Jr.)
/s/ Philip G. Turberville Director December 22, 1999
- - - - ------------------------------------
(Philip G. Turberville)
/s/ Paul C. Marsh Director December 22, 1999
- - - - ------------------------------------
(Paul C. Marsh)
II-10
<PAGE>
POWER OF ATTORNEY
Each director and/or officer of the registrant whose signature appears
below hereby appoints the Agents for Service named in this registration
statement, and each of them severally, as his attorney-in-fact to sign in his
name and behalf, in any and all capacities stated below, and to file with the
Securities and Exchange Commission, any and all amendments, including
post-effective amendments, to this registration statement, and the registrant
hereby also appoints each such Agent for Service as its attorney-in-fact with
like authority to sign and file any such amendments in its name and behalf.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Dallas and
State of Texas, on December 22 1999.
TXU Europe Limited
By /s/ Erle Nye
-------------------------------------
Name: Erle Nye
Title: Principal Executive Officer
and Director
Signatures Title Date
---------- ----- ----
Principal Executive
/s/ Erle Nye Officer and Director
- - - - ------------------------------------
(Erle Nye)
Principal Financial
/s/ Michael J. McNally Officer, Principal
- - - - ------------------------------------ Accounting Officer and
(Michael J. McNally) Director
/s/ Robert A. Wooldridge
- - - - ------------------------------------ Director
(Robert A. Wooldridge)
/s/ Derek Charles Bonham
- - - - ------------------------------------ Director
(Derek Charles Bonham)
/s/ H. Jarrell Gibbs
- - - - ------------------------------------ Director
(H. Jarrell Gibbs)
/s/ Paul Colin Marsh
- - - - ------------------------------------ Director
(Paul Colin Marsh)
/s/ Philip George Turberville
- - - - ------------------------------------ Director
(Philip George Turberville)
/s/ Robert J. Reger, Jr. Authorized Representative
- - - - ------------------------------------ in the United States.
(Robert J. Reger, Jr.)
II-11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York State on December 22, 1999.
TXU EUROPE FUNDING I, L.P
By: TXU Europe Limited
Its General Partner
By /s/ Robert J. Reger, Jr.
------------------------------
Name: Robert J. Reger, Jr.
Title: Attorney-in-fact.
II-12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of New York,
New York State on December 22, 1999.
TXU Europe Capital I
By /s/ Robert J. Reger, Jr.
-------------------------------
Name: Robert J. Reger, Jr.
Title: Attorney-in-fact.
II-13
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
1 - Form of Underwriting Agreement.
3(a) 333-82307 3(a) - Memorandum of Association of TXU Eastern Funding
and 333-82307-1 Company.
3(b) 333-82307 3(b) - Articles of Association of TXU Eastern Funding
and 333-82307-1 Company.
3(c) 333-82307 3(c) - Memorandum of Association of TXU Europe Limited.
and 333-82307-1
3(d) 333-82307 3(d) - New Articles of Association of TXU Europe Limited.
and 333-82307-1
3(e) - Trust Agreement of TXU Europe Capital I, dated as
of November 22, 1999.
3(f) - Certificate of Trust of TXU Europe Capital I, dated
November 22, 1999.
3(g) - Partnership Agreement of TXU Europe Funding I,
L.P., dated as of November 22, 1999.
3(h) - Certificate of Limited Partnership of TXU Europe
Funding I, L.P., dated November 22, 1999.
4(a) - Form of Amended and Restated Trust Agreement of TXU
Europe Capital I.
4(b) - Form of Amended and Restated Partnership Agreement
of TXU Europe Funding I, L.P.
4(c) - Form of Preferred Trust Securities Guarantee.
4(d) - Form of Preferred Partnership Securities Guarantee.
4(e) - Form of Subordinated Indenture of Funding.
4(f) - Form of officer's certificate establishing the
terms of the Funding debentures, with the form of
debentures attached thereto.
4(g) - Form of Subordinated Indenture of subsidiaries.
4(h) - Form of Deposit Agreement.
4(i) 333-82307 4(a) - Indenture (For Unsecured Debt Securities) dated May
and 333-82307-1 1, 1999.
4(j) 333-82307 4(d) - Officer's Certificate establishing 6.15% senior
and 333-82307-1 notes due May 15, 2002 and 6.15% exchange senior
notes due May 15, 2002, with the forms of notes
attached thereto.
4(k) 333-82307 4(c) - Officer's Certificate establishing 6.45% senior
and 333-82307-1 notes due May 15, 2005 and 6.45% exchange senior
notes due May 15, 2005, with the forms of notes
attached thereto.
4(l) 333-82307 4(d) - Officer's Certificate establishing 6.75% senior
and 333-82307-1 notes due May 15, 2009 and 6.75% exchange senior
notes due May 15, 2009 with the forms of notes
attached thereto.
</TABLE>
II-14
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
4(m) 333-82307 4(f) - Deposit Agreement with respect to the senior notes
and 333-82307-1 and the exchange senior notes.
5(a) - Opinion of E.J. Lean, general counsel to TXU Europe
Funding Company and TXU Europe Limited.
5(b) - Opinion of Worsham, Forsythe & Wooldridge, L.L.P.,
US counsel to TXU Eastern Funding Company, TXU Europe
Limited, TXU Europe Capital I and, TXU Europe Funding
I, L.P.
5(c) - Opinion of Thelen Reid & Priest LLP, special US
and counsel to TXU Eastern Funding Company, TXU Europe
8(a) Limited, TXU Europe Capital I and TXU Europe Funding
I, L.P.
5(d) - Opinion of Richards, Layton and Finger, P.A.,
Delaware counsel to TXU Europe Funding Company, TXU
Europe Limited, TXU Europe Capital I and TXU Europe
Funding I, L.P.
8(b) - Opinion of Norton Rose, English legal advisers to
TXU Eastern Funding Company and TXU Europe Limited,
TXU Europe Capital I and TXU Europe Funding I, L.P.
10(a) 1-12833 10(a) - Facilities Agreement for(pound)1,275,000, Credit
Form 10-Q Facilities, dated March 24, 1999, among TXU Europe
(Quarter ended Limited, TXU Finance (No. 2) Limited, TXU
March 31, 1999) Acquisitions Limited, Chase Manhattan Bank plc,
Lehman Brothers International (Europe), Merrill
Lynch Capital
Corporation other banks named therein.
10(b) 1-12833 99(a) - Facility Agreement for(pound)250,000,000 Revolving
Form 10-Q Credit Facility, dated May 21, 1998, among Eastern
(Quarter ended Electricity plc (EE), and Chase Manhattan plc, Lehman
September 30, 1998) Brothers International and Merrill Lynch Capital
Corporation as Joint Lead Arrangers, and The Chase
Manhattan Bank, Lehman Commercial Paper Inc. and
Merrill Lynch Capital Corporation as Underwriters.
10(c) 333-8008 and 4.1 - Indenture, dated as of October 16, 1997, among
333-8008-1 Energy Group Overseas B.V. (EGO), The Energy Group
PLC and The Bank of New York, as Trustee.
10(d) 333-8008 and 4.2 - Form of 7.375% Series B Guaranteed note of EGO due
333-8008-1 2017.
10(e) 333-8008 and 4.3 - Form of 7.500% Series B Guaranteed note of EGO due
333-8008-1 2027.
10(f) 1-14576 3.10 - Deed of Assignment of Rents, dated as of October
Form 20-F, dated 28, 1996, among EMPL (EMPL), Eastern Group Finance
January 27, 1997 Limited, Barclays Bank PLC (as agent) and the banks
listed therein.
10(g) 1-14576 3.12 - Guarantee and Indemnity Deed, dated as of October
Form 20-F, dated 28, 1996, among Eastern Group plc (Eastern), Eastern
January 27, 1997 Generation Limited (EGL), EE, Barclays Bank PLC,
Barclays De Zoete Wedd Limited, and the other bank
listed therein.
</TABLE>
II-15
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
10(h) 333-82307 10(f)-2 - Amendment dated July 17, 1998 to the Guarantee and
and 333-82307-1 Indemnity Deed, dated as of October 28, 1996, among
Eastern, EGL, EE, Barclays Bank PLC,
Barclays De Zoete Wedd Limited, and
the other banks listed therein.
10(i) 333-82307 10(f)-3 - Amendment dated March 11, 1999 to the Guarantee and
and 333-82307-1 Indemnity Deed dated as of October 28, 1996 (as
amended and restated on July 17, 1998), among Eastern, EGL,
EE, Barclays Bank Barclays De Zoete Wedd Limited,
and the other banks listed therein/
10(j) 1-14576 3.11 - Standby Credit Facility Agreement, dated as of
Form 20-F, dated October 28, 1996, among EMPL and Eastern Merchant
January 27, 1997 Generation Limited (EMGL) (as borrowers), Eastern and
EGL (as guarantors), EE, The Industrial Bank of Japan,
Limited (as arranger and agent), The Bank of Nova Scotia, the
Dai-ichi Kangyo Bank, Limited, The Royal Bank of
Scotland plc and Societe Generale (as co-arrangers), and
the financial institutions listed therein.
10(k) 333-82307 10(g)-1 - Supplemental Agreement dated July 17, 1998 to the
and 333-82307-1 Standby Credit Facility dated October 28, 1996 among
EMPL and EMGL (as borrowers), Eastern and EGL (as guarantors), EE,
Barclays Capital and The Royal Bank of Scotland plc (as arrangers),
The Bank of Nova Scotia, Bayerische Landesbank Girozentrale, The
Dai-Ichi Kangyo Bank, Limited, Den Danske Bank Aktieselskab,
Nationsbank, N.A., Royal Bank of Canada Europe Limited, The
Toronto-Dominion Bank and Westdeutsche Landesbank Girozentrale (as
co-arrangers), The Royal Bank of Scotland plc (as agent), and the
financial institutions listed therein.
10(l) 333-82307 10(g)-2 - Amendment dated March 11, 1999 to the Supplemental and 333-82307-1
Agreement dated July 17, 1998 to the Standby Credit Facility dated
October 28, 1996 among EMPL and EMGL (as borrowers), Eastern and
EGL (as guarantors), EE, Barclays Capital and The Royal Bank of
Scotland plc (as arrangers), The Bank of Nova Scotia, Bayerische
Landesbank Girozentrale, The Dai-Ichi Kangyo Bank, Limited, Den
Danske Bank Aktieselskab, Nationsbank, N.A., Royal Bank of Canada
Europe Limited, The Toronto-Dominion Bank and Westdeutsche Landesbank
Girozentrale (as co-arrangers), The Royal Bank of Scotland plc (as
agent), and the financial institutions listed therein.
10(m) 333-82307 10(h) - Pooling and Settlement Agreement dated 30 March
and 333-82307-1 1990, as amended as of 15 April 1999, among EE, National Grid
Company plc and other parties.
10(n) 333-82307 10(i) - Master Connection and Use of System Agreement dated
and 333-82307-1 as of 30 March 1990 among the National Grid Company plc and its users
(including EE).
10(o) 333-82307 10(j) - Lease of land and premises known as West Burton,
and 333-82307-1 Ironbridge and Rugeley B Power Stations dated 27 June 1996 from
National Power PLC to EMPL and Eastern.
</TABLE>
II-16
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
10(p) 333-82307 10(k) - Sublease of land and premises known as West Burton,
and 333-82307-1 Ironbridge and Rugeley B Power Stations dated 27 June 1996 from EMPL
to EMGL and Eastern.
10(q) 333-82307 10(l) - Lease of commercial premises at High Marnham,
and 333-82307-1 Newark, Nottinghamshire dated 2 July 1996 between
PowerGen plc and EMPL.
10(r) 333-82307 10(m) - Underlease of commercial premises at High Marnham,
and 333-82307-1 Newark, Nottinghamshire dated 2 July 1996 between
EMPL and EMGL.
10(s) 333-82307 10(n) - Lease of commercial premises at Drakelow,
and 333-82307-1 Burton-on-Trent, Staffordshire dated 2 July 1996
between PowerGen plc and EMPL.
10(t) 333-82307 10(o) - Underlease of commercial premises at Drakelow,
and 333-82307-1 Burton-on-Trent, Staffordshire dated 2 July 1996
between EMPL and EMGL.
12(a) 333-82307 12(a) - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-01 for TXU Europe Limited for the periods from formation
through December 31, 1998 and March 31, 1999.
12(b) - Computation of Ratio of Earnings to Fixed Charges
for TXU Europe Limited including the period from formation
through September 30, 1998 and nine months ended
September 30, 1999.
12(c) 333-82307 12(b) - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-1 for TXU Europe Group plc and Subsidiaries (US GAAP
basis).
12(d) 333-82307 12(b)-1 - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-1 for TXU Europe Group plc and Subsidiaries (US GAAP
basis) including the period from January 1, 1998 through May
18, 1998.
12(e) 333-82307 12(c) - Computation of Ratio of Earnings to Fixed Charges
and 333-82307-1 for Earnings to Fixed Charges for TXU Europe Group
plc and Subsidiaries (UK GAAP basis).
21(a) - Material subsidiaries of TXU Europe Limited.
23(a) - Consent of PricewaterhouseCoopers.
23(b) - Consent of Deloitte & Touche LLP.
23(c) - Consent of E. J. Lean (included in Opinion filed as
Exhibit 5(a) hereto).
23(d) - Consent of Worsham, Forsythe & Wooldridge, L.L.P.
(included in Opinion filed as Exhibit 5(b) hereto).
23(e) - Consent of Thelen Reid & Priest LLP (included in
Opinion filed as Exhibits 5(c) and 8(a) hereto).
23(f) - Consent of Richards, Layton and Finger, P.A.
(included in Opinion filed as Exhibit 5(d) hereto).
23(g) - Consent of Norton Rose (included in Opinion filed
as Exhibit 8(b) hereto).
</TABLE>
II-17
<PAGE>
<TABLE>
<CAPTION>
PREVIOUSLY FILED*
--------------------------------
EXHIBIT WITH FILE NUMBER AS EXHIBIT
------- ---------------- ----------
<S> <C> <C> <C>
24(a) - Power of Attorney for TXU Eastern Funding Company
(see page II-11).
24(b) - Power of Attorney for TXU Europe Limited (see page
II-12).
25(a) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the Indenture of TXU Europe
Limited and TXU Eastern Funding Company.
25(b) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the Indentures of TXU Europe
Limited and issuers of subsidiary debentures.
25(c) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the Amended and Restated
Trust Agreement of TXU Europe Capital I.
25(d) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the TXU Europe Limited
Guarantee relating to TXU Europe Capital I Preferred
Trust Securities.
25(e) - Statement of Eligibility on Form T-1 of The Bank of
New York with respect to the TXU Europe Limited
Guarantee relating to TXU Europe Funding I, L.P.
Preferred Partnership Securities.
27(a) - Financial Data Schedule.
</TABLE>
- - - - -------------------
* Incorporated herein by reference.
II-18
Exhibit 1
TXU EUROPE CAPITAL I
___% Trust Originated Preferred Securities
UNDERWRITING AGREEMENT
- - - - -------------------
- - - - -------------------
- - - - -------------------
as Representatives of the Underwriters
named in Schedule II hereto (the "Representatives")
c/o
-------------------
- - - - ----------------------
- - - - ----------------------
Ladies and Gentlemen:
1. Introduction. TXU Europe Limited, a private limited company
incorporated in England and Wales (the "Company"), TXU Eastern Funding Company,
a private unlimited company incorporated under the laws of England and Wales
("TXU Eastern Funding"), TXU Europe Funding I, L.P., a limited partnership
formed under the Delaware Revised Uniform Limited Partnership Act (the
"Partnership") and TXU Europe Capital I, a statutory business trust formed under
the Delaware Business Trust Act (the "Trust," and hereinafter, together with the
Company, TXU Eastern Funding and the Partnership, the "Offerors"), propose for
the Trust to issue and sell severally to the underwriters named in Schedule II
hereto (the "Underwriters") the Trust's ___% Trust Originated Preferred
Securities of the series designation, with the terms and in the liquidation
preference amount specified in Schedule I hereto (the "TOPrS").
2. Description of TOPrS. Each of the TOPrS represents an undivided
beneficial interest in the assets of the Trust. The TOPrS will be issued
pursuant to an Amended and Restated Trust Agreement, to be dated as of
____________, among The Bank of New York, as Property Trustee, The Bank of New
York (Delaware), as Delaware Trustee, certain employees of TXU Services Inc., as
Administrative Trustees, TXU Business Services Company, as depositor ("TXU
Services"), and the several Holders as defined therein in substantially the form
heretofore delivered to you as the Representatives, said agreement being
hereinafter referred to as the "Trust Agreement". The TOPrS will be guaranteed
by the Company, as and to the extent set forth in the Prospectus (as defined
below) and the Trust Preferred Securities Guarantee Agreement dated as of ______
between The Bank of New York, as trustee, and the Company (the "Trust
Guarantee"). The Trust will use the proceeds from the sale of the TOPrS to
purchase ___% Preferred Partnership Securities in the Partnership (the
"Preferred Partnership Securities").
The Preferred Partnership Securities will be issued pursuant to an
Amended and Restated Agreement of Limited Partnership, dated as of _________,
among the Company, as general partner of the Partnership (the "General
Partner"), the Trust, as initial limited partner, and such other persons who
become limited partners thereto (the "Partnership Agreement"). The Partnership
Preferred Securities will be guaranteed by the Company, as and to the extent set
forth in the Prospectus and the Preferred Partnership Securities Guarantee
Agreement dated as of ______ between The Bank of New York, as trustee, and the
Company (the "Partnership Guarantee"). The Partnership will use most of the
proceeds from the sale of the Preferred Partnership Securities to the Trust,
together with a capital contribution by the Company, to purchase beneficial
interests in junior subordinated debentures of TXU Eastern Funding (the "TXU
Funding Debentures") and the debentures of one or more other eligible
subsidiaries of the Company (the "Other Debentures" and together with the TXU
Funding Debentures, the "Debentures").
The TXU Funding Debentures shall be issued pursuant to an Indenture
among the The Bank of New York, as trustee, the Company and TXU Funding (the
"TXU Funding Indenture"). The Other Debentures shall be issued pursuant to one
or more indentures among The Bank of New York, as trustee, the Company and each
subsidiary issuing such debentures (the "Other Indentures" and, together with
the TXU Funding Indenture, the "Indentures"). The TXU Funding Debentures will be
guaranteed by the Company, as and to the extent set forth in the Prospectus and
the TXU Funding Indenture (the "TXU Funding Debenture Guarantee") The Other
Debentures will be guaranteed by the Company, as and to the extent set forth in
the Prospectus and the Other Indentures (the "Other Debenture Guarantees" and
together with the TXU Funding Guarantee, the "Debenture Guarantees"). The
Debenture Guarantees, together with the Trust Guarantee and the Partnership
Guarantee, are referred to herein as the "Guarantees").
The TOPrS and the Trust Guarantee, together with the Partnership
Preferred Securities, the Partnership Guarantee, the Debentures and the
Debenture Guarantees are referred to herein as the "Offered Securities".
3. Representations and Warranties of the Offerors. The Offerors
represent and warrant to the several Underwriters that:
(a) The Offerors have filed with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-1,
including a prospectus, on _________(Registration Nos. 333-______,
333-______-01, 333-______-02 and 333-______-03) for the registration under
the Securities Act of 1933, as amended (the "Securities Act") of $______
aggregate amount of Offered Securities. Such registration statement was
declared effective by the Commission on __________. References herein to
the term "Registration Statement" as of any date shall be deemed to refer
to Registration Statement Nos. 333-______, 333-______-01, 333-______-02 and
333-______-03, as amended or supplemented to such date; references herein
to the term "Prospectus" as of any given date shall be deemed to refer to
the prospectus, including any preliminary prospectus, forming a part of the
Registration Statement. References herein to the term "Effective Date"
shall be deemed to refer to the later of the time and date the Registration
Statement or any post-effective amendment to the Registration Statement was
declared effective. The Company will not file any amendment to the
Registration Statement or supplement to the Prospectus on or after the date
of this Agreement and prior to the Closing Date, as hereinafter defined,
without prior notice to the Underwriters, or to which Counsel for the
Underwriters shall reasonably object in writing.
(b) On the Effective Date, the Registration Statement and the
Prospectus fully complied and at the Closing Date, as hereinafter defined,
the Registration Statement, the Prospectus, the Trust Agreement, the TXU
Funding Indenture, the Trust Guarantee, the Partnership Guarantee and the
Other Debenture Guarantees will comply as to form in all material respects
with the applicable provisions of the Securities Act, the Trust Indenture
Act of 1939, as amended ("Trust Indenture Act"), and the applicable rules
and regulations of the Commission thereunder; on the Effective Date the
Registration Statement did not, and at the Closing Date, as hereinafter
defined, the Registration Statement will not, contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; on the
Effective Date the Prospectus did not, and at the Closing Date, as
hereinafter defined, and on the date it is filed with the Commission
pursuant to Rule 424 of the General Rules and Regulations of the Securities
Act ("Rule 424"), the Prospectus will not, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading; provided that the foregoing representations and
warranties in this paragraph (b) shall not apply to statements or omissions
made in reliance upon information furnished in writing to the Offerors by,
or on behalf of, any Underwriter for use in connection with the preparation
of the Registration Statement or the Prospectus or to any statements in or
omissions from the Statements of Eligibility and Qualification under the
Trust Indenture Act, or amendments thereto, filed as exhibits to the
Registration Statement.
(c) The execution and delivery of this Agreement by each of the
Offerors, and the consummation of the transactions herein contemplated and
the fulfillment of the terms hereof by each of the Offerors will not result
in a material breach of any of the terms or provisions of, or constitute a
material default under, any indenture, mortgage, deed of trust, charter,
by-laws or other organizational documents or any other agreement or
instrument to which any of the Offerors is now a party and which is
material to the respective Offeror and its subsidiaries, taken as a whole.
(d) Each of the Offerors and each direct and indirect material
subsidiary of the Company has been created, formed or incorporated, as the
case may be, and is validly existing and, where applicable, in good
standing under the laws of the jurisdiction of its creation, formation or
incorporation, as the case may be, has the power and authority to own,
lease and operate its properties and to conduct its business as currently
conducted and as set forth in or contemplated by the Prospectus, and is
qualified to transact business and is in good standing in each jurisdiction
in which such qualification and good standing is required, whether by
reason of the ownership or leasing of property or the conduct of business,
except, with respect to each direct and indirect material subsidiary of the
Company other than the Offerors, where the failure to so qualify or be in
good standing would not have a material adverse effect on the business,
property or financial condition of the Company and its subsidiaries,
considered as a whole. The Trust has the trust power and authority to
issue, and perform its obligations under, the TOPrS and purchase the
Partnership Preferred Securities, as described in the Prospectus. The Trust
is not a party to or otherwise bound by any material agreements other than
those described in the Prospectus; [and the Trust is and will be treated as
a consolidated subsidiary of the Company pursuant to generally accepted
accounting principles]. The Partnership has the partnership power and
authority to issue and perform its obligations under the Partnership
Preferred Securities and to lend the proceeds thereof to certain
subsidiaries of the Company, as described in the Prospectus. The
Partnership is not a party to or otherwise bound by any material agreements
other than those described in the Registration Statement and the
Prospectus[; and the Partnership is and will be treated as a consolidated
subsidiary of the Company pursuant to generally accepted accounting
principles].
(e) None of the Company, TXU Eastern Funding, the Partnership or the
Trust is, or after giving effect to the issuance and sale of the Offered
Securities and the application of the proceeds thereof as described in the
Prospectus will be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended.
(f) The Company and each of its material subsidiaries (i) is in
compliance with any and all applicable foreign, national, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) has received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (iii) is in compliance with
all terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(g) The Company and each of its material subsidiaries has good title
to all real property and other properties owned by it (other than
properties which are not material to the financial condition or the conduct
of the business of the Company and its subsidiaries, taken as a whole), in
each case, free and clear of all mortgages, pledges, liens, security
interests, claims, restrictions or encumbrances of any kind except such as
(a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially adversely affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property; and all of the leases and subleases material to the business of
the Company and its subsidiaries, taken as a whole, and under which the
Company or any of its material subsidiaries holds properties described in
the Prospectus are in full force and effect, and the Company has no notice
of any material claim of any sort that has been asserted by anyone adverse
to the rights of the Company or any material subsidiary of the Company
under any of the leases or subleases mentioned above, or affecting or
questioning the rights of the Company or any material subsidiary of the
Company to the continued possession of the leased or subleased properties
under any such lease or sublease.
(h) The Company and each of its material subsidiaries has filed all
national, state, local and foreign tax returns which have been required to
be filed and has paid all taxes shown thereon and all assessments received
by them or any of them to the extent that such taxes have become due and
are not being contested in good faith, except where the failure to have
made such filings or to have paid such taxes and assessments would not have
a material adverse effect on the Company and its subsidiaries, taken as a
whole; and there is no tax deficiency which has been asserted or, to the
knowledge of the Company, threatened against the Company or any of its
material subsidiaries which would be expected to have a material adverse
effect on, as the case may be, the Company and its subsidiaries, taken as a
whole.
(i) The Company and each of its material subsidiaries owns, possesses
or has obtained all licenses, permits, certificates, consents, orders,
approvals and other authorizations (collectively "Authorizations") from,
all national, state, local and other governmental authorities (including
foreign regulatory agencies), all self-regulatory organizations and all
courts and other tribunals, domestic or foreign, necessary to own or lease,
as the case may be, and to operate its properties and to carry on its
business as conducted as of the date hereof, except where the failure to
own, possess or obtain such Authorizations or to have made such
declarations and filings would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole; to the knowledge of the
Company and its material subsidiaries, each Authorization is in full force
and effect, except where the failure of such Authorization to be in full
force and effect would not be reasonably expected to have a material
adverse effect on the Company and its subsidiaries, taken as a whole; none
of the Company or its material subsidiaries has received any actual notice
of any proceeding relating to revocation or modification of any such
Authorization, except as described in the Prospectus and except as would
not, if the subject of an unfavorable decision, be reasonably expected to
have a material adverse effect on the Company and its subsidiaries, taken
as a whole.
(j) No stamp or other issuance or transfer taxes or duties are payable
by or on behalf of the Underwriters in the United Kingdom or the United
States or any political subdivision or taxing authority thereof or therein
on (i) the authorization, issue or delivery of the Offered Securities or
(ii) assuming all of the following transactions take place outside the
United Kingdom, the purchase by the Underwriters of the TOPrS, the sale and
delivery by the Underwriters of the TOPrS, the execution and delivery of
this Agreement, the Indentures, the Trust Agreement, the Partnership
Agreement, the Trust Guarantee and the Partnership Guarantee or the
consummation of the transactions contemplated by this Agreement.
(k) No exchange control authorization or any other authorization,
approval, consent or license of any governmental authority or agency of or
in the United Kingdom is required for the payment by the Offerors of any
amounts in United States dollars pursuant to the terms of the Offered
Securities.
(l) No filing with, or authorization, approval, consent, license,
order, registration, qualification or decree of, any court or governmental
authority or agency is necessary or required for the performance by the
Offerors of their respective obligations hereunder, in connection with the
offering, issuance or sale of the Offered Securities or the consummation of
the transactions contemplated by this Agreement.
(m) The Offerors and their respective obligations under this
Agreement, the Offered Securities, the Trust Agreement, the Partnership
Agreement and the Indentures are subject to civil and commercial law and to
suit and none of the Offerors nor any of their respective properties,
assets or revenues has, in the United Kingdom or any political subdivision
thereof or in the United States or any political subdivision thereof, any
right of immunity from any legal action, suit or proceeding, from the
giving of any relief in any such legal action, suit or proceeding, from
setoff or counterclaim, from the jurisdiction of any court, from service of
process, attachment upon or prior to judgment, or attachment in aid of
execution of judgment, or from execution of a judgment, or other legal
process or proceeding for the giving of any relief or for the enforcement
of a judgment, in any such jurisdiction, with respect to its obligations,
liabilities or any other matter under or arising out of or in connection
with the issuance of the Offered Securities; and, to the extent that any of
the Offerors or any of their respective properties, assets or revenues may
have or may hereafter become entitled to any such right of immunity in any
jurisdiction, each of the Offerors has effectively waived such right and
consented to such relief and enforcement pursuant to Section ___ of this
Agreement; nothing in this clause (m) shall be deemed to waive any defense
(other than any such immunity) available to any Offeror.
(n) The Trust Agreement has been duly qualified under the Trust
Indenture Act.
(o) The TOPrS have been duly authorized by the Trust Agreement and,
when issued and sold in accordance with the Trust Agreement, will be fully
paid and nonassessable undivided beneficial interests in the assets of the
Trust (subject to the limitations set forth in this paragraph below); the
issuance of the TOPrS is not subject to preemptive or other similar rights;
and holders of TOPrS 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
(provided, that, the holders of TOPrS 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 TOPrS certificates and the issuance of replacement TOPrS
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).
(p) Each of the Administrative Trustees of the Trust is an employee of
TXU Services; at the Closing Date, the Trust Agreement will have been duly
executed and delivered by the Administrative Trustees and, when executed
and delivered by TXU Services, the Property Trustee and the Delaware
Trustee, will be a valid and binding obligation of each Administrative
Trustee enforceable against such Administrative Trustee in accordance with
its terms, subject to the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, receivership, moratorium and other laws affecting
the rights and remedies of creditors generally and of general principles of
equity and the effect of applicable public policy on the enforceability of
provisions relating to contribution and indemnification.
(q) The Partnership Agreement has been duly authorized by the General
Partner and, at the Closing Date, will have been duly executed and
delivered by the General Partner and will be a legal, valid and binding
obligation of the General Partner enforceable against the General Partner
in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, fraudulent conveyance, receivership, moratorium
and other laws affecting the rights and remedies of creditors generally and
of general principles of equity and the effect of applicable public policy
on the enforceability of provisions relating to contribution and
indemnification.
(r) The Partnership Preferred Securities have been duly authorized by
the Partnership Agreement and, when issued and sold in accordance with the
Partnership Agreement, will be fully paid and nonassessable (subject to the
limitations set forth in this paragraph below); the issuance of the
Partnership Preferred Securities is not subject to preemptive or other
similar rights; and assuming that the holders of Partnership Preferred
Securities in their capacities as such do not participate in the control of
the business of the Company, the holders of Partnership Preferred
Securities, in their capacities as such, will have no liability in excess
of their obligations to make payments provided for in the Partnership
Agreement and their share of the Partnership's assets and undistributed
profits (subject to the obligation of a holder of Partnership Preferred
Securities to repay any funds distributed to it).
(s) The TXU Funding Indenture has been, and at the Closing Date each
of the Other Indentures will have been, duly authorized, and at the Closing
Date each of the Indentures will have been duly executed and delivered, by
the applicable subsidiary of the Company and, when duly executed and
delivered by the respective trustee thereof, will constitute a valid and
binding agreement of such subsidiary enforceable against such subsidiary in
accordance with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, fraudulent conveyance, receivership, moratorium and other
laws affecting the rights and remedies of creditors generally and of
general principles of equity and the effect of applicable public policy on
the enforceability of provisions relating to contribution and
indemnification. The TXU Funding Debentures have been, and at the Closing
Date the Other Debentures will have been, duly authorized for issuance and
sale to the Partnership and, at the Closing Date, the Debentures will have
been duly executed by the applicable subsidiary of the Company and, when
authenticated, issued and delivered in the manner provided in the
applicable Indenture and delivered against payment of the purchase price
therefor as contemplated by this Agreement, will constitute valid and
legally binding obligations of such subsidiary enforceable against such
subsidiary in accordance with their terms, subject to the effect of
bankruptcy, insolvency, reorganization, fraudulent conveyance,
receivership, moratorium and other laws affecting the rights and remedies
of creditors generally and of general principles of equity and the effect
of applicable public policy on the enforceability of provisions relating to
contribution and indemnification. The TXU Funding Indenture has been, and
at the Closing Date the Other Debenture Guarantees will be, duly qualified
under the Trust indenture Act.
(t) Each of the Trust Guarantee and the Partnership Guarantee has been
duly authorized and, at the Closing Date, will have been duly executed and
delivered by the Company and, when duly executed and delivered by the
trustee under the Trust Guarantee or the Partnership Guarantee, as the case
may be, will constitute a valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, subject to
the effect of bankruptcy, insolvency, reorganization, fraudulent
conveyance, receivership, moratorium and other laws affecting the rights
and remedies of creditors generally and of general principles of equity and
the effect of applicable public policy on the enforceability of provisions
relating to contribution and indemnification. each of the Trust Guarantee
and the Partnership Guarantee has been duly qualified under the Trust
indenture Act.
(u) This Agreement has been duly authorized, executed and delivered by
each of the Offerors, each of which has the necessary power and authority
to execute and deliver and perform its obligations under this Agreement
(v) The TOPrS, the Partnership Preferred Securities, the Trust
Guarantee and the Partnership Guarantee will conform in all material
respects to the respective statements relating thereto contained in the
Prospectus.
(w) Other than as set forth or contemplated in the Registration
Statement and the Prospectus, there are no legal or governmental
proceedings pending or, to the knowledge of the Company, threatened to
which the Company or any of its material subsidiaries is a party or to
which any property of the Company or any of its material subsidiaries is
the subject that is reasonably expected to have a material adverse effect
on the Company and its subsidiaries taken as a whole.
The Offerors acknowledge that the Underwriters, and, for purposes of
the opinions to be delivered to the Underwriters pursuant to Section __ hereof,
each counsel to any of the Offerors and counsel to the Underwriters, will rely
upon the accuracy and truth of the foregoing representations. The Offerors
hereby consent to such reliance.
3A. Representations and Warranties of the Underwriters.
[TO BE ADDED]
4. Purchase and Sale.
(a) On the basis of the representations and warranties herein
contained, and subject to the terms and conditions herein set forth,
the Trust shall sell to each of the Underwriters, and each Underwriter
shall purchase from the Trust, at the time and place herein specified,
severally and not jointly, the respective number of TOPrS set forth
opposite the name of such Underwriter in Schedule II attached hereto,
at the purchase price or prices set forth in Schedule I hereto.
(b) The Company shall pay to the Underwriters a commission equal
to $_____ per TOPrS.
5. Time and Place of Closing. Delivery of the TOPrS against payment
of the aggregate purchase price therefor by wire transfer in federal funds shall
be made at the office of Thelen Reid & Priest LLP, 40 West 57th Street, New
York, New York, at 10:00 A.M., New York Time, on ___________, or at such other
place, time and date as shall be agreed upon in writing by the Company and the
Representatives, or established in accordance with the following paragraph. The
hour and date of such delivery and payment are herein called the "Closing Date".
The TOPrS shall be delivered to The Depositary Trust Company or to The Bank of
New York, as custodian for The Depositary Trust Company, in fully registered
global form registered in the name of Cede & Co. for the respective accounts
specified by the Representatives not later than the close of business on the
business day preceding the Closing Date. The Trust agrees to make the TOPrS
available to the Representatives for checking purposes not later than 10:00
A.M., New York Time, on the last business day preceding the Closing Date at the
office of Thelen Reid & Priest, 40 West 57th Street, New York, New York, 10019,
or at such other place as the Trust may specify.
If any Underwriter 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 liquidation preference amount of the TOPrS that such Underwriter has
agreed to purchase and pay for hereunder, the Company shall immediately give
notice to the other Underwriters of the default of such Underwriter, and the
other Underwriters shall have the right within 24 hours after the receipt of
such notice to determine to purchase, or to procure one or more others, who are
members of the National Association of Securities Dealers, Inc. ("NASD") (or, if
not members of the NASD, who are not eligible for membership in the NASD and who
agree (i) to make no sales within the United States, its territories or its
possessions or to persons who are citizens thereof or residents therein and (ii)
in making sales to comply with the NASD's Conduct Rules) and satisfactory to the
Company, to purchase, upon the terms herein set forth, the liquidation
preference amount of the TOPrS that the defaulting Underwriter had agreed to
purchase. If any non-defaulting Underwriter or Underwriters shall determine to
exercise such right, such Underwriter or Underwriters shall give written notice
to the Company of the determination in that regard within 24 hours after receipt
of notice of any such default, and thereupon the Closing Date shall be postponed
for such period, not exceeding three business days, as the Company shall
determine. If in the event of such a default no non-defaulting Underwriter shall
give such notice, then this Agreement may be terminated by the Company, upon
like notice given to the non-defaulting Underwriters, within a further period of
24 hours. If in such case the Company shall not elect to terminate this
Agreement it shall have the right, irrespective of such default:
(a) to require each non-defaulting Underwriter to purchase and
pay for the respective liquidation preference amount of the TOPrS that
it had agreed to purchase hereunder as hereinabove provided and, in
addition, the liquidation preference amount of the TOPrS that the
defaulting Underwriter shall have so failed to purchase up to a
liquidation preference amount thereof equal to [one-ninth (1/9)] of
the liquidation preference amount of TOPrS that such non-defaulting
Underwriter has otherwise agreed to purchase hereunder, and/or
(b) to procure one or more persons, reasonably acceptable to the
Representatives, who are members of the NASD (or, if not members of
the NASD, who are not eligible for membership in the NASD and who
agree (i) to make no sales within the United States, its territories
or its possessions or to persons who are citizens thereof or residents
therein and (ii) in making sales to comply with the NASD's Conduct
Rules), to purchase, upon the terms herein set forth, either all or a
part of the liquidation preference amount of the TOPrS that such
defaulting Underwriter had agreed to purchase or that portion thereof
that the remaining Underwriters shall not be obligated to purchase
pursuant to the foregoing clause (a).
In the event the Company shall exercise its rights under (a) and/or (b) above,
the Company shall give written notice thereof to the non-defaulting Underwriters
within such further period of 24 hours, and thereupon the Closing Date shall be
postponed for such period, not exceeding three business days, as the Company
shall determine.
In the computation of any period of 24 hours referred to in this
Section 5, there shall be excluded a period of 24 hours in respect of each
Saturday, Sunday or legal holiday that would otherwise be included in such
period of time.
Any action taken by the Company under this Section 5 shall not relieve
any defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement. Termination by the Company under this Section
5 shall be without any liability on the part of the Company or any
non-defaulting Underwriter, except as otherwise provided in Sections 6(g) and 9
hereof.
6. Covenants of the Company. The Company agrees that:
(a) It will promptly deliver to each of the you a signed copy of
the Registration Statement as originally filed or, to the extent a
signed copy is not available, a conformed copy, certified by an
officer of the Company to be in the form as originally filed,
including all exhibits, and of all amendments thereto.
(b) It will deliver to you, as soon as practicable after the date
hereof, as many copies of the Prospectus as of such date as you may
reasonably request.
(c) It will cause the Prospectus to be filed with the Commission
pursuant to Rule 424 as soon as practicable and advise you of 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 the Offerors shall have received notice. The Company
will use its best efforts to prevent the issuance of any such stop
order and to secure the prompt removal thereof if issued.
(d) If, during such period of time (not exceeding nine months)
after the Prospectus has been filed with the Commission pursuant to
Rule 424 as in the opinion of Counsel for the Underwriters a
prospectus covering the TOPrS is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event relating
to or affecting the Company, TXU Eastern Funding, the Partnership or
the Trust or of which the Company shall be advised in writing by you
shall occur that in the Company's reasonable opinion after
consultation with Counsel for the Underwriters should be set forth 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 to a purchaser, the Company will, at its expense,
amend or supplement the Prospectus by either (i) preparing and
furnishing to you at the Company's expense a reasonable number of
copies of a supplement or supplements or an amendment or amendments to
the Prospectus or (ii) making an appropriate filing pursuant to
Section 13 of the Exchange Act, 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 to a purchaser,
not misleading; provided that should such event relate solely to the
activities of any of the Underwriters, then the Underwriters shall
assume the expense of preparing and furnishing any such amendment or
supplement. In case any Underwriter is required to deliver a
prospectus after the expiration of nine months from the date the
Prospectus is filed with the Commission pursuant to Rule 424, the
Company, upon such Underwriter's request, will furnish to such
Underwriter, at the expense of such Underwriter, a reasonable quantity
of a supplemental prospectus or supplements to the Prospectus
complying with Section 10(a) of the Securities Act.
(e) It will make generally available to its security holders and
the holders of the TOPrS, as soon as practicable, an earnings
statement of the Company (which need not be audited) covering a period
of at least twelve months beginning not earlier than the first day of
the month next succeeding the month in which occurred the effective
date of the Registration Statement as defined in Rule 158 under the
Securities Act.
(f) It will furnish such proper information as may be lawfully
required and otherwise cooperate in qualifying the Offered Securities
for offer and sale under the blue-sky laws of such jurisdictions as
you may designate, provided that the none of the Offerors shall be
required to qualify to do business in any jurisdiction, to qualify as
a dealer in securities, to file any consents to service of process
under the laws of any jurisdiction, or to meet any other requirements
deemed by the Offerors to be unduly burdensome.
(g) It will, except as herein provided, pay all expenses and
taxes (except transfer taxes) in connection with (i) the preparation
and filing by it of the Registration Statement, (ii) the issuance and
delivery of the TOPrS as provided in Section 5 hereof and the issuance
and delivery of the other Offered Securities in connection therewith,
(iii) the qualification of the Offered Securities under blue-sky laws
(including counsel fees not to exceed $7,500), and (iv) the printing
and delivery to the Underwriters of reasonable quantities of the
Registration Statement and, except as provided in Section 6(d) hereof,
of the Prospectus. The Company shall not, however, be required to pay
any amount for any expenses of yours or any of the Underwriters,
except that, if this Agreement shall be terminated in accordance with
the provisions of Section 7, 8 or 10 hereof, the Company will
reimburse you for the fees and disbursements of Counsel for the
Underwriters, whose fees and disbursements the Underwriters agree to
pay in any other event, and will reimburse the Underwriters for their
reasonable out-of-pocket expenses, in an aggregate amount not
exceeding $5,000, incurred in contemplation of the performance of this
Agreement. The Company shall not in any event be liable to any of the
several Underwriters for damages on account of loss of anticipated
profits.
(h) During the period from the date of this Agreement to the
Closing Date, neither the Company, TXU Eastern Funding, the
Partnership or the Trust will, without the prior written consent of
the Representatives, directly or indirectly, publicly issue, sell,
offer or contract to sell, in the market in which the TOPrS are being
offered and sold, any securities of the Company or any of its
subsidiaries that are of the same class as any of the Offered
Securities.
7. Conditions of Underwriters' Obligations. The obligations of the
Underwriters to purchase and pay for the TOPrS shall be subject to the accuracy
of the representations and warranties made herein on the part of each of the
Offerors, to the performance by each of the Offerors of its obligations to be
performed hereunder prior to the Closing Date, and to the following conditions:
(a) The Prospectus shall have been filed with the Commission
pursuant to Rule 424 prior to 5:30 P.M., New York Time, on the second
business day after the date of this Agreement, or such other time and
date as may be approved by you.
(b) No stop order suspending the effectiveness of the
Registration Statement shall be in effect, and no proceedings for that
purpose shall be pending before, or threatened by, the Commission on
the Closing Date; and you shall have received a certificate, dated the
Closing Date and signed by an officer of the Company, to the effect
that (A) no such stop order is in effect and that no proceedings for
such purpose are pending before, or to the knowledge of the Company
threatened by, the Commission and (B) the representations and
warranties of the Offerors in Section 3 hereof are true and correct
with the same force and effect as if made on the Closing Date.
(c) On the Closing Date, you shall have received from E.J. Lean,
General Counsel for the Company, TXU Eastern Funding, and the Material
Subsidiaries of the Company, Norton Rose, English tax counsel for the
Offerors, Richards, Layton & Finger, P.A., Delaware counsel for the
Company, the Partnership and the Trust, Worsham, Forsythe &
Wooldridge, L.L.P., United States counsel for the Offerors, Thelen
Reid & Priest LLP, special United States counsel for the Offerors, and
Winthrop, Stimson, Putnam & Roberts, Counsel for the Underwriters,
opinions in substantially the form and substance prescribed in
Schedules III, IV, V, VI, VII and VIII hereto (i) with such changes
therein as may be agreed upon by the Company and you, with the
approval of Counsel for the Underwriters, and (ii) if the Prospectus
relating to the TOPrS shall be supplemented or amended after the
Prospectus shall have been filed with the Commission pursuant to Rule
424, with any changes therein necessary to reflect such
supplementation or amendment.
(d) [On and as of the Closing Date, you shall have received from
PricewaterhouseCoopers, independent auditors, a letter in form and
substance reasonably satisfactory to Counsel to the Underwriters,
containing statements and information of the type ordinarily included
in accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in
the Prospectus; provided that such letter shall use a "cut-off date"
not earlier than the date hereof.]
(e) [On and as of the Closing Date, you shall have received from
Deloitte & Touche LLP a letter in form and substance satisfactory to
Counsel to the Underwriters, containing statements and information of
the type ordinarily included in accountants' "comfort letters" to
underwriters with respect to the financial statements and certain
financial information contained in the Prospectus; provided that such
letter shall use a "cut-off date" not earlier than the date hereof.]
(f) Since the most recent dates as of which information is given
in the Registration Statement or the Prospectus there shall not have
been any material adverse change in the business, property or
financial condition of the Trust, the Partnership, TXU Eastern Funding
or the Company and its subsidiaries, considered as a whole, whether or
not in the ordinary course of business, and, since such dates, there
shall not have been any material transaction entered into by the
Trust, the Partnership, TXU Eastern Funding or the Company, other than
transactions in the ordinary course of business and transactions
contemplated by the Registration Statement or Prospectus, and at the
Closing Date you shall have received a certificate to such effect
dated the Closing Date and signed by an officer of the Company.
(g) All legal proceedings to be taken in connection with the
issuance and sale of Offered Securities as described in the Prospectus
shall have been satisfactory in form and substance to Counsel for the
Underwriters.
(h) At the Closing Date, (i) the TOPrS shall be rated at least
_____________ by Moody's Investor Services ("Moody's"), and Standard &
Poor's Corporation ("S&P"), respectively, and the Company shall have
delivered to you a letter from each such rating agency, or other
evidence satisfactory to you, confirming that the TOPrS have such
ratings, and (ii) neither Moody's nor S&P shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of the TOPrS, any other securities
of the Company or a special purpose subsidiary of the Company which
are of the same class as the TOPrS or the financial condition of the
Company.
(i) The TOPrS shall have been approved for listing on the New
York Stock Exchange and the Luxembourg Stock Exchange.
In case any of the conditions specified above in this Section 7 shall
not have been fulfilled as of the Closing Date, this Agreement may be terminated
by the Representatives upon notice thereof to the Company. Any such termination
shall be without liability of any party to any other party except as otherwise
provided in Sections 6(g) and 9 hereof.
8. Conditions of Offerors' Obligations. The obligation of the
Offerors to deliver the TOPrS shall be subject to the conditions that the
Prospectus shall have been filed with the Commission pursuant to Rule 424 prior
to 5:30 P.M., New York Time, on the second business day after the date of this
Agreement or such other time and date as may be approved by the Company, and no
stop order suspending the effectiveness of the Registration Statement shall be
in effect at the Closing Date and no proceedings for that purpose shall be
pending before, or threatened by, the Commission at the Closing Date. In case
these conditions shall not have been fulfilled as of the Closing Date, this
Agreement may be terminated by the Company upon notice thereof to you. Any such
termination shall be without liability of any party to any other party except as
otherwise provided in Sections 6(g) and 9 hereof.
9. Indemnification.
(a) The Offerors shall jointly and severally indemnify, defend
and hold harmless each Underwriter and each person who controls any
Underwriter within the meaning of Section 15 of the Securities Act
from and against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject
under the Securities Act or any other statute or common law and shall
reimburse each such Underwriter and controlling person for any legal
or other expenses (including, to the extent hereinafter provided,
reasonable counsel fees) incurred by them in connection with
investigating any such losses, claims, damages or liabilities or in
connection with defending any actions, insofar as such losses, claims,
damages, liabilities, expenses 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 or the Prospectus, or the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein in
the light of the circumstances under which they were made not
misleading; provided, however, that the indemnity agreement contained
in this Section 9 shall not apply to any such losses, claims, damages,
liabilities, expenses or actions arising out of, or based upon, any
such untrue statement or alleged untrue statement, or any such
omission or alleged omission, if such statement or omission was made
in reliance upon and in conformity with information furnished in
writing to any of the Offerors by or on behalf of any Underwriter,
through the Representatives or Counsel for the Underwriters, for use
in connection with the preparation of the Registration Statement or
the Prospectus or any amendment or supplement to either thereof, or
arising out of, or based upon, statements in or omissions from that
part of the Registration Statement that shall constitute the
Statements of Eligibility and Qualification under the Trust Indenture
Act of any Trustee with respect to any indenture qualified pursuant to
the Registration Statement; and provided further, that the indemnity
agreement contained in this Section 9 shall not inure to the benefit
of any Underwriter (or of any person controlling such Underwriter) on
account of any such losses, claims, damages, liabilities, expenses or
actions arising from the sale of the TOPrS to any person if a copy of
the Prospectus shall not have been given or sent to such person by or
on behalf of such Underwriter with or prior to the written
confirmation of the sale involved unless the alleged omission or
alleged untrue statement was not corrected in the Prospectus at the
time of such written confirmation. The indemnity agreement of the
Offerors contained in this Section 9 and the representations and
warranties of the Offerors contained in Section 3 hereof shall remain
operative and in full force and effect regardless of any termination
of this Agreement or of any investigation made by or on behalf of any
Underwriter or any such controlling person, and shall survive the
delivery of the TOPrS.
(b) Each Underwriter shall indemnify, defend and hold harmless
each of the Offerors, its officers and directors, and each person who
controls any such Offeror within the meaning of Section 15 of the
Securities Act, from and against any and all losses, claims, damages
or liabilities, joint or several, to which they or any of them may
become subject under the Securities Act or any other statute or common
law and shall reimburse each of them for any legal or other expenses
(including, to the extent hereinafter provided, reasonable counsel
fees) incurred by them in connection with investigating any such
losses, claims, damages or liabilities or in connection with defending
any actions, insofar as such losses, claims, damages, liabilities,
expenses 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 or the Prospectus, or the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, if such statement or omission was made in reliance upon
and in conformity with information furnished in writing to the
Offerors by or on behalf of such Underwriter, through the
Representatives or Counsel for the Underwriters, for use in connection
with the preparation of the Registration Statement or the Prospectus
or any amendment or supplement to either thereof. Each Underwriter
hereby furnishes to the Offerors in writing expressly for use in the
Prospectus [(i) the statements on the cover page of the Prospectus
relating to delivery of the TOPrS, (ii) the statements in the
Prospectus relating to market making for the TOPrS, and (iii) the list
of underwriters and the number of TOPrS to be purchased by each of
them, statements relating to the offering of the TOPrS, statements
relating to market making for the TOPrS, and statements relating to
stabilization and over allotment by the Underwriters in the
"Underwriting" section of the Prospectus.] The indemnity agreement of
the respective Underwriters contained in this Section 9 shall remain
operative and in full force and effect regardless of any termination
of this Agreement or of any investigation made by or on behalf of any
Offeror, its directors, officers, partners or trustees, any such
Underwriter, or any such controlling person, and shall survive the
delivery of the TOPrS.
(c) The Company, TXU Eastern Funding, the Partnership, the Trust
and the several Underwriters each shall, upon the receipt of notice of
the commencement of any action against it or any person controlling it
as aforesaid, in respect of which indemnity may be sought on account
of any indemnity agreement contained herein, promptly give written
notice of the commencement thereof to the party or parties against
whom indemnity shall be sought hereunder, but the failure so to notify
such indemnifying party or parties of any such action shall not
relieve such indemnifying party or parties from any liability
hereunder to the extent it is not materially prejudiced as a result of
such failure to notify and in any event shall not relieve it from any
liability that it or they may have to the indemnified party otherwise
than on account of such indemnity agreement. In case such notice of
any such action shall be so given, such indemnifying party shall be
entitled to participate at its own expense in the defense, or, if it
so elects, to assume (in conjunction with any other indemnifying
parties) the defense of such action, in which event such defense shall
be conducted by counsel chosen by such indemnifying party or parties
and satisfactory to the indemnified party or parties who shall be
defendant or defendants in such action, and such defendant or
defendants shall bear the fees and expenses of any additional counsel
retained by them; but if the indemnifying party shall elect not to
assume the defense of such action, such indemnifying party will
reimburse such indemnified party or parties for the reasonable fees
and expenses of any counsel retained by them; provided, however, if
the defendants in any such action (including impleaded parties)
include both the indemnified party and the indemnifying party and
counsel for the indemnified party shall have reasonably concluded that
there may be a conflict of interest involved in the representation by
a single counsel of both the indemnifying party and the indemnified
party, the indemnified party or parties shall have the right to select
separate counsel, satisfactory to the indemnifying party, whose fees
and expenses shall be paid by such indemnifying party (it being
understood, however, that the indemnifying party shall not be liable
for the fees and expenses of more than one separate counsel (in
addition to local counsel) representing the indemnified parties who
are parties to such action). Each of the Offerors and the Underwriters
agrees that without the other parties' prior written consent, which
consent shall not be unreasonably withheld, it will not settle,
compromise or consent to the entry of any judgment in any claim in
respect of which indemnification may be sought under the
indemnification provision of this Agreement, unless such settlement,
compromise or consent (i) includes an unconditional release of such
other party from all liability arising out of such claim and (ii) does
not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of such other party.
(d) If the indemnification provided for in subparagraph (a) or
(b) above shall be unenforceable under applicable law by an
indemnified party, each indemnifying party agrees to contribute to
such indemnified party with respect to any and all losses, claims,
damages, liabilities and expenses for which each such indemnification
provided for in subparagraph (a) or (b) above shall be unenforceable,
in such proportion as shall be appropriate to reflect (i) the relative
fault of each indemnifying party on the one hand and the indemnified
party on the other in connection with the statements or omissions that
have resulted in such losses, claims, damages, liabilities and
expenses, (ii) the relative benefits received by the Offerors on the
one hand and the Underwriters on the other hand from the offering of
the TOPrS pursuant to this Agreement, and (iii) any other relevant
equitable considerations; provided, however, that no indemnified party
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any indemnifying party not guilty of such fraudulent
misrepresentation. Relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a
material fact relates to information supplied by such indemnifying
party or the indemnified party and each such party's relative intent,
knowledge, access to information and opportunity to correct or prevent
such untrue statement or omission. The Offerors and each of the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this subparagraph (d) were to be determined
by pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation that
does not take account of the equitable considerations referred to
above. Notwithstanding the provisions of this Section 9, no
Underwriter shall be required to contribute in excess of the amount
equal to the excess of (i) the total price at which the TOPrS
underwritten by it were offered to the public, over (ii) the amount of
any damages which such Underwriter has otherwise been required to pay
by reason of any such untrue or alleged untrue statement or omission
or alleged omission. The obligations of each Underwriter to contribute
pursuant to this Section 9 are several and not joint and shall be in
proportion to the principal amount of TOPrS set forth opposite its
name in Schedule II hereto.
10. Termination. This Agreement may be terminated, at any time prior
to the Closing Date, by the Representatives if (a) after the date hereof and at
or prior to the Closing Date there shall have occurred any general suspension of
trading in securities on The New York Stock Exchange, Inc. ("NYSE"), the
American Stock Exchange, Inc. ("AMEX"), the NASDAQ Stock Market, Inc. ("NASDAQ")
or the London Stock Exchange ("LSE")or there shall have been established by the
NYSE, AMEX, NASDAQ or LSE or by the Commission or by any government or
governmental agency in the United States or the United Kingdom or by the
decision of any court, any general limitation on prices for such trading or any
general restrictions on the distribution of securities, or a general banking
moratorium declared by New York, United States or United Kingdom authorities, or
(b) there shall have occurred any (i) new material outbreak of hostilities or
(ii) new material other national or international calamity or crisis, including,
but not limited to, an escalation of hostilities that existed prior to the date
of this Agreement or (iii) material adverse change in the financial markets in
the United States or the United Kingdom, and the effect of any such event
specified in clause (a) or (b) above on the financial markets of the United
States or the United Kingdom shall be such as to make it impracticable, in the
reasonable judgment of the Representatives, for the Underwriters to enforce
contracts for the sale of the TOPrS. This Agreement may also be terminated at
any time prior to the Closing Date by the Representatives if, in their
reasonable judgment, the subject matter of any amendment or supplement to the
Registration Statement or the Prospectus (other than an amendment or supplement
relating solely to the activity of any Underwriter or Underwriters) prepared and
issued by any Offeror after the effectiveness of this Agreement shall have
disclosed a material adverse change in the business, property or financial
condition of the Trust, the Partnership, TXU Eastern Funding or the Company and
its subsidiaries, considered as a whole, whether or not in the ordinary course
of business, that has materially impaired the marketability of the TOPrS. Any
termination hereof pursuant to this Section 10 shall be without liability of any
party to any other party except as otherwise provided in Sections 6(g) and 9
hereof.
11. Miscellaneous. THE VALIDITY AND INTERPRETATION OF THIS AGREEMENT
SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. This Agreement shall
inure to the benefit of the Offerors, the several Underwriters and, with respect
to the provisions of Section 9 hereof, each director, officer and controlling
person referred to in said Section 9, and their respective successors. Nothing
herein is intended or shall be construed to give to any other person, firm or
corporation any legal or equitable right, remedy or claim under or in respect of
any provision in this Agreement. The term "successor" as used herein shall not
include any purchaser, as such purchaser, of any of the TOPrS from any of the
several Underwriters.
12. Consent to Jurisdiction; Appointment of Agent to Accept Service of
Process. Each of the Offerors irrevocably submits to the non-exclusive
jurisdiction of any federal or state court in the City, County and State of New
York, United States of America, in any legal suit, action or proceeding based on
or arising under this agreement and agrees that all claims in respect of such
suit or proceeding may be determined in any such court. Each of the Offerors
irrevocably waives the defense of an inconvenient forum or objections to
personal jurisdiction with respect to the maintenance of such legal suit, action
or proceeding. To the extent permitted by law, each of the Offerors hereby
waives any objection to the enforcement by any competent court in the United
Kingdom of, and to the relitigation before any competent court in the United
Kingdom in connection with, any judgment validly obtained in any such court in
New York on the basis of any such legal suit, action or proceeding. Each of the
Offerors have appointed Thelen Reid & Priest LLP (the "Process Agent") as its
authorized agent upon whom process may be served in any such legal suit, action
or proceeding. Such appointment shall be irrevocable. The Process Agent has
agreed to act as said agent for service of process and each of the Offerors
agrees to take any and all action including the filing of any and all documents
and instruments, that may be necessary to continue such appointment in full
force and effect as aforesaid. Each of the Offerors further agrees that service
of process upon the Process Agent and written notice of said service to each of
the Offerors shall be deemed in every respect effective service of process upon
each of the Offerors in any such legal suit, action or proceeding. Nothing
herein shall affect the right of any Underwriter or any person controlling any
Underwriter to serve process in any other manner permitted by law. The
provisions of this Section 12 shall remain operative and in full force and
effect regardless of any termination of this Agreement, in whole or in part.
13. Waiver of Immunities. To the extent that the Offerors or any of
their respective properties, assets or revenues may have or may hereafter become
entitled to, or have attributed to it, any right of immunity, on the grounds of
sovereignty or otherwise, from any legal action, suit or proceeding, from the
giving of any relief in any thereof, from set-off or counterclaim, from the
jurisdiction of any court, from service or process, from attachment upon or
prior to judgment, from attachment in aid of execution of judgment, or from
execution of judgment, or other legal process or proceeding for the giving of
any relief or for the enforcement of any judgment, in any jurisdiction in which
proceedings may at any time be commenced, with respect to its obligations,
liabilities or any other matter under or arising out of or in connection with
the Offered Securities, Trust Agreement, the Partnership Agreement, any
Indenture or this Agreement, each of the Offerors hereby irrevocably and
unconditionally waives and agrees not to plead or claim, any such immunity and
consents to such relief and enforcement. Nothing in this Section 13 shall be
deemed to waive any defense (other than any such immunity) available to any
Offeror. The provisions of this Section 13 shall remain operative and in full
force and effect regardless of any termination of this Agreement, in whole or in
part.
14. Foreign Taxes. (a) All payments by the any Offeror to the
Underwriters hereunder shall be made free and clear of, and without withholding
or deduction for or on account of, any present or future income, stamp, or other
taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now
or hereafter imposed, levied, collected, withheld or assessed by any
jurisdiction in which the Company is managed or has a place of business or in
which any Offeror has a branch or office from which payment is made or deemed to
be made (each, a "Taxing Jurisdiction"), unless such withholding or deduction is
required by law. In the event of any such withholding or deduction ("Foreign
Taxes"), the Offerors shall pay to the Underwriters such additional amount as
shall be necessary in order that the amount received by such Underwriters after
withholding or deduction shall equal the amount that would otherwise have been
due to such Underwriter in the absence of such withholding or deduction, except
that no such amounts shall be payable under this Section 14 for:
(i) any such tax imposed by reason of any Underwriter 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, such Taxing
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 or by the State of New
York or any political subdivision of the United States or of the
State of New York.
(b) In the event any Underwriter obtains any actual payment of refund,
credit, allowance, remission or other deduction of, against or from income or
taxable income otherwise determined or taxes otherwise payable to which it may
be entitled from the relevant Taxing Jurisdiction in respect of any Foreign
Taxes paid on the Underwriter's behalf by the Company or for which the
Underwriter has received reimbursement from the Company, the Underwriter shall,
to the extent it can do so without prejudice to the retention of the amount so
realized (after taking into account any net additional taxes paid in connection
with the realization thereof), notify the Company and pay to the Offerors (to
the extent that the same shall not already have been taken into account in
computing any amount previously paid by the Offerors or the amount of any
reimbursement previously received by the Underwriter) promptly after the
realization thereof an amount which is equal to the net amount thereof (or, in
the event of a deduction from taxable income, the tax benefit generated thereby,
if less than such deduction) plus any additional tax savings resulting from the
payment pursuant to this sentence, provided that the aggregate of all such
payments shall not exceed the aggregate of all amounts paid by the Offerors in
respect of such Foreign Taxes.
The provisions of this Section 14 shall remain operative and in full
force and effect regardless of any termination of this Agreement, in whole or in
part.
15. Obligation Currency. The obligation of the parties to make
payments hereunder is in U.S. dollars (the "Obligation Currency") and such
obligation shall not be discharged or satisfied by any tender or recovery
pursuant to any judgment expressed in any currency other than the Obligation
Currency or any other realization in such other currency, whether as proceeds of
set-off, security, guarantee, distributions, or otherwise, except to the extent
to which such tender, recovery or realization shall result in the receipt by the
party which is to receive such payment of the full amount of the Obligation
Currency expressed to be payable hereunder. The party liable to make such
payment agrees to indemnify the party which is to receive such payment for the
amount (if any) by which such receipt shall fall short of the full amount of the
Obligation Currency expressed to be payable hereunder and the party which is to
receive such payment agrees to pay to the party liable to make such payment the
amount (if any) by which such receipt shall exceed the full amount of the
Obligation Currency, and, in each case, such obligation shall not be affected by
judgment being obtained for any other sums due under this Agreement. The parties
agree that the rate of exchange which shall be used to determine if such tender,
recovery or realization shall result in the receipt by the party which is to
receive such payment of the full amount of the Obligation Currency expressed to
be payable hereunder shall be the noon buying rate in New York City for cable
transfers in foreign currencies as certified for customs purposes by the Federal
Reserve Bank of New York for the business day preceding that on which the
judgment becomes a final judgment.
13. Notices. All communications hereunder shall be in writing, and, if
to the Underwriters, shall be mailed or delivered to you at the address set
forth above, or, if to any of the Offerors, shall be mailed or delivered to it,
to each of the following addresses: c/o TXU Europe Limited, Crown House, 51
Aldwych, London WC2B4AX, Attention: Treasurer; and c/o TXU Corp, Energy Plaza,
1601 Bryan Street, Dallas, Texas 75201, Attention: Treasurer.
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please indicate your acceptance thereof in the space provided below
for that purpose, whereupon this letter and your acceptance shall constitute a
binding agreement between the Company and the several Underwriters in accordance
with its terms.
Very truly yours,
TXU EUROPE LIMITED
By
-------------------------------
(Authorized Representative)
TXU EUROPE CAPITAL I
By
-------------------------------
(Authorized Representative)
TXU EUROPE FUNDING I, L.P.
By
-------------------------------
(Authorized Representative)
Accepted and delivered as of
the date first above written
- - - - ---------------------
- - - - ---------------------
- - - - ---------------------
By:
------------------
By:
---------------
<PAGE>
SCHEDULE I
----------
Underwriting Agreement dated: _________________
Representatives:
Designation: ___% Trust Originated Preferred Securities
Liquidation Preference Amount: $___
Date of Maturity:
Distribution Rate: ___%
Purchase Price: $___ per TOPrS
Underwriting Commissions (payable by the Company): $_____ per TOPrS
Public Offering Price: $___ per TOPrS
<PAGE>
SCHEDULE II
-----------
TXU Europe Capital I
___% Trust Originated Preferred Securities
Number of
Name TOPrS
- - - - ---- -----
---------
Total
<PAGE>
SCHEDULE III
------------
[LETTERHEAD OF E.J. LEAN]
[Date]
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as Representatives of the Underwriters
named in Schedule II to the Underwriting
Agreement, as herein defined
c/o
--------------
- - - - -----------------
- - - - -----------------
Ladies and Gentlemen
TXU Europe Capital I, a statutory business trust ("Trust) formed under the
Delaware Business Trust Act
$__________ aggregate liquidation preference amount of ___% Trust Orignated
Preferred Securities ("TOPrS") guaranteed by TXU Europe Limited ("Guarantor")
- - - - --------------------------------------------------------------------------------
1. I am General Counsel to the Guarantor and TXU Eastern Funding Company, a
private unlimited company incorporated under the laws of England and Wales
("TXU Eastern Funding") and have acted as such in connection with (i) the
issuance of the TOPrS by the Trust, (ii) the issuance by TXU Europe Funding
I, L.P., a limited partnership formed under the Delaware Revised Uniform
Limited Partnership Act (the "Partnership") of its ___% Partnership
Preferred Securities (the "Partnership Preferred Securities") having an
aggregate liquidation preference amount of $__________, (iii) the issuance
by TXU Eastern Funding of an aggregate of $__________ principal amount of
Junior Subordinated Debentures, Series ___ (the "TXU Eastern Funding
Debentures") pursuant to an indenture, dated as of _______, among the
Guarantor, TXU Eastern Funding and The Bank of New York, as trustee (the
"TXU Eastern Funding Indenture"), (iv) the issuance by __________ of an
aggregate of $_________ principal amount of Junior Subordinated Debentures,
Series __ (the "______ Debentures" and together with the TXU Eastern
Funding Debentures, the "Debentures") pursuant to an indenture, dated as of
_______, among the Guarantor, _________ and The Bank of New York, as
trustee (the "________ Indenture" and, together with the TXU Eastern
Funding Indenture, the "Indentures"), (v) the guarantee by the Guarantor of
the TOPrS pursuant to a Guarantee Agreement, dated as of ________, between
the Guarantor and The Bank of New York, as trustee (the "Trust Guarantee"),
(vi) the guarantee by the Guarantor of the Preferred Partnership Securities
pursuant to a Guarantee Agreement dated as of ______ between The Bank of
New York, as trustee, and the Guarantor (the "Partnership Guarantee"),
(vii) the guarantee by the Guarantor of the TXU Eastern Funding Debentures
pursuant to the guarantee forming a part of the TXU Eastern Funding
Indenture (the "TXU Eastern Funding Debenture Guarantee"), and (viii) the
guarantee by the Guarantor of the _______ Debentures pursuant to the
guarantee forming a part of the ________ Indenture (the "______ Debenture
Guarantee" and, together with the TXU Eastern Funding Debenture Guarantee,
the "Debenture Guarantees").
2. Terms not otherwise defined herein are used with the meanings ascribed to
them in the Underwriting Agreement dated ___________ among the Guarantor,
TXU Eastern Funding, the Trust, the Partnership and you (the "Underwriting
Agreement")
3. In such capacity I have examined copies of the documents referred to and,
where appropriate, defined in this Opinion. I express no opinion as to any
laws other than to the laws of England in force at the date of this
Opinion.
4. The Indentures, the Debentures, the Trust Agreement, the Partnership
Agreement, the Trust Guarantee, the Partnership Guarantee and the
Underwriting Agreement are together referred to in this Opinion as the
"Transaction Documents".
5. In giving this Opinion I have assumed:
(a) That the signatures on the originals of all documents submitted to me
are genuine;
(b) Other than with regard to the Guarantor and TXU Eastern Funding, the
due capacity and authority of each of the parties to the relevant
documents and the due execution and delivery of such documents by
those parties;
(c) That the obligations assumed by those parties other than the Guarantor
and TXU Eastern Funding under such documents are valid and binding
obligations of each of those parties;
(d) That each of the documents which is the subject of this Opinion is
valid and binding on each party under the law to which it is expressed
to be subject where that is not English law, and that words and
phrases used in those documents have the same meaning and effect as
they would if those documents were governed by English law; and
(e) That all representations and statements as to factual matters
expressed in the Underwriting Agreement are true and accurate.
6. Upon the basis of my familiarity with these transactions and with the
affairs and properties of the Guarantor, TXU Eastern Funding and each of
[________________], being the material subsidiaries of the Guarantor (the
"Material UK Subsidiaries"), subject to the qualifications set out below, I
am of the opinion that:
(a) The Guarantor is a company duly incorporated and validly existing
under the laws of England and Wales, and has the corporate power and
authority to (a) to own, lease and operate its properties and to
conduct its business as currently conducted and as set forth or
contemplated by the Prospectus; (b) execute, deliver and perform its
obligations under those Transaction Documents to which it is a party;
and (c) issue and deliver the Trust Guarantee, the Partnership
Guarantee and the Debenture Guarantees and incur the obligations
evidenced thereby.
(b) TXU Eastern Funding is a company duly incorporated and validly
existing under the laws of England and Wales, and has the corporate
power and authority to (a) own, lease and operate its properties and
to conduct its business as currently conducted and as set forth or
contemplated by the Prospectus; (b) execute, deliver and perform its
obligations under those Transaction Documents to which it is a party;
and (c) issue the TXU Eastern Funding Debentures and incur the
obligations evidenced thereby.
(c) Each Material UK Subsidiary of the Guarantor has been duly
incorporated and is validly existing under the laws of England and
Wales, has the corporate power and authority to own, lease and operate
its properties and to conduct its business as currently conducted and
as set forth in or contemplated by the Prospectus, is duly qualified
to transact business in England and Wales and is qualified as a
foreign corporation to transact business and so far as I am aware is
in good standing in each jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or
the conduct of business, except where the failure to so qualify or be
in good standing would not have a material adverse effect on the
business, property or financial condition of the Guarantor and its
subsidiaries, considered as a whole.
(d) Each Transaction Documents to which Guarantor or TXU Eastern Funding
is a party has been duly authorized, executed and delivered by the
Guarantor or TXU Eastern Funding, as the case may be.
(e) The execution and delivery by the Guarantor of, and the performance by
the Guarantor of its obligations under, and compliance with the
provisions of, the Transaction Documents to which Guarantor is a party
will not (i) contravene any existing applicable law in England or (ii)
contravene or conflict with any provision of the memorandum or
articles of association of the Guarantor or, any agreement or other
instrument of which I am aware binding upon the Guarantor or which
would affect the due authorization, execution, validity, binding
effect or enforceability of the Transaction Documents to which
Guarantor is a party, or (iii) contravene or conflict with any
judgment, order or decree of any English governmental body, agency or
court having jurisdiction over the Guarantor; and no consent,
approval, authorization or order of, or qualification with, any
governmental or public bodies in the United Kingdom is required for
the performance by the Guarantor of its obligations under the
Transaction Documents to which it is a party.
(f) The execution and delivery by TXU Eastern Funding of, and the
performance by TXU Eastern Funding of its obligations under, the
Transaction Documents to which it is a party and the TXU Eastern
Funding Debentures will not (i) contravene any existing applicable law
in England (ii) contravene or conflict with the memorandum or articles
of association of TXU Eastern Funding or, any agreement or other
instrument of which I am aware binding upon TXU Eastern Funding or
which would affect the due authorization, execution, validity, binding
effect or enforceability of the Transaction Documents to which TXU
Eastern Funding is a party or the TXU Eastern Funding Debentures, or
(iii) contravene or conflict with any judgment, order or decree of any
English governmental body, agency or court having jurisdiction over
TXU Eastern Funding; and no consent, approval, authorization or order
of, or qualification with, any governmental or public bodies in the
United Kingdom is required for the performance by TXU Eastern Funding
of its obligations under the Transaction Documents to which it is a
party or the TXU Eastern Funding Debentures.
(g) I am not aware of any legal or governmental proceedings pending or
threatened to which the Guarantor, TXU Eastern Funding or any of the
Material UK Subsidiaries is party or to which any of the properties of
the Guarantor, TXU Eastern Funding or any of the Material UK
Subsidiaries is subject, other than proceedings described or referred
to in the Prospectus and proceedings that in my belief would not, if
determined adversely, have a material adverse effect on the Guarantor,
TXU Eastern Funding or the Material UK Subsidiaries, taken as whole,
as the case may be.
(h) Under current practice, an English court of competent jurisdiction
would give effect to the choice of the internal laws of the State of
New York [ or the State of Delaware, as the case may be,] as the
proper law of the Transaction Documents if its application in the
circumstances of the case would not (i) be contrary to public policy
and I know of no reason as to why the same should be contrary to
public policy, or (ii) conflict with any rule of English law which is
of mandatory application and I know of no contractual provision which
the English courts might decline to enforce on this basis. Under
English law and subject to the above qualification each of the
Guarantor and TXU Eastern Funding has, pursuant to Section 12 of the
Purchase Agreement [and pursuant to the TXU Eastern Funding
Indenture], validly and severally submitted to the in personam
jurisdiction of the state and federal courts located in the City,
County and State of New York in any action, suit or proceeding arising
out of or relating to [the Transaction Documents].
(i) Neither the Guarantor nor TXU Eastern Funding enjoys any immunity from
suit in the English courts, and no assets of the Guarantor or TXU
Eastern Funding are exempt from execution. The Guarantor, TXU Eastern
Funding, and their respective obligations under the Transaction
Documents are subject to civil and commercial law and to suit and, to
the extent that the Guarantor or TXU Eastern Funding or any of their
respective properties, assets or revenues may have or may hereafter
become entitled to any immunity from suit or from execution, the
Guarantor and TXU Eastern Funding have given an enforceable waiver of
such right (but not of any defenses or other reliefs available to
them) pursuant to Section 13 of the Underwriting Agreement.
7. The opinions expressed in paragraph 6. are subject to the following
qualifications:
(a) It should be understood that I have not been responsible for
investigating or verifying the accuracy of the facts, including
statements of foreign law, or the reasonableness of any statements of
opinion contained in the Prospectus, or that no material facts have
been omitted from it;
(b) The effectiveness of provisions excluding a party from a liability or
duty otherwise owed are limited by law;
(c) The provisions of the Transaction Documents which provide that certain
certifications or determinations will be conclusive and binding will
not necessarily prevent judicial enquiry into the merits of any claim
by an aggrieved party;
(d) Section 117 of the Stamp Act 1891 may render the provisions of the
Transaction Documents (relating to payment of stamp duty)
unenforceable against the Guarantor and/or TXU Eastern Funding in
respect of United Kingdom stamp duties;
(e) An English court may refuse to give effect to provisions in respect of
the costs of enforcement (actual or contemplated) or of unsuccessful
litigation brought before an English court or where the court has
itself made an order for costs;
(f) Where obligations are to be performed in a jurisdiction outside
England, such obligations may not be enforceable in England to the
extent that performance would be illegal or contrary to public policy
under the laws of that jurisdiction.
8. In the course of the preparation of the information relating to the
Guarantor and TXU Eastern Funding contained in the Prospectus, I have
participated in discussions with certain of their directors and
representatives, with other counsel for the Guarantor and TXU Eastern
Funding, with Deloitte & Touche, the Guarantor's independent accountants,
with PricewaterhouseCoopers, the independent accountants who audited
certain of the financial statements contained in the Prospectus, and with
certain of your officers and employees and your counsel, but I have not
independently verified and I assume no responsibility for the accuracy or
completeness of the representations and statements made to me by the
Guarantor or TXU Eastern Funding or the information included with respect
to the Guarantor and TXU Eastern Funding in the Prospectus. However, no
facts have come to my attention which gives me reason to believe that the
Prospectus (except as to the financial statements and schedules and other
financial and statistical data contained therein, as to which I do not
express any belief), as of its date or on the date hereof, included or
includes an untrue statement of a material fact or omitted or omits 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.
This Opinion is given solely for your benefit in connection with the issue of
the TXU Eastern Funding Debentures, the Trust Guarantee, the Partnership
Guarantee and the Debenture Guarantees and may not be relied upon by any other
person nor quoted or referred to in any public document nor filed with any
governmental agency without my consent.
Yours faithfully
<PAGE>
SCHEDULE IV
[OPINION OF NORTON ROSE]
<PAGE>
SCHEDULE V
[LETTERHEAD OF RICHARDS, LAYTON & FINGER, P.A.]
[Date]
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- - - - --------------
- - - - --------------
as Representatives of the Underwriters
named in Schedule II to the Underwriting
Agreement, as herein defined
c/o
--------------
- - - - -----------------
- - - - -----------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for TXU Europe Limited, a
private limited company incorporated in England and Wales (the "Company"), TXU
Europe Funding I, L.P., a limited partnership formed under the Delaware Revised
Uniform Limited Partnership Act (the "Partnership") and TXU Europe Capital I, a
statutory business trust formed under the Delaware Business Trust Act (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 as of ____________
(the "Trust Certificate"), as filed in the office of the Secretary of State of
the State of Delaware (the "Secretary of State") on _____________;
(b) The Trust Agreement of the Trust, dated as of _____________, by
and among TXU Business Services Company, as depositor ("TXU Services"), and the
trustees of the Trust named therein;
(c) The Amended and Restated Trust Agreement of the Trust (including
Exhibits _____ thereto), dated as of _____________ (the "Trust Agreement"), by
and among TXU Services, the trustees of the Trust named therein (the
"Trustees"), and the holders, from time to time, of undivided beneficial
interests in the assets of the Trust;
(d) The Certificate of Limited Partnership of the Partnership, dated
as of ____________ (the "Partnership Certificate"), as filed in the office of
the Secretary of State on _____________;
(e) The Limited Partnership Agreement of the Partnership, dated as of
_____________, by and among the Company, as general partner of the partnership
(the "General Partner") and the Trust, as initial limited partner of the
Partnership (the "Initial Limited Partner");
(f) The [Action by the General Partner], dated as of ______ (the
["Action"]) creating the ___% Partnership Preferred Securities of the
Partnership (the "Partnership Preferred Securities");
(g) The Amended and Restated Agreement of Limited Partnership, dated
as of _________, among the General Partner, the Initial Limited Partner, and
such other persons who become limited partners thereto (the Amended and Restated
Agreement of Limited Partnership as amended and supplemented by the Action being
hereinafter referred to as the "Partnership Agreement")
(h) The Prospectus dated ___________ (the "Prospectus"), relating to
the preferred securities of the Trust representing preferred undivided
beneficial interests in the assets of the Trust (each, a "Preferred Trust
Security" and collectively, the "TOPrS");
(i) The Underwriting Agreement, dated _________ (the "Underwriting
Agreement"), among the Company, the Partnership, the Trust, TXU Eastern Funding
Company, a private unlimited company incorporated under the laws of England and
Wales ("TXU Eastern Funding") and the Underwriters named in Schedule II thereto;
(j) A Certificate of Good Standing for the Trust, dated ____________,
obtained from the Secretary of State; and
(k) A Certificate of Good Standing for the Partnership, dated
_____________, 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 (k) above, which we believe
are all the documents necessary or appropriate for us to have considered for the
purposes of rendering the opinions stated herein. In particular, we have not
reviewed any document (other than the documents listed in paragraphs (a) through
(k) 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 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
Trust Certificate are in full force and effect and have not been amended, (ii)
that the Partnership 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 Partnership, and that
the Partnership Agreement and the Partnership Certificate are in full force and
effect and have not been amended,(iii) except to the extent provided in
paragraphs 1 and 10 below, the due creation, due formation or due organization,
as the case may be, and the valid existence in good standing of each party to
the documents examined by us under the laws of the jurisdiction governing its
creation, formation or organization, (iv) the legal capacity of natural persons
who are parties to the documents examined by us, (v) except to the extent set
forth in paragraphs 2 and 11 below, 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, (vi) except to the extent
provided in paragraphs 3, 4, 6, 7, 10, 13 and 15 below, that each of the parties
to the documents examined by us has duly authorized, executed and delivered such
documents, (vii) the receipt by each Person to whom a Preferred Trust Security
is to be issued by the Trust (the "Preferred Trust Security Holders") of a
certificate for the Preferred Trust Security and the payment for the Preferred
Trust Security acquired by it, in accordance with the Trust Agreement, and as
described in the Prospectus, (viii) that the TOPrS are issued and sold to the
Preferred Trust Security Holders in accordance with the Trust Agreement, and as
described in the Prospectus, (ix) that the Trust derives no income from or
connected with sources within the State of Delaware and has no assets,
activities (other than having a Delaware trustee as required by the Delaware
Business Trust Act and filing documents with the Secretary of State) or
employees in the State of Delaware,(xii) that the Trust is treated as a grantor
trust for federal income tax purposes, (xiii) the receipt by the Trust in
connection with its purchase of Partnership Preferred Securities of a
certificate representing each Partnership Preferred Security and the payment for
the Partnership Preferred Securities acquired by it, in accordance with the
Partnership Agreement, and as described in the Prospectus, (xiv) the payment by
the General Partner of the full consideration due from it for the general
partner interest in the Partnership acquired by it, (xv) that the books and
records of the Partnership set forth all information required by the Partnership
Agreement and the Delaware Revised Uniform Limited Partnership Act (the "Limited
Partnership Act")" including all information with respect to al Persons to be
admitted as partners of the Partnership and their contributions to the
Partnership, (xvi) that the Partnership Preferred Securities are issued and sold
to the Trust in accordance with the Partnership Agreement, and as descried in
the Prospectus, (xvii) that the Partnership derives no income from or connected
with sources within the State of Delaware and has no assets, activities (other
than the maintenance of a registered office and registered agent in the State of
Delaware and the filing of documents with the Secretary of State) or employees
in the State of Delaware, and (xviii) that the Partnership is treated as a
partnership for United States federal income tax purposes. We have not
participated in the preparation of the Prospectus 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.
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, 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 Delaware Business Trust Act and the Trust Agreement, the
Trust has the trust power and authority to (i) own, lease and operate its
property and conduct its business as currently conducted and as set forth or
contemplated in the Prospectus, (ii) execute and deliver, and perform its
obligations under, the Underwriting Agreement, and (iii) issue, and perform its
obligations under, the TOPrS and purchase the Partnership Preferred Securities,
as described in the Prospectus.
3. The Trust Agreement is a legal, valid and binding obligation of
the Trustees, and is enforceable against the Trustees, in accordance with its
terms.
4. Under the Delaware Business Trust Act and the Trust Agreement, the
Underwriting Agreement has been duly authorized, 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 solely in connection with the issuance and sale of the TOPrS.
6. The TOPrS have been duly authorized by the Trust Agreement and,
when issued and sold in accordance with the Trust Agreement, the TOPrS will be,
subject to the qualifications set forth in paragraph 7 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
7. The Preferred 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 Preferred 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 TOPrS certificates
and the issuance of replacement TOPrS 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.
8. Under the Delaware Business Trust Act and the Trust Agreement, the
issuance of the TOPrS is not subject to preemptive rights or other similar
rights.
9. The Partnership has been duly formed and is validly existing in
good standing as a limited partnership under the Delaware Partnership Act; and
all filings required under the laws of the State of Delaware with respect to the
formation and valid existence of the Partnership as a limited partnership have
been made.
10. The Partnership Agreement has been duly authorized, executed and
delivered by the General Partner and is a valid and binding obligation of the
General Partner, enforceable against the General Partner in accordance with its
terms.
11. Under the Partnership Agreement and the Limited Partnership Act,
the Partnership has the partnership power and authority (i) to own, lease and
operate its property and to conduct its business as currently conducted and as
set forth or contemplated in the Prospectus, (ii) to execute and deliver and
perform its obligations under the Underwriting Agreement, and (iii) to issue and
perform its obligations under the Partnership Preferred Securities and to lend
the proceeds thereof to certain subsidiaries of the Company, as described in the
Prospectus.
12. The Preferred Partnership Securities have been duly authorized by
the Partnership Agreement and, when issued and sold in accordance with the
Partnership Agreement, will be, subject to the qualifications set forth in
paragraph 13 below, fully paid and nonassessable limited partner interests in
the Partnership.
13. Assuming that holders of Partnership Preferred Securities, in
their capacities as such, do not participate in the control of the business of
the Company, the holders of Partnership Preferred Securities, in their
capacities as such, will have no liability in excess of their obligations to
make payments provided for in the Partnership Agreement and their share of the
Partnership's assets and undistributed profits (subject to the obligation of a
holder of Partnership Preferred Securities to repay any funds wrongfully
distributed to it). There are no provisions in the Partnership Agreement the
inclusion of which, subject to the terms and conditions therein, or, assuming
that the Trust, as a limited partner of the partnership, takes no action other
than actions permitted by the partnership Agreement, the exercise of which, in
accordance with the terms and conditions therein, would cause the Trust, as a
limited partner of the partnership, to be deemed to be participating in the
control of the business of the Partnership.
14. Under the Limited Partnership Act and the Partnership Agreement,
the issuance of the Partnership Preferred Securities is not subject to
preemptive rights.
15. Under the Partnership Agreement and the Limited Partnership Act,
the Underwriting Agreement has been duly authorized, executed and delivered by
the Partnership.
16. The execution, delivery and performance by the Trust of the
Underwriting Agreement, the consummation by the Trust of the transactions
contemplated thereby and the fulfillment by the Trust of the terms do not
violate (i) any of the provisions of the Trust Certificate or the Trust
Agreement, or (ii) any applicable Delaware law or Delaware administrative
regulation.
17. The Preferred Trust Security Holders (other than those Preferred
Trust Security Holders who reside or are domiciled in the State of Delaware)
will have no liability for income taxes imposed by the State of Delaware solely
as a result of their participation in the Trust, and the Trust will not be
liable for any income tax imposed by the State of Delaware.
18. The execution, delivery and performance by the Partnership of the
Underwriting Agreement, the consummation by the Partnership of the transactions
contemplated thereby and the fulfillment by the Partnership of the terms thereof
do not violate (i) any of the provisions of the Partnership Certificate or the
Partnership Agreement, or (ii) any applicable Delaware law or Delaware
administrative regulation.
19. The Partnership Preferred Security Holders (other than the
Partnership Preferred Security Holders who reside or are domiciled in the State
of Delaware) will have no liability for income taxes imposed by the State of
Delaware solely as a result of their participation in the Partnership, and the
Partnership will not be liable for any income tax imposed by the State of
Delaware.
The opinion expressed in paragraphs 3 and 10 above are subject, as to
enforcement, to the effect upon the Trust Agreement or the Partnership
Agreement, as the case may be, of (i) bankruptcy, insolvency, moratorium,
fraudulent conveyance, receivership, reorganization, liquidation, fraudulent
conveyance or 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 or contribution.
We consent to your relying as to matters of Delaware law upon this
opinion in connection with the Underwriting Agreement. We also consent to
Winthrop, Stimson, Putnam & Roberts', Worsham, Forsyth & Wooldridge, L.L.P.'s,
and Thelen Reid & Priest LLP's relying as to matters of Delaware law upon this
opinion in connection with opinions to be rendered by them on the date hereof
pursuant to the Underwriting Agreement. Further, we consent to the reliance by
The Bank of New York and The Bank of New York (Delaware) as to matters of
Delaware law upon this opinion in connection with the matters set forth herein.
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,
<PAGE>
SCHEDULE VI
-----------
[LETTERHEAD OF WORSHAM, FORSYTHE & WOOLDRIDGE, L.L.P.]
[Date]
- - - - --------------
- - - - --------------
- - - - --------------
- - - - --------------
as Representatives of the Underwriters
named in Schedule II to the Underwriting
Agreement, as herein defined
c/o
--------------
- - - - -----------------
- - - - -----------------
Ladies and Gentlemen:
We have acted as United States counsel for TXU Europe Limited, a
private limited company incorporated in England and Wales (the "Company"), TXU
Eastern Funding Company, a private unlimited company incorporated under the laws
of England and Wales ("TXU Eastern Funding"), TXU Europe Funding I, L.P., a
limited partnership (the "Partnership") formed under the Delaware Revised
Uniform Limited Partnership Act (the "Delaware Partnership Act"), and TXU Europe
Capital I, a statutory business trust (the "Trust") formed under the Delaware
Business Trust Act (the "Delaware Trust Act") in connection with the
transactions contemplated by the Underwriting Agreement dated ___________ among
the Company, TXU Eastern Funding, the Partnership, the Trust and you (the
"Underwriting Agreement"), including, among others, (i) the issuance by the
Trust of its ___% Trust Originated Preferred Securities (the "TOPrS") having an
aggregate liquidation preference amount of $___________, (ii) the issuance by
the Partnership of its ___% Partnership Preferred Securities (the "Partnership
Preferred Securities") having an aggregate liquidation preference amount of
$_________, (iii) the issuance by TXU Eastern Funding of an aggregate of
$__________ principal amount of Junior Subordinated Debentures, Series __ (the
"TXU Eastern Funding Debentures") pursuant to an indenture, dated as of
________, among the Company, TXU Eastern Funding and The Bank of New York, as
trustee (the "TXU Eastern Funding Indenture"), (iv) the issuance by __________
of an aggregate of $_________ principal amount of Junior Subordinated
Debentures, Series __ (the "______ Debentures" and together with the TXU Eastern
Funding Debentures, the "Debentures") pursuant to an indenture, dated as of
_______, among the Company, _________ and The Bank of New York, as trustee (the
"________ Indenture" and, together with the TXU Eastern Funding Indenture, the
"Indentures"), (v) the guarantee by the Company of the TOPrS pursuant to a
Guarantee Agreement, dated as of ________, between the Company and The Bank of
New York, as trustee (the "Trust Guarantee"), (vi) the guarantee by the Company
of the Preferred Partnership Securities pursuant to a Guarantee Agreement dated
as of ______ between The Bank of New York, as trustee, and the Company (the
"Partnership Guarantee"), (vi) the guarantee by the Company of the TXU Eastern
Funding Debentures pursuant to the guarantee forming a part of the TXU Eastern
Funding Indenture (the "TXU Eastern Funding Debenture Guarantee"), and (vii) the
guarantee by the Company of the _______ Debentures pursuant to the guarantee
forming a part of the ________ Indenture (the "______ Debenture Guarantee" and,
together with the TXU Eastern Funding Debenture Guarantee, the "Debenture
Guarantees").
Terms not otherwise defined herein are used with the meanings ascribed
to them in the Underwriting Agreement.
In so acting we have participated in or reviewed the corporate
proceedings in connection with the authorization, execution and delivery of the
Underwriting Agreement, the Trust Agreement, the Partnership Agreement, the
Indentures, the Debentures, the Trust Guarantee and the Partnership Guarantee.
We have also examined such other documents and satisfied ourselves as to such
other matters as we have deemed necessary as a basis for the conclusions of law
contained in the opinions expressed below. We have relied as to various
questions of fact upon the representations and warranties of the Company
contained in the Underwriting Agreement and, where we deemed appropriate, on
certificates of public officials. We have relied upon certificates of The Bank
of New York, as trustee under the Indentures as to the authentication of the
Debentures. In our examination we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as photostatic
or certified copies.
Upon the basis of our familiarity with these transactions and with the
affairs and properties of the Company generally, we are of the opinion that:
1. The Underwriting Agreement has been duly authorized, executed and
delivered by each of the Company, TXU Eastern Funding, the Partnership and the
Trust.
2. The TXU Eastern Funding Indenture, the Trust Agreement, the
Partnership Guarantee, the Trust Guarantee and the ________ Debenture Guarantee
have been duly qualified under the Trust Indenture Act.
3. The TXU Eastern Funding Debentures and the TXU Eastern Funding
Indenture have been duly authorized, executed and delivered by TXU Eastern
Funding, the TXU Eastern Funding Debentures are entitled to the benefits of the
TXU Eastern Funding Indenture, and the TXU Eastern Funding Debentures and the
TXU Eastern Funding Indentures are legal, valid and binding obligations of TXU
Eastern Funding enforceable against TXU Eastern Funding in accordance with their
terms, subject to the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, receivership, moratorium and other laws affecting the
rights and remedies of creditors generally and of general principles of equity
and the effect of applicable public policy on the enforceability of provisions
relating to contribution and indemnification.
4. The ____________ Debentures and the ____________ Indenture have
been duly authorized, executed and delivered by ____________, the ____________
Debentures are entitled to the benefits of the ____________ Indenture, and the
____________ Debentures and the ____________ Indentures are legal, valid and
binding obligations of ____________ enforceable against ____________ in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, fraudulent conveyance, receivership, moratorium and other laws
affecting the rights and remedies of creditors generally and of general
principles of equity and the effect of applicable public policy on the
enforceability of provisions relating to contribution and indemnification.
5. Each of the Trust Guarantee and the Partnership Guarantee has been
duly authorized, executed and delivered by the Company, and is enforceable
against the Company in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, fraudulent conveyance, receivership,
moratorium and other laws affecting the rights and remedies of creditors
generally and of general principles of equity and the effect of applicable
public policy on the enforceability of provisions relating to contribution and
indemnification.
6. The statements made in the Prospectus under the captions
"Description of the Preferred Trust Securities", Description of the Trust
Guarantee", "Description of the Preferred Partnership Securities", "Description
of the Partnership Guarantee", and "Description of the Funding Debentures",
insofar as such statements constitute summaries of the legal matters or
documents referred to therein, are accurate in all material respects
7. None of the Company, TXU Eastern Funding, the Partnership or the
Trust is, or after giving effect to the issuance and sale of the Offered
Securities and the application of the proceeds thereof as described in the
Prospectus will be, directly or indirectly controlled by, or acting on behalf of
any person which is, an investment company within the meaning of the Investment
Company Act of 1940, as amended.
8. The Registration Statement, and the Prospectus at the time it was
filed with the Commission pursuant to Rule 424 under the Securities Act (in each
case except for financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein and except for
that part of the Registration Statement that constitutes the Forms T-1, as to
which we do not express any belief) complied as to form in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder; and the Registration Statement has been declared
effective by the Commission and, to our best knowledge, no proceedings for a
stop order with respect thereto are pending or threatened under Section 8 of the
Securities Act.
In the course of the preparation of the information relating to the
Company, TXU Eastern Funding, the Trust or the Partnership contained in the
Prospectus (including the documents incorporated therein by reference) we had
discussions with certain of the Company's officers and representatives and
certain officers and representatives of certain of its subsidiaries, with other
counsel for the Company, with Deloitte & Touche, the Company's independent
accountants, with PricewaterhouseCoopers, the independent certified public
accountants who audited certain of the financial statements of the Company
incorporated by reference in the Registration Statement and the Prospectus, but
we made no independent verification of the accuracy or completeness of the
representations and statements made to us by the Company or the information
included by the Company in the Prospectus and take no responsibility therefor
except as set forth in paragraph 6 above. However, our examination of the
information relating to the Company, TXU Eastern Funding Company, the
Partnership and the Trust contained in the Registration Statement and the
Prospectus and our discussions did not disclose to us anything which gives us
reason to believe that (in each case except for financial statements and
schedules and financial and statistical data and except for that part of the
Registration Statement that constitutes the Forms T-1, as to which we do not
express any belief) (i) the Registration Statement, as of the Effective Date,
included 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 (ii) the Prospectus at the time it was filed with the
Commission pursuant to Rule 424, included, or on the date hereof includes an
untrue statement of a material fact or on such dates omitted or omits 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.
<PAGE>
We are members of the State Bar of Texas and do not hold ourselves out
as experts in the laws of the State of New York or the laws of England. As to
all matters of New York law, we have, with your consent, relied upon the opinion
of Thelen Reid & Priest LLP, New York, New York, special United States Counsel
to the Company, TXU Eastern Funding, the Partnership and the Trust; as to
matters of English law, we have, with your consent relied upon the opinions of
E.J. Lean, General Counsel for the Company and TXU Eastern Funding, addressed to
you of even date herewith.
Very truly yours,
WORSHAM, FORSYTHE &
WOOLDRIDGE, L.L.P.
By:
----------------------------
A Partner
<PAGE>
SCHEDULE VII
------------
[LETTERHEAD OF THELEN REID & PRIEST LLP]
New York, New York
[Date]
- - - - --------------
- - - - --------------
- - - - --------------
- - - - --------------
as Representatives of the Underwriters
named in Schedule II to the Underwriting
Agreement, as herein defined
c/o
--------------
- - - - ------------------
- - - - ------------------
Ladies and Gentlemen:
We have acted as special United States counsel for TXU Europe Limited,
a private limited company incorporated in England and Wales (the "Company"), TXU
Eastern Funding Company, a private unlimited company incorporated under the laws
of England and Wales ("TXU Eastern Funding"), TXU Europe Funding I, L.P., a
limited partnership (the "Partnership") formed under the Delaware Revised
Uniform Limited Partnership Act (the "Delaware Partnership Act"), and TXU Europe
Capital I, a statutory business trust (the "Trust") formed under the Delaware
Business Trust Act (the "Delaware Trust Act") in connection with the
transactions contemplated by the Underwriting Agreement dated ___________ among
the Company, TXU Eastern Funding, the Partnership, the Trust and you (the
"Underwriting Agreement"), including, among others, (i) the issuance by the
Trust of its ___% Trust Originated Preferred Securities (the "TOPrS") having an
aggregate liquidation preference amount of $___________, (ii) the issuance by
the Partnership of its ___% Partnership Preferred Securities (the "Partnership
Preferred Securities") having an aggregate liquidation preference amount of
$_________, (iii) the issuance by TXU Eastern Funding of an aggregate of
$__________ principal amount of Junior Subordinated Debentures, Series __ (the
"TXU Eastern Funding Debentures") pursuant to an indenture, dated as of
________, among the Company, TXU Eastern Funding and The Bank of New York, as
trustee (the "TXU Eastern Funding Indenture"), (iv) the issuance by __________
of an aggregate of $_________ principal amount of Junior Subordinated
Debentures, Series __ (the "______ Debentures" and together with the TXU Eastern
Funding Debentures, the "Debentures") pursuant to an indenture, dated as of
_______, among the Company, _________ and The Bank of New York, as trustee (the
"________ Indenture" and, together with the TXU Eastern Funding Indenture, the
"Indentures"), (v) the guarantee by the Company of the TOPrS pursuant to a
Guarantee Agreement, dated as of ________, between the Company and The Bank of
New York, as trustee (the "Trust Guarantee"), (vi) the guarantee by the Company
of the Preferred Partnership Securities pursuant to a Guarantee Agreement dated
as of ______ between The Bank of New York, as trustee, and the Company (the
"Partnership Guarantee"), (vi) the guarantee by the Company of the TXU Eastern
Funding Debentures pursuant to the guarantee forming a part of the TXU Eastern
Funding Indenture (the "TXU Eastern Funding Debenture Guarantee"), and (vii) the
guarantee by the Company of the _______ Debentures pursuant to the guarantee
forming a part of the ________ Indenture (the "______ Debenture Guarantee" and,
together with the TXU Eastern Funding Debenture Guarantee, the "Debenture
Guarantees").
Terms not otherwise defined herein are used with the meanings ascribed
to them in the Underwriting Agreement.
In so acting we have participated in or reviewed the corporate
proceedings in connection with the authorization, execution and delivery of the
Underwriting Agreement, the Trust Agreement, the Partnership Agreement, the
Indentures, the Debentures, the Trust Guarantee and the Partnership Guarantee.
We have also examined such other documents and satisfied ourselves as to such
other matters as we have deemed necessary as a basis for the conclusions of law
contained in the opinions expressed below. We have relied as to various
questions of fact upon the representations and warranties of the Company
contained in the Underwriting Agreement and, where we deemed appropriate, on
certificates of public officials. We have relied upon certificates of The Bank
of New York, as trustee under the Indentures as to the authentication of the
Debentures. In our examination we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as originals and the
conformity to original documents of all documents submitted to us as photostatic
or certified copies.
Upon the basis of our familiarity with these transactions and with the
affairs and properties of the Company generally, we are of the opinion that:
1. The Underwriting Agreement has been duly authorized, executed and
delivered by each of the Company, TXU Eastern Funding, the Partnership and the
Trust.
2. The TXU Eastern Funding Indenture, the Trust Agreement, the
Partnership Guarantee, the Trust Guarantee and the ________ Debenture Guarantee
have been duly qualified under the Trust Indenture Act.
3. The TXU Eastern Funding Debentures and the TXU Eastern Funding
Indenture have been duly authorized, executed and delivered by TXU Eastern
Funding, the TXU Eastern Funding Debentures are entitled to the benefits of the
TXU Eastern Funding Indenture, and the TXU Eastern Funding Debentures and the
TXU Eastern Funding Indentures are legal, valid and binding obligations of TXU
Eastern Funding enforceable against TXU Eastern Funding in accordance with their
terms, subject to the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, receivership, moratorium and other laws affecting the
rights and remedies of creditors generally and of general principles of equity
and the effect of applicable public policy on the enforceability of provisions
relating to contribution and indemnification.
4. The ____________ Debentures and the ____________ Indenture have
been duly authorized, executed and delivered by ____________, the ____________
Debentures are entitled to the benefits of the ____________ Indenture, and the
____________ Debentures and the ____________ Indentures are legal, valid and
binding obligations of ____________ enforceable against ____________ in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, fraudulent conveyance, receivership, moratorium and other laws
affecting the rights and remedies of creditors generally and of general
principles of equity and the effect of applicable public policy on the
enforceability of provisions relating to contribution and indemnification.
5. Each of the Trust Guarantee and the Partnership Guarantee has been
duly authorized, executed and delivered by the Company, and is enforceable
against the Company in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, fraudulent conveyance, receivership,
moratorium and other laws affecting the rights and remedies of creditors
generally and of general principles of equity and the effect of applicable
public policy on the enforceability of provisions relating to contribution and
indemnification.
6. The statements made in the Prospectus under the captions
"Description of the Preferred Trust Securities", Description of the Trust
Guarantee", "Description of the Preferred Partnership Securities", "Description
of the Partnership Guarantee", "Description of the Funding Debentures", insofar
as such statements constitute summaries of the legal matters or documents
referred to therein, are accurate in all material respects.
7. None of the Company, TXU Eastern Funding, the Partnership or the
Trust is, or after giving effect to the issuance and sale of the Offered
Securities and the application of the proceeds thereof as described in the
Prospectus will be, directly or indirectly controlled by, or acting on behalf of
any person which is, an investment company within the meaning of the Investment
Company Act of 1940, as amended.
8. The Registration Statement, and the Prospectus at the time it was
filed with the Commission pursuant to Rule 424 under the Securities Act (in each
case except for financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein and except for
that part of the Registration Statement that constitutes the Forms T-1, as to
which we do not express any belief) complied as to form in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder; and the Registration Statement has been declared
effective by the Commission and, to our best knowledge, no proceedings for a
stop order with respect thereto are pending or threatened under Section 8 of the
Securities Act.
We herewith confirm as our opinion the statements under the caption
"Material Tax Considerations--US Income Tax Considerations" in the Prospectus.
In the course of the preparation of the information relating to the
Company, TXU Eastern Funding, the Trust or the Partnership contained in the
Prospectus (including the documents incorporated therein by reference) we had
discussions with certain of the Company's officers and representatives and
certain officers and representatives of certain of its subsidiaries, with other
counsel for the Company, with Deloitte & Touche, the Company's independent
accountants, with PricewaterhouseCoopers, the independent certified public
accountants who audited certain of the financial statements of the Company
incorporated by reference in the Registration Statement and the Prospectus, but
we made no independent verification of the accuracy or completeness of the
representations and statements made to us by the Company or the information
included by the Company in the Prospectus and take no responsibility therefor
except as set forth in paragraph 6 above. However, our examination of the
information relating to the Company, TXU Eastern Funding Company, the
Partnership and the Trust contained in the Registration Statement and the
Prospectus and our discussions did not disclose to us anything which gives us
reason to believe that (in each case except for financial statements and
schedules and financial and statistical data and except for that part of the
Registration Statement that constitutes the Forms T-1, as to which we do not
express any belief) (i) the Registration Statement, as of the Effective Date,
included 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 (ii) the Prospectus at the time it was filed with the
Commission pursuant to Rule 424, included, or on the date hereof includes an
untrue statement of a material fact or on such dates omitted or omits 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.
We are members of the New York Bar and do not hold ourselves out as
experts in the laws of England. As to all matters of English law, we have, with
your consent, relied upon the opinions of E.J. Lean, General Counsel for the
Company and TXU Eastern Funding, addressed to you of even date herewith.
Very truly yours,
THELEN REID & PRIEST LLP
<PAGE>
SCHEDULE VIII
-------------
[Letterhead of Winthrop, Stimson, Putnam & Roberts]
[Date]
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- - - - --------------
- - - - --------------
- - - - --------------
as Representatives of the Underwriters
named in Schedule II to the Underwriting
Agreement, as herein defined
c/o
--------------
- - - - -----------------
- - - - -----------------
Ladies and Gentlemen:
We have acted as counsel to you and the several Underwriters in
connection with the transactions contemplated by the Underwriting Agreement
dated ___________ among TXU Europe Limited, a private limited company
incorporated in England and Wales (the "Company"), TXU Eastern Funding Company,
a private unlimited company incorporated under the laws of England and Wales
("TXU Eastern Funding"), TXU Europe Funding I, L.P., a limited partnership (the
"Partnership") formed under the Delaware Revised Uniform Limited Partnership Act
(the "Delaware Partnership Act"), TXU Europe Capital I, a statutory business
trust (the "Trust") formed under the Delaware Business Trust Act (the "Delaware
Trust Act") and you (the "Underwriting Agreement"), including, among others, (i)
the issuance by the Trust of its ___% Trust Originated Preferred Securities (the
"TOPrS") having an aggregate liquidation preference amount of $___________, (ii)
the issuance by the Partnership of its ___% Partnership Preferred Securities
(the "Partnership Preferred Securities") having an aggregate liquidation
preference amount of $_________, (iii) the issuance by TXU Eastern Funding of an
aggregate of $__________ principal amount of Junior Subordinated Debentures,
Series __ (the "TXU Eastern Funding Debentures") pursuant to an indenture, dated
as of ________, among the Company, TXU Eastern Funding and The Bank of New York,
as trustee (the "TXU Eastern Funding Indenture"), (iv) the issuance by
__________ of an aggregate of $_________ principal amount of Junior Subordinated
Debentures, Series __ (the "______ Debentures" and together with the TXU Eastern
Funding Debentures, the "Debentures") pursuant to an indenture, dated as of
_______, among the Company, _________ and The Bank of New York, as trustee (the
"________ Indenture" and, together with the TXU Eastern Funding Indenture, the
"Indentures"), (v) the guarantee by the Company of the TOPrS pursuant to a
Guarantee Agreement, dated as of ________, between the Company and The Bank of
New York, as trustee (the "Trust Guarantee"), (vi) the guarantee by the Company
of the Preferred Partnership Securities pursuant to a Guarantee Agreement dated
as of ______ between The Bank of New York, as trustee, and the Company (the
"Partnership Guarantee"), (vi) the guarantee by the Company of the TXU Eastern
Funding Debentures pursuant to the guarantee forming a part of the TXU Eastern
Funding Indenture (the "TXU Eastern Funding Debenture Guarantee"), and (vii) the
guarantee by the Company of the _______ Debentures pursuant to the guarantee
forming a part of the ________ Indenture (the "______ Debenture Guarantee" and,
together with the TXU Eastern Funding Debenture Guarantee, the "Debenture
Guarantees"). Terms not otherwise defined herein are used with the meanings
ascribed to them in the Underwriting Agreement.
We are members of the New York Bar and do not hold ourselves out as
experts in the laws of England. We have, with your consent, relied upon opinions
of even date herewith addressed to you by E.J. Lean, General Counsel for the
Company and TXU Eastern Funding. We have reviewed such opinions and believe that
it is satisfactory and that you and we are justified in relying thereon. We
understand that you are relying, for all matters of Delaware law, upon an
opinion of even date herewith addressed to you by Richards, Layton & Finger,
P.A., Delaware Counsel for the Company.
We have, in addition, examined the documents described in the list of
closing papers as having been delivered to you at the closing and such other
documents and satisfied ourselves as to such other matters as we have deemed
necessary in order to enable us to express this opinion. As to various questions
of fact material to this opinion, we have relied upon representations of the
Company and statements in the Registration Statement hereinafter mentioned. In
such examination we have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us and the genuineness and conformity
to original documents of documents submitted to us as certified or photostatic
copies.
Based upon the foregoing, we are of the opinion that:
1. The Underwriting Agreement has been duly authorized, executed and
delivered by each of the Company, TXU Eastern Funding, the Partnership and the
Trust.
2. The TXU Eastern Funding Indenture, the Trust Agreement, the
Partnership Guarantee, the Trust Guarantee and the ________ Debenture Guarantee
have been duly qualified under the Trust Indenture Act.
3. The TXU Eastern Funding Debentures and the TXU Eastern Funding
Indenture have been duly authorized, executed and delivered by TXU Eastern
Funding, the TXU Eastern Funding Debentures are entitled to the benefits of the
TXU Eastern Funding Indenture, and the TXU Eastern Funding Debentures and the
TXU Eastern Funding Indentures are legal, valid and binding obligations of TXU
Eastern Funding enforceable against TXU Eastern Funding in accordance with their
terms, subject to the effect of bankruptcy, insolvency, reorganization,
fraudulent conveyance, receivership, moratorium and other laws affecting the
rights and remedies of creditors generally and of general principles of equity
and the effect of applicable public policy on the enforceability of provisions
relating to contribution and indemnification.
4. The ____________ Debentures and the ____________ Indenture have
been duly authorized, executed and delivered by ____________, the ____________
Debentures are entitled to the benefits of the ____________ Indenture, and the
____________ Debentures and the ____________ Indentures are legal, valid and
binding obligations of ____________ enforceable against ____________ in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
reorganization, fraudulent conveyance, receivership, moratorium and other laws
affecting the rights and remedies of creditors generally and of general
principles of equity and the effect of applicable public policy on the
enforceability of provisions relating to contribution and indemnification.
5. Each of the Trust Guarantee and the Partnership Guarantee has been
duly authorized, executed and delivered by the Company, and is enforceable
against the Company in accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, fraudulent conveyance, receivership,
moratorium and other laws affecting the rights and remedies of creditors
generally and of general principles of equity and the effect of applicable
public policy on the enforceability of provisions relating to contribution and
indemnification.
6. The statements made in the Prospectus under the captions
"Description of the Preferred Trust Securities", Description of the Trust
Guarantee", "Description of the Preferred Partnership Securities", "Description
of the Partnership Guarantee", "Description of the Funding Debentures", insofar
as such statements constitute summaries of the legal matters or documents
referred to therein, are accurate in all material respects.
7. None of the Company, TXU Eastern Funding, the Partnership or the
Trust is, or after giving effect to the issuance and sale of the Offered
Securities and the application of the proceeds thereof as described in the
Prospectus will be, directly or indirectly controlled by, or acting on behalf of
any person which is, an investment company within the meaning of the Investment
Company Act of 1940, as amended.
8. The Registration Statement, and the Prospectus at the time it was
filed with the Commission pursuant to Rule 424 under the Securities Act (in each
case except for financial statements and schedules and other financial and
statistical data contained or incorporated by reference therein and except for
that part of the Registration Statement that constitutes the Forms T-1, as to
which we do not express any belief) complied as to form in all material respects
with the Securities Act and the applicable rules and regulations of the
Commission thereunder.
In passing upon the form of the Registration Statement and the form of
the Prospectus, we necessarily assume the correctness and completeness of the
statements made by the Company, TXU Eastern Funding, the Partnership and the
Trust and the information included in the Registration Statement and the
Prospectus and take no responsibility therefor, except insofar as such
statements relate to us and as set forth in paragraph 6 above. In the course of
the preparation by the Company of the Registration Statement and the Prospectus,
we have had discussions with certain of its officers and representatives, and
representatives of the Company and certain of its subsidiaries, with counsel for
the Company, with Deloitte & Touche, the Company's independent accountants, with
PricewaterhouseCoopers, the independent public accountants who audited certain
of the financial statements of the Company incorporated by reference in the
Registration Statement and the Prospectus, and with certain of your
representatives. Our examination of the Registration Statement and the
Prospectus and our discussions did not disclose to us any information which
gives us reason to believe that at the Effective Date the Registration Statement
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 with the
Commission pursuant to Rule 424, or at the date hereof, included or includes an
untrue statement of a material fact or omitted or omits 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. We do not express any
belief as to the financial statements or other financial or statistical data
contained or incorporated by reference in the Registration Statement or
Prospectus or as to that part of the Registration Statement that constitutes the
Forms T-1.
This opinion is given to you solely for the use of the several
Underwriters in connection with the Underwriting Agreement and the transactions
contemplated thereunder and may not be relied upon by any other person or for
any other purpose.
Very truly yours,
Exhibit 3(e)
TRUST AGREEMENT
OF TXU EUROPE CAPITAL I
This TRUST AGREEMENT of TXU Europe Capital I (the "Trust"), dated as
of December 22, 1999, among (i) TXU Business Services Company, a Texas
corporation (the "Depositor"), (ii) The Bank of New York, a New York banking
corporation (the "Property Trustee"), as trustee of the Trust, (iii) The Bank of
New York (Delaware), a Delaware banking corporation (the "Delaware Trustee"), as
trustee of the Trust, and (iv) Laura Anderson, an individual employed by the
Depositor or one of its affiliates, as trustee of the Trust (the "Administrative
Trustee") (each of such trustees in (ii), (iii) and (iv) a "Trustee" and
collectively, the "Trustees"). The Depositor and the Trustees hereby agree as
follows:
1. The trust created hereby shall be known as "TXU Europe Capital I",
in which name the Trustees, or the Depositor 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 Trustees the sum of $85. The Trustees hereby acknowledge receipt of such
amount in trust from the Depositor, which amount shall constitute the initial
trust estate. The Trustees hereby declare that they will hold the trust estate
in trust for the Depositor. 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., as amended (the "Business Trust
------- -- ---
Act"), and that this document constitutes the governing instrument of the Trust.
The Trustees are hereby authorized and directed to execute and file a
certificate of trust with the Secretary of State of the State of Delaware in
accordance with the provisions of the Business Trust Act.
3. The Depositor and the Trustees will enter into an amended and
restated Trust Agreement, satisfactory to each such party and substantially in
the form to be included as an exhibit to the 1933 Act Registration Statement
referred to below, to provide for the contemplated operation of the Trust
created hereby and the issuance of the Preferred Trust Securities and the
Control Certificate 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 in respect of 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.
4. The Administrative Trustee, and the Depositor, acting singly or
together, (and, in the case of (iv) below, Robert J. Reger, Jr., as authorized
representative of the Trust) are hereby authorized (i) to prepare and file with
the Securities and Exchange Commission (the "Commission") and execute, in each
case on behalf of the Trust, (a) a Registration Statement on Form S-1 (the "1933
Act Registration Statement") (including any pre-effective or post-effective
amendments thereto), relating to the registration under the Securities Act of
1933, as amended, of the Preferred Trust Securities of the Trust and certain
other securities and (b) a Registration Statement on Form 8-A (the "1934 Act
Registration Statement") (including all pre-effective and post-effective
amendments thereto) relating to the registration of the Preferred Trust
Securities of the Trust under Section 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended; (ii) to prepare and file with The New York Stock
Exchange, Inc. (the "NYSE") and with the Luxembourg Stock Exchange (the
"Luxembourg Exchange") and execute on behalf of the Trust listing applications
and all other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred Trust
Securities to be listed on the NYSE and on the Luxembourg Exchange, (iii) to
prepare and 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 Trust Securities under the securities or blue sky laws of
such jurisdictions as the Depositor or the Administrative Trustee, on behalf of
the Trust, may deem necessary or desirable and (iv) to execute and deliver, on
behalf of the Trust, an underwriting agreement in respect of the sale of the
Preferred Trust Securities in such form as the Depositor shall approve. In the
event that any filing referred to above is required by the rules and regulations
of the Commission, the NYSE, the Luxembourg Exchange or state securities or blue
sky laws, to be executed on behalf of the Trust by one or more of the Trustees,
each of the Trustees, in its or her capacity as Trustee of the Trust, is hereby
authorized and, to the extent so required, 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, respectively, 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 NYSE, the
Luxembourg Exchange or state securities or blue sky laws. In connection with the
filings referred to above, the Depositor and each Trustee, solely in its or her
capacity as trustee of the Trust, hereby constitutes and appoints Robert A.
Wooldridge, Peter B. Tinkham and Robert J. Reger, Jr., and each of them, as its
or his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for the Depositor or such Trustee or in the
Depositor's or such Trustee's name, place and stead, in any and all capacities,
to sign any and all filings and amendments (including post-effective amendments)
to any of such filings (including the 1933 Act Registration Statement and the
1934 Act Registration Statement) and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Commission, the NYSE, the
Luxembourg Exchange and securities or blue sky administrators, granting unto
said attorneys-in-fact and agents full power and authority to do and perform
each and every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as the Depositor or such Trustee
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their respective substitute or
substitutes, shall do or cause to be done by virtue hereof.
5. This Trust Agreement may be executed in one or more counterparts.
6. 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 which may increase or decrease
the number of Trustees; provided, however, that to the extent required by the
Business Trust Act, one Trustee shall be either 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 and otherwise meets
the requirements of applicable Delaware law. Subject to the foregoing, the
Depositor is entitled to appoint or remove without cause any Trustee at any
time. Any one or more of the Trustees may resign upon thirty days prior written
notice to Depositor.
7. The Depositor shall have the right to dissolve the Trust at any
time prior to the issuance of any Preferred Trust Security. Upon dissolution of
the Trust pursuant to this Section 7, each of the Administrative Trustees,
acting singly, is hereby authorized to prepare, execute and file a Certificate
of Cancellation in respect of the Trust with the Secretary of State of the State
of Delaware.
8. This Trust Agreement shall be governed by, and construed in
accordance with, the laws of the State of Delaware (without regard to conflict
of laws principles).
9. The Depositor is hereby authorized and directed, on behalf of the
Trust, to execute and deliver the Agreement of Limited Partnership of TXU Europe
Funding I, L.P., a Delaware limited partnership (the "Partnership Agreement"),
and to take any and all action necessary under the Partnership Agreement for the
Trust to become a limited partner of TXU Europe Funding I, L.P., including the
making of any original contribution thereto.
<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.
TXU BUSINESS SERVICES COMPANY,
as Depositor
/s/ Laura Anderson
--------------------------------------
Name: Laura Anderson
Title: Assistant Treasurer
THE BANK OF NEW YORK,
as Trustee
/s/ Walter N. Gitlin
---------------------------------------
Name: Walter N. Gitlin
Title: Vice President
THE BANK OF NEW YORK
(DELAWARE), as Trustee
/s/ Walter N. Gitlin
---------------------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
Laura Anderson, as Trustee
/s/ Laura Anderson
---------------------------------------
Exhibit 3(f)
CERTIFICATE OF TRUST
OF
TXU EUROPE CAPITAL I
THIS CERTIFICATE OF TRUST of TXU Europe Capital I (the "Trust"), dated
as of December 22, 1999, is being duly executed and filed by the undersigned,
as trustees, to form a business trust under the Delaware Business Trust Act (12
Del.C. ss. 3801 et seq.).
- - - - ------ -- ---
1. Name. The name of the business trust formed hereby is TXU Europe
Capital 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 upon
filing with the Delaware Secretary of State.
IN WITNESS WHEREOF, the undersigned, being the only trustees of the
Trust at the time of the filing of this Certificate of Trust, have executed this
Certificate of Trust as of the date first above written.
THE BANK OF NEW YORK, LAURA ANDERSON
not in its individual capacity not in her individual capacity
but solely as trustee but solely as trustee
By: /s/ Walter N. Gitlin /s/ Laura Anderson
----------------------------- ---------------------------------
Name: Walter N. Gitlin
Title: Vice President
THE BANK OF NEW YORK (DELAWARE),
not in its individual capacity
but solely as trustee
By: /s/ Walter N. Gitlin
-----------------------------
Name: Walter N. Gitlin
Title: Authorized Signatory
Exhibit 3(g)
AGREEMENT OF LIMITED PARTNERSHIP
OF
TXU EUROPE FUNDING I, L.P.
This Agreement of Limited Partnership of TXU Europe Funding I, L.P. (the
"Agreement"), is entered into by and between TXU Europe Limited, a private
limited company incorporated under the laws of England and Wales, as general
partner (the "General Partner"), and TXU Europe Capital I, a statutory business
trust created under Delaware law, as limited partner (the "Limited Partner").
The General Partner and the Limited Partner hereby form a limited
partnership pursuant to and in accordance with the Delaware Revised Uniform
Limited Partnership Act (6 Del. C. ss.17-101, et seq.), as amended from time to
------- -- ---
time (the "Act"), and hereby agree as follows:
1. Name. The name of the limited partnership formed hereby is TXU Europe
----
Funding I, L.P. (the "Partnership").
2. Purpose. The Partnership is formed for the object and purpose of, and
-------
the nature of the business to be conducted and promoted by the Partnership is,
engaging in any lawful act or activity for which limited partnerships may be
formed under the Act and engaging in any and all activities necessary or
incidental to the foregoing.
3. Registered Office. The registered office of the Partnership in the
-----------------
State of Delaware is c/o RL&F Service Corp., One Rodney Square, 10th Floor,
Tenth and King Streets, Wilmington, New Castle County, Delaware 19801.
4. Registered Agent. The name and address of the registered agent of the
----------------
Partnership for service of process on the Partnership in the State of Delaware
are RL&F Service Corp., One Rodney Square, 10th Floor, Tenth and King Streets,
Wilmington, New Castle County, Delaware 19801.
5. Partners. The name and the mailing address of the General Partner and
--------
the Limited Partner are as follows:
General Partner:
---------------
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Limited Partner:
---------------
TXU Europe Capital I
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
6. Power. The powers of the General Partner include all powers, statutory
-----
and otherwise, possessed by general partners under the laws of the State of
Delaware.
7. Dissolution. The Partnership shall dissolve, and its affairs shall be
-----------
wound up at such time as (a) all of the partners of the Partnership approve in
writing, (b) an event of withdrawal of a general partner has occurred under the
Act, or (c) an entry of a decree of judicial dissolution has occurred under ss.
17-802 of the Act; provided, however, the Partnership shall not be dissolved or
required to be wound up upon an event of withdrawal of a general partner
described in Section 7(b) if (i) at the time of such event of withdrawal, there
is at least one (1) other general partner of the Partnership who carries on the
business of the Partnership (any remaining general partner being hereby
authorized to carry on the business of the Partnership), or (ii) within ninety
(90) days after the occurrence of such event of withdrawal, all remaining
partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of the date of the event of withdrawal, of one (1) or
more additional general partners of the Partnership.
8. Capital Contributions. The partners of the Partnership have
---------------------
contributed the following amounts, in cash, and no other property, to the
Partnership:
General Partner:
---------------
TXU Europe Limited $15.00
Limited Partner:
---------------
TXU Europe Capital I $85.00
9. Additional Contribution. No partner of the Partnership is required to
-----------------------
make any additional capital contribution to the Partnership.
10. Allocation of Profits and Losses. The Partnership's profits and losses
--------------------------------
shall be allocated in proportion to the capital contributions of the partners of
the Partnership.
11. Distributions. Distributions shall be made to the partners of the
-------------
Partnership at the times and in the aggregate amounts determined by the General
Partner, subject to the provisions of the Act. Such distributions shall be
allocated among the partners of the Partnership in the same proportion as their
then capital account balances.
12. Assignments.
-----------
(a) The Limited Partner may (i) assign all or any part of its
partnership interest in the Partnership and (ii) withdraw from the Partnership,
in each case, only with the consent of the General Partner.
(b) The General Partner may (i) assign all or any part of its
partnership interest in the Partnership and (ii) withdraw from the Partnership,
in each case, without the consent of the Limited Partner.
13. Withdrawal. Except to the extent set forth in Section 12, no right is
----------
given to any partner of the Partnership to withdraw from the Partnership.
14. Admission of Additional or Substitute Partners.
----------------------------------------------
(a) One (1) or more additional or substitute limited partners of the
Partnership may be admitted to the Partnership with only the consent of the
General Partner.
(b) Except as provided in Section 7, one (1) or more additional or
substitute general partners of the Partnership may be admitted to the
Partnership with only the consent of the General Partner.
15. Liability of Limited Partner. The Limited Partner shall not have any
----------------------------
liability for the obligations or liabilities of the Partnership except to the
extent provided in the Act.
16. Governing Law. This Agreement shall be governed by, and construed
-------------
under the laws of the State of Delaware, all rights and remedies being governed
by said laws, without regard to conflict of laws principles.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original of this Agreement and
all of which shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound hereby,
have duly executed this Agreement as of the 22nd day of November 1999.
GENERAL PARTNER:
TXU EUROPE LIMITED
By: /s/ Robert J. Reger, Jr.
-------------------------------------------
Robert J. Reger, Jr.
Attorney-in-fact
LIMITED PARTNER:
TXU EUROPE CAPITAL I
By TXU Business Services Company, as Depositor
under the Trust Agreement of TXU Europe
Capital I
By: /s/ Laura Anderson
-------------------------------------------
Laura Anderson
Assistant Treasurer
Exhibit 3(h)
CERTIFICATE OF LIMITED PARTNERSHIP
OF
TXU EUROPE FUNDING I, L.P.
THIS CERTIFICATE OF LIMITED PARTNERSHIP of TXU Europe Funding I, L.P. (the
"Partnership"), dated as of December 22, 1999, is being duly executed and filed
by TXU Europe Limited, a private limited company incorporated under the laws of
England and Wales, as general partner, to form a limited partnership under the
Delaware Revised Uniform Limited Partnership Act (6 Del. C. ss.17-101, et seq.).
------- -- ---
1. Name. The name of the limited partnership formed hereby is TXU Europe
----
Funding I, L.P.
2. Registered Office. The address of the registered office of the
-----------------
Partnership in the State of Delaware is c/o RL&F Service Corp., One Rodney
Square, 10th Floor, Tenth and King Streets, Wilmington, New Castle County,
Delaware 19801.
3. Registered Agent. The name and address of the registered agent for
----------------
service of process of the Partnership in the State of Delaware are RL&F Service
Corp., One Rodney Square, 10th Floor, Tenth and King Streets, Wilmington, New
Castle County, Delaware 19801.
4. General Partner. The name and the mailing address of the sole general
---------------
partner of the Partnership are:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Certificate of
Limited Partnership as of the date first-above written.
TXU EUROPE LIMITED
By /s/ Robert J. Reger, Jr.
------------------------------
Robert J. Reger, Jr.
Attorney-in-fact
Exhibit 4(a)
================================================================================
AMENDED AND RESTATED
TRUST AGREEMENT
among
TXU BUSINESS SERVICES COMPANY, as Initial Depositor,
TXU EUROPE LIMITED, as Successor Depositor,
and
THE BANK OF NEW YORK,
THE BANK OF NEW YORK (DELAWARE),
--------------------,
--------------------,
--------------------,
--------------------,
and
____________________, as Trustees
Dated as of ________ __, ________
TXU EUROPE CAPITAL I
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I INTERPRETATION AND DEFINITIONS.......................................1
SECTION 1.01 Definitions.............................................1
ARTICLE II TRUST INDENTURE ACT.................................................9
SECTION 2.01 Trust Indenture Act; Application........................9
SECTION 2.02 Lists of Holders.......................................10
SECTION 2.03 Reports by the Property Trustee........................10
SECTION 2.04 Periodic Reports to Property Trustee...................10
SECTION 2.05 Evidence of Compliance with Conditions Precedent.......10
SECTION 2.06 Trust Enforcement Events; Waiver.......................11
SECTION 2.07 Trust Enforcement Event; Notice........................11
ARTICLE III ORGANIZATION......................................................12
SECTION 3.01 Name...................................................12
SECTION 3.02 Office.................................................12
SECTION 3.03 Purpose................................................12
SECTION 3.04 Authority..............................................12
SECTION 3.05 Title to Property of the Trust.........................13
SECTION 3.06 Powers and Duties of the Administrative Trustees.......13
SECTION 3.07 Prohibition of Actions by the Trust and the Trustees...15
SECTION 3.08 Powers and Duties of the Property Trustee..............16
SECTION 3.09 Certain Duties and Responsibilities of the Property
Trustee................................................18
SECTION 3.10 Certain Rights of Property Trustee.....................19
SECTION 3.11 Delaware Trustee.......................................21
SECTION 3.12 Execution of Documents.................................21
SECTION 3.13 Not Responsible for Recitals or Issuance of Preferred
Trust Securities.......................................21
SECTION 3.14 Duration of Trust......................................22
SECTION 3.15 Mergers................................................22
i
<PAGE>
ARTICLE IV SUCCESSOR DEPOSITOR................................................23
SECTION 4.01 Responsibilities of the Successor Depositor............23
SECTION 4.02 Indemnification and Expenses of the Trustee............24
ARTICLE V CONTROL CERTIFICATE.................................................24
SECTION 5.01 Issuance of the Control Certificate....................24
SECTION 5.02 Transfer of the Control Certificate....................24
SECTION 5.03 No Economic Interest in the Trust......................25
SECTION 5.04 Certain Duties and Responsibilities....................25
SECTION 5.05 Rights and Responsibilities of the Control Party.......25
ARTICLE VI TRUSTEES...........................................................27
SECTION 6.01 Number of Trustees.....................................27
SECTION 6.02 Delaware Trustee.......................................27
SECTION 6.03 Property Trustee; Eligibility..........................28
SECTION 6.04 Qualifications of Administrative Trustees and Delaware
Trustee Generally......................................28
SECTION 6.05 Administrative Trustees................................29
SECTION 6.06 Delaware Trustee.......................................29
SECTION 6.07 Appointment, Removal and Resignation of Trustees.......29
SECTION 6.08 Vacancies among Trustees...............................30
SECTION 6.09 Effect of Vacancies....................................30
SECTION 6.10 Meetings...............................................31
SECTION 6.11 Delegation of Power....................................31
SECTION 6.12 Merger, Conversion, Consolidation or Succession to
Business...............................................31
ARTICLE VII...................................................................32
SECTION 7.01 Distributions..........................................32
ii
<PAGE>
ARTICLE VIII ISSUANCE OF PREFERRED TRUST SECURITIES...........................33
SECTION 8.01 Designation and General Provisions Regarding the
Preferred Trust Securities.............................33
SECTION 8.02 Redemption of Preferred Trust Securities...............34
SECTION 8.03 Redemption Procedures..................................35
SECTION 8.04 Voting Rights of Preferred Trust Securities............37
SECTION 8.05 Paying Agent...........................................39
SECTION 8.06 Listing................................................39
SECTION 8.07 Acceptance of Guarantee and Agreements, Limited
Partnership Agreement..................................39
ARTICLE IX DISSOLUTION AND LIQUIDATION OF THE TRUST...........................39
SECTION 9.01 Dissolution of Trust...................................39
SECTION 9.02 Liquidation Distribution Upon Termination and
Dissolution of the Trust...............................40
ARTICLE X TRANSFER OF INTERESTS...............................................40
SECTION 10.01 Transfer of Preferred Trust Securities.................40
SECTION 10.02 Transfer of Certificates...............................41
SECTION 10.03 Deemed Security Holders................................41
SECTION 10.04 Book Entry Interests...................................41
SECTION 10.05 Notices to Clearing Agency.............................42
SECTION 10.06 Appointment of Successor Clearing Agency...............42
SECTION 10.07 Definitive Preferred Trust Security Certificates.......42
SECTION 10.08 Mutilated, Destroyed, Lost or Stolen Certificates......43
ARTICLE XI LIMITATION OF LIABILITY OF HOLDERS, TRUSTEES OR OTHERS.............43
SECTION 11.01 Liability..............................................43
SECTION 11.02 Exculpation............................................44
SECTION 11.03 Fiduciary Duty.........................................44
SECTION 11.04 Indemnification........................................45
SECTION 11.05 Outside Businesses.....................................47
iii
<PAGE>
ARTICLE XII ACCOUNTING........................................................48
SECTION 12.01 Fiscal Year............................................48
SECTION 12.02 Certain Accounting Matters.............................48
SECTION 12.03 Banking................................................48
SECTION 12.04 Withholding............................................49
ARTICLE XIII AMENDMENTS AND MEETINGS..........................................49
SECTION 13.01 Amendments.............................................49
SECTION 13.02 Meetings of the Holders; Action by Written Consent.....51
ARTICLE XIV REPRESENTATIONS OF PROPERTY TRUSTEE AND DELAWARE TRUSTEE..........53
SECTION 14.01 Representations and Warranties of Property Trustee.....53
SECTION 14.02 Representations and Warranties of Delaware Trustee.....53
ARTICLE XV MISCELLANEOUS......................................................54
SECTION 15.01 Notices................................................54
SECTION 15.02 Governing Law..........................................55
SECTION 15.03 Intention of the Parties...............................55
SECTION 15.04 Headings...............................................55
SECTION 15.06 Partial Enforceability.................................55
SECTION 15.07 Counterparts...........................................56
iv
<PAGE>
TXU Europe Capital I
CROSS-REFERENCE TABLE*
Certain Sections of this Trust Agreement relating to
Sections 310 through 318 of the
Trust Indenture Act of 1939:
Trust Indenture Trust Agreement
Act Section Section
- - - - -------------------- ---------------
310(a).................................................... 6.3(a)
310(c).................................................... Inapplicable
311(c).................................................... Inapplicable
312(a).................................................... 2.2(a)
312(b).................................................... 2.2(b)
313....................................................... 2.3
314(a).................................................... 2.4
314(b).................................................... Inapplicable
314(c).................................................... 2.5
314(d).................................................... Inapplicable
314(f).................................................... Inapplicable
315(a).................................................... 3.9(b)
315(c).................................................... 3.9(a)
315(d).................................................... 3.9(a)
316(a).................................................... Annex I
316(c).................................................... 3.6(e)
- - - - -----------------
* This Cross-Reference Table does not constitute part of the Trust
Agreement and shall not affect the interpretation of any of its terms or
provisions.
<PAGE>
AMENDED AND RESTATED TRUST AGREEMENT, dated as of __________________,
_______, among (i) TXU Business Services Company, a Texas corporation, (the
"Initial Depositor"), (ii) TXU Europe Limited, a private limited company
organized under the laws of England and Wales, (the "Successor Depositor"),
(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 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"), (v) Laura
Anderson, ____________________, ____________________ and ____________________,
each an individual, and each of whose address is c/o TXU Business Services
Company,, 1601 Bryan Street, Dallas, Texas, 75201 (each, an "Administrative
Trustee" and collectively the "Administrative Trustees") (the Property Trustee,
the Delaware Trustee and the Administrative Trustees are referred to herein each
as a "Trustee" and collectively as the "Trustees"), (vi) __________________, a
wholly-owned U.S. subsidiary of TXU Europe (the "Control Party"), and (vi) the
several Holders, as hereinafter defined.
W I T N E S S E T H:
WHEREAS, the Initial Depositor, the Property Trustee, the Delaware
Trustee and ____________________, as Administrative Trustee, have heretofore
duly declared and established a business trust pursuant to the Delaware Business
Trust Act by the entering into of that certain Trust Agreement, dated as of
________________, ________ (the "Original Trust Agreement"), and by the
execution by the Property Trustee and the Delaware Trustee and filing with the
Secretary of State of the State of Delaware of the Certificate of Trust, dated
__________________, ________, a copy of which is attached as Exhibit A;
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS, the parties hereto desire to amend and restate the Original
Trust Agreement in its entirely as set forth 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 party and
for the benefit of the Securityholders, hereby amends and restates the Original
Trust Agreement in its entirety and agrees as follows:
ARTICLE I
INTERPRETATION AND DEFINITIONS
SECTION 1.01 DEFINITIONS.
Unless the context otherwise requires:
(a) Capitalized terms used in this Trust Agreement but not defined in
the preamble above have the respective meanings assigned to them in this Section
1.01;
(b) a term defined anywhere in this Trust Agreement has the same
meaning throughout;
(c) all references to "the Trust Agreement" or "this Trust Agreement"
are to this Trust Agreement as modified, supplemented or amended from time to
time;
(d) all references in this Trust Agreement to Articles and Sections
and Annexes and Exhibits are to Articles and Sections of and Annexes and
exhibits to this Trust Agreement unless otherwise specified;
(e) a term defined in the Trust Indenture Act has the same meaning
when used in this Trust Agreement unless otherwise defined in this Trust
Agreement or unless the context otherwise requires;
(f) a reference to the singular includes the plural and vice versa;
and
(g) a term used in this Trust Agreement and not otherwise defined
herein shall have the meaning ascribed to such term in the Partnership
Agreement.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Administrative Trustee" has the meaning set forth in Section 6.01 of
this Trust Agreement.
"Affiliate" has the same meaning as given to that term in Rule 405
under the Securities Act, or any successor rule thereunder.
"Affiliate Investment Instruments" has the meaning set forth in Section
7.1 of the Limited Partnership Agreement.
"Authorized Officer" of a Person means any Person that is authorized to
bind such Person.
"Book Entry Interest" means a beneficial interest in a Global
Certificate, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as set forth in Section 10.04 of this
Trust Agreement.
"Business Day" means any day other than (x) a Saturday or a Sunday, (y)
a day on which banks in New York, New York are authorized or obligated by law or
executive order to remain closed or (z) a day on which the Property Trustee's
Corporate Trust Office is closed for business.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.
"Certificate" means a Preferred Trust Security Certificate.
"Change in 1940 Act Law" means, as a result of the occurrence on or
after the date of the issuance of the Preferred Trust Securities 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, the Trust is or will be considered an "investment company" which is
required to be registered under the 1940 Act.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Preferred Trust Securities and in whose name or in the name of a nominee
of that organization shall be registered a Global Certificate and which shall
undertake to effect book entry transfers and pledges of beneficial interests in
the Preferred Trust Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of interest in securities
deposited with the Clearing Agency.
"Closing Date" means the date of execution and delivery of this Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange
Commission.
"Company" means TXU Business Services Company,.
"Company Indemnified Person" means (a) any Administrative Trustee; (b)
any Affiliate of any Administrative Trustee; (c) any officers, directors,
shareholders, members, partners, employees, representatives or agents of any
Administrative Trustee; or (d) any officer, director, shareholder, member,
partner, employee, representative or agent of the Trust or its Affiliates.
"Control Certificate" has the meaning set forth in Section 5.01(a) of
this Trust Agreement.
"Control Party" has the meaning set forth in the first paragraph of
this Trust Agreement, or any person appointed successor Control Party pursuant
to the terms of this Trust Agreement.
"Corporate Trust Office" means the principal corporate trust office of
the Property Trustee located in New York, New York which at the date of
execution of this Trust Agreement is located at 101 Barclay Street - 21W, New
York, New York 10286.
"Covered Person" means: (a) any officer, director, shareholder,
partner, member, representative, employee or agent of (i) the Trust or (ii) the
Trust's Affiliates; and (b) any Holder of Preferred Trust Securities.
"Definitive Preferred Trust Security Certificates" has the meaning set
forth in Section 10.04 of this Trust Agreement.
"Delaware Trustee" has the meaning set forth in the first paragraph of
this Trust Agreement, or any person appointed Successor Delaware Trustee.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fiduciary Indemnified Person" has the meaning set forth in Section
11.04(b) of this Trust Agreement.
"Fiscal Period" has the meaning set forth in Section 1.1 of the
Limited Partnership Agreement.
"Fiscal Year" has the meaning set forth in Section 12.01 of this Trust
Agreement.
"General Partner" means TXU Europe Limited, in its capacity as the
general partner of the Partnership, its permitted successors, or any successor
general partner in the Partnership admitted as such pursuant to the Limited
Partnership Agreement.
"Global Certificate" has the meaning set forth in Section 10.04 of
this Trust Agreement.
"Holder" means a Person in whose name a Certificate representing a
Preferred Trust Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means a Company Indemnified Person or a Fiduciary
Indemnified Person.
"Initial Debentures" has the meaning set forth in Section 7.1(b) of
the Limited Partnership Agreement.
"Initial Depositor" has the meaning set forth in the first paragraph
of this Trust Agreement.
"Investment Affiliate" means any corporation, partnership, limited
liability company or other entity (other than the Partnership or the Trust) that
(i) is controlled by the Company and (ii) is not an investment company by reason
of Section 3(a) or 3(b) of the 1940 Act or is otherwise an eligible recipient of
funds directly or indirectly from the Trust pursuant to an order issued by the
Commission.
"Investment Company" means an investment company as defined in the
1940 Act.
"Investment Guarantee" means any guarantee on a subordinated basis by
the Company with respect to payment of interest, principal and other payment
terms of Affiliate Investment Instruments.
"Legal Action" has the meaning set forth in Section 3.06(h) of this
Trust Agreement.
"Limited Partnership Agreement" means the Amended and Restated
Agreement of Limited Partnership of TXU Europe Funding I, L.P. dated as of
________, ________, as the same may be amended from time to time in accordance
with its terms.
"Liquidation Amount" means the stated amount of $25 per Preferred
Trust Security.
"List of Holders" has the meaning set forth in Section 2.02(a) of this
Trust Agreement.
"Majority in Liquidation Amount of the Preferred Trust Securities"
means, except as provided in the terms of the Preferred Trust Securities or by
the Trust Indenture Act, Holder(s) of outstanding Preferred Trust Securities
voting together who are the record owners of more than 50% of the aggregate
Liquidation Amount of all outstanding Preferred Trust Securities of the relevant
class.
"Ministerial Action" means, a ministerial action (such as filing a form
or making an election or pursuing some other similar reasonable measure) which
in the sole judgment of the Company has or will cause no adverse effect on the
Trust, the Partnership, the Company or the holders of the Preferred Trust
Securities and will involve no material cost.
"Nasdaq" means the National Association of Securities Dealers
Automated Quotation System.
"Officers' Certificate" means, with respect to any Person (who is not
an individual), a certificate signed by a director, the President, a Vice
President or the Treasurer, and by an Assistant Treasurer, the Secretary or an
Assistant Secretary of such Person. Any 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 director or 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 director or officer in
rendering the Officers' Certificate;
(c) a statement that each such director or officer has made
such examination or investigation as, in such director's or officer's
opinion, is necessary to enable such director or 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
director or officer, such condition or covenant has been complied
with.
"Original Trust Agreement" has the meaning set forth in the first
clause of this Trust Agreement.
"Partnership" means TXU Europe Funding I, L.P., a Delaware limited
partnership formed pursuant to the Limited Partnership Agreement.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of TXU Europe Funding I, L.P., dated ____________ as the
same may be amended from time to time in accordance with its terms.
"Partnership Enforcement Event" has the meaning set forth in Section
6.2(h)(i) of the Limited Partnership Agreement.
"Partnership Guarantee" means the Partnership Guarantee Agreement dated
as of _________, _______, by the Company in favor of the Preferred Partnership
Security Holders with respect to the Preferred Partnership Securities, as
amended or supplemented from time to time.
"Partnership Special Event" has the meaning set forth in Section 1.1 of
the Limited Partnership Agreement.
"Payment Amount" has the meaning set forth in Section 7.01(a) of this
Trust Agreement.
"Paying Agent" has the meaning set forth in Section 3.08(g) of this
Trust Agreement.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Partnership Securities" has the meaning set forth in Section
1.1 of the Limited Partnership Agreement.
"Preferred Security Beneficial Owner" or "Preferred Trust Security
Beneficial Owner" means, with respect to a Book Entry Interest, a Person who is
the beneficial owner of such Book Entry Interest, as reflected on the books of
the Clearing Agency, or on the books of a Person maintaining an account with
such Clearing Agency (directly as a Clearing Agency Participant or as an
indirect participant, or each case in accordance with the rules of such Clearing
Agency).
"Preferred Trust Securities Guarantee" means the Preferred Trust
Securities Guarantee dated as of _________________, _________, entered into by
the Company, as Guarantor, for the benefit of holders of the Preferred Trust
Securities.
"Preferred Trust Security" has the meaning set forth in Section
8.01(a)(i) of this Trust Agreement.
"Preferred Trust Security Certificate" means a certificate representing
a Preferred Security substantially in the form of Exhibit A-1.
"Property Account" has the meaning set forth in Section 3.08(c) of
this Trust Agreement.
"Property Trustee" has the meaning set forth in the first paragraph of
this Trust Agreement, or any person appointed as Successor Property Trustee.
"Pro Rata" means, in reference to any distributions on or redemptions
of Preferred Trust Securities or the distribution of Preferred Partnership
Securities or any other payment with respect to Preferred Trust Securities in
connection with a Trust Special Event or liquidation of the Trust, to each
Holder of Preferred Trust Securities according to the aggregate Liquidation
Amount of the Preferred Trust Securities held by the relevant Holder in relation
to the aggregate Liquidation Amount of all Preferred Trust Securities
outstanding.
"Quorum" means a majority of the Administrative Trustees or, if there
are only two Administrative Trustees, both of them.
"Redemption/Distribution Notice" has the meaning set forth in Section
8.03(a) of this Trust Agreement.
"Redemption Price" has the meaning set forth in Section 8.02(a) of
this Trust Agreement.
"Related Party" means, with respect to the Successor Depositor, any
direct or indirect wholly owned subsidiary of the Successor Depositor or any
Person that owns, directly or indirectly, 100% of the outstanding voting
securities of the Successor Depositor.
"Responsible Officer" means, with respect to the Trust Guarantee
Trustee, the chairman or vice-chairman of the board of directors, the chairman
or vice-chairman of the executive committee of the board of directors, the
president, any vice president (whether or not designated by a number or a word
or words added before or after the title "vice president"), the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier, any
assistant cashier, any trust officer or assistant trust officer, or any other
officer of the Trust Guarantee Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
"Rule 3a-5" means Rule 3a-5 under the 1940 Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Representative" has the meaning set forth in Section
6.2(h)(i) of the Limited Partnership Agreement.
"Successor Delaware Trustee" has the meaning set forth in Section
6.07(b)(ii) of this Trust Agreement.
"Successor Depositor" has the meaning set forth in the first paragraph
of this Trust Agreement, or any successor entity to TXU Europe by reason of
merger, consolidation or amalgamation, in its capacity as Successor Depositor of
the Trust.
"Successor Entity" has the meaning set forth in Section 3.15(b)(i) of
this Trust Agreement.
"Successor Property Trustee" has the meaning set forth in Section
6.07(b)(i) of this Trust Agreement.
"Successor Preferred Trust Securities" has the meaning set forth in
Section 3.15(b)(i)(B) of this Trust Agreement.
"Super Majority" has the meaning set forth in Section 2.06(a)(ii) of
this Trust Agreement.
"Surrendering Party" has the meaning set forth in Section 5.02(a) of
this Trust Agreement.
"Tax Action" means (a) an amendment to, change in or announced
proposed change in the laws (or any regulations thereunder) of the United States
or the United Kingdom or any political subdivision or taxing authority thereof
or therein, (b) a judicial decision interpreting, applying or clarifying such
laws or regulations, (c) an administrative pronouncement or action that
represents an official position (including a clarification of an official
position) of the governmental authority or regulatory body making such
administrative pronouncement or taking such action, or (d) a threatened
challenge asserted in connection with an audit of the Company or any of its
subsidiaries, the Partnership, or the Trust, or a threatened challenge asserted
in writing against any other taxpayer that has raised capital through the
issuance of securities that are substantially similar to the Affiliate
Investment Instruments, the Preferred Partnership Securities, or the Preferred
Trust Securities, which amendment or change is adopted or which decision,
pronouncement or proposed change is announced or which action, clarification or
challenge occurs on or after the date of the prospectus related to the issuance
of the Preferred Trust Securities.
"10% in Liquidation Amount of the Preferred Trust Securities" means,
except as provided in the terms of the Preferred Trust Securities or by the
Trust Indenture Act, Holder(s) of outstanding Preferred Trust Securities voting
together who are the record owners of 10% or more of the aggregate Liquidation
Amount of all outstanding Preferred Trust Securities of the relevant class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury Department, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust Dissolution Tax Opinion" means an opinion of nationally
recognized independent tax counsel experienced in such matters to the effect
that there has been a Trust Tax Event.
"Trust Enforcement Event" means the occurrence, at any time, of (i)
arrearages on distributions on the Preferred Trust Securities that shall exist
for ______ consecutive quarterly distribution periods, (ii) a default by the
Company in respect of any of its obligations under any Trust Guarantee or (iii)
a Partnership Enforcement Event (as defined in the Limited Partnership
Agreement).
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trust Investment Company Event" means that the Company shall have
requested and received and shall have delivered to the Administrative Trustees
an opinion of nationally recognized independent legal counsel experienced in
such matters to the effect that as a result of a Change in 1940 Act Law, the
Trust is or will be considered an "investment company" which is required to be
registered under the 1940 Act.
"Trust Liquidation" has the meaning set forth in Section 9.02(a) of
this Trust Agreement.
"Trust Liquidation Distribution" has the meaning set forth in Section
9.02(a) of this Trust Agreement.
"Trust Redemption Tax Opinion" means an opinion of nationally
recognized independent tax counsel experienced in such matters that there has
been a Trust Tax Event, and following such Trust Tax Event there is more than an
insubstantial risk that (i) interest payable by one or more of the Investment
Affiliates with respect to the Affiliate Investment Instruments is not, or will
not be, deductible by such Investment Affiliate for United States federal or
United Kingdom corporate income tax purposes or (ii) Additional Amounts (as
defined in the Indentures, the Partnership Guarantee and the Trust Guarantees)
are, or would be, payable in respect of Affiliate Investment Instruments, any
Investment Guarantee, the Partnership Guarantee or any Trust Guarantee, even if
the Preferred Partnership Securities were distributed to the Holders of the
Preferred Trust Securities in liquidation of such Holders' interests in the
Trust.
"Trust Special Event" means a Trust Tax Event or a Trust Investment
Company Event.
"Trust Tax Event" means that there has been a Tax Action which relates
to any of the items described in (i) through (iv) below, and that there is more
than an insubstantial risk that (i) the Trust is, or will be subject to United
States federal or United Kingdom corporate income tax with respect to income
accrued or received on the Preferred Partnership Securities, (ii) the Trust is,
or will be, subject to more than a de minimis amount of other taxes, duties or
other governmental charges, (iii) interest payable by one or more of the
Investment Affiliates with respect to the Affiliate Investment Instruments is
not, or will not be, deductible by such Investment Affiliate for United States
federal or United Kingdom corporate income tax purposes or (iv) Additional
Amounts (as defined in the Indentures, the Partnership Guarantee and the Trust
Guarantees) are, or would be, payable in respect of Affiliate Investment
Instruments, any Investment Guarantee, the Partnership Guarantee or any Trust
Guarantee.
"Trustee" or "Trustees" means each Person who has signed this Trust
Agreement as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
"TXU Europe" means TXU Europe Limited, a private limited company
incorporated under the laws of England and Wales.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 TRUST INDENTURE ACT; APPLICATION.
(a) This Trust Agreement is subject to the provisions of the Trust
Indenture Act that are required to be part of this Trust 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 and to the extent that any provision of this Trust 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.
(d) The application of the Trust Indenture Act to this Trust Agreement
shall not affect the nature of the Preferred Trust Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
SECTION 2.02 LISTS OF HOLDERS.
(a) Each of the Successor Depositor and the Administrative Trustees on
behalf of the Trust shall provide the Property Trustee (i) within 14 days after
each record date for payment of Distributions, a list, in such form as the
Property Trustee may reasonably require, of the names and addresses of the
Holders ("List of Holders") as of such record date, provided, that neither the
Successor Depositor nor the Administrative Trustees on behalf of the Trust shall
be obligated to provide such List of Holders at any time the List of Holders
does not differ from the most recent List of Holders given to the Property
Trustee by the Successor Depositor and the Administrative Trustees on behalf of
the Trust, and (ii) at any other time, within 30 days of receipt by the Trust of
a written request for a List of Holders as of a date no more than 14 days before
such List of Holders is given to the Property Trustee. The Property Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it or which it receives in
the capacity as Paying Agent (if acting in such capacity), provided, that the
Property Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.
(b) The Property 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 PROPERTY TRUSTEE.
Within 60 days after___________ of each year commencing ___________,
______, the Property Trustee shall provide to the Holders such reports as are
required by Section 313 of the Trust Indenture Act, if any, in the form and in
the manner provided by Section 313 of the Trust Indenture Act. The Property
Trustee shall also comply with the requirements of Section 313(d) of the Trust
Indenture Act.
SECTION 2.04 PERIODIC REPORTS TO PROPERTY TRUSTEE.
Each of the Successor Depositor and the Administrative Trustees on
behalf of the Trust shall provide to the Property Trustee such documents,
reports and information as are required by Section 314 of the Trust Indenture
Act (if any) and the compliance certificate required by Section 314 of the Trust
Indenture Act in the form, in the manner and at the times required by Section
314 of the Trust Indenture Act.
SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT.
Each of the Successor Depositor and the Administrative Trustees on
behalf of the Trust shall provide to the Property Trustee such evidence of
compliance with any conditions precedent 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 by an officer
pursuant to Section 314(c)(1) may be given in the form of an Officers'
Certificate.
SECTION 2.06 TRUST ENFORCEMENT EVENTS; WAIVER.
(a) The Holders of a Majority in Liquidation Amount of Preferred Trust
Securities may, by vote, on behalf of the Holders, waive any past Trust
Enforcement Event in respect of the Preferred Trust Securities and its
consequences, provided, that if the underlying event of default or Partnership
Enforcement Event:
is not waivable under the Preferred Trust Securities
Guarantee or the Limited Partnership Agreement, the Trust Enforcement
Event under this Trust Agreement shall also not be waivable; or
requires the consent or vote of the Holders of greater than
a Majority in Liquidation Amount of the Preferred Trust Securities to
be waived under the Preferred Trust Securities Guarantee or the
Preferred Partnership Securities to be waived under the Limited
Partnership Agreement (a "Super Majority"), the Trust Enforcement
Event under this Trust Agreement may only be waived by the vote of the
Holders of at least the relevant Super Majority in Liquidation Amount
of the Preferred Trust Securities.
The foregoing provisions of this Section 2.06(a) shall be in lieu of Section
316(a)(1)(B) of the Trust Indenture Act and such Section 316(a)(1)(B) of the
Trust Indenture Act is hereby expressly excluded from this Trust Agreement and
the Preferred Trust Securities, as permitted by the Trust Indenture Act. Upon
such waiver, any such default shall cease to exist, and any Trust Enforcement
Event with respect to the Preferred Trust Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Trust Agreement, but no
such waiver shall extend to any subsequent or other default or Trust Enforcement
Event with respect to the Preferred Trust Securities or impair any right
consequent thereon. Any waiver by the Holders of Trust Enforcement Events with
respect to the Preferred Trust Securities shall also be deemed to constitute a
waiver by the Control Party for all purposes of this Trust Agreement without any
further act, vote, or consent of the Control Party.
(b) A waiver of Partnership Enforcement Events under the Limited
Partnership Agreement by the Property Trustee at the direction of the Holders
constitutes a waiver of the corresponding Trust Enforcement Event under this
Trust Agreement. The foregoing provisions of this Section 2.06(c) shall be in
lieu of Section 316(a)(1)(B) of the Trust Indenture Act and such Section
316(a)(1)(B) of the Trust Indenture Act is hereby expressly excluded from this
Trust Agreement and the Preferred Trust Securities, as permitted by the Trust
Indenture Act.
SECTION 2.07 TRUST ENFORCEMENT EVENT; NOTICE.
The Property Trustee shall, within 90 days after the occurrence of a
Trust Enforcement Event, transmit by mail, first class postage prepaid, to the
Holders, notices of all defaults with respect to the Preferred Trust Securities
actually known to a Responsible Officer of the Property Trustee, unless such
defaults have been cured before the giving of such notice (the term "defaults"
for the purposes of this Section 2.07 being hereby defined to be defaults as
defined in the Trust Guarantees or the Limited Partnership Agreement, not
including any periods of grace provided for therein and irrespective of the
giving of any notice provided therein); provided, that except for a default in
the payment of principal of (or premium, if any) or interest on any of the
Affiliate Investment Instruments or in the payment of any sinking fund
installment established for the Affiliate Investment Instruments, the Property
Trustee shall be fully protected in withholding such notice if and so long as a
Responsible Officer of the Property Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
ARTICLE III
ORGANIZATION
SECTION 3.01 NAME.
The Trust is named "TXU Europe Capital Trust I," as such name may be
modified from time to time by the Administrative Trustees following written
notice to the Holders. The Trust's activities may be conducted under the name of
the Trust or any other name deemed advisable by the Administrative Trustees.
SECTION 3.02 OFFICE.
The address of the principal office of the Trust is c/o [TXU Business
Services Company, Energy Plaza, 1601 Bryan Street, Dallas, Texas 75201]. On ten
Business Days written notice to the Holders, the Administrative Trustees may
designate another principal office.
SECTION 3.03 PURPOSE.
The exclusive purposes and functions of the Trust are (a) to issue the
Preferred Trust Securities, (b) investing the proceeds from such sale of the
Preferred Trust Securities to acquire the Preferred Partnership Securities, and
(c) except as otherwise limited herein, to engage in only those other activities
necessary or incidental thereto. The Trust shall not borrow money, issue debt or
reinvest proceeds derived from investments, mortgage or pledge any of its
assets, or otherwise undertake (or permit to be undertaken) any activity that
would cause the Trust not to be classified for United States federal income tax
purposes as a grantor trust.
SECTION 3.04 AUTHORITY.
Subject to the limitations provided in this Trust Agreement and to the
specific duties of the Property Trustee, the Administrative Trustees shall have
exclusive and complete authority to carry out the purposes of the Trust. An
action taken by the Administrative Trustees in accordance with their powers
shall constitute the act of and serve to bind the Trust and an action taken by
the Property Trustee on behalf of the Trust in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Trust Agreement.
SECTION 3.05 TITLE TO PROPERTY OF THE TRUST.
Except as provided in Section 3.08 with respect to the Preferred
Partnership Securities and the Property Account or as otherwise provided in this
Trust Agreement, legal title to all assets of the Trust shall be vested in the
Trust. The Holders shall not have legal title to any part of the assets of the
Trust, but shall have an undivided beneficial ownership interest in the assets
of the Trust. Without prejudice to the generality of the preceding sentence, all
income of the Trust shall, as it arises, be held on trust for the Holders
absolutely Pro Rata to their interests in Preferred Trust Securities, such
income to be distributed in accordance with the provisions of Article VII.
SECTION 3.06 POWERS AND DUTIES OF THE ADMINISTRATIVE TRUSTEES.
The Administrative Trustees (and, in the case of (b)(iii)-(vi) below,
Robert J. Reger, Jr., as authorized representative of the Trust) shall have the
exclusive power, duty and authority to cause the Trust to engage in the
following activities:
(a) to issue and sell the Preferred Trust Securities in accordance
with this Trust Agreement; provided, however, that the Trust may issue no more
than one series of Preferred Trust Securities, and, provided, further, that
there shall be no interests in the Trust other than the Preferred Trust
Securities, and the issuance of Preferred Trust Securities shall be limited to a
one-time issuance of the Preferred Trust Securities on the Closing Date;
(b) in connection with the issue and sale of the Preferred Trust
Securities, at the direction of the Successor Depositor,
to execute and file with the Commission the registration
statement on Form S-1 prepared by the Successor Depositor, including
any amendments thereto, pertaining to the Preferred Trust Securities,
the Preferred Partnership Securities, the Preferred Trust Securities
Guarantee and the Partnership Guarantee;
to execute and file any documents prepared by the Successor
Depositor, or take any acts as determined by the Control Party to be
necessary in order to qualify or register all or part of the Preferred
Trust Securities in any State in which the Control Party has
determined to qualify or register such Preferred Trust Securities for
sale;
to execute and file an application, prepared by the
Successor Depositor, to The New York Stock Exchange, Inc. or any other
national stock exchange or the Nasdaq National Market System for
listing upon notice of issuance of any Preferred Trust Securities;
to execute and file with the Commission a registration
statement, including any amendments thereto, prepared by the Successor
Depositor, relating to the registration of the Preferred Trust
Securities, the Preferred Partnership Securities, the Preferred Trust
Securities Guarantee and the Partnership Guarantee under Section 12(b)
or Section 12(g) of the Exchange Act;
to execute and enter into an underwriting agreement
providing for the sale of the Preferred Trust Securities and perform
the duties and obligations of the Trust thereunder;
to execute the Partnership Agreement; and
to take any other actions necessary or desirable to carry
out any of the foregoing activities;
(c) to acquire the Preferred Partnership Securities with the proceeds
of the sale of the Preferred Trust Securities; provided, however, that the
Administrative Trustees shall cause legal title to the Preferred Partnership
Securities to be held of record in the name of the Property Trustee for the
benefit of the Holders;
(d) to give the Successor Depositor and the Property Trustee prompt
written notice of the occurrence of a Trust Special Event; provided, that the
Administrative Trustees shall consult with the Successor Depositor and the
Property Trustee before taking or refraining from taking any Ministerial Action
in relation to a Trust Special Event;
(e) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including and with respect
to, for the purposes of Section 316(c) of the Trust Indenture Act,
Distributions, voting rights, redemptions and exchanges, and to issue relevant
notices to the Holders and the Control Party as to such actions and applicable
record dates;
(f) to give prompt written notice to the Holders of any notice
received from the Partnership of the General Partner's election not to make a
current, quarterly distribution on the Preferred Partnership Securities under
the Limited Partnership Agreement;
(g) to take all actions and perform such duties as may be required of
the Administrative Trustees pursuant to the terms of the Preferred Trust
Securities;
(h) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.08(f), the Property Trustee has
the exclusive power to bring such Legal Action;
(i) 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;
(j) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(k) to give the certificate required by Section 314(a)(4) of the Trust
Indenture Act to the Property Trustee, which certificate may be executed by any
Administrative Trustee;
(l) to incur expenses that are necessary or incidental to carry out
any of the purposes of the Trust;
(m) to act as, or appoint another Person to act as, registrar and
transfer agent for the Preferred Trust Securities;
(n) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(o) to take any and all actions 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 or to enable the
Trust to effect the purposes for which the Trust was created;
(p) to take any action, or to take no action, not inconsistent with
this Trust Agreement or with applicable law, that the Administrative Trustees
determine in their discretion to be necessary or desirable in carrying out the
activities of the Trust as set out in this Section 3.06, including, but not
limited to:
causing the Trust not to be deemed to be an Investment
Company required to be registered under the 1940 Act; and
taking no action which would be reasonably likely to cause
the Trust to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income
tax purposes or as a company for United Kingdom corporate tax
purposes;
provided, that such action does not adversely affect the interests of Holders;
and
(q) 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.
The Administrative Trustees must exercise the powers set forth in this
Section 3.06 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Administrative Trustees shall not
take any action that is inconsistent with the purposes and functions of the
Trust set forth in Section 3.03.
Subject to this Section 3.06, the Administrative Trustees shall have
none of the powers or the authority of the Property Trustee set forth in Section
3.08.
Any expenses incurred by the Administrative Trustees pursuant to this
Section 3.06 shall be reimbursed by the Partnership pursuant to Section 9.1 of
the Limited Partnership Agreement.
SECTION 3.07 PROHIBITION OF ACTIONS BY THE TRUST AND THE TRUSTEES.
(a) The Trust shall not, and the Trustees (including the Property
Trustee) shall cause the Trust not to, engage in any activity other than as
required or authorized by this Trust Agreement. In particular, the Trust shall
not and the Trustees (including the Property Trustee) shall cause the Trust not
to:
invest any proceeds received by the Trust from holding the
Preferred Partnership Securities, but shall distribute all such
proceeds to Holders pursuant to the terms of this Trust Agreement and
of the Preferred Trust Securities;
acquire any assets other than as expressly provided herein;
possess Trust property for other than a Trust purpose;
make any loans or incur any indebtedness or acquire any
securities other than the Preferred Partnership Securities;
possess any power or otherwise act in such a way as to vary
the Trust assets or the terms of the Preferred Trust Securities in any
way whatsoever;
issue any securities or other evidences of beneficial
ownership of, or beneficial interest in, the Trust other than the
Preferred Trust Securities;
other than as set forth herein, (A) cause the Special
Representative to direct the time, method and place of conducting any
proceeding for any remedy available to the Special Representative or
exercising any trust or power conferred upon the Special
Representative with respect to the Preferred Partnership Securities,
the Affiliate Investment Instruments, and the Investment Guarantees,
(B) cause the Special Representative to waive any past default that is
waivable under the Limited Partnership Agreement, the Affiliate
Investment Instruments or the Investment Guarantees, (C) cause the
Special Representative to exercise any right to rescind or annul any
declaration that the principal of, or other amounts in respect of, any
Affiliate Investment Instrument or Investment Guarantee is due and
payable or (D) consent to any amendment, modification or termination
of the Limited Partnership Agreement or the Preferred Partnership
Securities where such consent shall be required; and
other than in connection with the liquidation of the Trust
pursuant to a Trust Special Event or upon redemption of all the
Preferred Trust Securities, file a certificate of cancellation of the
Trust.
SECTION 3.08 POWERS AND DUTIES OF THE PROPERTY TRUSTEE.
(a) The legal title to the Preferred Partnership Securities shall be
owned by and held of record in the name of the Property Trustee in trust for the
benefit of the Holders. The right, title and interest of the Property Trustee to
the Preferred Partnership Securities shall vest automatically in each Person who
may hereafter be appointed as Property Trustee in accordance with Section 6.07.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents with regard to the Preferred Partnership Securities have
been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Preferred Partnership Securities to the Administrative Trustees
or to the Delaware Trustee (if the Property Trustee does not also act as
Delaware Trustee).
(c) The Property Trustee shall:
establish and maintain a segregated non-interest bearing
trust account (the "Property Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders
and, upon the receipt of payments of funds made in respect of the
Preferred Partnership Securities held by the Property Trustee, deposit
such funds into the Property Account and make payments to the Holders
from the Property Account in accordance with Section 7.01. Funds in
the Property Account shall be held uninvested until disbursed in
accordance with this Trust Agreement. The Property Account shall be an
account that is maintained with a banking institution (including the
Property Trustee if it qualifies hereunder) authorized to exercise
corporate trust powers and having a combined capital and surplus of at
least $50,000,000 and subject to supervision or examination by a
Federal or state authority;
engage in such ministerial activities as shall be necessary
or appropriate to effect the redemption of the Preferred Trust
Securities to the extent the Preferred Partnership Securities are
redeemed; and
upon written notice of distribution issued by the
Administrative Trustees in accordance with the terms of the Preferred
Trust Securities, engage in such ministerial activities as shall be
necessary or appropriate to effect the distribution of the Preferred
Partnership Securities to Holders upon the occurrence of a Trust
Special Event.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Preferred Trust Securities.
(e) The Property Trustee shall take any Legal Action which arises out
of or in connection with a Trust Enforcement Event of which a Responsible
Officer of the Property Trustee has actual knowledge or the Property Trustee's
duties and obligations under this Trust Agreement or the Trust Indenture Act.
(f) The Property Trustee shall have the legal power to exercise all of
the rights, powers and privileges of a holder of Preferred Partnership
Securities and, if a Trust Enforcement Event occurs and is continuing, the
Property Trustee shall, for the benefit of Holders, enforce its rights as holder
of the Preferred Partnership Securities subject to the rights of the Holders
pursuant to the terms of such Preferred Trust Securities.
(g) The Property Trustee may authorize one or more Persons (each, a
"Paying Agent") to pay distributions, redemption payments or liquidation
payments on behalf of the Trust with respect to all Preferred Trust Securities
and any such Paying Agent shall comply with Section 317(b) of the Trust
Indenture Act. Any Paying Agent may be removed by the Property Trustee at any
time and a successor Paying Agent or additional Paying Agents may be appointed
at any time by the Property Trustee.
(h) The Property Trustee shall continue to serve as a Trustee until
either:
the Trust has been completely liquidated and the proceeds of
the liquidation distributed to the Holders pursuant to the terms of
the Preferred Trust Securities; or
(i) a Successor Property Trustee has been appointed and has
accepted that appointment in accordance with Section 6.07.
Subject to this Section 3.08, the Property Trustee shall have none of
the duties, liabilities, powers or the authority of the Administrative Trustees
set forth in Section 3.06.
The Property Trustee must exercise the powers set forth in this
Section 3.08 in a manner that is consistent with the purposes and functions of
the Trust set out in Section 3.03, and the Property Trustee shall not take any
action that is inconsistent with the purposes and functions of the Trust set out
in Section 3.03.
SECTION 3.09 CERTAIN DUTIES AND RESPONSIBILITIES OF THE PROPERTY
TRUSTEE.
(a) The Property Trustee, before the occurrence of any Trust
Enforcement Event and after the curing or waiver of all Trust Enforcement Events
that may have occurred, shall undertake to perform only such duties as are
specifically set forth in this Trust Agreement and no implied covenants shall be
read into this Trust Agreement against the Property Trustee. In case a Trust
Enforcement Event has occurred (that has not been cured or waived pursuant to
Section 2.06) of which a Responsible Officer of the Property Trustee has actual
knowledge, the Property Trustee shall exercise such of the rights and powers
vested in it by this Trust Agreement, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) No provision of this Trust Agreement shall be construed to relieve
the Property Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that:
prior to the occurrence of a Trust Enforcement Event and
after the curing or waiving of all such Trust Enforcement Events that
may have occurred:
(A) the duties and obligations of the Property Trustee shall
be determined solely by the express provisions of this Trust Agreement and the
Property Trustee shall not be liable except for the performance of such duties
and obligations as are specifically set forth in this Trust Agreement, and no
implied covenants or obligations shall be read into this Trust Agreement against
the Property Trustee;
(B) and in the absence of bad faith on the part of the
Property Trustee, the Property 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 Property Trustee and conforming to the
requirements of this Trust Agreement; but in the case of any such certificates
or opinions that by any provision hereof are specifically required to be
furnished to the Property Trustee, the Property Trustee shall be under a duty to
examine the same to determine whether or not they conform to the requirements of
this Trust Agreement;
the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
subject to the requirement of the Property Trustee receiving
a tax opinion as set forth in Section 8.04(d) or 8.05(c), as the case
may be, the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of not less than a Majority in
Liquidation Amount of the Preferred Trust Securities relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee under this Trust Agreement;
no provision of this Trust Agreement shall require the
Property Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties
or in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that the repayment of such funds or
protection from such liability is not reasonably assured to it under
the terms of this Trust Agreement or indemnity reasonably satisfactory
to the Property Trustee against such risk or liability is not
reasonably assured to it;
the Property Trustee's sole duty with respect to the
custody, safe keeping and physical preservation of the Preferred
Partnership Securities and the Property Account shall be to deal with
such property in a similar manner as the Property Trustee deals with
similar property for its own account, subject to the protections and
limitations on liability afforded to the Property Trustee under this
Trust Agreement and the Trust Indenture Act;
the Property Trustee shall have no duty or liability for or
with respect to the value, genuineness, existence or sufficiency of
the Preferred Partnership Securities or the payment of any taxes or
assessments levied thereon or in connection therewith;
money held by the Property Trustee need not be segregated
from other funds held by it except in relation to the Property Account
maintained by the Property Trustee pursuant to Section 3.08(c)(i) and
except to the extent otherwise required by law; and
the Property Trustee shall not be responsible for monitoring
the compliance by the Administrative Trustees or the Successor
Depositor with their respective duties under this Trust Agreement, nor
shall the Property Trustee be liable for any default or misconduct of
the Administrative Trustees or the Successor Depositor.
SECTION 3.10 CERTAIN RIGHTS OF PROPERTY TRUSTEE.
(a) Subject to the provisions of Section 3.09:
the Property 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;
any direction or act of the Control Party, Successor
Depositor, or the Administrative Trustees acting on behalf of the
Trust contemplated by this Trust Agreement shall be sufficiently
evidenced by an Officers' Certificate;
whenever in the administration of this Trust Agreement, the
Property Trustee shall deem it desirable that a matter be proved or
established before taking, suffering or omitting any action hereunder,
the Property Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and
conclusively rely upon an Officers' Certificate which, upon receipt of
such request, shall be promptly delivered by the Control Party,
Successor Depositor ,or the Administrative Trustees;
the Property Trustee shall have no duty to see to any
recording, filing or registration of any instrument (including any
financing or continuation statement or any filing under tax or
securities laws) or any re-recording, refilling or registration
thereof;
the Property Trustee may consult with counsel or other
experts and the advice or opinion of such counsel and experts with
respect to legal matters or advice within the scope of such experts'
area of expertise shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with such advice or opinion;
such counsel may be counsel to the Successor Depositor or any of its
Affiliates, and may include any of its employees. The Property Trustee
shall have the right at any time to seek instructions concerning the
administration of this Trust Agreement from any court of competent
jurisdiction;
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 Holder, unless (a) such
Holder shall have provided to the Property Trustee security and
indemnity, reasonably satisfactory to the Property Trustee, against
the costs, expenses (including attorneys' fees and expenses and the
expenses of the Property Trustee's agents, nominees or custodians) and
liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as may be
requested by the Property Trustee and (b) the Property Trustee has
obtained the legal opinions, if any, required by Section 8.04(d) or
8.05(c), as the case may be, of this Trust Agreement; provided, that,
nothing contained in this Section 3.10(a)(vi) shall be taken to
relieve the Property Trustee, upon the occurrence of a Trust
Enforcement Event, of its obligation to exercise the rights and powers
vested in it by this Trust Agreement;
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,
direction, consent, order, bond, debenture, note, other evidence of
indebtedness or other paper or document, but the Property Trustee, in
its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit;
the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents, custodians, nominees or attorneys and the Property
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;
any action taken by the Property Trustee or its agents
hereunder shall bind the Trust and the Holders, and the signature of
the Property Trustee or its agents alone shall be sufficient and
effective to perform any such action and no third party shall be
required to inquire as to the authority of the Property Trustee to so
act or as to its compliance with any of the terms and provisions of
this Trust Agreement, both of which shall be conclusively evidenced by
the Property Trustee's or its agent's taking such action;
whenever in the administration of this Trust Agreement the
Property Trustee shall deem it desirable to receive instructions with
respect to enforcing any remedy or right or taking any other action
hereunder, the Property Trustee (i) may request instructions from the
Holders which instructions may only be given by the Holders of the
same proportion in Liquidation Amount of the Preferred Trust
Securities as would be entitled to direct the Property Trustee under
the terms of the Preferred Trust Securities in respect of such remedy,
right or action, (ii) may refrain from enforcing such remedy or right
or taking such other action until such instructions are received, and
(iii) shall be fully protected in conclusively relying on or acting in
or accordance with such instructions; provided, however, that the
Property Trustee shall not be required to take any action unless it
shall have obtained such legal opinions, if any, required by Sections
8.04(d) or 8.05(c), as the case may be, of this Trust Agreement; and
except as otherwise expressly provided by this Trust
Agreement, the Property Trustee shall not be under any obligation to
take any action that is discretionary under the provisions of this
Trust Agreement.
(b) No provision of this Trust Agreement shall be deemed to impose any
duty or obligation on the Property 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 Property 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 Property Trustee
shall be construed to be a duty.
SECTION 3.11 DELAWARE TRUSTEE.
Notwithstanding any provision of this Trust Agreement other than Section
6.02, 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
Administrative Trustees or the Property Trustee described in this Trust
Agreement. Except as set forth in Section 6.02, the Delaware Trustee shall be a
Trustee for the sole and limited purpose of fulfilling the requirements of
Section 3807 of the Business Trust Act.
SECTION 3.12 EXECUTION OF DOCUMENTS.
Except as otherwise required by the Business Trust Act, any Administrative
Trustee or Robert J. Reger, Jr., as the authorized representative of the Trust,
is authorized to execute on behalf of the Trust any documents that the
Administrative Trustees have the power and authority to cause the Trust to
execute pursuant to Section 3.06.
SECTION 3.13 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF PREFERRED TRUST
SECURITIES.
The recitals contained in this Trust Agreement and the Preferred Trust
Securities shall be taken as the statements of the Initial Depositor, and the
Trustees do not assume any responsibility for their correctness. The Trustees
make no representations as to the value or condition of the property of the
Trust or any part thereof. The Trustees make no representations as to the
validity or sufficiency of this Trust Agreement or the Preferred Trust
Securities.
SECTION 3.14 DURATION OF TRUST.
The Trust, unless dissolved pursuant to the provisions of Article VIII
hereof, shall have perpetual existence.
SECTION 3.15 MERGERS.
(a) The Trust 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 Person, except as described in Section
3.15(b) and (c) or Section 9.02.
(b) The Trust may, with the consent of the Administrative Trustees or,
if there are more than two, a majority of the Administrative Trustees and
without the consent of the Holders, the Delaware Trustee or the Property
Trustee, consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety to a trust organized as such under the laws of any
State of the United States; provided, that:
if the Trust is not the survivor, such successor entity (the
"Successor Entity") either:
(A) expressly assumes all of the obligations of the Trust
under the Preferred Trust Securities; or
(B) substitutes for the Preferred Trust Securities other
securities having substantially the same terms as the Preferred Trust Securities
(the "Successor Preferred Trust Securities") so long as the Successor Preferred
Trust Securities rank the same as the Preferred Trust Securities rank with
respect to distributions, assets and payments upon liquidation, redemption and
otherwise;
the Company expressly acknowledges a trustee of the
Successor Entity that possesses the same powers and duties as the Property
Trustee as the Holder;
the Successor Preferred Trust Securities are listed, or any
Successor Preferred Trust Securities will be listed upon notification of
issuance, on any national securities exchange or with another organization on
which the Preferred Trust Securities are then listed or quoted;
such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not cause the Preferred Trust Securities
(including any Successor Preferred Trust Securities) to be downgraded by any
nationally recognized statistical rating organization;
such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease does not adversely affect the rights, preferences
and privileges of the Holders (including any Successor Preferred Trust
Securities) in any material respect;
such Successor Entity has a purpose identical to that of the
Trust;
TXU Europe, or a successor permitted by the Trust
Guarantees, guarantees the obligations of such Successor Entity under the
Successor Preferred Trust Securities at least to the extent provided by the
Trust Guarantees; and
prior to such merger, consolidation, amalgamation,
replacement, conveyance, transfer or lease, the Control Party has received an
opinion of a nationally recognized independent counsel to the Trust experienced
in such matters to the effect that:
(C) such merger, consolidation, amalgamation, replacement,
conveyance, transfer or lease will not adversely affect the rights, preferences
and privileges of the Holders (including any Successor Preferred Trust
Securities) in any material respect (other than with respect to any dilution of
the Holders' interest in the new entity);
(D) following such merger, consolidation, amalgamation,
replacement, conveyance,transfer or lease, neither the Trust nor the Successor
Entity will be required to register as an Investment Company under the 1940 Act;
(E) following such merger, consolidation, amalgamation or
replacement, the Trust (or the Successor Entity) will not be classified as an
association or a publicly traded partnership taxable as a corporation for United
States federal income tax purposes or as a company for United Kingdom corporate
income tax purposes; and
(F) following such merger, consolidation, amalgamation or
replacement, the Partnership will not be classified as an association or a
publicly traded partnership taxable as a corporation for United States federal
income tax purposes or as ____________________ for United Kingdom corporate
income tax purposes.
(c) Notwithstanding Section 3.15(b), the Trust shall not, except with
the consent of Holders of 100% in Liquidation Amount of the Preferred Trust
Securities, consolidate, amalgamate, merge with or into, or be replaced by any
other entity or permit any other entity to consolidate, amalgamate, merge with
or into, or replace it if such consolidation, amalgamation, merger or
replacement would cause the Trust or Successor Entity or the Partnership to be
classified as an association or a publicly traded partnership taxable as a
corporation for United States federal income tax purposes or as a company for
United Kingdom corporate income tax purposes.
ARTICLE IV
SUCCESSOR DEPOSITOR
SECTION 4.01 RESPONSIBILITIES OF THE SUCCESSOR DEPOSITOR.
In connection with the issue and sale of the Preferred Trust Securities,
the Successor Depositor shall have the exclusive right and responsibility to
engage in the following activities:
(a) to prepare for filing by the Trust with the Commission a
registration statement on Form S-1 in relation to the Preferred Trust
Securities, the Preferred Partnership Securities, the Preferred Trust Securities
Guarantee and the Partnership Guarantee, including any amendments thereto;
(b) to prepare for filing by the Trust an application to The New York
Stock Exchange, Inc. or any other national stock exchange or the Nasdaq National
Market System for listing upon notice of issuance of any Preferred Trust
Securities;
(c) to prepare for filing by the Trust with the Commission a
registration statement relating to the registration of the Preferred Trust
Securities, the Preferred Partnership Securities, the Preferred Trust Securities
Guarantee, and the Partnership Guarantee under Section 12(b) or Section 12(g) of
the Exchange Act, including any amendments thereto; and
SECTION 4.02 INDEMNIFICATION AND EXPENSES OF THE TRUSTEE.
To the extent the Partnership fails to do so, the Successor Depositor
agrees to indemnify the Property Trustee and the Delaware Trustee for, and to
hold each of them harmless against, any loss, liability or expense incurred
without negligence or bad faith on the part of the Property Trustee or the
Delaware Trustee, as the case may be, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses of defending either of them against any claim or liability in
connection with the exercise or performance of any of their respective powers or
duties hereunder; the provisions of this Section 4.02 shall survive the
resignation or removal of the Delaware Trustee or the Property Trustee or the
termination of this Trust Agreement.
ARTICLE V
CONTROL CERTIFICATE
SECTION 5.01 ISSUANCE OF THE CONTROL CERTIFICATE.
(a) The Initial Depositor shall transfer an instrument (the "Control
Certificate ") to the Control Party, which instrument shall establish in the
holder thereof certain voting, administrative and appointment powers with
respect to the Trust. Such voting, administrative and appointment powers shall
be as specified in this Trust Agreement.
(b) The Control Certificate shall be substantially in the form of
Exhibit A-2 to this Trust Agreement, with such changes and additions, thereto or
deletions therefrom as may be required by ordinary usage, custom, or practice.
SECTION 5.02 TRANSFER OF THE CONTROL CERTIFICATE.
Upon a transfer of the Control Certificate in accordance with this Section
5.02:
(a) The Control Party surrendering the Control Certificate (the
"Surrendering Party") (or its duly authorized attorney) shall surrender the
Control Certificate at the office or agency of the Trust along with a written
instrument of surrender, in a form satisfactory to at least one Administrative
Trustee, duly executed by the Surrendering Party. Thereupon, the Surrendering
Party shall cease to be the Control Party. The surrendered Control Certificate
shall be canceled and subsequently disposed of by the Administrative Trustee in
accordance with its customary practice; and
(b) Immediately upon such surrender, (i) the Initial Depositor, on
behalf of the Trust, shall execute and deliver in the name of the successor
Control Party a new Control Certificate dated the date of the delivery and (ii)
the successor Control Party shall evidence its acceptance by executing the new
Control Certificate and taking possession thereof. Thereupon, such entity shall
be deemed to be the Control Party.
No service charge shall be made for any registration of transfer or
surrender of the Control Certificate.
SECTION 5.03 NO ECONOMIC INTEREST IN THE TRUST.
(a) The Control Party, by virtue of its possession of the Control
Certificate, has a beneficial interest in the Trust; provided however, that the
Control Party, solely by virtue of its possession of the Control Certificate,
shall not be a trustee of the Trust nor shall it have an undivided beneficial
interest in the property of the Trust nor shall it be entitled to any financial
or monetary interest in the Trust, including but not limited to any distribution
from the Trust, any amounts paid on liquidation or termination of the Trust, or
any entitlement to the Subsidiary Debentures or payments thereon.
(b) Possession of the Control Certificate does not:
Entitle to the Control Party to income or assets of the
Trust;
Impose upon the Control Party any obligation as trustee with
respect to the Trust; or
Impose upon the Control Party any obligation to act as a
fiduciary (to the fullest extent of the law) with respect to the Trust
or the Preferred Trust Securities.
SECTION 5.04 CERTAIN DUTIES AND RESPONSIBILITIES.
The rights, duties, and responsibilities of the Control Party shall be only
as provided by the Control Certificate and this Trust Agreement. Notwithstanding
the foregoing, no provision of the Original Trust Agreement, the Control
Certificate, or this Trust Agreement shall require the Control Party to incur
any of its own funds in performance of its duties as Control Party. Whether or
not therein expressly so provided, every provision of the Control Certificate
and this Trust Agreement relating to the conduct of the Control party shall be
subject to the provisions of this Section.
SECTION 5.05 RIGHTS AND RESPONSIBILITIES OF THE CONTROL PARTY.
(a) Except as provided under this Section 5.05 or as otherwise
required by the Business Trust Act, the Trust Indenture Act or other applicable
law or provided by the Trust Agreement, the Control Party will have no voting
rights.
(b) The Control Party is entitled, in accordance with Article V of the
Trust Agreement, to vote to appoint, remove or replace any Trustee or to
increase or decrease the number of Trustees.
(c) Subject to Section 2.06 of the Trust Agreement and only after all
Trust Enforcement Events with respect to the Preferred Trust Securities have
been cured, waived, or otherwise eliminated and subject to the requirement of
the Property Trustee obtaining a tax opinion in certain circumstances set forth
in this paragraph (c), the Control Party has the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Property Trustee, or 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, as holder of the Preferred Partnership Securities, to (i)
exercise the remedies available to it under the Limited Partnership Agreement as
a holder of the Preferred Partnership Securities, including the right to direct
the Special Representative of the Partnership as elected by the holders of the
Preferred Partnership Securities in accordance with the Limited Partnership
Agreement (A) to enforce the Partnership's creditors rights and other rights
with respect to the Affiliate Investment Instruments and any Investment
Guarantees, (B) to enforce the rights of the holders of the Preferred
Partnership Securities under the Partnership Guarantee, and (C) to enforce the
rights of the holders of the Preferred Partnership Securities to receive
distributions (if and to the extent such distributions have been declared out of
funds legally available therefor by the General Partner in its sole discretion)
on the Preferred Partnership Securities or (ii) consent to any amendment,
modification, or termination of the Limited Partnership Agreement or the
Preferred Partnership Securities where such consent shall be required. Except
with respect to directing the time, method, and place of conducting a proceeding
for a remedy, the Property Trustee shall be under no obligation to take any of
the actions described in clause 8.05(c)(i) and (ii) above unless the Property
Trustee has obtained an opinion of independent tax counsel to the effect that,
as a result of such action, for United States federal income tax purposes the
Trust will not fail to be classified as a grantor trust and each Holder will be
treated as owning an undivided beneficial ownership interest in the Preferred
Partnership Securities.
(d) If the Property Trustee fails to enforce its rights under the
Preferred Partnership Securities after the Control Party has made a written
request, the Control Party may directly institute a legal proceeding directly
against the Company, as General Partner of the Partnership or the Special
Representative, to enforce the Property Trustee's rights under the Preferred
Partnership Securities without first instituting any legal proceeding against
the Property Trustee or any other person or entity. Notwithstanding the
foregoing, if a Trust Enforcement Event has occurred and is continuing and such
event is attributable to the failure of an Investment Affiliate to make any
required payment when due on any Affiliate Investment Instrument or the failure
of the Company to make any required payment when due on any Investment
Guarantee, then the Control Party may directly institute a proceeding against
such Investment Affiliate or the Company for enforcement of payment with respect
to such Affiliate Investment Instrument or Investment Guarantee.
(e) A waiver of a Partnership Enforcement Event with respect to the
Preferred Partnership Securities will constitute a waiver of the corresponding
Trust Enforcement Event.
(f) No vote or consent of the Control Party shall be required for the
Trust to distribute Preferred Partnership Securities in accordance with the
Trust Agreement and the terms of the Preferred Trust Securities.
(g) In connection with the issue and sale of the Preferred Trust
Securities, the Control Party shall have the exclusive right and responsibility
to engage in the following activities:
to determine the States in which to take appropriate action
to qualify or register for sale all or part of the Preferred Trust
Securities and to do any and all such acts, other than actions which
must be taken by the Trust, and advise the Trust of actions it must
take, and prepare for execution and filing any documents to be
executed and filed by the Trust, as the Control Party deems necessary
or advisable in order to comply with the applicable laws of any such
States; and
to select the investment banker or bankers to act as
underwriters with respect to the offer and sale of the Preferred Trust
Securities and to negotiate the terms of an underwriting agreement and
any pricing agreement providing for the sale of the Preferred Trust
Securities.
ARTICLE VI
TRUSTEES
SECTION 6.01 NUMBER OF TRUSTEES.
The number of Trustees initially shall be ___________ (___), and:
(a) at any time before the issuance of any Preferred Trust Securities,
the Initial Depositor may, by written instrument, increase or decrease the
number of Trustees; and
(b) after the issuance of any Preferred Trust Securities, the number
of Trustees may be increased or decreased by the Control Party; provided,
however, that the number of Trustees shall in no event be less than three (3);
provided, further, that (1) if required by the Business Trust Act, one Trustee
shall be the Delaware Trustee; (2) there shall be at least one Trustee who is an
employee or officer of, or is affiliated with the Company (each, an
"Administrative Trustee"); and (3) one Trustee shall be the Property Trustee for
so long as this Trust Agreement is required to qualify as an indenture under the
Trust Indenture Act, and such Property Trustee may also serve as Delaware
Trustee if it meets the applicable requirements.
SECTION 6.02 DELAWARE TRUSTEE.
If required by the Business Trust Act, the Delaware Trustee shall be:
(a) a natural person who is a resident of the State of Delaware; or
(b) if not a natural person, an entity which has its principal place
of business in the State of Delaware, and otherwise meets the requirements of
applicable law,
provided, that if the Property Trustee has its principal place of business in
the State of Delaware and otherwise meets the requirements of applicable law,
then the Property Trustee may also be the Delaware Trustee (in which case
Section 3.11 shall have no application).
SECTION 6.03 PROPERTY TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act as
Property Trustee which shall:
not be an Affiliate of the Successor Depositor; and
be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or
of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least 50 million
U.S. dollars ($50,000,000), and subject to supervision or examination
by Federal, State, Territorial or District of Columbia authority. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of the supervising or examining
authority referred to above, then for the purposes of this Section
6.03(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 Property Trustee shall cease to be eligible to
so act under Section 6.03(a), the Property Trustee shall immediately resign in
the manner and with the effect set forth in Section 6.07(c).
(c) If the Property Trustee has or shall acquire any "conflicting
interest" within the meaning of Section 310(b) of the Trust Indenture Act, the
Property Trustee and the Control Party (as if it were the obligor referred to in
Section 310(b) of the Trust Indenture Act) shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.
(d) The Preferred Trust Securities Guarantee and the Indenture (For
Unsecured Debt Securities) dated as of May 1, 1999 of TXU Europe and TXU Eastern
Funding Company to The Bank of New York, as trustee, shall be deemed to be
specifically described in this Trust Agreement for purposes of clause (i) of the
first proviso contained in Section 310(b) of the Trust Indenture Act.
(e) The initial Property Trustee shall be:
The Bank of New York
SECTION 6.04 QUALIFICATIONS OF ADMINISTRATIVE TRUSTEES AND DELAWARE TRUSTEE
GENERALLY.
Each Administrative Trustee and the Delaware Trustee (unless the Property
Trustee also acts as Delaware Trustee) shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
Authorized Officers.
SECTION 6.05 ADMINISTRATIVE TRUSTEES.
The initial Administrative Trustees shall be:
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Except as expressly set forth in this Trust Agreement and except if a
meeting of the Administrative Trustees is called with respect to any matter over
which the Administrative Trustees have power to act, any power of the
Administrative Trustees may be exercised by, or with the consent of, any one
such Administrative Trustee.
SECTION 6.06 DELAWARE TRUSTEE.
The initial Delaware Trustee shall be:
The Bank of New York (Delaware)
SECTION 6.07 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUSTEES.
(a) Subject to Section 6.07(b), Trustees may be appointed or removed
without cause at any time:
until the issuance of any Preferred Trust Securities, by
written instrument executed by the Initial Depositor; and
after the issuance of any Preferred Trust Securities, by the
Control Party.
(b) (i) The Trustee that acts as Property Trustee shall not be removed
in accordance with Section 6.07(a) until a successor Trustee possessing the
qualifications to act as Property Trustee under Section 6.03 (a "Successor
Property Trustee") has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and delivered to
the Administrative Trustees and the Successor Depositor; and
the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 6.07(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under
Sections 6.02 and 6.04 (a "Successor Delaware Trustee") has been
appointed and has accepted such appointment by written instrument
executed by such Successor Delaware Trustee and delivered to the
Administrative Trustees and the Successor Depositor.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation.
Any Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing signed by the Trustee and delivered to
the Successor Depositor and the Trust, which resignation shall take effect upon
such delivery or upon such later date as is specified therein; provided,
however, that:
No such resignation of the Trustee that acts as the Property Trustee
shall be effective:
(A) until a Successor Property Trustee has been appointed and has
accepted such appointment by instrument executed by such Successor Property
Trustee and delivered to the Trust, the Successor Depositor and the resigning
Property Trustee; or
(B) until the assets of the Trust have been completely liquidated
and the proceeds thereof distributed to the Holders; and
no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been appointed
and has accepted such appointment by instrument executed by such Successor
Delaware Trustee and delivered to the Trust, the Successor Depositor and the
resigning Delaware Trustee.
(d) The Control Party shall use its best efforts to promptly appoint a
Successor Delaware Trustee or Successor Property Trustee, as the case may be, if
the Property Trustee or the Delaware Trustee delivers an instrument of
resignation in accordance with this Section 6.07.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
6.07 within 60 days after delivery to the Successor Depositor and the Trust of
an instrument of resignation, the resigning Property Trustee or Delaware
Trustee, as applicable, may petition any court of competent jurisdiction for
appointment of a Successor Property Trustee or Successor Delaware Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper and prescribe, appoint a Successor Property Trustee or Successor Delaware
Trustee, as the case may be.
(f) No Property Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Property Trustee or successor Delaware
Trustee, as the case may be.
SECTION 6.08 VACANCIES AMONG TRUSTEES.
If a Trustee ceases to hold office for any reason and the number of
Trustees is not reduced pursuant to Section 6.01, or if the number of Trustees
is increased pursuant to Section 6.01, a vacancy shall occur. A resolution
certifying the existence of such vacancy by the Administrative Trustees or, if
there are more than two, a majority of the Administrative Trustees shall be
conclusive evidence of the existence of such vacancy. The vacancy shall be
filled with a Trustee appointed in accordance with Section 6.07.
SECTION 6.09 EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to annul, dissolve or terminate 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 6.07,
the Administrative Trustees in office, regardless of their number, shall have
all the powers granted to the Administrative Trustees and shall discharge all
the duties imposed upon the Administrative Trustees by this Trust Agreement.
SECTION 6.10 MEETINGS.
If there is more than one Administrative Trustee, meetings of the
Administrative Trustees shall be held from time to time upon the call of any
Administrative Trustee. Regular meetings of the Administrative Trustees may be
held at a time and place fixed by resolution of the Administrative Trustees.
Notice of any in-person meetings of the Administrative Trustees shall be hand
delivered or otherwise delivered in writing (including by facsimile, with a hard
copy by overnight courier) not less than 48 hours before such meeting. Notice of
any telephonic meetings of the Administrative Trustees or any committee thereof
shall be hand delivered or otherwise delivered in writing (including by
facsimile, with a hard copy by overnight courier) not less than 24 hours before
a meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of an Administrative Trustee at a meeting shall constitute a waiver
of notice of such meeting except where an Administrative Trustee attends a
meeting for the express purpose of objecting to the transaction of any activity
on the ground that the meeting has not been lawfully called or convened. Unless
provided otherwise in this Trust Agreement, any action of the Administrative
Trustees may be taken at a meeting by vote of a majority of the Administrative
Trustees present (whether in person or by telephone) and eligible to vote with
respect to such matter; provided, that a Quorum is present, or without a meeting
by the unanimous written consent of the Administrative Trustees. Notwithstanding
the foregoing, any and all actions of the Administrative Trustees may be taken
by the unanimous written consent of all Administrative Trustees.
SECTION 6.11 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
3.06, 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 or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the 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 6.12 MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any corporation into which the Property Trustee or the Delaware Trustee, as
the case may be, may be merged or converted or with which either may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Property Trustee or the Delaware Trustee, as the case
may be, shall be a party, or any corporation succeeding to all or substantially
all the corporate trust business of the Property Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Property Trustee or
the Delaware Trustee, as the case may be, hereunder; provided, that such
corporation shall be otherwise qualified and eligible under this Article,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto.
ARTICLE VII
SECTION 7.01 DISTRIBUTIONS.
(a) [Holders shall be entitled to receive cash distributions on a Pro
Rata basis of all amounts distributed to the Trust including amounts received
from (i) the Partnership on the Preferred Partnership Securities (which provide
for entitlements to share in net income of the Partnership at the rate per annum
of _____% of the principal amount of the Preferred Partnership Securities), and
(ii) the Company on the Partnership Guarantees.] Distributions on the Preferred
Trust Securities shall be payable to the extent that the Partnership makes a
distribution on the Preferred Partnership Securities held by the Property
Trustee or the Company makes a payment under the Partnership Guarantee (the
amount of any such partnership distribution or guarantee payment being a
"Payment Amount"). The Trust shall, and the Property Trustee is directed to,
utilizing all funds that are available for that purpose, make a Pro Rata
distribution of the Payment Amount to Holders.
(b) Distributions on the Preferred Trust Securities will be payable
quarterly in arrears on each ____________, ____________, ____________ and
____________, commencing ________, _________, when, as and if available for
payment, by the Property Trustee, except as otherwise described below.
(c) Amounts available to the Trust for distribution to the Holders
will be limited to payments received by the Trust from the Partnership on the
Preferred Partnership Securities or from the Company on the Partnership
Guarantees paid by the Company to the Trust. If the Property Trustee, as the
holder of the Preferred Partnership Securities for the benefit of the Holders,
receives notice of any determination by the Partnership not to pay distributions
on such Preferred Partnership Securities, the Property Trustee shall give notice
of such determination to the Holders.
(d) Distributions on the Preferred Trust Securities will be payable to
the Holders thereof as they appear on the books and records of the Trust on the
relevant record dates, which relevant record dates, as long as the Preferred
Trust Securities remain in book-entry only form, will be one Business Day prior
to the relevant payment dates. Such distributions will be paid through the
Property Trustee who will hold amounts received in respect of the Preferred
Partnership Securities in the Property Account for the benefit of the Holders.
In the event that the Preferred Trust Securities do not remain in book-entry
only form, the relevant record dates shall be the 15th day of the month of the
relevant payment dates. In the event that any date on which distributions are
payable on the Preferred Trust Securities is not a Business Day, payment of the
distribution payable on such date will be made on the next succeeding day which
is a Business Day (without any interest or other payment in respect of any such
delay) except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
ARTICLE VIII
ISSUANCE OF PREFERRED TRUST SECURITIES
SECTION 8.01 DESIGNATION AND GENERAL PROVISIONS REGARDING THE PREFERRED
TRUST SECURITIES.
(a) The Administrative Trustees shall on behalf of the Trust issue one
class of preferred securities representing undivided beneficial ownership
interests in the assets of the Trust with an aggregate Liquidation Amount with
respect to the assets of the Trust of _______dollars ($______) and a Liquidation
Amount with respect to the assets of the Trust of $25 per preferred security,
are hereby designated for the purpose of identification only as _______% Trust
Originated Preferred Securities (the "Preferred Trust Securities"). The
Preferred Trust Security Certificates evidencing the Preferred Trust Securities
shall be substantially in the form of Exhibit A-1 to the Trust Agreement, with
such changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice or to conform to the rules of any stock
exchange on which the Preferred Trust Securities are listed.
(b) The Trust shall issue no securities or other interests in the
assets of the Trust other than the Preferred Trust Securities.
(c) Any Administrative Trustee shall sign the Preferred Trust
Securities for the Trust by manual or facsimile signature. In case any
Administrative Trustee of the Trust who shall have signed any of the Preferred
Trust Securities shall cease to be an Administrative Trustee before the
Certificates so signed shall be delivered by the Trust, such Certificates
nevertheless may be delivered as though the person who signed such Certificates
had not ceased to be such Administrative Trustee; and any Certificate may be
signed on behalf of the Trust by such persons who, at the actual date of
execution of such Preferred Trust Security, shall be the Administrative Trustees
of the Trust, although at the date of the execution and delivery of the Trust
Agreement any such person was not such an Administrative Trustee. 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 their execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
Administrative Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation of any stock exchange on which
Preferred Trust Securities may be listed, or to conform to usage.
A Preferred Trust Security shall not be valid until authenticated by the
manual signature of an authorized officer of the Property Trustee. Such
signature shall be conclusive evidence that the Preferred Trust Security has
been authenticated under this Trust Agreement.
Upon a written order of the Trust signed by one Administrative Trustee, the
Property Trustee shall authenticate the Preferred Trust Securities for original
issue. The aggregate number of Preferred Trust Securities outstanding at any
time shall not exceed the number set forth in the terms of the Preferred Trust
Securities.
The Property Trustee may appoint an authenticating agent acceptable to the
Trust to authenticate Preferred Trust Securities. An authenticating agent may
authenticate Preferred Trust Securities whenever the Property Trustee may do so.
Each reference in this Trust Agreement to authentication by the Property Trustee
includes authentication by such agent. An authenticating agent has the same
rights as the Property Trustee to deal with the Control Party or an Affiliate of
the Control Party.
(d) The consideration received by the Trust for the issuance of the Preferred
Trust Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
(e) Upon issuance of the Preferred Trust Securities as provided in this Trust
Agreement, the Preferred Trust Securities so issued shall be deemed to be
validly issued, fully paid and non-assessable, subject to Section 11.01.
(f) Every Person, by virtue of having become a Holder or a Preferred Trust
Security Beneficial Owner in accordance with the terms of this Trust Agreement,
shall be deemed to have expressly assented and agreed to the terms of, and shall
be bound by, this Trust Agreement.
SECTION 8.02 REDEMPTION OF PREFERRED TRUST SECURITIES.
(a) Upon a purchase of the Preferred Partnership Securities by the Partnership
upon redemption or otherwise, the proceeds from such purchase shall be
simultaneously applied Pro Rata to redeem Preferred Trust Securities having an
aggregate Liquidation Amount equal to the Preferred Partnership Securities so
purchased or redeemed at an amount equal to $25 per Preferred Partnership
Security plus an amount equal to accumulated and unpaid distributions, including
any compounding thereon, through the date of the redemption or such lesser
amount as shall be received by the Trust in respect of the Preferred Partnership
Securities so purchased or redeemed (the "Redemption Price"). Holders will be
given not less than 30 nor more than 60 days notice of such redemption.
(b) If fewer than all the outstanding Preferred Trust Securities are to be so
redeemed, the Preferred Trust Securities to be redeemed will be redeemed as
described in Section 8.03 below; provided, that fewer than all of the
outstanding Preferred Trust Securities may not be redeemed unless all
accumulated and unpaid distributions have been paid on all Preferred Trust
Securities for all quarterly distribution periods terminating on or prior to the
date of redemption.
(c) If, at any time, a Trust Special Event shall occur and be continuing, the
Administrative Trustees shall, unless the Preferred Partnership Securities are
redeemed in the limited circumstances described below, within 90 days following
the occurrence of such Trust Special Event elect to either (i) dissolve the
Trust upon not less than 30 nor more than 60 days notice with the result that,
after satisfaction of creditors, if any, of the Trust, Preferred Partnership
Securities would be distributed on a Pro Rata basis to the Holders in
liquidation of such Holders' interests in the Trust; provided, however, that if
at the time there is available to the Trust the opportunity to eliminate, within
such 90-day period, the Trust Special Event by taking some ministerial action,
such as filing a form or making an election, or pursuing some other similar
reasonable measure which in the sole judgment of the Control Party has or will
cause no adverse effect on the Trust, the Partnership, the Control Party or the
Holders and will involve no material cost, the Trust will pursue such measure in
lieu of dissolution or (ii) cause the Preferred Trust Securities to remain
outstanding; provided, that in the case of this clause (ii), the Successor
Depositor shall pay any and all expenses incurred by or payable by the Trust
attributable to the Trust Special Event. Furthermore, if in the case of the
occurrence of a Trust Tax Event, the Administrative Trustees have received a
Trust Redemption Tax Opinion, then the General Partner shall have the right,
within 90 days following the occurrence of such Trust Tax Event, to elect to
cause the Partnership to redeem the Preferred Partnership Securities in whole
(but not in part) for cash upon not less than 30 nor more than 60 days notice
and promptly following such redemption, the Preferred Trust Securities will be
redeemed by the Trust at the Redemption Price.
(d) If the Preferred Partnership Securities are distributed to the Holders, the
Successor Depositor will use its best efforts to cause the Preferred Partnership
Securities to be listed on The New York Stock Exchange, Inc. and the Luxembourg
Stock Exchange or on such other national securities exchange or similar
organization as the Preferred Trust Securities are then listed or quoted.
(e) On the date fixed for any distribution of Preferred Partnership Securities,
upon dissolution of the Trust, (i) the Preferred Trust Securities will no longer
be deemed to be outstanding and (ii) certificates representing Preferred Trust
Securities will be deemed to represent the Preferred Partnership Securities
having a liquidation preference equal to the stated Liquidation Amount of such
Preferred Trust Securities until such certificates are presented to the
Successor Depositor or its agent for transfer or reissuance.
SECTION 8.03 REDEMPTION PROCEDURES.
(a) Notice of any redemption of, or notice of distribution of Preferred
Partnership Securities in exchange for, the Preferred Trust Securities (a
"Redemption/Distribution Notice") will be given by the Trust by mail to each
Holder to be redeemed or exchanged not fewer than 30 nor more than 60 days
before the date fixed for redemption or exchange thereof which, in the case of a
redemption, will be the date fixed for redemption of the Preferred Partnership
Securities. For purposes of the calculation of the date of redemption or
exchange and the dates on which notices are given pursuant to this Section 8.03,
a Redemption/ Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders. Each
Redemption/Distribution Notice shall be addressed to the Holders at the address
of each such Holder appearing in the books and records of the Trust. No defect
in the Redemption/ Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or exchange
proceedings with respect to any other Holder.
(b) In the event that fewer than all the outstanding Preferred Trust Securities
are to be redeemed, the Preferred Trust Securities to be redeemed shall be
redeemed Pro Rata from each Holder, provided, that in respect of Preferred Trust
Securities registered in the name of and held of record by DTC or its nominee
(or any successor Clearing Agency or its nominee) or any nominee, the
distribution of the proceeds of such redemption will be made to each Clearing
Agency Participant (or Person on whose behalf such nominee holds such
securities) in accordance with the procedures applied by such agency or nominee.
In the event that the Preferred Trust Securities do not remain in book-entry
only form and fewer than all of the outstanding Preferred Trust Securities are
to be redeemed, the Preferred Trust Securities shall be redeemed Pro Rata or
pursuant to the rules of any securities exchange on which the Preferred Trust
Securities are listed.
(c) If Preferred Trust Securities are to be redeemed and the Trust gives a
Redemption/Distribution Notice, which notice may only be issued if the Preferred
Partnership Securities are redeemed as set out in this Section 8.03 (which
notice will be irrevocable), then (A) while the Preferred Trust Securities are
in book-entry only form, by 12:00 noon, New York City time, on the redemption
date, the Property Trustee will deposit irrevocably with the DTC or its nominee
(or successor Clearing Agency or its nominee) funds sufficient to pay the
applicable Redemption Price with respect to the Preferred Trust Securities and
will give the DTC irrevocable instructions and authority to pay the Redemption
Price to the Holders, and (B) with respect to Preferred Trust Securities issued
in definitive form, the Property Trustee will pay the relevant Redemption Price
to the Holders by check mailed to the address of the relevant Holder appearing
on the books and records of the Trust on the redemption date. If a
Redemption/Distribution Notice shall have been given and funds deposited as
required, if applicable, then immediately prior to the close of business on the
date of such deposit, or on the redemption date, as applicable, distributions
will cease to accumulate on the Preferred Trust Securities so called for
redemption and all rights of Holders will cease, except the right of the Holders
to receive the Redemption Price, but without interest on such Redemption Price.
If any date fixed for redemption of Preferred 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 that is a Business Day (and without any interest or
other payment in respect of the amount payable subject to such delay) except
that, if such Business Day falls in the next calendar year, such payment will be
made on the immediately preceding Business Day, in each case with the same force
and effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of any Preferred Trust Securities is improperly
withheld or refused and not paid either by the Property Trustee or by the
Successor Depositor as guarantor pursuant to the relevant Trust Guarantee,
distributions on such Preferred Trust Securities will continue to accumulate at
the then applicable rate from the original redemption date to the actual date of
payment, in which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the Redemption Price. For these
purposes, the applicable Redemption Price shall not include distributions which
are being paid to Holders who were Holders on a relevant record date. Upon
satisfaction of the foregoing conditions, then immediately prior to the close of
business on the date of such deposit or payment, all rights of Holders so called
for redemption will cease, except the right of the Holders to have received the
Redemption Price, but without interest on such Redemption Price, and from and
after the date fixed for redemption, such Preferred Trust Securities will not
accumulate distributions or bear interest.
Neither the Administrative Trustees nor the Trust shall be required to
register or cause to be registered the transfer of any Preferred Trust
Securities that have been called for redemption.
(d) Subject to the foregoing and applicable law (including, without
limitation, United States federal securities laws), the Company or its
affiliates may at any time and from time to time purchase outstanding Preferred
Trust Securities by tender, in the open market or by private agreement.
SECTION 8.04 VOTING RIGHTS OF PREFERRED TRUST SECURITIES.
(a) Except as provided under this Article VIII and as otherwise
required by the Business Trust Act, the Trust Indenture Act and other applicable
law, the Holders will have no voting rights.
(b) Subject to the requirement of the Property Trustee obtaining a tax
opinion in certain circumstances set forth in Section 8.04(d) below, the Holders
of a Majority in Liquidation Amount of the Preferred Trust Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Property Trustee, or 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, as holder of the Preferred Partnership
Securities, to (i) exercise the remedies available to it under the Limited
Partnership Agreement as a holder of the Preferred Partnership Securities,
including the right to direct the Special Representative of the Partnership as
elected by the holders of the Preferred Partnership Securities in accordance
with the Limited Partnership Agreement (A) to enforce the Partnership's
creditors rights and other rights with respect to the Affiliate Investment
Instruments and any Investment Guarantees, (B) to enforce the rights of the
holders of the Preferred Partnership Securities under the Partnership Guarantee,
and (C) to enforce the rights of the holders of the Preferred Partnership
Securities to receive distributions (if and to the extent such distributions
have been declared out of funds legally available therefor by the General
Partner in its sole discretion) on the Preferred Partnership Securities or (ii)
consent to any amendment, modification, or termination of the Limited
Partnership Agreement or the Preferred Partnership Securities where such consent
shall be required; provided, however, that where a consent or action under the
Limited Partnership Agreement would require the consent or act of the holders of
more than a majority of the aggregate liquidation preference of Preferred
Partnership Securities affected thereby, only the Holders of the percentage of
the aggregate stated Liquidation Amount of the Preferred Trust Securities which
is at least equal to the percentage of aggregate liquidation preference required
under the Limited Partnership Agreement may direct the Property Trustee to give
such consent or take such action.
(c) If the Property Trustee fails to enforce its rights under the
Preferred Partnership Securities after a Holder of record has made a written
request, such Holder of record may institute a legal proceeding directly against
the General Partner or the Special Representative, to enforce the Property
Trustee's rights under the Limited Partnership Agreement without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. Notwithstanding the foregoing, if a Trust Enforcement Event
has occurred and is continuing and such event is attributable to the failure of
an Investment Affiliate to make any required payment when due on any Affiliate
Investment Instrument or the failure of the Company to make any required payment
when due on any Investment Guarantee, then a Holder may directly institute a
proceeding against such Investment Affiliate or the Company for enforcement of
payment with respect to such Affiliate Investment Instrument or Investment
Guarantee.
(d) The Property Trustee shall notify all Holders of any notice of any
Partnership Enforcement Event received from the General Partner with respect to
the Preferred Partnership Securities, the Affiliate Investment Instruments and
the Investment Guarantees. Such notice shall state that such Partnership
Enforcement Event also constitutes a Trust Enforcement Event. Except with
respect to directing the time, method, and place of conducting a proceeding for
a remedy, the Property Trustee shall be under no obligation to take any of the
actions described in clause 8.04(b)(i) and (ii) above unless the Property
Trustee has obtained an opinion of independent tax counsel to the effect that as
a result of such action, the Trust will not fail to be classified as a grantor
trust for United States federal income tax purposes and that after such action
each Holder will continue to be treated as owning an undivided beneficial
ownership interest in the Preferred Partnership Securities.
(e) In the event the consent of the Property Trustee, as the holder of
the Preferred Partnership Securities, is required under the Limited Partnership
Agreement with respect to any amendment, modification or termination of the
Limited Partnership Agreement, the Property Trustee shall request the direction
of the Holders with respect to such amendment, modification or termination and
shall vote with respect to such amendment, modification or termination as
directed by a Majority in Liquidation Amount of the Preferred Trust Securities
voting together as a single class; provided, however, that where a consent under
the Limited Partnership Agreement would require the consent of the holders of
more than a majority of the aggregate liquidation preference of the Preferred
Partnership Securities, the Property Trustee may only give such consent at the
direction of the Holders of at least the same proportion in aggregate stated
Liquidation Amount of the Preferred Trust Securities. The Property Trustee shall
not take any such action in accordance with the directions of the Holders unless
the Property Trustee has obtained an opinion of tax counsel to the effect that,
as a result of such action, the Trust will not be classified as other than a
grantor trust for United States federal income tax purposes.
(f) A waiver of a Partnership Enforcement Event with respect to the
Preferred Partnership Securities will constitute a waiver of the corresponding
Trust Enforcement Event.
(g) Any required approval or direction of Holders may be given at a
separate meeting of Holders convened for such purpose, at a meeting of all of
the Holders or pursuant to written consent. The Administrative Trustees will
cause a notice of any meeting at which Holders are entitled to vote, or of any
matter upon which action by written consent of such Holders is to be taken, to
be mailed to each Holder of record. Each such notice will include a statement
setting forth the following information: (i) the date of such meeting or the
date by which such action is to be taken; (ii) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought; and (iii) instructions
for the delivery of proxies or consents.
(h) No vote or consent of the Holders will be required for the Trust
to redeem and cancel Preferred Trust Securities or distribute Preferred
Partnership Securities in accordance with the Trust Agreement.
(i) Notwithstanding that Holders are entitled to vote or consent under
any of the circumstances described above, any of the Preferred Trust Securities
that are beneficially owned at such time by the Company or any entity directly
or indirectly controlled by, or under direct or indirect common control with,
the Company, shall not be entitled to vote or consent and shall, for purposes of
such vote or consent, be treated as if such Preferred Trust Securities were not
outstanding; provided, however, that persons (other than affiliates of the
Company) to whom the Company or any of its subsidiaries have pledged Preferred
Trust Securities may vote or consent with respect to such pledged Preferred
Trust Securities pursuant to the terms of such pledge.
(j) Holders will have no rights to appoint or remove the
Administrative Trustees, who may be appointed, removed or replaced solely by the
Control Party.
SECTION 8.05 PAYING AGENT.
In the event that the Preferred Trust Securities are not in book-entry only
form, the Trust shall maintain in the Borough of Manhattan, City of New York,
State of New York, an office or agency where the Preferred Trust Securities may
be presented for payment ("Paying Agent"). The Trust may appoint the Paying
Agent and may appoint one or more additional paying agents in such other
locations as it shall determine. The term "Paying Agent" includes any additional
paying agent. The Trust may change any Paying Agent without prior notice to any
Holder. The Trust shall notify the Property Trustee of the name and address of
any Paying Agent not a party to this Trust Agreement. If the Trust fails to
appoint or maintain another entity as Paying Agent, the Property Trustee shall
act as such. The Trust or any of its Affiliates may act as Paying Agent. The
Bank of New York shall initially act as Paying Agent for the Preferred Trust
Securities.
SECTION 8.06 LISTING.
The Successor Depositor shall use its best efforts to cause the Preferred
Trust Securities to be listed for quotation on The New York Stock Exchange, Inc.
SECTION 8.07 ACCEPTANCE OF GUARANTEE AND AGREEMENTS, LIMITED PARTNERSHIP
AGREEMENT.
Each Holder, by the acceptance thereof, agrees to the provisions of the
applicable Trust Guarantee, the Partnership Guarantee, the Affiliate Investment
Instruments and the Investment Guarantees, respectively, including the
subordination provisions therein.
ARTICLE IX
DISSOLUTION AND LIQUIDATION OF THE TRUST
SECTION 9.01 DISSOLUTION OF TRUST.
(a) The Trust shall dissolve:
upon the bankruptcy of the Successor Depositor;
upon the filing of a certificate of dissolution or its equivalent
with respect to the Successor Depositor, after having obtained the consent of at
least a Majority in Liquidation Amount of the Preferred Trust Securities, voting
together as a single class, to dissolve the Trust, or the revocation of the
Successor Depositor 's charter and the expiration of 90 days after the date of
revocation without a reinstatement thereof;
upon the entry of a decree of judicial dissolution of the
Successor Depositor or the Trust;
when all of the Preferred Trust Securities shall have been called
for redemption and the amounts necessary for redemption thereof shall have been
paid to the Holders in accordance with the terms of the Preferred Trust
Securities;
upon the election of the Administrative Trustees, following the
occurrence and continuation of a Trust Special Event, pursuant to which the
Trust shall have been dissolved in accordance with the terms of the Preferred
Trust Securities and all of the Preferred Partnership Securities shall have been
distributed to the Holders in exchange for all of the Preferred Trust
Securities; or
before the issuance of any Preferred Trust Securities, with the
consent of all of the Administrative Trustees and the Control Party.
(b) As soon as is practicable after the occurrence of an event
referred to in Section 9.01(a) and after the completion of the winding up of the
Trust, the Trustees shall file a certificate of cancellation with the Secretary
of State of the State of Delaware.
(c) The provisions of Section 3.09 and Article XI shall survive the
termination of the Trust.
SECTION 9.02 LIQUIDATION DISTRIBUTION UPON TERMINATION AND DISSOLUTION OF
THE TRUST.
(a) In the event of any voluntary or involuntary dissolution of the
Trust (each a "Trust Liquidation"), the Holders on the date of the Trust
Liquidation will be entitled to receive, out of the assets of the Trust
available for distribution to Holders after satisfaction of the Trusts'
liabilities and creditors, distributions in cash or other immediately available
funds in an amount equal to the aggregate of the stated Liquidation Amount of
$25 per Preferred Trust Security plus accumulated and unpaid distributions
thereon to the date of payment (such amount being the "Trust Liquidation
Distribution"), unless, in connection with such Trust Liquidation, Preferred
Partnership Securities shall be distributed on a Pro Rata basis to the Holders
in exchange for such Preferred Trust Securities.
(b) If, upon any such Trust Liquidation, the Trust Liquidation
Distribution can be paid only in part because the Trust has insufficient assets
available to pay in full the aggregate Trust Liquidation Distribution, then the
amounts payable directly by the Trust on the Preferred Trust Securities shall be
paid on a Pro Rata basis.
ARTICLE X
TRANSFER OF INTERESTS
SECTION 10.01 TRANSFER OF PREFERRED TRUST SECURITIES.
Subject to this Article X, Preferred Trust Securities shall be freely
transferable.
SECTION 10.02 TRANSFER OF CERTIFICATES.
The Administrative Trustees shall provide for the registration of
Certificates and of transfers of Certificates, which will be effected without
charge but only upon payment (with such indemnity as the Administrative Trustees
may require) in respect of any tax or other government charges that may be
imposed in relation to it. Upon surrender for registration of transfer of any
Certificate, the Administrative Trustees shall cause one or more new
Certificates to be issued in the name of the designated transferee or
transferees. Every Certificate surrendered for registration of transfer shall be
accompanied by a written instrument of transfer in form satisfactory to the
Administrative Trustees duly executed by the Holder or such Holder's attorney
duly authorized in writing. Each Certificate surrendered for registration of
transfer shall be canceled by the Administrative Trustees. A transferee of a
Certificate shall be entitled to the rights and subject to the obligations of a
Holder hereunder upon the receipt by such transferee of a Certificate. By
acceptance of a Certificate, each transferee shall be deemed to have agreed to
be bound by this Trust Agreement.
SECTION 10.03 DEEMED SECURITY HOLDERS.
The Trustees may treat the Person in whose name any Certificate shall be
registered on the books and records of the Trust as the sole Holder of such
Certificate and of the Preferred Trust Securities represented by such
Certificate for purposes of receiving distributions and for all other purposes
whatsoever and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such Certificate or in the Preferred Trust
Securities represented by such Certificate on the part of any Person, whether or
not the Trust shall have actual or other notice thereof.
SECTION 10.04 BOOK ENTRY INTERESTS.
Unless otherwise specified in the terms of the Preferred Trust Securities,
the Preferred Trust Securities Certificates, on original issuance, will be
issued in the form of one or more fully registered, global Preferred Trust
Security Certificates (each a "Global Certificate"), to be delivered to DTC, the
initial Clearing Agency, by, or on behalf of, the Trust. Such Global
Certificates shall initially be registered on the books and records of the Trust
in the name of Cede & Co., the nominee of DTC, and no Preferred Trust Security
Beneficial Owner will receive a definitive Preferred Trust Security Certificate
representing such Preferred Trust Security Beneficial Owner's interests in such
Global Certificates, except as provided in Section 10.07. Unless and until
definitive, fully registered Preferred Trust Security Certificates (the
"Definitive Preferred Trust Security Certificates") have been issued to the
Preferred Trust Security Beneficial Owners pursuant to Section 10.07:
(a) the provisions of this Section 10.04 shall be in full force and
effect;
(b) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Trust Agreement (including the payment
of distributions on the Global Certificates and receiving approvals, votes or
consents hereunder) as the Holder and the sole Holder of the Global Certificates
and shall have no obligation to the Preferred Trust Security Beneficial Owners;
(c) to the extent that the provisions of this Section 10.04 conflict
with any other provisions of this Trust Agreement, the provisions of this
Section 10.04 shall control; and
(d) the rights of the Preferred Trust Security Beneficial Owners shall
be exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Trust Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants and the Clearing Agency shall receive and transmit payments of
distributions on the Global Certificates to such Clearing Agency Participants.
The Clearing Agency will make book entry transfers among the Clearing Agency
Participants; provided, that solely for the purposes of determining whether the
Holders of the requisite amount of Preferred Trust Securities have voted on any
matter provided for in this Trust Agreement, so long as Definitive Preferred
Trust Security Certificates have not been issued, the Trustees may conclusively
rely on, and shall be fully protected in relying on, any written instrument
(including a proxy) delivered to the Trustees by the Clearing Agency setting
forth the Preferred Trust Security Beneficial Owners' votes or assigning the
right to vote on any matter to any other Persons either in whole or in part.
SECTION 10.05 NOTICES TO CLEARING AGENCY.
Whenever a notice or other communication to the Holders is required under
this Trust Agreement, unless and until Definitive Preferred Trust Security
Certificates shall have been issued to the Preferred Trust Security Beneficial
Owners pursuant to Section 10.07, the Administrative Trustees shall give all
such notices and communications specified herein to be given to the Holders to
the Clearing Agency, and shall have no notice obligations to the Preferred Trust
Security Beneficial Owners.
SECTION 10.06 APPOINTMENT OF SUCCESSOR CLEARING AGENCY.
If any Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Trust Securities, the Administrative
Trustees may, in their sole discretion, appoint a successor Clearing Agency with
respect to such Preferred Trust Securities.
SECTION 10.07 DEFINITIVE PREFERRED TRUST SECURITY CERTIFICATES.
If:
(a) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Trust Securities and a successor
Clearing Agency is not appointed within 90 days after such discontinuance
pursuant to Section 10.06 or
(b) the Administrative Trustees elect after consultation with the
Control Party to terminate the book entry system through the Clearing Agency
with respect to the Preferred Trust Securities,
(c) there is a Trust Enforcement Event, then:
(d) Definitive Preferred Trust Security Certificates shall be prepared
by the Administrative Trustees on behalf of the Trust with respect to such
Preferred Trust Securities; and
(e) upon surrender of the Global Certificates by the Clearing Agency,
accompanied by registration instructions, the Administrative Trustees shall
cause Definitive Preferred Trust Security Certificates to be delivered to
Preferred Trust Security Beneficial Owners in accordance with the instructions
of the Clearing Agency. Neither the Trustees nor the Trust shall be liable for
any delay in delivery of such instructions and each of them may conclusively
rely on and shall be fully protected in relying on, said instructions of the
Clearing Agency. The Definitive Preferred Trust Security 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 their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the
Administrative Trustees may deem appropriate, or as may be required to comply
with any law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which Preferred Trust Securities may
be listed, or to conform to usage.
SECTION 10.08 MUTILATED, DESTROYED, LOST OR STOLEN CERTIFICATES.
If:
(a) any mutilated Certificates should be surrendered to the
Administrative Trustees, or if the Administrative Trustees shall receive
evidence to their satisfaction of the destruction, loss or theft of any
Certificate; and
(b) there shall be delivered to the Administrative Trustees such
security or indemnity as may be required by them to keep each of them harmless,
then, in the absence of notice that such Certificate shall have been acquired by
a bona fide purchaser, any Administrative Trustee on behalf of the Trust shall
execute and deliver, in exchange for or in lieu of any such mutilated,
destroyed, lost or stolen Certificate, a new Certificate of like denomination.
In connection with the issuance of any new Certificate under this Section 10.08,
the Administrative Trustees 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 Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the relevant
Preferred Trust Securities, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
ARTICLE XI
LIMITATION OF LIABILITY OF
HOLDERS, TRUSTEES OR OTHERS
SECTION 11.01 LIABILITY.
(a) Except as expressly set forth in this Trust Agreement, the Trust
Guarantees and the terms of the Preferred Trust Securities, the Initial
Depositor, the Successor Depositor, the Control Party and the Trustees shall not
be:
personally liable for the return of any portion of the capital
contributions (or any return thereon) of the Holders which shall be made solely
from assets of the Trust; and
required to pay to the Trust or to any Holder any deficit upon
dissolution of the Trust or otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holders
shall be entitled to the same limitation of personal liability extended to
shareholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
SECTION 11.02 EXCULPATION.
(a) No Company Indemnified Person shall be liable, responsible or
accountable in damages or otherwise to the Trust or any Covered Person for any
loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Company Indemnified Person in good faith on behalf of the Trust
and in a manner such Company Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Company Indemnified Person by this
Trust Agreement or by law, except that a Company Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Company
Indemnified Person's gross negligence (or, in the case of the Property Trustee,
negligence) or willful misconduct with respect to such acts or omissions. An
Indemnified Person shall be fully protected in relying in good faith upon the
records of the Trust and upon such information, opinions, reports or statements
presented to the Trust by any Person as to matters the Indemnified Person
reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which distributions to
Holders might properly be paid.
SECTION 11.03 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Trust or to any other Covered Person, an Indemnified Person acting under this
Trust Agreement shall not be liable to the Trust or to any other Covered Person
for its good faith reliance on the provisions of this Trust Agreement. The
provisions of this Trust Agreement, to the extent that they restrict the duties
and liabilities of an Indemnified Person otherwise existing at law or in equity
(other than the duties imposed on the Property Trustee under the Trust Indenture
Act), are agreed by the parties hereto to replace such other duties and
liabilities of such Indemnified Person.
(b) Unless otherwise expressly provided herein:
whenever a conflict of interest exists or arises between an
Indemnified Person and any Covered Person; or
whenever this Trust Agreement or any other agreement contemplated
herein or therein provides that an Indemnified Person shall act in a manner that
is, or provides terms that are, fair and reasonable to the Trust or any Holder,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Trust Agreement or any other
agreement contemplated herein or of any duty or obligation of the Indemnified
Person at law or in equity or otherwise.
(c) Whenever in this Trust Agreement an Indemnified Person is
permitted or required to make a decision:
in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors as
it desires, including its own interests, and shall have no duty or obligation to
give any consideration to any interest of or factors affecting the Trust or any
other Person; or
in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Trust Agreement or by
applicable law.
SECTION 11.04 INDEMNIFICATION.
(a) (i)To the fullest extent permitted by applicable law, the
Successor Depositor shall indemnify and hold harmless any Company Indemnified
Person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Trust) by reason of the fact that he is or was a Company
Indemnified Person against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best interests of
the Trust, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the Company Indemnified Person did not act in good faith and in
a manner which he reasonably believed to be in or not opposed to the best
interests of the Trust, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that his conduct was unlawful.
The Successor Depositor shall indemnify, to the fullest extent
permitted by law, any Company Indemnified Person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Trust to procure a judgment in its favor by
reason of the fact that he is or was a Company Indemnified Person against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Trust and except that no such indemnification shall be
made in respect of any claim, issue or matter as to which such Company
Indemnified Person shall have been adjudged to be liable to the Trust unless and
only to the extent that the Court of Chancery of Delaware or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which such Court of Chancery or such other court shall deem proper.
To the extent that a Company Indemnified Person shall be successful on
the merits or otherwise (including dismissal of an action without prejudice or
the settlement of an action without admission of liability) in defense of any
action, suit or proceeding referred to in paragraphs (i) and (ii) of this
Section 11.04(a), or in defense of any claim, issue or matter therein, he shall
be indemnified, to the fullest extent permitted by law, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
Any indemnification under paragraphs (i) and (ii) of this Section
11.04(a) (unless ordered by a court) shall be made by the Successor Depositor
only as authorized in the specific case upon a determination that
indemnification of the Company Indemnified Person is proper in the circumstances
because he has met the applicable standard of conduct set forth in paragraphs
(i) and (ii). Such determination shall be made by the Administrative Trustees by
a majority vote of a quorum consisting of such Administrative Trustees who were
not parties to such action, suit or proceeding, if such a quorum is not
obtainable, or, even if obtainable, if a quorum of disinterested Administrative
Trustees so directs, by independent legal counsel in a written opinion, or by
the Control Party.
Expenses (including attorneys' fees) incurred by a Company Indemnified
Person in defending a civil, criminal, administrative or investigative action,
suit or proceeding referred to in paragraphs (i) and (ii) of this Section
11.04(a) shall be paid by the Successor Depositor in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Company Indemnified Person to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
Successor Depositor as authorized in this Section 11.04(a). Notwithstanding the
foregoing, no advance shall be made by the Successor Depositor if a
determination is reasonably and promptly made by the Administrative Trustees by
a majority vote of a quorum of disinterested Administrative Trustees, if such a
quorum is not obtainable, or, even if obtainable, if a quorum of disinterested
Administrative Trustees so directs, by independent legal counsel in a written
opinion or the Control Party, that, based upon the facts known to the
Administrative Trustees, counsel or the Control Party at the time such
determination is made, such Company Indemnified Person acted in bad faith or in
a manner that such person did not believe to be in or not opposed to the best
interests of the Trust, or, with respect to any criminal proceeding, that such
Company Indemnified Person believed or had reasonable cause to believe his
conduct was unlawful. In no event shall any advance be made in instances where
the Administrative Trustees, independent legal counsel or the Control Party
reasonably determine that such person deliberately breached his duty to the
Trust or the Control Party.
The indemnification and advancement of expenses provided by, or
granted pursuant to, the other paragraphs of this Section 11.04(a) shall not be
deemed exclusive of any other rights to which those seeking indemnification and
advancement of expenses may be entitled under any agreement, vote of
shareholders or disinterested directors of the Successor Depositor or Holders or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office. All rights to indemnification under
this Section 11.04(a) shall be deemed to be provided by a contract between the
Successor Depositor and each Company Indemnified Person who serves in such
capacity at any time while this Section 11.04(a) is in effect. Any repeal or
modification of this Section 11.04(a) shall not affect any rights or obligations
then existing.
The Successor Depositor or the Trust may purchase and maintain
insurance on behalf of any person who is or was a Company Indemnified Person
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Successor
Depositor would have the power to indemnify him against such liability under the
provisions of this Section 11.04(a).
For purposes of this Section 11.04(a), references to "the Trust" shall
include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger, so that any person who is or was a director, trustee, officer or
employee of such constituent entity, or is or was serving at the request of such
constituent entity as a director, trustee, officer, employee or agent of another
entity, shall stand in the same position under the provisions of this Section
11.04(a) with respect to the resulting or surviving entity as he would have with
respect to such constituent entity if its separate existence had continued.
The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 11.04(a) shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a Company
Indemnified Person and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(b) The Successor Depositor agrees to indemnify the (i) Property
Trustee, (ii) the Delaware Trustee, (iii) any Affiliate of the Property Trustee
and the Delaware Trustee, and (iv) any officers, directors, shareholders,
members, partners, employees, representatives, custodians, nominees or agents of
the Property Trustee and the Delaware Trustee (each of the Persons in (i)
through (iv) being referred to as a "Fiduciary Indemnified Person") for, and to
hold each Fiduciary Indemnified Person harmless against, any loss, damage,
claim, liability or expense including taxes (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on the part of
the Trustee arising out of or in connection with the acceptance or
administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself
against or investigating any claim or liability in connection with the exercise
or performance of any of its powers or duties hereunder. The obligation to
indemnify as set forth in this Section 11.04(b) shall survive the satisfaction
and discharge of this Trust Agreement.
SECTION 11.05 OUTSIDE BUSINESSES.
Any Covered Person, the Initial Depositor, the Successor Depositor, the
Delaware Trustee and the Property Trustee may engage in or possess an interest
in other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders shall have no rights by virtue of this Trust Agreement in and to
such independent ventures or the income or profits derived therefrom, and the
pursuit of any such venture, even if competitive with the business of the Trust,
shall not be deemed wrongful or improper. None of the Covered Person, the
Initial Depositor, the Successor Depositor, the Delaware Trustee, or the
Property Trustee shall be obligated to present any particular investment or
other opportunity to the Trust even if such opportunity is of a character that,
if presented to the Trust, could be taken by the Trust, and any Covered Person,
the Initial Depositor, the Successor Depositor, the Delaware Trustee and the
Property Trustee shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Covered Person, the Delaware Trustee and
the Property Trustee may engage or be interested in any financial or other
transaction with the Initial Depositor or any Affiliate of the Initial
Depositor, or may act as depositary for, trustee or agent for, or act on any
committee or body of Holders of, securities or other obligations of the Initial
Depositor or its Affiliates.
ARTICLE XII
ACCOUNTING
SECTION 12.01 FISCAL YEAR.
The fiscal year ("Fiscal Year") of the Trust shall be the calendar
year.
SECTION 12.02 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Trust, the Administrative
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail, each transaction
of the Trust. The books of account shall be maintained on the accrual method of
accounting, in accordance with generally accepted accounting principles,
consistently applied. The books of account and the records of the Trust shall be
examined by and reported upon as of the end of each Fiscal Year of the Trust by
a firm of independent certified public accountants selected by the
Administrative Trustees.
(b) Within 60 days after of each year commencing, the Property Trustee
shall provide to the Holders such reports as are required by Section 313 of the
Trust Indenture Act, if any, in the form and in the manner provided by Section
313 of the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of Section 313(d) of the Trust Indenture Act.
(c) The Administrative Trustees shall cause to be duly prepared and
delivered to each of the Holders, any annual United States federal income tax
information statement, required by the Code, containing such information with
regard to the Preferred Trust Securities held by each Holder as is required by
the Code and the Treasury Regulations. Notwithstanding any right under the Code
to deliver any such statement at a later date, the Administrative Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Trust.
(d) The Administrative Trustees shall cause to be duly prepared and
filed with the appropriate taxing authority, an annual United States federal
income tax return, on a Form 1041 or such other form required by United States
federal income tax law, and any other annual income tax returns required to be
filed by the Administrative Trustees on behalf of the Trust with any state or
local taxing authority.
SECTION 12.03 BANKING.
The Trust shall maintain one or more bank accounts in the name and for
the sole benefit of the Trust; provided, however, that all payments of funds in
respect of the Preferred Partnership Securities held by the Property Trustee
shall be made directly to the Property Account and no other funds of the Trust
shall be deposited in the Property Account. The sole signatories for such
accounts shall be designated by the Administrative Trustees; provided, however,
that the Property Trustee shall designate the signatories for the Property
Account.
SECTION 12.04 WITHHOLDING.
The Trust and the Administrative Trustees shall comply with all
withholding requirements under United States federal, state and local law. The
Trust shall request, and the Holders shall provide to the Trust, such forms or
certificates as are necessary to establish an exemption from withholding with
respect to each Holder, and any representations and forms as shall reasonably be
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Administrative Trustees shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld shall
be deemed to be a distribution in the amount of the withholding to the Holder.
In the event of any claimed over withholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual distributions made, the Trust may reduce
subsequent distributions by the amount of such withholding. Notwithstanding
anything herein to the contrary, the Trust and the Administrative Trustees
shall, absent receipt of an opinion of nationally recognized tax counsel to the
contrary, withhold thirty percent (30%) (or such other rate as may be imposed as
a result of an amendment to the Code or such lower rate as may be imposed under
an applicable income tax treaty) on the gross amount of any distributions on
Preferred Trust Securities held by a Holder that is not a "United States person"
within the meaning of Section 7701(a)(30) of the Code.
ARTICLE XIII
AMENDMENTS AND MEETINGS
SECTION 13.01 AMENDMENTS.
(a) Except as otherwise provided in this Trust Agreement or by any
applicable terms of the Preferred Trust Securities, this Trust Agreement may
only be amended by a written instrument approved and executed by:
the Administrative Trustees (or, if there are more than two
Administrative Trustees, a majority of the Administrative Trustees);
if the amendment affects the rights, powers, duties, obligations
or immunities of the Property Trustee, the Property Trustee; and
if the amendment affects the rights, powers, duties, obligations
or immunities of the Delaware Trustee, the Delaware Trustee.
(b) No amendment shall be made, and any such purported amendment shall
be void and ineffective:
unless, in the case of any proposed amendment, the Property
Trustee shall have first received an Officers' Certificate from each of the
Trust and the Control Party that such amendment is permitted by, and conforms
to, the terms of this Trust Agreement (including the terms of the Preferred
Trust Securities);
unless, in the case of any proposed amendment which affects the
rights, powers, duties, obligations or immunities of the Property Trustee, the
Property Trustee shall have first received an opinion of counsel (who may be
counsel to the Control Party or the Trust) that such amendment is permitted by,
and conforms to, the terms of this Trust Agreement (including the terms of the
Preferred Trust Securities); and
to the extent the result of such amendment would be to:
(A) cause the Trust to fail to continue to be classified for
purposes of United States federal income taxation as a grantor trust or a
company for United Kingdom corporate income tax purposes;
(B) cause the Partnership to be classified for purposes of
United States federal income tax as an association or publicly traded
partnership taxable as a corporation or a company for United Kingdom corporate
income tax purposes;
(C) reduce or otherwise adversely affect the powers of the
Property Trustee in contravention of the Trust Indenture Act; or
(D) cause the Trust to be deemed to be an Investment Company
required to be registered under the 1940 Act.
(c) In the event the consent of the Property Trustee, as the holder of
the Preferred Partnership Securities is required under the Limited Partnership
Agreement with respect to any amendment, modification or termination of the
Limited Partnership Agreement or the Preferred Partnership Securities the
Property Trustee shall request the direction of the Holders with respect to such
amendment, modification or termination and shall vote with respect to such
amendment, modification or termination as directed by a Majority in Liquidation
Amount of the Preferred Trust Securities voting together as a single class;
provided, however, that where a consent under the Limited Partnership Agreement
would require the consent of a Super Majority of the Holders of Preferred
Partnership Securities the Property Trustee may only give such consent at the
direction of the Holders of at least the proportion in Liquidation Amount of the
Preferred Trust Securities which the relevant Super Majority represents of the
aggregate liquidation preference of the Preferred Partnership Securities
outstanding; provided, further, that the Property Trustee shall not be obligated
to take any action in accordance with the directions of the Holders under this
Section 13.01(c) unless the Property Trustee has obtained an opinion of
independent tax counsel to the effect that for United States federal income tax
purposes the Trust will continue to be classified as a grantor trust after
consummation of such action and each Holder will be treated as owning an
undivided beneficial ownership interest in the Preferred Partnership Securities.
(d) At such time after the Trust has issued any Preferred Trust
Securities that remain outstanding, any amendment that would (I) adversely
affect the powers, preferences or special rights of the Preferred Trust
Securities or (II) provide for the dissolution, winding-up or termination of the
Trust other than pursuant to the terms of this Trust Agreement, may be effected
only with the approval of the Holders of at least a Majority in Liquidation
Amount of the Preferred Trust Securities affected thereby; provided, that if any
amendment or proposal referred to in clause (I) hereof would adversely affect
only the Preferred Trust Securities or the Control Party, then only the affected
class or party will be entitled to vote on such amendment or proposal and such
amendment or proposal shall not be effective except with the approval of a
Majority in Liquidation Amount of such class of Preferred Trust Securities;
(e) Section 11.01(c) and this Section 13.01 shall not be amended
without the consent of all of the Holders;
(f) Article IV shall not be amended without the consent of the Control
Party and;
(g) The rights of the Control Party under Article V to increase or
decrease the number of, and appoint and remove, Trustees shall not be amended
without the consent of the Control Party; and
(h) Notwithstanding Section 13.01(c), this Trust Agreement may be
amended without the consent of the Holders:
to cure any ambiguity;
to correct or supplement any provision in this Trust Agreement
that may be defective or inconsistent with any other provision of this Trust
Agreement;
to add to the covenants, restrictions or obligations of the
Successor Depositor;
to conform to any change in the 1940 Act or written change in
interpretation or application of the rules and regulations promulgated
thereunder by any legislative body, court, government agency or regulatory
authority;
to conform to any change in the Trust Indenture Act or written
change in interpretation or application of the rules and regulations promulgated
thereunder by any legislative body, court, government agency or regulatory
authority; and
to modify, eliminate and add to any provision of this Trust
Agreement to such extent as may be necessary; provided, that such amendments do
not have a material adverse effect on the rights, preferences or privileges of
the Holders.
SECTION 13.02 MEETINGS OF THE HOLDERS; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holders may be called at any time by the
Administrative Trustees (or as provided in the terms of the Preferred Trust
Securities) to consider and act on any matter on which Holders are entitled to
act under the terms of this Trust Agreement, the terms of the Preferred Trust
Securities, the Limited Partnership Agreement, the rules of any stock exchange
on which the Preferred Trust Securities are listed or admitted for trading, the
Business Trust Act or other applicable law. The Administrative Trustees shall
call a meeting of the Holders if directed to do so by the Holders of at least
10% in Liquidation Amount of such class of Preferred Trust Securities. Such
direction shall be given by delivering to the Administrative Trustees one or
more notices in a writing stating that the signing Holders wish to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Holders calling a meeting shall specify in writing the
Certificates held by the Holders exercising the right to call a meeting and only
those Preferred Trust Securities specified shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the
Preferred Trust Securities, the following provisions shall apply to meetings of
Holders:
notice of any such meeting shall be given to all the Holders
having a right to vote thereat at least 7 days and not more than 60 days before
the date of such meeting. Any action that may be taken at a meeting of the
Holders may be taken without a meeting if a consent in writing setting forth the
action so taken is signed by the Holders owning not less than the minimum amount
of Preferred Trust Securities in Liquidation Amount that would be necessary to
authorize or take such action at a meeting at which all Holders having a right
to vote thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders entitled to vote who have not
consented in writing. The Administrative Trustees may specify that any written
ballot submitted to the Holder for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the
Administrative Trustees;
each Holder may authorize any Person to act for it by proxy
on all matters in which a Holder is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. No proxy shall
be valid after the expiration of 11 months from the date thereof unless
otherwise provided in the proxy. Every proxy shall be revocable at the pleasure
of the Holder executing it. Except as otherwise provided herein, all matters
relating to the giving, voting or validity of proxies shall be governed by the
General Corporation Law of the State of Delaware relating to proxies, and
judicial interpretations thereunder, as if the Trust were a Delaware corporation
and the Holders were shareholders of a Delaware corporation;
each meeting of the Holders shall be conducted by the
Administrative Trustees or by such other Person that the Administrative Trustees
may designate; and
unless the Business Trust Act, this Trust Agreement, the
terms of the Preferred Trust Securities, the Trust Indenture Act or the listing
rules of any stock exchange on which the Preferred Trust Securities are then
listed for trading, otherwise provides, the Administrative Trustees, in their
sole discretion, shall establish all other provisions relating to meetings of
Holders, including notice of the time, place or purpose of any meeting at which
any matter is to be voted on by any Holders, waiver of any such notice, action
by consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with respect to
the exercise of any such right to vote.
ARTICLE XIV
REPRESENTATIONS OF PROPERTY TRUSTEE
AND DELAWARE TRUSTEE
SECTION 14.01 REPRESENTATIONS AND WARRANTIES OF PROPERTY TRUSTEE.
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 Trustee that:
(a) The Property Trustee is a New York banking corporation with
trust powers, duly organized, validly existing and in good standing under the
laws of New York, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, the Trust Agreement;
(b) The execution, delivery and performance by the Property
Trustee of the Trust Agreement has been duly authorized by all necessary
corporate action on the part of the Property Trustee. The 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 the Trust
Agreement by the Property Trustee does not conflict with or constitute a breach
of the Articles of Organization or By-laws of the Property Trustee;
(d) No consent, approval or authorization of, or registration
with or notice to, any State or Federal banking authority is required for the
execution, delivery or performance by the Property Trustee of this Trust
Agreement; and
(e) The Property Trustee, pursuant to this Trust Agreement, shall
hold legal title to, and a valid ownership interest on behalf of the Holders, in
the Preferred Partnership Securities and agrees that, except as expressly
provided or contemplated by this Agreement, it will not create, incur or assume,
or suffer to exist any mortgage, pledge, hypothecation, encumbrance, lien or
other charge or security interest upon the Preferred Partnership Securities.
SECTION 14.02 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 Trustee that:
(a) The Delaware Trustee is a Delaware corporation with, duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with power and authority to execute and deliver, and to carry out and
perform its obligations under the terms of, the Trust Agreement;
(b) The Delaware Trustee has been authorized to perform its
obligations under the Certificate of Trust and the Trust Agreement. The Trust
Agreement, under Delaware law, 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 State or Federal banking authority is required for the
execution, delivery or performance by the Delaware Trustee of the Trust
Agreement; and
(d) The Delaware Trustee is an entity which has its principal
place of business in the State of Delaware.
ARTICLE XV
MISCELLANEOUS
SECTION 15.01 NOTICES.
All notices provided for in this Trust Agreement shall be in writing, duly
signed by the party giving such notice, and shall be delivered, telecopied or
mailed by registered or certified mail, as follows:
(a) if given to the Trust, in care of the Administrative Trustees
at the Trust's mailing address set forth below (or such other address as the
Trust may give notice of to the Holders):
TXU Europe Capital I
c/o TXU Business Services Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Administrative Trustees
(b) if given to the Delaware Trustee, at the mailing address set
forth below (or such other address as the Delaware Trustee may give notice of to
the other Trustees):
The Bank of New York (Delaware)
White Clay Center
Route 273
Newark, Delaware 19711
Attention: Corporate Trust Department
(c) if given to the Property Trustee, at its Corporate Trust
Office to the attention of the Corporate Trust Department (or such other address
as the Property Trustee may give notice of to the Holders and the other
Trustee).
(d) if given to the Control Party, at its mailing address as set
forth below (or such other address as the Control Party may give notice of to
the Trust):
c/o TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust. All such notices shall be deemed to have been
given when received in person, telecopied with receipt confirmed, or mailed by
first class mail, postage prepaid, except that if a notice or other document is
refused delivery or cannot be delivered because of a changed address of which no
notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 15.02 GOVERNING LAW.
This Trust Agreement and the rights of the parties hereunder shall be
governed by and construed in accordance with the internal laws of the State of
Delaware and all rights and remedies shall be governed by such laws without
regard to principles of conflict of laws.
SECTION 15.03 INTENTION OF THE PARTIES.
It is the intention of the parties hereto that the Trust be classified for
United States federal income tax purposes as a grantor trust. The provisions of
this Trust Agreement shall be interpreted to further this intention of the
parties.
SECTION 15.04 HEADINGS.
Headings contained in this Trust Agreement are inserted for convenience of
reference only and do not affect the interpretation of this Trust Agreement or
any provision hereof.
SECTION 15.05 SUCCESSORS AND ASSIGNS
Whenever in this Trust Agreement any of the parties hereto is named or
referred to, the successors and assigns of such party shall be deemed to be
included, and all covenants and agreements in this Trust Agreement by the
Successor Depositor, the Control Party, and the Trustees shall bind and inure to
the benefit of their respective successors and assigns, whether so expressed.
SECTION 15.06 PARTIAL ENFORCEABILITY.
If any provision of this Trust Agreement, or the application of such
provision to any Person or circumstance, shall be held invalid, the remainder of
this Trust Agreement, or the application of such provision to persons or
circumstances other than those to which it is held invalid, shall not be
affected thereby.
SECTION 15.07 COUNTERPARTS.
This Trust Agreement may contain more than one counterpart of the signature
page and this Trust Agreement may be executed by the affixing of the signature
of each of the Trustees and a duly authorized director or officer of each of the
Initial Depositor, the Successor Depositor, and the Control Party to one of such
counterpart signature pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amended and Restated Trust
Agreement to be duly executed, all as of the day and year first above written.
TXU BUSINESS SERVICES COMPANY
By: _________________________________________________
Title:
THE BANK OF NEW YORK,
as Property Trustee
By:__________________________________________________
Title:
THE BANK OF NEW YORK (DELAWARE),
as Delaware Trustee
By:___________________________________________________
Title:
______________________________________________
solely in his (her) capacity as
Administrative Trustee
______________________________________________
solely in his (her) capacity as
Administrative Trustee
______________________________________________
solely in his (her) capacity as
Administrative Trustee
______________________________________________
solely in his (her) capacity as
Administrative Trustee
______________________________________________
solely in his (her) capacity as
Administrative Trustee
<PAGE>
EXHIBIT A-1
FORM OF PREFERRED SECURITY CERTIFICATE
This Preferred Trust Security is a Global Certificate within the
meaning of the Trust Agreement hereinafter referred to and is registered in the
name of The Depository Trust Company (the "Depositary") or a nominee of the
Depositary. This Preferred Trust Security is exchangeable for Preferred Trust
Securities registered in the name of a person other than the Depositary or its
nominee only in the limited circumstances described in the Trust Agreement and
no transfer of this Preferred Trust Security (other than a transfer of this
Preferred Trust Security as a whole by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary) may be registered except in limited circumstances.
Unless this Preferred Trust Security is presented by an authorized
representative of The Depository Trust Company (55 Water Street, New York, New
York), a New York corporation, to the Trust or its agent for registration of
transfer, exchange or payment, and any Preferred Trust Security issued is
registered in the name of Cede & Co. or such other name as requested by an
authorized representative of the Depositary and any payment hereon is made to
Cede & Co. or such other entity as is requested by an authorized representative
of the Depositary, ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.
Certificate Number Number of Preferred Trust Securities
P- CUSIP NO.
Certificate Evidencing Preferred Trust Securities
of
TXU EUROPE CAPITAL I
__% Trust Originated Preferred Securities
(liquidation amount $_____ per Preferred Trust Security)
TXU EUROPE CAPITAL I, a statutory business trust formed under the laws
of the State of Delaware (the "Trust"), hereby certifies that Cede & Co. (the
"Holder") is the registered owner of ___________ preferred securities of the
Trust representing undivided beneficial ownership interests in the assets of the
Trust designated the _____% Trust Originated Preferred Securities (Liquidation
Amount $25 per Preferred Trust Security) (the "Preferred Trust Securities"). The
Preferred Trust Securities are freely transferable on the books and records of
the Trust, in person or by a duly authorized attorney, upon surrender of this
certificate duly endorsed and in proper form for transfer. The designation,
rights, powers, privileges, restrictions, preferences and other terms and
provisions of the Preferred Trust Securities represented hereby are set forth
in, issued under and shall in all respects be subject to the provisions of the
Amended and Restated Trust Agreement dated as of _______________, __________, as
the same may be amended from time to time (the "Trust Agreement"). Capitalized
terms used herein but not defined shall have the meaning given them in the Trust
Agreement. The Holder is entitled to the benefits of the Preferred Trust
Securities Guarantee to the extent provided therein. Each Holder of a Preferred
Trust Security, by acceptance of this Certificate and each Certificate owner, by
acquisition of a beneficial interest in a Certificate, agrees to treat the
Initial Debentures, and any other Affiliate Investment Instruments, as
indebtedness for United States federal and United Kingdom corporate income tax
purposes. The Trust will provide a copy of the Trust Agreement, the Preferred
Trust Securities Guarantee and the Limited Partnership Agreement to a Holder
without charge upon written request to the Trust at its principal place of
business.
Upon receipt of this certificate, the Holder is bound by the Trust
Agreement and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trust has executed this certificate this __day
of ___________, _______.
TXU EUROPE CAPITAL I
By:
-----------------------------------------
Name: ___________________, solely in his
(her) capacity as Administrative Trustee
<PAGE>
(See reverse for additional terms)
CERTIFICATE OF AUTHENTICATION. This is the Preferred Trust Security described in
the within-mentioned Trust Agreement.
THE BANK OF NEW YORK, as Property Trustee
By:
------------------------------------------------
Authorized Signatory
[FORM OF REVERSE OF SECURITY]
Holders of Preferred Trust Securities shall be entitled to receive
cumulative cash distributions at a rate per annum of _____% of the stated
Liquidation Amount of $25 per Preferred Trust Security. Distributions on the
Preferred Trust Securities shall, from the date of original issue, accumulate
and be cumulative and shall be payable quarterly only to the extent that the
Trust has funds available for the payment of such distributions in the Property
Account. Distributions not paid on the scheduled payment date will accumulate
and compound quarterly (to the extent permitted by applicable law) at the rate
of _____% per annum. Amounts available to the Trust for distribution to the
holders of the Preferred Trust Securities will be limited to payments received
by the Trust from the Partnership on the Preferred Partnership Securities or
from the Company on the Partnership Guarantee. Distributions on the Preferred
Partnership Securities will be paid only if, as and when declared in the sole
discretion of the Company, as the General Partner of the Partnership. If and to
the extent that the Partnership makes a distribution on the Preferred
Partnership Securities held by the Property Trustee or the Company makes a
payment under the Partnership Guarantee (the amount of any such partnership
distribution, including any compounding thereon, or guarantee payment being a
"Payment Amount"), the Trust shall make, and the Property Trustee is directed to
make, to the extent funds are available for that purpose, a Pro Rata
Distribution of the Payment Amount to Holders.
The amount of Distributions payable for any period will be computed for
any full quarterly Distribution period on the basis of a 360-day year of twelve
30-day months, and for any period shorter than a full quarterly Distribution
period on the basis of the actual number of days elapsed in a 90-day quarter.
Except as otherwise described herein, distributions on the Preferred
Trust Securities will be cumulative, will accumulate from the date of initial
issuance and will be payable quarterly in arrears, on _______________,
_______________, _______________ and _______________ of each year, commencing on
_______________________, _________, if, as and when available for payment by the
Property Trustee. If the Preferred Trust Securities (or, if the Trust is
liquidated, the Preferred Partnership Securities) are in book-entry-only form,
Distributions will be payable to the Holders of record of Preferred Trust
Securities as they appear on the books and records of the Trust on the relevant
record dates, which will be one Business Day prior to the relevant payment
dates. If the Preferred Trust Securities (or, if the Trust is liquidated, the
Preferred Partnership Securities) do not remain in book-entry-only form, the
relevant record dates shall be the 15th day of the month of the relevant payment
dates. In the event that any date on which distributions are payable is not a
Business Day, payment of such Distribution shall be made on the next succeeding
day which is a Business Day (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 shall be made on the immediately preceding Business
Day, with the same force and effect as if made on such date. Payments of
accumulated Distributions will be payable to Holders of record of Preferred
Trust Securities as they appear on the books and records of the Trust on the
record date with respect to the payment date for the Preferred Trust Securities
which corresponds to the payment date fixed by the Partnership with respect to
the payment of cumulative distributions on the Preferred Partnership Securities.
The Preferred Trust Securities shall be redeemable as provided in the
Trust Agreement.
ASSIGNMENT FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Trust Security Certificate to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints agent to transfer this Preferred Trust Security
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date: ________________
Signature: _____________
(Sign exactly as your name appears on the other side of this Preferred Trust
Security Certificate)
<PAGE>
EXHIBIT A-2
FORM OF CONTROL CERTIFICATE
THIS CERTIFICATE IS NOT TRANSFERABLE EXCEPT AS
PROVIDED IN THE TRUST AGREEMENT REFERRED TO HEREIN
Control Certificate
of
TXU EUROPE CAPITAL I
With respect to TXU EUROPE CAPITAL I, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), by the execution of that
certain amended and restated Trust Agreement, dated as of _______________, 1999,
as the same may be amended and restated from time to time (the "Trust
Agreement") among (i) TXU Business Services Company, a Texas corporation (the
"Initial Depositor"), (ii) TXU Europe Limited, a private limited company
organized under the laws of England and Wales, (the "Successor Depositor"),
(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 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"), (v)
____________________, ____________________, ____________________ and
____________________, each an individual, and each of whose address is c/o TXU
Business Services Company, 1601 Bryan Avenue, Dallas, Texas 75201 (each, an
"Administrative Trustee" and collectively the "Administrative Trustees") (the
Property Trustee, the Delaware Trustee and the Administrative Trustees are
referred to herein each as a "Trustee" and collectively as the "Trustees"), (vi)
__________________, a Delaware corporation (the "Control Party"), and (vi) the
several Holders, the Trust hereby issues this Control Certificate to
_______________________. The designations, rights, privileges, restrictions, and
preferences of the holder of this certificate are set forth in, and shall in all
respects be subject to the terms and provisions of, the Trust Agreement. The
Trust shall furnish a copy of the Trust Agreement to the holder hereof without
charge upon written request to the Trust at its principal place of business.
Upon receipt of the Control Certificate, the holder hereof is bound by
the Trust Agreement and is entitled to the benefits thereunder. Receipt of the
Control Certificate will not bestow or impose on the holder hereof any economic
or financial interest in or obligation with respect to the Trust.
IN WITNESS WHEREOF, the Trust has executed this certificate this __day
of ________, _______.
TXU EUROPE CAPITAL I
By: .........
---------------------------------------
____________________, solely in
his (her) capacity as Administrative
Trustee
AGREED AND ACCEPTED:
- - - - ----------------------------------------,
as holder of the Control Certificate
By: ___________________________________
Title: ___________________________________
Exhibit 4(b)
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TXU EUROPE FUNDING I, L.P.
Dated as of ________ __, 1999
<PAGE>
TABLE OF CONTENTS
Page
TABLE OF CONTENTS..............................................................I
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF TXU
EUROPE FUNDING I, L.P. ________ __, 1998......................................4
ARTICLE I.DEFINED TERMS.......................................................2
SECTION 1.1 DEFINITIONS....................................................2
ARTICLE II....................................................................9
ARTICLE II.CONTINUATION OF THE PARTNERSHIP; ADMISSION OF PREFERRED
PARTNERSHIP SECURITIES HOLDERS; WITHDRAWAL OF INITIAL LIMITED
PARTNER.......................................................................9
SECTION 2.1 CONTINUATION OF THE PARTNERSHIP................................9
SECTION 2.2 NAME...........................................................9
SECTION 2.3 PURPOSES OF THE PARTNERSHIP....................................9
SECTION 2.4 TERM..........................................................10
SECTION 2.5 REGISTERED AGENT AND OFFICE...................................10
SECTION 2.6 PRINCIPAL PLACE OF ACTIVITY...................................10
SECTION 2.7 NAME AND ADDRESS OF GENERAL PARTNER...........................10
SECTION 2.8 QUALIFICATION TO CONDUCT ACTIVITIES...........................10
SECTION 2.9 ADMISSION OF HOLDERS OF PREFERRED PARTNERSHIP SECURITIES;
WITHDRAWAL OF INITIAL LIMITED PARTNER.....................................10
ARTICLE III.CAPITAL CONTRIBUTIONS; REPRESENTATION OF PREFERRED PARTNERSHIP
SECURITY HOLDER'S INTEREST; CAPITAL ACCOUNTS..................................11
SECTION 3.1 CAPITAL CONTRIBUTIONS..........................................11
SECTION 3.2 PREFERRED PARTNERSHIP SECURITY HOLDER'S INTEREST
REPRESENTED BY PREFERRED PARTNERSHIP SECURITIES............................11
SECTION 3.3 CAPITAL ACCOUNTS...............................................11
SECTION 3.4 INTEREST ON CAPITAL CONTRIBUTIONS..............................12
SECTION 3.5 WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS.................12
ARTICLE IV.ALLOCATIONS........................................................12
SECTION 4.1 PROFITS AND LOSSES.............................................12
SECTION 4.2 SPECIAL ALLOCATION.............................................13
SECTION 4.3 WITHHOLDING....................................................14
ARTICLE V.DISTRIBUTIONS.......................................................14
SECTION 5.1 DISTRIBUTIONS..................................................14
SECTION 5.2 LIMITATIONS ON DISTRIBUTIONS...................................15
ARTICLE VI.ISSUANCE OF PREFERRED PARTNERSHIP SECURITIES.......................15
SECTION 6.1 GENERAL PROVISIONS REGARDING PREFERRED PARTNERSHIP
SECURITIES.................................................................15
SECTION 6.2 PREFERRED PARTNERSHIP SECURITIES...............................16
ARTICLE VII.PARTNERSHIP INVESTMENTS...........................................24
SECTION 7.1 INITIAL AFFILIATE INVESTMENT INSTRUMENTS.......................24
SECTION 7.2 REINVESTMENT OF PAYMENTS RECEIVED BY THE PARTNERSHIP...........25
-i-
<PAGE>
ARTICLE VIII.BOOKS OF ACCOUNT, RECORDS AND REPORTS............................26
SECTION 8.1 BOOKS AND RECORDS..............................................26
SECTION 8.2 ACCOUNTING METHOD..............................................26
SECTION 8.3 ANNUAL AUDIT...................................................27
ARTICLE IX.PAYMENT OF EXPENSES................................................27
SECTION 9.1 PAYMENT OF TRUST EXPENSES AND PARTNERSHIP TAXES................27
SECTION 9.2 PAYMENT OF OTHER PARTNERSHIP EXPENSES..........................27
ARTICLE X.POWERS, RIGHTS AND DUTIES OF THE LIMITED PARTNERS...................28
SECTION 10.1 LIMITATIONS...................................................28
SECTION 10.2.LIABILITY.....................................................28
SECTION 10.3.PRIORITY......................................................28
ARTICLE XI.POWERS, RIGHTS AND DUTIES OF THE GENERAL PARTNER...................28
SECTION 11.1 AUTHORITY.....................................................28
SECTION 11.2 POWERS AND DUTIES OF GENERAL PARTNER..........................28
SECTION 11.3.OBLIGATIONS AND EXPENSES PAYABLE BY GENERAL PARTNER...........30
SECTION 11.4 LIABILITY.....................................................31
SECTION 11.5 OUTSIDE ACTIVITIES............................................31
SECTION 11.6 LIMITS ON GENERAL PARTNER'S POWERS............................31
SECTION 11.7 EXCULPATION...................................................32
SECTION 11.8 FIDUCIARY DUTY................................................32
SECTION 11.9 INDEMNIFICATION...............................................33
SECTION 11.10 TAX MATTERS .................................................34
SECTION 11.11 CONSOLIDATION, MERGER OR SALE OF ASSETS......................34
ARTICLE XII.TRANSFERS OF INTERESTS BY PARTNERS................................35
SECTION 12.1 TRANSFER OF INTERESTS.........................................35
SECTION 12.2 TRANSFER OF L.P.CERTIFICATES..................................36
SECTION 12.3DEFINITIVE L.P. CERTIFICATES; PERSONS DEEMED PREFERRED
PARTNERSHIP SECURITY HOLDERS...............................................37
SECTION 12.4 BOOK ENTRY PROVISIONS.........................................37
SECTION 12.5 REGISTRAR, TRANSFER AGENT AND PAYING AGENT....................39
ARTICLE XIII.WITHDRAWAL, DISSOLUTION; LIQUIDATION AND DISTRIBUTION
OF ASSETS.....................................................................39
SECTION 13.1 WITHDRAWAL OF PARTNERS........................................39
SECTION 13.2 DISSOLUTION OF THE PARTNERSHIP................................39
SECTION 13.3 LIQUIDATION...................................................40
SECTION 13.4 DISTRIBUTION IN LIQUIDATION...................................41
SECTION 13.5 RIGHTS OF LIMITED PARTNERS....................................41
SECTION 13.6 TERMINATION...................................................41
ARTICLE XIV.AMENDMENTS AND MEETINGS...........................................42
SECTION 14.1 AMENDMENTS....................................................42
SECTION 14.2 AMENDMENT OF CERTIFICATE......................................42
SECTION 14.3 MEETINGS OF PARTNERS..........................................42
ARTICLE XV.MISCELLANEOUS......................................................43
SECTION 15.1 NOTICES.......................................................43
SECTION 15.2 POWER OF ATTORNEY.............................................44
SECTION 15.3 ENTIRE AGREEMENT..............................................44
SECTION 15.4 GOVERNING LAW.................................................44
SECTION 15.5 EFFECT........................................................45
SECTION 15.6 PRONOUNS AND NUMBER...........................................45
<PAGE>
SECTION 15.7 CAPTIONS......................................................45
SECTION 15.8 PARTIAL ENFORCEABILITY........................................45
SECTION 15.9 COUNTERPARTS..................................................45
SECTION 15.10 WAIVER OF PARTITION..........................................45
SECTION 15.11 REMEDIES.....................................................45
SCHEDULE 1....................................................................48
ANNEX A FORM OF L.P. CERTIFICATE.............................................1
[ ] CERTIFICATE EVIDENCING PREFERRED PARTNERSHIP
SECURITIES OF TXU EUROPE FUNDING I, L.P. % PREFERRED PARTNERSHIP SECURITIES
(liquidation preference $25 per Preferred Partnership Security)................1
[FORM OF REVERSE OF SECURITY]..................................................3
___________________________ ASSIGNMENT........................................5
<PAGE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
TXU EUROPE FUNDING I, L.P.
-------- --, ----
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP of TXU
Europe Funding I, L.P., a Delaware limited partnership (the "Partnership"),
dated as of ________ __, ____, among TXU Europe Limited, a private limited
company incorporated under the laws of England and Wales (the "Company"), as the
general partner, and TXU Europe Capital I, a business trust formed pursuant to
the laws of the state of Delaware (the "Trust"), as the limited partner.
WHEREAS, the Company and the Limited Partner entered into an
Agreement of Limited Partnership of the Partnership dated as of_____________
(the "Original Partnership Agreement"), and the Partners (as defined herein)
desire to continue the Partnership under the Act (as defined herein) and to
amend and restate the Original Partnership Agreement in its entirety;
WHEREAS, the Certificate of Limited Partnership of the
Partnership was filed with the Office of the Secretary of State of the State of
Delaware on _____________________;
NOW, THEREFORE, in consideration of the agreements and
obligations set forth herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree to amend and restate the Original Partnership Agreement as follows:
<PAGE>
ARTICLE I.
DEFINED TERMS
Section 1.1 ____ DEFINITIONS. Unless the context otherwise requires,
the terms defined in this Article I shall, for the purposes of this Agreement,
have the meanings herein specified. Terms used in this Agreement and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Trust Agreement.
"1940 Act" means the Investment Company Act of 1940, as amended.
"Administrative Trustees" has the meaning set forth in Section 1.1 of
the Trust Agreement. "
"Affiliate" has the meaning set forth in Section 1.01 of the Trust
Agreement.
"Affiliate Investment Instruments" has the meaning set forth in
Section 7.1 of this Agreement.
"Agreement" means this Amended and Restated Agreement of Limited
Partnership, as it may be amended or supplemented from time to time.
"Beneficiaries" has the meaning set forth in Section 11.3 of this
Agreement.
"Book-Entry Interest" means a beneficial interest in the L.P.
Certificates, ownership and transfers of which shall be maintained and made
through book entries of a Clearing Agency as set forth in Section 12.4 of this
Agreement.
"Business Day" means any day other than a day on which banking
institutions in The City of New York are authorized or required by law to close.
"Capital Account" has the meaning set forth in Section 3.3 of this
Agreement.
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed with the Secretary of State of the State of Delaware on
__________________, as it may be amended and restated from time to time.
"Change in 1940 Act Law" has the meaning set forth in Section 1.01 of
the Trust Agreement.
"Closing Date" has the meaning set forth in Section 1.01 of the Trust
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Trust Securities" has the meaning specified in Section 8.01 of
the Trust Agreement.
"Common Trust Securities Guarantee" means the Common Trust Securities
Guarantee Agreement dated as of ________ __, ____, entered into by the Company,
as Guarantor, for the benefit of the holders of the Common Trust Securities.
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Compounded Preferred Entitlements" has the meaning set forth in
Section 6.2(b)(i) of this Agreement.
"Definitive L.P. Certificates" has the meaning set forth in Section
12.4(a) of this Agreement.
"Delaware Partnership Act" or "Act" means the Revised Uniform Limited
Partnership Act of the State of Delaware (6 Del. C. Section 17-101, et seq.).
"Delaware Trustee" has the meaning set forth in Section 6.02 of the
Trust Agreement.
"Distribution Payment Date" has the meaning set forth in Section
6.2(b)(i) of this Agreement.
"Distributions" means the cumulative cash distributions payable by the
Partnership with respect to the Interests represented by the Preferred
Partnership Securities, which amounts are payable quarterly in accordance with
Sections 5.1 and 6.2(b) of this Agreement.
"DTC" means the Depository Trust Company, the initial Clearing Agency.
"Eligible Debt Securities" means cash or book-entry securities,
negotiable instruments, or other securities of entities not affiliated with the
Company represented by instruments in registered form which evidence any of the
following: (a) any security issued or guaranteed as to principal or interest by
the United States, or by a person controlled or supervised by and acting as an
instrumentality of the Government of the United States pursuant to authority
granted by the Congress of the United States, or any certificate of deposit for
any of the foregoing; (b) commercial paper issued pursuant to Section 3(a)(3) of
the Securities Act of 1933 (the "Securities Act") and having, at the time of the
investment or contractual commitment to invest therein, a rating from each of
S&P and Moody's in the highest rating category granted by such rating agency and
having a maturity not in excess of nine months; (c) demand deposits, time
deposits and certificates of deposit which are fully insured by the FDIC, in no
case having a maturity greater than nine months; (d) repurchase obligations,
having a maturity of no greater than nine months; with respect to any security
that is a direct obligation of, or fully guaranteed by, the Government of the
United States of America or any agency or instrumentality thereof, the
obligations of which are backed by the full faith and credit of the United
States of America, in either case entered into with a depository institution or
trust company which is an Eligible Institution and the deposits of which are
insured by the FDIC; and (e) any other security which is identified as a
permitted investment of a finance subsidiary pursuant to Rule 3a-5 under the
1940 Act at the time it is acquired by the Partnership.
"Eligible Institution" means a depository institution organized under
the laws of the United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank), (1)(i) which
has either (A) a long-term unsecured debt rating of AA or better by S&P and Aa
or better by Moody's or (B) a short-term unsecured debt rating or a certificate
of deposit rating of A-1+ or better by S&P and P-1 or better by Moody's and (ii)
whose deposits are insured by the FDIC or (2)(i) the parent of which has a
long-term or short-term unsecured debt rating which signifies investment grade
and (ii) whose deposits are insured by the FDIC.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"FDIC" means the Federal Deposit Insurance Corporation or any
successor thereto.
"Finance Subsidiary" means any wholly-owned subsidiary of the
Company the principal purpose of which is to raise capital for the Company by
issuing securities that are guaranteed by the Company and the proceeds of which
are loaned to or invested in the Company or one or more of its affiliates.
"Fiscal Period" means each calendar quarter.
"Fiscal Year" means the calendar year.
"General Partner" means the Company, in its capacity as the general
partner of the Partnership, its permitted successors, or any successor general
partner in the Partnership admitted as such pursuant to the terms of this
Agreement.
"General Partner Capital Contribution" means the contribution by the
General Partner to the Partnership made contemporaneous with the issuance of the
Preferred Partnership Securities.
"General Partner Interest" means the Interest of the General Partner
in the
Partnership.
"Holder" or "Preferred Partnership Security Holder" means a Limited
Partner in whose name an L.P. Certificate representing Preferred Partnership
Securities is registered.
"Indentures" means the Indentures between the Company and certain of
its subsidiaries, and The Bank of New York, as Indenture Trustee, dated as of
_________________, forms of which are attached hereto as Exhibit A.
"Independent Financial Adviser" shall mean a nationally recognized
accounting firm, bank or investment banking firm which shall be designated by
the Company and which firm does not (and whose directors, officers, employees
and affiliates do not) have a direct or indirect material equity interest in the
Company or any of its subsidiaries.
"Initial Debentures" has the meaning set forth in Section 7.1(b) of
this
Agreement.
"Initial Partnership Proceeds" means the aggregate proceeds received
by the Partnership from the sale of the Preferred Partnership Securities and the
General Partner Capital Contribution.
"Interest" means the entire ownership interest of a Partner in the
Partnership at any particular time, including, without limitation, its interest
in the capital, profits, and losses of, and distributions from, the Partnership.
"Investment Affiliate" means that any corporation, partnership,
limited liability company or other entity (other than the Partnership or the
Trust) that (i) is controlled by the Company and (ii) is not an investment
company by reason of Section 3(a) or 3(b) of the 1940 Act or is otherwise an
eligible recipient of funds directly or indirectly from the Trust pursuant to an
order issued by the Securities and Exchange Commission.
"Investment Event of Default" means an event of default under any
Affiliate Investment Instrument or any Investment Guarantee.
"Investment Guarantee" has the meaning specified in Section 1.01 of
the Trust Agreement.
"Investment Offer" has the meaning specified in Section 7.2(b) of this
Agreement.
"Limited Partner" means the Trust, in its capacity as the limited
partner of the Partnership, and any Person who is admitted to the Partnership as
a limited partner pursuant to the terms of this Agreement, in such Person's
capacity as a limited partner of the Partnership.
"Liquidator" has the meaning specified in Section 13.3 of this
Agreement.
"L.P. Certificate" means a certificate substantially in the form
attached hereto as Annex A, evidencing the Preferred Partnership Securities held
by a Limited Partner.
"Majority in Liquidation Preference" means Holder(s) of Preferred
Partnership Securities who are the record owners of Preferred
Partnership Securities whose aggregate liquidation preferences represent more
than 50% of the aggregate liquidation preference of all Preferred Partnership
Securities then outstanding.
"Moody's" means Moody's Investors Service, Inc. or any successor
thereto.
"Net Income" and "Net Loss", respectively, for any Fiscal Period
mean the income and loss, respectively, of the Partnership for such Fiscal
Period as determined in accordance with the method of accounting followed by the
Partnership for United States federal income tax purposes, including any income
exempt from tax and any noncapital, nondeductible expenditures of the
Partnership which are described in the Code.
"Original Partnership Agreement" has the meaning set forth in the
recitals to this Agreement.
"Partners" means the General Partner and the Limited Partner,
collectively.
"Partnership Covered Person" means any Partner, any Affiliate of a
Partner or any officers, directors, shareholders, partners, members, employees,
representatives or agents of a Partner or its respective Affiliates, or any
employee or agent of the Partnership or its Affiliates or any Special
Representative.
"Partnership Enforcement Event" has the meaning set forth in Section
6.2(h)(i) of this Agreement.
"Partnership Guarantee" means the Partnership Guarantee Agreement
dated as of ________ __, ____ by the Company in favor of the Preferred
Partnership Security Holders with respect to the Preferred Partnership
Securities, as amended or supplemented from time to time.
"Partnership Indemnified Person" means the General Partner, any
Special Representative, any Affiliate of the General Partner or any Special
Representative or any officers, directors, shareholders, members, partners,
employees, representatives or agents of the General Partner or any Special
Representative, or any of their respective Affiliates, or any employee or agent
of the Partnership or its Affiliates.
"Partnership Investment Company Event" means that the General Partner
shall have requested and received an opinion of nationally recognized
independent legal counsel experienced in such matters to the effect that as a
result of the occurrence on or after the date hereof of a Change in 1940 Act
Law, the Partnership is or will be considered an "investment company" which is
required to be registered under the 1940 Act.
"Partnership Liquidation Distribution" has the meaning set forth in
Section 6.2(g) of this Agreement.
"Partnership Special Event" means either a Partnership Tax Event or a
Partnership Investment Company Event.
"Partnership Tax Event" means that the General Partner shall have
requested and received an opinion of nationally recognized independent tax
counsel experienced in such matters to the effect that there has been a Tax
Action which affects any of the events described in (i) through (iv) below and
that there is more than an insubstantial risk that (i) the Partnership is, or
will be, subject to United States federal or United Kingdom corporate income tax
with respect to income accrued or received on the Affiliate Investment
Instruments or the Eligible Debt Securities, (ii) the Partnership is, or will
be, subject to more than a de minimis amount of other taxes, duties or other
governmental charges, (iii) interest payable by an Investment Affiliate with
respect to the Affiliate Investment Instruments is not, or will not be,
deductible by such Investment Affiliate for United States federal or United
Kingdom corporate income tax purposes, or (iv) Additional Amounts (as defined in
the Indentures, the Partnership Guarantee and the Trust Guarantee) are payable
in respect of Affiliate Investment Instruments, any Investment Guarantee, the
Partnership Guarantee or any Trust Guarantee.
"Paying Agent" shall have the meaning set forth in Section 12.5
of this Agreement.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Power of Attorney" means the Power of Attorney granted pursuant to
Section 15.2 of this Agreement.
"Preferred Entitlement" shall have the meaning set forth in section
6.2(b)(I) of this Agreement.
"Preferred Partnership Securities" represent the Interests of Limited
Partners and have the preference and designation set forth in Section 6.2(a) of
this Agreement.
"Preferred Partnership Securities Purchase Agreement" means the
partnership purchase agreement between the Trust and the Partnership providing
for the purchase of the Preferred Partnership Securities.
"Preferred Partnership Security Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry Interest
as reflected on the books of DTC, or on the books of a Person maintaining an
account with DTC (directly as a participant or as an indirect participant, in
each case in accordance with the rules of DTC or such participant).
"Preferred Return" means an amount equal to % per annum, of the stated
liquidation preference of a Preferred Partnership Security, calculated on the
basis of a 360-day year consisting of twelve 30-day months, or, for any period
shorter that a full 90-day quarter, on the basis of the actual number of days
elapsed in such quarter. The Preferred Return shall be calculated on the basis
of quarterly periods ending on , , , and , and shall accumulate and be
cumulative from the date of original issue.
"Preferred Trust Securities" has the meaning specified in Section 8.01
of the Trust Agreement.
"Preferred Trust Securities Guarantee" means the Preferred Trust
Securities Guarantee Agreement dated as of ________ __, ____, entered into by
the Company, as Guarantor, for the benefit of the holders of the Preferred Trust
Securities.
"Property Trustee" has the meaning set forth in Section 1.01 of the
Trust Agreement.
"Record Date" means (i) as long as the Preferred Trust Securities
remain (or, in the event that the Trust is liquidated in connection with a
Special Trust Event, as long as the Preferred Partnership Securities remain) in
book-entry only form, one Business Day prior to the relevant payment dates and
(ii) in the event that the Preferred Trust Securities (or in the event that the
Trust is liquidated in connection with a Special Trust Event, the Preferred
Partnership Securities) shall not continue to remain in book-entry only form,
the 15th day of the month of the relevant payment date.
"Redemption Notice" has the meaning set forth in Section 6.2(e) of
this Agreement.
"Redemption Price" has the meaning set forth in Section 6.2(c) of this
Agreement.
"Registrar" has the meaning set forth in Section 12.5 of this
Agreement.
"Reinvestment Criteria" has the meaning specified in Section 7.2(c) of
this Agreement.
"S&P" means Standard & Poor's Ratings Services or any successor
thereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Special Representative" has the meaning set forth in Section
6.2(h)(i) of this Agreement.
"Successor Partnership Securities" has the meaning set forth in
Section 11.11 of this Agreement.
"Tax Action" has the meaning set forth in Section 1.01 of the Trust
Agreement.
"Tax Matters Partner" means the General Partner designated as such in
Section 11.10 of this Agreement.
"10% in Liquidation Preference" means Holder(s) of the Preferred
Partnership Securities voting together as a single class representing 10% of the
aggregate liquidation amount of the Preferred Partnership Securities.
"Treasury Regulations" means the income tax regulations, including
temporary and property regulations, promulgated under the Code by the United
States Treasury Department, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trust" has the meaning set forth in the first paragraph of this
Agreement.
"Trust Agreement" means the Amended and Restated Trust Agreement of
the Trust among the Company, as Depositor, the Property Trustee, the Delaware
Trustee, and the Administrative Trustees, dated as of ________ __, ____, as
amended from time to time in accordance with its terms.
"Trust Guarantees" means the Common Trust Securities Guarantee and the
Preferred Trust Securities Guarantee.
"Underwriting Agreement" means the Underwriting Agreement dated
________ __, ____ among the Company, the Trust, the Partnership and the
underwriters named in Schedule _ thereto.
ARTICLE II.
CONTINUATION OF THE PARTNERSHIP;
ADMISSION OF PREFERRED PARTNERSHIP SECURITIES HOLDERS
Section 2.1 ____ CONTINUATION OF THE PARTNERSHIP. The parties hereto
agree to continue the Partnership in accordance with the terms of this
Agreement. The General Partner, for itself and as agent for the Limited
Partners, shall make every reasonable effort to assure that all certificates and
documents are properly executed and shall accomplish all filing, recording,
publishing and other acts necessary or appropriate for compliance with all the
requirements for the continuation of the Partnership as a limited partnership
under the Act and under all other laws of the State of Delaware or such other
jurisdictions in which the General Partner determines that the Partnership may
conduct activities. The rights and duties of the Partners shall be as provided
herein and, subject to the terms hereof, under the Act.
Section 2.2 ____ NAME. The name of the Partnership is "TXU Europe
Funding I, L.P.", as such name may be modified from time to time by the General
Partner following written notice to the Limited Partners.
Section 2.3 ____ PURPOSES OF THE PARTNERSHIP. The purpose of the
Partnership is to carry on the business of making and managing investments with
a view to the realization of profit to be shared between the Limited Partners
and the General Partner as set forth herein, and to that intent: (a) to issue
limited partnership interests in the Partnership in the form of Preferred
Partnership Securities, (b) to receive the General Partner Capital Contribution,
(c) to use substantially all of the Initial Partnership Proceeds to purchase, as
an investment, beneficial interests in the Initial Debentures, (d) to invest, at
all times, an amount equal to at least __% of the Initial Partnership Proceeds
in Eligible Debt Securities, (e) to receive interest and other payments on the
Affiliate Investment Instruments and the Eligible Debt Securities held by the
Partnership from time to time, (f) to make Distributions on the Preferred
Partnership Securities and distributions on the General Partner Interest if, as
and when declared by the General Partner in its sole discretion, (g) subject to
the restrictions and conditions contained in this Agreement, to make additional
investments in Affiliate Investment Instruments and Eligible Debt Securities and
to dispose of any such investments and (h) except as otherwise limited herein,
to enter into, make and perform all contracts and other undertakings, and engage
in those activities and transactions as the General Partner may reasonably deem
necessary or advisable for the carrying out of the foregoing purposes of the
Partnership. The Partnership may not engage in any other activities or
operations except as contemplated by the preceding sentence.
Section 2.4 ____ TERM. The term of the Partnership commenced upon the
filing of the Certificate in the Office of the Secretary of State of the State
of Delaware and shall continue until the Partnership is dissolved in accordance
with the provisions of this Agreement.
Section 2.5 ____ REGISTERED AGENT AND OFFICE. The Partnership's
registered agent and office in Delaware shall be
_____________________________________. At any time, the General Partner may
designate another registered agent and/or registered office.
Section 2.6 ____ PRINCIPAL PLACE OF ACTIVITY. The principal place of
activity of the Partnership shall be c/o [TXU Business Services Company, Energy
Plaza, 1601 Bryan Street, Dallas, Texas 75201] [U.S. address required?]. Upon
ten days' written notice to the Partners, the General Partner may change the
location of the Partnership's principal place of activity, provided that such
change has no material adverse effect upon any Partner.
Section 2.7 NAME AND ADDRESS OF GENERAL PARTNER. The name and address
of the General Partner are as follows:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England
WC2N 6HT
Attn: Treasurer
The General Partner may change its name or address from time to time, in which
event the General Partner shall promptly notify the Limited Partners of any such
change.
Section 2.8 ____ QUALIFICATION TO CONDUCT ACTIVITIES. The General
Partner shall cause the Partnership to become qualified, formed or registered
under the applicable qualification, fictitious name or similar laws of any
jurisdiction in which the Partnership conducts activities.
Section 2.9 ADMISSION OF HOLDERS OF PREFERRED PARTNERSHIP SECURITIES.
(a) _____ Without execution of this Agreement, upon the receipt of an
L.P. Certificate by a Person, whether by purchase, gift, devise or other valid
transfer, which receipt shall be deemed to constitute a request by such Person
that the books and records of the Partnership reflect such Person's admission as
a Limited Partner, such Person shall be admitted to the Partnership as a Limited
Partner and shall become bound by this Agreement.
(b) _____ The name and mailing address of each Partner and the amount
contributed by such Partner to the capital of the Partnership shall be listed on
the books and records of the Partnership. The General Partner shall be required
to update the books and records from time to time as necessary to accurately
reflect such information.
ARTICLE III.
CAPITAL CONTRIBUTIONS; REPRESENTATION OF
PREFERRED PARTNERSHIP SECURITY
HOLDER'S INTEREST; CAPITAL ACCOUNTS
Section 3.1 ____ CAPITAL CONTRIBUTIONS.
(a) _____ The General Partner has, prior to the date hereof,
contributed an aggregate of $15.00 to the capital of the Partnership, which
amount is equal to at least 15% of the total capital contributions to the
Partnership, after taking into account the contribution of the Limited Partner
referred to in Section 3.1(b). Contemporaneous with the issuance of the
Preferred Partnership Securities, the General Partner shall make the General
Partner Capital Contribution.
(b) _____ The Limited Partner has, prior to the date hereof,
contributed the amount of $85.00 to the capital of the Partnership.
(c) _____ On the Closing Date, the Limited Partner shall, in exchange
for a definitive L.P. Certificate, contribute to the capital of the Partnership
on behalf of the Trust an amount in cash equal to the gross proceeds from the
sale of the Preferred Trust Securities.
(d) _____ No Limited Partner shall at any time be required to make any
additional capital contributions to the Partnership, except as may be required
by law.
Section 3.2 ____ PREFERRED PARTNERSHIP SECURITY HOLDER'S INTEREST
REPRESENTED BY PREFERRED PARTNERSHIP SECURITIES. A Preferred Partnership
Security Holder's Interest shall be represented by the Preferred Partnership
Securities held by or on behalf of such Partner. Each Preferred Partnership
Security Holder's respective ownership of Preferred Partnership Securities shall
be set forth on the books and records of the Partnership. Each Partner hereby
agrees that its Interest in the Partnership shall for all purposes be personal
property. No Partner shall have an interest in specific Partnership property.
Section 3.3 ____ CAPITAL ACCOUNTS.
(a) _____ Establishment and Maintenance of Capital Accounts. The
Partnership shall establish and maintain a separate account (the "Capital
Account") for each Partner. The initial balance of the Capital Account for each
Partner shall be the amount as set out opposite the name of each of the Partners
on Schedule 1 attached hereto. The Capital Account of each Partner shall be
increased by (i) the dollar amount of any additional contributions made by such
Partner and (ii) allocations to such Partner of income and gain (including
income exempt from tax). The Capital Account of each Partner shall be decreased
by (i) the dollar amount of any distributions made to such Partner, and (ii)
allocations to such Partner of loss and deduction (including noncapital,
nondeductible expenditures not deductible in computing the Partnership's income
or loss for United States federal income tax purposes).
(b) _____ Compliance with Regulations. Notwithstanding any other
provision of this Agreement to the contrary, the provisions of Section 3.3(a)
regarding the maintenance of Capital Accounts shall be construed so as to comply
with the Treasury Regulations promulgated under section 704 of the Code. The
General Partner, in its sole discretion, is authorized to modify such provisions
to the minimum extent necessary to comply with such Treasury Regulations.
Section 3.4 ____ INTEREST ON CAPITAL CONTRIBUTIONS. Except as provided
herein, no Partner shall be entitled to interest on or with respect to any
capital contribution to the Partnership.
Section 3.5 ____ WITHDRAWAL AND RETURN OF CAPITAL CONTRIBUTIONS.
Subject to Section 3.1(b) hereof, no Partner shall be entitled to withdraw any
part of such Partner's capital contribution to the Partnership. No Partner shall
be entitled to receive any distributions from the Partnership, except as
provided in this Agreement.
ARTICLE IV.
ALLOCATIONS
Section 4.1 ____ NET INCOME AND NET LOSSES. After giving effect to the
special allocation provisions set forth in Section 4.2, which special
allocations shall take precedence over any allocations made pursuant to this
Section 4.1,
(a) _____ the Partnership's Net Income for each Fiscal Period of the
Partnership shall be allocated as follows:
(i) First, to each Holder of a Preferred Partnership
Security in an amount equal to the excess, if any, of (x) all Net
Losses, if any, allocated to each such Holder from the date of
issuance of the Preferred Partnership Security through and including
the close of such Fiscal Period pursuant to Section 4.1(b)(ii) below
over (y) the amount of Net Income, if any, allocated to each such
Holder pursuant to this Section 4.1(a)(i) in all prior Fiscal Periods.
(ii) Second, to the Holders of the Preferred Partnership
Securities, an amount of Net Income equal to the excess of (x) the
Preferred Return accumulated on the Preferred Partnership Securities
from the date of their issuance through and including the last day of
such Fiscal Year, over (y) the amount of Net Income allocated to the
Holders of the Preferred Partnership Securities pursuant to this
Section 4.1(a)(ii) in all prior Fiscal Periods. Amounts allocated to
all Preferred Partnership Security Holders shall be allocated among
such Holders in proportion to the number of Preferred Partnership
Securities held by such Holders.
(iii) Any remaining Net Income shall be allocated to the
General Partner.
(b) _____ The Partnership's Net Loss for any Fiscal Period shall be
allocated as follows:
(i) First, to the General Partner until the balance of the
General Partner's Capital Account is reduced to zero, provided,
however, that the aggregate amount of Net Losses allocated to the
General Partner pursuant to this Section 4.1(b)(i) shall not exceed
the sum of 14% of the total capital contributions of all Partners plus
the aggregate Net Income allocated to the General Partner pursuant to
this Section 4.1.
(ii) Second, among the Holders of Preferred Partnership
Securities in proportion to their respective aggregate Capital Account
balances, until the Capital Account balances of such Holders are
reduced to zero.
(iii) Any remaining Net Loss shall be allocated to the
General Partner.
(c) _____ DAILY DETERMINATION. For purposes of determining the
profits, losses or any other items allocable to any period, profits, losses and
any such other items shall be determined on a daily basis, unless the General
Partner determines that another method is permissible under Section 704 of the
Code and the Treasury Regulations promulgated thereunder. Unless otherwise
specified, such profits, losses or other items shall be determined for each
Fiscal Period.
Section 4.2 ____ SPECIAL ALLOCATIONS.
(a) _____ All expenditures that are (i) incurred by, or on behalf of,
the Partnership and (ii) paid, or otherwise reimbursed, by the General Partner
out of its own funds shall be allocated entirely to the General Partner.
(b) _____ In the event any Partner unexpectedly receives any
adjustments, allocations or distributions described in Treasury Regulation
Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of the Partnership's income
(including gross income) shall be specially allocated to such Partner in a
manner sufficient to eliminate the deficit, if any, in the balance of the
Capital Account of such Partner as quickly as possible. The foregoing is
intended to be a "qualified income offset" provision as described in Treasury
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied in
all respects in accordance with such Treasury Regulation.
(c) _____ SECTION 704 COMPLIANCE. While this Agreement does not
specifically provide for certain provisions required by Treasury Regulation
Sections 1.704-1(b) and 1.704-2 because those provisions apply to transactions
that are not expected to occur as regards the Partnership, the Partners intend
that the allocations under Section 4.1 conform to Treasury Regulations Sections
1.704-1(b) and 1.704-2 (including, without limitation, the minimum gain
chargeback, chargeback of partner nonrecourse debt minimum gain and partner
nonrecourse debt provisions of such Treasury Regulations), and, to the extent
necessary due to the occurrence of unexpected events, the General Partner shall
make such changes in the allocations under Section 4.1 as it believes are
reasonably necessary to meet the requirements of such Treasury Regulations.
(d) _____ ADJUSTMENT OF ALLOCATIONS. If the allocations set forth in
this Article IV are adjusted by the Internal Revenue Service and the Tax Matters
Partner agrees to such adjustments, such allocations shall be amended to the
minimum extent necessary to conform with such adjustments.
(e) _____ ADDITIONAL ALLOCATIONS. Notwithstanding the foregoing, if,
upon the final dissolution and termination of the Partnership and after taking
into account all allocations of Net Income and Net Losses (and other tax items)
under this Article IV, the distributions to be made in accordance with positive
Capital Account balance would not result in a return of the liquidation
preference of the Preferred Partnership Securities plus the accumulated and
unpaid Preferred Return, then gross items of income and gain (and other tax
items) for the taxable year of the final dissolution and termination (and, to
the extent permitted under section 761(c) of the Code, gross items of income and
gain, and other tax items, for the immediately preceding taxable year) shall be
allocated to the Partners to increase or decrease their respective Capital
Account balances so that the final distribution will be result in a an amount
equal to the aggregate liquidation preference of the Preferred Partnership
Securities plus the amount of accumulated and unpaid Preferred Return being
distributed to the Limited Partners.
Section 4.3 ____ WITHHOLDING. The Partnership shall comply with
withholding requirements under Federal, state and local law and shall remit
amounts withheld to and file required forms with applicable jurisdictions. To
the extent that the Partnership is required to withhold and pay over any amounts
to any authority with respect to distributions or allocations to any Partner,
the amount withheld shall be deemed to be a distribution in the amount of the
withholding to the Partner. In the event of any claimed over-withholding,
Partners shall be limited to an action against the applicable jurisdiction. If
the amount withheld was not withheld from actual distributions, the Partnership
may reduce subsequent distributions by the amount of such withholding. Each
Partner agrees to furnish the Partnership with any representations and forms as
shall reasonably be requested by the Partnership to assist it in determining the
extent of, and in fulfilling, its withholding obligations.
ARTICLE V.
DISTRIBUTIONS
Section 5.1 ____ DISTRIBUTIONS. The Limited Partners shall receive
periodic Distributions with respect to Preferred Entitlements, redemption
payments and liquidation distributions in accordance with the terms of the
Preferred Partnership Securities set forth in Article VI. The General Partner
shall in its sole discretion determine whether and when Distributions shall be
payable; provided, however, that if the General Partner shall determine a
Distribution will not be paid on a scheduled Distribution Payment Date, the
General Partner shall give notice of its determination not to pay such
Distribution to Limited Partners of record as of the Record Date for the payment
of such Distribution; provided, further, however, that the General Partner shall
not declare Distributions, and no Distributions shall be payable by the
Partnership to the General Partner in respect of its General Partner Interest
unless all Distributions in respect of accumulated and unpaid Preferred
Entitlements, including any Distributions in respect of Compounded Preferred
Entitlements, have been paid in full for all prior Fiscal Periods. Subject to
the immediately preceding sentence, to the extent that the aggregate payments of
interest (or dividends) received by the Partnership in respect of Affiliate
Investment Instruments and Eligible Debt Securities for each Fiscal Period
exceed the amount of Distributions in respect of Preferred Entitlements,
including any Distributions in respect of Compounded Preferred Entitlements,
paid on the Preferred Partnership Securities for such Fiscal Period, the General
Partner, in its sole discretion may declare and distribute such excess funds to
the General Partner in respect of its General Partner Interest.
Section 5.2 ____ LIMITATIONS ON DISTRIBUTIONS. The Partnership shall
not make a Distribution to any Partner on account of such Partner's Interest if
such Distribution would violate Section 17-607 of the Act or other applicable
law.
ARTICLE VI.
ISSUANCE OF PREFERRED PARTNERSHIP SECURITIES
Section 6.1 GENERAL PROVISIONS REGARDING PREFERRED PARTNERSHIP
SECURITIES.
(a) _____ There is hereby authorized for issuance and sale Preferred
Partnership Securities having an aggregate liquidation preference outstanding
not greater than $___________ and having the designation, annual distribution
rate, liquidation preference, redemption terms, and other powers, preferences
and special rights and limitations set forth in this Article VI.
(b) _____ The payment of Distributions (including payments of
distributions by the Partnership in liquidation or on redemption in respect of
Preferred Partnership Securities) shall be guaranteed by the Company pursuant to
and to the extent set forth in the Partnership Guarantee. The Preferred
Partnership Security Holders hereby authorize the General Partner to hold the
Partnership Guarantee on behalf of the Preferred Partnership Security Holders.
In the event of an appointment of a Special Representative pursuant to Section
6.2(i), among other things, to enforce the Partnership Guarantee, the Special
Representative may take possession of the Partnership Guarantee for such
purpose. If no Special Representative has been appointed to enforce the
Partnership Guarantee, the General Partner has the right to enforce the
Partnership Guarantee on behalf of the Preferred Partnership Security Holders.
The Preferred Partnership Security Holders, by acceptance of such Preferred
Partnership Securities, acknowledge and agree to the subordination provisions
in, and other terms of, the Partnership Guarantee.
(c) _____ The Partnership may not issue any interests in the
Partnership other than the Preferred Partnership Securities and the General
Partner Interest, provided that the Partnership may accept additional capital
contributions from the General Partner with respect to the General Partner
Interest. All Preferred Partnership Securities shall rank senior to all other
Interests in the Partnership in respect of the right to receive Distributions.
All Preferred Partnership Securities redeemed, purchased or otherwise acquired
by the Partnership shall be canceled. The Preferred Partnership Securities will
be issued in registered form only.
(d) _____ No Holder shall be entitled as a matter of right to
subscribe for or purchase, or have any preemptive right with respect to, any
part of any new or additional limited partnership interests, or of securities
convertible into any Preferred Partnership Securities or other limited
partnership interests, whether now or hereafter authorized and whether issued
for cash or other consideration or by way of a distribution.
(e) _____ Any of the Preferred Partnership Securities that are owned
by the Company or by any entity directly or indirectly controlled by, or under
direct or indirect common control with, the Company, shall not be entitled to
vote or consent with respect to any Preferred Partnership Security owned by it,
and shall, for purposes of such vote or consent, be treated as if they were not
outstanding; provided, however, that persons (other than affiliates of the
Company) to whom the Company or any of its subsidiaries have pledged Preferred
Partnership Securities may vote or consent with respect to such pledged
Preferred Partnership Securities under any of the circumstances described in
Section 6.2.
Section 6.2 PREFERRED PARTNERSHIP SECURITIES.
(a) _____ DESIGNATION. A total of _________________ Preferred
Partnership Securities, liquidation preference $25 per Preferred Partnership
Security, are hereby designated as "___% Preferred Partnership Securities".
(b) PREFERRED ENTITLEMENTS AND DISTRIBUTIONS.
(i) Preferred Entitlements. Preferred Partnership Security
Holders shall be entitled to share in the profits of the Partnership
to the extent of amounts (Preferred Entitlements") determined at a
rate per annum of % of the stated liquidation preference of $25 per
Preferred Partnership Security, calculated on the basis of a 360-day
year consisting of twelve 30-day months, and computed by reference to
quarterly periods ____________ ending ____________ on ____________ ,
____________ , , and of each year ("Distribution Payment Dates"). For
any period shorter than a full 90-day quarter, Preferred Entitlements
will be computed on the basis of the actual number of days elapsed in
such 90-day quarter. Preferred Entitlements shall, from the date of
original issue, accumulate and be cumulative. Preferred Entitlements
not distributed on the scheduled Distribution Payment Date will
accumulate and compound quarterly at the rate of __% per annum
("Compounded Preferred Entitlements"). Preferred Entitlements and
Compounded Preferred Entitlements (if any) shall be cumulative from
the Closing Date. The relevant Distribution Payment Date in respect of
any Preferred Entitlement shall be the last day of the quarter in
respect of which the Preferred Entitlement is computed. In the event
that the last day of any such quarter is not a Business Day, then the
relevant Distribution Payment Date shall be the next succeeding day
which is a Business Day (and without any interest or other payment in
respect of distribution subject to the delay) except that, if such
Business Day is in the next succeeding calendar year, such relevant
Distribution Payment Date shall be the immediately preceding Business
Day (without any reduction in interest or other payments in respect of
such early payment).
(ii) Distributions. Distributions in respect of Preferred
Entitlements on the Preferred ------------- Partnership Securities
will be payable if, as and when, declared by the General Partner in
its sole discretion, out of the assets of the Partnership legally
available therefor. Distributions will be payable to the Holders as
they appear on the books and records of the Partnership on the
relevant Record Date. If the Trust or the Property Trustee is the
Holder of the Preferred Partnership Securities, all Distributions of
cash shall be made by wire transfer of same day funds to such Holder
by 10:00 a.m., New York City time, on the applicable Distribution
Payment Date or the Business Day specified in section 6.2(b)(i).
Distributions payable in respect of Preferred Entitlements on any
Preferred Partnership Securities that are not punctually paid on any
Distribution Payment Date or the Business Day specified in section
6.2(b)(i) will not to be payable to the Person in whose name such
Preferred Partnership Securities are registered on the relevant record
date, and such Distribution will instead be payable to the Person in
whose name such Preferred Partnership Securities are registered on the
special record date or other specified date for payment of such
Distribution.
(c) _____ OPTIONAL REDEMPTION. Preferred Partnership Securities shall
be redeemable at the option of the General Partner, in whole or in part, from
time to time, on or after ________ __, ____, upon not less than 30 nor more than
60 days notice, at an amount per Preferred Partnership Securities equal to $25
plus accumulated and unpaid Distributions thereon, including any Compounded
Distributions (the "Redemption Price"). The Partnership may not redeem the
Preferred Partnership Securities in part unless all accumulated and unpaid
Distributions, including any Compounded Distributions, have been paid in full on
all Preferred Partnership Securities for all Fiscal Periods terminating on or
prior to the date of redemption. If a partial redemption of the Preferred
Partnership Securities would result in the delisting of the Preferred Trust
Securities (or, if the Trust is liquidated in connection with a Special Trust
Event, or if a partial redemption would result in the delisting of the Preferred
Partnership Securities), the Partnership may only redeem the Preferred
Partnership Securities in whole but not in part.
(d) _____ SPECIAL EVENT REDEMPTIONS. If, at any time, a Partnership
Special Event shall occur and be continuing, the General Partner shall, within
90 days following the occurrence of such Partnership Special Event, elect to
either (i) redeem the Preferred Partnership Securities in whole (but not in
part), upon not less than 30 or more than 60 days notice at the Redemption
Price, provided that if at the time there is available to the Partnership the
opportunity to eliminate, within such 90-day period, the Partnership Special
Event by taking some ministerial action, such as filing a form or making an
election, or pursuing some other similar reasonable measure that in the sole
judgment of the General Partner has or will cause no adverse effect on the
Partnership, the Trust, or the Company, the General Partner will pursue such
measure in lieu of redemption; or (ii) cause the Preferred Partnership
Securities to remain outstanding, provided that in the case of this clause (ii),
the General Partner shall pay any and all costs and expenses incurred by or
payable by the Partnership which are attributable to the Partnership Special
Event.
(e) REDEMPTION PROCEDURES.
(i) Notice of any redemption of Preferred Partnership
Securities (a "Redemption Notice") will be given by the Partnership by
mail to each Holder of Preferred Partnership Securities to be redeemed
not fewer than 30 nor more than 60 days before the date fixed for
redemption. For purposes of the calculation of the date of redemption
and the dates on which notices are given pursuant to this Section
6.2(e)(i), a Redemption Notice shall be deemed to be given on the day
such notice is first mailed, by first-class mail, postage prepaid, to
Holders of Preferred Partnership Securities. Each Redemption Notice
shall be addressed to the Holders of Preferred Partnership Securities
at the address of each such Holder appearing in the books and records
of the Partnership. No defect in the Redemption Notice or in the
mailing thereof with respect to any Holder shall affect the validity
of the redemption proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding
Preferred Partnership Securities are to be redeemed, the Preferred
Partnership Securities to be redeemed shall be redeemed pro rata
provided, that, in the event Preferred Partnership Securities are held
in book-entry only form by DTC or its nominee (or any successor
Clearing Agency or its nominee), DTC will reduce, in accordance with
DTC's customary procedures, the amount of the interest of each
Clearing Agency Participant in the Preferred Partnership Securities to
be redeemed; provided, that if, as a result of such pro rata
redemption, Holders would hold fractional interests in the Preferred
Partnership Securities, the General Partner may adjust the amount of
the interest of each Holder to be redeemed to avoid such fractional
interests.
(iii) If the Partnership gives a Redemption Notice (which
notice will be irrevocable), then by 12:00 noon, New York City time,
on the redemption date, the Partnership (A) if the Preferred
Partnership Securities are in book-entry only form with DTC, will
deposit irrevocably with DTC funds sufficient to pay the applicable
Redemption Price and will give DTC irrevocable instructions and
authority to pay the Redemption Price in respect of the Preferred
Partnership Securities held through DTC in global form or (B) if the
Preferred Partnership Securities are held in certificated form, will
deposit with the Paying Agent, funds sufficient to pay the applicable
Redemption Price of the amount of any such Preferred Partnership
Securities and will give to the Paying Agent irrevocable instructions
and authority to pay such amounts to the Holders of Preferred
Partnership Securities, upon surrender of their certificates, by
check, mailed to the address of the relevant Holder appearing on the
books and records of the Partnership on the redemption date; provided,
however, that for so long as the Trust or the Property Trustee of the
Trust shall hold the Preferred Partnership Securities, payment of cash
shall be made by wire in same day funds to the Holder by 12:00 Noon,
New York City time, on the redemption date. [For these purposes, the
applicable Redemption Price shall not include Distributions which are
being paid to Holders who were Holders on a relevant record date.]
Upon satisfaction of the foregoing conditions, then immediately prior
to the close of business on the date of such deposit or payment, all
rights of Holders of such Preferred Partnership Securities so called
for redemption will cease, except the right of the Holders to receive
the Redemption Price, but without interest on such Redemption Price,
and from and after the date fixed for redemption, such Preferred
Partnership Securities will not accumulate Distributions or bear
interest. In the event that any date fixed for redemption of Preferred
Partnership Securities is not a Business Day, then payment of the
Redemption Price payable on such date will be made on the next
succeeding Business Day (and without any interest in respect of any
such delay), except that, if such Business Day falls in the next
calendar year, such payment will be made on the immediately preceding
Business Day in each case, with the same force and effect as if made
on such date fixed for redemption. In the event that payment of the
Redemption Price is improperly withheld or refused and not paid by
either the Partnership or the Company pursuant to the Partnership
Guarantee, Distributions on the Preferred Partnership Securities
called for Redemption will continue to accumulate, to the extent that
payment of such interest is legally available, from the original
redemption date until the Redemption Price is actually paid. The
Partnership shall not be required to register or cause to be
registered the transfer of any Preferred Partnership Securities which
have been called for redemption.
(f) COMPANY PURCHASES. Subject to the provisions of this Section
6.2 and applicable law (including, without limitation, Federal securities laws),
if Preferred Partnership Securities have been distributed to the Holders (as
defined in the Trust Agreement) of Preferred Trust Securities, the Company or
any of its subsidiaries may at any time and from time to time purchase
outstanding Preferred Partnership Securities by tender, in the open market, or
by private agreement.
(g) LIQUIDATION DISTRIBUTION UPON DISSOLUTION. In the event of any
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Partnership, the Holders of Preferred Partnership Securities at the time
outstanding will be entitled to receive out of the assets of the Partnership
such amount as is determined in accordance with Section 13.4 (the "Partnership
Liquidation Distribution") payable in cash.
(h) VOTING RIGHTS.
(i) SPECIAL REPRESENTATIVE.
(A) If one or more of the following events shall occur and
be continuing (each a "Partnership Enforcement Event"): (i) arrearages
on distributions on the Preferred Partnership Securities shall exist
for ___ consecutive quarterly distribution periods, (ii) the Company
is in default on any of its obligations under the Partnership
Guarantee or (iii) an Investment Event of Default on any Affiliate
Investment Instrument or a default under any Investment Guarantee, as
the case may be, occurs and is continuing then the Property Trustee,
for so long as the Preferred Partnership Securities are held by the
Property Trustee, will have the right, or the Holders of the Preferred
Partnership Securities, upon the affirmative vote of at least a
Majority in Liquidation Preference of the Preferred Partnership
Securities, shall have the right, to the exclusion of the General
Partner, (a) to appoint and authorize a special representative of the
Partnership and the Limited Partners (a "Special Representative") to
enforce (1) to the maximum extent permitted by applicable law, the
Partnership's creditors' rights and other rights, including the right
to receive payments under, with respect to the Affiliate Investment
Instruments and the Investment Guarantees, (2) the rights of the
Holders of the Preferred Partnership Securities under the Partnership
Guarantee, and (3) the rights of the Holders of the Preferred
Partnership Securities to receive Distributions (only if, and to the
extent, declared by the General Partner, in its sole discretion, out
of funds legally available therefor) on the Preferred Partnership
Securities, and (b) under the Partnership Guarantee to enforce the
terms of the Partnership Guarantee, including the right to enforce the
covenant restricting certain payments of the Company and Finance
Subsidiaries. Under no circumstances, however, shall the Special
Representative have authority to cause the General Partner to declare
Distributions on the Preferred Partnership Securities nor to have any
authority concerning the selection of Partnership Investments. When
the Special Representative acts to enforce the Partnership's
creditors' rights and other rights with respect to the Affiliate
Investment Instruments and the Investment Guarantees, the Special
Representative acts as an agent of the Partnership. When the Special
Representative acts to enforce the rights of the Holders of the
Preferred Partnership Securities under the Partnership Guarantee or
their rights to receive Distributions on the Preferred Partnership
Securities, the Special Representative acts as an agent of the Holders
of the Preferred Partnership Securities. In addition, the Special
Representative shall not, by virtue of acting in such capacity, be
admitted as a general or limited partner in the Partnership or
otherwise be deemed to be a general or limited partner in the
Partnership and shall have no liability for the debts, obligations, or
liabilities of the Partnership.
(B) In furtherance of the foregoing, and without limiting
the powers of any Special Representative so appointed and to avoid any
doubt concerning the powers of the Special Representative, any Special
Representative, in its own name, in the name of the Partnership, in
the name of the Limited Partners, or otherwise, may institute, or
cause to be instituted, a proceeding, including, without limitation,
any suit in equity, an action at law or other judicial or
administrative proceeding, to enforce on behalf of the Partnership the
Partnership's rights directly against the Company or any other obligor
in connection with its obligations to the Partnership, and may
prosecute such proceeding to judgment or final decree, and enforce the
same against the Company or any other obligor in connection with such
obligations and collect, out of the property, wherever situated, of
the Company or any such other obligor upon such obligations, the
monies adjudged or decreed to be payable in the manner provided by
law. The General Partner agrees to execute and deliver such documents
as may be necessary, appropriate or convenient for the Special
Representative to enforce the foregoing rights and obligations on
behalf and in the name of the Partnership.
(C) If the Special Representative fails to enforce its
rights under any Affiliate Investment Instrument or any Investment
Guarantee after a holder of Preferred Partnership Securities has made
a written request, such holder of record of Preferred Partnership
Securities may to the fullest extent permitted by law directly
institute a legal proceeding against the issuer of that Affiliate
Investment Instrument or the Company to enforce the rights of the
Special Representative and the Partnership under that Affiliate
Investment Instrument or any Investment Guarantee without first
instituting any legal proceeding against the Special Representative,
the Partnership or any other person or entity. In any event, if a
Partnership Enforcement Event has occurred and is continuing and such
event is attributable to the failure of an Investment Affiliate to
make any required payment when due on any Affiliate Investment
Instrument, or of the Company to make any required payment when due on
any Investment Guarantee, then a holder of Preferred Partnership
Securities may to the fullest extent permitted by law on behalf of the
Partnership directly institute a proceeding against such Investment
Affiliate or the Company with respect to such Affiliate Investment
Instrument or Investment Guarantee, as the case may be, for
enforcement of payment. In addition, the Partnership acknowledges
that, for so long as the Trust holds any Preferred Partnership
Securities, if the Special Representative fails to enforce its rights
on behalf of the Partnership under any Affiliate Investment Instrument
or Investment Guarantee, as the case may be, after a holder of Trust
Securities has made a written request, a holder of record of Trust
Securities may to the fullest extent permitted by law on behalf of the
Partnership directly institute a legal proceeding against the
Investment Affiliate under the Affiliate Investment Instrument or the
Company under the Investment Guarantee, without first instituting any
legal proceeding against the Property Trustee, the Trust, the Special
Representative or the Partnership. In any event, for so long as the
Trust is the holder of any Preferred Partnership Securities, if a
Trust Enforcement Event has occurred and is continuing and such event
is attributable to the failure of an Investment Affiliate to make any
required payment when due on any Affiliate Investment Instrument or
the failure of the Company to make any required payment when due on
any Investment Guarantee, then the Partnership acknowledges that a
holder of Trust Securities may to the fullest extent permitted by law
on behalf of the Partnership directly institute a proceeding against
such Investment Affiliate with respect to such Affiliate Investment
Instrument or against the Company with respect to any such Investment
Guarantee, in each case for enforcement of payment. Under no
circumstances shall the Special Representative, any holder of
Preferred Partnership Securities or any holder of Preferred Trust
Securities have authority to cause the General Partner to declare
distributions on the Preferred Partnership Securities.
(D) For purposes of determining whether the Partnership has
deferred payment of Distributions for ____ consecutive quarters,
Distributions shall be deemed to remain in arrears, notwithstanding
any payments in respect thereof, until full cumulative Distributions,
including Compounded Distributions, have been or contemporaneously are
paid with respect to all quarterly Distribution periods terminating on
or prior to the date of payment of such full cumulative Distributions.
Not later than 30 days after such right to appoint a Special
Representative arises, the General Partner will convene a meeting for
election of a Special Representative. If the General Partner fails to
convene such meeting within such 30-day period, the Holders of not
less than 10% in Liquidation Preference of the Outstanding Preferred
Partnership Securities will be entitled to convene such meeting. The
provisions of Section 14.3 relating to the convening and conduct of
meetings of the Partners will apply with respect to any such meeting.
In the event that, at any such meeting, Holders of less than a
Majority in Liquidation Preference of Preferred Partnership Securities
entitled to vote for the appointment of a Special Representative vote
for such appointment, no Special Representative shall be appointed.
Any Special Representative appointed shall cease to be a Special
Representative of the Partnership and/or the Limited Partners if (x)
the Partnership (or the Company pursuant to the Partnership Guarantee)
shall have paid in full all accumulated and unpaid Distributions on
the Preferred Partnership Securities, (y) the relevant Investment
Event of Default shall have been cured, and (z) the Company is in
compliance with all its obligations under the Partnership Guarantee,
and the Company, in its capacity as the General Partner, shall
continue the activities of the Partnership without dissolution.
Notwithstanding the appointment of any such Special Representative,
the Company shall continue as General Partner and shall retain all
rights under this Agreement, including the right to determine whether
to declare, in its sole discretion, the payment of Distributions on
the Preferred Partnership Securities.
(ii) CERTAIN AMENDMENTS; WAIVER. (1) If any proposed
amendment of this Agreement provides for, or the General Partner
otherwise proposes to effect, (x) any action that would materially
adversely affect the powers, preferences or special rights of the
Holders of the Preferred Partnership Securities, whether by way of
amendment of this Agreement or otherwise (including, without
limitation, the authorization or issuance of any limited partnership
interests in the Partnership ranking, as to participation in profits
or distributions, or in the assets of the Partnership, senior to the
Preferred Partnership Securities); or (y) the dissolution, winding-up
or termination of the Partnership, other than (1) in connection with
the occurrence of a Partnership Special Event or (2) as described
under Sections 11.11 and 13.2 of this Agreement, then the Holders of
outstanding Preferred Partnership Securities will be entitled to vote
on such amendment or proposal of the General Partner (but not on any
other amendment or proposal) as a class and such amendment or proposal
shall not be effective except with the approval of Holders of a
Majority in Liquidation Preference of such outstanding Preferred
Partnership Securities having a right to vote on the matter; provided,
however, that if the Property Trustee on behalf of the Trust is the
Holder of the Preferred Partnership Securities, any such amendment or
proposal not excepted by (1) or (2) above shall not be effective
without the prior or concurrent approval of the Holders of a majority
in liquidation preference of the outstanding Preferred Trust
Securities having a right to vote on such matters; provided, further,
that no such approval shall be required if the dissolution, winding-up
or termination of the Partnership is proposed or initiated upon the
initiation of proceedings, or after proceedings have been initiated,
for the dissolution, winding-up, liquidation or termination of the
Company.
(2) The Holders of a Majority in Liquidation Preference of Preferred
Partnership Securities may, by vote, on behalf of the Holders of all of the
Preferred Partnership Securities, waive any past Partnership Enforcement Event
with respect to the Preferred Partnership Securities and its consequences;
provided, that if the underlying Investment Event of Default:
(A) is not waivable under the related Affiliate Investment
Instrument or Investment Guarantee, such Partnership Enforcement Event
shall also not be waivable; or
(B) requires the consent or vote of the Holders of greater
than a majority in principal amount of the related Affiliate
Investment Instrument (a "Super Majority") to be waived under the
related Affiliate Investment Instrument or Investment Guarantee, the
Partnership Enforcement Event may only be waived by the vote of the
Holders of the relevant Super Majority in liquidation preference of
the Preferred Partnership Securities.
Upon such waiver, any such Partnership Enforcement Event shall cease
to exist, and shall be deemed to have been cured, for every purpose of
this Agreement, but no such waiver shall extend to any subsequent or
other Partnership Enforcement Event or impair any right consequent
thereon.
(3) A waiver of an Investment Event of Default by the Special
Representative, acting at the direction of the Holders of the Preferred
Partnership Securities, constitutes a waiver of the corresponding Partnership
Enforcement Event.
(iii) GENERAL VOTING. (1) The General Partner shall not (i)
direct the time, method and place of conducting any proceeding for any
remedy available, (ii) waive any Investment Event of Default that is
waivable under the Affiliate Investment Instruments or Investment
Guarantees, [(iii) exercise any right to rescind or annul a Trust
Agreement that the principal of any Affiliate Investment Instruments
shall be due and payable,] (iv) waive the breach of the covenant by
the Company in the Partnership Guarantee to restrict certain payments
by the Company, or Finance Subsidiaries, or (v) consent to any
amendment, modification or termination of any Affiliate Investment
Instrument or Investment Guarantee, where such consent shall be
required from the investor, without, in each case, obtaining the prior
approval of the Holders of at least a Majority in Liquidation
Preference of the Preferred Partnership Securities; provided, however,
that if the Property Trustee on behalf of the Trust is the Holder of
the Preferred Partnership Securities, such waiver, consent or
amendment or other action shall not be effective without the prior or
concurrent approval of at least a majority in liquidation amount of
the outstanding Preferred Trust Securities having a right to vote on
such matters. The General Partner shall not revoke any action
previously authorized or approved by a vote of the Holders of the
Preferred Partnership Securities without the approval of a Majority in
Liquidation Preference of the Preferred Partnership Securities. The
General Partner shall notify all Holders of the Preferred Partnership
Securities of any notice of an Investment Event of Default received
with respect to any Affiliate Investment Instrument or Investment
Guarantee.
(2) Any required approval of Holders of Preferred Partnership
Securities may be given at a separate meeting of such Holders convened for such
purpose or pursuant to written consent. The General Partner will cause a notice
of any meeting at which Holders of Preferred Partnership Securities are entitled
to vote, or of any matter upon which the action by written consent of such
Holders is to be taken, to be mailed to each Holder of record of Preferred
Partnership Securities. Each such notice will include a statement setting forth
(x) the date of such meeting or the date by which such action is to be taken,
(y) a description of any matter proposed for adoption at such meeting on which
such Holders are entitled to vote or of such matters upon which written consent
is sought and (z) instructions for the delivery of proxies or consents. No vote
or consent of the Holders of Preferred Partnership Securities will be required
for the Partnership to redeem and cancel Preferred Partnership Securities in
accordance with this Agreement.
(3) Notwithstanding that Holders of Preferred Partnership Securities
are entitled to vote or consent under any of the circumstances described above,
any of the Preferred Partnership Securities at such time that are beneficially
owned by the Company or by any entity directly or indirectly controlled by, or
under direct or indirect common control with, the Company, shall not be entitled
to vote or consent and shall, for purposes of such vote or consent, be treated
as if they were not outstanding; provided, however, that persons (other than
affiliates of the Company) to whom the Company or any of its subsidiaries have
pledged Preferred Partnership Securities may vote or consent with respect to
such pledged Preferred Partnership Securities pursuant to the terms of such
pledge.
(4) Holders of the Preferred Partnership Securities shall have no
rights to remove or replace the General Partner.
(5) _____ Holders of Preferred Partnership Securities shall have no
preemptive rights.
ARTICLE VII.
PARTNERSHIP INVESTMENTS
Section 7.1 INITIAL AFFILIATE INVESTMENT INSTRUMENTS.
(a) _____ All Partnership funds will be invested in the subordinated
debt securities of Investment Affiliates (the "Affiliate Investment
Instruments") and Eligible Debt Securities. No more than __% of the Initial
Partnership Proceeds will be used by the Partnership to purchase the Initial
Debentures meeting the criteria set forth in this Section 7.1. The remaining
funds from the Initial Partnership Proceeds will be used to purchase Eligible
Debt Securities in accordance with the terms of this Agreement.
(b) _____ The Partnership shall apply approximately __% of the Initial
Partnership Proceeds to purchase subordinated debt instruments of one or more
eligible controlled affiliates of the Company (such debt instruments
collectively referred to as the "Initial Debentures"). The Initial Debentures
may each contain a provision that allows an affiliate of the issuer of such
Debenture to assume the obligations of such issuer subject to certain
conditions. The Partnership may purchase the Initial Debentures only upon
receipt of an opinion of the Independent Financial Advisor to the effect that
(i) if such Initial Debentures were to be rated, at least one Rating Agency
would rate all the Initial Debentures investment grade at the time such Initial
Debentures are purchased by the Partnership, (ii) the Company and each
Investment Affiliate which is a subsidiary of the Company would have been
capable of issuing and selling debt instruments with the same terms and
conditions as the applicable Initial Debentures to unrelated third party
investors, (iii) the terms and conditions of the Initial Debentures are
consistent with the terms and conditions of a public offering or a private
placement pursuant to Rule 144A under the Securities Act of such Initial
Debentures and are no more favorable to the relevant Investment Affiliate than
could have been obtained by such Investment Affiliate from unrelated third party
investors pursuant to such a public offering or private placement of such
Initial Debentures. On the Closing Date, the Partnership shall invest at least
__% of such Initial Partnership Proceeds in Eligible Debt Securities. The terms
of the Initial Debentures will be as set forth in the Indenture attached hereto
as Exhibits A.
Section 7.2 REINVESTMENT OF PAYMENTS RECEIVED BY THE PARTNERSHIP.
(a) The Partnership must at all times invest an amount equal to at
least __% of the Initial Partnership Proceeds in Eligible Debt Securities.
(b) The Partnership may reinvest any payments it receives in respect
of its investments in (i) Eligible Debt Securities without limitation and (ii)
additional Affiliate Investment Instruments but only upon (A) the acceptance of
a written offer setting forth the terms and conditions on which an Investment
Affiliate would be willing to issue an Affiliate Investment Instrument to the
Partnership (an "Investment Offer") and (B) the receipt of an opinion of the
Independent Financial Advisor that the terms of such Affiliate Investment
Instrument set forth in such Investment Offer satisfy the Reinvestment Criteria.
(c) If the Independent Financial Advisor determines that the terms of
an Affiliate Investment Instrument (as set forth in the Investment Offer) do not
satisfy the Reinvestment Criteria, the Partnership shall be prohibited from
making any investment in such Affiliate Investment Instrument.
(d) Each Affiliate Investment Instrument shall satisfy the following
criteria (the "Reinvestment Criteria"): (i) the economic terms of each Affiliate
Investment Instrument shall be no less favorable to the Partnership than terms
that would otherwise be obtainable through a public offering or private
placement under Rule 144A of the Securities Act of securities by the requesting
Investment Affiliate and the other terms and conditions of each Affiliate
Reinvestment Instrument are substantially similar to the terms and conditions of
similar securities and guarantees, if any, included therein, that are offered to
the public in a public offering or private placement under Rule 144A of the
Securities Act of such securities; (ii) the Partnership shall not have held any
Affiliate Investment Instruments of the Investment Affiliate submitting the
Investment Offer within the three-year period ending on the date of the
Investment Offer other than Funding; (iii) there shall not have been a default
on any debt obligation of the Investment Affiliate submitting the Investment
Offer that was owned by the Partnership; (iv) no dividend arrearages shall have
existed on any preferred shares of the Investment Affiliate submitting the
Investment Offer that was owned by the Partnership; and (v) the Investment
Affiliate submitting the Investment Offer shall not be deemed to be an
investment company by reason of Section 3(a) or 3(b) of the 1940 Act or is
otherwise an eligible recipient of funds directly or indirectly from the Trust
pursuant to an order issued by the Securities and Exchange Commission.
(e) Any payments received by the Partnership in respect of its
investments that are not invested in additional Affiliate Investment
Instruments, may be reinvested only in Eligible Debt Securities (subject to
restrictions of applicable law, including the 1940 Act).
ARTICLE VIII.
BOOKS OF ACCOUNT, RECORDS AND REPORTS
Section 8.1 BOOKS AND RECORDS.
(a) Proper and complete records and books of account of the
Partnership shall be kept by the General Partner, in which shall be entered
fully and accurately all transactions and other matters relative to the
Partnership's investments. The books and records of the Partnership, together
with a certified copy of this Agreement and of the Certificate, shall at all
times be maintained at the principal office of the General Partner and shall be
open to the inspection and examination of the Partners or their duly authorized
representatives for any proper purpose reasonably related to its Interest during
reasonable business hours.
(b) Notwithstanding any other provision of this Agreement to the
contrary, the General Partner may, to the maximum extent permitted by applicable
law, keep confidential from the Partners any information with respect to the
Partnership, the disclosure of which the General Partner reasonably believes is
not in the best interests of the Partnership, or is adverse to the interests of
the Partnership, or which the Partnership or the General Partner is required by
law or by an agreement with any Person to keep confidential.
(c) (i) For so long as the Preferred Partnership Securities are held
by the Property Trustee on behalf of the Trust, within one month after the close
of each Fiscal Year, the General Partner shall transmit to each Partner a
statement indicating such Partner's share of each item of Partnership income,
gain, loss, deduction or credit, for United States federal income tax purposes,
for such Fiscal Year.
(ii) In the event that the Preferred Partnership Securities are no
longer held by the Property Trustee on behalf of the Trust, as soon as
reasonably possible after the close of the Fiscal Year, the General Partner
shall transmit to each Partner the statement referred to in Section 8.1(c)(i)
hereof.
Section 8.2 ACCOUNTING METHOD. For both financial and tax reporting
purposes, the books and records of the Partnership shall be kept on the accrual
method of accounting applied on a consistent basis and shall reflect all
Partnership transactions.
Section 8.3 ANNUAL AUDIT. As soon as practical after the end of each
Fiscal Year, but not later than 90 days after such end, the financial statements
of the Partnership shall be audited by a firm of independent certified public
accountants selected by the General Partner in accordance with applicable law.
The cost of such audits will be an expense of the Partnership and shall be paid
by the General Partner.
ARTICLE IX.
PAYMENT OF EXPENSES
Section 9.1 PAYMENT OF TRUST EXPENSES AND PARTNERSHIP TAXES.
Since the Trust is being formed solely to facilitate a direct investment in the
Preferred Partnership Securities, the Partnership hereby agrees, at any time
while the Property Trustee is the Holder of any Preferred Partnership
Securities, to pay all the expenses of the Trust, including, but not limited to,
any taxes, duties, assessments or governmental charges of whatever nature (other
than withholding taxes) imposed on the Trust by the United States, or any other
domestic taxing authority, so that the net amounts received and retained by the
Trust and the Property Trustee after paying such expenses will be equal to the
amounts the Trust and the Property Trustee would have received had no such costs
or expenses been incurred by or imposed on the Trust. The General Partner shall
be liable for, and shall pay all such expenses solely out of its own funds. In
addition, if the Partnership is required to pay any taxes, duties, assessments
or governmental charges of whatever nature (other than withholding taxes)
imposed by the United States, or any other domestic taxing authority, then, in
any case, the General Partner will pay such taxes, duties, assessments or other
governmental charges out of its own funds.
Section 9.2 PAYMENT OF OTHER PARTNERSHIP EXPENSES. In connection
with the offering, sale and issuance of the Preferred Partnership Securities by
the Partnership, the General Partner shall:
(a) pay all costs and expenses of the Partnership (including,
but not limited to, costs and expenses relating to the organization of the
Partnership, the offering, sale and issuance of the Preferred Partnership
Securities (including commissions to the underwriters in connection therewith),
the fees and expenses of the Special Representatives (if any), and the costs and
expenses relating to the operation of the Partnership, including, without
limitation, costs and expenses of accountants, attorneys, statistical or
bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses; and
(b) be primarily and fully liable for any indemnification
obligations arising with respect to this Agreement.
ARTICLE X.
POWERS, RIGHTS AND DUTIES
OF THE LIMITED PARTNERS
Section 10.1 LIMITATIONS. The Limited Partners shall not participate
in the management or control of the Partnership's investment activity, property
or other assets, nor shall the Limited Partners engage in any activities for the
Partnership, nor shall the Limited Partners have the power to act for or bind
the Partnership, such powers being vested solely and exclusively in the General
Partner (and, upon appointment, and to the extent set forth herein, the Special
Representative). The Limited Partners shall have such rights as are set forth
herein and in the Partnership Guarantee. The Limited Partners shall have no
interest in the properties or assets of the General Partner, or any equity
therein, or in any proceeds of any sales thereof (which sales shall not be
restricted in any respect), by virtue of acquiring or owning an Interest in the
Partnership.
Section 10.2 LIABILITY. Subject to the provisions of the Act, no
Limited Partner shall be liable for the repayment, satisfaction or discharge of
any debts or other obligations of the Partnership in excess of the Capital
Account balance of such Limited Partner.
Section 10.3 PRIORITY. No Limited Partner shall have priority over any
other Limited Partner as to Partnership allocations or distributions.
ARTICLE XI.
POWERS, RIGHTS AND DUTIES
OF THE GENERAL PARTNER
Section 11.1 AUTHORITY. Subject to the provisions of Section 6.2(h)(i)
with respect to the Special Representative, the General Partner shall have
exclusive and complete authority and discretion to manage the operations and
affairs of the Partnership and to make all decisions regarding the investment
activity of the Partnership. Any action taken by the General Partner shall
constitute the act of and serve to bind the Partnership. In dealing with the
General Partner acting on behalf of the Partnership no Person shall be required
to inquire into the authority of the General Partner to bind the Partnership.
Persons dealing with the Partnership are entitled to rely conclusively on the
power and authority of the General Partner as set forth in this Agreement.
Section 11.2 POWERS AND DUTIES OF GENERAL PARTNER. (a) Subject to the
provisions of Section 6.2(h)(i) with respect to the Special Representative, the
General Partner shall have all rights and powers of a general partner under the
Act, and shall have all authority, rights and powers in the management of the
Partnership's investment activity to do any and all other acts and things
necessary, proper, convenient or advisable to effectuate the purposes of this
Agreement, including by way of illustration but not by way of limitation, the
following:
(i) to secure the necessary goods and services required in
performing the General Partner's duties for the Partnership;
(ii) to exercise all powers of the Partnership, on behalf of
the Partnership, in connection with enforcing the Partnership's rights
under the Affiliate Investment Instruments, Investment Guarantees and
the Partnership Guarantee;
(iii) to issue Preferred Partnership Securities and to admit
Limited Partners in connection therewith in accordance with this
Agreement;
(iv) to act as registrar and transfer agent for the
Preferred Partnership Securities or designate an entity to act as
registrar and transfer agent;
(v) to establish a record date with respect to all actions
to be taken hereunder that require a record date be established,
including with respect to Distributions and voting rights and to make
determinations as to the payment of Distributions, and make or cause
to be made all other required payments to Holders of the Preferred
Partnership Securities and to the General Partner;
(vi) to open, maintain and close bank accounts and to draw
checks and other orders for the payment of money;
(vii) to bring or defend, pay, collect, compromise,
arbitrate, resort to legal action, or otherwise adjust claims or
demands of or against the Partnership;
(viii) to deposit, withdraw, invest, pay, retain and
distribute the Partnership's funds in a manner consistent with the
provisions of this Agreement;
(ix) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Partnership's valid
existence, rights, franchises and privileges as a limited partnership
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 Limited Partners or to enable the Partnership to invest in the
Affiliate Investment Instruments and Eligible Debt Securities;
(x) to take all action not inconsistent with applicable law,
the Certificate or this Agreement, that the General Partner or, upon
appointment pursuant to Section 6.2(h)(i), the Special Representative
determines in its sole discretion to be necessary or desirable to
ensure, as long as such action does not materially adversely affect
the interests of the Preferred Partnership Security Holders, or cause
(i) the Partnership to be deemed to be an "investment company"
required to be registered under the 1940 Act, (ii) any Initial
Debenture (or any subsequent Affiliate Investment Instrument) to not
be treated as indebtedness for United States federal or United Kingdom
corporate income tax purposes, or (iii) the Partnership to be treated
as an association, or as a publicly traded partnership, taxable as a
corporation for United States federal income tax purpose[ or to be
treated as a company for United Kingdom corporate income tax
purposes];
(xi) to cause the Partnership to enter into and perform the
Underwriting Agreement and the Preferred Partnership Securities
Purchase Agreement and to purchase Eligible Debt Securities and
Affiliate Investment Instruments, as the case may be, without any
further act, vote or approval of any Partner; and
(xii) to execute and deliver any and all documents or
instruments, perform all duties and powers and do all things for and
on behalf of the Partnership in all matters necessary or desirable or
incidental to the foregoing.
(b) For so long as any Preferred Partnership Securities remain
outstanding, the General Partner covenants and agrees (i) subject to Section
12.1(b) hereof, to remain the sole general partner of the Partnership and to
maintain directly 100% ownership of the General Partner's interest in the
Partnership, which interest will at all times represent at least 1% of the total
capital of the Partnership, (ii) to cause the Partnership to remain a limited
partnership and not to voluntarily dissolve, liquidate, wind-up or be
terminated, except as permitted by the Limited Partnership Agreement and (iii)
to use its commercially reasonable efforts to ensure that the Partnership will
not be (A) an "investment company" for purposes of the 1940 Act or (B) an
association or a publicly traded partnership taxable as a corporation for United
States federal income tax purposes or[ as a company for United Kingdom corporate
income tax purposes].
Section 11.3 OBLIGATIONS AND EXPENSES PAYABLE BY GENERAL PARTNER. (a)
The General Partner hereby assumes and shall be liable for the debts,
obligations and liabilities of the Partnership, including, but not limited to,
any liabilities arising under the Securities Act or the Exchange Act and all
costs and expenses relating to the investment by the Partnership in any
Affiliate Investment Instruments (but not any losses related to any non-payment
with respect to such investments), and agrees to pay to each Person to whom the
Partnership is now or hereafter becomes indebted or liable (the
"Beneficiaries"), whether such indebtedness, obligations or liabilities arise in
contract, tort or otherwise (excluding payment obligations of the Company to
Holders of the Preferred Partnership Securities in such Holders' capacities as
Holders of such Preferred Partnership Securities, such obligations being
separately guaranteed under the Partnership Guarantee), the full payment of such
indebtedness and any and all liabilities, when and as due. This Agreement is
intended to be for the benefit of and to be enforceable by all such
Beneficiaries whether or not such Beneficiaries have received notice hereof.
(b) The General Partner agrees to pay and be responsible for:
(i) all costs and expenses of the Partnership including, but
not limited to, costs and expenses relating to the organization of the
Partnership, the offering, sale and issuance of Preferred Partnership
Securities, the costs and expenses relating to the operation of the
Partnership (including without limitation, costs and expenses of
accountants, attorneys, statistical or bookkeeping services, expenses
for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agents, duplicating, travel
and telephone and other telecommunications expenses) and costs and
expenses incurred in connection with the acquisition, financing, and
disposition of the Partnership's assets; and (ii) any and all taxes
(other than Federal, state and local withholding taxes) and all
liabilities, costs and expenses with respect to such taxes of the
Partnership.
Section 11.4 LIABILITY. Except as expressly set forth in this
Agreement, (a) the General Partner shall not be personally liable for the return
of any portion of the capital contributions (or any return thereon) of the
Limited Partners; (b) the return of such capital contributions (or any return
thereon) shall be made solely from assets of the Partnership; and (c) the
General Partner shall not be required to pay to the Partnership or to any
Limited Partner any deficit in any Limited Partner's Capital Account upon
dissolution, winding up or otherwise. Other than as expressly provided in this
Agreement or under the Act, no Limited Partner shall have the right to demand or
receive property other than cash for its respective Interest in the Partnership.
The General Partner shall be liable to an unlimited extent for the debts and
other obligations of the Partnership.
Section 11.5 OUTSIDE ACTIVITIES. Any Partner or Affiliate thereof may
engage in or possess an interest in other ventures of any nature or description,
independently or with others, similar or dissimilar to the activities of the
Partnership, and the Partnership and the Partners shall have no rights by virtue
of this Agreement in and to such independent ventures or the income or profits
derived therefrom, and the pursuit of any such venture, even if competitive with
the activities of the Partnership, shall not be deemed wrongful or improper. No
Partner or Affiliate thereof shall be obligated to present any particular
investment opportunity to the Partnership even if such opportunity is of a
character that, if presented to the Partnership, could be taken by the
Partnership, and any Partner or Affiliate thereof shall have the right to take
for its own account (individually or as a partner or fiduciary) or to recommend
to others any such particular investment opportunity.
Section 11.6 LIMITS ON GENERAL PARTNER'S POWERS. Anything in this
Agreement to the contrary notwithstanding, the General Partner shall not cause
or permit the Partnership to:
(i) acquire any assets other than as expressly provided
herein;
(ii) do any act which would make it impractical or
impossible to carry on the ordinary activity of the Partnership as set
forth in Section 2.3;
(iii) possess Partnership property for other than a
Partnership purpose;
(iv) admit a Person as a Partner, except as expressly
provided in this Agreement;
(v) make any advances of funds to the General Partner or its
Affiliates, other than such as represented by the Affiliate Investment
Instruments;
(vi) perform any act that would subject any Limited Partner
to liability as a general partner in any jurisdiction;
(vii) engage in any activity that is not consistent with the
purposes of the Partnership, as set forth in Section 2.3;
(viii) without the written consent of the Holders of 66-2/3%
in liquidation preference of the Preferred Partnership Securities,
have an order for relief entered with respect to the Partnership or
commence a voluntary case under any applicable bankruptcy, insolvency
or other similar law now or hereafter in effect, or consent to the
entry of an order for relief in an involuntary case under any such
law, or consent to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of
the Partnership's property, or make any assignment for the benefit of
creditors of the Partnership; or
(ix) borrow money or become liable for the borrowings of any
third party or to engage in any financial or other trade or business.
Section 11.7 EXCULPATION. (a) No Partnership Indemnified Person shall
be liable, responsible or accountable in damages or otherwise to the Partnership
or any Partnership Covered Person for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such Partnership
Indemnified Person in good faith on behalf of the Partnership and in a manner
such Partnership Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Partnership Indemnified Person by this
Agreement or by law, except that a Partnership Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such Partnership
Indemnified Person's negligence or willful misconduct with respect to such acts
or omissions.
(b) A Partnership Indemnified Person shall be fully protected in
relying in good faith upon the records of the Partnership and upon such
information, opinions, reports or statements presented to the Partnership by any
Person as to matters the Partnership Indemnified Person reasonably believes are
within such other Person's professional or expert competence and who has been
selected with reasonable care by or on behalf of the Partnership, including
information, opinions, reports or statements as to the value and amount of the
assets, liabilities, profits, losses, or any other facts pertinent to the
existence and amount of assets from which distributions to Partners might
properly be paid.
Section 11.8 FIDUCIARY DUTY. (a) To the extent that, at law or in
equity, a Partnership Indemnified Person has duties (including fiduciary duties)
and liabilities relating thereto to the Partnership or to any other Partnership
Covered Person, a Partnership Indemnified Person acting under this Agreement
shall not be liable to the Partnership or to any other Partnership Covered
Person for its good faith reliance on the provisions of this Agreement. The
provisions of this Agreement, to the extent that they restrict the duties and
liabilities of a Partnership Indemnified Person otherwise existing at law or in
equity, are agreed by the parties hereto to replace such other duties and
liabilities of such Partnership Indemnified Person.
(b) Unless otherwise expressly provided herein, (i) whenever a
conflict of interest exists or arises between Partnership Covered Persons, or
(ii) whether this Agreement or any other agreement contemplated herein or
therein provides that a Partnership Indemnified Person shall act in a manner
that is, or provides terms that are, fair and reasonable to the Partnership or
any Partner, the Partnership Indemnified Person shall resolve such conflict of
interest, take such action or provide such terms, considering in each case the
relative interest of each party (including its own interest) to such conflict,
agreement, transaction or situation and the benefits and burdens relating to
such interests, any customary or accepted industry practices, and any applicable
generally accepted accounting practices or principles. In the absence of bad
faith by the Partnership Indemnified Person, the resolution, action or term so
made, taken or provided by the Partnership Indemnified Person shall not
constitute a breach of this Agreement or any other agreement contemplated herein
or of any duty or obligation of the Partnership Indemnified Person at law or in
equity or otherwise.
(c) Whenever in this Agreement a Partnership Indemnified Person is
permitted or required to make a decision (i) in its "discretion" or under a
grant of similar authority, the Partnership Indemnified Person shall be entitled
to consider such interests and factors as it desires, including its own
interest, and shall have no duty or obligation to give any consideration to any
interest of or factors affecting the Partnership or any other Person, or (ii) in
its "good faith" or under another express standard, the Partnership Indemnified
Person shall act under such express standard and shall not be subject to any
other or different standard imposed by this Agreement or by applicable law.
Section 11.9 INDEMNIFICATION. (a) To the fullest extent permitted by
applicable law, the Partnership shall indemnify and hold harmless each
Partnership Indemnified Person from and against any loss, damage or claim
incurred by such Partnership Indemnified Person by reason of any act or omission
performed or omitted by such Partnership Indemnified Person in good faith on
behalf of the Partnership and in a manner such Partnership Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Partnership Indemnified Person by this Agreement, except that no Partnership
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Partnership Indemnified Person by reason of
negligence or willful misconduct with respect to such acts or omissions;
provided, however, that any indemnity under this Section 11.9 shall be provided
out of and to the extent of Partnership assets only, and no Partnership Covered
Person shall have any personal liability on account thereof.
(b) To the fullest extent permitted by applicable law, expenses
(including legal fees) incurred by a Partnership Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Partnership prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Partnership of an
undertaking by or on behalf of the Partnership Indemnified Person to repay such
amount if it shall be determined that the Partnership Indemnified Person is not
entitled to be indemnified as authorized in Section 11.9(a).
Section 11.10 TAX MATTERS
(a) For purposes of section 6231(a)(7) of the Code, the "Tax Matters
Partner" shall be the Company as long as it remains the general partner of the
Partnership. The Tax Matters Partner shall keep the Limited Partners fully
informed of any inquiry, examination or proceeding.
(b) Neither the Partnership, nor the Tax Matters Partner on behalf of
the Partnership, shall make an election under section 754 of the Code.
(c) The General Partner and the Preferred Partnership Security Holders
acknowledge that they intend, for United States federal and United Kingdom
corporate income tax purposes, that the Partnership shall be treated as a
"partnership" (other than a publicly traded partnership taxable as a
corporation) and that the General Partner and the Preferred Partnership Security
Holders shall be treated as "partners" of the Partnership.
[(d) The General Partner shall retain, at the expense of the
Partnership and at its sole discretion, a nationally recognized firm of
certified public accountants which shall prepare all United States federal,
state, local or other tax and information returns of the Partnership, as
required by law, and the Schedule K-1's or any successor or similar forms or
schedules.] [Does TXU do this in-house?]
Section 11.11 CONSOLIDATION, MERGER OR SALE OF ASSETS. The Partnership
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 body, except as permitted pursuant to this Section
11.11. The Partnership may, without the consent of the Holders of the Preferred
Partnership Securities, consolidate, amalgamate, merge with or into, or be
replaced by a limited partnership, limited liability company or trust organized
as such under the laws of any state of the United States of America, provided
that (i) such successor entity either (x) expressly assumes all of the
obligations of the Partnership under the Preferred Partnership Securities or (y)
substitutes for the Preferred Partnership Securities other securities having
substantially the same terms as the Preferred Partnership Securities (the
"Successor Partnership Securities") so long as the Successor Partnership
Securities 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) the Investment Affiliates expressly
acknowledge such successor entity as the holder of the Affiliate Investment
Instruments, (iii) the Preferred Partnership Securities continue to be or any
Successor Partnership Securities are or will be listed, upon notification of
issuance, on any national securities exchange or other organization on which the
Preferred Partnership Securities, if so listed, are then listed, (iv) such
merger, consolidation, amalgamation or replacement does not cause the Preferred
Trust Securities (or, in the event that the Trust is liquidated in connection
with a Special Trust Event, the Preferred Partnership Securities (including any
Successor Partnership Securities)) to be downgraded by any nationally recognized
statistical securities rating organization, (v) such merger, consolidation,
amalgamation or replacement does not adversely affect the powers, preferences
and other special rights of the holders of the Preferred Trust Securities or the
Holders of the Preferred Partnership Securities (including any Successor
Partnership Securities)) in any material respect (other than, in the case of the
Preferred Partnership Securities, with respect to any dilution of the Holders'
interest in the new resulting entity), (vi) such successor entity has a purpose
substantially identical to that of the Partnership, (vii) prior to such merger,
consolidation, amalgamation or replacement, the Company has received an opinion
of nationally recognized independent counsel to the Partnership experienced in
such matters to the effect that (A) such successor entity will be treated as a
"partnership" for United States federal [and United Kingdom corporate] income
tax purposes and not as an association or a publicly traded partnership taxable
as a corporation, (B) such merger, consolidation, amalgamation or replacement
will not cause the Trust to be classified as an association or a publicly traded
partnership taxable as a corporation for United States federal income tax
purposes or as __________________ for United Kingdom corporate income tax
purposes, (C) following such merger, consolidation, amalgamation or replacement,
the Company and such successor entity will be in compliance with the 1940 Act
without registering thereunder as an investment company, and (D) such merger,
consolidation, amalgamation or replacement will not adversely affect the limited
liability of the Holders of the Preferred Partnership Securities (viii)
following the merger, consolidation or replacement, the Trust will not be
classified other than a transparent entity for the United Kingdom income tax
purposes and (ix) the Company or a successor permitted by the Partnership
Guarantee guarantees the obligations of such successor entity under the
Successor Partnership Securities at least to the extent provided by the
Partnership Guarantee.
ARTICLE XII.
TRANSFERS OF INTERESTS BY PARTNERS
Section 12.1 TRANSFER OF INTERESTS.
(a) Preferred Partnership Securities shall be freely transferable by a
Holder.
(b) Except as provided in the next sentence, the General Partner may
not assign or transfer its Interest in the Partnership in whole or in part
unless, prior to such assignment or transfer, the General Partner has obtained
the consent of the Holders of not less than 66-2/3% in Liquidation Preference of
the Preferred Partnership Securities. The General Partner may assign or transfer
its Interest in the Partnership without such consent to an entity that is the
survivor of a merger or consolidation of the General Partner in a transaction
that meets the requirements of Section 11.11 and only if prior to such
assignment or transfer the Company has received an opinion of nationally
recognized independent tax counsel to the Partnership experienced in such
matters to the effect that after such assignment or transfer the Partnership
will continue to be treated as a partnership for United States federal [and
United Kingdom corporate] income tax purposes and will not be treated as an
association or a publicly traded partnership taxable as a corporation. The
General Partner may transfer its Interest to a wholly-owned direct or indirect
subsidiary of the Company provided that (i) such entity expressly accepts such
transfer of the obligations as General Partner and (ii) prior to such transfer,
the Company has received an opinion of nationally recognized independent counsel
to the Partnership experienced in such matters to the effect that (A) the
Partnership will be treated as a partnership for United States federal [and
United Kingdom corporate] income tax purposes, (B) such transfer would not cause
the Trust to be classified as an association taxable as a corporation for United
States federal [and United Kingdom corporate] income tax purposes, (C) following
such transfer, the Company and such successor entity will be in compliance with
the 1940 Act without registering thereunder as an investment company, and (D)
such transfer will not adversely affect the limited liability of the holders of
the Preferred Partnership Securities. "Permitted Successor" shall mean an entity
that is an assignee or transferee of the Interest of the General Partner as
permitted by this Section 12.1(b). The admission of a Permitted Successor as a
general partner of the Partnership shall be effective upon the filing of an
amendment to the Certificate with the Secretary of State of the State of
Delaware which indicates that the Permitted Successor has been admitted as a
general partner of the Partnership. If the General Partner assigns its entire
Interest, the General Partner shall cease to be a general partner of the
Partnership simultaneously with the admission of the Permitted Successor as a
general partner of the Partnership. Any such Permitted Successor is hereby
authorized to and shall continue the business of the Partnership without
dissolution.
(c) Except as provided above, no Interest shall be transferred, in
whole or in part, except in accordance with the terms and conditions set forth
in this Agreement. Any transfer or purported transfer of any Interest not made
in accordance with this Agreement shall be null and void.
Section 12.2 TRANSFER OF L.P. CERTIFICATES. The General Partner shall
provide for the registration of L.P. Certificates and of transfers of L.P.
Certificates. Upon surrender for registration of transfer of any L.P.
Certificate, the General Partner shall cause one or more new L.P. Certificates
to be issued in the name of the designated transferee or transferees. Every L.P.
Certificate surrendered for registration of transfer shall be accompanied by a
written instrument of transfer in form satisfactory to the General Partner duly
executed by the Preferred Partnership Security Holder or his or her attorney
duly authorized in writing. Each L.P. Certificate surrendered for registration
of transfer shall be cancelled by the General Partner. A transferee of an L.P.
Certificate shall be admitted to the Partnership as a Limited Partner, shall
become bound by this Agreement and shall be entitled to the rights and subject
to the obligations of a Preferred Partnership Security Holder hereunder upon the
receipt by the transferee of an L.P. Certificate, which receipt shall be deemed
to constitute a request by such transferee that the books and records of the
Partnership reflect such transferee's admission as a limited partner. The
transferor of an L.P. Certificate, in whole, shall cease to be a Limited Partner
at the time that the transferee of such L.P. Certificate is admitted to the
Partnership as a Limited Partner in accordance with this Section 12.2.
Section 12.3 DEFINITIVE L.P. CERTIFICATES; PERSONS DEEMED PREFERRED
PARTNERSHIP SECURITY HOLDERS. Unless and until the Partnership issues a global
L.P. Certificate pursuant to Section 12.4, .the Partnership shall only issue
definitive L.P. Certificates to the Preferred Partnership Security Holders.
(b) The Partnership may treat the Person in whose name any L.P.
Certificate shall be registered on the books and records of the Partnership as
the sole holder of such L.P. Certificate and of the Preferred Partnership
Securities represented by such L.P. Certificate for purposes of receiving
Distributions and for all other purposes whatsoever (including without
limitation, tax returns and information reports) and, accordingly, shall not be
bound to recognize any equitable or other claim to or interest in such L.P.
Certificate or in the Preferred Partnership Securities represented by such L.P.
Certificate on the part of any other Person, whether or not the Partnership
shall have actual or other notice thereof.
Section 12.4 BOOK ENTRY PROVISIONS.
(a) General. The provisions of this Section 12.4 shall apply only in
the event that the Preferred Partnership Securities are distributed to the
Holders of Trust Securities in connection with the involuntary or voluntary
dissolution, winding up or liquidation of the Trust as a result of the
occurrence of a Special Trust Event. Upon the occurrence of such event, a global
L.P. Certificate representing the Book-Entry Interests shall be delivered to
DTC, the initial Clearing Agency, by, or on behalf of, the Partnership and any
previously issued and still outstanding definitive L.P. Certificates shall be of
no further force and effect. The global L.P. Certificate shall initially be
registered on the books and records of the Partnership in the name of Cede &
Co., the nominee of DTC, and no Holder of a Preferred Partnership Security will
receive a new definitive L.P. Certificate representing such Holder's interests
in such L.P. Certificate, except as provided in Section 12.4(c). In connection
with the involuntary or voluntary dissolution, winding up or liquidation of the
Trust as a result of the occurrence of a Special Trust Event, Cede & Co., the
nominee of DTC, shall automatically be admitted to the Partnership as a Limited
Partner. Receipt of the global L.P. Certificate shall be deemed to constitute a
request by Cede & Co., the nominee of DTC, that the books and records of the
Partnership reflect its admission as a Limited Partner. Unless and until new
definitive, fully registered L.P. Certificates (the "Definitive L.P.
Certificates") have been issued to the Preferred Partnership Security Owners
pursuant to Section 12.4(c):
(i) The provisions of this Section shall be in full force
and effect;
(ii) The Partnership, the General Partner and any Special
Representative shall be entitled to deal with the Clearing Agency for
all purposes of this Agreement (including the payment of
Distributions, Redemption Price and liquidation proceeds on the L.P.
Certificates and receiving approvals, votes or consents hereunder) as
the Preferred Partnership Security Holder and the sole holder of the
L.P. Certificates and shall have no obligation to the Preferred
Partnership Security Owners;
(iii) None of the Partnership, the Trust, the General
Partner, any Special Representative or any agents of any of the
foregoing shall have any liability or responsibility for any aspect of
the records relating to or payments made on account of beneficial
ownership interests in a global L.P. Certificate for such beneficial
ownership interests or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests; and
(iv) Except as provided in Section 12.4(c) below, the
Preferred Partnership Security Owners will not be entitled to receive
physical delivery of the Preferred Partnership Securities in
definitive form and will not be considered Holders thereof for any
purpose under this Agreement, and no global L.P. Certificate
representing Preferred Partnership Securities shall be exchangeable,
except for another global L.P. Certificate of like denomination and
tenor to be registered in the name of DTC or Cede & Co., or to a
successor Depositary or its nominee. Accordingly, each Preferred
Partnership Security Owner must rely on the procedures of DTC or if
such person is not a Participant, on the procedures of the Participant
through which such person owns its interest to exercise any rights of
a Holder under the Agreement.
(b) NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Preferred Partnership Security Holders is required under
this Agreement, unless and until Definitive L.P. Certificates shall have been
issued to the Preferred Partnership Security Owners pursuant to Section 12.4(c),
the General Partner and any Special Representative shall give all such notices
and communications specified herein to be given to the Preferred Partnership
Security Holders to the Clearing Agency, and shall have no obligations to the
Preferred Partnership Security Owners.
(c) DEFINITIVE L.P. CERTIFICATES. Definitive L.P. Certificates shall
be prepared by the Partnership and exchangeable for the global L.P. Certificate
or L.P. Certificates if and only if (i) the Depositary notifies the Company that
it is unwilling or unable to continue its services as a securities depositary
and no successor depositary shall have been appointed, (ii) the Depositary, at
any time, ceases to be a clearing agency registered under the Exchange Act at
such time as the Depositary is required to be so registered to act as such
depositary and no successor depositary shall have been appointed, or (iii) the
Company, in its sole discretion, determines that such global L.P. Certificate
shall be so exchangeable. Upon surrender of the global L.P. Certificate or L.P.
Certificates representing the Book-Entry Interests by the Clearing Agency,
accompanied by registration instructions, the General Partner shall cause
Definitive L.P. Certificates to be delivered to Preferred Partnership Security
Owners in accordance with the instructions of the Clearing Agency. Neither the
General Partner nor the Partnership 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. Any Person receiving a Definitive L.P.
Certificate in accordance with this Section 12.4 shall be admitted to the
Partnership as a Limited Partner upon receipt of such Definitive L.P.
Certificate and shall be registered on the books and records of the Partnership
as a Preferred Partnership Security Holder. The Clearing Agency or the nominee
of the Clearing Agency, as the case may be, shall cease to be a Limited Partner
under this Section 12.4(c) at the time that at least one additional Person is
admitted to the Partnership as a Limited Partner in accordance herewith. The
Definitive L.P. Certificates shall be printed, lithographed or engraved or may
be produced in any other manner as may be required by any national securities
exchange on which Preferred Partnership Securities may be listed and is
reasonably acceptable to the General Partner, as evidenced by its execution
thereof.
Section 12.5 REGISTRAR, TRANSFER AGENT AND PAYING AGENT.
(a) The General Partner will act as Registrar, Transfer Agent and
Paying Agent for the Preferred Partnership Securities for so long as the
Preferred Partnership Securities are held by the Trust or, if the Trust is
liquidated in connection with a Special Trust Event, for so long as the
Preferred Partnership Securities remain in book-entry only form.
(b) Except in such case where the General Partner shall act as
Registrar or Paying Agent pursuant to Section 12.5(a) hereof, the Partnership
shall maintain in the Borough of Manhattan, City of New York, State of New York
(i) an office or agency where Preferred Partnership Securities may be presented
for registration of transfer or for exchange ("Registrar") and (ii) an office or
agency where Preferred Partnership Securities may be presented for payment
("Paying Agent"). The Registrar shall keep a register of the Preferred
Partnership Securities and of their transfer and exchange. The Partnership may
appoint the Registrar and the Paying Agent and may appoint one or more
co-registrars and one or more additional paying agents in such other locations
as it shall determine. The term "Paying Agent" includes any additional paying
agent. The Partnership may change any Paying Agent, Registrar or co-registrar
without prior notice to any Holder. If the Partnership fails to appoint or
maintain another entity as Registrar or Paying Agent, the General Partner shall
act as such.
(c) Registration of transfers of Preferred Partnership Securities
shall be effected without charge by or on behalf of the Partnership, but upon
payment (with the giving of such indemnity as the Partnership or the General
Partner may require) in respect of any tax or other governmental charges that
may be imposed.
(d) The Partnership will not be required to register or cause to be
registered the transfer of Preferred Partnership Securities after such Preferred
Partnership Securities have been called for redemption.
ARTICLE XIII.
WITHDRAWAL, DISSOLUTION;
LIQUIDATION AND DISTRIBUTION OF ASSETS
Section 13.1 WITHDRAWAL OF PARTNERS. The General Partner shall not at
any time retire or withdraw from the Partnership except as otherwise permitted
hereunder. If the General Partner retires or withdraws in contravention of this
Section 13.1, it shall indemnify, defend and hold harmless the Partnership and
the other Partners from and against any losses, expenses, judgments, fines,
settlements or damages suffered or incurred by the Partnership or such other
Partners arising out of or resulting from such retirement or withdrawal.
Section 13.2 DISSOLUTION OF THE PARTNERSHIP.
(a) The Partnership shall not be dissolved by the admission of
Partners in accordance with the terms of this Agreement. The death, withdrawal,
bankruptcy or dissolution of a Limited Partner, or the occurrence of any other
event which terminates the Interest of a Limited Partner in the Partnership,
shall not, in and of itself, cause the Partnership to be dissolved and its
affairs wound up. To the fullest extent permitted by applicable law, upon the
occurrence of any such event, the General Partner may, without any further act,
vote on approval of any Partner, admit any Person to the Partnership as an
additional or substitute limited partner in the Partnership, which admission
shall be effective as of the date of the occurrence of such event, and the
business of the Partnership shall be continued without dissolution.
(b) The Partnership shall be dissolved and its affairs shall be wound
up upon the earliest to occur of any of the following events:
(i) upon the bankruptcy or insolvency of the General
Partner;
(ii) upon the assignment by the General Partner of its
entire interest in the Partnership when the assignee is not admitted
to the Partnership as a general partner of the Partnership in
accordance with this Agreement, or the filing of a certificate of
dissolution or its equivalent with respect to the General Partner, or
the revocation of the General Partner's charter and the expiration of
90 days after the date of notice to the General Partner of revocation
without a reinstatement of its charter, or if any other event occurs
that causes the General Partner to cease to be a general partner of
the Partnership under the Delaware Partnership Act, unless the
business of the Partnership is continued in accordance with the
Delaware Partnership Act;
(iii) the Partnership has redeemed or otherwise purchased
all of the Preferred Partnership Securities;
(iv) upon the entry of a decree of judicial dissolution
under Section 17-802 of the Delaware Partnership Act; or
(v) the written consent of all Partners.
(c) Upon dissolution of the Partnership, the Liquidator shall promptly
notify the Partners of such dissolution.
Section 13.3 LIQUIDATION.
(a) In the event of the dissolution of the Partnership for any reason,
the General Partner (or, if the Partnership is dissolved pursuant to Section
13.2(b)(i) or (ii), then a liquidating agent appointed by Holders of not less
than 66 2/3% in Liquidation Preference of the Preferred Partnership Securities
(the General Partner or such Person so appointed is hereinafter referred to as
the "Liquidator")) shall commence to wind up the affairs of the Partnership and
to liquidate the Partnership's assets; provided, however, that a reasonable time
shall be allowed for the orderly liquidation of the assets of the Partnership
and the satisfaction of liabilities to creditors so as to enable the Partners to
minimize the normal losses attendant upon liquidation. The Partners shall
continue to share all income, losses and distributions during the period of
liquidation in accordance with Articles IV and V. Subject to the provisions of
this Article XIII, the Liquidator shall have full right and unlimited discretion
to determine the time, manner and terms of any sale or sales of Partnership
property pursuant to such liquidation, giving due regard to the activity and
condition of the relevant market and general financial and economic conditions.
(b) The Liquidator shall have all of the rights and powers with
respect to the assets and liabilities of the Partnership in connection with the
liquidation and termination of the Partnership that the General Partner would
have with respect to the assets and liabilities of the Partnership during the
term of the Partnership, and the Liquidator is hereby expressly authorized and
empowered to execute any and all documents necessary or desirable to effectuate
the liquidation and termination of the Partnership and the transfer of any
assets.
(c) Notwithstanding the foregoing, a Liquidator that is not a General
Partner shall not, by virtue of acting in such capacity, be deemed a Partner in
this Partnership and shall not have any of the economic interests in the
Partnership of a Partner; and such Liquidator may be compensated for its
services to the Partnership at normal customary and competitive rates for its
services to the Partnership as reasonably determined by all the Limited
Partners.
Section 13.4 DISTRIBUTION IN LIQUIDATION. The proceeds of liquidation
shall be applied in the following order of priority (and without regard to the
non-mandatory provisions of Section 17-804 of the Delaware Partnership Act):
(i) first, to creditors of the Partnership, including
Partners who are creditors, to the extent otherwise permitted by law,
in satisfaction of the liabilities of the Partnership (whether by
payment or the making of reasonable provisions for payment thereof),
other than liabilities for distributions (including Distributions) to
Partners;
(ii) second, following any allocations required under
Section 4.2(e) of the Agreement, to the Limited Partners, an amount
equal to and pro rata in proportion with the positive Capital Account
balances of the Limited Partners; and
(iii) thereafter, to the General Partner.
Section 13.5 RIGHTS OF LIMITED PARTNERS. Each Limited Partner shall
look solely to the assets of the Partnership for all distributions with respect
to the Partnership and such Partner's capital contribution (including returns
thereof), and such Partner's share of profits or losses thereof, and shall have
no recourse therefor (upon dissolution or otherwise) against the General
Partner, except under the Partnership Guarantee. No Partner shall have any right
to demand or receive property other than cash upon dissolution and termination
of the Partnership.
Section 13.6 TERMINATION. The Partnership shall terminate when all of
the assets of the Partnership shall have been disposed of and the assets shall
have been distributed as provided in Section 13.4 and the Liquidator has
executed and caused to be filed a certificate of cancellation of the
Partnership.
ARTICLE XIV.
AMENDMENTS AND MEETINGS
Section 14.1 AMENDMENTS. Except as provided by Section 3.3(b) and
Section 6.2(i), this Agreement may be amended by, and only by, a written
instrument executed by the General Partner without the consent of any Limited
Partner; provided, however, that no amendment shall be made, and any such
purported amendment shall be void and ineffective, to the extent the result
thereof would be to (A) cause the Partnership to be treated for United States
federal income tax purposes as an association or a publicly traded partnership
taxable as a corporation or for United Kingdom corporate income tax purposes as
______________, (B) require the Partnership to register under the 1940 Act or
(C) materially adversely affect the rights, privileges or preferences of the
Preferred Partnership Securities. Notwithstanding any provision to the contrary,
in the event of (i) a liquidation of the Trust for any reason or (ii) any other
distribution which effectively causes Preferred Partnership Securities to be
distributed to Holders of Preferred Trust Securities, the General Partner may
amend this Agreement without the consent of the Limited Partners to provide for
(A) orderly dissemination, purchase, sale, exchange and replacement of such
Preferred Partnership Securities, (B) all other matters to the extent required
by or desirable under then applicable law and (C) such other matters reasonably
incidental or related thereto; provided, however, that no such amendment may
materially adversely affect the rights, privileges, or preferences of the
Preferred Partnership Securities without the consent of a majority in interest
of the Partners so effected.
Section 14.2 AMENDMENT OF CERTIFICATE. In the event this Agreement
shall be amended pursuant to Section 14.1, the General Partner shall amend the
Certificate to reflect such change if it deems such amendment of the Certificate
to be necessary or appropriate.
Section 14.3 MEETINGS OF PARTNERS.
(a) Meetings of the Limited Partners who are Holders may be called at
any time by the General Partner to consider and act on any matter on which
Limited Partners are entitled to act under the terms of this Agreement or the
Act. The General Partner shall call a meeting of Holders if directed to do so by
Holders of no less than 10% in Liquidation Preference as permitted by this
Agreement. Such direction shall be given by delivering to the General Partner a
request in writing stating that the signing Limited Partners desire to call a
meeting and indicating the general or specific purpose for which the meeting is
to be called. Any Limited Partners calling a meeting shall specify in writing
the L.P. Certificates held by the Limited Partners exercising the right to call
a meeting and only those specified Interests shall be counted for purposes of
determining whether the required percentage set forth in the second sentence of
this paragraph has been met. Except to the extent otherwise provided in this
Agreement, the following provisions shall apply to meetings of Partners.
(b) Notice of any such meeting shall be given to all Limited Partners
having a right to vote thereat not less than seven Business Days nor more than
60 days prior to the date of such meeting. Each such notice shall set forth the
date, time and place of the meeting, a description of any matter on which
Holders are entitled to vote and instructions for the delivery of proxies or
written consents.
(c) Any action that may be taken at a meeting of the Limited Partners
may be taken without a meeting if a consent in writing setting forth the action
so taken is signed by Limited Partners owning not less than the minimum
Interests that would be necessary to authorize or take such action at a meeting
in which all Limited Partners having a right to vote thereon were present and
voting. Prompt notice of the taking of action without a meeting shall be given
to the Limited Partners entitled to vote who have not consented in writing. The
General Partner may provide that any written ballot submitted to the Limited
Partners for the purpose of taking any action without a meeting shall be
returned to the Partnership within a specified time.
(d) Each Partner may authorize any Person to act for it by proxy on
all matters as to which a Partner is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. Every proxy must
be signed by the Partner or its attorney-in-fact. No proxy shall be valid after
the expiration of 11 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Partner
executing it. Except as otherwise provided herein, or pursuant to Section
14.3(f), all matters relating to the giving, voting or validity of proxies shall
be governed by the General Corporation Law of the State of Delaware relating to
proxies, and judicial interpretations thereunder, as if the Partnership were a
Delaware corporation and the Limited Partners were stockholders of a Delaware
corporation.
(e) Each meeting of Partners shall be conducted by the General Partner
or by such other Person that the General Partner may designate.
(f) The General Partner may establish all other reasonable procedures
relating to meetings of Limited Partners or the giving of written consents, in
addition to those expressly provided, including notice of time, place or purpose
of any meeting at which any matter is to be voted on by any Partners, waiver of
any such notice, action by consent without a meeting, the establishment of a
record date, quorum requirements, voting in person or by proxy or any other
matter with respect to the exercise of any such right to vote.
ARTICLE XV.
MISCELLANEOUS
Section 15.1 NOTICES. All notices provided for in this Agreement shall
be in writing, and shall be delivered or mailed by first class or registered or
certified mail or, with respect to the Partnership and General Partner,
telecopied, as follows:
(a) if given to the Partnership, in care of the General Partner at the
Partnership's mailing address set forth below:
TXU Corp.
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Treasurer
(b) if given to the General Partner, at its mailing address set forth
below:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
(c) if given to any other Partner at the address set forth on the
books and records of the Partnership.
Section 15.2 POWER OF ATTORNEY. Each Holder of a Preferred Partnership
Security does hereby constitute and appoint the General Partner, and if
applicable, any Special Representative appointed pursuant to Section 6.2(h)(i)
of this Agreement, as its true and lawful representative and attorney-in-fact,
in its name, place and stead to make, execute, sign, deliver and file (a) any
amendment of the Certificate required because of an amendment of this Agreement
or in order to effect any change in the Partnership, (b) this Agreement, (c) any
amendments to this Agreement and (d) all such other instruments, documents and
certificates which from time to time may be required by the laws of the United
States of America, the State of Delaware or any other jurisdiction, or any
political subdivision or agency thereof, to effectuate, implement and continue
the valid and subsisting existence of the Partnership or to dissolve the
Partnership for any other purpose consistent with this Agreement and the
transactions contemplated hereby.
The power of attorney granted hereby is coupled with an interest
and shall (a) survive and not be affected by the subsequent death, incapacity,
disability, dissolution, termination, or bankruptcy of the Holder granting the
same or the transfer of all or any portion of such Holder's Interest and (b)
extend to such Holder's successors, assigns and legal representatives.
Section 15.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties. It supersedes any prior agreement or understandings
among them, and it may not be modified or amended in any manner other than as
set forth herein.
Section 15.4 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE
LAW OF THE STATE OF DELAWARE AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY
SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
Section 15.5 EFFECT. Except as herein otherwise specifically provided,
this Agreement shall be binding upon and inure to the benefit of the parties and
their legal representatives, successors and assigns.
Section 15.6 PRONOUNS AND NUMBER. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall include
the singular and the plural, and pronouns stated in either the masculine,
feminine or neuter shall include the masculine, feminine and neuter.
Section 15.7 CAPTIONS. Captions, headings, and subheadings contained
in this Agreement are included for convenience and identification purposes only
and in no way define, limit or extend the scope or intent of this Agreement or
any provision herein.
Section 15.8 PARTIAL ENFORCEABILITY. If any provision of this
Agreement, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Agreement, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
Section 15.9 COUNTERPARTS. This Agreement may contain more than one
counterpart of the signature page and this Agreement may be executed by the
affixing of the signature of each of the Partners to one of such counterpart
signature pages. All of such counterpart signature pages shall be read as though
one, and they shall have the same force and effect as though all of the signers
had signed a single signature page.
Section 15.10 WAIVER OF PARTITION. Each Partner hereby irrevocably
waives any and all rights (if any) that such Partner may have to maintain any
action for partition of any of the Partnership's property.
Section 15.11 REMEDIES. The failure of any party to seek redress for
violation of, or to insist upon the strict performance of, any provision of this
Agreement shall not prevent a subsequent act, which would have originally
constituted a violation, from having the effect of an original violation. The
rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by any party shall not preclude or waive its right to use
any or all other remedies. Said rights and remedies are given in addition to any
other rights the parties may have by law, statute, ordinance or otherwise.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above stated.
GENERAL PARTNER:
TXU EUROPE LIMITED.
By:_____________________________________________
Name:
Title:
LIMITED PARTNER:
TXU EUROPE CAPITAL I
By:_____________________________________________
Name:
Title: Administrative Trustee
<PAGE>
SCHEDULE 1
<PAGE>
ANNEX A
FORM OF L.P. CERTIFICATE
[IF THE PREFERRED PARTNERSHIP SECURITY IS TO BE A GLOBAL
CERTIFICATE INSERT: This Preferred Partnership Security is a Global Certificate
within the meaning of the Partnership Agreement hereinafter referred to and is
registered in the name of The Depository Trust Company (the "Depositary") or a
nominee of the Depositary. This Preferred Partnership Security is exchangeable
for Preferred Partnership Securities registered in the name of a person other
than the Depositary or its nominee only in the limited circumstances described
in the Partnership Agreement and no transfer of this Preferred Partnership
Security (other than a transfer of this Preferred Partnership Security as a
whole by the Depositary to a nominee of the Depositary or by a nominee of the
Depositary to the Depositary or another nominee of the Depositary) may be
registered except in limited circumstances.
Unless this Preferred Partnership Security is presented by an
authorized representative of The Depository Trust Company (55 Water Street, New
York, New York), a New York corporation, to the Partnership or its agent for
registration of transfer, exchange or payment, and any Preferred Partnership
Security issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of the Depositary and any payment
hereon is made to Cede & Co. or such other entity as is requested by an
authorized representative of the Depositary, ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the
registered owner hereof, Cede & Co., has an interest herein.]
<PAGE>
PS-1
[ ]
CERTIFICATE EVIDENCING PREFERRED PARTNERSHIP SECURITIES
OF
TXU EUROPE FUNDING I, L.P.
__% PREFERRED PARTNERSHIP SECURITIES
(liquidation preference $25 per Preferred Partnership Security)
TXU EUROPE FUNDING I, L.P., a limited partnership formed under
the laws of the State of Delaware (the "Partnership"), hereby certifies that The
Bank of New York, a property trustee pursuant to the Amended and Restated Trust
Agreement of TXU Europe Capital I, dated as of ________ __, ____ (the "Holder")
is the registered owner of preferred securities of the Partnership representing
limited partner interests in the Partnership designated the __% Preferred
Partnership Securities (liquidation preference $25 per Preferred Partnership
Security) (the "Preferred Partnership Securities"). The Preferred Partnership
Securities are freely transferable on the books and records of the Partnership,
in person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer. The designation, rights, powers,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Partnership Securities represented hereby are set forth in, issued
under and shall in all respects be subject to the provisions of the Amended and
Restated Agreement of Limited Partnership dated as of ________ __, ____, as the
same may be amended from time to time (the "Partnership Agreement"). Capitalized
terms used herein but not defined shall have the meaning given them in the
Partnership Agreement. The Holder is entitled to the benefits of the Partnership
Guarantee to the extent provided therein. The Partnership will provide a copy of
the Partnership Agreement and the Partnership Guarantee to a Holder without
charge upon written request to the Partnership at its principal place of
business.
Upon receipt of this certificate, the Holder is admitted to the
Partnership as a Limited Partner, is bound by the Partnership Agreement and is
entitled to the benefits thereunder. Each Holder of a Preferred Partnership
Security, by acceptance of this Certificate and each Certificate owner, by
acquisition of a beneficial interest in a Certificate, agrees to treat the
Initial Debentures, and any other Affiliate Investment Instruments, as
indebtedness for United States federal [and United Kingdom corporate] income tax
purposes.
<PAGE>
IN WITNESS WHEREOF, the Partnership has executed this certificate
this __ day of ________, ____.
TXU EUROPE FUNDING I, L.P.
By: TXU EUROPE LIMITED
as General Partner
By: ________________________________
Name:
Title:
(See reverse for additional terms)
<PAGE>
[FORM OF REVERSE OF SECURITY]
Distributions payable on each Preferred Partnership Security will
be fixed at a rate per annum of % of the stated liquidation preference of $25
per Preferred Partnership Security. Distributions not paid on the scheduled
payment date will accumulate and compound quarterly (to the extent permitted by
applicable law) at the rate of % per annum. The term "Distributions" as used
herein shall mean ordinary cumulative distributions in respect of each Fiscal
Period together with any such Compounded Distributions. Distributions on the
Preferred Partnership Securities will only be made to the extent that the
Partnership has funds legally available for the payment of such distributions.
Amounts available to the Partnership for Distribution to the holders of the
Preferred Partnership Securities will be limited to payments received by the
Partnership from certain subsidiaries of the Company on the Initial Debentures
and Affiliate Investment Instruments or from the Company on the Partnership
Guarantee or the Investment Guarantees or on the Eligible Debt Securities.
Distributions on the Preferred Partnership Securities will be paid only if, as
and when declared in the sole discretion of the Company, as the General Partner
of the Partnership. The amount of Distributions payable for any period will be
computed for any full quarterly Distribution period on the basis of a 360-day
year of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period on the basis of the actual number of days elapsed in a
90-day quarter.
Except as otherwise described herein, Distributions on the
Preferred Partnership Securities will be cumulative, will accumulate from the
date of initial issuance and will be payable quarterly in arrears, on
____________, _______________, ____________ and ___________________________ of
each year, commencing on ________ __, ____, if, as and when declared by the
General Partner in its sole discretion. If the Preferred Trust Securities (or,
if the Trust is liquidated, the Preferred Partnership Securities) are in
book-entry-only form, Distributions will be payable to the Holders of record of
Preferred Partnership Securities as they appear on the books and records of the
Partnership on the relevant record dates, which will be one Business Day prior
to the relevant payment dates. If the Trust or the Property Trustee is the
Holder of the Preferred Partnership Securities, all Distributions of cash shall
be made by wire transfer of same day funds to such Holder by 10:00 a.m., New
York City time, on the applicable Distribution Payment Date. Distributions
payable on any Preferred Partnership Securities that are not punctually paid on
any Distribution Payment Date will cease to be payable to the Person in whose
name such Preferred Partnership Securities are registered on the relevant record
date, and such Distribution will instead be payable to the Person in whose name
such Preferred Partnership Securities are registered on the special record date
or other specified date for payment of such defaulted or accumulated
Distribution. If the Preferred Trust Securities (or, if the Trust is liquidated,
the Preferred Partnership Securities) are not in book-entry-only form, the
relevant record dates shall be the 15th day of the month of the relevant payment
dates. In the event that any date on which Distributions are payable is not a
Business Day, payment of such Distribution shall be made on the next succeeding
day which is a Business Day (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 shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
The Preferred Partnership Securities shall be redeemable as
provided in the Partnership Agreement.
<PAGE>
---------------------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Preferred Partnership Security Certificate to:
-------------------------------
- - - - ------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- - - - ------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- - - - ------------------------------------------------------------------------------
- - - - ------------------------------------------------------------------------------
agent to
- - - - ------------------------------------------------------------------
transfer this Preferred Partnership Security Certificate on the books of
the Partnership. 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 Preferred
Partnership Security Certificate)
Exhibit 4(c)
PREFERRED TRUST SECURITIES GUARANTEE
Between
TXU Europe Limited
(as Guarantor)
and
The Bank of New York
(as Trustee)
dated as of
------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS ..................................................1
SECTION 1.01 Definitions ..................................................1
ARTICLE II TRUST INDENTURE ACT ..........................................4
SECTION 2.01 Trust Indenture Act; Application .............................4
SECTION 2.02 Lists of Holders of Preferred Trust Securities ...............4
SECTION 2.03 Reports by the Trust Guarantee Trustee .......................5
SECTION 2.04 Periodic Reports to Trust Guarantee Trustee ..................5
SECTION 2.05 Evidence of Compliance with Conditions Precedent .............5
SECTION 2.06 Events of Default; Waiver ....................................5
SECTION 2.07 Event of Default; Notice .....................................5
SECTION 2.08 Conflicting Interests ........................................6
ARTICLE III POWERS, DUTIES AND RIGHTS OF TRUST GUARANTEE TRUSTEE .........6
SECTION 3.01 Powers and Duties of the Trust Guarantee Trustee .............6
SECTION 3.02 Certain Rights of Trust Guarantee Trustee 8
SECTION 3.03 Not Responsible for Recitals or Issuance of Preferred
Trust Securities Guarantee .................................9
ARTICLE IV TRUST GUARANTEE TRUSTEE ..................................... 9
SECTION 4.01 Trust Guarantee Trustee; Eligibility ........................ 9
SECTION 4.02 Compensation and Reimbursement ..............................10
SECTION 4.03 Appointment, Removal and Resignation of Trust Guarantee
Trustee ...................................................11
ARTICLE V GUARANTEE ...................................................12
SECTION 5.01 Guarantee ...................................................12
SECTION 5.02 Waiver of Notice and Demand .................................12
SECTION 5.03 Obligations Not Affected ....................................12
SECTION 5.04 Rights of Holders ...........................................13
SECTION 5.05 Guarantee of Payment ........................................13
SECTION 5.06 Subrogation .................................................13
SECTION 5.07 Independent Obligations .....................................14
SECTION 5.08 Additional Amounts ..........................................14
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION ...................15
SECTION 6.01 Limitation of Transactions ..................................15
SECTION 6.02 Subordination ...............................................15
ARTICLE VII TERMINATION .................................................15
-i-
<PAGE>
ARTICLE VIII MISCELLANEOUS ...............................................16
SECTION 8.01 Successors and Assigns ......................................16
SECTION 8.02 Amendments ..................................................16
SECTION 8.03 Consolidations and Mergers ..................................16
SECTION 8.04 Notices .....................................................16
SECTION 8.05 Benefit .....................................................18
SECTION 8.06 Interpretation ..............................................18
SECTION 8.07 Governing Law ...............................................18
-ii-
<PAGE>
CROSS-REFERENCE TABLE*
---------------------
Section of Section of
Trust Indenture Act Preferred
of 1939, as amended Trust
Securities Guarantee
- - - - ---------- ---------
310(a) .........................................................4.01(a)
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)
316(a) .........................................................5.04(a), 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)
- - - - -------------
* This Cross-Reference Table does not constitute part of the Preferred Trust
Securities Guarantee and shall not affect the interpretation of any of its terms
or provisions.
-iii-
<PAGE>
PREFERRED TRUST SECURITIES GUARANTEE AGREEMENT
This PREFERRED TRUST SECURITIES GUARANTEE AGREEMENT ("Preferred Trust
Securities Guarantee"), dated as of ____________, is executed and delivered by
TXU Europe Limited, a private limited company incorporated under the laws of
England and Wales (the "Guarantor"), and The Bank of New York, as trustee (the
"Trust Guarantee Trustee"), for the benefit of the Holders (as defined herein)
from time to time of the Preferred Trust Securities (as defined herein) of TXU
Europe Capital I, a Delaware statutory business trust (the "Issuer").
WHEREAS, pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), dated as of _____________among the Trustees named therein,
TXU Europe Limited, as Depositor, and the several Holders (as defined therein),
the Issuer is issuing as of the date hereof $_____________ aggregate Liquidation
Amount of its __% Trust Originated Preferred Securities (the "Preferred Trust
Securities") representing undivided beneficial interests in the assets of the
Issuer and having the terms set forth in the Trust Agreement;
WHEREAS, in order to enhance the value of the Preferred Trust
Securities, the Guarantor desires irrevocably and unconditionally to 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 purchase by each Holder of
Preferred Trust Securities, which purchase the Guarantor hereby agrees shall
benefit the Guarantor, the Guarantor executes and delivers this Preferred Trust
Securities Guarantee for the benefit of the Holders from time to time.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Preferred Trust Securities
Guarantee, 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 or Partnership 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 indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day other than a day on which banking
institutions in The City of New York are authorized or required by law to close.
"Common Trust Securities" means the securities representing common
undivided beneficial interests in the assets of the Issuer.
"Corporate Trust Office" means the principal trust office of the Trust
Guarantee Trustee in the Borough of Manhattan, The City of New York, which
office at the date hereof is located at _________________________________.
"Event of Default" means a default by the Guarantor on any of its
payment obligations under this Preferred Trust Securities Guarantee.
"Finance Subsidiary" means any wholly-owned subsidiary of the
Guarantor the principal purpose of which is to raise capital for the Guarantor
by issuing securities that are guaranteed by the Guarantor and the proceeds of
which are loaned to or invested in the Guarantor or one or more of its
affiliates.
"Guarantee Payments" means the following payments or distributions,
without duplication, with respect to the Preferred Trust Securities, to the
extent not paid or made by or on behalf of the Issuer: (i) any accrued and
unpaid Distributions (as defined in the Trust Agreement) that are required to be
paid on such Preferred Trust Securities but only if and to the extent that the
Property Trustee has available in the Payment Account funds sufficient to make
such payment, (ii) the redemption price (the "Redemption Price"), and all
accrued and unpaid Distributions to the date of redemption, with respect to the
Preferred Trust Securities called for redemption by the Issuer but only if and
to the extent that the Property Trustee has available in the Payment Account
funds sufficient to make such payment, (iii) upon a voluntary or involuntary
dissolution, winding-up or termination of the Issuer (other than in connection
with the distribution of Preferred Partnership Securities to the Holders in
exchange for Preferred Trust Securities as provided in the Trust Agreement or
upon a redemption of all of the Preferred Trust Securities, the lesser of (a)
the aggregate of the Liquidation Amount of all Preferred Trust Securities and
all accrued and unpaid Distributions on the Preferred Trust Securities to the
date of payment but only if and to the extent that the Property Trustee has
available in the Payment Account funds sufficient to make such payment, and (b)
the amount of assets of the Issuer remaining available for distribution to
Holders in liquidation of the Issuer (in either case, the "Liquidation
Distribution"). The term Guarantee Payments shall include any Additional Amounts
(as defined in Section 5.08 hereof) payable by the Guarantor in respect of
payments under the Preferred Trust Securities Guarantee.
"Holder" means a Person in whose name a Preferred Trust Security or
Preferred Trust Securities is registered in the Securities Register; provided,
however, that in determining whether the holders of the requisite percentage of
Preferred Trust Securities have given any request, notice, consent or waiver
hereunder, "Holder" shall not include the Guarantor or any Affiliate of the
Guarantor.
"Majority in Liquidation Amount of the Preferred Trust Securities"
means a vote by Holders, voting separately as a class, of more than 50% of the
aggregate Liquidation Amount of all Preferred Trust Securities.
"Officer's Certificate" means a certificate signed by any Director,
the President, any Vice President, the Treasurer, or any Assistant Treasurer of
the Guarantor, and delivered to the Trust Guarantee Trustee. Any Officer's
Certificate or Opinion of Counsel delivered with respect to compliance with a
condition or covenant provided for in this Guarantee Agreement shall include:
(a) a statement that the director, officer or counsel signing the
Officer's Certificate or the Opinion of Counsel 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 director, officer or counsel in rendering the
Officer's Certificate or the Opinion of Counsel;
(c) a statement that each such director, officer or counsel has made
such examination or investigation as, in such director's, officer's or counsel's
opinion, is necessary to enable such director, officer or counsel 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 director,
officer or counsel, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Trust Guarantee Trustee or the Guarantor or an Affiliate of the
Guarantor, or an employee or any thereof, who shall be acceptable to the
Guarantee Trustee.
"Partnership" means TXU Europe Funding I, L.P.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of _________ __, ____, among
TXU Europe Limited, a private limited company incorporated under the laws of
England and Wales, as general partner, ________________________, as initial
limited partner and such other persons who become limited partners as provided
therein.
"Preferred Partnership Securities" means those securities representing
limited partnership interests in the Partnership.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company, 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 Guarantee Trustee,
any vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Corporate Trust Department
of the Trust Guarantee Trustee customarily performing functions similar to those
performed by any of the above designated officers and also means, with respect
to a particular corporate trust matter, any other officer to whom such matter is
referred because of that officer's knowledge of and familiarity with the
particular subject.
"Senior Indebtedness" means any payment in respect of indebtedness of
the Guarantor for money borrowed, except for any such indebtedness that is by
its terms subordinated to or pari passu with Guarantor's guarantees of the debt
instruments purchased by the Partnership (the "Subsidiary Debentures"), as the
case may be.
"Successor Trust Guarantee Trustee" means a successor Trust Guarantee
Trustee possessing the qualifications to act as Trust Guarantee Trustee under
Section 4.01.
"Trust Guarantee Trustee" means The Bank of New York until a Successor
Trust Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Preferred Trust Securities Guarantee and
thereafter means each such Successor Trust Guarantee Trustee.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trust Securities" means the Common Trust Securities together with the
Preferred Trust Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Trust Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required or deemed to be part of
this Preferred Trust Securities Guarantee and shall, to the extent applicable,
be governed by such provisions; and
(b) if and to the extent that any provision of this Preferred Trust
Securities Guarantee limits, qualifies or conflicts with the duties imposed by
Section 310 to 317, inclusive, of the Trust Indenture Act, such imposed duties
shall control.
SECTION 2.02 LISTS OF HOLDERS OF PREFERRED TRUST SECURITIES.
(a) The Guarantor shall furnish or cause to be furnished to the Trust
Guarantee Trustee (a) semiannually, not later than ________ and ______ in each
year, a list, in such form as the Trust Guarantee 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 delivery thereof, and (b) at such other
times as the Trust Guarantee 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 Trust Guarantee Trustee by the Guarantor. The Guarantee
Trustee may destroy any List of Holders previously given to it on receipt of a
new List of Holders.
(b) The Trust Guarantee Trustee shall comply with its obligations
under Section 311(a) of the Trust Indenture Act, subject to the provisions of
Section 311(b) of the Trust Indenture Act, and Section 312(b) of the Trust
Indenture Act.
SECTION 2.03 REPORTS BY THE TRUST GUARANTEE TRUSTEE. Not later than
________ in each year, commencing ________________, the Trust Guarantee
Trustee shall provide to the Holders such reports, if any, as are required by
Section 313(a) of the Trust Indenture Act in the form and in the manner provided
by Section 313(a) of the Trust Indenture Act. Any such report shall be dated as
of the next preceding _________ 15. The Trust Guarantee Trustee shall also
comply with the requirements of Sections 313(b), (c) and (d) of the Trust
Indenture Act.
SECTION 2.04 PERIODIC REPORTS TO TRUST GUARANTEE TRUSTEE. The
Guarantor shall provide to the Trust Guarantee Trustee such documents, reports
and information, if any, as required by Section 314 of the Trust Indenture Act
and the compliance certificate required by Section 314 of the Trust Indenture
Act in the form, in the manner and at the times required by Section 314 of the
Trust Indenture Act.
SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Trust Guarantee Trustee such evidence of
compliance with any conditions precedent provided for in this Preferred Trust
Securities Guarantee as and to the extent required by Section 314(c) of the
Trust Indenture Act. Any certificate or opinion required to be given by an
officer or director and any opinion of counsel required to be given by counsel,
in each case pursuant to Section 314(c) of the Trust Indenture Act, shall be
given in the form of an Officer's Certificate, and an Opinion of Counsel,
respectively.
SECTION 2.06 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
Liquidation Amount of Preferred 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
Preferred Trust Securities Guarantee, but no such waiver shall extend to any
subsequent or other default or Event of Default or impair any right consequent
thereon.
SECTION 2.07 EVENT OF DEFAULT; NOTICE.
(a) The Trust Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, a notice of such Event of Default known to the Trust
Guarantee Trustee, unless such default shall have been cured or waived before
the giving of such notice, provided that the Trust Guarantee Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors or Responsible
Officers of the Trust Guarantee Trustee in good faith determines that the
withholding of such notice is in the interests of the Holders.
(b) The Trust Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless a Responsible Officer of the Trust Guarantee
Trustee charged with the administration of the Trust Agreement shall have
received written notice of such Event of Default.
SECTION 2.08 CONFLICTING INTERESTS. The Trust Agreement and the
Indenture (For Unsecured Debt Securities) dated as of May 1, 1999 of TXU Eastern
Funding Company and TXU Europe Limited to The Bank of New York, as trustee,
shall be deemed to be specifically described in this Preferred Trust Securities
Guarantee for the purposes of clause (i) of the first proviso contained in
Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF TRUST GUARANTEE TRUSTEE
SECTION 3.01 POWERS AND DUTIES OF THE TRUST GUARANTEE TRUSTEE.
(a) This Preferred Trust Securities Guarantee shall be held by the
Trust Guarantee Trustee for the benefit of the Holders, and the Trust Guarantee
Trustee shall not transfer this Preferred Trust Securities Guarantee or any
rights hereunder to any Person except a Holder exercising his or her rights
pursuant to Section 5.04 or to a Successor Trust Guarantee Trustee on acceptance
by such Successor Trust Guarantee Trustee of its appointment to act as Successor
Trust Guarantee Trustee. The right, title and interest of the Trust Guarantee
Trustee shall automatically vest in any Successor Trust Guarantee Trustee, and
such vesting and cessation of title shall be effective whether or not convincing
documents have been executed and delivered pursuant to the appointment of such
Successor Trust Guarantee Trustee.
(b) The Trust Guarantee Trustee, prior to 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 such duties and only such duties as
are specifically set forth in this Preferred Trust Securities Guarantee, and no
implied covenants or obligations shall be read into this Preferred Trust
Securities Guarantee against the Trust Guarantee Trustee. In case an Event of
Default has occurred (that has not been cured or waived pursuant to Section
2.06), and is actually known to a Responsible Officer of the Trust Guarantee
Trustee, the Trust Guarantee Trustee shall exercise such of the rights and
powers vested in it by this Preferred Trust Securities Guarantee, and use the
same degree of care and skill in its exercise thereof, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(c) No provision of this Preferred Trust Securities Guarantee shall be
construed to relieve the Trust Guarantee Trustee from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Trust Guarantee
Trustee shall be determined solely by the express provisions of this Preferred
Trust Securities Guarantee, and the Trust Guarantee Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Preferred Trust Securities Guarantee, and no implied covenants
or obligations shall be read into this Preferred Trust Securities Guarantee
against the Trust Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Trust
Guarantee Trustee, the Trust Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the Trust Guarantee Trustee and
conforming to the requirements of this Preferred Trust Securities Guarantee; but
in the case of any such certificates or opinions that by any provision hereof
are specifically required to be furnished to the Trust Guarantee Trustee, the
Trust Guarantee Trustee shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Trust Guarantee;
(ii) the Trust Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the Trust
Guarantee Trustee, unless it shall be proved that the Trust Guarantee Trustee
was negligent in ascertaining the pertinent facts upon which such judgment was
made;
(iii) the Trust Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in Liquidation Amount
of the Preferred Trust Securities relating to the time, method and place of
conducting any proceeding for any remedy available to the Trust Guarantee
Trustee, or exercising any trust or power conferred upon the Trust Guarantee
Trustee under this Preferred Trust Securities Guarantee; and
(iv) no provision of this Preferred Trust Securities Guarantee
shall require the Trust Guarantee Trustee to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if the Trust
Guarantee Trustee shall have reasonable grounds for believing that the repayment
of such funds or liability is not reasonably assured to it under the terms of
this Preferred Trust Securities Guarantee or adequate indemnity, reasonably
satisfactory to the Trust Guarantee Trustee, against such risk or liability is
not reasonably assured to it.
(d) Whether or not therein expressly provided, every provision of this
Preferred Trust Securities Guarantee relating to the conduct or affecting the
liability of or affording protection to the Trust Guarantee Trustee shall be
subject to the provisions of Sections 3.01(b) and 3.01(c).
SECTION 3.02 CERTAIN RIGHTS OF TRUST GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.01:
(i) the Trust Guarantee Trustee may 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 reasonably believed by it to be genuine and to have been signed, sent
or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Preferred Trust Securities Guarantee shall be sufficiently evidenced by an
Officer's Certificate;
(iii) whenever, in the administration of this Preferred Trust
Securities Guarantee, the Trust Guarantee Trustee shall deem it desirable that a
matter be proved or established before taking, suffering or omitting to take any
action hereunder, the Trust Guarantee Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, request
and rely upon an Officer's Certificate which, upon receipt of such request from
the Trust Guarantee Trustee, shall be promptly delivered by the Guarantor;
(iv) the Trust Guarantee Trustee may consult with counsel of its
choice, and the written advice or Opinion of Counsel with respect to legal
matters shall be full and complete authorization and protection in respect of
any action which is within the scope of such advice or opinion 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 Trust Guarantee Trustee shall have the
right at any time to seek instructions concerning the administration of this
Preferred Trust Securities Guarantee from any court of competent jurisdiction;
(v) the Trust Guarantee Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Preferred Trust
Securities Guarantee at the request or direction of any Holder, unless such
Holder shall have provided to the Trust Guarantee Trustee such adequate security
and indemnity as would satisfy a reasonable person in the position of the Trust
Guarantee 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 Trust Guarantee Trustee; provided that, nothing contained in this Section
3.02(a)(v) shall be taken to relieve the Trust Guarantee Trustee, upon the
occurrence and continuance of an Event of Default, of its obligation under the
last sentence of Section 3.01(b) to exercise the rights and powers vested in it
by this Preferred Trust Securities Guarantee;
(vi) the Trust Guarantee Trustee shall not be bound except in
the case of manifest error 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 Trust Guarantee
Trustee, in its discretion, may make such further inquiry or investigation
into such facts or matters as it may see fit;
(vii) the Trust Guarantee 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 Trust Guarantee Trustee shall not be
responsible for any misconduct or negligence on the part of any such agent or
attorney appointed with due care by it hereunder;
(viii) whenever in the administration of this Preferred Trust
Securities Guarantee the Trust Guarantee Trustee shall deem it desirable to
receive instructions with respect to enforcing any remedy or right or taking any
other action hereunder, the Trust Guarantee Trustee (1) may request instructions
from the Holders of a Majority in Liquidation Amount of the Preferred Trust
Securities, (2) may refrain from enforcing such remedy or right or taking such
other action until such instructions are received, and (3) shall be protected in
relying on or acting in accordance with such instructions;
(ix) the Trust Guarantee Trustee shall have no duty to see to
any recording, filing or registration of any instrument (including any financing
or continuation statement or any tax or securities form) (or any re-recording,
refiling or re-registration thereof); and
(x) the Trust Guarantee Trustee shall not be liable for any
action taken, suffered or omitted to be taken by it in good faith and reasonably
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Preferred Trust Securities Guarantee.
(b) No provision of this Preferred Trust Securities Guarantee shall be
deemed to impose any duty or obligation on the Trust Guarantee Trustee to
perform any act or acts or exercise any right, power, duty or obligation
conferred or imposed on it in any jurisdiction in which it shall be illegal, or
in which the Trust Guarantee Trustee shall be unqualified or incompetent in
accordance with applicable law, to perform any such act or acts or to exercise
any such right, power, duty or obligation. No permissive power or authority
available to the Trust Guarantee Trustee shall be construed to be a duty to act
in accordance with such power or authority.
SECTION 3.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF PREFERRED
TRUST SECURITIES GUARANTEE.
The recitals contained in this Preferred Trust Securities Guarantee
shall be taken as the statements of the Guarantor, and the Trust Guarantee
Trustee does not assume any responsibility for their correctness. The Trust
Guarantee Trustee makes no representation as to the validity or sufficiency of
this Preferred Trust Securities Guarantee.
ARTICLE IV
TRUST GUARANTEE TRUSTEE
SECTION 4.01 TRUST GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Trust Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the purposes of
this Section 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 Trust Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Trust Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.03(c).
(c) If the Trust Guarantee Trustee has acquired or shall acquire any
"conflicting interest" within the meaning of Section 310(b) of the Trust
Indenture Act, the Trust Guarantee Trustee and Guarantor shall in all respects
comply with the provisions of Section 310(b) of the Trust Indenture Act.
SECTION 4.02 COMPENSATION AND REIMBURSEMENT.
The Guarantor agrees:
(a) to pay the Trust Guarantee Trustee from time to time such
reasonable compensation as the Guarantor and the Trust Guarantee Trustee shall
from time to time agree in writing for all services rendered by it 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, to reimburse the
Trust Guarantee Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trust Guarantee Trustee in
accordance with the provisions of this Preferred Trust Securities Guarantee
(including the reasonable compensation and expenses of its agents and counsel),
except any such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(c) to indemnify each of the Trust Guarantee Trustee and any
predecessor Trust Guarantee Trustee for, and to hold it harmless from and
against, any and all loss, damage, claim, liability or expense, including taxes
(other than taxes based upon the income of the Trust Guarantee Trustee) incurred
without negligence or bad faith on its part, arising out of or in connection
with the acceptance of the trusts created by, or the administration of, this
Preferred Trust Securities Guarantee, 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.
As security for the performance of the obligations of the Guarantor
under this Section, the Trust Guarantee Trustee shall be entitled upon 5 days
prior notice in writing to the Guarantor to exercise a lien prior to the
Preferred Trust Securities upon all the property and funds held or collected by
the Trust Guarantee Trustee as such, except funds held in trust for the payment
of principal of, and premium (if any) or interest on, particular obligations of
the Guarantor under this Preferred Trust Securities Guarantee.
The provisions of this Section shall survive the termination of this
Guarantee Agreement.
SECTION 4.03 APPOINTMENT, REMOVAL AND RESIGNATION OF TRUST GUARANTEE
TRUSTEE.
(a) Subject to Section 4.03(b), unless an Event of Default shall have
occurred and be continuing, the Trust Guarantee Trustee may be appointed or
removed without cause at any time by the Guarantor.
(b) The Trust Guarantee Trustee shall not be removed until a Successor
Trust Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Trust Guarantee Trustee and
delivered to the Guarantor.
(c) The Trust Guarantee Trustee appointed to office shall hold office
until a Successor Trust Guarantee Trustee shall have been appointed or until its
removal or resignation. The Trust Guarantee Trustee may resign from office
(without need for prior or subsequent accounting) by an instrument in writing
executed by the Trust Guarantee Trustee and delivered to the Guarantor, which
resignation shall not take effect until a Successor Trust Guarantee Trustee has
been appointed and has accepted such appointment by instrument in writing
executed by such Successor Trust Guarantee Trustee and delivered to the
Guarantor and the resigning Trust Guarantee Trustee.
(d) If no Successor Trust Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.03 within 60 days after
delivery to the Guarantor of an instrument of resignation or removal, the Trust
Guarantee Trustee resigning or being removed may petition any court of competent
jurisdiction for appointment of a Successor Trust Guarantee Trustee. Such court
may thereupon, after prescribing such notice, if any, as it may deem proper,
appoint a Successor Trust Guarantee Trustee.
(e) The Guarantor shall give notice of each resignation and each
removal of the Trust Guarantee Trustee and each appointment of a Successor Trust
Guarantee Trustee to all Holders in the manner provided in Section 8.03 hereof.
Each notice shall include the name of the Successor Trust Guarantee Trustee and
the address of its Corporate Trust Office.
(f) No Trust Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Trust Guarantee 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 Issuer), as and when due,
regardless of any defense, right of set-off or counterclaim which the Issuer may
have or assert. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.02 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives
notice of acceptance of this Preferred Trust Securities Guarantee and of any
liability to which it applies or may apply, presentment, demand for payment, any
right to require a proceeding first against the Trust Guarantee Trustee, Issuer
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 Preferred Trust Securities
Guarantee shall in no way be affected or impaired by reason of the happening
from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Trust Securities to be
performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the Distributions, Redemption Price, Liquidation Distribution or any
other sums payable under the terms of the Preferred Trust Securities or the
extension of time for the performance of any other obligation under, arising out
of, or in connection with, the Preferred Trust Securities (other than pursuant
to the terms of the Trust Agreement);
(c) any failure, omission, delay or lack of diligence on the part of
the Property Trustee or the Holders to enforce, assert or exercise any right,
privilege, power or remedy conferred on the Property Trustee or the Holders
pursuant to the terms of the Preferred Trust Securities, or any action on the
part of the Issuer 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 Issuer or any of the assets of the
Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred 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 Trust Guarantee Trustee, the Property
Trustee or the Holders to give notice to, or obtain consent of, the Guarantor or
any other Person with respect to the happening of any of the foregoing.
SECTION 5.04 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges
that: (i) this Preferred Trust Securities Guarantee will be deposited with the
Trust Guarantee Trustee to be held for the benefit of the Holders; (ii) if an
Event of Default has occurred and is continuing, the Trust Guarantee Trustee has
the right to enforce this Preferred Trust Securities Guarantee on behalf of the
Holders; (iii) the Holders of a Majority in Liquidation Amount of the Preferred
Trust Securities have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trust Guarantee
Trustee in respect of this Preferred Trust Securities Guarantee or exercising
any trust or power conferred upon the Trust Guarantee Trustee under this
Preferred Trust Securities Guarantee; and (iv) if the Trust Guarantee Trustee
fails to enforce this Preferred Trust Securities Guarantee, any Holder may
enforce this Preferred Trust Securities Guarantee, or institute a legal
proceeding directly against the Guarantor to enforce the Trust Guarantee
Trustee's rights under this Preferred Trust Securities Guarantee without first
instituting a legal proceeding against the Issuer, the Trust Guarantee Trustee,
or any other Person.
SECTION 5.05 GUARANTEE OF PAYMENT. This Preferred Trust Securities
Guarantee 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).
SECTION 5.06 SUBROGATION. The Guarantor shall be subrogated to all,
if any, rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Preferred Trust Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required
by mandatory provisions of law) be entitled to enforce or exercise any rights
which it may acquire by way of subrogation or any indemnity, reimbursement or
other agreement, in all cases as a result of payment under this Preferred Trust
Securities Guarantee, if, at the time of any such payment, any amounts of
Guarantee Payments are due and unpaid under this Preferred Trust Securities
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.
SECTION 5.07 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred 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 Preferred Trust Securities Guarantee notwithstanding the
occurrence of any event referred to in subsections (a) through (g), inclusive,
of Section 5.03.
SECTION 5.08 ADDITIONAL AMOUNTS. All payments made pursuant to the
Guarantee Payments 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 any supranational federation to which a jurisdiction in
which the Guarantor is incorporated or organized ("Jurisdiction of
Incorporation"), belongs or any Jurisdiction of Incorporation (or any political
subdivision or taxing authority thereof or therein) or any jurisdiction in which
the Guarantor is managed or has a place of business (each, a "Taxing
Jurisdiction") or by or within any political subdivision thereof or any
authority therein or thereof having power to tax, unless such withholding or
deduction is required by law. In the event of any such withholding or deduction
("Gross-Up Taxes"), the Guarantor shall pay to the Holder of the Preferred Trust
Securities such additional amount ("Additional Amount") as shall be necessary in
order that the amount received by such Holder after withholding or deduction
shall equal the amount that would otherwise have been due to such Holder in the
absence of such withholding or deduction, except that no such Additional Amounts
shall be payable:
(A) to, or to a Person on behalf of, a Holder who is liable for
such Gross-Up Taxes with respect to the Preferred Trust Securities 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 receipt of Guarantee
Payments;
(B) to, or to a Person on behalf of, a Holder who presents a
Senior Note of the first or Second Series (whenever presentation is required)
for payment more than 30 days after the date on which payment first becomes due
except to the extent that such Holder would have been entitled to such
Additional Amounts on presenting such Senior Note of the first or Second Series
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
Preferred Trust Security (when presentation is required) other than in The City
of New York.
(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 Preferred
Trust Security that is issued in certificated form following and during the
continuance of an Event of Default if such Holder (or any predecessor Holder)
was one of the beneficial owners requesting that such certificated Preferred
Trust Security be so issued.]
Such Additional Amounts will also not be payable where, had the beneficial owner
of the Preferred Trust Security (or any interest therein) been the Holder of the
Preferred Trust Security , it 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 Guarantor shall determine that Additional Amounts will not be
payable because of the immediately preceding sentence, the Guarantor will inform
such Holder promptly after making such determination setting forth the reason(s)
thereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01 LIMITATION OF TRANSACTIONS. So long as any Preferred
Trust Securities remain outstanding, if (a) for any distribution period (as
defined in the Trust Agreement), full distributions on a cumulative basis on
any Preferred Trust Securities have not been paid when due or declared and set
apart for payment within the period of time allowed under the Trust Agreement,
(b) an Investment Event of Default by any Investment Affiliate in respect of
any Affiliate Investment Instrument has occurred and is continuing, or (c) the
Guarantor is in default of its obligations under the Preferred Trust Securities
Guarantee, the Partnership Guarantee or any Investment Guarantee which has not
been cured within the respective periods of time allowed under such guarantee,
then, during such period (i) the Guarantor shall not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or
make a liquidation payment with respect to any of its capital stock or
comparable equity interest (except for dividends or distributions in shares of,
or options, warrants or rights to subscribe for or purchase shares of, its
capital stock and conversations or exchanges of common stock of one class
into common stock of another class) and (ii) the Guarantor shall not make or
permit any Finance Subsidiary to make, any payments that would enable any
Finance Subsidiary to make, any payment of any dividends on, any distribution
with respect to, or any redemption, purchase or other acquisition of, or any
liquidation payment with respect to, any preferred security or comparable equity
interest of any Finance Subsidiary.
SECTION 6.02 SUBORDINATION. This Preferred Trust Securities Guarantee
will constitute an unsecured obligation of the Guarantor and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Guarantor, including the Investment Guarantees, except those 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 into by the Guarantor in respect of any preferred or
preference stock of any Affiliate of the Guarantor, and (iii) senior to all
common stock of the Guarantor. Nothing in this Section 6.02 shall apply to
claims of, or payments to, the Trust Guarantee Trustee under or pursuant to
Section 4.02 hereof.
ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION. Subject to Section 4.02 hereof, this
Preferred Trust Securities Guarantee shall terminate and be of no further force
and effect upon: (i) full payment of the Redemption Price of all Preferred Trust
Securities, and all accrued and unpaid Distributions to the date of redemption,
(ii) the distribution of Preferred Partnership Securities to Holders in exchange
for all of the Preferred Trust Securities, or (iii) full payment of the amounts
payable in accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Preferred Trust Securities Guarantee will
continue to be effective or will be reinstated, as the case may be, if at any
time any Holder must restore payment of any sums paid with respect to Preferred
Trust Securities or under this Preferred Partnership Securities Guarantee.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Preferred Partnership Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Preferred Trust Securities
then outstanding.
SECTION 8.02 AMENDMENTS. This Preferred Trust Securities Guarantee
may be amended only by an instrument in writing entered into by the Guarantor
and the Trust Guarantee Trustee. Except with respect to any changes which do not
materially adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Preferred Partnership Securities Guarantee may
only be amended with the prior approval of the Holders of at least a majority in
aggregate Liquidation Amount of all the outstanding Preferred Trust Securities.
The provisions of Article VI of the Trust Agreement concerning meetings of
Holders shall apply to the giving of such approval. Nothing herein contained
shall be deemed to require that the Trust Guarantee Trustee enter into any
amendment of this Preferred Trust Securities Guarantee.
SECTION 8.03 CONSOLIDATIONS AND MERGERS. The Guarantor may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation or other entity;
provided, that in any such case, (i) either the Guarantor shall be the
continuing entity, or the successor entity shall be a corporation or other
entity organized and existing under the laws of England and Wales, or any state
of the United States of America and such successor entity shall expressly assume
the due and punctual payment of the Guarantee Payments payable pursuant to
Section 5.01 hereof and the due and punctual performance and observance of all
of the covenants and conditions of this Preferred Trust Securities Guarantee to
be performed by the Guarantor by a separate guarantee satisfactory to the Trust
Guarantee Trustee, executed and delivered to the Trust Guarantee Trustee by such
entity, and (ii) the guarantor or such successor entity, as the case may be,
shall not, immediately after such merger or consolidation, or such sale, lease
or conveyance, be in default in the performance of any such covenant or
condition.
SECTION 8.04 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 Trust Guarantee Trustee
and the Holders of the Preferred Trust Securities:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Facsimile No: 44 20 78 798082
Attention: Treasurer
(b) if given to the Issuer, in care of the Administrative Trustees, at
the Issuer's (and the Administrative Trustees') address set forth below or such
other address as the Administrative Trustees on behalf of the Issuer may give
notice of to the Guarantee Trustee and the Holders:
TXU Europe Capital I
c/o TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Facsimile No: 44 20 78 798082
Attention: Administrative Trustees
(c) if given to the Trust Guarantee Trustee, to the address set forth
below or such other address as the Guarantee Trustee may give notice of to the
Guarantor and the Holders of the Preferred Trust Securities:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Facsimile No: (212) 815-5915
Attention: Corporate Trust Trustee Administration
(d) if given to any Holder, at the address set forth on the books and
records of the Issuer.
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 8.05 BENEFIT. This Preferred Trust Securities Guarantee is
solely for the benefit of the Holders and, subject to Section 3.01(a), is not
separately transferable from the Preferred Trust Securities.
SECTION 8.06 INTERPRETATION. In this Preferred Trust Securities
Guarantee, unless the context otherwise requires:
(a) a term defined anywhere in this Preferred Trust Securities
Guarantee has the same meaning throughout;
(b) all references to "the Preferred Trust Securities Guarantee" or
"this Preferred Trust Securities Guarantee" are to this Preferred Trust
Securities Guarantee as modified, supplemented or amended from time to time;
(c) all references in this Preferred Trust Securities Guarantee to
Articles and Sections are to Articles and Sections of this Preferred Trust
Securities Guarantee unless otherwise specified;
(d) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Trust Securities Guarantee unless otherwise defined
in this Preferred Trust Securities Guarantee or unless the context otherwise
requires;
(e) a reference to the singular includes the plural and vice versa;
and
(f) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.07 GOVERNING LAW. THIS PREFERRED TRUST SECURITIES GUARANTEE
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
THIS PREFERRED TRUST SECURITIES GUARANTEE is executed as of the day
and year first above written.
TXU Europe Limited
By:
------------------------
Name:
Title:
The Bank of New York,
as Trust Guarantee Trustee
By:
------------------------
Name:
Title:
Exhibit 4(d)
PREFERRED PARTNERSHIP SECURITIES GUARANTEE
Between
TXU Europe Limited
(as Guarantor)
and
The Bank of New York
(as Trustee)
dated as of
------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I DEFINITIONS .................................................... 1
SECTION 1.01 Definitions ................................................ 1
ARTICLE II TRUST INDENTURE ACT ............................................ 4
SECTION 2.01 Trust Indenture Act; Application ........................... 4
SECTION 2.02 Lists of Holders of Preferred Partnership Securities ....... 4
SECTION 2.03 Reports by the Partnership Guarantee Trustee ............... 4
SECTION 2.04 Periodic Reports to Partnership Guarantee Trustee .......... 5
SECTION 2.05 Evidence of Compliance with Conditions Precedent ........... 5
SECTION 2.06 Events of Default; Waiver .................................. 5
SECTION 2.07 Event of Default; Notice ................................... 5
SECTION 2.08 Conflicting Interests ...................................... 5
ARTICLE III POWERS, DUTIES AND RIGHTS OF Partnership Guarantee Trustee ..... 6
SECTION 3.01 Powers and Duties of the Partnership Guarantee Trustee ..... 6
SECTION 3.02 Certain Rights of Partnership Guarantee Trustee ............ 7
SECTION 3.03 Not Responsible for Recitals or Issuance of Preferred
Partnership Securities Guarantee .........................10
ARTICLE IV Partnership Guarantee Trustee ..................................10
SECTION 4.01 Partnership Guarantee Trustee; Eligibility .................10
SECTION 4.02 Compensation and Reimbursement .............................10
SECTION 4.03 Appointment, Removal and Resignation of Partnership
Guarantee Trustee ........................................11
ARTICLE V GUARANTEE ......................................................12
SECTION 5.01 Guarantee ..................................................12
SECTION 5.02 Waiver of Notice and Demand.................................12
SECTION 5.03 Obligations Not Affected ...................................12
SECTION 5.04 Rights of Holders ..........................................13
SECTION 5.05 Guarantee of Payment .......................................14
SECTION 5.06 Subrogation ................................................14
SECTION 5.07 Independent Obligations ....................................14
SECTION 5.08 Additional Amounts .........................................14
ARTICLE VI LIMITATION OF TRANSACTIONS; SUBORDINATION ......................15
SECTION 6.01 Limitation of Transactions .................................15
SECTION 6.02 Subordination ..............................................16
ARTICLE VII TERMINATION ....................................................16
ARTICLE VIII MISCELLANEOUS ..................................................16
-i-
<PAGE>
SECTION 8.01 Successors and Assigns .....................................16
SECTION 8.02 Amendments .................................................16
SECTION 8.03 Consolidations and Mergers .................................17
SECTION 8.04 Notices ....................................................17
SECTION 8.05 Benefit ....................................................18
SECTION 8.06 Interpretation .............................................18
SECTION 8.07 Governing Law ..............................................19
-ii-
<PAGE>
CROSS-REFERENCE TABLE*
----------------------
Section of Section of
Trust Indenture Act Preferred
of 1939, as amended Trust
Securities Guarantee
- - - - ---------- ---------
310(a).............................................................4.01(a)
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)
316(a).............................................................5.04(a), 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)
- - - - -------------
* This Cross-Reference Table does not constitute part of the Preferred
Partnership Securities Guarantee and shall not affect the interpretation of any
of its terms or provisions.
-iii-
<PAGE>
PREFERRED PARTNERSHIP SECURITIES GUARANTEE AGREEMENT
This PREFERRED PARTNERSHIP SECURITIES GUARANTEE AGREEMENT ("Preferred
Partnership Securities Guarantee"), dated as of November _, 1999, is executed
and delivered by TXU Europe Limited, a private limited company incorporated
under the laws of England and Wales (the "Guarantor"), and The Bank of New York,
as trustee (the "Partnership Guarantee Trustee"), for the benefit of the Holders
(as defined herein) from time to time of the Preferred Partnership Securities
(as defined herein) of TXU Europe Funding I, L.P. a Delaware limited partnership
(the "Issuer").
WHEREAS, pursuant to an Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement"), dated as of the date hereof, the
Issuer may issue a single series of limited partner interests in the Issuer (the
"Partnership Preferred Securities");
WHEREAS, pursuant to the Partnership Agreement, the proceeds received
by the Issuer from the issuance and sale of the Partnership Preferred Securities
will be invested by the Issuer in junior subordinated debentures of TXU Eastern
Funding Company and one or more eligible subsidiaries of the Guarantor and to a
limited extent, in other eligible debt securities; and
WHEREAS, the Guarantor, as incentive for the Holders (as defined
herein) to purchase Partnership Preferred Securities, desires hereby irrevocably
and unconditionally to agree, to the extent set forth herein, to pay to the
Holders the Guarantee Payments (as defined herein).
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Partnership Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Preferred
Partnership Securities Guarantee for the benefit of the Holders from time to
time.
ARTICLE I
DEFINITIONS
SECTION 1.01 DEFINITIONS. As used in this Preferred Partnership
Securities Guarantee, 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 Partnership Agreement or 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 indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Business Day" means any day other than a day on which banking
institutions in The City of New York are authorized or required by law to close.
"Corporate Trust Office" means the principal trust office of the
Partnership Guarantee Trustee in the Borough of Manhattan, The City of New York,
which office at the date hereof is located at _________________________________.
"Distributions" shall have the meaning set forth in Section 5.1 of the
Partnership Agreement.
"Event of Default" means a default by the Guarantor on any of its
payment obligations under this Preferred Partnership Securities Guarantee.
"Finance Subsidiary" means any wholly-owned subsidiary of the
Guarantor the principal purpose of which is to raise capital for the Guarantor
by issuing securities that are guaranteed by the Guarantor and the proceeds of
which are loaned to or invested in the Guarantor or one or more of its
affiliates.
"Guarantee Payments" shall mean the following payments or
distribution, without duplication, with respect to the Partnership Preferred
Securities, to the extent not paid or made by the Partnership: (i) any
accumulated and unpaid Distributions that have theretofore been properly
declared by the General Partner on the Partnership Preferred Securities out of
funds legally available to the Partnership therefor, (ii) the redemption price
of the Partnership Preferred Securities, including all accumulated and unpaid
Distributions to the date of redemption ( the " Redemption Price"), payable out
of funds legally available to the Partnership therefor, with respect to any
Partnership Preferred Securities called for redemption by the Partnership, and
(iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Partnership, the lesser of (a) the aggregate of the liquidation preference
and all accumulated and unpaid Distributions on the partnership Preferred
Securities to the date of payment and (b) the amount of assets of the
Partnership remaining available for distribution to Holders in liquidation of
the Partnership after satisfaction of all liabilities of the Partnership (in
either case, the " Liquidation Distribution").
"Holders" shall mean the holders, as registered on the books and
records of the Partnership, of the Partnership Preferred Securities; provided,
however, that in determining whether the holders of the requisite percentage of
Partnership Preferred Securities have given any request, notice, consent or
waiver hereunder, "Holders" shall not include the Guarantor or any entity owned
more than 50% by the Guarantor, either directly or indirectly.
"Investment Event of Default" has the meaning ascribed to it in the
Partnership Agreement.
"Majority in Liquidation Amount of the Preferred Partnership
Securities" means a vote by Holders, voting separately as a class, of more than
50% of the aggregate Liquidation Amount of all Preferred Partnership Securities.
"Officer's Certificate" means a certificate signed by any Director,
the President, any Vice President, the Treasurer, or any Assistant Treasurer of
the Guarantor, and delivered to the Partnership Guarantee Trustee. Any Officer's
Certificate or Opinion of Counsel delivered with respect to compliance with a
condition or covenant provided for in this Guarantee Agreement shall include:
(a) a statement that the director, officer or counsel signing the
Officer's Certificate or the Opinion of Counsel 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 director, officer or counsel in rendering the
Officer's Certificate or the Opinion of Counsel;
(c) a statement that each such director, officer or counsel has made
such examination or investigation as, in such director's, officer's or counsel's
opinion, is necessary to enable such director, officer or counsel 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 director,
officer or counsel, such condition or covenant has been complied with.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Partnership Guarantee Trustee or the Guarantor or an Affiliate
of the Guarantor, or an employee or any thereof, who shall be acceptable to the
Guarantee Trustee.
"Partnership" means TXU Europe Funding I, L.P.
"Partnership Agreement" means the Amended and Restated Agreement of
Limited Partnership of the Partnership, dated as of _________ ______, _____,
amoung TXU Europe Limited, a private limited company incorporated under the
laws of England and Wales as general partner, as initial limited partner and
such other persons who became limited partners as provided therein.
"Partnership Guarantee Trustee" means The Bank of New York until a
Successor Partnership Guarantee Trustee (as defined below) has been appointed
and has accepted such appointment pursuant to the terms of this Preferred
Partnership Securities Guarantee and thereafter means each such Successor
Partnership Guarantee Trustee.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company, 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 Guarantee Trustee,
any vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Corporate Trust Department
of the Partnership Guarantee Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Senior Indebtedness" means any payment in respect of indebtedness of
the Guarantor for money borrowed, except for any such indebtedness that is by
its terms subordinated to or pari passu with Guarantor's guarantees of the debt
instruments purchased by the Partnership (the "Subsidiary Debentures"), as the
case may be.
"Successor Partnership Guarantee Trustee" means a successor
Partnership Guarantee Trustee possessing the qualifications to act as
Partnership Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trust Securities" means the Preferred Partnership Securities.
ARTICLE II
TRUST INDENTURE ACT
SECTION 2.01 TRUST INDENTURE ACT; APPLICATION.
(a) This Preferred Partnership Securities Guarantee is subject to the
provisions of the Trust Indenture Act that are required or deemed to be part of
this Preferred Partnership Securities Guarantee and shall, to the extent
applicable, be governed by such provisions; and
(b) if and to the extent that any provision of this Preferred
Partnership Securities Guarantee limits, qualifies or conflicts with the duties
imposed by Section 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.
SECTION 2.02 LISTS OF HOLDERS OF PREFERRED PARTNERSHIP SECURITIES.
(a) The Guarantor shall furnish or cause to be furnished to the
Partnership Guarantee Trustee (a) semiannually, not later than ________ and
_______ in each year, a list, in such form as the Partnership Guarantee 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 delivery thereof, and
(b) at such other times as the Partnership Guarantee 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 Partnership Guarantee Trustee by the
Guarantor. The Guarantee Trustee may destroy any List of Holders previously
given to it on receipt of a new List of Holders.
(b) The Guarantee Trustee shall comply with its obligations under
Section 311(a) of the Trust Indenture Act, subject to the provisions of Section
311(b) of the Trust Indenture Act, and Section 312(b) of the Trust Indenture
Act.
SECTION 2.03 REPORTS BY THE PARTNERSHIP GUARANTEE TRUSTEE. Not later
than ________ in each year, commencing ________________, the Partnership
Guarantee Trustee shall provide to the Holders such reports, if any, as are
required by Section 313(a) of the Trust Indenture Act in the form and in the
manner provided by Section 313(a) of the Trust Indenture Act. Any such report
shall be dated as of the next preceding _________ 15. The Guarantee Trustee
shall also comply with the requirements of Sections 313(b), (c) and (d) of the
Trust Indenture Act.
SECTION 2.04 PERIODIC REPORTS TO PARTNERSHIP GUARANTEE TRUSTEE. The
Guarantor shall provide to the Partnership Guarantee Trustee such documents,
reports and information, if any, as required by Section 314 of the Trust
Indenture Act and the compliance certificate required by Section 314 of the
Trust Indenture Act in the form, in the manner and at the times required by
Section 314 of the Trust Indenture Act.
SECTION 2.05 EVIDENCE OF COMPLIANCE WITH CONDITIONS PRECEDENT. The
Guarantor shall provide to the Partnership Guarantee Trustee such evidence of
compliance with any conditions precedent provided for in this Preferred
Partnership Securities Guarantee as and to the extent required by Section 314(c)
of the Trust Indenture Act. Any certificate or opinion required to be given by
an officer or director and any opinion of counsel required to be given by
counsel, in each case pursuant to Section 314(c) of the Trust Indenture Act,
shall be given in the form of an Officer's Certificate, and an Opinion of
Counsel, respectively.
SECTION 2.06 EVENTS OF DEFAULT; WAIVER. The Holders of a Majority in
Liquidation Amount of Preferred Partnership 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 Preferred Partnership Securities Guarantee, but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon.
SECTION 2.07 EVENT OF DEFAULT; NOTICE.
(a) The Partnership Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, a notice of such Event of Default known to the
Partnership Guarantee Trustee, unless such default shall have been cured or
waived before the giving of such notice, provided that the Partnership Guarantee
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
or Responsible Officers of the Partnership Guarantee Trustee in good faith
determines that the withholding of such notice is in the interests of the
Holders.
(b) The Partnership Guarantee Trustee shall not be deemed to have
knowledge of any Event of Default unless the Partnership Guarantee Trustee
receives notice or a Responsible Officer of the Partnership Guarantee Trustee
charged with the administration of the Trust Agreement shall have obtained
actual knowledge of an Event of Default
SECTION 2.08 CONFLICTING INTERESTS. The Trust Agreement and the
Indenture (For Unsecured Debt Securities) dated as of May 1, 1999 of TXU Eastern
Funding Company and TXU Europe Limited to The Bank of New York, as trustee,
shall be deemed to be specifically described in this Preferred Partnership
Securities Guarantee for the purposes of clause (i) of the first proviso
contained in Section 310(b) of the Trust Indenture Act.
ARTICLE III
POWERS, DUTIES AND RIGHTS OF PARTNERSHIP GUARANTEE TRUSTEE
SECTION 3.01 POWERS AND DUTIES OF THE PARTNERSHIP GUARANTEE TRUSTEE.
(a) This Preferred Partnership Securities Guarantee shall be held by
the Partnership Guarantee Trustee for the benefit of the Holders, and the
Partnership Guarantee Trustee shall not transfer this Preferred Partnership
Securities Guarantee or any rights hereunder to any Person except a Holder
exercising his or her rights pursuant to Section 5.04 or to a Successor
Partnership Guarantee Trustee on acceptance by such Successor Partnership
Guarantee Trustee of its appointment to act as Successor Partnership Guarantee
Trustee. The right, title and interest of the Partnership Guarantee Trustee
shall automatically vest in any Successor Partnership Guarantee Trustee, and
such vesting and cessation of title shall be effective whether or not convincing
documents have been executed and delivered pursuant to the appointment of such
Successor Partnership Guarantee Trustee.
(b) If an Event of Default actually known to a Responsible Officer of
the Partnership Guarantee Trustee has occurred and is continuing, and unless
enforcement action under the Partnership Guarantee has been undertaken and is
being pursued by the Special Representative, the Partnership Guarantee Trustee
shall enforce this Partnership Guarantee for the benefit of the Holders of the
Partnership Preferred Securities.
(c) The Partnership Guarantee Trustee, prior to 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 such duties and only such duties
as are specifically set forth in this Preferred Partnership Securities
Guarantee, and no implied covenants or obligations shall be read into this
Preferred Partnership Securities Guarantee against the Partnership Guarantee
Trustee. In case an Event of Default has occurred (that has not been cured or
waived pursuant to Section 2.06), and is actually known to a Responsible Officer
of the Partnership Guarantee Trustee, the Partnership Guarantee Trustee shall
exercise such of the rights and powers vested in it by this Preferred
Partnership Securities Guarantee, and use the same degree of care and skill in
its exercise thereof, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(d) No provision of this Preferred Partnership Securities Guarantee
shall be construed to relieve the Partnership Guarantee Trustee from liability
for its own negligent action, its own negligent failure to act, or its own
willful misconduct, except that:
(i) prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Partnership Guarantee
Trustee shall be determined solely by the express provisions of this Preferred
Partnership Securities Guarantee, and the Partnership Guarantee Trustee shall
not be liable except for the performance of such duties and obligations as are
specifically set forth in this Preferred Partnership Securities Guarantee, and
no implied covenants or obligations shall be read into this Preferred
Partnership Securities Guarantee against the Partnership Guarantee Trustee; and
(B) in the absence of bad faith on the part of the
Partnership Guarantee Trustee, the Partnership Guarantee Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions furnished to the
Partnership Guarantee Trustee and conforming to the requirements of this
Preferred Partnership Securities Guarantee; but in the case of any such
certificates or opinions that by any provision hereof are specifically required
to be furnished to the Partnership Guarantee Trustee, the Partnership Guarantee
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Trust Guarantee;
(ii) the Partnership Guarantee Trustee shall not be liable for
any error of judgment made in good faith by a Responsible Officer of the
Partnership Guarantee Trustee, unless it shall be proved that the Partnership
Guarantee Trustee was negligent in ascertaining the pertinent facts upon which
such judgment was made;
(iii) the Partnership Guarantee Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a Majority in Liquidation Amount
of the Preferred Partnership Securities relating to the time, method and place
of conducting any proceeding for any remedy available to the Partnership
Guarantee Trustee, or exercising any trust or power conferred upon the
Partnership Guarantee Trustee under this Preferred Partnership Securities
Guarantee; and
(iv) no provision of this Preferred Partnership Securities
Guarantee shall require the Partnership Guarantee Trustee to expend or risk its
own funds or otherwise incur any financial liability in the performance of any
of its duties hereunder, or in the exercise of any of its rights or powers, if
the Partnership Guarantee Trustee shall have reasonable grounds for believing
that the repayment of such funds or liability is not reasonably assured to it
under the terms of this Preferred Partnership Securities Guarantee or adequate
indemnity, reasonably satisfactory to the Partnership Guarantee Trustee, against
such risk or liability is not reasonably assured to it.
(e) Whether or not therein expressly provided, every provision of this
Preferred Partnership Securities Guarantee relating to the conduct or affecting
the liability of or affording protection to the Partnership Guarantee Trustee
shall be subject to the provisions of Sections 3.01(c) and 3.01(d).
SECTION 3.02 CERTAIN RIGHTS OF PARTNERSHIP GUARANTEE TRUSTEE.
(a) Subject to the provisions of Section 3.01:
(i) the Partnership Guarantee Trustee may 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 reasonably believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties;
(ii) any direction or act of the Guarantor contemplated by this
Preferred Partnership Securities Guarantee shall be sufficiently evidenced by an
Officer's Certificate;
(iii) whenever, in the administration of this Preferred
Partnership Securities Guarantee, the Partnership Guarantee Trustee shall deem
it desirable that a matter be proved or established before taking, suffering or
omitting to take any action hereunder, the Partnership Guarantee Trustee (unless
other evidence is herein specifically prescribed) may, in the absence of bad
faith on its part, request and rely upon an Officer's Certificate which, upon
receipt of such request from the Partnership Guarantee Trustee, shall be
promptly delivered by the Guarantor;
(iv) the Partnership Guarantee Trustee may consult with counsel
of its choice, and the written advice or Opinion of Counsel with respect to
legal matters shall be full and complete authorization and protection in respect
of any action which is within the scope of such advice or opinion 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 Partnership Guarantee
Trustee shall have the right at any time to seek instructions concerning the
administration of this Preferred Partnership Securities Guarantee from any
court of competent jurisdiction;
(v) the Partnership Guarantee Trustee shall be under no
obligation to exercise any of the rights or powers vested in it by this
Preferred Partnership Securities Guarantee at the request or direction of any
Holder, unless such Holder shall have provided to the Partnership Guarantee
Trustee such adequate security and indemnity as would satisfy a reasonable
person in the position of the Partnership Guarantee 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 Partnership Guarantee Trustee;
provided that, nothing contained in this Section 3.02(a)(v) shall be taken to
relieve the Partnership Guarantee Trustee, upon the occurrence and continuance
of an Event of Default, of its obligation under the last sentence of Section
3.01(b) to exercise the rights and powers vested in it by this Preferred
Partnership Securities Guarantee;
(vi) the Partnership Guarantee Trustee shall not be bound,
except in the case of manifest error, 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
Partnership Guarantee Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit;
(vii) the Partnership Guarantee 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 Partnership Guarantee Trustee shall not
be responsible for any misconduct or negligence on the part of any such agent or
attorney appointed with due care by it hereunder;
(viii) whenever in the administration of this Preferred
Partnership Securities Guarantee the Partnership Guarantee Trustee shall deem it
desirable to receive instructions with respect to enforcing any remedy or right
or taking any other action hereunder, the Partnership Guarantee Trustee (1) may
request instructions from the Holders of a Majority in Liquidation Amount of the
Preferred Partnership Securities, (2) may refrain from enforcing such remedy or
right or taking such other action until such instructions are received, and (3)
shall be protected in relying on or acting in accordance with such instructions;
(ix) the Partnership Guarantee Trustee shall have no duty to see
to any recording, filing or registration of any instrument (including any
financing or continuation statement or any tax or securities form) (or any
re-recording, refiling or re-registration thereof); and
(x) the Partnership Guarantee Trustee shall not be liable for
any action taken, suffered or omitted to be taken by it in good faith and
reasonably believed by it to be authorized or within the discretion or rights or
powers conferred upon it by this Preferred Partnership Securities Guarantee.
(viii) The Partnership Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents, nominees, custodians or attorneys, and the Partnership Guarantee trustee
shall not be responsible for any misconduct or negligence on the part of any
agent or attorney appointed with due care by it hereunder.
(ix) Any action taken by the Partnership Guarantee Trustee or its agents
hereunder shall bind the Holders of the Partnership Preferred Securities, and
the signature of the Partnership Guarantee Trustee or its agents alone shall be
sufficient and effective to perform any such action. No third party shall be
required to inquire as to the authority of the Partnership Guarantee trustee to
so act or as to its compliance with any of the terms and provisions of this
Partnership Guarantee, both of which shall be conclusively evidenced by the
Partnership Guarantee Trustee or its agent taking such action.
(b) No provision of this Preferred Partnership Securities Guarantee
shall be deemed to impose any duty or obligation on the Partnership Guarantee
Trustee to perform any act or acts or exercise any right, power, duty or
obligation conferred or imposed on it in any jurisdiction in which it shall be
illegal, or in which the Partnership Guarantee Trustee shall be unqualified or
incompetent in accordance with applicable law, to perform any such act or acts
or to exercise any such right, power, duty or obligation. No permissive power or
authority available to the Partnership Guarantee Trustee shall be construed to
be a duty to act in accordance with such power or authority.
SECTION 3.03 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF PREFERRED
PARTNERSHIP SECURITIES GUARANTEE.
The recitals contained in this Preferred Partnership Securities
Guarantee shall be taken as the statements of the Guarantor, and the Partnership
Guarantee Trustee does not assume any responsibility for their correctness. The
Partnership Guarantee Trustee makes no representation as to the validity or
sufficiency of this Preferred Partnership Securities Guarantee.
ARTICLE IV
PARTNERSHIP GUARANTEE TRUSTEE
SECTION 4.01 PARTNERSHIP GUARANTEE TRUSTEE; ELIGIBILITY.
(a) There shall at all times be a Partnership Guarantee Trustee which
shall:
(i) not be an Affiliate of the Guarantor; and
(ii) be a corporation organized and doing business under the laws
of the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the Securities and
Exchange Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least 50 million U.S. dollars ($50,000,000),
and subject to supervision or examination by Federal, State, Territorial or
District of Columbia authority. If such corporation publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then, for the purposes of
this Section 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 Partnership Guarantee Trustee shall cease to be
eligible to so act under Section 4.01(a), the Partnership Guarantee Trustee
shall immediately resign in the manner and with the effect set out in Section
4.03(c).
(c) If the Partnership Guarantee Trustee has acquired or shall
acquire any "conflicting interest" within the meaning of Section 310(b) of the
Trust Indenture Act, the Partnership Guarantee Trustee and Guarantor shall in
all respects comply with the provisions of Section 310(b) of the Trust Indenture
Act.
SECTION 4.02 COMPENSATION AND REIMBURSEMENT.
The Guarantor agrees:
(a) to pay the Partnership Guarantee Trustee from time to time such
reasonable compensation as the Guarantor and the Partnership Guarantee Trustee
shall from time to time agree in writing for all services rendered by it
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, to reimburse the
Partnership Guarantee Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Partnership Guarantee Trustee
in accordance with the provisions of this Preferred Partnership Securities
Guarantee (including the reasonable compensation and expenses of its agents and
counsel), except any such expense, disbursement or advance as may be
attributable to its negligence or bad faith; and
(c) to indemnify each of the Partnership Guarantee Trustee and any
predecessor Partnership Guarantee Trustee for, and to hold it harmless from and
against, any and all loss, damage, claim, liability or expense, including taxes
(other than taxes based upon the income of the Partnership Guarantee Trustee)
incurred without negligence or bad faith on its part, arising out of or in
connection with the acceptance of the trusts created by, or the administration
of, this Preferred Partnership Securities Guarantee, 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.
As security for the performance of the obligations of the Guarantor
under this Section, the Partnership Guarantee Trustee shall be entitled upon
giving 5 days prior written notice to the Guarantor to exercise a lien prior to
the Preferred Partnership Securities upon all the property and funds held or
collected by the Partnership Guarantee Trustee as such, except funds held in
trust for the payment of principal of, and premium (if any) or interest on,
particular obligations of the Guarantor under this Preferred Partnership
Securities Guarantee.
The provisions of this Section shall survive the termination of this
Guarantee Agreement.
SECTION 4.03 APPOINTMENT, REMOVAL AND RESIGNATION OF PARTNERSHIP
GUARANTEE TRUSTEE.
(a) Subject to Section 4.03(b), unless an Event of Default shall have
occurred and be continuing, the Partnership Guarantee Trustee may be appointed
or removed without cause at any time by the Guarantor.
(b) The Partnership Guarantee Trustee shall not be removed until a
Successor Partnership Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor Partnership
Guarantee Trustee and delivered to the Guarantor.
(c) The Partnership Guarantee Trustee appointed to office shall hold
office until a Successor Partnership Guarantee Trustee shall have been appointed
or until its removal or resignation. The Partnership Guarantee Trustee may
resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the Partnership Guarantee Trustee and
delivered to the Guarantor, which resignation shall not take effect until a
Successor Partnership Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor Partnership
Guarantee Trustee and delivered to the Guarantor and the resigning Partnership
Guarantee Trustee.
(d) If no Successor Partnership Guarantee Trustee shall have been
appointed and accepted appointment as provided in this Section 4.03 within 60
days after delivery to the Guarantor of an instrument of resignation or removal,
the Partnership Guarantee Trustee resigning or being removed may petition any
court of competent jurisdiction for appointment of a Successor Partnership
Guarantee Trustee. Such court may thereupon, after prescribing such notice, if
any, as it may deem proper, appoint a Successor Partnership Guarantee Trustee.
(e) The Guarantor shall give notice of each resignation and each
removal of the Partnership Guarantee Trustee and each appointment of a Successor
Partnership Guarantee Trustee to all Holders in the manner provided in Section
8.03 hereof. Each notice shall include the name of the Successor Partnership
Guarantee Trustee and the address of its Corporate Trust Office.
(f) No Partnership Guarantee Trustee shall be liable for the acts or
omissions to act of any Successor Partnership Guarantee 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 Issuer), as and when due,
regardless of any defense, right of set-off or counterclaim which the Issuer may
have or assert. The Guarantor's obligation to make a Guarantee Payment may be
satisfied by direct payment of the required amounts by the Guarantor to the
Holders or by causing the Issuer to pay such amounts to the Holders.
SECTION 5.02 WAIVER OF NOTICE AND DEMAND. The Guarantor hereby waives
notice of acceptance of this Preferred Partnership Securities Guarantee and of
any liability to which it applies or may apply, presentment, demand for payment,
any right to require a proceeding first against the Partnership Guarantee
Trustee, Issuer 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 Preferred Partnership
Securities Guarantee shall in no way be affected or impaired by reason of the
happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise, of the
performance or observance by the Issuer of any express or implied agreement,
covenant, term or condition relating to the Preferred Partnership Securities to
be performed or observed by the Issuer;
(b) the extension of time for the payment by the Issuer of all or any
portion of the [Distributions, Redemption Price, Liquidation Distribution] or
any other sums payable under the terms of the Preferred Partnership Securities
or the extension of time for the performance of any other obligation under,
arising out of, or in connection with, the Preferred Partnership Securities
(other than pursuant to the terms of the Partnership Agreement);
(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 Preferred Partnership
Securities, or any action on the part of the Issuer 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 Issuer or any of the assets of
the Issuer;
(e) any invalidity of, or defect or deficiency in, the Preferred
Partnership 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 Partnership Guarantee Trustee or the Holders
to give notice to, or obtain consent of, the Guarantor or any other Person with
respect to the happening of any of the foregoing.
SECTION 5.04 RIGHTS OF HOLDERS. The Guarantor expressly acknowledges
that: (i) this Preferred Partnership Securities Guarantee will be deposited with
the Partnership Guarantee Trustee to be held for the benefit of the Holders;
(ii) if an Event of Default has occurred and is continuing, the Partnership
Guarantee Trustee has the right to enforce this Preferred Partnership Securities
Guarantee on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Preferred Partnership Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available to the Partnership Guarantee Trustee in respect of this Preferred
Partnership Securities Guarantee or exercising any trust or power conferred upon
the Partnership Guarantee Trustee under this Preferred Partnership Securities
Guarantee; and (iv) if the Partnership Guarantee Trustee fails to enforce this
Preferred Partnership Securities Guarantee, any Holder may enforce this
Preferred Partnership Securities Guarantee, or institute a legal proceeding
directly against the Guarantor to enforce the Partnership Guarantee Trustee's
rights under this Preferred Partnership Securities Guarantee without first
instituting a legal proceeding against the Issuer, the Partnership Guarantee
Trustee, or any other Person.
SECTION 5.05 GUARANTEE OF PAYMENT. This Preferred Partnership
Securities Guarantee 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).
SECTION 5.06 SUBROGATION. The Guarantor shall be subrogated to all,
if any, rights of the Holders against the Issuer in respect of any amounts paid
to the Holders by the Guarantor under this Preferred Partnership Securities
Guarantee; provided, however, that the Guarantor shall not (except to the extent
required by mandatory provisions of law) be entitled to enforce or exercise any
rights which it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Preferred Partnership Securities Guarantee, if, at the time of any such payment,
any amounts of Guarantee Payments are due and unpaid under this Preferred
Partnership Securities Guarantee. If any amount shall be paid to the Guarantor
in violation of the preceding sentence, the Guarantor agrees to hold such amount
in trust for the Holders and to pay over such amount to the Holders.
SECTION 5.07 INDEPENDENT OBLIGATIONS. The Guarantor acknowledges that
its obligations hereunder are independent of the obligations of the Issuer with
respect to the Preferred Partnership Securities and that the Guarantor shall be
liable as principal and as debtor hereunder to make Guarantee Payments pursuant
to the terms of this Preferred Partnership Securities Guarantee notwithstanding
the occurrence of any event referred to in subsections (a) through (g),
inclusive, of Section 5.03.
SECTION 5.08 ADDITIONAL AMOUNTS. All payments made pursuant to the
Guarantee Payments 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 any supranational federation to which a jurisdiction in
which the Guarantor is incorporated or organized ("Jurisdiction of
Incorporation"), belongs or any Jurisdiction of Incorporation (or any political
subdivision or taxing authority thereof or therein) or any jurisdiction in which
the Guarantor is managed or has a place of business (each, a "Taxing
Jurisdiction") or by or within any political subdivision thereof or any
authority therein or thereof having power to tax, unless such withholding or
deduction is required by law. In the event of any such withholding or deduction
("Gross-Up Taxes"), the Guarantor shall pay to the Holder of the Preferred
Partnership Securities such additional amount ("Additional Amount") as shall be
necessary in order that the amount received by such Holder after withholding or
deduction shall equal the amount that would otherwise have been due to such
Holder in the absence of such withholding or deduction, except that no such
Additional Amounts shall be payable:
(A) to, or to a Person on behalf of, a Holder who is liable
for such Gross-Up Taxes with respect to the Preferred Partnership Securities
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 receipt of
Guarantee Payments;
(B) to, or to a Person on behalf of, a Holder who presents a
Preferred Partnership Security (whenever presentation is required) for payment
more than 30 days after the date on which payment first becomes due except to
the extent that such Holder would have been entitled to such Additional Amounts
on presenting such Preferred Partnership 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
Preferred Partnership Security (when presentation is required) other than in The
City of New York.
(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
Preferred Partnership Security that is issued in certificated form following and
during the continuance of an Event of Default if such Holder (or any predecessor
Holder) was one of the beneficial owners requesting that such certificated
Preferred Partnership Security be so issued.]
Such Additional Amounts will also not be payable where, had the beneficial owner
of the Preferred Partnership Security (or any interest therein) been the Holder
of the Preferred Partnership Security, it 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 Guarantor shall determine that Additional Amounts will
not be payable because of the immediately preceding sentence, the Guarantor will
inform such Holder promptly after making such determination setting forth the
reason(s) thereof.
ARTICLE VI
LIMITATION OF TRANSACTIONS; SUBORDINATION
SECTION 6.01 LIMITATION OF TRANSACTIONS. So long as any Preferred
Partnership Securities remain outstanding, if (a) for any distribution period
(as defined in the Partnership Agreement), full distributions on a cumulative
basis on any Preferred Partnership Securities have not been paid when due or
declared and set apart for payment within the period of time allowed by the
Partnership Agreement, (b) an Investment Event of Default has occurred and is
continuing, or (c) the Guarantor is in default of its obligations under the
Preferred Partnership Securities Guarantee which has not been cured within the
period of time allowed under this Preferred Partnership Securities Guarantee,
then, during such period (i) the Guarantor shall not declare or pay dividends
on, make distributions with respect to, or redeem, purchase or acquire, or make
a liquidation payment with respect to any of its capital stock or comparable
equity interest (except for dividends or distributions in shares of, or options,
warrants or rights to subscribe for or purchase shares of, its capital stock and
conversations or exchanges of common stock of one class into common stock of
another class) and (ii) the Guarantor shall not make or permit any Finance
Subsidiary to make, any payments that would enable any Finance Subsidiary to
make, any payment of any dividends on, any distribution with respect to, or any
redemption, purchase or other acquisition of, or any liquidation payment with
respect to, any preferred security or comparable equity interest of any Finance
Subsidiary.
SECTION 6.02 SUBORDINATION. This Preferred Partnership Securities
Guarantee will constitute an unsecured obligation of the Guarantor and will rank
(i) subordinate and junior in right of payment to all other liabilities of the
Guarantor, including the Investment Guarantees, except those 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 into by the Guarantor in respect of any preferred or
preference stock of any Affiliate of the Guarantor, and (iii) senior to all
common stock of the Guarantor. Nothing in this Section 6.02 shall apply to
claims of, or payments to, the Partnership Guarantee Trustee under or pursuant
to Section 4.02 hereof.
ARTICLE VII
TERMINATION
SECTION 7.01 TERMINATION. Subject to Section 4.02 hereof, this
Preferred Partnership Securities Guarantee shall terminate and be of no further
force and effect upon: (i) full payment of the Redemption Price of all Preferred
Partnership Securities, and all accrued and unpaid Distributions to the date of
redemption, (ii) [the distribution of Preferred Partnership Securities to
Holders in exchange for all of the Preferred Partnership Securities], or (iii)
full payment of the amounts payable in accordance with the Trust Agreement upon
liquidation of the Issuer. Notwithstanding the foregoing, this Preferred
Partnership Securities Guarantee will continue to be effective or will be
reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid with respect to Preferred Partnership Securities or under this
Preferred Partnership Securities Guarantee.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01 SUCCESSORS AND ASSIGNS. All guarantees and agreements
contained in this Preferred Partnership Securities Guarantee shall bind the
successors, assigns, receivers, trustees and representatives of the Guarantor
and shall inure to the benefit of the Holders of the Preferred Partnership
Securities then outstanding.
SECTION 8.02 AMENDMENTS. This Preferred Partnership Securities
Guarantee may be amended only by an instrument in writing entered into by the
Guarantor and the Partnership Guarantee Trustee. Except with respect to any
changes which do not materially adversely affect the rights of Holders (in which
case no consent of Holders will be required), this Preferred Partnership
Securities Guarantee may only be amended with the prior approval of the Holders
of at least a majority in aggregate Liquidation Amount of all the outstanding
Preferred Partnership Securities. The provisions of Article VI of the Trust
Agreement concerning meetings of Holders shall apply to the giving of such
approval. Nothing herein contained shall be deemed to require that the
Partnership Guarantee Trustee enter into any amendment of this Preferred
Partnership Securities Guarantee.
SECTION 8.03 CONSOLIDATIONS AND MERGERS. The Guarantor may
consolidate with, or sell, lease or convey all or substantially all of its
assets to, or merge with or into any other corporation or other entity;
provided, that in any such case, (i) either the Guarantor shall be the
continuing entity, or the successor entity shall be a corporation or other
entity organized and existing under the laws of England and Wales, or any state
of the United States of America and such successor entity shall expressly assume
the due and punctual payment of the Guarantee Payments payable pursuant to
Section 5.01 hereof and the due and punctual performance and observance of all
of the covenants and conditions of this Preferred Partnership Securities
Guarantee to be performed by the Guarantor by a separate guarantee satisfactory
to the Partnership Guarantee Trustee, executed and delivered to the Partnership
Guarantee Trustee by such entity, and (ii) the guarantor or such successor
entity, as the case may be, shall not, immediately after such merger or
consolidation, or such sale, lease or conveyance, be in default in the
performance of any such covenant or condition.
SECTION 8.04 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 Partnership Guarantee
Trustee and the Holders of the Preferred Partnership Securities:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Facsimile No: 44 20 78 798082
Attention: Treasurer
(b) if given to the Issuer, in care of the Administrative Trustees, at
the Issuer's (and the Administrative Trustees') address set forth below or such
other address as the Administrative Trustees on behalf of the Issuer may give
notice of to the Guarantee Trustee and the Holders:
TXU Europe Capital I
c/o TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Facsimile No: 44 20 78 798082
Attention: Administrative Trustees
(c) if given to the Partnership Guarantee Trustee, to the address set
forth below or such other address as the Guarantee Trustee may give notice of to
the Guarantor and the Holders of the Preferred Partnership Securities:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Facsimile No: (212) 815-5915
Attention: Corporate Trust Trustee Administration
(d) if given to any Holder, at the address set forth on the books and
records of the Issuer.
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 8.05 BENEFIT. This Preferred Partnership Securities Guarantee
is solely for the benefit of the Holders and, subject to Section 3.01(a), is not
separately transferable from the Preferred Partnership Securities.
SECTION 8.06 INTERPRETATION. In this Preferred Partnership Securities
Guarantee, unless the context otherwise requires:
(a) a term defined anywhere in this Preferred Partnership Securities
Guarantee has the same meaning throughout;
(b) all references to "the Preferred Partnership Securities Guarantee"
or "this Preferred Partnership Securities Guarantee" are to this Preferred
Partnership Securities Guarantee as modified, supplemented or amended from time
to time;
(c) all references in this Preferred Partnership Securities Guarantee
to Articles and Sections are to Articles and Sections of this Preferred
Partnership Securities Guarantee unless otherwise specified;
(d) a term defined in the Trust Indenture Act has the same meaning
when used in this Preferred Partnership Securities Guarantee unless otherwise
defined in this Preferred Partnership Securities Guarantee or unless the context
otherwise requires;
(e) a reference to the singular includes the plural and vice versa;
and
(f) the masculine, feminine or neuter genders used herein shall
include the masculine, feminine and neuter genders.
SECTION 8.07 GOVERNING LAW. THIS PREFERRED PARTNERSHIP SECURITIES
GUARANTEE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
THIS PREFERRED PARTNERSHIP SECURITIES GUARANTEE is executed as of the
day and year first above written.
TXU Europe Limited
By:
------------------------------
Name:
Title:
The Bank of New York,
as Partnership Guarantee Trustee
By:
------------------------------
Name:
Title:
Exhibit 4(e)
------------------------------------------
TXU EASTERN FUNDING COMPANY
ISSUER
AND
TXU EUROPE LIMITED,
GUARANTOR
TO
THE BANK OF NEW YORK
TRUSTEE
---------
INDENTURE
(FOR UNSECURED SUBORDINATED DEBT SECURITIES)
DATED AS OF _________ 1, 1999
------------------------------------------
<PAGE>
TABLE OF CONTENTS
PARTIES .......................................................................1
RECITAL OF THE COMPANY ........................................................1
RECITAL OF THE GUARANTOR ......................................................1
ARTICLE One ...................................................................1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION .......................1
SECTION 101.Definitions ..............................................1
Act .............................................................2
Additional Amounts ..............................................2
Affiliate .......................................................2
Agreement of Limited Partnership ................................2
Authenticating Agent ............................................2
Authorized Officer ..............................................2
Board of Directors ..............................................2
Board Resolution ................................................2
Business Day ....................................................3
Commission ......................................................3
Company .........................................................3
Company Request .................................................3
Company Order ...................................................3
Corporate Trust Office ..........................................3
Corporation .....................................................3
Defaulted Interest ..............................................3
Discount Security ...............................................3
Dollar or $ .....................................................3
Eligible Obligations ............................................3
Event of Default ................................................4
Governmental Authority ..........................................4
Government Obligations ..........................................4
Guarantee .......................................................4
Guarantor .......................................................4
Guarantor Order .................................................4
Guarantor Request ...............................................4
Holder ..........................................................4
Indenture .......................................................4
Interest Payment Date ...........................................4
Judgment Currency ...............................................4
Jurisdiction of Incorporation ...................................5
Maturity ........................................................5
Officer's Certificate ...........................................5
Opinion of Counsel ..............................................5
Outstanding .....................................................5
Partnership .....................................................6
Preferred Partners Securities ...................................6
Preferred Trust Securities ......................................6
Paying Agent ....................................................6
Periodic Offering ...............................................6
Person ..........................................................6
Place of Payment ................................................7
-i-
<PAGE>
Predecessor Security ............................................7
Redemption Date .................................................7
Redemption Price ................................................7
Regular Record Date .............................................7
Required Currency ...............................................7
Responsible Officer .............................................7
Securities ......................................................7
Security Register ...............................................7
Security Registrar ..............................................7
Senior Indebtedness .............................................7
Special Record Date .............................................8
Stated Interest Rate ............................................8
Stated Maturity .................................................8
Tranche .........................................................8
Trust ...........................................................8
Trust Agreement .................................................8
Trust Indenture Act .............................................8
Trustee .........................................................8
United States ...................................................8
SECTION 102.Compliance Certificates and Opinions .....................8
SECTION 103.Form of Documents Delivered to Trustee ...................9
SECTION 104.Acts of Holders .........................................10
SECTION 105.Notices, etc. to Trustee, Company or Guarantor ..........11
SECTION 106.Notice to Holders of Securities; Waiver .................12
SECTION 107.Conflict with Trust Indenture Act .......................13
SECTION 108.Effect of Headings and Table of Contents ................13
SECTION 109.Successors and Assigns ..................................13
SECTION 110.Separability Clause .....................................13
SECTION 111.Benefits of Indenture ...................................13
SECTION 112.Governing Law ...........................................13
SECTION 113.Legal Holidays ..........................................14
SECTION 114.Agent to Receive Service of Process .....................14
SECTION 115.Consent to Jurisdiction; Appointment of Agent for
Service; Judgment Currency; Waiver of Immunities .....14
ARTICLE TWO ..................................................................16
SECURITY FORMS ...............................................................16
SECTION 201.Forms Generally .........................................16
SECTION 202.Form of Trustee's Certificate of Authentication .........16
ARTICLE THREE ................................................................17
THE SECURITIES ...............................................................17
SECTION 301.Amount Unlimited; Issuable in Series ....................17
SECTION 302.Denominations ...........................................20
SECTION 303.Execution, Authentication, Delivery and Dating ..........20
SECTION 304.Temporary Securities ....................................23
SECTION 305.Registration, Registration of Transfer and Exchange .....23
SECTION 306.Mutilated, Destroyed, Lost and Stolen Securities ........24
SECTION 307.Payment of Interest; Interest Rights Preserved ..........25
SECTION 308.Persons Deemed Owners ...................................26
SECTION 309.Cancellation by Security Registrar ......................26
SECTION 310.Computation of Interest .................................27
SECTION 311.Payment to Be in Proper Currency ........................27
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<PAGE>
SECTION 312.Extension of Interest Payment ...........................27
ARTICLE FOUR .................................................................28
REDEMPTION OF SECURITIES .....................................................28
SECTION 401.Applicability of Article ................................28
SECTION 402.Election to Redeem; Notice to Trustee ...................28
SECTION 403.Selection of Securities to Be Redeemed ..................28
SECTION 404.Notice of Redemption ....................................29
SECTION 405.Securities Payable on Redemption Date ...................30
SECTION 406.Securities Redeemed in Part .............................30
ARTICLE FIVE .................................................................30
SINKING FUNDS ................................................................30
SECTION 501.Applicability of Article ................................30
SECTION 502.Satisfaction of Sinking Fund Payments with Securities ...31
SECTION 503.Redemption of Securities for Sinking Fund ...............31
ARTICLE SIX ..................................................................32
COVENANTS ....................................................................32
SECTION 601.Payment of Principal, Premium and Interest ..............32
SECTION 602.Maintenance of Office or Agency .........................32
SECTION 603.Money for Securities Payments to Be Held in Trust .......32
SECTION 604.Corporate Existence .....................................34
SECTION 605.Maintenance of Corporate Records; Protection of Assets ..34
SECTION 606.Annual Officer's Certificate as to Compliance............34
SECTION 607.Waiver of Certain Covenants..............................34
SECTION 608.Business of the Company..................................34
SECTION 609.Maintenance of Trust Existence...........................34
ARTICLE SEVEN.................................................................35
SATISFACTION AND DISCHARGE....................................................35
SECTION 701.Satisfaction and Discharge of Securities.................35
SECTION 702.Satisfaction and Discharge of Indenture..................37
SECTION 703.Application of Trust Money...............................37
ARTICLE EIGHT.................................................................38
EVENTS OF DEFAULT; REMEDIES...................................................38
SECTION 801.Events of Default........................................38
SECTION 802.Acceleration of Maturity; Rescission and Annulment.......39
SECTION 803.Collection of Indebtedness and Suits for Enforcement
by Trustee ...........................................40
SECTION 804.Trustee May File Proofs of Claim ........................41
SECTION 805.Trustee May Enforce Claims Without Possession of
Securities ...........................................41
SECTION 806.Application of Money Collected ..........................41
SECTION 807.Limitation on Suits .....................................42
SECTION 808.Unconditional Right of Holders to Receive Principal,
Premium and Interest .................................42
SECTION 809.Restoration of Rights and Remedies ......................43
SECTION 810.Rights and Remedies Cumulative ..........................43
SECTION 811.Delay or Omission Not Waiver ............................43
SECTION 812.Control by Holders of Securities ........................43
SECTION 813.Waiver of Past Defaults .................................44
SECTION 814.Undertaking for Costs ...................................44
SECTION 815.Waiver of Stay or Extension Laws ........................44
ARTICLE NINE .................................................................45
THE TRUSTEE ..................................................................45
SECTION 901.Certain Duties and Responsibilities .....................45
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<PAGE>
SECTION 902.Notice of Defaults ......................................45
SECTION 903.Certain Rights of Trustee ...............................45
SECTION 904.Not Responsible for Recitals or Issuance of Securities ..47
SECTION 905.May Hold Securities .....................................47
SECTION 906.Money Held in Trust .....................................47
SECTION 907.Compensation and Reimbursement ..........................47
SECTION 908.Disqualification; Conflicting Interests .................48
SECTION 909.Corporate Trustee Required; Eligibility .................48
SECTION 910.Resignation and Removal; Appointment of Successor .......49
SECTION 911.Acceptance of Appointment by Successor ..................50
SECTION 912.Merger, Conversion, Consolidation or Succession to
Business .............................................51
SECTION 913.Preferential Collection of Claims Against Company .......51
SECTION 914.Co-trustees and Separate Trustees .......................52
SECTION 915.Appointment of Authenticating Agent .....................53
ARTICLE TEN ..................................................................54
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR .................54
SECTION 1001.Lists of Holders .......................................54
SECTION 1002.Reports by Trustee, Company and Guarantor ..............55
ARTICLE ELEVEN ...............................................................55
CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER ..........................55
SECTION 1101.Company or Guarantor May Consolidate, etc., Only on
Certain Terms ........................................55
SECTION 1102.Successor Corporation Substituted ......................56
SECTION 1103.Merger into Company or Guarantor; Certain Transfers ....56
SECTION 1104.Consolidation Defined ..................................56
ARTICLE TWELVE ...............................................................56
SUPPLEMENTAL INDENTURES ......................................................56
SECTION 1201.Supplemental Indentures Without Consent of Holders .....56
SECTION 1202.Supplemental Indentures With Consent of Holders ........58
SECTION 1203.Execution of Supplemental Indentures ...................59
SECTION 1204.Effect of Supplemental Indentures ......................59
SECTION 1205.Conformity With Trust Indenture Act ....................59
SECTION 1206.Reference in Securities to Supplemental Indentures .....59
SECTION 1207.Modification Without Supplemental Indenture ............60
ARTICLE THIRTEEN .............................................................60
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING ..................................60
SECTION 1301.Purposes for Which Meetings May Be Called ..............60
SECTION 1302.Call, Notice and Place of Meetings .....................60
SECTION 1303.Persons Entitled to Vote at Meetings ...................61
SECTION 1304.Quorum; Action .........................................61
SECTION 1305.Attendance at Meetings; Determination of Voting
Rights; Conduct and Adjournment of Meetings ..........62
SECTION 1306.Counting Votes and Recording Action of Meetings ........62
SECTION 1307.Action Without Meeting .................................63
ARTICLE FOURTEEN .............................................................63
GUARANTEE ....................................................................63
SECTION 1401.Guarantee ..............................................63
SECTION 1402.Execution and Delivery of Guarantee ....................65
ARTICLE FIFTEEN ..............................................................65
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS ..............65
SECTION 1501.Liability Solely Corporate .............................65
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<PAGE>
ARTICLE SIXTEEN ..............................................................66
SUBORDINATION OF SECURITIES ..................................................66
SECTION 1601.Securities Subordinate to Senior Indebtedness ..........66
SECTION 1602.Payment Over of Proceeds of Securities .................66
SECTION 1603.Disputes with Holders of Certain Senior Indebtedness ...67
SECTION 1604.Subrogation ............................................68
SECTION 1605.Obligation of the Company Unconditional ................68
SECTION 1606.Priority of Senior Indebtedness Upon Maturity ..........68
SECTION 1607.Trustee as Holder of Senior Indebtedness ...............69
SECTION 1608.Notice to Trustee to Effectuate Subordination ..........69
SECTION 1609.Modification, Extension, etc. of Senior Indebtedness ...69
SECTION 1610.Trustee Has No Fiduciary Duty to Holders of Senior
Indebtedness .......................................69
SECTION 1611.Paying Agents Other Than the Trustee..................69
SECTION 1612.Rights of Holders of Senior Indebtedness Not Impaired. .70
SECTION 1613.Effect of Subordination Provisions; Termination ........70
Testimonium ..................................................................71
Signatures ...................................................................72
-v-
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TXU EASTERN FUNDING COMPANY
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939
AND INDENTURE, DATED AS OF _________ 1, 1999
TRUST INDENTURE ACT SECTION INDENTURE SECTION
ss.310 (a)(1) .....................................................909
(a)(2) .....................................................909
(a)(3) .....................................................914
(a)(4) ...............................................Not Applicable
(b) ........................................................908
............................................................910
ss.311 (a) ........................................................913
(b) ........................................................913
(c) ........................................................913
ss.312 (a) .......................................................1001
(b) .......................................................1001
(c) .......................................................1001
ss.313 (a) .......................................................1002
(b) .......................................................1002
(c) .......................................................1002
ss.314 (a) .......................................................1002
(a)(4) .....................................................606
(b) ..................................................Not Applicable
(c)(1) .....................................................102
(c)(2) .....................................................102
(c)(3) ...............................................Not Applicable
(d) ..................................................Not Applicable
(e) ........................................................102
ss.315 (a) ........................................................901
............................................................903
(b) ........................................................902
(c) ........................................................901
(d) ........................................................901
(e) ........................................................814
ss.316 (a) ........................................................812
............................................................813
(a)(1)(A) ..................................................802
............................................................812
(a)(1)(B) ..................................................813
(a)(2) ...............................................Not Applicable
(b) ........................................................808
ss.317 (a)(1) .....................................................803
(a)(2) .....................................................804
(b) ........................................................603
ss.318 (a) ........................................................107
-vi-
<PAGE>
INDENTURE, dated as of _________ 1, 1999, among TXU EASTERN FUNDING
COMPANY, a private unlimited company duly incorporated and existing under the
laws of England and Wales (herein called the "Company"), having its registered
office at The Adelphi 1-11 John Adam Street, London, England WC2N 6HT, TXU
EUROPE LIMITED, a private limited company duly incorporated and existing under
the laws of England and Wales (herein called the "Guarantor"), having its
principal office at The Adelphi 1-11 John Adam Street, London, England WC2N 6HT
and THE BANK OF NEW YORK, a banking corporation of the State of New York, having
its principal corporate trust office at 101 Barclay Street, New York, New York
10286, as Trustee (herein called the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities"), in an unlimited aggregate principal amount to be issued from
time to time in one or more series as contemplated herein with a Guarantee
endorsed thereon; and all acts necessary to make this Indenture a valid
agreement of the Company have been performed.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires, capitalized terms used herein
shall have the meanings assigned to them in Article One of this Indenture.
RECITAL OF THE GUARANTOR
The Guarantor has duly authorized the execution and delivery of this
Indenture to provide for the Guarantee of the Securities provided for herein;
and all acts necessary to make this Indenture a valid agreement of the
Guarantor, in accordance with its terms have been performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of any
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(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 terms used herein without definition which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with respect
to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States at the
date of such computation or, at the election of the Company from time to
time, at the date of the execution and delivery of this Indenture;
provided, however, that in determining generally accepted accounting
principles applicable to the Company, the Company shall, to the extent
required, conform to any order, rule or regulation of any administrative
agency, regulatory authority or other governmental body having jurisdiction
over the Company; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Nine, are defined in that
Article.
"ACT", when used with respect to any Holder of a Security, has the
meaning specified in Section 104.
"ADDITIONAL AMOUNTS" means amounts that may be payable with respect to
Securities of one or more series or Tranches as may be provided pursuant to
Section 301.
"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 through one or
more intermediaries, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"AGREEMENT OF LIMITED PARTNERSHIP" means the Amended and Restated
Agreement of Limited Partnership dated as of _________, 1999, relating to TXU
Europe Funding I, L.P., or an Amended and Restated Agreement of Limited
Partnership relating to a Partnership designated pursuant to Section 301,
hereof, as they may be amended, modified or otherwise supplemented from time to
time.
"AUTHENTICATING AGENT" means any Person (other than the Company or an
Affiliate of the Company) authorized by the Trustee pursuant to Section 915 to
act on behalf of the Trustee to authenticate one or more series of Securities or
Tranche thereof.
"AUTHORIZED OFFICER" means the Chairman of the Board, any director,
any managing director, the President, any Vice President, the Treasurer, any
Assistant Treasurer, or any other officer or agent of the Company or the
Guarantor, as the case may be, authorized by a Board Resolution of the Company
or the Guarantor, as the case requires, to act in respect of matters relating to
this Indenture.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or the Guarantor, as the case requires, or any committee of that board
duly authorized to act in respect of matters relating to this Indenture or its
equivalent if the Company or the Guarantor has no board of directors.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary or a director or other persons designated by
the Board of Directors of the Company or the Guarantor, as the case requires, to
have been duly adopted by the Board of Directors of the Company or the
Guarantor, as the case requires, and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"BUSINESS DAY", when used with respect to a Place of Payment or any
other particular location specified in the Securities or this Indenture, means
any day, other than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other location are
generally authorized or required by law, regulation or executive order to remain
closed, except as may be otherwise specified as contemplated by Section 301.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the date of execution and delivery of this
Indenture such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body, if any, performing such
duties at such time.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by an Authorized Officer and delivered to the
Trustee.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution and delivery of this
instrument is located on the 21st floor, at 101 Barclay Street-21W, New York,
New York 10286.
"CORPORATION" means a corporation, association, company, limited
liability company, partnership, joint stock company or business trust.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DISCOUNT SECURITY" means any Security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 802. "Interest" with
respect to a Discount Security means interest, if any, borne by such Security at
a Stated Interest Rate.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"ELIGIBLE OBLIGATIONS" means:
(a) with respect to Securities denominated in Dollars, Government
Obligations; or
(b) with respect to Securities denominated in a currency other than
Dollars or in a composite currency, such other obligations or instruments
as shall be specified with respect to such Securities, as contemplated by
Section 301.
"EVENT OF DEFAULT" has the meaning specified in Section 801.
"GOVERNMENTAL AUTHORITY" means the government of any country or state
or of any county, municipality or other political subdivision of any of the
foregoing, or any department, agency, authority or other instrumentality of any
of the foregoing.
"GOVERNMENT OBLIGATIONS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States and
entitled to the benefit of the full faith and credit thereof; and
(b) certificates, depositary receipts or other instruments which
evidence a direct ownership interest in obligations described in clause (a)
above or in any specific interest or principal payments due in respect
thereof; provided, however, that the custodian of such obligations or
specific interest or principal payments shall be a bank or trust company
(which may include the Trustee or any Paying Agent) subject to Federal or
state supervision or examination with a combined capital and surplus of at
least $50,000,000; and provided, further, that except as may be otherwise
required by law, such custodian shall be obligated to pay to the holders of
such certificates, depositary receipts or other instruments the full amount
received by such custodian in respect of such obligations or specific
payments and shall not be permitted to make any deduction therefrom.
"GUARANTEE" means any guarantee of the Guarantor endorsed on a
Security authenticated and delivered pursuant to this Indenture in the form
thereof established pursuant to Section 201 and shall include the guarantee set
forth in Section 1401.
"GUARANTOR" means the Person named as "Guarantor" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Guarantor" shall include such successor Person.
"GUARANTOR ORDER" or "GUARANTOR REQUEST" mean, respectively, a written
order or request, as the case may be, signed in the name of the Guarantor by an
Authorized Officer of the Guarantor and delivered to the Trustee.
"HOLDER" means a Person in whose name a Security is registered in the
Security Register or, in the case of a Security issued in bearer, global form,
the bearer of such Security.
"INDENTURE" means this instrument as originally executed and delivered
and as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of a particular series of
Securities established as contemplated by Section 301.
"INTEREST PAYMENT DATE", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"JUDGMENT CURRENCY" has the meaning specified in Section 115(c).
"JURISDICTION OF INCORPORATION" shall mean each jurisdiction in which
the Company or the Guarantor, as the case requires, is incorporated or
organized.
"MATURITY", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as provided in such Security or in this Indenture, whether at the
Stated Maturity, by declaration of acceleration, upon call for redemption or
otherwise.
"OFFICER'S CERTIFICATE" means a certificate signed by an Authorized
Officer of the Company or the Guarantor, as the case requires, and delivered to
the Trustee. An Officer's Certificate of the Company may be combined with an
Officer's Certificate of the Guarantor if signed by Authorized Officers of the
Company and the Guarantor. "OPINION OF COUNSEL" means a written opinion of
counsel, who may be counsel for the Company or the Guarantor, as the case
requires, or other counsel acceptable to the Trustee.
"OUTSTANDING", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled or delivered to the Security
Registrar for cancellation;
(b) Securities deemed to have been paid in accordance with Section
701; and
(c) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
and the Company that such Securities are held by a bona fide purchaser or
purchasers in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether or not the Holders of the
requisite principal amount of the Securities Outstanding under this Indenture,
or the Outstanding Securities of any series or Tranche, have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or whether
or not a quorum is present at a meeting of Holders of Securities,
(x) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor (unless
the Company, such Affiliate or such obligor owns all Securities Outstanding
under this Indenture, or (except for the purposes of actions to be taken by
Holders of (i) more than one series voting as a class under Section 812 or
(ii) more than one series or more than one Tranche, as the case may be,
voting as a class under Section 1202) all Outstanding Securities of each
such series and each such Tranche, as the case may be, determined without
regard to this clause (x)) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver or upon any such determination as to
the presence of a quorum, only Securities which the Trustee knows to be so
owned shall be so disregarded; provided, however, that Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor;
(y) the principal amount of a Discount Security that shall be deemed
to be Outstanding for such purposes shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 802; and
(z) the principal amount of any Security which is denominated in a
currency other than Dollars or in a composite currency that shall be deemed
to be Outstanding for such purposes shall be the amount of Dollars which
could have been purchased by the principal amount (or, in the case of a
Discount Security, the Dollar equivalent on the date determined as set
forth below of the amount determined as provided in (y) above) of such
currency or composite currency evidenced by such Security, in each case
certified to the Trustee in an Officer's Certificate of the Company, based
(i) on the average of the mean of the buying and selling spot rates quoted
by three banks which are members of the New York Clearing House Association
selected by the Company in effect at 11:00 a.m. (New York time) in The City
of New York on the fifth Business Day preceding any such determination or
(ii) if on such fifth Business Day it shall not be possible or practicable
to obtain such quotations from three such banks, on such other quotations
or alternative methods of determination which shall be as consistent as
practicable with the method set forth in (i) above;
provided, further, that, in the case of any Security the principal of which is
payable from time to time without presentment or surrender, the principal amount
of such Security that shall be deemed to be Outstanding at any time for all
purposes of this Indenture shall be the original principal amount thereof less
the aggregate amount of principal thereof theretofore paid.
"PARTNERSHIP" means TXU Europe Funding I, L.P., or other Partnership
designated pursuant to Section 301 hereof or any permitted successor under the
Agreement of Limited Partnership pertaining to such Partnership.
"PREFERRED PARTNERSHIP SECURITIES" means the limited partnership
interests, if any, issued pursuant to the Agreement of Limited Partnership.
"PREFERRED TRUST SECURITIES" means any preferred trust interests
issued by a Trust or similar securities issued by permitted successors to such
Trust in accordance with the Trust Agreement pertaining to such Trust
"PAYING AGENT" means any Person, including the Company or the
Guarantor, 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 or the
Guarantor.
"PERIODIC OFFERING" means an offering of Securities of a series from
time to time any or all of the specific terms of which Securities, including
without limitation the rate or rates of interest, if any, thereon, the Stated
Maturity or Maturities thereof and the redemption provisions, if any, with
respect thereto, are to be determined by the Company or its agents upon the
issuance of such Securities.
"PERSON" means any individual, corporation, joint venture, trust or
unincorporated organization or any Governmental Authority.
"PLACE OF PAYMENT", when used with respect to the Securities of any
series, or any Tranche thereof, means the place or places, specified as
contemplated by Section 301, at which, subject to Section 602, principal of and
premium, if any, and interest, if any, and Additional Amounts, if any, on the
Securities of such series or Tranche are payable.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed (to the extent
lawful) to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"REDEMPTION DATE", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"REQUIRED CURRENCY" has the meaning specified in Section 311.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any Vice President, Assistant Vice President, Trust Officer or other officer of
the Trustee assigned by the Trustee to the Corporation Trust Administration
Division of the Trustee (or any successor division or department of the
Trustee).
"SECURITIES" has the meaning stated in the first recital of this
Indenture and more particularly means any securities authenticated and delivered
under this Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective
meanings specified in Section 305.
"SENIOR INDEBTEDNESS" means all obligations (other than non-recourse
obligations and the indebtedness issued under this Indenture) of, or guaranteed
or assumed by, the Company for borrowed money, including both senior and
subordinated indebtedness for borrowed money (other than the Securities), or for
the payment of money relating to any lease which is capitalized on the
consolidated balance sheet of the Company and its subsidiaries in accordance
with generally accepted accounting principles as in effect from time to time, or
evidenced by bonds, debentures, notes or other similar instruments, and in each
case, amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligations, whether existing as of the date of this Indenture
or subsequently incurred by the Company unless, in the case of any particular
indebtedness, renewal, extension or refunding, the instrument creating or
evidencing the same or the assumption or guarantee of the same expressly
provides that such indebtedness, renewal, extension or refunding is not superior
in right of payment to or is pari passu with the Securities; provided that the
Company's obligations under the Guaranty shall not be deemed to be Senior
Indebtedness.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
307.
"STATED INTEREST RATE" means a rate (whether fixed or variable) at
which an obligation by its terms is stated to bear simple interest. Any
calculation or other determination to be made under this Indenture by reference
to the Stated Interest Rate on a Security shall be made without regard to the
effective interest cost to the Company of such Security and without regard to
the Stated Interest Rate on, or the effective cost to the Company of, any other
indebtedness in respect of which the Company's obligations are evidenced or
secured in whole or in part by such Security.
"STATED MATURITY", when used with respect to any obligation or any
installment of principal thereof or interest thereon, means the date 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, acceleration, purchase or extension).
"TRANCHE" means a group of Securities which (a) are of the same series
and (b) have identical terms except as to principal amount and/or date of
issuance.
"TRUST" means TXU Europe Capital I, a statutory business trust formed
under the laws of the State of Delaware, or any other Trust designated pursuant
to Section 301 hereof or any permitted successor under the Trust Agreement
pertaining to such Trust.
"TRUST AGREEMENT" means the Amended and Restated Trust Agreement,
dated as of _________ __, ____, relating to TXU Europe Capital I, or an Amended
and Restated Trust Agreement relating to a Trust designated pursuant to Section
301 hereof, in each case, among the Company, as Depositor, the trustees named
therein and several holders referred to therein as they may be amended from time
to time.
"TRUST INDENTURE ACT" means, as of any time, the Trust Indenture Act
of 1939, or any successor statute, as in effect at such time.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
with respect to one or more series of Securities pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of that series.
"UNITED STATES" means the United States of America, its Territories,
its possessions and other areas subject to its political jurisdiction.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company or the Guarantor to the Trustee to take
any action under any provision of this Indenture, the Company and the Guarantor
shall each, if requested by the Trustee, furnish to the Trustee an Officer's
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action (including any covenants compliance
with which constitutes a condition precedent) have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(b) 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;
(c) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable such
Person 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 Person,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
Any certificate or opinion of an officer of the Company or the
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which such
officer's certificate or opinion are 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
of the Company stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. In addition, any
Opinion of Counsel may be based (without further examination or investigation),
insofar as it relates to or is dependent upon matters covered in an Opinion of
Counsel rendered by other counsel, upon such other Opinion of Counsel, unless
such counsel has actual knowledge that the Opinion of Counsel rendered by such
other counsel with respect to the matters upon which his Opinion of Counsel may
be based as aforesaid are erroneous. If, in order to render any Opinion of
Counsel provided for herein, the signer thereof shall deem it necessary that
additional facts or matters be stated in any Officer's Certificate provided for
herein, then such certificate may state all such additional facts or matters as
the signer of such Opinion of Counsel may request.
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.
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.
Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officer's Certificate, Opinion of Counsel or other document or
instrument, a clerical, typographical or other inadvertent or unintentional
error or omission shall be discovered therein, a new document or instrument may
be substituted therefor in corrected form with the same force and effect as if
originally filed in the corrected form and, irrespective of the date or dates of
the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the date
or dates required with respect to the document or instrument for which it is
substituted. Anything in this Indenture to the contrary notwithstanding, if any
such corrective document or instrument indicates that action has been taken by
or at the request of the Company which could not have been taken had the
original document or instrument not contained such error or omission, the action
so taken shall not be invalidated or otherwise rendered ineffective but shall be
and remain in full force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the generality of
the foregoing, any Securities issued under the authority of such defective
document or instrument shall nevertheless be the valid obligations of the
Company entitled to the benefits of this Indenture equally and ratably with all
other Outstanding Securities, except as aforesaid.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
election, waiver or other action provided by this Indenture to be made,
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by an agent duly appointed in writing or, alternatively, may be embodied
in and evidenced by the record of Holders voting in favor thereof, either
in person or by proxies duly appointed in writing, at any meeting of
Holders duly called and held in accordance with the provisions of Article
Thirteen, or a combination of such instruments and any such record. Except
as herein otherwise expressly provided, such action shall become effective
when such instrument or instruments or record or both are delivered to the
Trustee and, where it is hereby expressly required, to the Company and the
Guarantor. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments and so voting at any such meeting. Proof of execution of any
such instrument or of a writing appointing any such agent, or of the
holding by any Person of a Security, shall be sufficient for any purpose of
this Indenture and (subject to Section 901) conclusive in favor of the
Trustee, the Company and the Guarantor, if made in the manner provided in
this Section. The record of any meeting of Holders shall be proved in the
manner provided in Section 1306.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof or may be proved in any other manner which the Trustee
and the Company deem sufficient. 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.
(c) The principal amount (except as otherwise contemplated in clause
(y) of the first proviso to the definition of Outstanding) and serial
numbers of Securities held by any Person, and the date of holding the same,
shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of a Holder 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,
the Company or the Guarantor in reliance thereon, whether or not notation
of such action is made upon such Security.
(e) Until such time as written instruments shall have been delivered
to the Trustee with respect to the requisite percentage of principal amount
of Securities for the action contemplated by such instruments, any such
instrument executed and delivered by or on behalf of a Holder may be
revoked with respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in which such
instrument was proven.
(f) Securities of any series, or any Tranche thereof, authenticated
and delivered after any Act of Holders may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as to any action
taken by such Act of Holders. If the Company shall so determine, new
Securities of any series, or any Tranche thereof, so modified as to
conform, in the opinion of the Trustee and the Company, to such action may
be prepared and executed by the Company and the Guarantor and authenticated
and delivered by the Trustee in exchange for Outstanding Securities of such
series or Tranche.
(g) If the Company or Guarantor shall solicit from Holders any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but neither
the Company nor the Guarantor shall have any obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such
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 the Outstanding Securities
have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of the record
date.
SECTION 105. NOTICES, ETC. TO TRUSTEE, COMPANY OR GUARANTOR.
Any request, demand, authorization, direction, notice, consent,
election, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with, the
Trustee by any Holder or by the Company or the Guarantor, or the Company or the
Guarantor by the Trustee or by any Holder, shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if in writing and
delivered personally to an officer or other responsible employee of the
addressee at the applicable location set forth below or at such other location
as such party may from time to time designate by written notice, or transmitted
by facsimile transmission or other direct written electronic means to such
telephone number or other electronic communications address as the parties
hereto shall from time to time designate by written notice, or transmitted by
certified or registered mail, charges prepaid, to the applicable address set
forth below or to such other address as such party may from time to time
designate by written notice:
If to the Trustee, to:
The Bank of New York
Corporate Trust Administration, 21st Floor
101 Barclay Street - 21W
New York, New York 10286
Attention: Vice President, Corporate Trust Administration
Telephone: (212) 815-5375
Telecopy: (212) 815-5915
If to the Company, to:
TXU Eastern Funding Company
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
Telephone: 011-44-171-879-8081
Telecopy: 011-44-171-___-____
With a copy to:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
Telephone: 011-44-171-879-8081
Telecopy: 011-44-171-___-____
If to the Guarantor, to:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
Telephone: 011-44-171-879-8081
Telecopy: 011-44-171-___-____
Any communication contemplated herein shall be deemed to have
been made, given, furnished and filed if personally delivered, on the date of
delivery, if transmitted by facsimile transmission or other direct written
electronic means, on the date of receipt, and if transmitted by certified or
registered mail, on the date of receipt.
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given, and shall be deemed given, to Holders if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at the
address of such Holder as it appears in the Security Register, not later than
the latest date, if any, and not earlier than the earliest date, if any,
prescribed for the giving of such notice.
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 to
Holders by mail (as in the case of bearer Securities where the address of the
Holder is not known to the Security Registrar), then such notification as shall
be made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder. 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.
Any notice required by this Indenture may be waived in writing by the
Person entitled to receive such notice, either before or after the event
otherwise to be specified therein, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Indenture by, or is otherwise governed by, any of the provisions of the Trust
Indenture Act, such other provision shall control; and if any provision hereof
otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall
control unless otherwise provided as contemplated by Section 301 with respect to
any series of Securities.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings in this Indenture and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company or the
Guarantor and Trustee shall bind their respective successors and assigns,
whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or the Securities or the
Guarantees shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, nothing in this Indenture, the Securities or the
Guarantees, express or implied, shall give to any Person, other than the parties
hereto, their successors hereunder, the Holders and, so long as the notice
described in Section 1613 hereof has not been given, the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT THE LAW OF
ANY OTHER JURISDICTION SHALL BE MANDATORILY APPLICABLE; PROVIDED, HOWEVER, THAT
ALL MATTERS GOVERNING THE AUTHORIZATION BY THE COMPANY OF THIS INDENTURE AND THE
SECURITIES, THE AUTHORIZATION OF THE GUARANTOR OF THE GUARANTEES AND THE
CORPORATE EXISTENCE OF THE COMPANY AND THE GUARANTOR, AS THE CASE MAY BE, WILL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE JURISDICTION
IN WHICH THE COMPANY OR THE GUARANTOR, AS THE CASE MAY BE, IS INCORPORATED OR
ORGANIZED.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
other than a provision in Securities of any series, or any Tranche thereof, or
in the Board Resolution or Officer's Certificate which establishes the terms of
the Securities of such series or Tranche, which specifically states that such
provision shall apply in lieu of this Section) payment of interest or principal
and premium, if any, need not be made at such Place of Payment on such date, but
may be made on the next succeeding Business Day at such Place of Payment, with
the same force and effect, and in the same amount, as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity, as the case may be,
and, if such payment is made or duly provided for on such Business Day, no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to such Business Day.
SECTION 114. AGENT TO RECEIVE SERVICE OF PROCESS.
Unless otherwise specified in an Officer's Certificate of the Company
or the Guarantor delivered to the Trustee, Thelen Reid & Priest LLP in New York
City will be the authorized agent of the Company and the Guarantor to receive
service of process in the State of New York.
SECTION 115. CONSENT TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE; JUDGMENT
CURRENCY; WAIVER OF IMMUNITIES.
(a) Consent to Jurisdiction. The Company and the Guarantor each
irrevocably consents to the nonexclusive jurisdiction of any court of the
State of New York or any United States Federal court sitting, in each case,
in the Borough of Manhattan, The City of New York, New York, United States
of America, and any appellate court from any thereof in any suit, action or
proceeding that may be brought in connection with this Indenture, the
Securities or the Guarantees, and waives any immunity from the jurisdiction
of such courts. The Company and the Guarantor each irrevocably waives, to
the fullest extent permitted by law, any objection to any such suit, action
or proceeding that may be brought in such courts whether on the grounds of
venue, residence or domicile or on the ground that any such suit, action or
proceeding has been brought in an inconvenient forum. The Company and the
Guarantor each agrees, to the fullest extent that it lawfully may do so,
that final judgment in any such suit, action or proceeding brought in such
a court shall be conclusive and binding upon the Company or the Guarantor,
as the case may be, and waives, to the fullest extent permitted by law, any
objection to the enforcement by any competent court in the Jurisdiction of
Incorporation of judgments validly obtained in any such court in New York
on the basis of such suit, action or proceeding; provided, however, that
the Company or the Guarantor does not waive, and the foregoing provisions
of this sentence shall not constitute or be deemed to constitute a waiver
of, (i) any right to appeal any such judgment, to seek any stay or
otherwise to seek reconsideration or review of any such judgment, (ii) any
stay of execution or levy pending an appeal from, or a suit, action or
proceeding for reconsideration of, any such judgment, or (iii) any other
right or remedy of the Company or the Guarantor to the extent not expressly
waived in accordance with this Section 115.
(b) Appointment of Agent for Service. The Company and the Guarantor
each has designated and appointed Thelen Reid & Priest LLP, 40 West 57th
Street, New York, New York 10019, as its authorized agent upon which
process may be served in any suit or proceeding in any Federal or State
court in the Borough of Manhattan, The City of New York arising out of or
relating to the Securities, the Guarantees or this Indenture, but for that
purpose only, and agrees that service of process upon said agent shall be
deemed in every respect effective service of process upon it in any such
suit or proceeding in any Federal or State court in the Borough of
Manhattan, The City of New York. Such appointment shall be irrevocable so
long as any of the Securities remain Outstanding until the appointment of a
successor by the Company and the Guarantor and such successor's acceptance
of such appointment. Upon such acceptance, the Company and the Guarantor
shall notify the Trustee of the name and address of such successor. The
Company and the Guarantor further agree to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and
appointment of said agent in full force and effect so long as any of the
Securities shall be Outstanding. The Trustee shall not be obligated and
shall have no responsibility with respect to any failure by the Company or
the Guarantor to take any such action.
Nothing in this Section shall affect the right of the Trustee or any
Holder of any Security to serve process in any manner permitted by applicable
law or limit the right of the Trustee or any Holder of any Security to bring
proceedings against the Company or the Guarantor in the courts of any other
jurisdiction or jurisdictions.
(c) Judgment Currency. The Company and the Guarantor each agrees, to
the fullest extent that it may effectively do so under applicable law, that
(a) if for the purpose of obtaining judgment in any court it is necessary
to convert the sum due in respect of the principal of, or premium or
interest, if any, on the Securities of any series from the Required
Currency into a currency in which a judgment will be rendered (the
"Judgment Currency"), the rate of exchange used shall be the rate at which,
in accordance with normal banking procedures, the Trustee could purchase
the Required Currency with the Judgment Currency and (b) its obligations
under this Indenture to make payments in the Required Currency (i) shall
not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment (whether or not entered in accordance with subsection (a)), in
any currency other than the Required Currency, except to the extent that
such tender or recovery shall result in the actual receipt, by the payee,
of the full amount of the Required Currency expressed to be payable in
respect of such payments, (ii) shall be enforceable as an alternative or
additional cause of action for the purpose of recovering the amount, if any
by which actual receipt shall fall short of the full amount of the Required
Currency so expressed to be payable and (iii) shall not be affected by
judgment being obtained for any other sum due under this Indenture.
(d) Waiver of Immunities. To the extent that the Company, the
Guarantor or any of their respective properties, assets or revenues may
have or may hereafter become entitled to, or have attributed to it, any
right of immunity, on the grounds of sovereignty or otherwise, from legal
action, suit or proceeding, from the giving of any relief in any thereof,
from set-off or counterclaim, from the jurisdiction of any court, from
service of process, from attachment upon or prior to judgment, from
attachment in aid of execution of judgment, or from execution of judgment,
or other legal process or proceeding for the giving of any relief or for
the enforcement of any judgment, in any jurisdiction in which proceedings
may at any time be commenced, with respect to its obligations, liabilities
or any other matter under or arising out of or in connection with this
Indenture or the Securities issued hereunder or the Guarantees endorsed
thereon, each of the Company and the Guarantor hereby irrevocably and
unconditionally waives and agrees not to plead or claim, any such immunity
and consents to such relief and enforcement. Nothing in this paragraph
shall be deemed to waive any defense (other than such immunity) available
to either the Company or the Guarantor.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities of each series shall be in substantially the
form or forms thereof established in the indenture supplemental hereto
establishing such series or in a Board Resolution establishing such series, or
in an Officer's Certificate of the Company pursuant to such supplemental
indenture or Board Resolution, in each case with such appropriate terms,
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such 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 Person executing such Securities, as
evidenced by their execution thereof. The Guarantees to be endorsed on such
Securities shall be in substantially the form or forms thereof established in an
indenture supplemental hereto establishing such series or in an Officer's
Certificate of the Guarantor delivered to the Trustee in connection with the
establishment of such series, in each case with such appropriate terms,
insertions, omissions, substitutions and other variations as may be determined
by the Authorized Officer signing such supplemental indenture or Officer's
Certificate, and may have such letters, numbers or other marks of identification
and such legends or endorsements place thereon as may be required to comply with
the rules of any securities exchange or as may, consistently herewith, be
determined by the Person executing such Guarantees. If the form or forms of
Securities of any series or Guarantees endorsed thereon, as the case may be, are
established in a Board Resolution or in an Officer's Certificate pursuant to a
Board Resolution, such Board Resolution and Officer's Certificate, if any, shall
be delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
Unless otherwise specified as contemplated by Section 301 or clause
(g) of Section 1201, the Securities of each series shall be issuable in
registered form without coupons. The definitive Securities and Guarantees
endorsed thereon shall be produced in such manner as shall be determined by the
Person executing such Securities or Guarantees, as evidenced by their execution
thereof.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the form set forth below:
This is one of the Securities of the series designated
therein and the Guarantee thereof referred to in the
within-mentioned Indenture.
Dated:
---------------------------------
as Trustee
By: ___________________________
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. Subject to the
last paragraph of this Section, prior to the authentication and delivery of
Securities of any series there shall be established by specification in a
supplemental indenture or in a Board Resolution of the Company, or in an
Officer's Certificate of the Company 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 304, 305, 306, 406 or 1206 and except for any
Securities which, pursuant to Section 303, 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, or any Tranche thereof, shall be
payable on any Interest Payment Date, if other than 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 on which the principal of the Securities of such
series, or any Tranche thereof, 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 of this
Indenture or otherwise (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);
(e) the rate or rates at which the Securities of such series, or any
Tranche thereof, 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 Maturity,
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 of 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 as
contemplated by Section 312; and the basis of computation of interest, if
other than as provided in Section 310;
(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,
or any Tranche thereof, shall be payable, (2) registration of transfer of
Securities of such series, or any Tranche thereof, may be effected, (3)
exchanges of Securities of such series, or any Tranche thereof, may be
effected and (4) notices and demands to or upon the Company in respect of
the Securities of such series, or any Tranche thereof, and this Indenture
may be served; the Security Registrar for such series or Tranche; and if
such is the case, 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, or any Tranche thereof, 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, or any Tranche
thereof, resulting in delisting of such Securities from any national
exchange;
(h) the obligation or obligations, if any, of the Company to redeem or
purchase or repay the Securities of such series, or any Tranche thereof,
pursuant to any sinking fund or other 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 or
repaid, in whole or in part, pursuant to such obligation, and applicable
exceptions to the requirements of Section 404 in the case of mandatory
redemption or redemption or repayment at the option of the Holder;
(i) the denominations in which Securities of such series, or any
Tranche thereof, shall be issuable if other than denominations of $25 and
any integral multiple thereof;
(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, or any Tranche thereof, 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, or any Tranche thereof, 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, or any Tranche thereof, 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) if the amount payable in respect of principal of or premium, if
any, or interest, if any, on the Securities of such series, or any Tranche
thereof, may be determined with reference to an index or other fact or
event ascertainable outside of this Indenture, the manner in which such
amounts shall be determined to the extent not established pursuant to
clause (e) of this paragraph;
(n) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series, or any Tranche thereof,
which shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 802;
(o) any Events of Default, in addition to those specified in Section
801, with respect to the Securities of such series, and any covenants of
the Company or the Guarantor for the benefit of the Holders of the
Securities of such series, or any Tranche thereof, in addition to those set
forth in Article Six or any exceptions to those set forth in Article Six;
(p) the terms, if any, pursuant to which the Securities of such
series, or any Tranche thereof, may be converted into or exchanged for
shares of capital stock or other securities of the Company or any other
Person;
(q) the obligations or instruments, if any, which shall be considered
to be Eligible Obligations in respect of the Securities of such series, or
any Tranche thereof, 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 701;
(r) if the Securities of such series, or any Tranche thereof, are to
be issued in global form, (i) any limitations on the rights of the Holder
or Holders of such Securities to transfer or exchange the same or to obtain
the registration of transfer thereof, (ii) any limitations on the rights of
the Holder or Holders thereof to obtain certificates therefor in definitive
form in lieu of temporary form and (iii) any and all other matters
incidental to such Securities;
(s) if the Securities of such series, or any Tranche thereof, are to
be issuable as bearer securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental indenture as
contemplated by clause (g) of Section 1201;
(t) to the extent not established pursuant to clause (r) of this
paragraph, any limitations on the rights of the Holders of the Securities
of such Series, or any Tranche thereof, 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, or any Tranche thereof, the amount or terms
thereof;
(u) any exceptions to Section 113, or variation in the definition of
Business Day, with respect to the Securities of such series, or any Tranche
thereof;
(v) any collateral security or assurance for the securities of such
series;
(w) any rights or duties of another Person to assume the obligations
of the Company with respect to the Securities of such series (whether as
joint obligor, primary obligor, secondary obligor or substitute obligor)
and any rights or duties to discharge and release any obligor with respect
to the Securities of such series or the Indenture to the extent related to
such series;
(x) any rights to change or eliminate any provision of this Indenture
or to add any new provision to this Indenture (by supplemental indenture or
otherwise) without the consent of the Holders of the Securities of such
series, or with the consent of the Holders of the Securities of such series
as specified for such series;
(y) the agent of the Company and the Guarantor to receive service of
process in the State of New York, if other than Thelen Reid & Priest LLP in
New York City; and
(z) the designation of the Trust and the Partnership to which
securities of such series are to be issued;
(aa) any other terms of the Securities of such series, or any Tranche
thereof, not inconsistent with the provisions of this Indenture.
The terms of the Securities include any additional amounts that may be
payable in certain circumstances with respect to such Securities.
With respect to Securities of a series subject to a Periodic Offering,
the indenture supplemental hereto or the Board Resolution which establishes such
series, or the Officer's Certificate pursuant to such supplemental indenture or
Board Resolution, as the case may be, may provide general terms or parameters
for Securities of such series and provide either that the specific terms of
Securities of such series, or any Tranche thereof, shall be specified in a
Company Order or that such terms shall be determined by the Company or its
agents in accordance with procedures specified in a Company Order as
contemplated by clause (b) of Section 303.
The Securities of each series shall be subordinated in right of
payment to Senior Indebtedness as provided in Article Sixteen.
SECTION 302. DENOMINATIONS.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities of each
series shall be issuable in denominations of $25 and any integral multiple
thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities shall be
executed on behalf of the Company by an Authorized Officer of the Company, and
may have the corporate seal of the Company affixed thereto or reproduced thereon
attested by any other Authorized Officer of the Company or by the Secretary or
an Assistant Secretary of the Company. The signature of any or all of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at the time of execution Authorized Officers of the Company or the
Secretary or an Assistant Secretary of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
Unless otherwise provided as contemplated by Section 301, with respect
to any series of Securities or Tranche thereof, Guarantees to be endorsed on any
Securities shall be executed and delivered in accordance with the provisions of
Section 1402.
The Trustee shall authenticate and deliver Securities of a series with
the Guarantees endorsed thereon, for original issue, at one time or from time to
time in accordance with the Company Order referred to below, upon receipt by the
Trustee of:
(a) the instrument or instruments establishing the form or forms and
terms of the Securities of such series and the Guarantees to be endorsed
thereon, as provided in Sections 201 and 301;
(b) a Company Order requesting the authentication and delivery of such
Securities, and, to the extent that the terms of such Securities shall not
have been established in an indenture supplemental hereto or in a Board
Resolution, or in an Officer's Certificate pursuant to a supplemental
indenture or Board Resolution, all as contemplated by Sections 201 and 301,
either (i) establishing such terms or (ii) in the case of Securities of a
series subject to a Periodic Offering, specifying procedures, acceptable to
the Trustee, by which such terms are to be established (which procedures
may provide, to the extent acceptable to the Trustee, for authentication
and delivery pursuant to oral or electronic instructions from the Company
or any agent or agents thereof, which oral instructions are to be promptly
confirmed electronically or in writing), in either case in accordance with
the instrument or instruments delivered pursuant to clause (a) above;
(c) A Guarantor Order (which may be combined with a Company Order
hereunder) requesting authentication and delivery of the Guarantees to be
endorsed on such Securities;
(d) the Securities of such series, each executed on behalf of the
Company by an Authorized Officer of the Company and having a Guarantee
endorsed thereon executed on behalf of the Guarantor by an Authorized
Officer of the Guarantor;
(e) one or more Opinions of Counsel of the Company and the Guarantor
to the effect that:
(i)(A) the form or forms of such Securities have been duly
authorized by the Company, (B) the form or forms of such Guarantees
have been duly authorized by the Guarantor, and (C) the form or forms
of the Securities and the Guarantees have been established in
conformity with the provisions of this Indenture;
(ii)(A) the terms of such Securities have been duly authorized by
the Company, (B) the terms of such Guarantees have been duly
authorized by the Guarantor, and (C) the terms of the Securities and
the Guarantees have been established in conformity with the provisions
of this Indenture; and
(iii) such Securities and the Guarantees endorsed thereon, when
authenticated and delivered by the Trustee and issued and delivered by
the Company and the Guarantor in the manner and subject to any
conditions specified in such Opinion of Counsel, will have been duly
issued under this Indenture and will constitute valid and legally
binding obligations of the Company and the Guarantor, respectively,
entitled to the benefits provided by this Indenture, and enforceable
in accordance with their terms, subject, as to enforcement, to laws
relating to or affecting generally the enforcement of creditors'
rights, including, without limitation, bankruptcy and insolvency laws
and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
provided, however, that, with respect to Securities of a series subject to a
Periodic Offering, the Trustee shall be entitled to receive such Opinion of
Counsel only once at or prior to the time of the first authentication of such
Securities and the Guarantees endorsed thereon (provided that such Opinion of
Counsel addresses the authentication and delivery of all Securities of such
series) and that in lieu of the opinions described in clauses (ii) and (iii)
above Counsel may opine that:
(x) when the terms of such Securities and the Guarantees endorsed
thereon shall have been established pursuant to a Company Order or Orders
and, if applicable, a Guarantor Order or Orders or pursuant to such
procedures (acceptable to the Trustee) as may be specified from time to
time by a Company Order or Orders, and, if applicable, a Guarantor Order or
Orders all as contemplated by and in accordance with the instrument or
instruments delivered pursuant to clause (a) above, such terms will have
been duly authorized by the Company and the Guarantor, respectively, and
will have been established in conformity with the provisions of this
Indenture; and
(y) such Securities and the Guarantees endorsed thereon, when (1)
executed by the Company or the Guarantor, as the case may be, (2)
authenticated and delivered by the Trustee in accordance with this
Indenture and the Company Order or Orders or specified procedures referred
to in paragraph (x) above, (3) issued and delivered by the Company and the
Guarantor in the manner and subject to any conditions specified in such
Opinion of Counsel, and (4) paid for, all as contemplated by and in
accordance with the aforesaid Company Order or Orders and, if applicable, a
Guarantor Order or Orders or specified procedures, as the case may be, will
have been duly issued under this Indenture and will constitute valid and
legally binding obligations of the Company and the Guarantor, respectively,
entitled to the benefits provided by the Indenture, and enforceable in
accordance with their terms, subject, as to enforcement, to laws relating
to or affecting generally the enforcement of creditors' rights, including,
without limitation, bankruptcy and insolvency laws, and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
With respect to Securities of a series subject to a Periodic Offering,
the Trustee may conclusively rely, as to the authorization by the Company and
the Guarantor of any of such Securities and Guarantees, the form and terms
thereof, the legality, validity, binding effect and enforceability thereof, and
compliance of the authentication and delivery thereof with the terms and
conditions of this Indenture, upon the Opinion of Counsel and other documents
delivered pursuant to Sections 201 and 301 and this Section, as applicable, at
or prior to the time of the first authentication of Securities of such series
with the Guarantees endorsed thereon, unless and until such opinion or other
documents have been superseded or revoked or expire by their terms. In
connection with the authentication and delivery of Securities of a series with
Guarantees endorsed thereon, pursuant to a Periodic Offering, the Trustee shall
be entitled to assume that the Company's instructions to authenticate and
deliver such Securities and the Guarantor's approval of the delivery of the
Guarantees thereon, do not violate any applicable law or any applicable rule,
regulation or order of any Governmental Authority having jurisdiction over the
Company or the Guarantor.
If the form or terms of the Securities of any series have been
established by or pursuant to a Board Resolution or an Officer's Certificate as
permitted by Sections 201 or 301, the Trustee shall not be required to
authenticate such Securities if the issuance of such Securities pursuant to this
Indenture will materially or adversely affect the Trustee's own rights, duties
or immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, each Security, and any
Guarantee endorsed thereon, shall each be dated the date of its authentication.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities or any Tranche thereof, no Security or Guarantee
endorsed thereon 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 and such Guarantee endorsed thereon 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 to the Company, or any Person acting on
its behalf, but shall never have been issued and sold by the Company, and the
Company shall deliver such Security to the Security Registrar for cancellation
as provided in Section 309 together with a written statement (which need not
comply with Section 102 and 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 (including any Guarantee endorsed
thereon) shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits hereof.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, or any
Tranche thereof, the Company may execute, and upon a Company Order and a
Guarantor Order the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, having Guarantees
endorsed thereon, with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities or Guarantees may
determine, as evidenced by their execution of such Securities or Guarantees;
provided, however, that temporary Securities need not recite specific
redemption, sinking fund, conversion or exchange provisions.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, or any Tranche thereof, after the preparation
of definitive Securities of such series or Tranche, the temporary Securities of
such series or Tranche shall be exchangeable, without charge to the Holder
thereof, for definitive Securities of such series or Tranche with the definitive
Guarantees of Guarantor endorsed thereon, upon surrender of such temporary
Securities at the office or agency of the Company maintained pursuant to Section
602 in a Place of Payment for such Securities. Upon such surrender of temporary
Securities for such exchange, the Company shall, except as aforesaid, execute
and the Trustee shall authenticate and deliver in exchange therefor definitive
Securities of the same series and Tranche of authorized denominations and of
like tenor and aggregate principal amount with the definitive Guarantees of the
Guarantor endorsed thereon.
Until exchanged in full as hereinabove provided, temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of the same series and Tranche and of like tenor
authenticated and delivered hereunder.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, the Company shall cause to be kept in each office
designated pursuant to Section 602, with respect to the Securities of each
series, a register (all registers kept in accordance with this Section being
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 those Securities of such series, or any Tranche thereof, which
are not in bearer global form, and the registration of transfer thereof. The
Company shall designate one Person to maintain the Security Register for the
Securities of each series on a consolidated basis, and such Person is referred
to herein, with respect to such series, as the "Security Registrar." Anything
herein to the contrary notwithstanding, the Company may designate one or more of
its offices or an office of any Affiliate (including the Guarantor) as an office
in which a register with respect to the Securities of one or more series shall
be maintained, and the Company may designate itself or any Affiliate (including
the Guarantor) as the Security Registrar with respect to one or more of such
series. The Security Register shall be open for inspection by the Trustee and
the Company at all reasonable times.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, upon surrender
for registration of transfer of any Security of such series or Tranche at the
office or agency of the Company maintained pursuant to Section 602 in a Place of
Payment for such series or Tranche, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of the same series and Tranche, of
authorized denominations and of like tenor and aggregate principal amount with
the Guarantee of the Guarantor endorsed thereon.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, any Security of
such series or Tranche may be exchanged at the option of the Holder, for one or
more new Securities of the same series and Tranche, of authorized denominations
and of like tenor and aggregate principal amount, upon surrender of the
Securities to be exchanged at any such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities, with the Guarantees of the
Guarantor endorsed thereon, which the Holder making the exchange is entitled to
receive.
All Securities and Guarantees delivered upon any registration of
transfer or exchange of Securities and the Guarantees endorsed thereon shall be
valid obligations of the Company and the Guarantor, respectively, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities and Guarantees surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Guarantor, the Trustee
or the Security Registrar) be duly endorsed or shall be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Guarantor, the
Trustee or the Security Registrar, as the case may be, duly executed by the
Holder thereof or his attorney duly authorized in writing.
Unless otherwise specified as contemplated by Section 301, with
respect to Securities of any series, or any Tranche thereof, no service charge
shall be made for any registration of transfer or exchange of Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
304, 406 or 1206 not involving any transfer.
The Company shall not be required to execute or to provide for the
registration of transfer of or the exchange of (a) Securities of any series, or
any Tranche thereof, during a period of 15 days immediately preceding the date
notice is to be given identifying the serial numbers of the Securities of such
series or Tranche called for redemption or (b) any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
Securities issued in bearer global form shall be transferred by
delivery thereof, unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities.
SECTION 306. 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 Tranche, and of like tenor and
principal amount, having a Guarantee of the Guarantor endorsed thereon and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company, the Guarantor and the
Trustee (a) evidence to their satisfaction of the ownership of and the
destruction, loss or theft of any Security and (b) such security or indemnity as
may be reasonably required by them to save each of them and any agent of any of
them harmless, then, in the absence of notice to the Company, the Guarantor or
the Trustee that such Security is held by a Person purporting to be the owner of
such Security, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and Tranche, and of like tenor and principal amount, having a
Guarantee of the Guarantor endorsed thereon and bearing a number not
contemporaneously outstanding.
Notwithstanding the foregoing, in case any such mutilated, destroyed,
lost or stolen Security has become or is about to become due and payable, the
Company or the Guarantor in its discretion may, instead of issuing a new
Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security and any Guarantee endorsed
thereon shall constitute an original additional contractual obligation of the
Company and the Guarantor, respectively, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone other than the Holder
of such new Security, and any such new Security shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Securities of such series duly issued hereunder and the Guarantees endorsed on
such Securities.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, or any Tranche thereof, interest on any
Security which is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Subject to Section 312, 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 forthwith cease
to be payable to the Holder on the related Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company
or the Guarantor, at its election in each case, as provided in clause (a) or (b)
below:
(a) The Company or the Guarantor may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities of such
series (or their respective Predecessor Securities) are registered at the
close of business on a date (herein called a "Special Record Date") for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company or the Guarantor shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security of
such series and the date of the proposed payment, and at the same time the
Company or the Guarantor, as the case may be, 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 on or prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company or the
Guarantor of such Special Record Date and, in the name and at the expense
of the Company or the Guarantor, shall promptly 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 the address of such Holder as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date.
(b) The Company or the Guarantor may make payment of any Defaulted
Interest on the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company or the Guarantor to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305,
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 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Guarantor, the Trustee and any agent of the Company, the
Guarantor or the Trustee may treat the Person in whose name such Security is
registered or, in the case of a Security issued in bearer global form, the
bearer of such Security, unless otherwise provided pursuant to Section 301, as
the absolute owner of such Security for the purpose of receiving payment of
principal of and premium, if any, and (subject to Sections 305 and 307)
interest, if any, on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and none of the Company, the Guarantor,
the Trustee or any agent of the Company, the Guarantor or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION BY SECURITY REGISTRAR.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Security
Registrar, be delivered to the Security Registrar and, if not theretofore
canceled, shall be promptly canceled by the Security Registrar. The Company or
the Guarantor may at any time deliver to the Security Registrar for cancellation
any Securities previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever or which the Company or the
Guarantor shall not have issued and sold, and all Securities so delivered shall
be promptly canceled by the Security Registrar. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Security Registrar shall be disposed of in accordance
with the customary practices of the Security Registrar at the time in effect,
and the Security Registrar shall not be required to destroy any such
certificates. The Security Registrar shall promptly deliver a certificate of
disposition to the Trustee and the Company unless, by a Company Order, similarly
delivered, the Company shall direct that canceled Securities be returned to it.
The Security Registrar shall promptly deliver evidence of any cancellation of a
Security in accordance with this Section 309 to the Trustee and the Company.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, or any Tranche thereof, interest on the Securities of
each series shall be computed on the basis of a 360-day year consisting of
twelve 30-day months and for any period shorter than a full month, on the basis
of the actual number of days elapsed in such period.
SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.
In the case of the Securities of any series, or any Tranche thereof,
denominated in any currency or in a composite currency (the "Required
Currency"), except as otherwise specified with respect to such Securities as
contemplated by Section 301, the obligation of the Company or the Guarantor to
make any payment of the principal thereof, or the premium or interest thereon,
shall not be discharged or satisfied by any tender by the Company, or recovery
by the Trustee, in any currency other than the Required Currency, except to the
extent that such tender or recovery shall result in the Trustee timely holding
the full amount of the Required Currency then due and payable. If any such
tender or recovery is in a currency other than the Required Currency, the
Trustee may take such actions as it considers appropriate to exchange such
currency for the Required Currency. The costs and risks of any such exchange,
including without limitation the risks of delay and exchange rate fluctuation,
shall be borne by the Company and the Guarantor, the Company and the Guarantor
shall remain fully liable for any shortfall or delinquency in the full amount of
Required Currency then due and payable, and in no circumstances shall the
Trustee be liable therefor except in the case of its negligence or willful
misconduct. The Company and the Guarantor hereby waive any defense of payment
based upon any such tender or recovery which is not in the Required Currency, to
the extent such amount, when exchanged for the Required Currency by the Trustee,
is less than the full amount of Required Currency then due and payable
SECTION 312. EXTENSION OF INTEREST PAYMENT.
The Company shall have the right at any time, so long as the Company
is not in default in the payment of interest on the Securities of any series
hereunder, to extend interest payment periods on all Securities of one or more
series, if so specified as contemplated by Section 301 with respect to such
Securities and upon such terms as may be specified as contemplated by Section
301 with respect to such Securities.
ARTICLE FOUR
REDEMPTION OF SECURITIES
SECTION 401. APPLICABILITY OF ARTICLE.
Securities of any series, or any Tranche thereof, which are redeemable
before their Stated Maturity shall be redeemable in accordance with their terms
and (except as otherwise specified as contemplated by Section 301 for Securities
of such series or Tranche) in accordance with this Article.
SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or an Officer's Certificate of the Company. The
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal amount of
such Securities to be redeemed. In the case of any redemption of Securities (a)
prior to the expiration of any restriction on such redemption provided in the
terms of such Securities or elsewhere in this Indenture or (b) pursuant to an
election of the Company which is subject to a condition specified in the terms
of such Securities, the Company and the Guarantor shall each furnish the Trustee
with an Officer's Certificate evidencing compliance with such restriction or
condition.
SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series, or any Tranche thereof,
are to be redeemed, the particular Securities to be redeemed shall be selected
by the Trustee from the Outstanding Securities of such series or Tranche not
previously called for redemption, by such method as shall be provided for any
particular series, or, in the absence of any such provision, by such method as
the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of such series or Tranche or any integral multiple
thereof) of the principal amount of Securities of such series or Tranche of a
denomination larger than the minimum authorized denomination for Securities of
such series or Tranche; provided, however, that if, as indicated in an Officer's
Certificate, the Company shall have offered to purchase all or any principal
amount of the Securities then Outstanding of any series, or any Tranche thereof,
and less than all of such Securities as to which such offer was made shall have
been tendered to the Company for such purchase, the Trustee, if so directed by
Company Order, shall select for redemption all or any principal amount of such
Securities which have not been so tendered.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected to be redeemed in part, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 404. NOTICE OF REDEMPTION.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, notice of redemption shall be given in the manner
provided in Section 106 to the Holders of the Securities to be redeemed not less
than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price (if known),
(c) if less than all the Securities of any series or Tranche are to be
redeemed, the identification of the particular Securities to be redeemed
and the portion of the principal amount of any Security to be redeemed in
part,
(d) that on the Redemption Date the Redemption Price, together with
accrued interest, if any, to the Redemption Date, will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any, unless it
shall have been specified as contemplated by Section 301 with respect to
such Securities that such surrender shall not be required,
(f) that the redemption is for a sinking or other fund, if such is the
case, and
(g) such other matters as the Company shall deem desirable or
appropriate.
Unless otherwise specified with respect to any Securities in
accordance with Section 301, with respect to any notice of redemption of
Securities at the election of the Company, unless, upon the giving of such
notice, such Securities shall be deemed to have been paid in accordance with
Section 701, such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such Securities, on or prior
to the date fixed for such redemption, of money sufficient to pay the principal
of and premium, if any, and interest, if any, on such Securities and that if
such money shall not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such Securities. In the
event that such notice of redemption contains such a condition and such money is
not so received, the redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the notice of
redemption was given, that such money was not so received and such redemption
was not required to be made, and the Paying Agent or Agents for the Securities
otherwise to have been redeemed shall promptly return to the Holders thereof any
of such Securities which had been surrendered for payment upon such redemption.
Notice of redemption of Securities to be redeemed at the election of
the Company, and any notice of non-satisfaction of a condition for redemption as
aforesaid, shall be given by the Company or, at the Company's request, by the
Security Registrar in the name and at the expense of the Company. Notice of any
mandatory redemption of Securities shall be given by the Security Registrar in
the name and at the expense of the Company.
SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been satisfied, the
Securities or portions thereof 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, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price and accrued
interest and Additional Amounts, if any) such Securities or portions thereof, if
interest-bearing, shall cease to bear interest. Upon surrender of any such
Security for redemption in accordance with such notice, such Security or portion
thereof shall be paid by the Company at the Redemption Price, together with
accrued interest and Additional Amounts, if any, to the Redemption Date;
provided, however, that no such surrender shall be a condition to such payment
if so specified as contemplated by Section 301 with respect to such Security;
and provided, further, that except as otherwise specified as contemplated by
Section 301 with respect to such Security, any installment of interest on any
Security the Stated Maturity of which installment is on or prior to the
Redemption Date shall be payable to the Holder of such Security, or one or more
Predecessor Securities, registered as such at the close of business on the
related Regular Record Date according to the terms of such Security and subject
to the provisions of Section 307.
SECTION 406. SECURITIES REDEEMED IN PART.
Upon the surrender of any Security which is to be redeemed only in
part at a Place of Payment therefor (with, if the Company, the Guarantor or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company, the Guarantor and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security, without service charge, a new Security or Securities of the same
series and Tranche, of any authorized denomination requested by such Holder and
of like tenor and in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered with the
Guarantee of the Guarantor endorsed thereon.
ARTICLE FIVE
SINKING FUNDS
SECTION 501. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of the Securities of any series, or any Tranche thereof,
except as otherwise specified as contemplated by Section 301 for Securities of
such series or Tranche.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series, or any Tranche thereof, 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, or any Tranche
thereof, is herein referred to as an "optional sinking fund payment". If
provided for by the terms of Securities of any series, or any Tranche thereof,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 502. Each sinking fund payment shall be applied to the
redemption of Securities of the series or Tranche in respect of which it was
made as provided for by the terms of such Securities.
SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (a) may deliver to the Trustee Outstanding Securities
(other than any previously called for redemption) of a series or Tranche in
respect of which a mandatory sinking fund payment is to be made and (b) may
apply as a credit Securities of such series or Tranche which have been redeemed
either at the election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund payments pursuant
to the terms of such Securities, in each case in satisfaction of all or any part
of such mandatory sinking fund payment with respect to the Securities of such
series; provided, however, that no Securities shall be applied in satisfaction
of a mandatory sinking fund payment if such Securities shall have been
previously so applied. Securities so applied shall be received and credited for
such purpose by the Trustee at the Redemption Price specified in such Securities
for redemption through operation of the sinking fund and the amount of such
mandatory sinking fund payment shall be reduced accordingly.
SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 45 days prior to each sinking fund payment date for the
Securities of any series, or any Tranche thereof, the Company shall deliver to
the Trustee an Officer's Certificate specifying:
(a) the amount of the next succeeding mandatory sinking fund payment
for such series or Tranche;
(b) the amount, if any, of the optional sinking fund payment to be
made together with such mandatory sinking fund payment;
(c) the aggregate sinking fund payment;
(d) the portion, if any, of such aggregate sinking fund payment which
is to be satisfied by the payment of cash; and
(e) the portion, if any, of such aggregate sinking fund payment which
is to be satisfied by delivering and crediting Securities of such series or
Tranche pursuant to Section 502 and stating the basis for such credit and
that such Securities have not previously been so credited, and the Company
shall also deliver to the Trustee any Securities to be so delivered.
If the Company shall have not delivered such Officer's Certificate
and, to the extent applicable, all such Securities, the next succeeding sinking
fund payment for such series or Tranche shall be made entirely in cash in the
amount of the mandatory sinking fund payment. 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
403 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 404. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Sections 405 and 406.
ARTICLE SIX
COVENANTS
SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall pay the principal of and premium, interest and
Additional Amounts, if any, on the Securities of each series in accordance with
the terms of such Securities and this Indenture.
SECTION 602. MAINTENANCE OF OFFICE OR AGENCY.
The Company and the Guarantor shall maintain in each Place of Payment
for the Securities of each series, or any Tranche thereof, an office or agency
where payment of such Securities shall be made, where the registration of
transfer or exchange of such Securities may be effected and where notices and
demands to or upon the Company or the Guarantor in respect of such Securities
and this Indenture may be served. The Company and the Guarantor shall give
prompt written notice to the Trustee of the location, and any change in the
location, of each such office or agency and prompt notice to the Holders of any
such change in the manner specified in Section 106. If at any time the Company
or the Guarantor shall fail to maintain any such required office or agency in
respect of Securities of any series, or any Tranche thereof, or shall fail to
furnish the Trustee with the address thereof, payment of such Securities shall
be made, registration of transfer or exchange thereof may be effected and
notices and demands in respect thereof may be served at the Corporate Trust
Office of the Trustee, and each of the Company and the Guarantor hereby appoint
the Trustee as its agent for all such purposes in any such event.
The Company or the Guarantor may also from time to time designate one
or more other offices or agencies with respect to the Securities of one or more
series, or any Tranche thereof, for any or all of the foregoing purposes and may
from time to time rescind such designations; provided, however, that, unless
otherwise specified as contemplated by Section 301 with respect to the
Securities of such series or Tranche, no such designation or rescission shall in
any manner relieve the Company or the Guarantor of its obligation to maintain an
office or agency for such purposes in each Place of Payment for such Securities
in accordance with the requirements set forth above. The Company and the
Guarantor shall give prompt written notice to the Trustee, and prompt notice to
the Holders in the manner specified in Section 106, of any such designation or
rescission and of any change in the location of any such other office or agency.
Anything herein to the contrary notwithstanding, any office or agency
required by this Section may be maintained at an office of the Company or the
Guarantor of any Affiliate of either of them, in which event the Company, the
Guarantor or such Affiliate, as the case may be, shall perform all functions to
be performed at such office or agency.
SECTION 603. 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 the Securities of any series, or any Tranche thereof, it shall, on or
before each due date of the principal of or premium, interest or Additional
Amounts, if any, on any of such Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal,
premium, interest or Additional Amounts so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided. The Company
shall promptly notify the Trustee of any failure by the Company (or any other
obligor on such Securities) to make any payment of principal of or premium,
interest or Additional Amounts, if any, on such Securities.
Whenever the Company shall have one or more Paying Agents for the
Securities of any series, or any Tranche thereof, it shall, on or before each
due date of the principal of or premium, interest, or Additional Amounts, if
any, on such Securities, deposit with such Paying Agents sums sufficient
(without duplication) to pay the principal, premium, interest or Additional
Amounts so becoming due, such sums to be held in trust for the benefit of the
Persons entitled to such principal, premium, interest or Additional Amounts, and
(unless such Paying Agent is the Trustee) the Company shall promptly notify the
Trustee of any failure by it so to act.
The Company shall cause each Paying Agent for the Securities of any
series, or any Tranche thereof, other than the Company or the Trustee, to
execute and deliver an instrument in which such Paying Agent shall agree,
subject to the provisions of this Section, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of or
premium, interest or Additional Amounts, if any, on such Securities in
trust for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any failure by the Company (or any
other obligor upon such Securities) to make any payment of principal of or
premium, interest or Additional Amounts, if any, on such Securities; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent and furnish to the Trustee such
information as it possesses regarding the names and addresses of the
Persons entitled to such sums.
The Company may at any time 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, if so
stated in a Company Order delivered to the Trustee, in accordance with the
provisions of Article Seven; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and premium,
interest or Additional Amounts, if any, on any Security and remaining unclaimed
for two years after such principal or premium, interest or Additional Amounts
have 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, upon such
payment or discharge, the Holder of such Security shall, as an unsecured general
creditor and not as a Holder of an Outstanding Security, look only to the
Company for payment of the amount so due and payable and remaining unpaid, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such payment to the Company, may at the expense of the
Company cause to be mailed, on one occasion only, notice to such Holder that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such mailing, any unclaimed
balance of such money then remaining will be paid to the Company.
SECTION 604. CORPORATE EXISTENCE.
Subject to the rights of the Company and the Guarantor under Article
Eleven, each of the Company and the Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation.
SECTION 605. MAINTENANCE OF CORPORATE RECORDS; PROTECTION OF ASSETS.
Each of the Company and the Guarantor shall maintain proper books of
record and accounts and shall maintain and protect its assets in accordance with
customary business practices.
SECTION 606. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
Not later than June 1 in each year, commencing June 1, 2000, the
Company and the Guarantor each shall deliver to the Trustee an Officer's
Certificate which need not comply with Section 102, executed by the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, as to such officer's knowledge of such obligor's
compliance with all conditions and covenants under this Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under this Indenture, and making any other statements as may be
required by the provisions of Section 314(a)(4) of the Trust Indenture Act.
SECTION 607. 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 (a) Section 602 or any
additional covenant or restriction specified with respect to the Securities of
any series, or any Tranche thereof, as contemplated by Section 301 or by clause
(b) of Section 1201, if before the time for such compliance the Holders of a
majority in aggregate principal amount of the Outstanding Securities of all
series and Tranches with respect to which compliance with Section 602 or such
additional covenant or restriction is to be omitted, considered as one class,
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition and (b)
Section 605 or Article Eleven if before the time for such compliance the Holders
of a majority in principal amount of Securities Outstanding under this Indenture
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition; but, in the
case of (a) or (b), no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the Guarantor
and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
SECTION 608. BUSINESS OF THE COMPANY.
So long as any Securities are outstanding, the Company will not engage
in significant business activities other than issuing securities, incurring debt
and entering into financing transactions to enable it to make loans or advances
to, purchase securities from, or otherwise provide financing to the Guarantor
for the benefit of the Guarantor and its Subsidiaries.
SECTION 609. [MAINTENANCE OF TRUST EXISTENCE.
So long as Preferred Trust Securities of any series remain
outstanding, the Company shall (i) maintain direct or indirect ownership of all
interests in the Trust which issued such Preferred Trust Securities, other than
such Preferred Trust Securities, and (ii) use reasonable efforts to cause such
Trust to remain a business trust and otherwise continue to be treated as a
grantor trust for Federal income tax purposes.]
ARTICLE SEVEN
SATISFACTION AND DISCHARGE
SECTION 701. 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 each of the Company and the Guarantor 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 or the Guarantor), 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, Eligible 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
(c) a combination of (a) or (b) which shall be sufficient,
(d) to pay when due the principal of and premium, interest and
Additional Amounts, 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 or Tranche, such Securities or portions thereof
shall have been selected by the Trustee 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 Eligible Obligations
deposited in accordance with this Section shall be held in trust, as
provided in Section 703; and
(y) if Eligible Obligations shall have been deposited, an Opinion of
Counsel that the obligations so deposited constitute Eligible 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 Eligible 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) 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 Six (except the covenants
contained in Sections 602 and 603) or any other covenants made in respect of
such Securities or portions thereof as contemplated by Section 301 or Section
1201(b), but the indebtedness of the Company in respect of such Securities or
portions thereof shall not be 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, or any Tranche thereof, 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 403 for selection for redemption of less than all the Securities of a
series or Tranche.
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 Eligible
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,
the Guarantor and the Trustee in respect of such Securities under Sections 304,
305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this
Article Seven shall survive.
The Company shall pay, and shall indemnify the Trustee or any Paying
Agent with which Eligible Obligations shall have been deposited as provided in
this Section against, any tax, fee or other charge imposed on or assessed
against such Eligible Obligations or the principal or interest received in
respect of such Eligible 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
Eligible Obligations, or combination thereof, deposited with it as aforesaid to
the Company or its representative under any applicable 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 603.
SECTION 702. 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 or the Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company or the Guarantor;
provided, however, that if, in accordance with the last paragraph of Section
701, 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, the Guarantor and the Trustee under
Sections 304, 305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and
915 and this Article Seven 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 907, 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 Eligible Obligations held by the Trustee
pursuant to Section 703 and shall execute and deliver to the Company and the
Guarantor such instruments as, in the judgment of the Company and the Guarantor,
shall be necessary, desirable or appropriate to effect or evidence the
satisfaction and discharge of this Indenture.
SECTION 703. APPLICATION OF TRUST MONEY.
Neither the Eligible Obligations nor the money deposited pursuant to
Section 701, nor the principal or interest payments on any such Eligible
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, interest and
Additional Amounts, 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 603; 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 Eligible Obligations, if not then needed
for such purpose, shall, to the extent practicable and upon Company Request, be
invested in Eligible Obligations of the type described in clause (b) in the
first paragraph of Section 701 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 Eligible 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 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 907; 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,
interest and Additional Amounts, 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 907; 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 EIGHT
EVENTS OF DEFAULT; REMEDIES
SECTION 801. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events:
(a) failure to pay interest, if any, on any Security of such series
within 30 days after the same becomes due and payable (whether or not
payment is prohibited by the provisions of Article Sixteen hereof);
provided, however, that a valid extension of the interest payment period by
the Company as contemplated in Section 312 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 at its Maturity (whether or not payment is
prohibited by the provisions of Article Sixteen hereof); or
(c) failure to perform, or to remedy any 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 90 days
after there has been given, by registered or certified mail, to the Company
and the Guarantor by the Trustee, or to the Company, the Guarantor and the
Trustee by the Holders of at least 25% in 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, unless the Trustee, or the
Trustee and the Holders of a principal amount of Securities of such series
not less than the principal amount of Securities the Holders of which gave
such notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided, however, that the Trustee,
or the Trustee and the Holders of such principal amount of Securities of
such series, as the case may be, shall be deemed to have agreed to a
reasonable extension of such period if corrective action is initiated by
the Company or the Guarantor within such period and is being diligently
pursued; or
(d) except as provided by the terms hereof, the Securities of such
series and the Guarantees endorsed thereon, the cessation of effectiveness
of the Guarantee endorsed on a Security of such series or the finding by
any judicial proceeding that the Guarantee endorsed on a Security of such
series is unenforceable or invalid or the denial or disaffirmation by the
Guarantor of its obligations under the Guarantee endorsed on a Security of
such series; or
(e) 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 bankruptcy, insolvency,
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 arrangement, adjustment or composition of or in respect of the
Company or the Guarantor under any applicable bankruptcy, insolvency, or
other similar law, or appointing a custodian, receiver, liquidator,
administrator, 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 remained unstayed and in effect for a period of 90 consecutive days;
or
(f) the commencement by the Company or the Guarantor of a voluntary
case or proceeding under any applicable bankruptcy, insolvency, or other
similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by the Company or the Guarantor 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 bankruptcy, insolvency, or
other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against the Company or the Guarantor, or the filing by
the Company or the Guarantor of a petition or answer or consent seeking
relief under any applicable bankruptcy, insolvency, or other similar law,
or the consent by the Company or the Guarantor to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, administrator, assignee, trustee, sequestrator or
similar official of the Company or the Guarantor or of any substantial part
of its property or the consent by the Company or the Guarantor to the
winding up or liquidation of its affairs, or the making by the Company or
the Guarantor of an assignment for the benefit of creditors, or the
admission by the Company or the Guarantor in writing of inability to pay
its debts generally as they become due, or the authorization of such action
by the Board of Directors of the Company or the Guarantor; or
(g) any other Event of Default specified in an Officer's Certificate
with respect to Securities of such series.
SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
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
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 25% in principal amount of the Securities of
such series may then declare the principal amount (or, if any of the Securities
of such series are Discount Securities, such portion of the principal amount as
may be specified in the terms thereof as contemplated by Section 301) 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 Sixteen
hereof). If an Event of Default due to 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 801(d), (e) or (f) shall have
occurred and be continuing, either the Trustee or the Holders of not less than
25% in principal amount of all Securities then Outstanding (considered as one
class), and not the Holders of the Securities of any one of such series, may
declare the principal of all Securities 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
Sixteen hereof). As a consequence of each such declaration (herein referred to
as a declaration of acceleration) with respect to Securities of any series, the
principal amount (or portion thereof in the case of Discount Securities) of such
Securities and interest accrued thereon shall become due and payable
immediately.
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 of Default 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 have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor herein or 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 herein or in such Securities;
(4) all amounts due to the Trustee under Section 907;
and
(b) any other Event of Default or Events of Default with respect to
Securities of such series, other than the nonpayment 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 813.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
If an Event of Default described in clause (a) or (b) of Section 801
shall have occurred and be continuing, the Company or the Guarantor 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, interest and Additional Amounts, if any, and, to the extent
permitted by law, interest on any overdue principal, premium, interest and
Additional Amounts, if any, at the rate or rates prescribed therefor herein or
in such Securities, and, in addition thereto, such further amount as shall be
sufficient to cover any amounts due to the Trustee under Section 907. Unless
otherwise specified pursuant to Section 301 with respect to any series of
Securities, the rate or rates at which Securities shall bear interest on overdue
principal, premium, interest and Additional Amounts shall be, to the extent
permitted by law, the same rate or rates at which such Securities shall bear
interest prior to maturity.
If the Company or the Guarantor 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, the Guarantor 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, the
Guarantor 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.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, arrangement, adjustment, composition or other judicial proceeding
relative to the Company or the Guarantor or any other obligor upon the
Securities or the property of the Company or the Guarantor or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company or the Guarantor for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for amounts due to the Trustee under Section 907) and of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amounts due it under Section 907.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
or the Guarantee endorsed thereon may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders in respect of which such
judgment has been recovered.
SECTION 806. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium, if
any, or interest, if any, upon presentation of the Securities in respect of
which or for the benefit of which such money shall have been collected and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
907;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal of and premium, if any, and interest, if any, in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any,
and interest, if any, respectively; and
THIRD: To the payment of the remainder, if any, to the Company or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
SECTION 807. LIMITATION ON SUITS.
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 preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, 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
Sections 307 and 312) interest, if any, and Additional Amounts, if any, on such
Security on the Stated Maturity or Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, the Guarantor, the Trustee
and such Holder shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
such Holder shall continue as though no such proceeding had been instituted.
SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 811. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 812. CONTROL BY HOLDERS OF SECURITIES.
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 such direction shall not be
in conflict with any rule of law or with this Indenture. The Trustee may take
any other action, deemed proper by the Trustee, which is not inconsistent with
any such direction. Before proceeding to exercise any right or power hereunder
at the direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with any such direction.
SECTION 813. WAIVER OF PAST DEFAULTS.
The Holders of not less than 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, interest or
Additional Amounts, if any, on any Security of such series, or
(b) in respect of a covenant or provision hereof which under Section
1202 cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any 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 814. UNDERTAKING FOR COSTS.
The Company, the Guarantor and the Trustee agree, and each Holder by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the Company
or the Guarantor, 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 Outstanding Securities of all series in
respect of which such suit may be brought, considered as one class, or to any
suit instituted by any Holder for the enforcement of the payment of the
principal of or premium, if any, or interest, if any, on any Security on or
after the Stated Maturity or Maturities expressed in such Security (or, in the
case of redemption, on or after the Redemption Date).
SECTION 815. WAIVER OF STAY OR EXTENSION LAWS.
Each of the Company and the Guarantor covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE NINE
THE TRUSTEE
SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee in the
Trust Indenture Act and no implied covenants or obligations shall be read
into this Indenture against the Trustee. For purposes of Sections 315(a)
and 315(c) of the Trust Indenture Act, the term "default" is hereby defined
as an Event of Default which has occurred and is continuing.
(b) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(c) Notwithstanding anything contained in this Indenture to the
contrary, the duties and responsibilities of the Trustee under this
Indenture shall be subject to the protections, exculpations and limitations
on liability afforded to the Trustee under the provisions of the Trust
Indenture Act. For the purposes of Sections 315(b)(2) and 315(d)(2) of the
Trust Indenture Act, the term "responsible officer" is hereby defined as a
Responsible Officer and the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the
board of directors, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any trust officer or assistant trust officer, the
controller and any assistant controller of the Trustee, or any other
officer of the Trustee customarily performing functions similar to those
performed by a Responsible Officer or any of the above designated officers
and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 902. NOTICE OF DEFAULTS.
The Trustee shall give notice of any default hereunder with respect to
the Securities of any series to the Holders of Securities of such series known
to the Trustee in the manner and to the extent required to do so by the Trust
Indenture Act, unless such default shall have been cured or waived; provided,
however, that in the case of any default of the character specified in Section
801(c), no such notice to Holders shall be given until at least 45 days after
the occurrence thereof. For the purpose of this Section and clause (h) of
Section 903, the term "default" means any event which is, or after notice or
lapse of time, or both, would become, an Event of Default.
SECTION 903. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 901 and to the applicable
provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in good faith 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 reasonably 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 or the Guarantor mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order or a Guarantor Request or Guarantor Order, as the case may be, or as
otherwise expressly provided herein, and any resolution of the Board of
Directors of the Company or the Guarantor 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 Officer's Certificate of the Company or the
Guarantor;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any Holder pursuant to this Indenture, unless such Holder shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall (subject to applicable legal requirements) be entitled to examine,
during normal business hours, the books, records and premises of the
Company or the Guarantor, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be charged with knowledge of any default or
Event of Default with respect to the Securities of any series for which it
is acting as Trustee unless either (1) a Responsible Officer of the Trustee
shall have actual knowledge that such default or Event of Default exists
and constitutes a default or Event of Default under this Indenture, or (2)
written notice of such default or Event of Default shall have been given in
the manner provided in Section 105 hereof to the Trustee by the Company or
the Guarantor or any other obligor on such Securities or by any Holder of
such Securities.
SECTION 904. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities and the Guarantees
endorsed thereon (except the Trustee's certificates of authentication) shall be
taken as the statements of the Company and the Guarantor, as the case may be,
and neither the Trustee nor any Authenticating Agent assumes responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities or the Guarantees endorsed
thereon. 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 905. MAY HOLD SECURITIES.
Each of 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 908 and 913, may otherwise deal with the Company with the same rights
it would have if it were not the Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 906. 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
expressly provided herein or otherwise agreed with, and for the sole benefit of,
the Company or the Guarantor.
SECTION 907. COMPENSATION AND REIMBURSEMENT.
The Company and the Guarantor jointly and severally agree
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it 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, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances reasonably incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except to the extent
that any such expense, disbursement or advance may be attributable to the
Trustee's negligence, willful misconduct or bad faith; and
(c) to indemnify the Trustee for, and hold it harmless from and
against, any loss, liability or expense reasonably incurred by it arising
out of or in connection with the acceptance or administration of the trust
or trusts hereunder or the performance of its duties hereunder, including
the reasonable 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, except to the extent any such loss, liability
or expense may be attributable to its negligence, willful misconduct or bad
faith.
As security for the performance of the obligations of the Company and
the Guarantor under this Section, the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the Trustee as such
other than property and funds held in trust under Section 703 (except as
otherwise provided in Section 703). "Trustee" for purposes of this Section shall
include any predecessor Trustee; provided, however, that the negligence, willful
misconduct or bad faith of any Trustee hereunder shall not affect the rights of
any other Trustee hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 801(d) or Section 801(e), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable bankruptcy, insolvency or other similar law.
The provisions of this Section 907 shall survive the termination of
this Indenture.
SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee shall have or acquire any conflicting interest within
the meaning of the Trust Indenture Act, it shall either eliminate such
conflicting interest or resign to the extent, in the manner and with the effect,
and subject to the conditions, provided in the Trust Indenture Act and this
Indenture.
For purposes of Section 310(b)(1) of the Trust Indenture Act and to
the extent permitted thereby, the Trustee, in its capacity as trustee in respect
of (i) the Securities of any series or Guarantees endorsed thereon, (ii) the
Trust Agreement and the Guarantee pertaining to the Trust shall not be deemed to
have a conflicting interest arising from its capacity as trustee in respect of
the Securities of any other series or Guarantees endorsed thereon.
SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States, any State or Territory thereof or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal, State or other applicable government
authority, or
(b) b) if and to the extent permitted by the Commission by rule,
regulation or order upon application, a corporation or other Person
organized and doing business under the laws of a foreign government,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 or the Dollar
equivalent of the applicable foreign currency and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
and, in either case, qualified and eligible under this Article and the Trust
Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of such supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital 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, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 910. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 911.
(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 and
the Guarantor. If the instrument of acceptance by a successor Trustee
required by Section 911 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 by Act of the Holders of a
majority in principal amount of the Outstanding Securities of all series
and delivery of such Act to the Trustee, the Company and the Guarantor.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908 after
written request therefor by the Company, the Guarantor or by any
Holder who has been a bona fide Holder for at least six months, or
(2) the Trustee shall cease to be eligible under Section 909 and
shall fail to resign after written request therefor by the Company,
the Guarantor 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, (x) the Company and the Guarantor by Board
Resolutions may remove the Trustee with respect to all Securities or (y)
subject to Section 814, any Holder who has been a bona fide Holder 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
(other than as contemplated in clause (y) in Subsection (d) of this
Section), with respect to the Securities of one or more series, the Company
and the Guarantor, by Board Resolutions, 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 911. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 911,
become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company
and the Guarantor. If no successor Trustee with respect to the Securities
of any series shall have been so appointed by the Company and the Guarantor
or the Holders and accepted appointment in the manner required by Section
911, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of itself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) So long as no event which is, or after notice or lapse of time, or
both, would become, an Event of Default shall have occurred and be
continuing, and except with respect to a Trustee appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
pursuant to Subsection (e) of this Section, if the Company and the
Guarantor shall have delivered to the Trustee (i) Board Resolutions of the
Company and the Guarantor appointing a successor Trustee, effective as of a
date specified therein, and (ii) an instrument of acceptance of such
appointment, effective as of such date, by such successor Trustee in
accordance with Section 911, the Trustee shall be deemed to have resigned
as contemplated in Subsection (b) of this Section, the successor Trustee
shall be deemed to have been appointed by the Company and the Guarantor
pursuant to Subsection (e) of this Section and such appointment shall be
deemed to have been accepted as contemplated in Section 911, all as of such
date, and all other provisions of this Section and Section 911 shall be
applicable to such resignation, appointment and acceptance except to the
extent inconsistent with this Subsection (f).
(g) The Company (or, should the Company fail so to act promptly, the
successor trustee at the expense of 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 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of all series, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company, the
Guarantor 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, the Guarantor or the successor Trustee, such retiring Trustee
shall, upon payment of all sums owed to it, 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 Guarantor, 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, the Guarantor or any successor Trustee,
such retiring Trustee, upon payment of all sums owed to it, shall duly
assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company and the
Guarantor shall execute any instruments which fully vest in and confirm to
such successor Trustee all such rights, powers and trusts referred to in
Subsection (a) or (b) of this Section, 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 912. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the 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. 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 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If the Trustee shall be or become a creditor of the Company, the
Guarantor or any other obligor upon the Securities (other than by reason of a
relationship described in Section 311(b) of the Trust Indenture Act), the
Trustee shall be subject to any and all applicable provisions of the Trust
Indenture Act regarding the collection of claims against the Company, the
Guarantor or such other obligor. For purposes of Section 311(b) of the Trust
Indenture Act:
(a) 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;
(b) 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.
SECTION 914. CO-TRUSTEES AND SEPARATE TRUSTEES.
At any time or times, for the purpose of meeting the legal
requirements of any applicable jurisdiction, the Company and the Trustee shall
have power to appoint, and, upon the written request of the Trustee or of the
Holders of at least 33% in principal amount of the Securities then Outstanding,
the Company shall for such purpose join with the Trustee in the execution and
delivery of all instruments and agreements necessary or proper to appoint, one
or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, or to act as separate trustee, 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 Company does not join in such appointment within 15 days after the
receipt by it of a request so to do, or if an Event of Default shall have
occurred and be continuing, the Trustee alone shall have power to make such
appointment.
Should any written instrument or instruments from the Company be
required by any co-trustee or separate trustee so appointed to more fully
confirm 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 Company.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following conditions:
(a) the Securities shall be 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 Trustee hereunder, shall be exercised
solely, by the Trustee;
(b) the rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed
either by the Trustee or by the 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
Trustee shall be incompetent or unqualified to perform such act, in which
event such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee;
(c) the Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company, may accept the resignation of or
remove any co-trustee or separate trustee appointed under this Section,
and, if an Event of Default shall have occurred and be continuing, the
Trustee shall have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the Company. Upon
the written request of the Trustee, the Company shall join with the Trustee
in the execution and delivery 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;
(d) no co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee, or any other such
trustee hereunder; and
(e) any Act of Holders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION 915. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities of one or more series, or Tranche thereof, which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series or Tranche, and any Guarantee to be endorsed thereon, issued upon
original issuance and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities, and any
Guarantees endorsed thereon, so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities or Guarantees by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and the Guarantor and shall at all times be a
corporation organized and doing business under the laws of the United States,
any State or territory thereof or the District of Columbia, authorized under
such laws to act as Authenticating Agent, having a combined capital and surplus
of not less than $50,000,000 and subject to supervision or examination by
Federal, State or other applicable government authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee, the Company and the Guarantor. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent, the Company and the Guarantor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and the Guarantor.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, in accordance
with, and subject to the provisions of, Section 907.
The provisions of Sections 308, 904 and 905 shall be applicable to
each Authenticating Agent.
If an appointment with respect to the Securities of one or more series
shall be made pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein and the
Guarantee thereof referred to in the within-mentioned Indenture.
Dated: ________________________
As Trustee
By______________________
As Authenticating
Agent
By______________________
Authorized Signatory
If all of the Securities of a series may not be originally issued at
one time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing (which writing
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel), shall appoint, in accordance with this Section and in accordance with
such procedures as shall be acceptable to the Trustee, an Authenticating Agent
having an office in a Place of Payment designated by the Company with respect to
such series of Securities.
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR
SECTION 1001. LISTS OF HOLDERS.
Semiannually, not later than May 1 and November 1 in each year,
commencing May 1, 1999, and at such other times as the Trustee may request in
writing, the Company and the Guarantor shall furnish or cause to be furnished to
the Trustee information as to the names and addresses of the Holders, and the
Trustee shall preserve such information and similar information received by it
in any other capacity and afford to the Holders access to information so
preserved by it, all to such extent, if any, and in such manner as shall be
required by the Trust Indenture Act; provided, however, that no such list need
be furnished so long as the Trustee shall be the Security Registrar.
SECTION 1002. REPORTS BY TRUSTEE, COMPANY AND GUARANTOR.
Not later than May 1 in each year, commencing May 1, 2000, the Trustee
shall transmit to the Holders, the Commission and each securities exchange upon
which any Securities are listed, a report, dated as of the next preceding March
1, with respect to any events and other matters described in Section 313(a) of
the Trust Indenture Act, in such manner and to the extent required by the Trust
Indenture Act. The Trustee shall transmit to the Holders, the Commission and
each securities exchange upon which any Securities are listed, and the Company
and the Guarantor shall file with the Trustee (within 30 days after filing with
the Commission in the case of reports which pursuant to the Trust Indenture Act
must be filed with the Commission and furnished to the Trustee) and transmit to
the Holders, such other information, reports and other documents, if any, at
such times and in such manner, as shall be required by the Trust Indenture Act.
The Company and the Guarantor shall notify the Trustee of the listing of any
Securities on any securities exchange.
ARTICLE ELEVEN
CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER
SECTION 1101. COMPANY OR GUARANTOR MAY CONSOLIDATE, ETC., ONLY 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 Guarantor, as the case may be, is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company or Guarantor, as the case may be, substantially as an
entirety shall be a Person organized under any jurisdiction and validly
existing under the laws of such jurisdiction, and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest, if any, on all Outstanding
Securities (or the Guarantees endorsed thereon, as the case may be) 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; and
(c) the Company or the Guarantor, as the case may be, shall have
delivered to the Trustee an Officer's 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.
SECTION 1102. 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, or
other transfer or lease of the properties and assets of the Company or the
Guarantor substantially as an entirety in accordance with Section 1101, the
successor corporation formed by such consolidation or into which the Company or
the Guarantor, as the case may be, is merged or the Person 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, as the
case may be, under this Indenture with the same effect as if such successor
Person had been named as the Company or the Guarantor, as the case may be,
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities Outstanding hereunder or the Guarantees endorsed thereon, as the case
may be.
SECTION 1103. MERGER INTO COMPANY OR GUARANTOR; CERTAIN TRANSFERS.
Nothing in this Indenture shall be deemed to prevent or restrict any
consolidation or merger after the consummation of which the Company or the
Guarantor, as the case may be, would be the surviving or resulting corporation
or any conveyance or other transfer, or lease of any part of the properties of
the Company or the Guarantor, as the case may be, which does not constitute the
entirety, or substantially the entirety, thereof.
SECTION 1104. CONSOLIDATION DEFINED.
The term "consolidation" as used in this Article shall include similar
transactions such as amalgamations and reorganizations.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 1201. 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 or the
Guarantor, as the case may be, and the assumption by any such successor of
the covenants of the Company or the Guarantor, as the case may be, herein
and in the Securities, all as provided in Article Eleven; 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 one or more
specified Tranches thereof, 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 provision of this Indenture or to add
any new provision 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 or Tranche 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
or Tranche only pursuant to the provisions of Section 1202 hereof or when
no Security of such series or Tranche remains Outstanding; or
(e) to provide collateral security for all but not part of the
Securities; or
(f) to establish the form or terms of Securities of any series or
Tranche or any Guarantees as contemplated by Sections 201 and 301; or
(g) to the extent not provided herein, to provide for the
authentication, delivery and issuance 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 shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 911(b); or
(i) to provide for the procedures required to permit the Company to
utilize, at its option, a noncertificated system of registration for all,
or any series or Tranche of, the Securities; or
(j) to change any place or places where (1) the principal of and
premium, interest and Additional Amounts, if any, on all or any series of
Securities, or any Tranche thereof, shall be payable, (2) all or any series
of Securities, or any Tranche thereof, may be surrendered for registration
of transfer, (3) all or any series of Securities, or any Tranche thereof,
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, or
any Tranche thereof, 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 provisions with respect to matters or
questions arising under this Indenture, provided that such action shall not
adversely affect the interests of the Holders of Securities of any series
or Tranche in any material respect.
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 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 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of a majority in aggregate principal
amount of the Securities of all series then Outstanding under this Indenture,
considered as one class, by Act of said Holders delivered to the Company, the
Guarantor and the Trustee, the Company and the Guarantor, when authorized by
Board Resolutions, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or modifying
in any manner the rights of the Holders of Securities of such series under the
Indenture; provided, however, that if there shall be Securities of more than one
series Outstanding hereunder and if a proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such series, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all series so
directly affected, considered as one class, shall be required; and provided,
further, that if the Securities of any series shall have been issued in more
than one Tranche and if the proposed supplemental indenture shall directly
affect the rights of the Holders of Securities of one or more, but less than
all, of such Tranches, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that no such supplemental indenture shall:
(a) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal
amount thereof or 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 reduce
the amount of the principal of a Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 802, 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
on or after the Stated Maturity of any Security (or, in the case of
redemption, on or after the Redemption Date), without, in any such case,
the consent of the Holder of such Security, or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, or any Tranche thereof, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with any provision of this Indenture or of any default hereunder and its
consequences, or reduce the requirements of Section 1304 for quorum or
voting, without, in any such case, the consent of the Holders of each
Outstanding Security of such series or Tranche, or
(c) modify any of the provisions of this Section, Section 607 or
Section 813 with respect to the Securities of any series, or any Tranche
thereof, except to increase the percentages in principal amount referred to
in this Section or such other Sections or to provide that other provisions
of this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby; provided, however,
that this clause shall not be deemed to require the consent of any Holder
with respect to changes in the references to "the Trustee" and concomitant
changes in this Section, or the deletion of this proviso, in accordance
with the requirements of Sections 911(b), 914 and 1201(h).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or one or more
Tranches thereof, or which modifies the rights of the Holders of Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities of
any other series or Tranche.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof. A waiver by a
Holder of such Holder's right to consent under this Section shall be deemed to
be a consent of such Holder.
SECTION 1203. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 901) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, immunities or liabilities under this Indenture or
otherwise.
SECTION 1204. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. Any supplemental indenture permitted by this Article may
restate this Indenture in its entirety, and, upon the execution and delivery
thereof, any such restatement shall supersede this Indenture as theretofore in
effect for all purposes.
SECTION 1205. CONFORMITY WITH TRUST INDENTURE ACT.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, every supplemental indenture executed pursuant to
this Article shall conform to the requirements of the Trust Indenture Act as
then in effect.
SECTION 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series, or any Tranche thereof, authenticated and
delivered after the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company and the Guarantor shall so determine, new Securities
of any series, or any Tranche thereof, so modified as to conform, in the opinion
of the Trustee, the Company and the Guarantor, to any such supplemental
indenture may be prepared and executed by the Company with Guarantees of the
Guarantor endorsed thereon and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series or Tranche.
SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.
If the terms of any particular series of Securities shall have been
established in a Board Resolution or an Officer's Certificate as contemplated by
Section 301, and not in an indenture supplemental hereto, additions to, changes
in or the elimination of any of such terms may be effected by means of a
supplemental Board Resolution or Officer's Certificate, as the case may be,
delivered to, and accepted by, the Trustee; provided, however, that such
supplemental Board Resolution or Officer's Certificate shall not be accepted by
the Trustee or otherwise be effective unless all conditions set forth in this
Indenture which would be required to be satisfied if such additions, changes or
elimination were contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the Trustee, any such
supplemental Board Resolution or Officer's Certificate shall be deemed to be a
"supplemental indenture" for purposes of Section 1204 and 1206.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Securities of one or more, or all, series, or
any Tranche or Tranches thereof, may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series or Tranches.
SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders of
Securities of one or more, or all, series, or any Tranche or Tranches
thereof, for any purpose specified in Section 1301, to be held at such time
and at such place in the Borough of Manhattan, The City of New York, as the
Trustee shall determine, 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 given, in the manner provided in Section 106, not
less than 21 nor more than 180 days prior to the date fixed for the
meeting.
(b) If the Trustee shall have been requested to call a meeting of the
Holders of Securities of one or more, or all, series, or any Tranche or
Tranches thereof, by the Company, the Guarantor or by the Holders of 33% in
aggregate principal amount of all of such series and Tranches, considered
as one class, for any purpose specified in Section 1301, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the
Company, the Guarantor or the Holders of Securities of such series and
Tranches in the amount above specified, as the case may be, may determine
the time and the place in the Borough of Manhattan, The City of New York,
or in such other place as shall be determined or approved by the Company or
the Guarantor, for such meeting and may call such meeting for such purposes
by giving notice thereof as provided in Subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or more, or all,
series, or any Tranche or Tranches thereof, shall be valid without notice
if the Holders of all Outstanding Securities of such series or Tranches are
present in person or by proxy and if representatives of the Company, the
Guarantor and the Trustee are present, or if notice is waived in writing
before or after the meeting by the Holders of all Outstanding Securities of
such series, or any Tranche or Tranches thereof, or by such of them as are
not present at the meeting in person or by proxy, and by the Company, the
Guarantor and the Trustee.
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of Securities of one
or more, or all, series, or any Tranche or Tranches thereof, a Person shall be
(a) a Holder of one or more Outstanding Securities of such series or Tranches,
or (b) a Person appointed by an instrument in writing as proxy for a Holder or
Holders of one or more Outstanding Securities of such series or Tranches by such
Holder or Holders. The only Persons who shall be entitled to attend any meeting
of Holders of Securities of any series or Tranche shall be the Persons entitled
to vote at such meeting and their counsel, any representatives of the Trustee
and its counsel and any representatives of the Company, the Guarantor and their
counsel.
SECTION 1304. QUORUM; ACTION.
The Persons entitled to vote a majority in aggregate principal amount
of the Outstanding Securities of the series and Tranches with respect to which a
meeting shall have been called as hereinbefore provided, considered as one
class, shall constitute a quorum for a meeting of Holders of Securities of such
series and Tranches; provided, however, that if any action is to be taken at
such meeting which this Indenture expressly provides may be taken by the Holders
of a specified percentage, which is less than a majority, in principal amount of
the Outstanding Securities of such series and Tranches, considered as one class,
the Persons entitled to vote such specified percentage in principal amount of
the Outstanding Securities of such series and Tranches, considered as one class,
shall constitute a quorum. In the absence of a quorum within one hour of the
time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series and Tranches, be dissolved. In
any other case the meeting may be adjourned for such period as may be determined
by the chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at any such adjourned meeting, such adjourned meeting may be
further adjourned for such period as may be determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Except as provided
by Section 1305(e), notice of the reconvening of any meeting adjourned for more
than 30 days shall be given as provided in Section 1302(a) not less than 10 days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities of such
series and Tranches which shall constitute a quorum.
Except as limited by Section 1202, any resolution presented to a
meeting or adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of the
series and Tranches with respect to which such meeting shall have been called,
considered as one class; provided, however, that, except as so limited, any
resolution with respect to any action which this Indenture expressly provides
may be taken by the Holders of a specified percentage, which is less than a
majority, in principal amount of the Outstanding Securities of such series and
Tranches, considered as one class, may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of such series and Tranches, considered as one
class.
Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities of the series and Tranches with respect to which such
meeting shall have been held, whether or not present or represented at the
meeting.
SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING RIGHTS;
CONDUCT AND ADJOURNMENT OF MEETINGS.
(a) Attendance at meetings of Holders of Securities may be in person
or by proxy; and, to the extent permitted by law, any such proxy shall
remain in effect and be binding upon any future Holder of the Securities
with respect to which it was given unless and until specifically revoked by
the Holder or future Holder of such Securities before being voted.
(b) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities 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 deem appropriate. Except as otherwise permitted or required by any
such regulations, the holding of Securities shall be proved in the manner
specified in Section 104 and the appointment of any proxy shall be proved
in the manner specified in Section 104. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section 104 or
other proof.
(c) 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 the Guarantor or by Holders as provided in Section
1302(b), in which case the Company or the Guarantor or the Holders of
Securities of the series and Tranches 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 vote of the
Persons entitled to vote a majority in aggregate principal amount of the
Outstanding Securities of all series and Tranches represented at the
meeting, considered as one class.
(d) At any meeting each Holder or proxy shall be entitled to one vote
for each $1 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, except as a Holder of a Security or proxy.
(e) Any meeting duly called pursuant to Section 1302 at which a quorum
is present may be adjourned from time to time by Persons entitled to vote a
majority in aggregate principal amount of the Outstanding Securities of all
series and Tranches represented at the meeting, considered as one class;
and the meeting may be held as so adjourned without further notice.
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
or of their representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series and Tranches 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 of all votes cast at the meeting. A record 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 given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another 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.
SECTION 1307. ACTION WITHOUT MEETING.
In lieu of a vote of Holders at a meeting as hereinbefore contemplated
in this Article, any request, demand, authorization, direction, notice, consent,
waiver or other action may be made, given or taken by Holders by written
instruments as provided in Section 104.
ARTICLE FOURTEEN
GUARANTEE
SECTION 1401. GUARANTEE.
The Guarantor hereby unconditionally and irrevocably guarantees to
each Holder of a Security authenticated and delivered by the Trustee, and to the
Trustee on behalf of such Holder, the due and punctual payment of the principal
of, and premium, if any, and interest and Additional Amounts, if any, on 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 Security and of this Indenture,
regardless of any defense, right of set-off or counterclaim that the Guarantor
may have (except the defense of payment). In case of the failure of the Company
punctually to make any such payment, the Guarantor hereby agrees to cause such
payment to be made punctually when and as the same shall become due and payable,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise, and as if such payment were made by the Company. The
Guarantor's obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holder of the Security
or to a Paying Agent, or by causing the Company to pay such amount to such
Holder or a Paying Agent.
Unless otherwise provided as contemplated by Section 201, this
Guarantee is an unsecured and subordinated obligation of the Guarantor and
shall at all times rank at least pari passu with each other Guarantee issued
pursuant to the Indenture and, except as permitted by Section 806 hereof,
will rank at least pari passu with all other unsecured subordinated indebtedness
of the Guarantor.
The Guarantor hereby agrees that its obligations hereunder shall be
absolute and unconditional irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of such Security or this Indenture,
any failure to enforce the provisions of such Security or this Indenture, any
extension of time for payment or performance by the Company as provided by such
Security or this Indenture, or any waiver, modification or indulgence granted to
the Company with respect thereto, by the Holder of such Security or the Trustee
or any other circumstance which may otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor; provided, however, that
notwithstanding the foregoing, no such waiver, modification or indulgence shall,
without the consent of the Guarantor, increase the principal amount of such
Security, or increase the interest rate thereon, or change any redemption
provisions thereof (including any change to increase any premium payable upon
redemption thereof), or change the Stated Maturity thereof, or increase the
principal amount of any Discount Security that would be due and payable upon a
declaration of acceleration or the maturity thereof pursuant to Article Eight of
this Indenture.
The Guarantor hereby waives the benefits of diligence, presentment,
demand for payment, any requirement that the Trustee or any of the Holders
exhaust any right or take any action against the Company or any other Person,
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, protest or
notice with respect to any Security or the indebtedness evidenced thereby and
all demands whatsoever, and covenants that this Guarantee will not be discharged
in respect of any Security except by complete performance of the obligations
contained in such Security and in this Indenture and in this Guarantee. This
Guarantee shall constitute a guarantee of payment and not of collection. The
Guarantor hereby agrees that, in the event of a default in payment of principal,
or premium, if any, or interest, if any, on any Security, whether at its Stated
Maturity, by declaration of acceleration, call for redemption, or otherwise,
legal proceedings may be instituted by the Trustee on behalf of, or by, the
Holder of such Security, subject to the terms and conditions set forth in this
Indenture, directly against the Guarantor to enforce this Guarantee without
first proceeding against the Company. The Guarantor agrees that if, after the
occurrence and during the continuance of an Event of Default, the Trustee or any
of the Holders are prevented by applicable law from exercising their respective
rights to accelerate the maturity of the Securities, to collect interest on the
Securities, or to enforce or exercise any other right or remedy with respect to
the Securities, the Guarantor will pay to the Trustee for the account of the
Holders, upon demand therefor, the amount that otherwise would have been due and
payable had such rights and remedies been permitted to be exercised by the
Trustee or any of the Holders.
The obligations of the Guarantor hereunder with respect to any
Security shall be continuing and irrevocable until the date upon which the
entire principal of, premium, if any, and interest on such Security has been, or
has been deemed pursuant to the provisions of Article Seven of this Indenture to
have been, paid in full or otherwise discharged.
The Guarantor shall be subrogated to all rights of the Holder of each
Security upon which its Guarantee is endorsed against the Company in respect of
any amounts paid by the Guarantor on account of such Security pursuant to the
provisions of its Guarantee or this Indenture; provided, however, that the
Guarantor shall not be entitled to enforce or to receive any payments arising
out of, or based upon, such right of subrogation until the principal of, and
premium, if any, and interest, if any, on all Securities issued hereunder shall
have been paid in full.
This Guarantee shall remain in full force and effect and continue
notwithstanding any petition filed by or against the Company for liquidation or
reorganization, the Company becoming insolvent or making an assignment for the
benefit of creditors or a receiver or trustee being appointed for all or any
significant part of the Company's assets, and shall, to the fullest extent
permitted by law, continue to be effective or reinstated, as the case may be, if
at any time payment of any Security upon which this Guarantee is endorsed, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any Holder of such Security, whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned on a Security, such
Security shall, to the fullest extent permitted by law, be reinstated and deemed
paid only by such amount paid and not so rescinded, reduced, restored or
returned.
SECTION 1402. EXECUTION AND DELIVERY OF GUARANTEE.
The Guarantee to be endorsed on the certificate for the Securities of
each series shall include the terms of the Guarantee set forth in Section 1401
and any other terms, insertions, omissions or variations that may be set forth
as established pursuant to Section 201. The Guarantor hereby agrees to execute
its Guarantee, in a form established pursuant to Sections 201 and 1401, to be
endorsed on each certificate for a Security authenticated and delivered by the
Trustee.
The Guarantee shall be executed on behalf of the Guarantor by an
Authorized Officer of the Guarantor. The signature of any such officer on the
Guarantee may be manual or facsimile.
A Guarantee bearing the manual or facsimile signature of an individual
who was at the time of execution an Authorized Officer of the Guarantor shall
bind the Guarantor, notwithstanding that any such individual has ceased to be an
Authorized Officer prior to the authentication and delivery of the Security on
which such Guarantee is endorsed or was not an Authorized Officer at the date of
such Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee endorsed
thereon on behalf of the Guarantor. The Guarantor by its execution of this
Indenture hereby authorizes the Company, in the name and on behalf of the
Guarantor, to confirm the applicable Guarantee to the Holder of each Security
authenticated and delivered hereunder by its delivery of each such Security,
with such Guarantee endorsed thereon, authenticated and delivered by the
Trustee.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
SECTION 1501. LIABILITY SOLELY CORPORATE.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest, if any, on any Securities, any Guarantees, or any
part thereof, or for any claim based thereon or otherwise in respect thereof, or
of the indebtedness represented thereby, or upon any obligation, covenant or
agreement under this Indenture, against any incorporator, shareholder, officer
or director, as such, past, present or future of the Company or the Guarantor or
of any predecessor or successor corporation of either of them (either directly
or through the Company or the Guarantor, as the case may be, or a predecessor or
successor corporation of either of them), whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly agreed and understood
that this Indenture and all the Securities and Guarantees are solely corporate
obligations, and that no personal liability whatsoever shall attach to, or be
incurred by, any incorporator, shareholder, officer or director, past, present
or future, of the Company or of the Guarantor or of any predecessor or successor
corporation, either directly or indirectly through the Company or the Guarantor
or any predecessor or successor corporation, because of the indebtedness hereby
authorized or under or by reason of any of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities or Guarantees
or to be implied herefrom or therefrom, and that any such personal liability is
hereby expressly waived and released as a condition of, and as part of the
consideration for, the execution of this Indenture and the issuance of the
Securities and the Guarantees.
ARTICLE SIXTEEN
SUBORDINATION OF SECURITIES
SECTION 1601. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company, for itself, its successors and assigns, covenants and
agrees, and each Holder of the Securities of each series, by its acceptance
thereof, likewise covenants and agrees, that the payment of the principal of and
premium, if any, and interest, if any, on each and all of the Securities is
hereby expressly subordinated and subject to the extent and in the manner set
forth in this Article, in right of payment to the prior payment in full of all
Senior Indebtedness.
Each Holder of the Securities of each series, by its acceptance
thereof, authorizes and directs the Trustee on its behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article, and appoints the Trustee its attorney-in-fact for any and all such
purposes.
SECTION 1602. PAYMENT OVER OF PROCEEDS OF SECURITIES.
In the event (a) of any insolvency or bankruptcy proceedings or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or of any
proceedings for liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy, or (b) subject to the
provisions of Section 1603, that (i) a default shall have occurred with respect
to the payment of principal of or interest on or other monetary amounts due and
payable on any Senior Indebtedness, or (ii) there shall have occurred a default
(other than a default in the payment of principal or interest or other monetary
amounts due and payable) in respect of any Senior Indebtedness, as defined
therein or in the instrument under which the same is outstanding, permitting the
holder or holders thereof to accelerate the maturity thereof (with notice or
lapse of time, or both), and such default shall have continued beyond the period
of grace, if any, in respect thereof, and, in the cases of subclauses (i) and
(ii) of this clause (b), such default shall not have been cured or waived or
shall not have ceased to exist, or (c) that the principal of and accrued
interest on the Securities of any series shall have been declared due and
payable pursuant to Section 801 and such declaration shall not have been
rescinded and annulled as provided in Section 802, then:
(1) the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or
provision shall be made for such payment in money or money's worth,
before the Holders of any of the Securities are entitled to receive a
payment on account of the principal of or interest on the indebtedness
evidenced by the Securities, including, without limitation, any
payments made pursuant to Articles Four and Five;
(2) any payment by, or distribution of assets of, the Company of
any kind or character, whether in cash, property or securities, to
which any Holder or the Trustee would be entitled except for the
provisions of this Article, shall be paid or delivered by the person
making such payment or distribution, whether a trustee in bankruptcy,
a receiver or liquidating trustee or otherwise, directly to the
holders of such Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture
under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of such Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full
of all Senior Indebtedness remaining unpaid after giving effect to any
concurrent payment or distribution (or provision therefor) to the
holders of such Senior Indebtedness, before any payment or
distribution is made to the Holders of the indebtedness evidenced by
the Securities or to the Trustee under this Indenture; and
(3) in the event that, notwithstanding the foregoing, any payment
by, or distribution of assets of, the Company of any kind or
character, whether in cash, property or securities, in respect of
principal of or interest on the Securities or in connection with any
repurchase by the Company of the Securities, shall be received by the
Trustee or any Holder before all Senior Indebtedness is paid in full,
or provision is made for such payment in money or money's worth, such
payment or distribution in respect of principal of or interest on the
Securities or in connection with any repurchase by the Company of the
Securities shall be paid over to the holders of such Senior
Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments
evidencing any such Senior Indebtedness may have been issued, ratably
as aforesaid, for application to the payment of all Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall
have been paid in full, after giving effect to any concurrent payment
or distribution (or provision therefor) to the holders of such Senior
Indebtedness.
Notwithstanding the foregoing, at any time after the 123rd day
following the date of deposit of cash or Government Obligations pursuant to
Section 701 (provided all conditions set out in such Section shall have been
satisfied), the funds so deposited and any interest thereon will not be subject
to any rights of holders of Senior Indebtedness including, without limitation,
those arising under this Article Sixteen; provided that no event described in
clauses (d) and (e) of Section 801 with respect to the Company has occurred
during such 123-day period.
For purposes of this Article only, 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 or reorganization or readjustment which are subordinate
in right of payment to all Senior Indebtedness which may at the time be
outstanding to the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article Eleven hereof
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 1602 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article Eleven hereof. Nothing in Section 1601 or in this Section 1602
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 907.
SECTION 1603. DISPUTES WITH HOLDERS OF CERTAIN SENIOR INDEBTEDNESS.
Any failure by the Company to make any payment on or perform any other
obligation in respect of Senior Indebtedness, other than any indebtedness
incurred by the Company or assumed or guaranteed, directly or indirectly, by the
Company for money borrowed (or any deferral, renewal, extension or refunding
thereof) or any other obligation as to which the provisions of this Section
shall have been waived by the Company in the instrument or instruments by which
the Company incurred, assumed, guaranteed or otherwise created such indebtedness
or obligation, shall not be deemed a default under clause (b) of Section 1602 if
(i) the Company shall be disputing its obligation to make such payment or
perform such obligation and (ii) either (A) no final judgment relating to such
dispute shall have been issued against the Company which is in full force and
effect and is not subject to further review, including a judgment that has
become final by reason of the expiration of the time within which a party may
seek further appeal or review, or (B) in the event that a judgment that is
subject to further review or appeal has been issued, the Company shall in good
faith be prosecuting an appeal or other proceeding for review and a stay or
execution shall have been obtained pending such appeal or review.
SECTION 1604. SUBROGATION.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Subject to the prior payment in full of all
Senior Indebtedness, the rights of the Holders of the Securities shall be
subrogated to the rights of the holders of Senior Indebtedness to receive any
further payments or distributions of cash, property or securities of the Company
applicable to the holders of the Senior Indebtedness until all amounts owing on
the Securities shall be paid in full; and such payments or distributions of
cash, property or securities received by the Holders of the Securities, by
reason of such subrogation, which otherwise would be paid or distributed to the
holders of such Senior Indebtedness shall, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, be deemed to be
a payment by the Company to or on account of Senior Indebtedness, it being
understood that the provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders, on the one hand, and
the holders of the Senior Indebtedness, on the other hand.
SECTION 1605. OBLIGATION OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of 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 and creditors of the Company
other than the holders of Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Upon any payment or distribution of assets or securities of the
Company referred to in this Article, the Trustee and the Holders shall be
entitled to rely upon any order or decree of a court of competent jurisdiction
in which such dissolution, winding up, liquidation or reorganization proceedings
are pending for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness 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.
SECTION 1606. PRIORITY OF SENIOR INDEBTEDNESS UPON MATURITY.
Upon the maturity of the principal of any Senior Indebtedness by lapse
of time, acceleration or otherwise, all matured principal of Senior Indebtedness
and interest and premium, if any, thereon shall first be paid in full before any
payment of principal or premium, if any, or interest, if any, is made upon the
Securities or before any Securities can be acquired by the Company or any
sinking fund payment is made with respect to the Securities (except that
required sinking fund payments may be reduced by Securities acquired before such
maturity of such Senior Indebtedness).
SECTION 1607. TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS.
The Trustee shall be entitled to all rights set forth in this Article
with respect to any Senior Indebtedness at any time held by it, to the same
extent as any other holder of Senior Indebtedness. Nothing in this Article shall
deprive the Trustee of any of its rights as such holder.
SECTION 1608. NOTICE TO TRUSTEE TO EFFECTUATE SUBORDINATION.
Notwithstanding the provisions of this Article or any other provision
of the Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of moneys
to or by the Trustee unless and until the Trustee shall have received written
notice thereof from the Company, from a Holder or from a holder of any Senior
Indebtedness or from any representative or representatives of such holder and,
prior to the receipt of any such written notice, the Trustee shall be entitled,
subject to Section 901, in all respects to assume that no such facts exist;
provided, however, that, if prior to the fifth Business Day preceding the date
upon which by the terms hereof any such moneys may become payable for any
purpose, or in the event of the execution of an instrument pursuant to Section
702 acknowledging satisfaction and discharge of this Indenture, then if prior to
the second Business Day preceding the date of such execution, the Trustee shall
not have received with respect to such moneys the notice provided for in this
Section, then, anything herein contained to the contrary notwithstanding, the
Trustee may, in its discretion, receive such moneys and/or apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary, which may be received by it on or after such date; provided,
however, that no such application shall affect the obligations under this
Article of the persons receiving such moneys from the Trustee.
SECTION 1609. MODIFICATION, EXTENSION, ETC. OF SENIOR INDEBTEDNESS.
The holders of Senior Indebtedness may, without affecting in any
manner the subordination of the payment of the principal of and premium, if any,
and interest, if any, on the Securities, at any time or from time to time and in
their absolute discretion, agree with the Company to change the manner, place or
terms of payment, change or extend the time of payment of, or renew or alter,
any Senior Indebtedness, or amend or supplement any instrument pursuant to which
any Senior Indebtedness is issued, or exercise or refrain from exercising any
other of their rights under the Senior Indebtedness including, without
limitation, the waiver of default thereunder, all without notice to or assent
from the Holders or the Trustee.
SECTION 1610. TRUSTEE HAS NO FIDUCIARY DUTY TO HOLDERS OF SENIOR INDEBTEDNESS.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and objectives as
are specifically set forth in this Indenture, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if it shall mistakenly pay over or deliver to the
Holders or the Company or any other Person, money or assets to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
SECTION 1611. PAYING AGENTS OTHER THAN THE TRUSTEE.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article in addition to or in place of the Trustee; provided, however,
that Sections 1607, 1608 and 1610 shall not apply to the Company if it acts as
Paying Agent.
SECTION 1612. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT IMPAIRED.
No right of any present or future holder of Senior Indebtedness to
enforce the subordination herein shall at any time or in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
SECTION 1613. EFFECT OF SUBORDINATION PROVISIONS; TERMINATION.
Notwithstanding anything contained herein to the contrary, other than
as provided in the immediately succeeding sentence, all the provisions of this
Indenture shall be subject to the provisions of this Article, so far as the same
may be applicable thereto.
Notwithstanding anything contained herein to the contrary, the
provisions of this Article Sixteen shall be of no further effect, and the
Securities shall no longer be subordinated in right of payment to the prior
payment of Senior Indebtedness, if the Company shall have delivered to the
Trustee a notice to such effect. Any such notice delivered by the Company shall
not be deemed to be a supplemental indenture for purposes of Article Twelve.
-------------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
TXU EASTERN FUNDING COMPANY
------------------------------
TXU EUROPE LIMITED
------------------------------
THE BANK OF NEW YORK, Trustee
-----------------------------
Exhibit 4(f)
[[TXU EASTERN FUNDING COMPANY]]
TXU EUROPE LIMITED
OFFICER'S CERTIFICATE
________, an authorized attorney of [TXU EASTERN FUNDING COMPANY], a
[private unlimited company] duly incorporated and existing under the laws of
[England and Wales] (the "Company"), and __________, a Director of the Company,
pursuant to the authority granted in the Board Resolutions of the Company dated
___________, 1999, and Sections 201, 301, _______ of the Indenture defined
herein, and __________, an authorized attorney of TXU EUROPE LIMITED, a private
limited company duly incorporated and existing under the laws of England and
Wales (the "Guarantor"), and ____________, a Director of the Guarantor, pursuant
to the authority granted in the Board Resolutions of the Guarantor, dated
________, 1999 and Section 201 of the Indenture defined herein, do hereby
certify to The Bank of New York (the "Trustee"), as Trustee under the Indenture
of the Company (For Unsecured Subordinated Debt Securities) dated as of _______,
1999 (the "Indenture") that:
1. The securities of the ______ Series to be issued under the Indenture
shall be designated "___% Subordinated Debentures due _____" (the
"Debentures of the ______ Series"). The Debentures of the ______
Series will be unconditionally guaranteed by the Guarantor, as to
payment of principal, premium, if any, and interest and Additional
Amounts, if any. All capitalized terms used in this certificate which
are not defined herein but are defined in Exhibit A shall have the
meanings therein; all capitalized terms used in this certificate or
Exhibit A which are not defined herein or therein but are defined in
the Indenture shall have the meanings set forth in the Indenture.
2. The Debentures of the ______ Series initially shall be issued in
substantially the form thereof set forth in Exhibit A hereto. The
Debentures of the ______ Series shall have such terms and provisions
as are provided herein, in the Indenture and in the forms thereof set
forth in Exhibit A hereto, and shall be issued in substantially such
form.
3. The Debentures of the _____ Series shall mature and the principal
shall be due and payable together with all accrued and unpaid interest
thereon on _______.
4. The Debentures of the _____ Series shall be issued in the
denominations of $25 and in integral multiples of $25 in excess
thereof.
5. The Debentures of the _____ Series shall bear interest as provided in
Exhibit A.
6. Each installment of interest on a Debenture of the _____ Series shall
be payable on the dates specified in Exhibit A.
7. The principal of (and premium, if any, on) and each installment of
interest on and any other amounts payable on the Debentures of the
_____ Series shall be payable at, and registration and registration of
transfers and exchanges in respect of the Debentures of the _____
Series may be effected at, the office or agency of the Company in The
City of New York and, for so long as the Debentures of the _____
Series are listed on the Luxembourg Stock Exchange, at the agency of
the Company in Luxembourg. In the case of Debentures of the _____
Series issued in bearer form, interest shall be paid upon presentation
of the applicable Debenture of such Series to a Paying Agent; the
Paying Agent shall mark the original Debenture of such Series in the
appropriate box on the interest payment schedule included therein to
indicate that the interest payment has been made.
8. Notices and demands to or upon the Company or the Guarantor in respect
of the Debentures of the _____ Series may be served at the office or
agency of the Company in The City of New York.
9. The Corporate Trust Office of the Trustee will initially be the agency
of the Company in The City of New York for payments, registration and
registration of transfers and exchanges and service of notices and
demands with respect to the Debentures of the _____ Series and the
Company hereby appoints the Trustee as its agent for all such
purposes, and the Corporate Trust Office of Kredietbank SA
Luxembourgeoise ("Kredietbank") at 43, Boulevard Royal L-2955,
Luxembourg, initially will be the agency of the Company in Luxembourg;
provided, however, that the Company reserves the right to change, by
one or more Officer's Certificates, any such office or agency and such
agent, provided the Company will always have a paying agent location
in The City of New York and, for so long as any Debentures of the
_____ Series are listed on the Luxembourg Stock Exchange, in
Luxembourg. The Trustee initially will be the Security Registrar and
the Paying Agent for the Debentures of the _____ Series.
10. [The following constitute additional Events of Default with respect to
the Debentures of the _____ Series:
Failure of the Company or the Guarantor to pay Additional
Amounts (as defined herein) on any Debenture of the _____
Series within 30 days after it is due.
11. The Debentures of the ______ Series will be redeemable as provided in
the forms thereof attached hereto as Exhibit A.
12. Notwithstanding Section 106 of the Indenture, notice to a Holder of
Debentures of the _____ Series in bearer, form shall be given
sufficiently if given to such Holder in writing by the Trustee, if the
Trustee knows the identity of such Holder, or in such other manner as
the Trustee deems necessary or desirable; provided, however, that so
long as the Debentures of the _____ Series are listed on the
Luxembourg Stock Exchange and the rules of the Luxembourg Stock
Exchange so require, notices to Holders of the Debentures of the _____
Series will be published in a leading daily newspaper having general
circulation in Luxembourg (which is expected to be the Luxemburger
Wort).
13. The Debentures of the ______ Series will be initially issued as one or
more Debentures of the ______ Series in bearer form and shall be
issued to the Book-Entry Depositary (as defined in the Deposit
Agreement by and between The Bank of New York, as Book-Entry
Depositary, and [TXU EASTERN FUNDING COMPANY], as Issuer, dated as of
_____, 1999 (the "Deposit Agreement"). Nothing in the Indenture, the
Debentures of the ______ Series or this certificate shall be construed
to require the Company to register any Debentures of the ______ Series
under the Securities Act, unless otherwise expressly agreed by the
Company, confirmed in writing to the Trustee, or to make any transfer
of such Debentures of the ______ Series in violation of applicable
law.
14. It is contemplated that the Book-Entry Depositary will issue to TXU
Europe Funding I, L.P., (the "Partnership") one or more Book-Entry
Interests (as defined in the Deposit Agreement), which together will
represent a 100% interest in the Debentures of the _____ Series. The
Trustee, the Security Registrar and the Company will have no
responsibility under the Indenture for transfers of beneficial
interests in the Debentures of the _____ Series.
15. No service charge shall be made for the registration of transfer or
exchange of the Debentures of the _____ Series; provided, however,
that the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection
with the exchange or transfer.
16. Additional Amounts. All payments of principal and interest (including
payments of discount and premium, if any) with respect to the
Debentures of the _____ 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 any supranational
federation to which a Jurisdiction of Incorporation belongs or any
Jurisdiction of Incorporation (or any political subdivision or taxing
authority thereof or therein) or any jurisdiction in which the Company
or the Guarantor is managed or has a place of business (each, a
"Taxing Jurisdiction") or by or within any political subdivision
thereof or any authority therein or thereof having power to tax,
unless such withholding or deduction is required by law. In the event
of any such withholding or deduction ("Gross-Up Taxes"), the Company
or the Guarantor, as the case may be, shall pay to the Holder of such
Debentures of the _____ Series such additional amount ("Additional
Amount") as shall be necessary in order that the amount received by
such Holder after withholding or deduction shall equal the amount that
would otherwise have been due to such Holder in the absence of such
withholding or deduction, except that no such Additional Amounts shall
be payable:
(A) to, or to a Person on behalf of, a Holder who is liable for
such Gross-Up Taxes with respect to the Debentures of the
_____ Series 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 Debenture of
the _____ Series 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
Debenture of the _____ Series (whenever presentation is
required) for payment more than 30 days after the date on
which payment first becomes due except to the extent that such
Holder would have been entitled to such Additional Amounts on
presenting such Debenture of the _____ Series 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
Debenture of the _____ Series (when presentation is required)
other than at a Place of Payment in The City of New York or,
so long as the Debentures of the _____ Series are listed on
the Luxembourg Stock Exchange, in Luxembourg; or
(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.
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.
17. Special Redemption. If (a) the Company or the Guarantor certifies to
the 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 Debentures of the _____ Series as a result of either (x) any
change in, or amendment to, or clarification of, or announced change
to occur in the future in, 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 offering memorandum or (y) the unwillingness or inability of the
Book-Entry Depositary to continue to act as such and a successor is
not appointed by the Company within 120 days, and (b) such obligation
cannot be avoided by the Company or the Guarantor taking reasonable
measures available to it, and, prior to the giving of a notice of
redemption as hereinafter in this paragraph provided, the Company or
the Guarantor delivers to the Trustee the certificate referred to in
the last sentence of this paragraph, then the Company shall have the
right, at its option, upon not less than 30 days nor more than 60
days' prior written notice of redemption to the Holders of Debentures
of such Series, to redeem the Debentures of such Series, in whole but
not in part, at the principal amount thereof plus accrued and unpaid
interest thereon, and accrued Additional Amounts with respect thereto,
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 any such Additional Amounts
with respect to such Series. Prior to the mailing of any notice of
redemption pursuant to this paragraph, the Company shall deliver to
the Trustee a certificate signed by an officer of the Company stating
that the obligation referred to in (a) above cannot be avoided by the
Guarantor or the Company taking reasonable measures available to it,
and the Trustee shall accept, and shall be fully protected in relying
upon, 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.
18. Enforcement of Rights by Holders of Preferred Partnership Securities:
If the Special Representative appointed pursuant to the Amended and
Restated Agreement of Limited Partnership of TXU Europe Funding I,
L.P. dated _____, 1999 (the "Partnership Agreement") fails to enforce
its rights on behalf of the Partnership in the Debentures of the _____
Series or Guarantor's guarantees of the Debentures of the _____ Series
after a holder of Preferred Partnership Securities issued under the
Partnership Agreement has made a written request, the holder of record
of those Preferred Partnership Securities, as a third party
beneficiary, may directly institute a legal proceeding against the
Guarantor or the Company to enforce the rights of the Special
Representative and the Partnership in the Debentures of the _____
Series or Guarantor's guarantees of those debentures without first
instituting any legal proceeding against the Special Representative,
the Partnership or any other person or entity. In any event, if a
Partnership Enforcement Event as defined in the Partnership Agreement
has occurred and is continuing and that event is attributable to the
failure of the Company to make any required payment when due on any
Debenture of the _____ Series or the failure of Guarantor to make any
required payment when due on any guarantee of a Debenture of the _____
Series, then a holder of Preferred Partnership Securities, as a third
party beneficiary, may on behalf of the Partnership directly institute
a proceeding against the Company with respect to that debenture or
against Guarantor with respect to that guarantee, in each case for
enforcement of payment to the Holder of that debenture or guarantee.
19. Enforcement of Rights by Holders of Preferred Trust Securities: In
addition, for so long as the Delaware business trust known as TXU
Europe Capital I established on ________, 1999 (the "Trust") holds any
Preferred Partnership Securities, if the Special Representative fails
to enforce its rights on behalf of the Partnership in the Debentures
of the _____ Series or Guarantor's guarantees of those debentures
after a holder of Preferred Trust Securities issued by the Trust has
made a written request, a holder of record of those Preferred Trust
Securities, as a third party beneficiary, may on behalf of the
Partnership directly institute a legal proceeding against the Company,
without first instituting any legal proceeding against the Property
Trustee under the Trust, the Trust, the Special Representative, the
Partnership or any other person. In any event, for so long as the
Trust is the holder of any Preferred Partnership Securities, if a
Trust Enforcement Event as defined in the Amended and Restated Trust
Agreement dated as of _______, 1999 has occurred and is continuing and
that Trust Enforcement Event is attributable to the failure of the
Company to make any required payment when due on any Debenture of the
_____ Series or the failure of Guarantor to make any required payment
when due on any guarantee of a Debenture of the _____ Series, then a
holder of those Preferred Trust Securities, as a third party
beneficiary, may on behalf of the Partnership directly institute a
proceeding against the Company with respect to that debenture or
against Guarantor with respect to that guarantee, in each case for
enforcement of payment to Holder of that debenture or that guarantee.
20. If the Company shall make any deposit of money and/or Eligible
Obligations with respect to any Debentures of the _____ Series, or any
portion of the principal amount thereof, as contemplated by Section
701 of the Indenture, the Company shall not deliver an Officer's
Certificate described in clause (z) in the first paragraph of said
Section 701 unless the Company shall also deliver to the Trustee,
together with such Officer's Certificate, either:
(A) an instrument wherein the Company, notwithstanding the
satisfaction and discharge of its indebtedness in respect of
the Debentures of the _____ Series, shall assume the
obligation (which shall be absolute, unconditional and
guaranteed to the same extent as were the obligations of the
Company under the Debentures of the _____ Series) to
irrevocably deposit with the Trustee or Paying Agent such
additional sums of money, if any, or additional Eligible
Obligations (meeting the requirements of Section 701), if
any, or any combination thereof, at such time or times, as
shall be necessary, together with the money and/or Eligible
Obligations theretofore so deposited, to pay when due the
principal of and premium, if any, and interest due and to
become due and Additional Amounts, if any, due and known to
become due on such Debentures of the _____ Series or
portions thereof, all in accordance with and subject to the
provisions of said Section 701; provided, however, that such
instrument may state that the obligation of the Company to
make additional deposits as aforesaid shall be subject to
the delivery to the Company by the Trustee of a notice
asserting the deficiency accompanied by an opinion of an
independent public accountant of nationally recognized
standing, selected by the Trustee, showing the calculation
thereof; or
(B) an Opinion of Counsel to the effect that, as a result of a
change in law occurring after the date of this certificate,
the Holders of such Debentures of the _____ Series, or
portions of the principal amount thereof, will not recognize
income, gain or loss for United States federal income tax
purposes as a result of the satisfaction and discharge of
the Company's indebtedness in respect thereof and will be
subject to United States federal income tax on the same
amounts, at the same times and in the same manner as if such
satisfaction and discharge had not been effected.
21. The Company reserves the right to require legends on Debentures of the
______ Series as it may determine are necessary to ensure compliance
with the securities laws of the US and the states therein and any
other applicable laws.
[RIGHT FOR AN AFFILIATE OF THE COMPANY TO ASSUME THE OBLIGATIONS OF THE
COMPANY SUBJECT TO CERTAIN CONDITIONS.]
22. Each of the undersigned has read all of the covenants and conditions
contained in the Indenture (including the definitions in the Indenture
relating thereto) relating to the issuance of the Debentures of the
_____ Series and the Guarantees endorsed thereon and in respect of
compliance with which this certificate is made.
23. The statements contained in this certificate are based upon the
familiarity of each of the undersigned with the Indenture, the
documents accompanying this certificate, and upon discussions by each
of the undersigned with officers and employees of the Company and the
Guarantor familiar with the matters set forth herein.
24. In the opinion of each of the undersigned, he has made such
examination or investigation as is necessary to enable him to express
an informed opinion whether or not such covenants and conditions have
been complied with.
25. In the opinion of each of the undersigned, such conditions and
covenants and conditions precedent, if any (including any covenants
compliance with which constitutes a condition precedent) to the
authentication and delivery of the Debentures of the ______ Series and
the Guarantees to be endorsed thereon requested in the accompanying
Company Order and Guarantor Order.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Officer's
Certificate as of this _____ day of _____, 1999.
-------------------
Name:
Title: Authorized Attorney
-----------------------
Name:
Title: Director
-------------------
Name:
Title: Authorized Attorney
-----------------------
Name:
Title: Director
<PAGE>
EXHIBIT A
[FORM OF FACE OF DEBENTURE]
BEARER FORM
NO.o CUSIP NO. o
[TXU EASTERN FUNDING COMPANY]
___% Subordinated Debentures due _____
[TXU EASTERN FUNDING COMPANY], a corporation duly incorporated and
existing under the laws of England and Wales (herein referred to as the
"Company", which term includes any successor Person under the Indenture), for
value received, hereby promises to pay to the bearer upon surrender hereof the
principal sum of $________ Dollars on _____, and, except as hereinafter
provided, to pay interest on said principal sum [quarterly] in arrears on _____,
_____, _____, and _____ of each year (each an Interest Payment Date) at the rate
of ____% per annum until the principal hereof is paid or made available for
payment. Interest on the Securities of this series shall be computed on the
basis of a 360-day year consisting of twelve 30-day months and for any period
shorter than a full month, on the basis of the actual number of days elapsed in
such period. Interest on the Securities of this series will accrue from _____,
1999, to the first Interest Payment Date (which shall be _____, 1999), and
thereafter will accrue from the last Interest Payment Date to which interest has
been paid or duly provided for. In the event that any Interest Payment Date is
not a Business Day, then payment of interest payable on such date will be made
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of such delay) with the same force and effect as if
made on the Interest Payment Date. The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will be paid upon
presentation to any Paying Agent; such Paying Agent shall mark this Security in
the appropriate box on the Interest Payment Schedule included therein to
indicate that the interest payment has been made. Payments of any Defaulted
Interest will be paid to the bearer hereof at the time of presentation.
Payment of the principal of (and premium, if any) and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in The City of New York, the State of New York and, for so long as the
Securities of this series 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 payment of public and private debts.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this Security
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed.
[TXU EASTERN FUNDING COMPANY]
By:
-----------------------
[FORM OF GUARANTEE]
TXU EUROPE LIMITED, a corporation incorporated under the laws of
England and Wales (the "Guarantor", which term includes any successor under the
Indenture (the "Indenture") referred to in the Security upon which this
Guarantee is endorsed), for value received, hereby unconditionally and
irrevocably guarantees to the Holder of the Security upon which this Guarantee
is endorsed, the due and punctual payment of the principal of, and premium, if
any, and interest and Additional Amounts, if any, on 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 Security and of the Indenture, regardless of any defense,
right of set-off or counterclaim that the Guarantor may have (except the defense
of payment). In case of the failure of [TXU EASTERN FUNDING COMPANY], a
corporation incorporated under the laws of England and Wales (the "Company",
which term includes any successor under the Indenture), punctually to make any
such payment, the Guarantor hereby agrees to cause such payment to be made
punctually when and as the same shall become due and payable, whether at the
Stated Maturity or by declaration of acceleration, call for redemption or
otherwise, and as if such payment were made by the Company. The Guarantor's
obligation to make a guarantee payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holder of such Security or to a Paying
Agent, or by causing the Company to pay such amount to such Holder or a Paying
Agent.
Except as provided pursuant to Section 608 of the Indenture, this
Guarantee is an unsecured and subordinated obligation of the Guarantor and shall
at all times rank at least pari passu with each other Guarantee issued pursuant
to the Indenture and, except as permitted by Sections 608 and 806 of the
Indenture, will rank at least pari passu with all other unsecured subordinated
indebtedness of the Guarantor.
The Guarantor hereby agrees that its obligations hereunder shall be
absolute and unconditional irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of such Security or the Indenture,
any failure to enforce the provisions of such Security or the Indenture, any
extension of time for payment or performance by the Company as provided by such
Security or the Indenture, or any waiver, modification or indulgence granted to
the Company with respect thereto, by the Holder of such Security or the Trustee
or any other circumstance which may otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor; provided, however, that
notwithstanding the foregoing, no such waiver, modification or indulgence shall,
without the consent of the Guarantor, increase the principal amount of such
Security, or increase the interest rate thereon, or change any redemption
provisions thereof (including any change to increase any premium payable upon
redemption thereof) or change the Stated Maturity thereof.
The Guarantor hereby waives the benefits of diligence, presentment,
demand for payment, any requirement that the Trustee or the Holder of such
Security exhaust any right or take any action against the Company or any other
Person, 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,
protest or notice with respect to such Security or the indebtedness evidenced
thereby and all demands whatsoever, and covenants that this Guarantee will not
be discharged in respect of such Security except by complete performance of the
obligations contained in such Security and in this Indenture and in this
Guarantee. This Guarantee shall constitute a guarantee of payment and not of
collection. The Guarantor hereby agrees that, in the event of a default in
payment of principal, or premium, if any, or interest, if any, on such Security,
whether at its Stated Maturity, by declaration of acceleration, call for
redemption, or otherwise, legal proceedings may be instituted by the Trustee on
behalf of, or by, the Holder of such Security, subject to the terms and
conditions set forth in the Indenture, directly against the Guarantor to enforce
this Guarantee without first proceeding against the Company. The Guarantor
agrees that if, after the occurrence and during the continuance of an Event of
Default, the Trustee or any of the Holders are prevented by applicable law from
exercising their respective rights to accelerate the maturity of the Securities,
to collect interest on the Securities, or to enforce or exercise any other right
or remedy with respect to the Securities, the Guarantor will pay to the Trustee
for the account of the Holders, upon demand therefor, the amount that would
otherwise have been due and payable had such rights been permitted to be
exercised by the Trustee or any of the Holders.
The obligations of the Guarantor hereunder with respect to such
Security shall be continuing and irrevocable until the date upon which the
entire principal of, premium, if any, and interest and Additional Amounts, if
any, on such Security has been, or has been deemed pursuant to the provisions of
Article Seven of the Indenture to have been, paid in full or otherwise
discharged.
The Guarantor shall be subrogated to all rights of the Holder of each
Security upon which its Guarantee is endorsed against the Company in respect of
any amounts paid by the Guarantor on account of such Security pursuant to the
provisions of its Guarantee or the Indenture; provided, however, that the
Guarantor shall not be entitled to enforce or to receive any payments arising
out of, or based upon, such right of subrogation until the principal of, and
premium, if any, and interest, if any, and Additional Amounts, if any, on all
Securities issued under the Indenture shall have been paid in full.
This Guarantee shall remain in full force and effect and continue
notwithstanding any petition filed by or against the Company for liquidation or
reorganization, the Company becoming insolvent or making an assignment for the
benefit of creditors or a receiver or trustee being appointed for all or any
significant part of the Company's assets, and shall, to the fullest extent
permitted by law, continue to be effective or reinstated, as the case may be, if
at any time payment of the Security upon which this Guarantee is endorsed, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by the Holder of such Security, whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned on such Security, such
Security shall, to the fullest extent permitted by law, be reinstated and deemed
paid only by such amount paid and not so rescinded, reduced, restored or
returned.
This Guarantee shall not be valid or obligatory for any purpose until
the certificate of authentication of the Security upon which this Guarantee is
endorsed shall have been manually executed by or on behalf of the Trustee under
the Indenture.
All terms used in this Guarantee which are defined in the Indenture
shall have the meanings assigned to them in such Indenture.
This Guarantee shall be deemed to be a contract made under the laws of
the State of New York, and for all purposes shall be governed by and construed
in accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee to be
executed as of the date first written above.
TXU EUROPE LIMITED
By:
-----------------------
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated therein and the
Guarantee thereof referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
--------------------------
Authorized Signatory
<PAGE>
[FORM OF REVERSE OF DEBENTURE]
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 (For Unsecured Subordinated Debt Securities), dated as
of _____, 1999 (herein, together with any amendments thereto, called the
"Indenture", which term shall have the meaning assigned to it in such
instrument), among the Company, TXU EUROPE LIMITED, as Guarantor (herein called
the "Guarantor," which term includes any successor under the Indenture) and The
Bank of New York, as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), and reference is hereby made to the
Indenture, including the Board Resolutions and Officer's Certificate filed with
the Trustee on _____, 1999, creating the series designated on the face hereof,
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Guarantor, the Trustee 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.
On or after [_____, 2004], the Securities of this series will be
redeemable as a whole at any time or in part, from time to time, at the option
of the Company, at a Redemption Price equal to 100% of the unpaid principal
amount thereof plus any accrued interest thereon and any Additional Amounts
thereon. [insert other redemption provisions]
Notwithstanding Section 404 of the Indenture, the Trustee shall give
the bearer of this Security notice of any redemption hereof in such manner as
the Trustee deems necessary or desirable. So long as the Securities are listed
on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange
so require, notices to Holders of the Securities will be published in a leading
daily newspaper having general circulation in Luxembourg (which is expected to
be the Luxemburger Wort).
Upon payment of the Redemption Price, on and after the Redemption Date
interest and any Additional Amounts will cease to accrue on the Securities of
this series or portions thereof called for redemption.
Except as provided herein, Article Four of the Indenture shall apply
to redemptions of the Securities of this series.
If the Company or the Guarantor is required to pay Additional Amounts
with respect to Securities of this series, the Company has the right to redeem
this Security as set forth in the Officer's Certificate described above.
The indebtedness evidenced by this Security is, to the extent provided
in the Indenture, subordinated and subject in right of payment to the prior
payment in full of all Senior Indebtedness, and this Security is issued subject
to the provisions of the Indenture with respect thereto. Each Holder of this
Security, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his behalf to take such
action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his attorney-in-fact for
any and all such purposes. Each Holder hereof, by his acceptance hereof, hereby
waives all notice of the acceptance of the subordination provisions contained
herein and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such Holder upon
said provisions.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security upon compliance with certain conditions set
forth in the Indenture including the Officer's Certificate described above.
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.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of 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 principal amount of the Securities at
the time Outstanding of all series to be affected. 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.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
the Trustee written notice of a continuing Event of Default with respect to the
Securities of this series, the Holders of a majority in aggregate principal
amount of the Securities of all series at the time Outstanding in respect of
which an Event of Default shall have occurred and be continuing shall have made
written request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity, and the
Trustee shall not have received from the Holders of a majority in aggregate
principal amount of Securities of all series at the time Outstanding in respect
of which an Event of Default shall have occurred and be continuing a direction
inconsistent with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to any suit instituted by the Holder of
this Security for the enforcement of any payment of principal hereof or any
premium or interest hereon on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and any premium and
interest on this Security at the times, place and rate, and in the coin or
currency, herein prescribed.
Pursuant to Section 311 of the Indenture, so long as the Company is
not in default in the payment of interest on the Securities of any series under
the Indenture, the Company shall have the right, at any time and from time to
time during the term of the Securities of this series, to extend the interest
payment period to a period not exceeding 20 consecutive quarterly periods (an
"Extension Period") during which period interest (calculated for each period
from, and including, an Interest Payment Date to, but excluding the next
succeeding Interest Payment Date (an "Interest Period"), except that the first
Interest Period shall commence on [the date of original issuance] in the manner
described in the first paragraph of this Debenture, as if the interest payment
period had not been so extended) will be compounded quarterly. At the end of the
Extension Period, the Company shall pay all interest accrued and unpaid hereon
(together with interest thereon at the rate specified for the Securities of this
series, compounded quarterly, to the extent permitted by applicable law) and
Additional Interest, if any. Prior to the termination of any such Extension
Period, the Company may further extend the interest payment period, provided
that such Extension Period together with all such previous and further
extensions thereof shall not exceed 20 consecutive quarterly periods at any one
time or extend beyond the Maturity of the Securities of this series. Upon the
termination of any such Extension Period and the payment of all amounts then
due, including interest on deferred interest payments, the Company may elect to
begin a new Extension Period, subject to the above requirements. No interest
shall be due and payable during an Extension Period, except at the end thereof.
The Company shall give the Trustee notice of its election of an Extension Period
prior to the earlier of (i) one Business Day prior to the record date for the
distribution which would occur but for such election or (ii) the date the
Company is required to give notice to any securities exchange on which the
Securities may be listed or any other applicable self-regulatory organization of
the record date.
The Indenture contains terms, provisions and conditions relating to
the consolidation or merger of the Company or the Guarantor with or into, and
the conveyance or other transfer, or lease, of assets to another Person and to
the release and discharge of the Company or the Guarantor, as the case may be,
in certain circumstances from such obligations.
The Securities of this series are issuable only in registered form
without coupons in denominations of $25 and in integral multiples of $25 in
excess 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 and of
authorized denominations, 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.
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.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture and in the Officer's
Certificate establishing the terms of the Securities of this series.
INTEREST PAYMENT SCHEDULE
Instructions to Paying Agent: Mark the box across from the appropriate
Interest Payment Date when the interest payable on such date has been paid.
Interest Payment Date (Mark When Interest is Paid)
- - - - --------------------- ---------------------------
[Insert Schedule]
PRINCIPAL PAYMENT SCHEDULE
PRINCIPAL AMOUNT OF THIS BEARER DEBENTURE
The outstanding aggregate principal amount of this Bearer Debenture is initially
as shown on the face of this Bearer Debenture and, pursuant thereto, by the
latest entry made by or on behalf of the Issuer in the third column below.
Reductions in the principal amount of this Bearer Debenture following, among
other things, partial redemptions or exchange of an interest in this Bearer
Debenture for another Bearer Debenture of this series of Securities, and
increases in the principal amount of this Bearer Debenture following exchange of
an interest in another Bearer Debenture of this series for an interest in this
Bearer Debenture, are entered in the second column below.
Date Amount of (reduction)/ Outstanding principal Trustee's
- - - - ---- Increase amount of this Bearer Authentication
--------------------- Debenture following Signature
such (reduction)/ ---------------
increase
---------------------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
- - - - ------ ---------- ----------- ----------
Exhibit 4(g)
------------------------------------------
___________________________
ISSUER
AND
TXU EUROPE LIMITED,
GUARANTOR
TO
THE BANK OF NEW YORK
TRUSTEE
---------
INDENTURE
(FOR UNSECURED SUBORDINATED DEBT SECURITIES)
DATED AS OF _________ 1, 1999
------------------------------------------
<PAGE>
TABLE OF CONTENTS
PARTIES .......................................................................1
RECITAL OF THE COMPANY ........................................................1
RECITAL OF THE GUARANTOR ......................................................1
ARTICLE One ...................................................................1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION .......................1
SECTION 101.Definitions ..............................................1
Act .............................................................2
Additional Amounts ..............................................2
Affiliate .......................................................2
Agreement of Limited Partnership ................................2
Authenticating Agent ............................................2
Authorized Officer ..............................................2
Board of Directors ..............................................2
Board Resolution ................................................2
Business Day ....................................................3
Commission ......................................................3
Company .........................................................3
Company Request .................................................3
Company Order ...................................................3
Corporate Trust Office ..........................................3
Corporation .....................................................3
Defaulted Interest ..............................................3
Discount Security ...............................................3
Dollar or $ .....................................................3
Eligible Obligations ............................................3
Event of Default ................................................4
Governmental Authority ..........................................4
Government Obligations ..........................................4
Guarantee .......................................................4
Guarantor .......................................................4
Guarantor Order .................................................4
Guarantor Request ...............................................4
Holder ..........................................................4
Indenture .......................................................4
Interest Payment Date ...........................................4
Judgment Currency ...............................................4
Jurisdiction of Incorporation ...................................5
Maturity ........................................................5
Officer's Certificate ...........................................5
Opinion of Counsel ..............................................5
Outstanding .....................................................5
Partnership .....................................................6
Preferred Partners Securities ...................................6
Preferred Trust Securities ......................................6
Paying Agent ....................................................6
Periodic Offering ...............................................6
Person ..........................................................6
Place of Payment ................................................7
-i-
<PAGE>
Predecessor Security ............................................7
Redemption Date .................................................7
Redemption Price ................................................7
Regular Record Date .............................................7
Required Currency ...............................................7
Responsible Officer .............................................7
Securities ......................................................7
Security Register ...............................................7
Security Registrar ..............................................7
Senior Indebtedness .............................................7
Special Record Date .............................................8
Stated Interest Rate ............................................8
Stated Maturity .................................................8
Tranche .........................................................8
Trust ...........................................................8
Trust Agreement .................................................8
Trust Indenture Act .............................................8
Trustee .........................................................8
United States ...................................................8
SECTION 102.Compliance Certificates and Opinions .....................8
SECTION 103.Form of Documents Delivered to Trustee ...................9
SECTION 104.Acts of Holders .........................................10
SECTION 105.Notices, etc. to Trustee, Company or Guarantor ..........11
SECTION 106.Notice to Holders of Securities; Waiver .................12
SECTION 107.Conflict with Trust Indenture Act .......................13
SECTION 108.Effect of Headings and Table of Contents ................13
SECTION 109.Successors and Assigns ..................................13
SECTION 110.Separability Clause .....................................13
SECTION 111.Benefits of Indenture ...................................13
SECTION 112.Governing Law ...........................................13
SECTION 113.Legal Holidays ..........................................14
SECTION 114.Agent to Receive Service of Process .....................14
SECTION 115.Consent to Jurisdiction; Appointment of Agent for
Service; Judgment Currency; Waiver of Immunities .....14
ARTICLE TWO ..................................................................16
SECURITY FORMS ...............................................................16
SECTION 201.Forms Generally .........................................16
SECTION 202.Form of Trustee's Certificate of Authentication .........16
ARTICLE THREE ................................................................17
THE SECURITIES ...............................................................17
SECTION 301.Amount Unlimited; Issuable in Series ....................17
SECTION 302.Denominations ...........................................20
SECTION 303.Execution, Authentication, Delivery and Dating ..........20
SECTION 304.Temporary Securities ....................................23
SECTION 305.Registration, Registration of Transfer and Exchange .....23
SECTION 306.Mutilated, Destroyed, Lost and Stolen Securities ........24
SECTION 307.Payment of Interest; Interest Rights Preserved ..........25
SECTION 308.Persons Deemed Owners ...................................26
SECTION 309.Cancellation by Security Registrar ......................26
SECTION 310.Computation of Interest .................................27
SECTION 311.Payment to Be in Proper Currency ........................27
-ii-
<PAGE>
SECTION 312.Extension of Interest Payment ...........................27
ARTICLE FOUR .................................................................28
REDEMPTION OF SECURITIES .....................................................28
SECTION 401.Applicability of Article ................................28
SECTION 402.Election to Redeem; Notice to Trustee ...................28
SECTION 403.Selection of Securities to Be Redeemed ..................28
SECTION 404.Notice of Redemption ....................................29
SECTION 405.Securities Payable on Redemption Date ...................30
SECTION 406.Securities Redeemed in Part .............................30
ARTICLE FIVE .................................................................30
SINKING FUNDS ................................................................30
SECTION 501.Applicability of Article ................................30
SECTION 502.Satisfaction of Sinking Fund Payments with Securities ...31
SECTION 503.Redemption of Securities for Sinking Fund ...............31
ARTICLE SIX ..................................................................32
COVENANTS ....................................................................32
SECTION 601.Payment of Principal, Premium and Interest ..............32
SECTION 602.Maintenance of Office or Agency .........................32
SECTION 603.Money for Securities Payments to Be Held in Trust .......32
SECTION 604.Corporate Existence .....................................34
SECTION 605.Maintenance of Corporate Records; Protection of Assets ..34
SECTION 606.Annual Officer's Certificate as to Compliance............34
SECTION 607.Waiver of Certain Covenants..............................34
SECTION 608.Business of the Company..................................34
SECTION 609.Maintenance of Trust Existence...........................34
ARTICLE SEVEN.................................................................35
SATISFACTION AND DISCHARGE....................................................35
SECTION 701.Satisfaction and Discharge of Securities.................35
SECTION 702.Satisfaction and Discharge of Indenture..................37
SECTION 703.Application of Trust Money...............................37
ARTICLE EIGHT.................................................................38
EVENTS OF DEFAULT; REMEDIES...................................................38
SECTION 801.Events of Default........................................38
SECTION 802.Acceleration of Maturity; Rescission and Annulment.......39
SECTION 803.Collection of Indebtedness and Suits for Enforcement
by Trustee ...........................................40
SECTION 804.Trustee May File Proofs of Claim ........................41
SECTION 805.Trustee May Enforce Claims Without Possession of
Securities ...........................................41
SECTION 806.Application of Money Collected ..........................41
SECTION 807.Limitation on Suits .....................................42
SECTION 808.Unconditional Right of Holders to Receive Principal,
Premium and Interest .................................42
SECTION 809.Restoration of Rights and Remedies ......................43
SECTION 810.Rights and Remedies Cumulative ..........................43
SECTION 811.Delay or Omission Not Waiver ............................43
SECTION 812.Control by Holders of Securities ........................43
SECTION 813.Waiver of Past Defaults .................................44
SECTION 814.Undertaking for Costs ...................................44
SECTION 815.Waiver of Stay or Extension Laws ........................44
ARTICLE NINE .................................................................45
THE TRUSTEE ..................................................................45
SECTION 901.Certain Duties and Responsibilities .....................45
-iii-
<PAGE>
SECTION 902.Notice of Defaults ......................................45
SECTION 903.Certain Rights of Trustee ...............................45
SECTION 904.Not Responsible for Recitals or Issuance of Securities ..47
SECTION 905.May Hold Securities .....................................47
SECTION 906.Money Held in Trust .....................................47
SECTION 907.Compensation and Reimbursement ..........................47
SECTION 908.Disqualification; Conflicting Interests .................48
SECTION 909.Corporate Trustee Required; Eligibility .................48
SECTION 910.Resignation and Removal; Appointment of Successor .......49
SECTION 911.Acceptance of Appointment by Successor ..................50
SECTION 912.Merger, Conversion, Consolidation or Succession to
Business .............................................51
SECTION 913.Preferential Collection of Claims Against Company .......51
SECTION 914.Co-trustees and Separate Trustees .......................52
SECTION 915.Appointment of Authenticating Agent .....................53
ARTICLE TEN ..................................................................54
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR .................54
SECTION 1001.Lists of Holders .......................................54
SECTION 1002.Reports by Trustee, Company and Guarantor ..............55
ARTICLE ELEVEN ...............................................................55
CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER ..........................55
SECTION 1101.Company or Guarantor May Consolidate, etc., Only on
Certain Terms ........................................55
SECTION 1102.Successor Corporation Substituted ......................56
SECTION 1103.Merger into Company or Guarantor; Certain Transfers ....56
SECTION 1104.Consolidation Defined ..................................56
ARTICLE TWELVE ...............................................................56
SUPPLEMENTAL INDENTURES ......................................................56
SECTION 1201.Supplemental Indentures Without Consent of Holders .....56
SECTION 1202.Supplemental Indentures With Consent of Holders ........58
SECTION 1203.Execution of Supplemental Indentures ...................59
SECTION 1204.Effect of Supplemental Indentures ......................59
SECTION 1205.Conformity With Trust Indenture Act ....................59
SECTION 1206.Reference in Securities to Supplemental Indentures .....59
SECTION 1207.Modification Without Supplemental Indenture ............60
ARTICLE THIRTEEN .............................................................60
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING ..................................60
SECTION 1301.Purposes for Which Meetings May Be Called ..............60
SECTION 1302.Call, Notice and Place of Meetings .....................60
SECTION 1303.Persons Entitled to Vote at Meetings ...................61
SECTION 1304.Quorum; Action .........................................61
SECTION 1305.Attendance at Meetings; Determination of Voting
Rights; Conduct and Adjournment of Meetings ..........62
SECTION 1306.Counting Votes and Recording Action of Meetings ........62
SECTION 1307.Action Without Meeting .................................63
ARTICLE FOURTEEN .............................................................63
GUARANTEE ....................................................................63
SECTION 1401.Guarantee ..............................................63
SECTION 1402.Execution and Delivery of Guarantee ....................65
ARTICLE FIFTEEN ..............................................................65
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS ..............65
SECTION 1501.Liability Solely Corporate .............................65
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<PAGE>
ARTICLE SIXTEEN ..............................................................66
SUBORDINATION OF SECURITIES ..................................................66
SECTION 1601.Securities Subordinate to Senior Indebtedness ..........66
SECTION 1602.Payment Over of Proceeds of Securities .................66
SECTION 1603.Disputes with Holders of Certain Senior Indebtedness ...67
SECTION 1604.Subrogation ............................................68
SECTION 1605.Obligation of the Company Unconditional ................68
SECTION 1606.Priority of Senior Indebtedness Upon Maturity ..........68
SECTION 1607.Trustee as Holder of Senior Indebtedness ...............69
SECTION 1608.Notice to Trustee to Effectuate Subordination ..........69
SECTION 1609.Modification, Extension, etc. of Senior Indebtedness ...69
SECTION 1610.Trustee Has No Fiduciary Duty to Holders of Senior
Indebtedness .......................................69
SECTION 1611.Paying Agents Other Than the Trustee..................69
SECTION 1612.Rights of Holders of Senior Indebtedness Not Impaired. .70
SECTION 1613.Effect of Subordination Provisions; Termination ........70
Testimonium ..................................................................71
Signatures ...................................................................72
-v-
<PAGE>
__________________________
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939
AND INDENTURE, DATED AS OF _________ 1, 1999
TRUST INDENTURE ACT SECTION INDENTURE SECTION
ss.310 (a)(1) .....................................................909
(a)(2) .....................................................909
(a)(3) .....................................................914
(a)(4) ...............................................Not Applicable
(b) ........................................................908
............................................................910
ss.311 (a) ........................................................913
(b) ........................................................913
(c) ........................................................913
ss.312 (a) .......................................................1001
(b) .......................................................1001
(c) .......................................................1001
ss.313 (a) .......................................................1002
(b) .......................................................1002
(c) .......................................................1002
ss.314 (a) .......................................................1002
(a)(4) .....................................................606
(b) ..................................................Not Applicable
(c)(1) .....................................................102
(c)(2) .....................................................102
(c)(3) ...............................................Not Applicable
(d) ..................................................Not Applicable
(e) ........................................................102
ss.315 (a) ........................................................901
............................................................903
(b) ........................................................902
(c) ........................................................901
(d) ........................................................901
(e) ........................................................814
ss.316 (a) ........................................................812
............................................................813
(a)(1)(A) ..................................................802
............................................................812
(a)(1)(B) ..................................................813
(a)(2) ...............................................Not Applicable
(b) ........................................................808
ss.317 (a)(1) .....................................................803
(a)(2) .....................................................804
(b) ........................................................603
ss.318 (a) ........................................................107
-vi-
<PAGE>
INDENTURE, dated as of _________ 1, 1999, among _________________,
__________________________ (herein called the "Company"), having its registered
office at __________________________, a private limited company duly
incorporated and existing under the laws of England and Wales (herein called the
"Guarantor"), having its principal office at The Adelphi 1-11 John Adam Street,
London, England WC2N 6HT and THE BANK OF NEW YORK, a banking corporation of the
State of New York, having its principal corporate trust office at 101 Barclay
Street, New York, New York 10286, as Trustee (herein called the "Trustee").
RECITAL OF THE COMPANY
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance from time to time of its unsecured
subordinated debentures, notes or other evidences of indebtedness (herein called
the "Securities"), in an unlimited aggregate principal amount to be issued from
time to time in one or more series as contemplated herein with a Guarantee
endorsed thereon; and all acts necessary to make this Indenture a valid
agreement of the Company have been performed.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires, capitalized terms used herein
shall have the meanings assigned to them in Article One of this Indenture.
RECITAL OF THE GUARANTOR
The Guarantor has duly authorized the execution and delivery of this
Indenture to provide for the Guarantee of the Securities provided for herein;
and all acts necessary to make this Indenture a valid agreement of the
Guarantor, in accordance with its terms have been performed.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities or of any
series thereof, as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 101. DEFINITIONS.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(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 terms used herein without definition which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles in the United States, and, except as otherwise herein expressly
provided, the term "generally accepted accounting principles" with respect
to any computation required or permitted hereunder shall mean such
accounting principles as are generally accepted in the United States at the
date of such computation or, at the election of the Company from time to
time, at the date of the execution and delivery of this Indenture;
provided, however, that in determining generally accepted accounting
principles applicable to the Company, the Company shall, to the extent
required, conform to any order, rule or regulation of any administrative
agency, regulatory authority or other governmental body having jurisdiction
over the Company; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any particular
Article, Section or other subdivision.
Certain terms, used principally in Article Nine, are defined in that
Article.
"ACT", when used with respect to any Holder of a Security, has the
meaning specified in Section 104.
"ADDITIONAL AMOUNTS" means amounts that may be payable with respect to
Securities of one or more series or Tranches as may be provided pursuant to
Section 301.
"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 through one or
more intermediaries, whether through the ownership of voting securities, by
contract or otherwise; and the terms "CONTROLLING" and "CONTROLLED" have
meanings correlative to the foregoing.
"AGREEMENT OF LIMITED PARTNERSHIP" means the Amended and Restated
Agreement of Limited Partnership dated as of _________, 1999, relating to TXU
Europe Funding I, L.P., or an Amended and Restated Agreement of Limited
Partnership relating to a Partnership designated pursuant to Section 301,
hereof, as they may be amended, modified or otherwise supplemented from time to
time.
"AUTHENTICATING AGENT" means any Person (other than the Company or an
Affiliate of the Company) authorized by the Trustee pursuant to Section 915 to
act on behalf of the Trustee to authenticate one or more series of Securities or
Tranche thereof.
"AUTHORIZED OFFICER" means the Chairman of the Board, any director,
any managing director, the President, any Vice President, the Treasurer, any
Assistant Treasurer, or any other officer or agent of the Company or the
Guarantor, as the case may be, authorized by a Board Resolution of the Company
or the Guarantor, as the case requires, to act in respect of matters relating to
this Indenture.
"BOARD OF DIRECTORS" means either the board of directors of the
Company or the Guarantor, as the case requires, or any committee of that board
duly authorized to act in respect of matters relating to this Indenture or its
equivalent if the Company or the Guarantor has no board of directors.
"BOARD RESOLUTION" means a copy of a resolution certified by the
Secretary or an Assistant Secretary or a director or other persons designated by
the Board of Directors of the Company or the Guarantor, as the case requires, to
have been duly adopted by the Board of Directors of the Company or the
Guarantor, as the case requires, and to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"BUSINESS DAY", when used with respect to a Place of Payment or any
other particular location specified in the Securities or this Indenture, means
any day, other than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in such Place of Payment or other location are
generally authorized or required by law, regulation or executive order to remain
closed, except as may be otherwise specified as contemplated by Section 301.
"COMMISSION" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, as
amended, or, if at any time after the date of execution and delivery of this
Indenture such Commission is not existing and performing the duties now assigned
to it under the Trust Indenture Act, then the body, if any, performing such
duties at such time.
"COMPANY" means the Person named as the "Company" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"COMPANY REQUEST" or "COMPANY ORDER" means a written request or order
signed in the name of the Company by an Authorized Officer and delivered to the
Trustee.
"CORPORATE TRUST OFFICE" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date of execution and delivery of this
instrument is located on the 21st floor, at 101 Barclay Street-21W, New York,
New York 10286.
"CORPORATION" means a corporation, association, company, limited
liability company, partnership, joint stock company or business trust.
"DEFAULTED INTEREST" has the meaning specified in Section 307.
"DISCOUNT SECURITY" means any Security which provides for an amount
less than the principal amount thereof to be due and payable upon a declaration
of acceleration of the Maturity thereof pursuant to Section 802. "Interest" with
respect to a Discount Security means interest, if any, borne by such Security at
a Stated Interest Rate.
"DOLLAR" or "$" means a dollar or other equivalent unit in such coin
or currency of the United States as at the time shall be legal tender for the
payment of public and private debts.
"ELIGIBLE OBLIGATIONS" means:
(a) with respect to Securities denominated in Dollars, Government
Obligations; or
(b) with respect to Securities denominated in a currency other than
Dollars or in a composite currency, such other obligations or instruments
as shall be specified with respect to such Securities, as contemplated by
Section 301.
"EVENT OF DEFAULT" has the meaning specified in Section 801.
"GOVERNMENTAL AUTHORITY" means the government of any country or state
or of any county, municipality or other political subdivision of any of the
foregoing, or any department, agency, authority or other instrumentality of any
of the foregoing.
"GOVERNMENT OBLIGATIONS" means:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States and
entitled to the benefit of the full faith and credit thereof; and
(b) certificates, depositary receipts or other instruments which
evidence a direct ownership interest in obligations described in clause (a)
above or in any specific interest or principal payments due in respect
thereof; provided, however, that the custodian of such obligations or
specific interest or principal payments shall be a bank or trust company
(which may include the Trustee or any Paying Agent) subject to Federal or
state supervision or examination with a combined capital and surplus of at
least $50,000,000; and provided, further, that except as may be otherwise
required by law, such custodian shall be obligated to pay to the holders of
such certificates, depositary receipts or other instruments the full amount
received by such custodian in respect of such obligations or specific
payments and shall not be permitted to make any deduction therefrom.
"GUARANTEE" means any guarantee of the Guarantor endorsed on a
Security authenticated and delivered pursuant to this Indenture in the form
thereof established pursuant to Section 201 and shall include the guarantee set
forth in Section 1401.
"GUARANTOR" means the Person named as "Guarantor" in the first
paragraph of this Indenture until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Guarantor" shall include such successor Person.
"GUARANTOR ORDER" or "GUARANTOR REQUEST" mean, respectively, a written
order or request, as the case may be, signed in the name of the Guarantor by an
Authorized Officer of the Guarantor and delivered to the Trustee.
"HOLDER" means a Person in whose name a Security is registered in the
Security Register or, in the case of a Security issued in bearer, global form,
the bearer of such Security.
"INDENTURE" means this instrument as originally executed and delivered
and as it may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of a particular series of
Securities established as contemplated by Section 301.
"INTEREST PAYMENT DATE", when used with respect to any Security, means
the Stated Maturity of an installment of interest on such Security.
"JUDGMENT CURRENCY" has the meaning specified in Section 115(c).
"JURISDICTION OF INCORPORATION" shall mean each jurisdiction in which
the Company or the Guarantor, as the case requires, is incorporated or
organized.
"MATURITY", when used with respect to any Security, means the date on
which the principal of such Security or an installment of principal becomes due
and payable as provided in such Security or in this Indenture, whether at the
Stated Maturity, by declaration of acceleration, upon call for redemption or
otherwise.
"OFFICER'S CERTIFICATE" means a certificate signed by an Authorized
Officer of the Company or the Guarantor, as the case requires, and delivered to
the Trustee. An Officer's Certificate of the Company may be combined with an
Officer's Certificate of the Guarantor if signed by Authorized Officers of the
Company and the Guarantor. "OPINION OF COUNSEL" means a written opinion of
counsel, who may be counsel for the Company or the Guarantor, as the case
requires, or other counsel acceptable to the Trustee.
"OUTSTANDING", when used with respect to Securities, means, as of the
date of determination, all Securities theretofore authenticated and delivered
under this Indenture, except:
(a) Securities theretofore canceled or delivered to the Security
Registrar for cancellation;
(b) Securities deemed to have been paid in accordance with Section
701; and
(c) Securities which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Securities have been authenticated and
delivered pursuant to this Indenture, other than any such Securities in respect
of which there shall have been presented to the Trustee proof satisfactory to it
and the Company that such Securities are held by a bona fide purchaser or
purchasers in whose hands such Securities are valid obligations of the Company;
provided, however, that in determining whether or not the Holders of the
requisite principal amount of the Securities Outstanding under this Indenture,
or the Outstanding Securities of any series or Tranche, have given any request,
demand, authorization, direction, notice, consent or waiver hereunder or whether
or not a quorum is present at a meeting of Holders of Securities,
(x) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor (unless
the Company, such Affiliate or such obligor owns all Securities Outstanding
under this Indenture, or (except for the purposes of actions to be taken by
Holders of (i) more than one series voting as a class under Section 812 or
(ii) more than one series or more than one Tranche, as the case may be,
voting as a class under Section 1202) all Outstanding Securities of each
such series and each such Tranche, as the case may be, determined without
regard to this clause (x)) shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization,
direction, notice, consent or waiver or upon any such determination as to
the presence of a quorum, only Securities which the Trustee knows to be so
owned shall be so disregarded; provided, however, that Securities so owned
which have been pledged in good faith may be regarded as Outstanding if the
pledgee establishes to the satisfaction of the Trustee the pledgee's right
so to act with respect to such Securities and that the pledgee is not the
Company or any other obligor upon the Securities or any Affiliate of the
Company or of such other obligor;
(y) the principal amount of a Discount Security that shall be deemed
to be Outstanding for such purposes shall be the amount of the principal
thereof that would be due and payable as of the date of such determination
upon a declaration of acceleration of the Maturity thereof pursuant to
Section 802; and
(z) the principal amount of any Security which is denominated in a
currency other than Dollars or in a composite currency that shall be deemed
to be Outstanding for such purposes shall be the amount of Dollars which
could have been purchased by the principal amount (or, in the case of a
Discount Security, the Dollar equivalent on the date determined as set
forth below of the amount determined as provided in (y) above) of such
currency or composite currency evidenced by such Security, in each case
certified to the Trustee in an Officer's Certificate of the Company, based
(i) on the average of the mean of the buying and selling spot rates quoted
by three banks which are members of the New York Clearing House Association
selected by the Company in effect at 11:00 a.m. (New York time) in The City
of New York on the fifth Business Day preceding any such determination or
(ii) if on such fifth Business Day it shall not be possible or practicable
to obtain such quotations from three such banks, on such other quotations
or alternative methods of determination which shall be as consistent as
practicable with the method set forth in (i) above;
provided, further, that, in the case of any Security the principal of which is
payable from time to time without presentment or surrender, the principal amount
of such Security that shall be deemed to be Outstanding at any time for all
purposes of this Indenture shall be the original principal amount thereof less
the aggregate amount of principal thereof theretofore paid.
"PARTNERSHIP" means TXU Europe Funding I, L.P., or other Partnership
designated pursuant to Section 301 hereof or any permitted successor under the
Agreement of Limited Partnership pertaining to such Partnership.
"PREFERRED PARTNERSHIP SECURITIES" means the limited partnership
interests, if any, issued pursuant to the Agreement of Limited Partnership.
"PREFERRED TRUST SECURITIES" means any preferred trust interests
issued by a Trust or similar securities issued by permitted successors to such
Trust in accordance with the Trust Agreement pertaining to such Trust
"PAYING AGENT" means any Person, including the Company or the
Guarantor, 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 or the
Guarantor.
"PERIODIC OFFERING" means an offering of Securities of a series from
time to time any or all of the specific terms of which Securities, including
without limitation the rate or rates of interest, if any, thereon, the Stated
Maturity or Maturities thereof and the redemption provisions, if any, with
respect thereto, are to be determined by the Company or its agents upon the
issuance of such Securities.
"PERSON" means any individual, corporation, joint venture, trust or
unincorporated organization or any Governmental Authority.
"PLACE OF PAYMENT", when used with respect to the Securities of any
series, or any Tranche thereof, means the place or places, specified as
contemplated by Section 301, at which, subject to Section 602, principal of and
premium, if any, and interest, if any, and Additional Amounts, if any, on the
Securities of such series or Tranche are payable.
"PREDECESSOR SECURITY" of any particular Security means every previous
Security evidencing all or a portion of the same debt as that evidenced by such
particular Security; and, for the purposes of this definition, any Security
authenticated and delivered under Section 306 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed (to the extent
lawful) to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"REDEMPTION DATE", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"REDEMPTION PRICE", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"REGULAR RECORD DATE" for the interest payable on any Interest Payment
Date on the Securities of any series means the date specified for that purpose
as contemplated by Section 301.
"REQUIRED CURRENCY" has the meaning specified in Section 311.
"RESPONSIBLE OFFICER", when used with respect to the Trustee, means
any Vice President, Assistant Vice President, Trust Officer or other officer of
the Trustee assigned by the Trustee to the Corporation Trust Administration
Division of the Trustee (or any successor division or department of the
Trustee).
"SECURITIES" has the meaning stated in the first recital of this
Indenture and more particularly means any securities authenticated and delivered
under this Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the respective
meanings specified in Section 305.
"SENIOR INDEBTEDNESS" means all obligations (other than non-recourse
obligations and the indebtedness issued under this Indenture) of, or guaranteed
or assumed by, the Company for borrowed money, including both senior and
subordinated indebtedness for borrowed money (other than the Securities), or for
the payment of money relating to any lease which is capitalized on the
consolidated balance sheet of the Company and its subsidiaries in accordance
with generally accepted accounting principles as in effect from time to time, or
evidenced by bonds, debentures, notes or other similar instruments, and in each
case, amendments, renewals, extensions, modifications and refundings of any such
indebtedness or obligations, whether existing as of the date of this Indenture
or subsequently incurred by the Company unless, in the case of any particular
indebtedness, renewal, extension or refunding, the instrument creating or
evidencing the same or the assumption or guarantee of the same expressly
provides that such indebtedness, renewal, extension or refunding is not superior
in right of payment to or is pari passu with the Securities; provided that the
Company's obligations under the Guaranty shall not be deemed to be Senior
Indebtedness.
"SPECIAL RECORD DATE" for the payment of any Defaulted Interest on the
Securities of any series means a date fixed by the Trustee pursuant to Section
307.
"STATED INTEREST RATE" means a rate (whether fixed or variable) at
which an obligation by its terms is stated to bear simple interest. Any
calculation or other determination to be made under this Indenture by reference
to the Stated Interest Rate on a Security shall be made without regard to the
effective interest cost to the Company of such Security and without regard to
the Stated Interest Rate on, or the effective cost to the Company of, any other
indebtedness in respect of which the Company's obligations are evidenced or
secured in whole or in part by such Security.
"STATED MATURITY", when used with respect to any obligation or any
installment of principal thereof or interest thereon, means the date 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, acceleration, purchase or extension).
"TRANCHE" means a group of Securities which (a) are of the same series
and (b) have identical terms except as to principal amount and/or date of
issuance.
"TRUST" means TXU Europe Capital I, a statutory business trust formed
under the laws of the State of Delaware, or any other Trust designated pursuant
to Section 301 hereof or any permitted successor under the Trust Agreement
pertaining to such Trust.
"TRUST AGREEMENT" means the Amended and Restated Trust Agreement,
dated as of _________ __, ____, relating to TXU Europe Capital I, or an Amended
and Restated Trust Agreement relating to a Trust designated pursuant to Section
301 hereof, in each case, among the Company, as Depositor, the trustees named
therein and several holders referred to therein as they may be amended from time
to time.
"TRUST INDENTURE ACT" means, as of any time, the Trust Indenture Act
of 1939, or any successor statute, as in effect at such time.
"TRUSTEE" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
with respect to one or more series of Securities pursuant to the applicable
provisions of this Indenture, and thereafter "Trustee" shall mean or include
each Person who is then a Trustee hereunder, and if at any time there is more
than one such Person, "Trustee" as used with respect to the Securities of any
series shall mean the Trustee with respect to Securities of that series.
"UNITED STATES" means the United States of America, its Territories,
its possessions and other areas subject to its political jurisdiction.
SECTION 102. COMPLIANCE CERTIFICATES AND OPINIONS.
Except as otherwise expressly provided in this Indenture, upon any
application or request by the Company or the Guarantor to the Trustee to take
any action under any provision of this Indenture, the Company and the Guarantor
shall each, if requested by the Trustee, furnish to the Trustee an Officer's
Certificate stating that all conditions precedent, if any, provided for in this
Indenture relating to the proposed action (including any covenants compliance
with which constitutes a condition precedent) have been complied with and an
Opinion of Counsel stating that in the opinion of such counsel all such
conditions precedent, if any, have been complied with, except that in the case
of any such application or request as to which the furnishing of such documents
is specifically required by any provision of this Indenture relating to such
particular application or request, no additional certificate or opinion need be
furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(a) a statement that each Person signing such certificate or opinion
has read such covenant or condition and the definitions herein relating
thereto;
(b) 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;
(c) a statement that, in the opinion of each such Person, such Person
has made such examination or investigation as is necessary to enable such
Person 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 Person,
such condition or covenant has been complied with.
SECTION 103. FORM OF DOCUMENTS DELIVERED TO TRUSTEE.
Any certificate or opinion of an officer of the Company or the
Guarantor may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless such officer
knows, or in the exercise of reasonable care should know, that the certificate
or opinion or representations with respect to the matters upon which such
officer's certificate or opinion are 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
of the Company stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion or
representations with respect to such matters are erroneous. In addition, any
Opinion of Counsel may be based (without further examination or investigation),
insofar as it relates to or is dependent upon matters covered in an Opinion of
Counsel rendered by other counsel, upon such other Opinion of Counsel, unless
such counsel has actual knowledge that the Opinion of Counsel rendered by such
other counsel with respect to the matters upon which his Opinion of Counsel may
be based as aforesaid are erroneous. If, in order to render any Opinion of
Counsel provided for herein, the signer thereof shall deem it necessary that
additional facts or matters be stated in any Officer's Certificate provided for
herein, then such certificate may state all such additional facts or matters as
the signer of such Opinion of Counsel may request.
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.
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.
Whenever, subsequent to the receipt by the Trustee of any Board
Resolution, Officer's Certificate, Opinion of Counsel or other document or
instrument, a clerical, typographical or other inadvertent or unintentional
error or omission shall be discovered therein, a new document or instrument may
be substituted therefor in corrected form with the same force and effect as if
originally filed in the corrected form and, irrespective of the date or dates of
the actual execution and/or delivery thereof, such substitute document or
instrument shall be deemed to have been executed and/or delivered as of the date
or dates required with respect to the document or instrument for which it is
substituted. Anything in this Indenture to the contrary notwithstanding, if any
such corrective document or instrument indicates that action has been taken by
or at the request of the Company which could not have been taken had the
original document or instrument not contained such error or omission, the action
so taken shall not be invalidated or otherwise rendered ineffective but shall be
and remain in full force and effect, except to the extent that such action was a
result of willful misconduct or bad faith. Without limiting the generality of
the foregoing, any Securities issued under the authority of such defective
document or instrument shall nevertheless be the valid obligations of the
Company entitled to the benefits of this Indenture equally and ratably with all
other Outstanding Securities, except as aforesaid.
SECTION 104. ACTS OF HOLDERS.
(a) Any request, demand, authorization, direction, notice, consent,
election, waiver or other action provided by this Indenture to be made,
given or taken by Holders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders in person
or by an agent duly appointed in writing or, alternatively, may be embodied
in and evidenced by the record of Holders voting in favor thereof, either
in person or by proxies duly appointed in writing, at any meeting of
Holders duly called and held in accordance with the provisions of Article
Thirteen, or a combination of such instruments and any such record. Except
as herein otherwise expressly provided, such action shall become effective
when such instrument or instruments or record or both are delivered to the
Trustee and, where it is hereby expressly required, to the Company and the
Guarantor. Such instrument or instruments and any such record (and the
action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Holders signing such instrument or
instruments and so voting at any such meeting. Proof of execution of any
such instrument or of a writing appointing any such agent, or of the
holding by any Person of a Security, shall be sufficient for any purpose of
this Indenture and (subject to Section 901) conclusive in favor of the
Trustee, the Company and the Guarantor, if made in the manner provided in
this Section. The record of any meeting of Holders shall be proved in the
manner provided in Section 1306.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof or may be proved in any other manner which the Trustee
and the Company deem sufficient. 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.
(c) The principal amount (except as otherwise contemplated in clause
(y) of the first proviso to the definition of Outstanding) and serial
numbers of Securities held by any Person, and the date of holding the same,
shall be proved by the Security Register.
(d) Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of a Holder 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,
the Company or the Guarantor in reliance thereon, whether or not notation
of such action is made upon such Security.
(e) Until such time as written instruments shall have been delivered
to the Trustee with respect to the requisite percentage of principal amount
of Securities for the action contemplated by such instruments, any such
instrument executed and delivered by or on behalf of a Holder may be
revoked with respect to any or all of such Securities by written notice by
such Holder or any subsequent Holder, proven in the manner in which such
instrument was proven.
(f) Securities of any series, or any Tranche thereof, authenticated
and delivered after any Act of Holders may, and shall if required by the
Trustee, bear a notation in form approved by the Trustee as to any action
taken by such Act of Holders. If the Company shall so determine, new
Securities of any series, or any Tranche thereof, so modified as to
conform, in the opinion of the Trustee and the Company, to such action may
be prepared and executed by the Company and the Guarantor and authenticated
and delivered by the Trustee in exchange for Outstanding Securities of such
series or Tranche.
(g) If the Company or Guarantor shall solicit from Holders any
request, demand, authorization, direction, notice, consent, waiver or other
Act, the Company may, at its option, fix in advance a record date for the
determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but neither
the Company nor the Guarantor shall have any obligation to do so. If such a
record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other Act may be given before or after such
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 the Outstanding Securities
have authorized or agreed or consented to such request, demand,
authorization, direction, notice, consent, waiver or other Act, and for
that purpose the Outstanding Securities shall be computed as of the record
date.
SECTION 105. NOTICES, ETC. TO TRUSTEE, COMPANY OR GUARANTOR.
Any request, demand, authorization, direction, notice, consent,
election, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with, the
Trustee by any Holder or by the Company or the Guarantor, or the Company or the
Guarantor by the Trustee or by any Holder, shall be sufficient for every purpose
hereunder (unless otherwise herein expressly provided) if in writing and
delivered personally to an officer or other responsible employee of the
addressee at the applicable location set forth below or at such other location
as such party may from time to time designate by written notice, or transmitted
by facsimile transmission or other direct written electronic means to such
telephone number or other electronic communications address as the parties
hereto shall from time to time designate by written notice, or transmitted by
certified or registered mail, charges prepaid, to the applicable address set
forth below or to such other address as such party may from time to time
designate by written notice:
If to the Trustee, to:
The Bank of New York
Corporate Trust Administration, 21st Floor
101 Barclay Street - 21W
New York, New York 10286
Attention: Vice President, Corporate Trust Administration
Telephone: (212) 815-5375
Telecopy: (212) 815-5915
If to the Company, to:
__________________________
__________________________
__________________________
__________________________
__________________________
__________________________
__________________________
With a copy to:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
Telephone: 011-44-171-879-8081
Telecopy: 011-44-171-___-____
If to the Guarantor, to:
TXU Europe Limited
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Attention: Treasurer
Telephone: 011-44-171-879-8081
Telecopy: 011-44-171-___-____
Any communication contemplated herein shall be deemed to have
been made, given, furnished and filed if personally delivered, on the date of
delivery, if transmitted by facsimile transmission or other direct written
electronic means, on the date of receipt, and if transmitted by certified or
registered mail, on the date of receipt.
SECTION 106. NOTICE TO HOLDERS OF SECURITIES; WAIVER.
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of any event, such notice shall be sufficiently
given, and shall be deemed given, to Holders if in writing and mailed,
first-class postage prepaid, to each Holder affected by such event, at the
address of such Holder as it appears in the Security Register, not later than
the latest date, if any, and not earlier than the earliest date, if any,
prescribed for the giving of such notice.
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 to
Holders by mail (as in the case of bearer Securities where the address of the
Holder is not known to the Security Registrar), then such notification as shall
be made with the approval of the Trustee shall constitute a sufficient
notification for every purpose hereunder. 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.
Any notice required by this Indenture may be waived in writing by the
Person entitled to receive such notice, either before or after the event
otherwise to be specified therein, and such waiver shall be the equivalent of
such notice. Waivers of notice by Holders shall be filed with the Trustee, but
such filing shall not be a condition precedent to the validity of any action
taken in reliance upon such waiver.
SECTION 107. CONFLICT WITH TRUST INDENTURE ACT.
If any provision of this Indenture limits, qualifies or conflicts with
another provision hereof which is required or deemed to be included in this
Indenture by, or is otherwise governed by, any of the provisions of the Trust
Indenture Act, such other provision shall control; and if any provision hereof
otherwise conflicts with the Trust Indenture Act, the Trust Indenture Act shall
control unless otherwise provided as contemplated by Section 301 with respect to
any series of Securities.
SECTION 108. EFFECT OF HEADINGS AND TABLE OF CONTENTS.
The Article and Section headings in this Indenture and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. SUCCESSORS AND ASSIGNS.
All covenants and agreements in this Indenture by the Company or the
Guarantor and Trustee shall bind their respective successors and assigns,
whether so expressed or not.
SECTION 110. SEPARABILITY CLAUSE.
In case any provision in this Indenture or the Securities or the
Guarantees shall be held to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 111. BENEFITS OF INDENTURE.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, nothing in this Indenture, the Securities or the
Guarantees, express or implied, shall give to any Person, other than the parties
hereto, their successors hereunder, the Holders and, so long as the notice
described in Section 1613 hereof has not been given, the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICT OF LAWS, EXCEPT TO THE EXTENT THAT THE LAW OF
ANY OTHER JURISDICTION SHALL BE MANDATORILY APPLICABLE; PROVIDED, HOWEVER, THAT
ALL MATTERS GOVERNING THE AUTHORIZATION BY THE COMPANY OF THIS INDENTURE AND THE
SECURITIES, THE AUTHORIZATION OF THE GUARANTOR OF THE GUARANTEES AND THE
CORPORATE EXISTENCE OF THE COMPANY AND THE GUARANTOR, AS THE CASE MAY BE, WILL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE JURISDICTION
IN WHICH THE COMPANY OR THE GUARANTOR, AS THE CASE MAY BE, IS INCORPORATED OR
ORGANIZED.
SECTION 113. LEGAL HOLIDAYS.
In any case where any Interest Payment Date, Redemption Date or Stated
Maturity of any Security shall not be a Business Day at any Place of Payment,
then (notwithstanding any other provision of this Indenture or of the Securities
other than a provision in Securities of any series, or any Tranche thereof, or
in the Board Resolution or Officer's Certificate which establishes the terms of
the Securities of such series or Tranche, which specifically states that such
provision shall apply in lieu of this Section) payment of interest or principal
and premium, if any, need not be made at such Place of Payment on such date, but
may be made on the next succeeding Business Day at such Place of Payment, with
the same force and effect, and in the same amount, as if made on the Interest
Payment Date or Redemption Date, or at the Stated Maturity, as the case may be,
and, if such payment is made or duly provided for on such Business Day, no
interest shall accrue on the amount so payable for the period from and after
such Interest Payment Date, Redemption Date or Stated Maturity, as the case may
be, to such Business Day.
SECTION 114. AGENT TO RECEIVE SERVICE OF PROCESS.
Unless otherwise specified in an Officer's Certificate of the Company
or the Guarantor delivered to the Trustee, Thelen Reid & Priest LLP in New York
City will be the authorized agent of the Company and the Guarantor to receive
service of process in the State of New York.
SECTION 115. CONSENT TO JURISDICTION; APPOINTMENT OF AGENT FOR SERVICE; JUDGMENT
CURRENCY; WAIVER OF IMMUNITIES.
(a) Consent to Jurisdiction. The Company and the Guarantor each
irrevocably consents to the nonexclusive jurisdiction of any court of the
State of New York or any United States Federal court sitting, in each case,
in the Borough of Manhattan, The City of New York, New York, United States
of America, and any appellate court from any thereof in any suit, action or
proceeding that may be brought in connection with this Indenture, the
Securities or the Guarantees, and waives any immunity from the jurisdiction
of such courts. The Company and the Guarantor each irrevocably waives, to
the fullest extent permitted by law, any objection to any such suit, action
or proceeding that may be brought in such courts whether on the grounds of
venue, residence or domicile or on the ground that any such suit, action or
proceeding has been brought in an inconvenient forum. The Company and the
Guarantor each agrees, to the fullest extent that it lawfully may do so,
that final judgment in any such suit, action or proceeding brought in such
a court shall be conclusive and binding upon the Company or the Guarantor,
as the case may be, and waives, to the fullest extent permitted by law, any
objection to the enforcement by any competent court in the Jurisdiction of
Incorporation of judgments validly obtained in any such court in New York
on the basis of such suit, action or proceeding; provided, however, that
the Company or the Guarantor does not waive, and the foregoing provisions
of this sentence shall not constitute or be deemed to constitute a waiver
of, (i) any right to appeal any such judgment, to seek any stay or
otherwise to seek reconsideration or review of any such judgment, (ii) any
stay of execution or levy pending an appeal from, or a suit, action or
proceeding for reconsideration of, any such judgment, or (iii) any other
right or remedy of the Company or the Guarantor to the extent not expressly
waived in accordance with this Section 115.
(b) Appointment of Agent for Service. The Company and the Guarantor
each has designated and appointed Thelen Reid & Priest LLP, 40 West 57th
Street, New York, New York 10019, as its authorized agent upon which
process may be served in any suit or proceeding in any Federal or State
court in the Borough of Manhattan, The City of New York arising out of or
relating to the Securities, the Guarantees or this Indenture, but for that
purpose only, and agrees that service of process upon said agent shall be
deemed in every respect effective service of process upon it in any such
suit or proceeding in any Federal or State court in the Borough of
Manhattan, The City of New York. Such appointment shall be irrevocable so
long as any of the Securities remain Outstanding until the appointment of a
successor by the Company and the Guarantor and such successor's acceptance
of such appointment. Upon such acceptance, the Company and the Guarantor
shall notify the Trustee of the name and address of such successor. The
Company and the Guarantor further agree to take any and all action,
including the execution and filing of any and all such documents and
instruments, as may be necessary to continue such designation and
appointment of said agent in full force and effect so long as any of the
Securities shall be Outstanding. The Trustee shall not be obligated and
shall have no responsibility with respect to any failure by the Company or
the Guarantor to take any such action.
Nothing in this Section shall affect the right of the Trustee or any
Holder of any Security to serve process in any manner permitted by applicable
law or limit the right of the Trustee or any Holder of any Security to bring
proceedings against the Company or the Guarantor in the courts of any other
jurisdiction or jurisdictions.
(c) Judgment Currency. The Company and the Guarantor each agrees, to
the fullest extent that it may effectively do so under applicable law, that
(a) if for the purpose of obtaining judgment in any court it is necessary
to convert the sum due in respect of the principal of, or premium or
interest, if any, on the Securities of any series from the Required
Currency into a currency in which a judgment will be rendered (the
"Judgment Currency"), the rate of exchange used shall be the rate at which,
in accordance with normal banking procedures, the Trustee could purchase
the Required Currency with the Judgment Currency and (b) its obligations
under this Indenture to make payments in the Required Currency (i) shall
not be discharged or satisfied by any tender, or any recovery pursuant to
any judgment (whether or not entered in accordance with subsection (a)), in
any currency other than the Required Currency, except to the extent that
such tender or recovery shall result in the actual receipt, by the payee,
of the full amount of the Required Currency expressed to be payable in
respect of such payments, (ii) shall be enforceable as an alternative or
additional cause of action for the purpose of recovering the amount, if any
by which actual receipt shall fall short of the full amount of the Required
Currency so expressed to be payable and (iii) shall not be affected by
judgment being obtained for any other sum due under this Indenture.
(d) Waiver of Immunities. To the extent that the Company, the
Guarantor or any of their respective properties, assets or revenues may
have or may hereafter become entitled to, or have attributed to it, any
right of immunity, on the grounds of sovereignty or otherwise, from legal
action, suit or proceeding, from the giving of any relief in any thereof,
from set-off or counterclaim, from the jurisdiction of any court, from
service of process, from attachment upon or prior to judgment, from
attachment in aid of execution of judgment, or from execution of judgment,
or other legal process or proceeding for the giving of any relief or for
the enforcement of any judgment, in any jurisdiction in which proceedings
may at any time be commenced, with respect to its obligations, liabilities
or any other matter under or arising out of or in connection with this
Indenture or the Securities issued hereunder or the Guarantees endorsed
thereon, each of the Company and the Guarantor hereby irrevocably and
unconditionally waives and agrees not to plead or claim, any such immunity
and consents to such relief and enforcement. Nothing in this paragraph
shall be deemed to waive any defense (other than such immunity) available
to either the Company or the Guarantor.
ARTICLE TWO
SECURITY FORMS
SECTION 201. FORMS GENERALLY.
The definitive Securities of each series shall be in substantially the
form or forms thereof established in the indenture supplemental hereto
establishing such series or in a Board Resolution establishing such series, or
in an Officer's Certificate of the Company pursuant to such supplemental
indenture or Board Resolution, in each case with such appropriate terms,
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such 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 Person executing such Securities, as
evidenced by their execution thereof. The Guarantees to be endorsed on such
Securities shall be in substantially the form or forms thereof established in an
indenture supplemental hereto establishing such series or in an Officer's
Certificate of the Guarantor delivered to the Trustee in connection with the
establishment of such series, in each case with such appropriate terms,
insertions, omissions, substitutions and other variations as may be determined
by the Authorized Officer signing such supplemental indenture or Officer's
Certificate, and may have such letters, numbers or other marks of identification
and such legends or endorsements place thereon as may be required to comply with
the rules of any securities exchange or as may, consistently herewith, be
determined by the Person executing such Guarantees. If the form or forms of
Securities of any series or Guarantees endorsed thereon, as the case may be, are
established in a Board Resolution or in an Officer's Certificate pursuant to a
Board Resolution, such Board Resolution and Officer's Certificate, if any, shall
be delivered to the Trustee at or prior to the delivery of the Company Order
contemplated by Section 303 for the authentication and delivery of such
Securities.
Unless otherwise specified as contemplated by Section 301 or clause
(g) of Section 1201, the Securities of each series shall be issuable in
registered form without coupons. The definitive Securities and Guarantees
endorsed thereon shall be produced in such manner as shall be determined by the
Person executing such Securities or Guarantees, as evidenced by their execution
thereof.
SECTION 202. FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION.
The Trustee's certificate of authentication shall be in substantially
the form set forth below:
This is one of the Securities of the series designated
therein and the Guarantee thereof referred to in the
within-mentioned Indenture.
Dated:
---------------------------------
as Trustee
By: ___________________________
Authorized Signatory
ARTICLE THREE
THE SECURITIES
SECTION 301. AMOUNT UNLIMITED; ISSUABLE IN SERIES.
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is unlimited.
The Securities may be issued in one or more series. Subject to the
last paragraph of this Section, prior to the authentication and delivery of
Securities of any series there shall be established by specification in a
supplemental indenture or in a Board Resolution of the Company, or in an
Officer's Certificate of the Company 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 304, 305, 306, 406 or 1206 and except for any
Securities which, pursuant to Section 303, 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, or any Tranche thereof, shall be
payable on any Interest Payment Date, if other than 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 on which the principal of the Securities of such
series, or any Tranche thereof, 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 of this
Indenture or otherwise (without regard to any provisions for redemption,
prepayment, acceleration, purchase or extension);
(e) the rate or rates at which the Securities of such series, or any
Tranche thereof, 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 Maturity,
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 of 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 as
contemplated by Section 312; and the basis of computation of interest, if
other than as provided in Section 310;
(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,
or any Tranche thereof, shall be payable, (2) registration of transfer of
Securities of such series, or any Tranche thereof, may be effected, (3)
exchanges of Securities of such series, or any Tranche thereof, may be
effected and (4) notices and demands to or upon the Company in respect of
the Securities of such series, or any Tranche thereof, and this Indenture
may be served; the Security Registrar for such series or Tranche; and if
such is the case, 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, or any Tranche thereof, 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, or any Tranche
thereof, resulting in delisting of such Securities from any national
exchange;
(h) the obligation or obligations, if any, of the Company to redeem or
purchase or repay the Securities of such series, or any Tranche thereof,
pursuant to any sinking fund or other 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 or
repaid, in whole or in part, pursuant to such obligation, and applicable
exceptions to the requirements of Section 404 in the case of mandatory
redemption or redemption or repayment at the option of the Holder;
(i) the denominations in which Securities of such series, or any
Tranche thereof, shall be issuable if other than denominations of $25 and
any integral multiple thereof;
(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, or any Tranche thereof, 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, or any Tranche thereof, 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, or any Tranche thereof, 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) if the amount payable in respect of principal of or premium, if
any, or interest, if any, on the Securities of such series, or any Tranche
thereof, may be determined with reference to an index or other fact or
event ascertainable outside of this Indenture, the manner in which such
amounts shall be determined to the extent not established pursuant to
clause (e) of this paragraph;
(n) if other than the principal amount thereof, the portion of the
principal amount of Securities of such series, or any Tranche thereof,
which shall be payable upon declaration of acceleration of the Maturity
thereof pursuant to Section 802;
(o) any Events of Default, in addition to those specified in Section
801, with respect to the Securities of such series, and any covenants of
the Company or the Guarantor for the benefit of the Holders of the
Securities of such series, or any Tranche thereof, in addition to those set
forth in Article Six or any exceptions to those set forth in Article Six;
(p) the terms, if any, pursuant to which the Securities of such
series, or any Tranche thereof, may be converted into or exchanged for
shares of capital stock or other securities of the Company or any other
Person;
(q) the obligations or instruments, if any, which shall be considered
to be Eligible Obligations in respect of the Securities of such series, or
any Tranche thereof, 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 701;
(r) if the Securities of such series, or any Tranche thereof, are to
be issued in global form, (i) any limitations on the rights of the Holder
or Holders of such Securities to transfer or exchange the same or to obtain
the registration of transfer thereof, (ii) any limitations on the rights of
the Holder or Holders thereof to obtain certificates therefor in definitive
form in lieu of temporary form and (iii) any and all other matters
incidental to such Securities;
(s) if the Securities of such series, or any Tranche thereof, are to
be issuable as bearer securities, any and all matters incidental thereto
which are not specifically addressed in a supplemental indenture as
contemplated by clause (g) of Section 1201;
(t) to the extent not established pursuant to clause (r) of this
paragraph, any limitations on the rights of the Holders of the Securities
of such Series, or any Tranche thereof, 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, or any Tranche thereof, the amount or terms
thereof;
(u) any exceptions to Section 113, or variation in the definition of
Business Day, with respect to the Securities of such series, or any Tranche
thereof;
(v) any collateral security or assurance for the securities of such
series;
(w) any rights or duties of another Person to assume the obligations
of the Company with respect to the Securities of such series (whether as
joint obligor, primary obligor, secondary obligor or substitute obligor)
and any rights or duties to discharge and release any obligor with respect
to the Securities of such series or the Indenture to the extent related to
such series;
(x) any rights to change or eliminate any provision of this Indenture
or to add any new provision to this Indenture (by supplemental indenture or
otherwise) without the consent of the Holders of the Securities of such
series, or with the consent of the Holders of the Securities of such series
as specified for such series;
(y) the agent of the Company and the Guarantor to receive service of
process in the State of New York, if other than Thelen Reid & Priest LLP in
New York City; and
(z) the designation of the Trust and the Partnership to which
securities of such series are to be issued;
(aa) any other terms of the Securities of such series, or any Tranche
thereof, not inconsistent with the provisions of this Indenture.
The terms of the Securities include any additional amounts that may be
payable in certain circumstances with respect to such Securities.
With respect to Securities of a series subject to a Periodic Offering,
the indenture supplemental hereto or the Board Resolution which establishes such
series, or the Officer's Certificate pursuant to such supplemental indenture or
Board Resolution, as the case may be, may provide general terms or parameters
for Securities of such series and provide either that the specific terms of
Securities of such series, or any Tranche thereof, shall be specified in a
Company Order or that such terms shall be determined by the Company or its
agents in accordance with procedures specified in a Company Order as
contemplated by clause (b) of Section 303.
The Securities of each series shall be subordinated in right of
payment to Senior Indebtedness as provided in Article Sixteen.
SECTION 302. DENOMINATIONS.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities of each
series shall be issuable in denominations of $25 and any integral multiple
thereof.
SECTION 303. EXECUTION, AUTHENTICATION, DELIVERY AND DATING.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, the Securities shall be
executed on behalf of the Company by an Authorized Officer of the Company, and
may have the corporate seal of the Company affixed thereto or reproduced thereon
attested by any other Authorized Officer of the Company or by the Secretary or
an Assistant Secretary of the Company. The signature of any or all of these
officers on the Securities may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at the time of execution Authorized Officers of the Company or the
Secretary or an Assistant Secretary of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
Unless otherwise provided as contemplated by Section 301, with respect
to any series of Securities or Tranche thereof, Guarantees to be endorsed on any
Securities shall be executed and delivered in accordance with the provisions of
Section 1402.
The Trustee shall authenticate and deliver Securities of a series with
the Guarantees endorsed thereon, for original issue, at one time or from time to
time in accordance with the Company Order referred to below, upon receipt by the
Trustee of:
(a) the instrument or instruments establishing the form or forms and
terms of the Securities of such series and the Guarantees to be endorsed
thereon, as provided in Sections 201 and 301;
(b) a Company Order requesting the authentication and delivery of such
Securities, and, to the extent that the terms of such Securities shall not
have been established in an indenture supplemental hereto or in a Board
Resolution, or in an Officer's Certificate pursuant to a supplemental
indenture or Board Resolution, all as contemplated by Sections 201 and 301,
either (i) establishing such terms or (ii) in the case of Securities of a
series subject to a Periodic Offering, specifying procedures, acceptable to
the Trustee, by which such terms are to be established (which procedures
may provide, to the extent acceptable to the Trustee, for authentication
and delivery pursuant to oral or electronic instructions from the Company
or any agent or agents thereof, which oral instructions are to be promptly
confirmed electronically or in writing), in either case in accordance with
the instrument or instruments delivered pursuant to clause (a) above;
(c) A Guarantor Order (which may be combined with a Company Order
hereunder) requesting authentication and delivery of the Guarantees to be
endorsed on such Securities;
(d) the Securities of such series, each executed on behalf of the
Company by an Authorized Officer of the Company and having a Guarantee
endorsed thereon executed on behalf of the Guarantor by an Authorized
Officer of the Guarantor;
(e) one or more Opinions of Counsel of the Company and the Guarantor
to the effect that:
(i)(A) the form or forms of such Securities have been duly
authorized by the Company, (B) the form or forms of such Guarantees
have been duly authorized by the Guarantor, and (C) the form or forms
of the Securities and the Guarantees have been established in
conformity with the provisions of this Indenture;
(ii)(A) the terms of such Securities have been duly authorized by
the Company, (B) the terms of such Guarantees have been duly
authorized by the Guarantor, and (C) the terms of the Securities and
the Guarantees have been established in conformity with the provisions
of this Indenture; and
(iii) such Securities and the Guarantees endorsed thereon, when
authenticated and delivered by the Trustee and issued and delivered by
the Company and the Guarantor in the manner and subject to any
conditions specified in such Opinion of Counsel, will have been duly
issued under this Indenture and will constitute valid and legally
binding obligations of the Company and the Guarantor, respectively,
entitled to the benefits provided by this Indenture, and enforceable
in accordance with their terms, subject, as to enforcement, to laws
relating to or affecting generally the enforcement of creditors'
rights, including, without limitation, bankruptcy and insolvency laws
and to general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law);
provided, however, that, with respect to Securities of a series subject to a
Periodic Offering, the Trustee shall be entitled to receive such Opinion of
Counsel only once at or prior to the time of the first authentication of such
Securities and the Guarantees endorsed thereon (provided that such Opinion of
Counsel addresses the authentication and delivery of all Securities of such
series) and that in lieu of the opinions described in clauses (ii) and (iii)
above Counsel may opine that:
(x) when the terms of such Securities and the Guarantees endorsed
thereon shall have been established pursuant to a Company Order or Orders
and, if applicable, a Guarantor Order or Orders or pursuant to such
procedures (acceptable to the Trustee) as may be specified from time to
time by a Company Order or Orders, and, if applicable, a Guarantor Order or
Orders all as contemplated by and in accordance with the instrument or
instruments delivered pursuant to clause (a) above, such terms will have
been duly authorized by the Company and the Guarantor, respectively, and
will have been established in conformity with the provisions of this
Indenture; and
(y) such Securities and the Guarantees endorsed thereon, when (1)
executed by the Company or the Guarantor, as the case may be, (2)
authenticated and delivered by the Trustee in accordance with this
Indenture and the Company Order or Orders or specified procedures referred
to in paragraph (x) above, (3) issued and delivered by the Company and the
Guarantor in the manner and subject to any conditions specified in such
Opinion of Counsel, and (4) paid for, all as contemplated by and in
accordance with the aforesaid Company Order or Orders and, if applicable, a
Guarantor Order or Orders or specified procedures, as the case may be, will
have been duly issued under this Indenture and will constitute valid and
legally binding obligations of the Company and the Guarantor, respectively,
entitled to the benefits provided by the Indenture, and enforceable in
accordance with their terms, subject, as to enforcement, to laws relating
to or affecting generally the enforcement of creditors' rights, including,
without limitation, bankruptcy and insolvency laws, and to general
principles of equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
With respect to Securities of a series subject to a Periodic Offering,
the Trustee may conclusively rely, as to the authorization by the Company and
the Guarantor of any of such Securities and Guarantees, the form and terms
thereof, the legality, validity, binding effect and enforceability thereof, and
compliance of the authentication and delivery thereof with the terms and
conditions of this Indenture, upon the Opinion of Counsel and other documents
delivered pursuant to Sections 201 and 301 and this Section, as applicable, at
or prior to the time of the first authentication of Securities of such series
with the Guarantees endorsed thereon, unless and until such opinion or other
documents have been superseded or revoked or expire by their terms. In
connection with the authentication and delivery of Securities of a series with
Guarantees endorsed thereon, pursuant to a Periodic Offering, the Trustee shall
be entitled to assume that the Company's instructions to authenticate and
deliver such Securities and the Guarantor's approval of the delivery of the
Guarantees thereon, do not violate any applicable law or any applicable rule,
regulation or order of any Governmental Authority having jurisdiction over the
Company or the Guarantor.
If the form or terms of the Securities of any series have been
established by or pursuant to a Board Resolution or an Officer's Certificate as
permitted by Sections 201 or 301, the Trustee shall not be required to
authenticate such Securities if the issuance of such Securities pursuant to this
Indenture will materially or adversely affect the Trustee's own rights, duties
or immunities under the Securities and this Indenture or otherwise in a manner
which is not reasonably acceptable to the Trustee.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, or any Tranche thereof, each Security, and any
Guarantee endorsed thereon, shall each be dated the date of its authentication.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities or any Tranche thereof, no Security or Guarantee
endorsed thereon 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 and such Guarantee endorsed thereon 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 to the Company, or any Person acting on
its behalf, but shall never have been issued and sold by the Company, and the
Company shall deliver such Security to the Security Registrar for cancellation
as provided in Section 309 together with a written statement (which need not
comply with Section 102 and 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 (including any Guarantee endorsed
thereon) shall be deemed never to have been authenticated and delivered
hereunder and shall never be entitled to the benefits hereof.
SECTION 304. TEMPORARY SECURITIES.
Pending the preparation of definitive Securities of any series, or any
Tranche thereof, the Company may execute, and upon a Company Order and a
Guarantor Order the Trustee shall authenticate and deliver, temporary Securities
which are printed, lithographed, typewritten, mimeographed or otherwise
produced, in any authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, having Guarantees
endorsed thereon, with such appropriate insertions, omissions, substitutions and
other variations as the officers executing such Securities or Guarantees may
determine, as evidenced by their execution of such Securities or Guarantees;
provided, however, that temporary Securities need not recite specific
redemption, sinking fund, conversion or exchange provisions.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, or any Tranche thereof, after the preparation
of definitive Securities of such series or Tranche, the temporary Securities of
such series or Tranche shall be exchangeable, without charge to the Holder
thereof, for definitive Securities of such series or Tranche with the definitive
Guarantees of Guarantor endorsed thereon, upon surrender of such temporary
Securities at the office or agency of the Company maintained pursuant to Section
602 in a Place of Payment for such Securities. Upon such surrender of temporary
Securities for such exchange, the Company shall, except as aforesaid, execute
and the Trustee shall authenticate and deliver in exchange therefor definitive
Securities of the same series and Tranche of authorized denominations and of
like tenor and aggregate principal amount with the definitive Guarantees of the
Guarantor endorsed thereon.
Until exchanged in full as hereinabove provided, temporary Securities
shall in all respects be entitled to the same benefits under this Indenture as
definitive Securities of the same series and Tranche and of like tenor
authenticated and delivered hereunder.
SECTION 305. REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE.
Unless otherwise specified as contemplated by Section 301 with respect
to any series of Securities, the Company shall cause to be kept in each office
designated pursuant to Section 602, with respect to the Securities of each
series, a register (all registers kept in accordance with this Section being
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 those Securities of such series, or any Tranche thereof, which
are not in bearer global form, and the registration of transfer thereof. The
Company shall designate one Person to maintain the Security Register for the
Securities of each series on a consolidated basis, and such Person is referred
to herein, with respect to such series, as the "Security Registrar." Anything
herein to the contrary notwithstanding, the Company may designate one or more of
its offices or an office of any Affiliate (including the Guarantor) as an office
in which a register with respect to the Securities of one or more series shall
be maintained, and the Company may designate itself or any Affiliate (including
the Guarantor) as the Security Registrar with respect to one or more of such
series. The Security Register shall be open for inspection by the Trustee and
the Company at all reasonable times.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, upon surrender
for registration of transfer of any Security of such series or Tranche at the
office or agency of the Company maintained pursuant to Section 602 in a Place of
Payment for such series or Tranche, the Company shall execute, and the Trustee
shall authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of the same series and Tranche, of
authorized denominations and of like tenor and aggregate principal amount with
the Guarantee of the Guarantor endorsed thereon.
Except as otherwise specified as contemplated by Section 301 with
respect to the Securities of any series, or any Tranche thereof, any Security of
such series or Tranche may be exchanged at the option of the Holder, for one or
more new Securities of the same series and Tranche, of authorized denominations
and of like tenor and aggregate principal amount, upon surrender of the
Securities to be exchanged at any such office or agency. Whenever any Securities
are so surrendered for exchange, the Company shall execute, and the Trustee
shall authenticate and deliver, the Securities, with the Guarantees of the
Guarantor endorsed thereon, which the Holder making the exchange is entitled to
receive.
All Securities and Guarantees delivered upon any registration of
transfer or exchange of Securities and the Guarantees endorsed thereon shall be
valid obligations of the Company and the Guarantor, respectively, evidencing the
same debt, and entitled to the same benefits under this Indenture, as the
Securities and Guarantees surrendered upon such registration of transfer or
exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company, the Guarantor, the Trustee
or the Security Registrar) be duly endorsed or shall be accompanied by a written
instrument of transfer in form satisfactory to the Company, the Guarantor, the
Trustee or the Security Registrar, as the case may be, duly executed by the
Holder thereof or his attorney duly authorized in writing.
Unless otherwise specified as contemplated by Section 301, with
respect to Securities of any series, or any Tranche thereof, no service charge
shall be made for any registration of transfer or exchange of Securities, but
the Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection with any registration of
transfer or exchange of Securities, other than exchanges pursuant to Section
304, 406 or 1206 not involving any transfer.
The Company shall not be required to execute or to provide for the
registration of transfer of or the exchange of (a) Securities of any series, or
any Tranche thereof, during a period of 15 days immediately preceding the date
notice is to be given identifying the serial numbers of the Securities of such
series or Tranche called for redemption or (b) any Security so selected for
redemption in whole or in part, except the unredeemed portion of any Security
being redeemed in part.
Securities issued in bearer global form shall be transferred by
delivery thereof, unless otherwise specified as contemplated by Section 301 with
respect to any series of Securities.
SECTION 306. 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 Tranche, and of like tenor and
principal amount, having a Guarantee of the Guarantor endorsed thereon and
bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company, the Guarantor and the
Trustee (a) evidence to their satisfaction of the ownership of and the
destruction, loss or theft of any Security and (b) such security or indemnity as
may be reasonably required by them to save each of them and any agent of any of
them harmless, then, in the absence of notice to the Company, the Guarantor or
the Trustee that such Security is held by a Person purporting to be the owner of
such Security, the Company shall execute and the Trustee shall authenticate and
deliver, in lieu of any such destroyed, lost or stolen Security, a new Security
of the same series and Tranche, and of like tenor and principal amount, having a
Guarantee of the Guarantor endorsed thereon and bearing a number not
contemporaneously outstanding.
Notwithstanding the foregoing, in case any such mutilated, destroyed,
lost or stolen Security has become or is about to become due and payable, the
Company or the Guarantor in its discretion may, instead of issuing a new
Security, pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
reasonable expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security of any series issued pursuant to this Section in
lieu of any destroyed, lost or stolen Security and any Guarantee endorsed
thereon shall constitute an original additional contractual obligation of the
Company and the Guarantor, respectively, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone other than the Holder
of such new Security, and any such new Security shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all other
Securities of such series duly issued hereunder and the Guarantees endorsed on
such Securities.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 307. PAYMENT OF INTEREST; INTEREST RIGHTS PRESERVED.
Unless otherwise specified as contemplated by Section 301 with respect
to the Securities of any series, or any Tranche thereof, interest on any
Security which is payable, and is punctually paid or duly provided for, on any
Interest Payment Date shall be paid to the Person in whose name that Security
(or one or more Predecessor Securities) is registered at the close of business
on the Regular Record Date for such interest.
Subject to Section 312, 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 forthwith cease
to be payable to the Holder on the related Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the Company
or the Guarantor, at its election in each case, as provided in clause (a) or (b)
below:
(a) The Company or the Guarantor may elect to make payment of any
Defaulted Interest to the Persons in whose names the Securities of such
series (or their respective Predecessor Securities) are registered at the
close of business on a date (herein called a "Special Record Date") for the
payment of such Defaulted Interest, which shall be fixed in the following
manner. The Company or the Guarantor shall notify the Trustee in writing of
the amount of Defaulted Interest proposed to be paid on each Security of
such series and the date of the proposed payment, and at the same time the
Company or the Guarantor, as the case may be, 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 on or prior to the date of the
proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15 days
and not less than 10 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company or the
Guarantor of such Special Record Date and, in the name and at the expense
of the Company or the Guarantor, shall promptly 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 the address of such Holder as it appears in
the Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted Interest
shall be paid to the Persons in whose names the Securities of such series
(or their respective Predecessor Securities) are registered at the close of
business on such Special Record Date.
(b) The Company or the Guarantor may make payment of any Defaulted
Interest on the Securities of any series in any other lawful manner not
inconsistent with the requirements of any securities exchange on which such
Securities may be listed, and upon such notice as may be required by such
exchange, if, after notice given by the Company or the Guarantor to the
Trustee of the proposed payment pursuant to this clause, such manner of
payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section 305,
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 308. PERSONS DEEMED OWNERS.
Prior to due presentment of a Security for registration of transfer,
the Company, the Guarantor, the Trustee and any agent of the Company, the
Guarantor or the Trustee may treat the Person in whose name such Security is
registered or, in the case of a Security issued in bearer global form, the
bearer of such Security, unless otherwise provided pursuant to Section 301, as
the absolute owner of such Security for the purpose of receiving payment of
principal of and premium, if any, and (subject to Sections 305 and 307)
interest, if any, on such Security and for all other purposes whatsoever,
whether or not such Security be overdue, and none of the Company, the Guarantor,
the Trustee or any agent of the Company, the Guarantor or the Trustee shall be
affected by notice to the contrary.
SECTION 309. CANCELLATION BY SECURITY REGISTRAR.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Security
Registrar, be delivered to the Security Registrar and, if not theretofore
canceled, shall be promptly canceled by the Security Registrar. The Company or
the Guarantor may at any time deliver to the Security Registrar for cancellation
any Securities previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever or which the Company or the
Guarantor shall not have issued and sold, and all Securities so delivered shall
be promptly canceled by the Security Registrar. No Securities shall be
authenticated in lieu of or in exchange for any Securities canceled as provided
in this Section, except as expressly permitted by this Indenture. All canceled
Securities held by the Security Registrar shall be disposed of in accordance
with the customary practices of the Security Registrar at the time in effect,
and the Security Registrar shall not be required to destroy any such
certificates. The Security Registrar shall promptly deliver a certificate of
disposition to the Trustee and the Company unless, by a Company Order, similarly
delivered, the Company shall direct that canceled Securities be returned to it.
The Security Registrar shall promptly deliver evidence of any cancellation of a
Security in accordance with this Section 309 to the Trustee and the Company.
SECTION 310. COMPUTATION OF INTEREST.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, or any Tranche thereof, interest on the Securities of
each series shall be computed on the basis of a 360-day year consisting of
twelve 30-day months and for any period shorter than a full month, on the basis
of the actual number of days elapsed in such period.
SECTION 311. PAYMENT TO BE IN PROPER CURRENCY.
In the case of the Securities of any series, or any Tranche thereof,
denominated in any currency or in a composite currency (the "Required
Currency"), except as otherwise specified with respect to such Securities as
contemplated by Section 301, the obligation of the Company or the Guarantor to
make any payment of the principal thereof, or the premium or interest thereon,
shall not be discharged or satisfied by any tender by the Company, or recovery
by the Trustee, in any currency other than the Required Currency, except to the
extent that such tender or recovery shall result in the Trustee timely holding
the full amount of the Required Currency then due and payable. If any such
tender or recovery is in a currency other than the Required Currency, the
Trustee may take such actions as it considers appropriate to exchange such
currency for the Required Currency. The costs and risks of any such exchange,
including without limitation the risks of delay and exchange rate fluctuation,
shall be borne by the Company and the Guarantor, the Company and the Guarantor
shall remain fully liable for any shortfall or delinquency in the full amount of
Required Currency then due and payable, and in no circumstances shall the
Trustee be liable therefor except in the case of its negligence or willful
misconduct. The Company and the Guarantor hereby waive any defense of payment
based upon any such tender or recovery which is not in the Required Currency, to
the extent such amount, when exchanged for the Required Currency by the Trustee,
is less than the full amount of Required Currency then due and payable
SECTION 312. EXTENSION OF INTEREST PAYMENT.
The Company shall have the right at any time, so long as the Company
is not in default in the payment of interest on the Securities of any series
hereunder, to extend interest payment periods on all Securities of one or more
series, if so specified as contemplated by Section 301 with respect to such
Securities and upon such terms as may be specified as contemplated by Section
301 with respect to such Securities.
ARTICLE FOUR
REDEMPTION OF SECURITIES
SECTION 401. APPLICABILITY OF ARTICLE.
Securities of any series, or any Tranche thereof, which are redeemable
before their Stated Maturity shall be redeemable in accordance with their terms
and (except as otherwise specified as contemplated by Section 301 for Securities
of such series or Tranche) in accordance with this Article.
SECTION 402. ELECTION TO REDEEM; NOTICE TO TRUSTEE.
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution or an Officer's Certificate of the Company. The
Company shall, at least 45 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee in writing of such Redemption Date and of the principal amount of
such Securities to be redeemed. In the case of any redemption of Securities (a)
prior to the expiration of any restriction on such redemption provided in the
terms of such Securities or elsewhere in this Indenture or (b) pursuant to an
election of the Company which is subject to a condition specified in the terms
of such Securities, the Company and the Guarantor shall each furnish the Trustee
with an Officer's Certificate evidencing compliance with such restriction or
condition.
SECTION 403. SELECTION OF SECURITIES TO BE REDEEMED.
If less than all the Securities of any series, or any Tranche thereof,
are to be redeemed, the particular Securities to be redeemed shall be selected
by the Trustee from the Outstanding Securities of such series or Tranche not
previously called for redemption, by such method as shall be provided for any
particular series, or, in the absence of any such provision, by such method as
the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions (equal to the minimum authorized
denomination for Securities of such series or Tranche or any integral multiple
thereof) of the principal amount of Securities of such series or Tranche of a
denomination larger than the minimum authorized denomination for Securities of
such series or Tranche; provided, however, that if, as indicated in an Officer's
Certificate, the Company shall have offered to purchase all or any principal
amount of the Securities then Outstanding of any series, or any Tranche thereof,
and less than all of such Securities as to which such offer was made shall have
been tendered to the Company for such purchase, the Trustee, if so directed by
Company Order, shall select for redemption all or any principal amount of such
Securities which have not been so tendered.
The Trustee shall promptly notify the Company and the Security
Registrar in writing of the Securities selected for redemption and, in the case
of any Securities selected to be redeemed in part, the principal amount thereof
to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Securities redeemed or to be redeemed only in part, to the
portion of the principal amount of such Securities which has been or is to be
redeemed.
SECTION 404. NOTICE OF REDEMPTION.
Except as otherwise specified as contemplated by Section 301 for
Securities of any series, notice of redemption shall be given in the manner
provided in Section 106 to the Holders of the Securities to be redeemed not less
than 30 nor more than 60 days prior to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price (if known),
(c) if less than all the Securities of any series or Tranche are to be
redeemed, the identification of the particular Securities to be redeemed
and the portion of the principal amount of any Security to be redeemed in
part,
(d) that on the Redemption Date the Redemption Price, together with
accrued interest, if any, to the Redemption Date, will become due and
payable upon each such Security to be redeemed and, if applicable, that
interest thereon will cease to accrue on and after said date,
(e) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any, unless it
shall have been specified as contemplated by Section 301 with respect to
such Securities that such surrender shall not be required,
(f) that the redemption is for a sinking or other fund, if such is the
case, and
(g) such other matters as the Company shall deem desirable or
appropriate.
Unless otherwise specified with respect to any Securities in
accordance with Section 301, with respect to any notice of redemption of
Securities at the election of the Company, unless, upon the giving of such
notice, such Securities shall be deemed to have been paid in accordance with
Section 701, such notice may state that such redemption shall be conditional
upon the receipt by the Paying Agent or Agents for such Securities, on or prior
to the date fixed for such redemption, of money sufficient to pay the principal
of and premium, if any, and interest, if any, on such Securities and that if
such money shall not have been so received such notice shall be of no force or
effect and the Company shall not be required to redeem such Securities. In the
event that such notice of redemption contains such a condition and such money is
not so received, the redemption shall not be made and within a reasonable time
thereafter notice shall be given, in the manner in which the notice of
redemption was given, that such money was not so received and such redemption
was not required to be made, and the Paying Agent or Agents for the Securities
otherwise to have been redeemed shall promptly return to the Holders thereof any
of such Securities which had been surrendered for payment upon such redemption.
Notice of redemption of Securities to be redeemed at the election of
the Company, and any notice of non-satisfaction of a condition for redemption as
aforesaid, shall be given by the Company or, at the Company's request, by the
Security Registrar in the name and at the expense of the Company. Notice of any
mandatory redemption of Securities shall be given by the Security Registrar in
the name and at the expense of the Company.
SECTION 405. SECURITIES PAYABLE ON REDEMPTION DATE.
Notice of redemption having been given as aforesaid, and the
conditions, if any, set forth in such notice having been satisfied, the
Securities or portions thereof 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, in the case of an unconditional notice of redemption,
the Company shall default in the payment of the Redemption Price and accrued
interest and Additional Amounts, if any) such Securities or portions thereof, if
interest-bearing, shall cease to bear interest. Upon surrender of any such
Security for redemption in accordance with such notice, such Security or portion
thereof shall be paid by the Company at the Redemption Price, together with
accrued interest and Additional Amounts, if any, to the Redemption Date;
provided, however, that no such surrender shall be a condition to such payment
if so specified as contemplated by Section 301 with respect to such Security;
and provided, further, that except as otherwise specified as contemplated by
Section 301 with respect to such Security, any installment of interest on any
Security the Stated Maturity of which installment is on or prior to the
Redemption Date shall be payable to the Holder of such Security, or one or more
Predecessor Securities, registered as such at the close of business on the
related Regular Record Date according to the terms of such Security and subject
to the provisions of Section 307.
SECTION 406. SECURITIES REDEEMED IN PART.
Upon the surrender of any Security which is to be redeemed only in
part at a Place of Payment therefor (with, if the Company, the Guarantor or the
Trustee so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company, the Guarantor and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing), the Company
shall execute, and the Trustee shall authenticate and deliver to the Holder of
such Security, without service charge, a new Security or Securities of the same
series and Tranche, of any authorized denomination requested by such Holder and
of like tenor and in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Security so surrendered with the
Guarantee of the Guarantor endorsed thereon.
ARTICLE FIVE
SINKING FUNDS
SECTION 501. APPLICABILITY OF ARTICLE.
The provisions of this Article shall be applicable to any sinking fund
for the retirement of the Securities of any series, or any Tranche thereof,
except as otherwise specified as contemplated by Section 301 for Securities of
such series or Tranche.
The minimum amount of any sinking fund payment provided for by the
terms of Securities of any series, or any Tranche thereof, 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, or any Tranche
thereof, is herein referred to as an "optional sinking fund payment". If
provided for by the terms of Securities of any series, or any Tranche thereof,
the cash amount of any sinking fund payment may be subject to reduction as
provided in Section 502. Each sinking fund payment shall be applied to the
redemption of Securities of the series or Tranche in respect of which it was
made as provided for by the terms of such Securities.
SECTION 502. SATISFACTION OF SINKING FUND PAYMENTS WITH SECURITIES.
The Company (a) may deliver to the Trustee Outstanding Securities
(other than any previously called for redemption) of a series or Tranche in
respect of which a mandatory sinking fund payment is to be made and (b) may
apply as a credit Securities of such series or Tranche which have been redeemed
either at the election of the Company pursuant to the terms of such Securities
or through the application of permitted optional sinking fund payments pursuant
to the terms of such Securities, in each case in satisfaction of all or any part
of such mandatory sinking fund payment with respect to the Securities of such
series; provided, however, that no Securities shall be applied in satisfaction
of a mandatory sinking fund payment if such Securities shall have been
previously so applied. Securities so applied shall be received and credited for
such purpose by the Trustee at the Redemption Price specified in such Securities
for redemption through operation of the sinking fund and the amount of such
mandatory sinking fund payment shall be reduced accordingly.
SECTION 503. REDEMPTION OF SECURITIES FOR SINKING FUND.
Not less than 45 days prior to each sinking fund payment date for the
Securities of any series, or any Tranche thereof, the Company shall deliver to
the Trustee an Officer's Certificate specifying:
(a) the amount of the next succeeding mandatory sinking fund payment
for such series or Tranche;
(b) the amount, if any, of the optional sinking fund payment to be
made together with such mandatory sinking fund payment;
(c) the aggregate sinking fund payment;
(d) the portion, if any, of such aggregate sinking fund payment which
is to be satisfied by the payment of cash; and
(e) the portion, if any, of such aggregate sinking fund payment which
is to be satisfied by delivering and crediting Securities of such series or
Tranche pursuant to Section 502 and stating the basis for such credit and
that such Securities have not previously been so credited, and the Company
shall also deliver to the Trustee any Securities to be so delivered.
If the Company shall have not delivered such Officer's Certificate
and, to the extent applicable, all such Securities, the next succeeding sinking
fund payment for such series or Tranche shall be made entirely in cash in the
amount of the mandatory sinking fund payment. 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
403 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 404. Such notice
having been duly given, the redemption of such Securities shall be made upon the
terms and in the manner stated in Sections 405 and 406.
ARTICLE SIX
COVENANTS
SECTION 601. PAYMENT OF PRINCIPAL, PREMIUM AND INTEREST.
The Company shall pay the principal of and premium, interest and
Additional Amounts, if any, on the Securities of each series in accordance with
the terms of such Securities and this Indenture.
SECTION 602. MAINTENANCE OF OFFICE OR AGENCY.
The Company and the Guarantor shall maintain in each Place of Payment
for the Securities of each series, or any Tranche thereof, an office or agency
where payment of such Securities shall be made, where the registration of
transfer or exchange of such Securities may be effected and where notices and
demands to or upon the Company or the Guarantor in respect of such Securities
and this Indenture may be served. The Company and the Guarantor shall give
prompt written notice to the Trustee of the location, and any change in the
location, of each such office or agency and prompt notice to the Holders of any
such change in the manner specified in Section 106. If at any time the Company
or the Guarantor shall fail to maintain any such required office or agency in
respect of Securities of any series, or any Tranche thereof, or shall fail to
furnish the Trustee with the address thereof, payment of such Securities shall
be made, registration of transfer or exchange thereof may be effected and
notices and demands in respect thereof may be served at the Corporate Trust
Office of the Trustee, and each of the Company and the Guarantor hereby appoint
the Trustee as its agent for all such purposes in any such event.
The Company or the Guarantor may also from time to time designate one
or more other offices or agencies with respect to the Securities of one or more
series, or any Tranche thereof, for any or all of the foregoing purposes and may
from time to time rescind such designations; provided, however, that, unless
otherwise specified as contemplated by Section 301 with respect to the
Securities of such series or Tranche, no such designation or rescission shall in
any manner relieve the Company or the Guarantor of its obligation to maintain an
office or agency for such purposes in each Place of Payment for such Securities
in accordance with the requirements set forth above. The Company and the
Guarantor shall give prompt written notice to the Trustee, and prompt notice to
the Holders in the manner specified in Section 106, of any such designation or
rescission and of any change in the location of any such other office or agency.
Anything herein to the contrary notwithstanding, any office or agency
required by this Section may be maintained at an office of the Company or the
Guarantor of any Affiliate of either of them, in which event the Company, the
Guarantor or such Affiliate, as the case may be, shall perform all functions to
be performed at such office or agency.
SECTION 603. 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 the Securities of any series, or any Tranche thereof, it shall, on or
before each due date of the principal of or premium, interest or Additional
Amounts, if any, on any of such Securities, segregate and hold in trust for the
benefit of the Persons entitled thereto a sum sufficient to pay the principal,
premium, interest or Additional Amounts so becoming due until such sums shall be
paid to such Persons or otherwise disposed of as herein provided. The Company
shall promptly notify the Trustee of any failure by the Company (or any other
obligor on such Securities) to make any payment of principal of or premium,
interest or Additional Amounts, if any, on such Securities.
Whenever the Company shall have one or more Paying Agents for the
Securities of any series, or any Tranche thereof, it shall, on or before each
due date of the principal of or premium, interest, or Additional Amounts, if
any, on such Securities, deposit with such Paying Agents sums sufficient
(without duplication) to pay the principal, premium, interest or Additional
Amounts so becoming due, such sums to be held in trust for the benefit of the
Persons entitled to such principal, premium, interest or Additional Amounts, and
(unless such Paying Agent is the Trustee) the Company shall promptly notify the
Trustee of any failure by it so to act.
The Company shall cause each Paying Agent for the Securities of any
series, or any Tranche thereof, other than the Company or the Trustee, to
execute and deliver an instrument in which such Paying Agent shall agree,
subject to the provisions of this Section, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of or
premium, interest or Additional Amounts, if any, on such Securities in
trust for the benefit of the Persons entitled thereto until such sums shall
be paid to such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any failure by the Company (or any
other obligor upon such Securities) to make any payment of principal of or
premium, interest or Additional Amounts, if any, on such Securities; and
(c) at any time during the continuance of any such failure, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent and furnish to the Trustee such
information as it possesses regarding the names and addresses of the
Persons entitled to such sums.
The Company may at any time 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, if so
stated in a Company Order delivered to the Trustee, in accordance with the
provisions of Article Seven; and, upon such payment by any Paying Agent to the
Trustee, such Paying Agent shall be released from all further liability with
respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of and premium,
interest or Additional Amounts, if any, on any Security and remaining unclaimed
for two years after such principal or premium, interest or Additional Amounts
have 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, upon such
payment or discharge, the Holder of such Security shall, as an unsecured general
creditor and not as a Holder of an Outstanding Security, look only to the
Company for payment of the amount so due and payable and remaining unpaid, and
all liability of the Trustee or such Paying Agent with respect to such trust
money, and all liability of the Company as trustee thereof, shall thereupon
cease; provided, however, that the Trustee or such Paying Agent, before being
required to make any such payment to the Company, may at the expense of the
Company cause to be mailed, on one occasion only, notice to such Holder that
such money remains unclaimed and that, after a date specified therein, which
shall not be less than 30 days from the date of such mailing, any unclaimed
balance of such money then remaining will be paid to the Company.
SECTION 604. CORPORATE EXISTENCE.
Subject to the rights of the Company and the Guarantor under Article
Eleven, each of the Company and the Guarantor shall do or cause to be done all
things necessary to preserve and keep in full force and effect its existence as
a corporation.
SECTION 605. MAINTENANCE OF CORPORATE RECORDS; PROTECTION OF ASSETS.
Each of the Company and the Guarantor shall maintain proper books of
record and accounts and shall maintain and protect its assets in accordance with
customary business practices.
SECTION 606. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
Not later than June 1 in each year, commencing June 1, 2000, the
Company and the Guarantor each shall deliver to the Trustee an Officer's
Certificate which need not comply with Section 102, executed by the principal
executive officer, the principal financial officer or the principal accounting
officer of the Company, as to such officer's knowledge of such obligor's
compliance with all conditions and covenants under this Indenture, such
compliance to be determined without regard to any period of grace or requirement
of notice under this Indenture, and making any other statements as may be
required by the provisions of Section 314(a)(4) of the Trust Indenture Act.
SECTION 607. 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 (a) Section 602 or any
additional covenant or restriction specified with respect to the Securities of
any series, or any Tranche thereof, as contemplated by Section 301 or by clause
(b) of Section 1201, if before the time for such compliance the Holders of a
majority in aggregate principal amount of the Outstanding Securities of all
series and Tranches with respect to which compliance with Section 602 or such
additional covenant or restriction is to be omitted, considered as one class,
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition and (b)
Section 605 or Article Eleven if before the time for such compliance the Holders
of a majority in principal amount of Securities Outstanding under this Indenture
shall, by Act of such Holders, either waive such compliance in such instance or
generally waive compliance with such term, provision or condition; but, in the
case of (a) or (b), no such waiver shall extend to or affect such term,
provision or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the Guarantor
and the duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
SECTION 608. BUSINESS OF THE COMPANY.
So long as any Securities are outstanding, the Company will not engage
in significant business activities other than issuing securities, incurring debt
and entering into financing transactions to enable it to make loans or advances
to, purchase securities from, or otherwise provide financing to the Guarantor
for the benefit of the Guarantor and its Subsidiaries.
SECTION 609. [MAINTENANCE OF TRUST EXISTENCE.
So long as Preferred Trust Securities of any series remain
outstanding, the Company shall (i) maintain direct or indirect ownership of all
interests in the Trust which issued such Preferred Trust Securities, other than
such Preferred Trust Securities, and (ii) use reasonable efforts to cause such
Trust to remain a business trust and otherwise continue to be treated as a
grantor trust for Federal income tax purposes.]
ARTICLE SEVEN
SATISFACTION AND DISCHARGE
SECTION 701. 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 each of the Company and the Guarantor 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 or the Guarantor), 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, Eligible 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
(c) a combination of (a) or (b) which shall be sufficient,
(d) to pay when due the principal of and premium, interest and
Additional Amounts, 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 or Tranche, such Securities or portions thereof
shall have been selected by the Trustee 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 Eligible Obligations
deposited in accordance with this Section shall be held in trust, as
provided in Section 703; and
(y) if Eligible Obligations shall have been deposited, an Opinion of
Counsel that the obligations so deposited constitute Eligible 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 Eligible 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) 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 Six (except the covenants
contained in Sections 602 and 603) or any other covenants made in respect of
such Securities or portions thereof as contemplated by Section 301 or Section
1201(b), but the indebtedness of the Company in respect of such Securities or
portions thereof shall not be 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, or any Tranche thereof, 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 403 for selection for redemption of less than all the Securities of a
series or Tranche.
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 Eligible
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,
the Guarantor and the Trustee in respect of such Securities under Sections 304,
305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and 915 and this
Article Seven shall survive.
The Company shall pay, and shall indemnify the Trustee or any Paying
Agent with which Eligible Obligations shall have been deposited as provided in
this Section against, any tax, fee or other charge imposed on or assessed
against such Eligible Obligations or the principal or interest received in
respect of such Eligible 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
Eligible Obligations, or combination thereof, deposited with it as aforesaid to
the Company or its representative under any applicable 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 603.
SECTION 702. 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 or the Guarantor has paid or caused to be paid all
other sums payable hereunder by the Company or the Guarantor;
provided, however, that if, in accordance with the last paragraph of Section
701, 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, the Guarantor and the Trustee under
Sections 304, 305, 306, 404, 503 (as to notice of redemption), 602, 603, 907 and
915 and this Article Seven 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 907, 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 Eligible Obligations held by the Trustee
pursuant to Section 703 and shall execute and deliver to the Company and the
Guarantor such instruments as, in the judgment of the Company and the Guarantor,
shall be necessary, desirable or appropriate to effect or evidence the
satisfaction and discharge of this Indenture.
SECTION 703. APPLICATION OF TRUST MONEY.
Neither the Eligible Obligations nor the money deposited pursuant to
Section 701, nor the principal or interest payments on any such Eligible
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, interest and
Additional Amounts, 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 603; 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 Eligible Obligations, if not then needed
for such purpose, shall, to the extent practicable and upon Company Request, be
invested in Eligible Obligations of the type described in clause (b) in the
first paragraph of Section 701 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 Eligible 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 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 907; 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,
interest and Additional Amounts, 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 907; 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 EIGHT
EVENTS OF DEFAULT; REMEDIES
SECTION 801. EVENTS OF DEFAULT.
"Event of Default", wherever used herein with respect to Securities of
any series, means any one of the following events:
(a) failure to pay interest, if any, on any Security of such series
within 30 days after the same becomes due and payable (whether or not
payment is prohibited by the provisions of Article Sixteen hereof);
provided, however, that a valid extension of the interest payment period by
the Company as contemplated in Section 312 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 at its Maturity (whether or not payment is
prohibited by the provisions of Article Sixteen hereof); or
(c) failure to perform, or to remedy any 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 90 days
after there has been given, by registered or certified mail, to the Company
and the Guarantor by the Trustee, or to the Company, the Guarantor and the
Trustee by the Holders of at least 25% in 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, unless the Trustee, or the
Trustee and the Holders of a principal amount of Securities of such series
not less than the principal amount of Securities the Holders of which gave
such notice, as the case may be, shall agree in writing to an extension of
such period prior to its expiration; provided, however, that the Trustee,
or the Trustee and the Holders of such principal amount of Securities of
such series, as the case may be, shall be deemed to have agreed to a
reasonable extension of such period if corrective action is initiated by
the Company or the Guarantor within such period and is being diligently
pursued; or
(d) except as provided by the terms hereof, the Securities of such
series and the Guarantees endorsed thereon, the cessation of effectiveness
of the Guarantee endorsed on a Security of such series or the finding by
any judicial proceeding that the Guarantee endorsed on a Security of such
series is unenforceable or invalid or the denial or disaffirmation by the
Guarantor of its obligations under the Guarantee endorsed on a Security of
such series; or
(e) 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 bankruptcy, insolvency,
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 arrangement, adjustment or composition of or in respect of the
Company or the Guarantor under any applicable bankruptcy, insolvency, or
other similar law, or appointing a custodian, receiver, liquidator,
administrator, 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 remained unstayed and in effect for a period of 90 consecutive days;
or
(f) the commencement by the Company or the Guarantor of a voluntary
case or proceeding under any applicable bankruptcy, insolvency, or other
similar law or of any other case or proceeding to be adjudicated a bankrupt
or insolvent, or the consent by the Company or the Guarantor 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 bankruptcy, insolvency, or
other similar law or to the commencement of any bankruptcy or insolvency
case or proceeding against the Company or the Guarantor, or the filing by
the Company or the Guarantor of a petition or answer or consent seeking
relief under any applicable bankruptcy, insolvency, or other similar law,
or the consent by the Company or the Guarantor to the filing of such
petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, administrator, assignee, trustee, sequestrator or
similar official of the Company or the Guarantor or of any substantial part
of its property or the consent by the Company or the Guarantor to the
winding up or liquidation of its affairs, or the making by the Company or
the Guarantor of an assignment for the benefit of creditors, or the
admission by the Company or the Guarantor in writing of inability to pay
its debts generally as they become due, or the authorization of such action
by the Board of Directors of the Company or the Guarantor; or
(g) any other Event of Default specified in an Officer's Certificate
with respect to Securities of such series.
SECTION 802. ACCELERATION OF MATURITY; RESCISSION AND ANNULMENT.
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
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 25% in principal amount of the Securities of
such series may then declare the principal amount (or, if any of the Securities
of such series are Discount Securities, such portion of the principal amount as
may be specified in the terms thereof as contemplated by Section 301) 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 Sixteen
hereof). If an Event of Default due to 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 801(d), (e) or (f) shall have
occurred and be continuing, either the Trustee or the Holders of not less than
25% in principal amount of all Securities then Outstanding (considered as one
class), and not the Holders of the Securities of any one of such series, may
declare the principal of all Securities 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
Sixteen hereof). As a consequence of each such declaration (herein referred to
as a declaration of acceleration) with respect to Securities of any series, the
principal amount (or portion thereof in the case of Discount Securities) of such
Securities and interest accrued thereon shall become due and payable
immediately.
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 of Default 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 have become due otherwise than by such declaration
of acceleration and interest thereon at the rate or rates prescribed
therefor herein or 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 herein or in such Securities;
(4) all amounts due to the Trustee under Section 907;
and
(b) any other Event of Default or Events of Default with respect to
Securities of such series, other than the nonpayment 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 813.
No such rescission shall affect any subsequent Event of Default or impair any
right consequent thereon.
SECTION 803. COLLECTION OF INDEBTEDNESS AND SUITS FOR ENFORCEMENT BY TRUSTEE.
If an Event of Default described in clause (a) or (b) of Section 801
shall have occurred and be continuing, the Company or the Guarantor 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, interest and Additional Amounts, if any, and, to the extent
permitted by law, interest on any overdue principal, premium, interest and
Additional Amounts, if any, at the rate or rates prescribed therefor herein or
in such Securities, and, in addition thereto, such further amount as shall be
sufficient to cover any amounts due to the Trustee under Section 907. Unless
otherwise specified pursuant to Section 301 with respect to any series of
Securities, the rate or rates at which Securities shall bear interest on overdue
principal, premium, interest and Additional Amounts shall be, to the extent
permitted by law, the same rate or rates at which such Securities shall bear
interest prior to maturity.
If the Company or the Guarantor 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, the Guarantor 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, the
Guarantor 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.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, arrangement, adjustment, composition or other judicial proceeding
relative to the Company or the Guarantor or any other obligor upon the
Securities or the property of the Company or the Guarantor or of such other
obligor or their creditors, the Trustee (irrespective of whether the principal
of the Securities shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand on the Company or the Guarantor for the payment of overdue principal
or interest) shall be entitled and empowered, by intervention in such proceeding
or otherwise,
(a) to file and prove a claim for the whole amount of principal,
premium, if any, and interest, if any, owing and unpaid in respect of the
Securities and to file such other papers or documents as may be necessary
or advisable in order to have the claims of the Trustee (including any
claim for amounts due to the Trustee under Section 907) and of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby authorized by
each Holder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the Trustee any amounts due it under Section 907.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
arrangement, adjustment or composition affecting the Securities or the rights of
any Holder thereof or to authorize the Trustee to vote in respect of the claim
of any Holder in any such proceeding.
SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF SECURITIES.
All rights of action and claims under this Indenture or the Securities
or the Guarantee endorsed thereon may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, be for the ratable benefit of the Holders in respect of which such
judgment has been recovered.
SECTION 806. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Article shall be
applied in the following order, at the date or dates fixed by the Trustee and,
in case of the distribution of such money on account of principal or premium, if
any, or interest, if any, upon presentation of the Securities in respect of
which or for the benefit of which such money shall have been collected and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
907;
SECOND: To the payment of the amounts then due and unpaid upon the
Securities for principal of and premium, if any, and interest, if any, in
respect of which or for the benefit of which such money has been collected,
ratably, without preference or priority of any kind, according to the
amounts due and payable on such Securities for principal, premium, if any,
and interest, if any, respectively; and
THIRD: To the payment of the remainder, if any, to the Company or to
whomsoever may be lawfully entitled to receive the same or as a court of
competent jurisdiction may direct.
SECTION 807. LIMITATION ON SUITS.
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 preference over any
other of such Holders or to enforce any right under this Indenture, except in
the manner herein provided and for the equal and ratable benefit of all of such
Holders.
SECTION 808. UNCONDITIONAL RIGHT OF HOLDERS TO RECEIVE PRINCIPAL,
PREMIUM AND INTEREST.
Notwithstanding any other provision in this Indenture, 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
Sections 307 and 312) interest, if any, and Additional Amounts, if any, on such
Security on the Stated Maturity or Maturities expressed in such Security (or, in
the case of redemption, on the Redemption Date) and to institute suit for the
enforcement of any such payment, and such rights shall not be impaired without
the consent of such Holder.
SECTION 809. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to enforce
any right or remedy under this Indenture and such proceeding shall have been
discontinued or abandoned for any reason, or shall have been determined
adversely to the Trustee or to such Holder, then and in every such case, subject
to any determination in such proceeding, the Company, the Guarantor, the Trustee
and such Holder shall be restored severally and respectively to their former
positions hereunder and thereafter all rights and remedies of the Trustee and
such Holder shall continue as though no such proceeding had been instituted.
SECTION 810. RIGHTS AND REMEDIES CUMULATIVE.
Except as otherwise provided in the last paragraph of Section 306, no
right or remedy herein conferred upon or reserved to the Trustee or to the
Holders is intended to be exclusive of any other right or remedy, and every
right and remedy shall, to the extent permitted by law, be cumulative and in
addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any
right or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 811. DELAY OR OMISSION NOT WAIVER.
No delay or omission of the Trustee or of any Holder to exercise any
right or remedy accruing upon any Event of Default shall impair any such right
or remedy or constitute a waiver of any such Event of Default or an acquiescence
therein. Every right and remedy given by this Article or by law to the Trustee
or to the Holders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Holders, as the case may be.
SECTION 812. CONTROL BY HOLDERS OF SECURITIES.
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 such direction shall not be
in conflict with any rule of law or with this Indenture. The Trustee may take
any other action, deemed proper by the Trustee, which is not inconsistent with
any such direction. Before proceeding to exercise any right or power hereunder
at the direction of such Holders, the Trustee shall be entitled to receive from
such Holders reasonable security or indemnity against the costs, expenses and
liabilities which might be incurred by it in compliance with any such direction.
SECTION 813. WAIVER OF PAST DEFAULTS.
The Holders of not less than 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, interest or
Additional Amounts, if any, on any Security of such series, or
(b) in respect of a covenant or provision hereof which under Section
1202 cannot be modified or amended without the consent of the Holder of
each Outstanding Security of such series affected.
Upon any such waiver, such default shall cease to exist, and any 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 814. UNDERTAKING FOR COSTS.
The Company, the Guarantor and the Trustee agree, and each Holder by
his acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the Company
or the Guarantor, 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 Outstanding Securities of all series in
respect of which such suit may be brought, considered as one class, or to any
suit instituted by any Holder for the enforcement of the payment of the
principal of or premium, if any, or interest, if any, on any Security on or
after the Stated Maturity or Maturities expressed in such Security (or, in the
case of redemption, on or after the Redemption Date).
SECTION 815. WAIVER OF STAY OR EXTENSION LAWS.
Each of the Company and the Guarantor covenants (to the extent that it
may lawfully do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay or
extension law wherever enacted, now or at any time hereafter in force, which may
affect the covenants or the performance of this Indenture; and each of the
Company and the Guarantor (to the extent that it may lawfully do so) hereby
expressly waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede the execution of any power herein granted to
the Trustee, but will suffer and permit the execution of every such power as
though no such law had been enacted.
ARTICLE NINE
THE TRUSTEE
SECTION 901. CERTAIN DUTIES AND RESPONSIBILITIES.
(a) The Trustee shall have and be subject to all the duties and
responsibilities specified with respect to an indenture trustee in the
Trust Indenture Act and no implied covenants or obligations shall be read
into this Indenture against the Trustee. For purposes of Sections 315(a)
and 315(c) of the Trust Indenture Act, the term "default" is hereby defined
as an Event of Default which has occurred and is continuing.
(b) No provision of this Indenture shall require the Trustee to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder, or in the exercise of any of
its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(c) Notwithstanding anything contained in this Indenture to the
contrary, the duties and responsibilities of the Trustee under this
Indenture shall be subject to the protections, exculpations and limitations
on liability afforded to the Trustee under the provisions of the Trust
Indenture Act. For the purposes of Sections 315(b)(2) and 315(d)(2) of the
Trust Indenture Act, the term "responsible officer" is hereby defined as a
Responsible Officer and the chairman or vice-chairman of the board of
directors, the chairman or vice-chairman of the executive committee of the
board of directors, the president, any vice president, the secretary, any
assistant secretary, the treasurer, any assistant treasurer, the cashier,
any assistant cashier, any trust officer or assistant trust officer, the
controller and any assistant controller of the Trustee, or any other
officer of the Trustee customarily performing functions similar to those
performed by a Responsible Officer or any of the above designated officers
and also means, with respect to a particular corporate trust matter, any
other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of
this Section.
SECTION 902. NOTICE OF DEFAULTS.
The Trustee shall give notice of any default hereunder with respect to
the Securities of any series to the Holders of Securities of such series known
to the Trustee in the manner and to the extent required to do so by the Trust
Indenture Act, unless such default shall have been cured or waived; provided,
however, that in the case of any default of the character specified in Section
801(c), no such notice to Holders shall be given until at least 45 days after
the occurrence thereof. For the purpose of this Section and clause (h) of
Section 903, the term "default" means any event which is, or after notice or
lapse of time, or both, would become, an Event of Default.
SECTION 903. CERTAIN RIGHTS OF TRUSTEE.
Subject to the provisions of Section 901 and to the applicable
provisions of the Trust Indenture Act:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting in good faith 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 reasonably 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 or the Guarantor mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order or a Guarantor Request or Guarantor Order, as the case may be, or as
otherwise expressly provided herein, and any resolution of the Board of
Directors of the Company or the Guarantor 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 Officer's Certificate of the Company or the
Guarantor;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any Holder pursuant to this Indenture, unless such Holder shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture, note, other evidence of indebtedness or other paper or
document, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall (subject to applicable legal requirements) be entitled to examine,
during normal business hours, the books, records and premises of the
Company or the Guarantor, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys, and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be charged with knowledge of any default or
Event of Default with respect to the Securities of any series for which it
is acting as Trustee unless either (1) a Responsible Officer of the Trustee
shall have actual knowledge that such default or Event of Default exists
and constitutes a default or Event of Default under this Indenture, or (2)
written notice of such default or Event of Default shall have been given in
the manner provided in Section 105 hereof to the Trustee by the Company or
the Guarantor or any other obligor on such Securities or by any Holder of
such Securities.
SECTION 904. NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF SECURITIES.
The recitals contained herein and in the Securities and the Guarantees
endorsed thereon (except the Trustee's certificates of authentication) shall be
taken as the statements of the Company and the Guarantor, as the case may be,
and neither the Trustee nor any Authenticating Agent assumes responsibility for
their correctness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities or the Guarantees endorsed
thereon. 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 905. MAY HOLD SECURITIES.
Each of 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 908 and 913, may otherwise deal with the Company with the same rights
it would have if it were not the Trustee, Authenticating Agent, Paying Agent,
Security Registrar or such other agent.
SECTION 906. 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
expressly provided herein or otherwise agreed with, and for the sole benefit of,
the Company or the Guarantor.
SECTION 907. COMPENSATION AND REIMBURSEMENT.
The Company and the Guarantor jointly and severally agree
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it 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, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances reasonably incurred or made by the Trustee in accordance with any
provision of this Indenture (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except to the extent
that any such expense, disbursement or advance may be attributable to the
Trustee's negligence, willful misconduct or bad faith; and
(c) to indemnify the Trustee for, and hold it harmless from and
against, any loss, liability or expense reasonably incurred by it arising
out of or in connection with the acceptance or administration of the trust
or trusts hereunder or the performance of its duties hereunder, including
the reasonable 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, except to the extent any such loss, liability
or expense may be attributable to its negligence, willful misconduct or bad
faith.
As security for the performance of the obligations of the Company and
the Guarantor under this Section, the Trustee shall have a lien prior to the
Securities upon all property and funds held or collected by the Trustee as such
other than property and funds held in trust under Section 703 (except as
otherwise provided in Section 703). "Trustee" for purposes of this Section shall
include any predecessor Trustee; provided, however, that the negligence, willful
misconduct or bad faith of any Trustee hereunder shall not affect the rights of
any other Trustee hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 801(d) or Section 801(e), the
expenses (including the reasonable charges and expenses of its counsel) and the
compensation for the services are intended to constitute expenses of
administration under any applicable bankruptcy, insolvency or other similar law.
The provisions of this Section 907 shall survive the termination of
this Indenture.
SECTION 908. DISQUALIFICATION; CONFLICTING INTERESTS.
If the Trustee shall have or acquire any conflicting interest within
the meaning of the Trust Indenture Act, it shall either eliminate such
conflicting interest or resign to the extent, in the manner and with the effect,
and subject to the conditions, provided in the Trust Indenture Act and this
Indenture.
For purposes of Section 310(b)(1) of the Trust Indenture Act and to
the extent permitted thereby, the Trustee, in its capacity as trustee in respect
of (i) the Securities of any series or Guarantees endorsed thereon, (ii) the
Trust Agreement and the Guarantee pertaining to the Trust shall not be deemed to
have a conflicting interest arising from its capacity as trustee in respect of
the Securities of any other series or Guarantees endorsed thereon.
SECTION 909. CORPORATE TRUSTEE REQUIRED; ELIGIBILITY.
There shall at all times be a Trustee hereunder which shall be
(a) a corporation organized and doing business under the laws of the
United States, any State or Territory thereof or the District of Columbia,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 and subject to
supervision or examination by Federal, State or other applicable government
authority, or
(b) b) if and to the extent permitted by the Commission by rule,
regulation or order upon application, a corporation or other Person
organized and doing business under the laws of a foreign government,
authorized under such laws to exercise corporate trust powers, having a
combined capital and surplus of at least $50,000,000 or the Dollar
equivalent of the applicable foreign currency and subject to supervision or
examination by authority of such foreign government or a political
subdivision thereof substantially equivalent to supervision or examination
applicable to United States institutional trustees,
and, in either case, qualified and eligible under this Article and the Trust
Indenture Act. If such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of such supervising or
examining authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined capital 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, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 910. RESIGNATION AND REMOVAL; APPOINTMENT OF SUCCESSOR.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 911.
(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 and
the Guarantor. If the instrument of acceptance by a successor Trustee
required by Section 911 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 by Act of the Holders of a
majority in principal amount of the Outstanding Securities of all series
and delivery of such Act to the Trustee, the Company and the Guarantor.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908 after
written request therefor by the Company, the Guarantor or by any
Holder who has been a bona fide Holder for at least six months, or
(2) the Trustee shall cease to be eligible under Section 909 and
shall fail to resign after written request therefor by the Company,
the Guarantor 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, (x) the Company and the Guarantor by Board
Resolutions may remove the Trustee with respect to all Securities or (y)
subject to Section 814, any Holder who has been a bona fide Holder 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
(other than as contemplated in clause (y) in Subsection (d) of this
Section), with respect to the Securities of one or more series, the Company
and the Guarantor, by Board Resolutions, 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 911. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee with
respect to the Securities of any series shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities of
such series delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment in accordance with the applicable requirements of Section 911,
become the successor Trustee with respect to the Securities of such series
and to that extent supersede the successor Trustee appointed by the Company
and the Guarantor. If no successor Trustee with respect to the Securities
of any series shall have been so appointed by the Company and the Guarantor
or the Holders and accepted appointment in the manner required by Section
911, any Holder who has been a bona fide Holder of a Security of such
series for at least six months may, on behalf of itself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to the Securities of such
series.
(f) So long as no event which is, or after notice or lapse of time, or
both, would become, an Event of Default shall have occurred and be
continuing, and except with respect to a Trustee appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
pursuant to Subsection (e) of this Section, if the Company and the
Guarantor shall have delivered to the Trustee (i) Board Resolutions of the
Company and the Guarantor appointing a successor Trustee, effective as of a
date specified therein, and (ii) an instrument of acceptance of such
appointment, effective as of such date, by such successor Trustee in
accordance with Section 911, the Trustee shall be deemed to have resigned
as contemplated in Subsection (b) of this Section, the successor Trustee
shall be deemed to have been appointed by the Company and the Guarantor
pursuant to Subsection (e) of this Section and such appointment shall be
deemed to have been accepted as contemplated in Section 911, all as of such
date, and all other provisions of this Section and Section 911 shall be
applicable to such resignation, appointment and acceptance except to the
extent inconsistent with this Subsection (f).
(g) The Company (or, should the Company fail so to act promptly, the
successor trustee at the expense of 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 911. ACCEPTANCE OF APPOINTMENT BY SUCCESSOR.
(a) In case of the appointment hereunder of a successor Trustee with
respect to the Securities of all series, every such successor Trustee so
appointed shall execute, acknowledge and deliver to the Company, the
Guarantor 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, the Guarantor or the successor Trustee, such retiring Trustee
shall, upon payment of all sums owed to it, 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 Guarantor, 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, the Guarantor or any successor Trustee,
such retiring Trustee, upon payment of all sums owed to it, shall duly
assign, transfer and deliver to such successor Trustee all property and
money held by such retiring Trustee hereunder with respect to the
Securities of that or those series to which the appointment of such
successor Trustee relates.
(c) Upon request of any such successor Trustee, the Company and the
Guarantor shall execute any instruments which fully vest in and confirm to
such successor Trustee all such rights, powers and trusts referred to in
Subsection (a) or (b) of this Section, 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 912. MERGER, CONVERSION, CONSOLIDATION OR SUCCESSION TO BUSINESS.
Any Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any Person
succeeding to all or substantially all the corporate trust business of the
Trustee, shall be the successor of the 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. 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 913. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
If the Trustee shall be or become a creditor of the Company, the
Guarantor or any other obligor upon the Securities (other than by reason of a
relationship described in Section 311(b) of the Trust Indenture Act), the
Trustee shall be subject to any and all applicable provisions of the Trust
Indenture Act regarding the collection of claims against the Company, the
Guarantor or such other obligor. For purposes of Section 311(b) of the Trust
Indenture Act:
(a) 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;
(b) 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.
SECTION 914. CO-TRUSTEES AND SEPARATE TRUSTEES.
At any time or times, for the purpose of meeting the legal
requirements of any applicable jurisdiction, the Company and the Trustee shall
have power to appoint, and, upon the written request of the Trustee or of the
Holders of at least 33% in principal amount of the Securities then Outstanding,
the Company shall for such purpose join with the Trustee in the execution and
delivery of all instruments and agreements necessary or proper to appoint, one
or more Persons approved by the Trustee either to act as co-trustee, jointly
with the Trustee, or to act as separate trustee, 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 Company does not join in such appointment within 15 days after the
receipt by it of a request so to do, or if an Event of Default shall have
occurred and be continuing, the Trustee alone shall have power to make such
appointment.
Should any written instrument or instruments from the Company be
required by any co-trustee or separate trustee so appointed to more fully
confirm 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 Company.
Every co-trustee or separate trustee shall, to the extent permitted by
law, but to such extent only, be appointed subject to the following conditions:
(a) the Securities shall be 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 Trustee hereunder, shall be exercised
solely, by the Trustee;
(b) the rights, powers, duties and obligations hereby conferred or
imposed upon the Trustee in respect of any property covered by such
appointment shall be conferred or imposed upon and exercised or performed
either by the Trustee or by the 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
Trustee shall be incompetent or unqualified to perform such act, in which
event such rights, powers, duties and obligations shall be exercised and
performed by such co-trustee or separate trustee;
(c) the Trustee at any time, by an instrument in writing executed by
it, with the concurrence of the Company, may accept the resignation of or
remove any co-trustee or separate trustee appointed under this Section,
and, if an Event of Default shall have occurred and be continuing, the
Trustee shall have power to accept the resignation of, or remove, any such
co-trustee or separate trustee without the concurrence of the Company. Upon
the written request of the Trustee, the Company shall join with the Trustee
in the execution and delivery 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;
(d) no co-trustee or separate trustee hereunder shall be personally
liable by reason of any act or omission of the Trustee, or any other such
trustee hereunder; and
(e) any Act of Holders delivered to the Trustee shall be deemed to
have been delivered to each such co-trustee and separate trustee.
SECTION 915. APPOINTMENT OF AUTHENTICATING AGENT.
The Trustee may appoint an Authenticating Agent or Agents with respect
to the Securities of one or more series, or Tranche thereof, which shall be
authorized to act on behalf of the Trustee to authenticate Securities of such
series or Tranche, and any Guarantee to be endorsed thereon, issued upon
original issuance and upon exchange, registration of transfer or partial
redemption thereof or pursuant to Section 306, and Securities, and any
Guarantees endorsed thereon, so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities or Guarantees by the
Trustee or the Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and the Guarantor and shall at all times be a
corporation organized and doing business under the laws of the United States,
any State or territory thereof or the District of Columbia, authorized under
such laws to act as Authenticating Agent, having a combined capital and surplus
of not less than $50,000,000 and subject to supervision or examination by
Federal, State or other applicable government authority. If such Authenticating
Agent publishes reports of condition at least annually, pursuant to law or to
the requirements of said supervising or examining authority, then for the
purposes of this Section, the combined capital and surplus of such
Authenticating Agent shall be deemed to be its combined capital and surplus as
set forth in its most recent report of condition so published. If at any time an
Authenticating Agent shall cease to be eligible in accordance with the
provisions of this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any paper or any further
act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee, the Company and the Guarantor. The Trustee may at
any time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent, the Company and the Guarantor. Upon
receiving such a notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in accordance with
the provisions of this Section, the Trustee may appoint a successor
Authenticating Agent which shall be acceptable to the Company and the Guarantor.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, in accordance
with, and subject to the provisions of, Section 907.
The provisions of Sections 308, 904 and 905 shall be applicable to
each Authenticating Agent.
If an appointment with respect to the Securities of one or more series
shall be made pursuant to this Section, the Securities of such series may have
endorsed thereon, in addition to the Trustee's certificate of authentication, an
alternate certificate of authentication substantially in the following form:
This is one of the Securities of the series designated therein and the
Guarantee thereof referred to in the within-mentioned Indenture.
Dated: ________________________
As Trustee
By______________________
As Authenticating
Agent
By______________________
Authorized Signatory
If all of the Securities of a series may not be originally issued at
one time, and if the Trustee does not have an office capable of authenticating
Securities upon original issuance located in a Place of Payment where the
Company wishes to have Securities of such series authenticated upon original
issuance, the Trustee, if so requested by the Company in writing (which writing
need not comply with Section 102 and need not be accompanied by an Opinion of
Counsel), shall appoint, in accordance with this Section and in accordance with
such procedures as shall be acceptable to the Trustee, an Authenticating Agent
having an office in a Place of Payment designated by the Company with respect to
such series of Securities.
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE, COMPANY AND GUARANTOR
SECTION 1001. LISTS OF HOLDERS.
Semiannually, not later than May 1 and November 1 in each year,
commencing May 1, 1999, and at such other times as the Trustee may request in
writing, the Company and the Guarantor shall furnish or cause to be furnished to
the Trustee information as to the names and addresses of the Holders, and the
Trustee shall preserve such information and similar information received by it
in any other capacity and afford to the Holders access to information so
preserved by it, all to such extent, if any, and in such manner as shall be
required by the Trust Indenture Act; provided, however, that no such list need
be furnished so long as the Trustee shall be the Security Registrar.
SECTION 1002. REPORTS BY TRUSTEE, COMPANY AND GUARANTOR.
Not later than May 1 in each year, commencing May 1, 2000, the Trustee
shall transmit to the Holders, the Commission and each securities exchange upon
which any Securities are listed, a report, dated as of the next preceding March
1, with respect to any events and other matters described in Section 313(a) of
the Trust Indenture Act, in such manner and to the extent required by the Trust
Indenture Act. The Trustee shall transmit to the Holders, the Commission and
each securities exchange upon which any Securities are listed, and the Company
and the Guarantor shall file with the Trustee (within 30 days after filing with
the Commission in the case of reports which pursuant to the Trust Indenture Act
must be filed with the Commission and furnished to the Trustee) and transmit to
the Holders, such other information, reports and other documents, if any, at
such times and in such manner, as shall be required by the Trust Indenture Act.
The Company and the Guarantor shall notify the Trustee of the listing of any
Securities on any securities exchange.
ARTICLE ELEVEN
CONSOLIDATION, MERGER, CONVEYANCE OR OTHER TRANSFER
SECTION 1101. COMPANY OR GUARANTOR MAY CONSOLIDATE, ETC., ONLY 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 Guarantor, as the case may be, is merged or the Person which
acquires by conveyance or transfer, or which leases, the properties and
assets of the Company or Guarantor, as the case may be, substantially as an
entirety shall be a Person organized under any jurisdiction and validly
existing under the laws of such jurisdiction, and shall expressly assume,
by an indenture supplemental hereto, executed and delivered to the Trustee,
in form satisfactory to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest, if any, on all Outstanding
Securities (or the Guarantees endorsed thereon, as the case may be) 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; and
(c) the Company or the Guarantor, as the case may be, shall have
delivered to the Trustee an Officer's 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.
SECTION 1102. 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, or
other transfer or lease of the properties and assets of the Company or the
Guarantor substantially as an entirety in accordance with Section 1101, the
successor corporation formed by such consolidation or into which the Company or
the Guarantor, as the case may be, is merged or the Person 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, as the
case may be, under this Indenture with the same effect as if such successor
Person had been named as the Company or the Guarantor, as the case may be,
herein, and thereafter, except in the case of a lease, the predecessor Person
shall be relieved of all obligations and covenants under this Indenture and the
Securities Outstanding hereunder or the Guarantees endorsed thereon, as the case
may be.
SECTION 1103. MERGER INTO COMPANY OR GUARANTOR; CERTAIN TRANSFERS.
Nothing in this Indenture shall be deemed to prevent or restrict any
consolidation or merger after the consummation of which the Company or the
Guarantor, as the case may be, would be the surviving or resulting corporation
or any conveyance or other transfer, or lease of any part of the properties of
the Company or the Guarantor, as the case may be, which does not constitute the
entirety, or substantially the entirety, thereof.
SECTION 1104. CONSOLIDATION DEFINED.
The term "consolidation" as used in this Article shall include similar
transactions such as amalgamations and reorganizations.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 1201. 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 or the
Guarantor, as the case may be, and the assumption by any such successor of
the covenants of the Company or the Guarantor, as the case may be, herein
and in the Securities, all as provided in Article Eleven; 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 one or more
specified Tranches thereof, 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 provision of this Indenture or to add
any new provision 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 or Tranche 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
or Tranche only pursuant to the provisions of Section 1202 hereof or when
no Security of such series or Tranche remains Outstanding; or
(e) to provide collateral security for all but not part of the
Securities; or
(f) to establish the form or terms of Securities of any series or
Tranche or any Guarantees as contemplated by Sections 201 and 301; or
(g) to the extent not provided herein, to provide for the
authentication, delivery and issuance 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 shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one
Trustee, pursuant to the requirements of Section 911(b); or
(i) to provide for the procedures required to permit the Company to
utilize, at its option, a noncertificated system of registration for all,
or any series or Tranche of, the Securities; or
(j) to change any place or places where (1) the principal of and
premium, interest and Additional Amounts, if any, on all or any series of
Securities, or any Tranche thereof, shall be payable, (2) all or any series
of Securities, or any Tranche thereof, may be surrendered for registration
of transfer, (3) all or any series of Securities, or any Tranche thereof,
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, or
any Tranche thereof, 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 provisions with respect to matters or
questions arising under this Indenture, provided that such action shall not
adversely affect the interests of the Holders of Securities of any series
or Tranche in any material respect.
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 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 1202. SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS.
With the consent of the Holders of a majority in aggregate principal
amount of the Securities of all series then Outstanding under this Indenture,
considered as one class, by Act of said Holders delivered to the Company, the
Guarantor and the Trustee, the Company and the Guarantor, when authorized by
Board Resolutions, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to, or changing in
any manner or eliminating any of the provisions of, this Indenture or modifying
in any manner the rights of the Holders of Securities of such series under the
Indenture; provided, however, that if there shall be Securities of more than one
series Outstanding hereunder and if a proposed supplemental indenture shall
directly affect the rights of the Holders of Securities of one or more, but less
than all, of such series, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all series so
directly affected, considered as one class, shall be required; and provided,
further, that if the Securities of any series shall have been issued in more
than one Tranche and if the proposed supplemental indenture shall directly
affect the rights of the Holders of Securities of one or more, but less than
all, of such Tranches, then the consent only of the Holders of a majority in
aggregate principal amount of the Outstanding Securities of all Tranches so
directly affected, considered as one class, shall be required; and provided,
further, that no such supplemental indenture shall:
(a) change the Stated Maturity of the principal of, or any installment
of principal of or interest on, any Security, or reduce the principal
amount thereof or 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 reduce
the amount of the principal of a Discount Security that would be due and
payable upon a declaration of acceleration of the Maturity thereof pursuant
to Section 802, 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
on or after the Stated Maturity of any Security (or, in the case of
redemption, on or after the Redemption Date), without, in any such case,
the consent of the Holder of such Security, or
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, or any Tranche thereof, the consent of the
Holders of which is required for any such supplemental indenture, or the
consent of the Holders of which is required for any waiver of compliance
with any provision of this Indenture or of any default hereunder and its
consequences, or reduce the requirements of Section 1304 for quorum or
voting, without, in any such case, the consent of the Holders of each
Outstanding Security of such series or Tranche, or
(c) modify any of the provisions of this Section, Section 607 or
Section 813 with respect to the Securities of any series, or any Tranche
thereof, except to increase the percentages in principal amount referred to
in this Section or such other Sections or to provide that other provisions
of this Indenture cannot be modified or waived without the consent of the
Holder of each Outstanding Security affected thereby; provided, however,
that this clause shall not be deemed to require the consent of any Holder
with respect to changes in the references to "the Trustee" and concomitant
changes in this Section, or the deletion of this proviso, in accordance
with the requirements of Sections 911(b), 914 and 1201(h).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or one or more
Tranches thereof, or which modifies the rights of the Holders of Securities of
such series with respect to such covenant or other provision, shall be deemed
not to affect the rights under this Indenture of the Holders of Securities of
any other series or Tranche.
It shall not be necessary for any Act of Holders under this Section to
approve the particular form of any proposed supplemental indenture, but it shall
be sufficient if such Act shall approve the substance thereof. A waiver by a
Holder of such Holder's right to consent under this Section shall be deemed to
be a consent of such Holder.
SECTION 1203. EXECUTION OF SUPPLEMENTAL INDENTURES.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and (subject to Section 901) shall be fully protected in relying upon, an
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects the
Trustee's own rights, duties, immunities or liabilities under this Indenture or
otherwise.
SECTION 1204. EFFECT OF SUPPLEMENTAL INDENTURES.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby. Any supplemental indenture permitted by this Article may
restate this Indenture in its entirety, and, upon the execution and delivery
thereof, any such restatement shall supersede this Indenture as theretofore in
effect for all purposes.
SECTION 1205. CONFORMITY WITH TRUST INDENTURE ACT.
Unless otherwise provided as contemplated by Section 301 with respect
to any series of Securities, every supplemental indenture executed pursuant to
this Article shall conform to the requirements of the Trust Indenture Act as
then in effect.
SECTION 1206. REFERENCE IN SECURITIES TO SUPPLEMENTAL INDENTURES.
Securities of any series, or any Tranche thereof, authenticated and
delivered after the execution of any supplemental indenture pursuant to this
Article may, and shall if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company and the Guarantor shall so determine, new Securities
of any series, or any Tranche thereof, so modified as to conform, in the opinion
of the Trustee, the Company and the Guarantor, to any such supplemental
indenture may be prepared and executed by the Company with Guarantees of the
Guarantor endorsed thereon and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series or Tranche.
SECTION 1207. MODIFICATION WITHOUT SUPPLEMENTAL INDENTURE.
If the terms of any particular series of Securities shall have been
established in a Board Resolution or an Officer's Certificate as contemplated by
Section 301, and not in an indenture supplemental hereto, additions to, changes
in or the elimination of any of such terms may be effected by means of a
supplemental Board Resolution or Officer's Certificate, as the case may be,
delivered to, and accepted by, the Trustee; provided, however, that such
supplemental Board Resolution or Officer's Certificate shall not be accepted by
the Trustee or otherwise be effective unless all conditions set forth in this
Indenture which would be required to be satisfied if such additions, changes or
elimination were contained in a supplemental indenture shall have been
appropriately satisfied. Upon the acceptance thereof by the Trustee, any such
supplemental Board Resolution or Officer's Certificate shall be deemed to be a
"supplemental indenture" for purposes of Section 1204 and 1206.
ARTICLE THIRTEEN
MEETINGS OF HOLDERS; ACTION WITHOUT MEETING
SECTION 1301. PURPOSES FOR WHICH MEETINGS MAY BE CALLED.
A meeting of Holders of Securities of one or more, or all, series, or
any Tranche or Tranches thereof, may be called at any time and from time to time
pursuant to this Article to make, give or take any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be made, given or taken by Holders of Securities of such
series or Tranches.
SECTION 1302. CALL, NOTICE AND PLACE OF MEETINGS.
(a) The Trustee may at any time call a meeting of Holders of
Securities of one or more, or all, series, or any Tranche or Tranches
thereof, for any purpose specified in Section 1301, to be held at such time
and at such place in the Borough of Manhattan, The City of New York, as the
Trustee shall determine, 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 given, in the manner provided in Section 106, not
less than 21 nor more than 180 days prior to the date fixed for the
meeting.
(b) If the Trustee shall have been requested to call a meeting of the
Holders of Securities of one or more, or all, series, or any Tranche or
Tranches thereof, by the Company, the Guarantor or by the Holders of 33% in
aggregate principal amount of all of such series and Tranches, considered
as one class, for any purpose specified in Section 1301, by written request
setting forth in reasonable detail the action proposed to be taken at the
meeting, and the Trustee shall not have given the notice of such meeting
within 21 days after receipt of such request or shall not thereafter
proceed to cause the meeting to be held as provided herein, then the
Company, the Guarantor or the Holders of Securities of such series and
Tranches in the amount above specified, as the case may be, may determine
the time and the place in the Borough of Manhattan, The City of New York,
or in such other place as shall be determined or approved by the Company or
the Guarantor, for such meeting and may call such meeting for such purposes
by giving notice thereof as provided in Subsection (a) of this Section.
(c) Any meeting of Holders of Securities of one or more, or all,
series, or any Tranche or Tranches thereof, shall be valid without notice
if the Holders of all Outstanding Securities of such series or Tranches are
present in person or by proxy and if representatives of the Company, the
Guarantor and the Trustee are present, or if notice is waived in writing
before or after the meeting by the Holders of all Outstanding Securities of
such series, or any Tranche or Tranches thereof, or by such of them as are
not present at the meeting in person or by proxy, and by the Company, the
Guarantor and the Trustee.
SECTION 1303. PERSONS ENTITLED TO VOTE AT MEETINGS.
To be entitled to vote at any meeting of Holders of Securities of one
or more, or all, series, or any Tranche or Tranches thereof, a Person shall be
(a) a Holder of one or more Outstanding Securities of such series or Tranches,
or (b) a Person appointed by an instrument in writing as proxy for a Holder or
Holders of one or more Outstanding Securities of such series or Tranches by such
Holder or Holders. The only Persons who shall be entitled to attend any meeting
of Holders of Securities of any series or Tranche shall be the Persons entitled
to vote at such meeting and their counsel, any representatives of the Trustee
and its counsel and any representatives of the Company, the Guarantor and their
counsel.
SECTION 1304. QUORUM; ACTION.
The Persons entitled to vote a majority in aggregate principal amount
of the Outstanding Securities of the series and Tranches with respect to which a
meeting shall have been called as hereinbefore provided, considered as one
class, shall constitute a quorum for a meeting of Holders of Securities of such
series and Tranches; provided, however, that if any action is to be taken at
such meeting which this Indenture expressly provides may be taken by the Holders
of a specified percentage, which is less than a majority, in principal amount of
the Outstanding Securities of such series and Tranches, considered as one class,
the Persons entitled to vote such specified percentage in principal amount of
the Outstanding Securities of such series and Tranches, considered as one class,
shall constitute a quorum. In the absence of a quorum within one hour of the
time appointed for any such meeting, the meeting shall, if convened at the
request of Holders of Securities of such series and Tranches, be dissolved. In
any other case the meeting may be adjourned for such period as may be determined
by the chairman of the meeting prior to the adjournment of such meeting. In the
absence of a quorum at any such adjourned meeting, such adjourned meeting may be
further adjourned for such period as may be determined by the chairman of the
meeting prior to the adjournment of such adjourned meeting. Except as provided
by Section 1305(e), notice of the reconvening of any meeting adjourned for more
than 30 days shall be given as provided in Section 1302(a) not less than 10 days
prior to the date on which the meeting is scheduled to be reconvened. Notice of
the reconvening of an adjourned meeting shall state expressly the percentage, as
provided above, of the principal amount of the Outstanding Securities of such
series and Tranches which shall constitute a quorum.
Except as limited by Section 1202, any resolution presented to a
meeting or adjourned meeting duly reconvened at which a quorum is present as
aforesaid may be adopted only by the affirmative vote of the Holders of a
majority in aggregate principal amount of the Outstanding Securities of the
series and Tranches with respect to which such meeting shall have been called,
considered as one class; provided, however, that, except as so limited, any
resolution with respect to any action which this Indenture expressly provides
may be taken by the Holders of a specified percentage, which is less than a
majority, in principal amount of the Outstanding Securities of such series and
Tranches, considered as one class, may be adopted at a meeting or an adjourned
meeting duly reconvened and at which a quorum is present as aforesaid by the
affirmative vote of the Holders of such specified percentage in principal amount
of the Outstanding Securities of such series and Tranches, considered as one
class.
Any resolution passed or decision taken at any meeting of Holders of
Securities duly held in accordance with this Section shall be binding on all the
Holders of Securities of the series and Tranches with respect to which such
meeting shall have been held, whether or not present or represented at the
meeting.
SECTION 1305. ATTENDANCE AT MEETINGS; DETERMINATION OF VOTING RIGHTS;
CONDUCT AND ADJOURNMENT OF MEETINGS.
(a) Attendance at meetings of Holders of Securities may be in person
or by proxy; and, to the extent permitted by law, any such proxy shall
remain in effect and be binding upon any future Holder of the Securities
with respect to which it was given unless and until specifically revoked by
the Holder or future Holder of such Securities before being voted.
(b) Notwithstanding any other provisions of this Indenture, the
Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Holders of Securities 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 deem appropriate. Except as otherwise permitted or required by any
such regulations, the holding of Securities shall be proved in the manner
specified in Section 104 and the appointment of any proxy shall be proved
in the manner specified in Section 104. Such regulations may provide that
written instruments appointing proxies, regular on their face, may be
presumed valid and genuine without the proof specified in Section 104 or
other proof.
(c) 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 the Guarantor or by Holders as provided in Section
1302(b), in which case the Company or the Guarantor or the Holders of
Securities of the series and Tranches 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 vote of the
Persons entitled to vote a majority in aggregate principal amount of the
Outstanding Securities of all series and Tranches represented at the
meeting, considered as one class.
(d) At any meeting each Holder or proxy shall be entitled to one vote
for each $1 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, except as a Holder of a Security or proxy.
(e) Any meeting duly called pursuant to Section 1302 at which a quorum
is present may be adjourned from time to time by Persons entitled to vote a
majority in aggregate principal amount of the Outstanding Securities of all
series and Tranches represented at the meeting, considered as one class;
and the meeting may be held as so adjourned without further notice.
SECTION 1306. COUNTING VOTES AND RECORDING ACTION OF MEETINGS.
The vote upon any resolution submitted to any meeting of Holders shall
be by written ballots on which shall be subscribed the signatures of the Holders
or of their representatives by proxy and the principal amounts and serial
numbers of the Outstanding Securities, of the series and Tranches 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 of all votes cast at the meeting. A record 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 given as provided in Section 1302 and, if
applicable, Section 1304. Each copy shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one such
copy shall be delivered to the Company, and another 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.
SECTION 1307. ACTION WITHOUT MEETING.
In lieu of a vote of Holders at a meeting as hereinbefore contemplated
in this Article, any request, demand, authorization, direction, notice, consent,
waiver or other action may be made, given or taken by Holders by written
instruments as provided in Section 104.
ARTICLE FOURTEEN
GUARANTEE
SECTION 1401. GUARANTEE.
The Guarantor hereby unconditionally and irrevocably guarantees to
each Holder of a Security authenticated and delivered by the Trustee, and to the
Trustee on behalf of such Holder, the due and punctual payment of the principal
of, and premium, if any, and interest and Additional Amounts, if any, on 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 Security and of this Indenture,
regardless of any defense, right of set-off or counterclaim that the Guarantor
may have (except the defense of payment). In case of the failure of the Company
punctually to make any such payment, the Guarantor hereby agrees to cause such
payment to be made punctually when and as the same shall become due and payable,
whether at the Stated Maturity or by declaration of acceleration, call for
redemption or otherwise, and as if such payment were made by the Company. The
Guarantor's obligation to make a guarantee payment may be satisfied by direct
payment of the required amounts by the Guarantor to the Holder of the Security
or to a Paying Agent, or by causing the Company to pay such amount to such
Holder or a Paying Agent.
Unless otherwise provided as contemplated by Section 201 or except as
provided pursuant to Section 608 hereof, this Guarantee is an unsecured and
subordinated obligation of the Guarantor and shall at all times rank at least
pari passu with each other Guarantee issued pursuant to the Indenture and,
except as permitted by Sections 608 and 806 hereof, will rank at least pari
passu with all other unsecured subordinated indebtedness of the Guarantor.
The Guarantor hereby agrees that its obligations hereunder shall be
absolute and unconditional irrespective of, and shall be unaffected by, any
invalidity, irregularity or unenforceability of such Security or this Indenture,
any failure to enforce the provisions of such Security or this Indenture, any
extension of time for payment or performance by the Company as provided by such
Security or this Indenture, or any waiver, modification or indulgence granted to
the Company with respect thereto, by the Holder of such Security or the Trustee
or any other circumstance which may otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor; provided, however, that
notwithstanding the foregoing, no such waiver, modification or indulgence shall,
without the consent of the Guarantor, increase the principal amount of such
Security, or increase the interest rate thereon, or change any redemption
provisions thereof (including any change to increase any premium payable upon
redemption thereof), or change the Stated Maturity thereof, or increase the
principal amount of any Discount Security that would be due and payable upon a
declaration of acceleration or the maturity thereof pursuant to Article Eight of
this Indenture.
The Guarantor hereby waives the benefits of diligence, presentment,
demand for payment, any requirement that the Trustee or any of the Holders
exhaust any right or take any action against the Company or any other Person,
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, protest or
notice with respect to any Security or the indebtedness evidenced thereby and
all demands whatsoever, and covenants that this Guarantee will not be discharged
in respect of any Security except by complete performance of the obligations
contained in such Security and in this Indenture and in this Guarantee. This
Guarantee shall constitute a guarantee of payment and not of collection. The
Guarantor hereby agrees that, in the event of a default in payment of principal,
or premium, if any, or interest, if any, on any Security, whether at its Stated
Maturity, by declaration of acceleration, call for redemption, or otherwise,
legal proceedings may be instituted by the Trustee on behalf of, or by, the
Holder of such Security, subject to the terms and conditions set forth in this
Indenture, directly against the Guarantor to enforce this Guarantee without
first proceeding against the Company. The Guarantor agrees that if, after the
occurrence and during the continuance of an Event of Default, the Trustee or any
of the Holders are prevented by applicable law from exercising their respective
rights to accelerate the maturity of the Securities, to collect interest on the
Securities, or to enforce or exercise any other right or remedy with respect to
the Securities, the Guarantor will pay to the Trustee for the account of the
Holders, upon demand therefor, the amount that otherwise would have been due and
payable had such rights and remedies been permitted to be exercised by the
Trustee or any of the Holders.
The obligations of the Guarantor hereunder with respect to any
Security shall be continuing and irrevocable until the date upon which the
entire principal of, premium, if any, and interest on such Security has been, or
has been deemed pursuant to the provisions of Article Seven of this Indenture to
have been, paid in full or otherwise discharged.
The Guarantor shall be subrogated to all rights of the Holder of each
Security upon which its Guarantee is endorsed against the Company in respect of
any amounts paid by the Guarantor on account of such Security pursuant to the
provisions of its Guarantee or this Indenture; provided, however, that the
Guarantor shall not be entitled to enforce or to receive any payments arising
out of, or based upon, such right of subrogation until the principal of, and
premium, if any, and interest, if any, on all Securities issued hereunder shall
have been paid in full.
This Guarantee shall remain in full force and effect and continue
notwithstanding any petition filed by or against the Company for liquidation or
reorganization, the Company becoming insolvent or making an assignment for the
benefit of creditors or a receiver or trustee being appointed for all or any
significant part of the Company's assets, and shall, to the fullest extent
permitted by law, continue to be effective or reinstated, as the case may be, if
at any time payment of any Security upon which this Guarantee is endorsed, is,
pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any Holder of such Security, whether as a "voidable
preference," "fraudulent transfer," or otherwise, all as though such payment or
performance had not been made. In the event that any payment, or any part
thereof, is rescinded, reduced, restored or returned on a Security, such
Security shall, to the fullest extent permitted by law, be reinstated and deemed
paid only by such amount paid and not so rescinded, reduced, restored or
returned.
SECTION 1402. EXECUTION AND DELIVERY OF GUARANTEE.
The Guarantee to be endorsed on the certificate for the Securities of
each series shall include the terms of the Guarantee set forth in Section 1401
and any other terms, insertions, omissions or variations that may be set forth
as established pursuant to Section 201. The Guarantor hereby agrees to execute
its Guarantee, in a form established pursuant to Sections 201 and 1401, to be
endorsed on each certificate for a Security authenticated and delivered by the
Trustee.
The Guarantee shall be executed on behalf of the Guarantor by an
Authorized Officer of the Guarantor. The signature of any such officer on the
Guarantee may be manual or facsimile.
A Guarantee bearing the manual or facsimile signature of an individual
who was at the time of execution an Authorized Officer of the Guarantor shall
bind the Guarantor, notwithstanding that any such individual has ceased to be an
Authorized Officer prior to the authentication and delivery of the Security on
which such Guarantee is endorsed or was not an Authorized Officer at the date of
such Guarantee.
The delivery of any Security by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Guarantee endorsed
thereon on behalf of the Guarantor. The Guarantor by its execution of this
Indenture hereby authorizes the Company, in the name and on behalf of the
Guarantor, to confirm the applicable Guarantee to the Holder of each Security
authenticated and delivered hereunder by its delivery of each such Security,
with such Guarantee endorsed thereon, authenticated and delivered by the
Trustee.
ARTICLE FIFTEEN
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
SECTION 1501. LIABILITY SOLELY CORPORATE.
No recourse shall be had for the payment of the principal of or
premium, if any, or interest, if any, on any Securities, any Guarantees, or any
part thereof, or for any claim based thereon or otherwise in respect thereof, or
of the indebtedness represented thereby, or upon any obligation, covenant or
agreement under this Indenture, against any incorporator, shareholder, officer
or director, as such, past, present or future of the Company or the Guarantor or
of any predecessor or successor corporation of either of them (either directly
or through the Company or the Guarantor, as the case may be, or a predecessor or
successor corporation of either of them), whether by virtue of any
constitutional provision, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly agreed and understood
that this Indenture and all the Securities and Guarantees are solely corporate
obligations, and that no personal liability whatsoever shall attach to, or be
incurred by, any incorporator, shareholder, officer or director, past, present
or future, of the Company or of the Guarantor or of any predecessor or successor
corporation, either directly or indirectly through the Company or the Guarantor
or any predecessor or successor corporation, because of the indebtedness hereby
authorized or under or by reason of any of the obligations, covenants or
agreements contained in this Indenture or in any of the Securities or Guarantees
or to be implied herefrom or therefrom, and that any such personal liability is
hereby expressly waived and released as a condition of, and as part of the
consideration for, the execution of this Indenture and the issuance of the
Securities and the Guarantees.
ARTICLE SIXTEEN
SUBORDINATION OF SECURITIES
SECTION 1601. SECURITIES SUBORDINATE TO SENIOR INDEBTEDNESS.
The Company, for itself, its successors and assigns, covenants and
agrees, and each Holder of the Securities of each series, by its acceptance
thereof, likewise covenants and agrees, that the payment of the principal of and
premium, if any, and interest, if any, on each and all of the Securities is
hereby expressly subordinated and subject to the extent and in the manner set
forth in this Article, in right of payment to the prior payment in full of all
Senior Indebtedness.
Each Holder of the Securities of each series, by its acceptance
thereof, authorizes and directs the Trustee on its behalf to take such action as
may be necessary or appropriate to effectuate the subordination as provided in
this Article, and appoints the Trustee its attorney-in-fact for any and all such
purposes.
SECTION 1602. PAYMENT OVER OF PROCEEDS OF SECURITIES.
In the event (a) of any insolvency or bankruptcy proceedings or any
receivership, liquidation, reorganization or other similar proceedings in
respect of the Company or a substantial part of its property, or of any
proceedings for liquidation, dissolution or other winding up of the Company,
whether or not involving insolvency or bankruptcy, or (b) subject to the
provisions of Section 1603, that (i) a default shall have occurred with respect
to the payment of principal of or interest on or other monetary amounts due and
payable on any Senior Indebtedness, or (ii) there shall have occurred a default
(other than a default in the payment of principal or interest or other monetary
amounts due and payable) in respect of any Senior Indebtedness, as defined
therein or in the instrument under which the same is outstanding, permitting the
holder or holders thereof to accelerate the maturity thereof (with notice or
lapse of time, or both), and such default shall have continued beyond the period
of grace, if any, in respect thereof, and, in the cases of subclauses (i) and
(ii) of this clause (b), such default shall not have been cured or waived or
shall not have ceased to exist, or (c) that the principal of and accrued
interest on the Securities of any series shall have been declared due and
payable pursuant to Section 801 and such declaration shall not have been
rescinded and annulled as provided in Section 802, then:
(1) the holders of all Senior Indebtedness shall first be
entitled to receive payment of the full amount due thereon, or
provision shall be made for such payment in money or money's worth,
before the Holders of any of the Securities are entitled to receive a
payment on account of the principal of or interest on the indebtedness
evidenced by the Securities, including, without limitation, any
payments made pursuant to Articles Four and Five;
(2) any payment by, or distribution of assets of, the Company of
any kind or character, whether in cash, property or securities, to
which any Holder or the Trustee would be entitled except for the
provisions of this Article, shall be paid or delivered by the person
making such payment or distribution, whether a trustee in bankruptcy,
a receiver or liquidating trustee or otherwise, directly to the
holders of such Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture
under which any instruments evidencing any of such Senior Indebtedness
may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of such Senior Indebtedness held or
represented by each, to the extent necessary to make payment in full
of all Senior Indebtedness remaining unpaid after giving effect to any
concurrent payment or distribution (or provision therefor) to the
holders of such Senior Indebtedness, before any payment or
distribution is made to the Holders of the indebtedness evidenced by
the Securities or to the Trustee under this Indenture; and
(3) in the event that, notwithstanding the foregoing, any payment
by, or distribution of assets of, the Company of any kind or
character, whether in cash, property or securities, in respect of
principal of or interest on the Securities or in connection with any
repurchase by the Company of the Securities, shall be received by the
Trustee or any Holder before all Senior Indebtedness is paid in full,
or provision is made for such payment in money or money's worth, such
payment or distribution in respect of principal of or interest on the
Securities or in connection with any repurchase by the Company of the
Securities shall be paid over to the holders of such Senior
Indebtedness or their representative or representatives or to the
trustee or trustees under any indenture under which any instruments
evidencing any such Senior Indebtedness may have been issued, ratably
as aforesaid, for application to the payment of all Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall
have been paid in full, after giving effect to any concurrent payment
or distribution (or provision therefor) to the holders of such Senior
Indebtedness.
Notwithstanding the foregoing, at any time after the 123rd day
following the date of deposit of cash or Government Obligations pursuant to
Section 701 (provided all conditions set out in such Section shall have been
satisfied), the funds so deposited and any interest thereon will not be subject
to any rights of holders of Senior Indebtedness including, without limitation,
those arising under this Article Sixteen; provided that no event described in
clauses (d) and (e) of Section 801 with respect to the Company has occurred
during such 123-day period.
For purposes of this Article only, 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 or reorganization or readjustment which are subordinate
in right of payment to all Senior Indebtedness which may at the time be
outstanding to the same extent as, or to a greater extent than, the Securities
are so subordinated as provided in this Article. The consolidation of the
Company with, or the merger of the Company into, another corporation or the
liquidation or dissolution of the Company following the conveyance or transfer
of its property as an entirety, or substantially as an entirety, to another
corporation upon the terms and conditions provided for in Article Eleven hereof
shall not be deemed a dissolution, winding-up, liquidation or reorganization for
the purposes of this Section 1602 if such other corporation shall, as a part of
such consolidation, merger, conveyance or transfer, comply with the conditions
stated in Article Eleven hereof. Nothing in Section 1601 or in this Section 1602
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section 907.
SECTION 1603. DISPUTES WITH HOLDERS OF CERTAIN SENIOR INDEBTEDNESS.
Any failure by the Company to make any payment on or perform any other
obligation in respect of Senior Indebtedness, other than any indebtedness
incurred by the Company or assumed or guaranteed, directly or indirectly, by the
Company for money borrowed (or any deferral, renewal, extension or refunding
thereof) or any other obligation as to which the provisions of this Section
shall have been waived by the Company in the instrument or instruments by which
the Company incurred, assumed, guaranteed or otherwise created such indebtedness
or obligation, shall not be deemed a default under clause (b) of Section 1602 if
(i) the Company shall be disputing its obligation to make such payment or
perform such obligation and (ii) either (A) no final judgment relating to such
dispute shall have been issued against the Company which is in full force and
effect and is not subject to further review, including a judgment that has
become final by reason of the expiration of the time within which a party may
seek further appeal or review, or (B) in the event that a judgment that is
subject to further review or appeal has been issued, the Company shall in good
faith be prosecuting an appeal or other proceeding for review and a stay or
execution shall have been obtained pending such appeal or review.
SECTION 1604. SUBROGATION.
Senior Indebtedness shall not be deemed to have been paid in full
unless the holders thereof shall have received cash (or securities or other
property satisfactory to such holders) in full payment of such Senior
Indebtedness then outstanding. Subject to the prior payment in full of all
Senior Indebtedness, the rights of the Holders of the Securities shall be
subrogated to the rights of the holders of Senior Indebtedness to receive any
further payments or distributions of cash, property or securities of the Company
applicable to the holders of the Senior Indebtedness until all amounts owing on
the Securities shall be paid in full; and such payments or distributions of
cash, property or securities received by the Holders of the Securities, by
reason of such subrogation, which otherwise would be paid or distributed to the
holders of such Senior Indebtedness shall, as between the Company, its creditors
other than the holders of Senior Indebtedness, and the Holders, be deemed to be
a payment by the Company to or on account of Senior Indebtedness, it being
understood that the provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders, on the one hand, and
the holders of the Senior Indebtedness, on the other hand.
SECTION 1605. OBLIGATION OF THE COMPANY UNCONDITIONAL.
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall impair, as among the Company, its
creditors other than the holders of Senior Indebtedness and the Holders, the
obligation of the Company, which is absolute and unconditional, to pay to the
Holders the principal of 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 and creditors of the Company
other than the holders of Senior Indebtedness, nor shall anything herein or
therein prevent the Trustee or any Holder from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article of the holders of Senior Indebtedness in
respect of cash, property or securities of the Company received upon the
exercise of any such remedy.
Upon any payment or distribution of assets or securities of the
Company referred to in this Article, the Trustee and the Holders shall be
entitled to rely upon any order or decree of a court of competent jurisdiction
in which such dissolution, winding up, liquidation or reorganization proceedings
are pending for the purpose of ascertaining the persons entitled to participate
in such distribution, the holders of the Senior Indebtedness 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.
SECTION 1606. PRIORITY OF SENIOR INDEBTEDNESS UPON MATURITY.
Upon the maturity of the principal of any Senior Indebtedness by lapse
of time, acceleration or otherwise, all matured principal of Senior Indebtedness
and interest and premium, if any, thereon shall first be paid in full before any
payment of principal or premium, if any, or interest, if any, is made upon the
Securities or before any Securities can be acquired by the Company or any
sinking fund payment is made with respect to the Securities (except that
required sinking fund payments may be reduced by Securities acquired before such
maturity of such Senior Indebtedness).
SECTION 1607. TRUSTEE AS HOLDER OF SENIOR INDEBTEDNESS.
The Trustee shall be entitled to all rights set forth in this Article
with respect to any Senior Indebtedness at any time held by it, to the same
extent as any other holder of Senior Indebtedness. Nothing in this Article shall
deprive the Trustee of any of its rights as such holder.
SECTION 1608. NOTICE TO TRUSTEE TO EFFECTUATE SUBORDINATION.
Notwithstanding the provisions of this Article or any other provision
of the Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment of moneys
to or by the Trustee unless and until the Trustee shall have received written
notice thereof from the Company, from a Holder or from a holder of any Senior
Indebtedness or from any representative or representatives of such holder and,
prior to the receipt of any such written notice, the Trustee shall be entitled,
subject to Section 901, in all respects to assume that no such facts exist;
provided, however, that, if prior to the fifth Business Day preceding the date
upon which by the terms hereof any such moneys may become payable for any
purpose, or in the event of the execution of an instrument pursuant to Section
702 acknowledging satisfaction and discharge of this Indenture, then if prior to
the second Business Day preceding the date of such execution, the Trustee shall
not have received with respect to such moneys the notice provided for in this
Section, then, anything herein contained to the contrary notwithstanding, the
Trustee may, in its discretion, receive such moneys and/or apply the same to the
purpose for which they were received, and shall not be affected by any notice to
the contrary, which may be received by it on or after such date; provided,
however, that no such application shall affect the obligations under this
Article of the persons receiving such moneys from the Trustee.
SECTION 1609. MODIFICATION, EXTENSION, ETC. OF SENIOR INDEBTEDNESS.
The holders of Senior Indebtedness may, without affecting in any
manner the subordination of the payment of the principal of and premium, if any,
and interest, if any, on the Securities, at any time or from time to time and in
their absolute discretion, agree with the Company to change the manner, place or
terms of payment, change or extend the time of payment of, or renew or alter,
any Senior Indebtedness, or amend or supplement any instrument pursuant to which
any Senior Indebtedness is issued, or exercise or refrain from exercising any
other of their rights under the Senior Indebtedness including, without
limitation, the waiver of default thereunder, all without notice to or assent
from the Holders or the Trustee.
SECTION 1610. TRUSTEE HAS NO FIDUCIARY DUTY TO HOLDERS OF SENIOR INDEBTEDNESS.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and objectives as
are specifically set forth in this Indenture, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if it shall mistakenly pay over or deliver to the
Holders or the Company or any other Person, money or assets to which any holders
of Senior Indebtedness shall be entitled by virtue of this Article or otherwise.
SECTION 1611. PAYING AGENTS OTHER THAN THE TRUSTEE.
In case at any time any Paying Agent other than the Trustee shall have
been appointed by the Company and be then acting hereunder, the term "Trustee"
as used in this Article shall in such case (unless the context shall otherwise
require) be construed as extending to and including such Paying Agent within its
meaning as fully for all intents and purposes as if such Paying Agent were named
in this Article in addition to or in place of the Trustee; provided, however,
that Sections 1607, 1608 and 1610 shall not apply to the Company if it acts as
Paying Agent.
SECTION 1612. RIGHTS OF HOLDERS OF SENIOR INDEBTEDNESS NOT IMPAIRED.
No right of any present or future holder of Senior Indebtedness to
enforce the subordination herein shall at any time or in any way be prejudiced
or impaired by any act or failure to act on the part of the Company or by any
noncompliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
SECTION 1613. EFFECT OF SUBORDINATION PROVISIONS; TERMINATION.
Notwithstanding anything contained herein to the contrary, other than
as provided in the immediately succeeding sentence, all the provisions of this
Indenture shall be subject to the provisions of this Article, so far as the same
may be applicable thereto.
Notwithstanding anything contained herein to the contrary, the
provisions of this Article Sixteen shall be of no further effect, and the
Securities shall no longer be subordinated in right of payment to the prior
payment of Senior Indebtedness, if the Company shall have delivered to the
Trustee a notice to such effect. Any such notice delivered by the Company shall
not be deemed to be a supplemental indenture for purposes of Article Twelve.
-------------------------
This instrument may be executed in any number of counterparts, each of
which so executed shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, all as of the day and year first above written.
TXU EUROPE LIMITED
__________________________
THE BANK OF NEW YORK, Trustee
__________________________
Exhibit 4(h)
DEPOSIT AGREEMENT
BETWEEN
THE BANK OF NEW YORK, as Book-Entry Depositary
and
TXU EASTERN FUNDING COMPANY, Issuer
Dated as of __________________
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I..................................................................... 3
Section 1.01. Definitions.................................................. 3
Section 1.02. Rules of Construction ....................................... 4
ARTICLE II ................................................................... 5
Section 2.01. Deposit of the Junior Subordinated Debentures ............... 5
Section 2.02. Redemption of the Junior Subordinated Debentures ............ 5
Section 2.03. Cancellation ................................................ 5
Section 2.04. Payments in Respect of the Book-Entry Interests and the
Junior Subordinated Debentures ............................ 5
Section 2.05. Change in Principal Amount of Junior Subordinated Debentures. 6
Section 2.06. Record Date ................................................. 6
Section 2.07. Reports and Notices ......................................... 6
Section 2.08. Additional Amounts .......................................... 6
Section 2.09. Changes Affecting Junior Subordinated Debentures ............ 7
ARTICLE III .................................................................. 7
Section 3.01. Certain Duties and Responsibilities ......................... 7
Section 3.02. Events of Default ........................................... 8
Section 3.03. Certain Rights of Book-Entry Depositary ..................... 8
Section 3.04. Not Responsible for Recitals or Issuance of Junior
Subordinated Debentures ................................. 9
Section 3.05. Money Held in Trust ......................................... 9
Section 3.06. Compensation and Reimbursement .............................. 9
Section 3.07. Book-Entry Depositary Required; Eligibility .................10
Section 3.08. Resignation and Removal; Appointment of Successor ...........11
Section 3.09. Acceptance of Appointment by Successor ......................12
Section 3.10. Merger, Conversion, Consolidation or Succession to Business .13
ARTICLE IV ...................................................................13
Section 4.01. Notices to Book-Entry Depositary or Issuer ..................13
Section 4.02. Notice to the Partnership; Waiver ...........................13
Section 4.03. Effect of Headings and Table of Contents ....................14
Section 4.04. Successors and Assigns ......................................14
Section 4.05. Separability Clause .........................................14
Section 4.06. Benefits of Agreement .......................................14
Section 4.07. GOVERNING LAW ...............................................14
Section 4.08. Jurisdiction ................................................14
Section 4.09. Counterparts ................................................15
Section 4.10. Inspection of Agreement .....................................15
Section 4.11. Satisfaction and Discharge ..................................15
Section 4.12. Amendments ..................................................15
Section 4.13. Book-Entry Depositary To Sign Amendments ....................16
2
<PAGE>
DEPOSIT AGREEMENT
This Deposit Agreement (as the same may be amended from time to time
in accordance with the provisions hereof, the "Deposit Agreement"), dated as of
______________, 1999, is among The Bank of New York, a New York banking
corporation, as book-entry depositary with respect to the Junior Subordinated
Debentures hereunder (the "Book-Entry Depositary"), TXU Eastern Funding Company,
a private unlimited company incorporated under the laws of England and Wales
(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 represent the right to receive 100% of the principal,
premium (if any) and interest on the underlying Junior Subordinated Debentures
from time to time received by the Book-Entry Depositary.
"Corporate Trust Office" means the office of the Book-Entry Depositary
in The City of New York, at which at 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 Division,
Corporate Finance Group.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Guarantor" means TXU Eastern Holdings Limited, a private limited
company incorporated under the laws of England and Wales.
"Indenture" means the Indenture dated as of ____________, 1999, among
the Issuer, the Guarantor, and The Bank of New York, as Trustee, relating to the
Junior Subordinated Debentures as originally executed or as it may from time to
time be supplemented or amended including by Officer's Certificate 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.
"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 officer of the Issuer or other person duly authorized by the
Board of Directors, and delivered to the Book-Entry Depositary.
"Junior Subordinated Debentures" means Junior Subordinated Debentures
in bearer form issued by the Issuer to the Book-Entry Depositary pursuant to the
Indenture, substantially in the form included therefor as an exhibit to the
Officer's Certificate.
"Jurisdiction of Incorporation" means each jurisdiction in which the
Issuer or the Guarantor, as the case requires, is incorporated or organized.
"Officer's Certificate" means the certificate signed in the name of
the Issuer by an officer or director of the Issuer or by any other person duly
authorized by the Board of Directors of the Issuer and signed in the name of the
Guarantor by an officer or director of the Guarantor or by any other person duly
authorized by the Board of Directors of the Guarantor, dated as of
_____________, 1999 and establishing certain terms of the Junior Subordinated
Debentures.
"officer's certificate" means a certificate signed in the name of the
Issuer by an Authorized Officer of the Issuer and delivered to the Trustee or
the Book-Entry Depositary, as the case requires.
"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.
"Partnership" means TXU Europe Funding I, L.P., a Delaware Limited
Partnership formed pursuant to the Amended and Restated Agreement of Limited
Partnership, dated as of _____________.
"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.
"Taxing Jurisdiction" means (i) any supranational federation to which
a Jurisdiction of Incorporation belongs or (ii) any Jurisdiction of
Incorporation (or any political subdivision or taxing authority thereof or
therein) or any jurisdiction in which the Issuer or the Guarantor is
incorporated or in which the Issuer or the Guarantor is managed and controlled
or has a place of business.
"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 Junior Subordinated Debentures.
The Book-Entry Depositary hereby accepts custody of the Junior
Subordinated Debentures and shall act as Book-Entry Depositary in accordance
with the terms of this Agreement. The Book-Entry Depositary shall hold such
Junior Subordinated 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 issue the Book-Entry
Interests to the Partnership.
Section 2.02. Redemption of the Junior Subordinated Debentures.
In the event that the Issuer exercises any right to redeem the Junior
Subordinated Debentures in whole or in part, the Book-Entry Depositary, as
holder of Junior Subordinated Debentures, shall, upon notice from the Issuer or
the Trustee, as the case may be, surrender the Junior Subordinated Debentures at
a place of payment or such other place as the Issuer may designate, and deliver
such Junior Subordinated Debentures to the Trustee for cancellation or for
reduction of principal amount by an endorsement on the reverse thereof or in
exchange for a substitute Junior Subordinated Debenture, as the case may be.
Section 2.03. Cancellation.
If the Junior Subordinated Debentures are surrendered for payment, for
redemption in whole to any Person other than the Trustee, such Junior
Subordinated Debentures shall be surrendered to the Security Registrar for
cancellation.
Section 2.04. Payments in Respect of the Book-Entry Interests and the Junior
Subordinated Debentures.
(a) Whenever the Book-Entry Depositary, as holder of the Junior
Subordinated Debentures, shall receive from the Trustee (or other paying agent
under the Indenture) any payment on the Junior Subordinated Debentures, such
payments shall be distributed promptly to the Partnership on the payment date
for the Junior Subordinated Debentures. The Book-Entry Depositary shall maintain
a place of payment at its Corporate Trust Office in The City of New York. 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 Junior
Subordinated 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 Partnership as the beneficial
owners if Interests.
(c) Notwithstanding any other provisions of this Agreement, the
Book-Entry Depositary shall be required to pay to the Partnership only amounts
(including Additional Amounts) received by the Book-Entry Depositary from the
Issuer under the Junior Subordinated 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 Amounts, if any) made or to be made by the Book-Entry
Depositary to the Partnership in respect of the Junior Subordinated Debentures
or the Book-Entry Interests.
Section 2.05. Change in Principal Amount of Junior Subordinated Debentures.
Whenever the principal amount at maturity of the Junior Subordinated
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 Partnership of such
corresponding change.
Section 2.06. Record Date; Action in Respect of the Book-Entry Interests or
the Junior Subordinated Debentures.
Whenever the Book-Entry Depositary shall receive notice of any action
to be taken in respect of the Book-Entry Interests or Junior Subordinated
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 to determine who shall be entitled to take any such action or to act in
respect of any such matter.
The Partnership may direct the time, method and place of conducting
any proceeding for any remedy available to the Book-Entry Depositary or of
exercising any rights or duties conferred on the Book-Entry Depositary. However,
the Book-Entry Depositary will not exercise any discretion in the granting of
consents or the taking of any other action in respect of the Book-Entry
Interests or the Junior Subordinated Debentures but it may refuse to follow any
direction that conflicts with law or this Agreement or the Indenture or the
Junior Subordinated Debentures, subject to Section 3.01 hereof, that the
Book-Entry Depositary determines would involve it in personal liability.
Section 2.07. Reports and Notices.
The Book-Entry Depositary shall promptly (and in no event later than
10 days from receipt) send to the Partnership a copy of any notices, reports and
other communications received by it relating to the Issuer, the Junior
Subordinated Debentures or the Book-Entry Interests.
Section 2.08. Additional Amounts.
The Book-Entry Depositary shall pay to the Partnership any Additional
Amounts, as defined in the Officer's Certificate, that have been paid by the
Issuer or the Guarantor to the Book-Entry Depositary.
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
officer's certificate, the Issuer will furnish the Book-Entry Depositary with an
officer's certificate instructing the Book-Entry Depositary whether such payment
of principal, premium, if any, or interest on such Book-Entry Interests shall be
made to DTC 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
officer's 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 and them 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 officer's certificate
furnished to it pursuant to this Section 2.08.
Section 2.09. Changes Affecting Junior Subordinated Debentures.
Upon any reclassification of the Junior Subordinated 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 Junior Subordinated 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 Junior Subordinated Debentures shall be
treated as new Junior Subordinated Debentures under this Agreement and the
Book-Entry Interests shall thenceforth represent beneficial interests in such
new Junior Subordinated Debentures so received.
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 Partnership 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.
Section 3.02. Events of Default.
Upon the occurrence of any Event of Default or in connection with any
other right of the holder of the Junior Subordinated 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 Junior Subordinated 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 officer's 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 may rely
upon the written advice of such counsel or any Opinion of Counsel and shall be
protected 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 such
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 rights hereunder
or perform any duties hereunder either directly or by or through agents or
attorneys, but the Book-Entry Depositary shall be responsible for any misconduct
or negligence on the part of any such agent or attorney appointed by it
hereunder;
(f) the Book-Entry Depositary shall be under no obligation to expend
or risk its own funds or to exercise, at the request or direction of the
Partnership, any of the rights or powers vested in it by this Agreement or the
Indenture unless the Partnership 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
officer's certificate.
Section 3.04. Not Responsible for Recitals or Issuance of Junior Subordinated
Debentures.
The recitals contained in the Indenture and in the Junior Subordinated
Debentures, except the Trustee's certificates of authentication, shall be taken
as the statements of the Issuer, and the Guarantor, as the case may be, 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, the Indenture or of the Junior Subordinated Debentures. The
Book-Entry Depositary shall not be accountable for the use or application by the
Issuer of the proceeds with respect to the Junior Subordinated Debentures.
Section 3.05. Money Held in Trust.
Money held by the Book-Entry Depositary in trust hereunder need not be
segregated from other funds held by the Book-Entry Depositary, except to the
extent required by law. The Book-Entry Depositary shall be under no obligation
to invest or pay interest on any money received by it hereunder, except as
otherwise agreed in writing with the 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 Partnership 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
(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
and the termination of this Agreement for any reason.
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 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.
(b) The Book-Entry Depositary may at any time resign as Book-Entry
Depositary with respect to the Junior Subordinated Debentures by giving written
notice thereof to the Issuer and the Partnership, 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 Partnership, 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 Partnership may, on behalf of itself and all others similarly situated,
petition any court of competent jurisdiction for the removal of the Book-Entry
Depositary or Book-Entry Depositaries and the appointment of a successor
Book-Entry Depositary.
(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 Junior Subordinated Debentures shall
have been so appointed by the Issuer and accepted appointment in the manner
required by Section 3.09 within 120 days [than the Book-Entry Depository may
deliver the Junior Subordinated Debentures to the Partnership]
(e) The Issuer shall give, or shall cause such successor Book-Entry
Depositary at the expense of the Issuer 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 Partnership 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 Junior Subordinated
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.
(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 DTC 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 Person into which the Book-Entry Depositary may be merged or
converted or with which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Book-Entry Depositary shall be
a party, or any corporation succeeding to all or substantially all the corporate
trust business of the Book-Entry Depositary, shall be the successor of the
Book-Entry Depositary hereunder, without the execution or filing of any paper or
any further act on the part of any of the parties hereto.
ARTICLE IV
MISCELLANEOUS PROVISIONS
Section 4.01. Notices to Book-Entry Depositary or 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, the Book-Entry Depositary by the
Partnership , by the Trustee or the Issuer or the Guarantor 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 Division, Corporate Finance Group, or at any
other address previously furnished in writing by the Book-Entry Depositary to
the Partnership, the Trustee, the Guarantor and the Issuer, or the Issuer, by
the Book-Entry Depositary or by the Partnership 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 TXU Eastern Funding Company, c/o The Adelphi, 1-11 John Adam
Street, London, England WC2N 6HT, Attention: Treasurer or at any other address
previously furnished in writing to the Book-Entry Depositary by the Issuer.
Section 4.02. Notice to the Partnership; Waiver.
Where this Agreement provides for notice to the Partnership of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided or as provided in the Letters of Representations) if in
writing and mailed, first-class postage prepaid, to the Partnership 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 Partnership shall be filed with the
Book-Entry Depositary, but such filing shall not be a condition precedent to the
validity of any action taken in reliance upon such waiver.
In case by reason of the suspension of regular mail service or by
reason of any other cause it shall be impracticable to give such notice by mail,
then such notification as shall be made with the approval of the Book-Entry
Depositary shall constitute a sufficient notification for every purpose
hereunder.
Section 4.03. Effect of Headings and Table of Contents.
The Article and Section headings herein are for convenience only and
shall not affect the construction hereof.
Section 4.04. Successors and Assigns.
All covenants and agreements in this Agreement and the Junior
Subordinated 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 Junior Subordinated
Debentures shall be invalid, illegal or unenforceable, the validity, legality
and enforceability of the remaining provisions hereof and thereof shall not in
any way be affected or impaired thereby.
Section 4.06. Benefits of Agreement.
Nothing in this Agreement, the Junior Subordinated 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 Partnership shall
be intended third-party beneficiaries of this Agreement. The Partnership shall
be party to this Agreement and shall be bound by all of the terms and conditions
hereof and of the Indenture and the Junior Subordinated 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 Thelen Reid & Priest LLP at 40 West 57th
Street, 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 or the United States District Court
for the Southern District of New York by the Partnership 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 Wales.
(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 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 Partnership.
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)
the Indenture has been satisfied and discharged pursuant to the provisions
thereof and all of the Junior Subordinated 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 officer's
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 Partnership:
(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;
(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 Partnership, 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 Registered Holder.
The Issuer and the Book-Entry Depositary, with the consent of the
Registered Holder, can make such changes as are necessary to effect and
implement a substitution of a successor depositary for the Registered Holder.
Except as set forth in this Section 4.12, no amendment which
materially adversely affects the Registered Holder or beneficial owners of
Interests may be made to this Agreement without the consent of the Registered
Holder 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.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
TXU EASTERN FUNDING COMPANY
By:
------------------------
THE BANK OF NEW YORK,
as Book-Entry Depositary
By:
------------------------
Exhibit 5(a)
[LOGO] TXU
- - - - -------------------------------------------------------------------------------
TXU EUROPE LIMITED
The Adelphi
1-11 John Adam Street
London WC2N 6HT
Tel: +44(0) 831 274478
Fax: +44(0) 207 879 8023 Date: 21 December, 1999
Email: [email protected]
Ladies and Gentlemen:
As general counsel, I have acted on behalf of TXU Europe Limited, a
private limited company incorporated under the laws of England and Wales
(Company), TXU Eastern Funding Company, a private unlimited company
incorporated under the laws of England and Wales (Funding), TXU Europe Funding
I, L.P., a Delaware limited partnership (Partnership) and TXU Europe Capital I,
a Delaware statutory business trust (Trust), in connection with the preparation
and filing by the Company, Funding, the Partnership and the Trust with the
Securities and Exchange Commission of a Registration Statement on Form S-1
(Registration Statement) under the Securities Act of 1933, as amended, with
respect to (i) the preferred trust securities (Preferred Trust Securities) to
be issued by the Trust, (ii) the guarantee (Trust Guarantee) to be issued by
the Company to The Bank of New York, as trustee, for the benefit of the holders
of the Preferred Trust Securities, (iii) the preferred partnership securities
(Preferred Partnership Securities) to be issued by the Partnership, (iv) the
guarantee (Partnership Guarantee) to be issued by the Company to The Bank of
New York, as trustee, for the benefit of holders of the Preferred Partnership
Securities, (v) the junior subordinated debentures (Funding Debentures) to be
issued by Funding pursuant to an indenture (Funding Indenture), (vi) the
guarantee (Funding Guarantee) to be issued by the Company to The Bank of New
York, as trustee, for the benefit of the holders of Funding Debentures pursuant
to the terms of the Funding Indenture, and (vii) the guarantees (Subsidiary
Guarantees) to be issued by the Company to The Bank of New York, as trustee,
for the benefit of the holders of junior subordinated debentures (Subsidiary
Debentures) to be issued by one or more of the Company's eligible subsidiaries
(each, an Issuing Subsidiary and together, the Issuing Subsidiaries), each
pursuant to the terms of one or more indentures (Subsidiary Indentures),
each substantially in the form filed as exhibits to the Registration Statement.
In connection therewith, I have reviewed such documents and records as I have
deemed necessary to enable me to express my opinion on the matters covered
hereby.
Based upon the foregoing, I am of the opinion that:
1. Funding is a company duly incorporated and validly existing under the
laws of England and Wales.
2. The Company is a company duly incorporated and validly existing under the
laws of England and Wales.
<PAGE>
3. All requisite action necessary to make the Trust Guarantee a valid,
legal and binding obligation of the Company will have been taken when:
a. the Board of Directors of the Company shall have taken such
action as may be necessary to authorize the issuance of the
Trust Guarantee,
b. the Board of Directors of the Company, or officers or
representatives duly authorized thereby, shall have taken such
action as may be necessary to fix and determine the terms of the
Trust Guarantee,
c. the Preferred Trust Securities shall be issued and sold in the
manner contemplated by the Registration Statement, and
d. the Trust Guarantee shall have been duly executed and delivered
by the parties thereto.
4. All requisite action necessary to make the Partnership Guarantee a valid,
legal and binding obligation of the Company will have been taken when:
a. the Board of Directors of the Company shall have taken such
action as may be necessary to authorize the issuance of the
Partnership Guarantee,
b. the Board of Directors of the Company, or officers or
representatives duly authorized thereby, shall have taken such
action as may be necessary to fix and determine the terms of the
Partnership Guarantee,
c. the Preferred Partnership Securities shall be issued and sold in
the manner contemplated by the Registration Statement, and
d. the Partnership Guarantee shall have been duly executed and
delivered by the parties thereto.
5. All requisite action necessary to make the Funding Debentures and
the Funding Guarantee valid, legal and binding obligations of Funding and
the Company, respectively, will have been taken when:
a. the Boards of Directors of Funding and the Company, as the case
may be, shall have taken such action as may be necessary to
authorize the issuance of the Funding Debentures and the Funding
Guarantee,
b. the Funding Indenture shall have been executed and delivered by
duly authorized officers or representatives of Funding and the
Company and by the trustee under the Funding Indenture, and
c. the Boards of Directors of Funding and the Company, or officers
or representatives duly authorized thereby, shall have taken such
action as may be necessary, pursuant to the terms of the Funding
Indenture, to fix and determine the terms of the Funding Debentures
and the Funding Guarantee, and the Funding Debentures and the
Funding Guarantee shall
<PAGE>
have been issued and delivered in accordance with the terms and
provisions of the Funding Indenture.
6. All requisite action necessary to make the Subsidiary Guarantees
valid, legal and binding obligations of the Company will have been taken
when:
a. the Boards of Directors of each Issuing Subsidiary and the
Company, as the case may be, shall have taken such action as may
be necessary to authorize the issuance of the Subsidiary
Debentures and the Subsidiary Guarantees,
b. the Subsidiary Indentures shall have been executed and delivered
by duly authorized officers or representatives of the Issuing
Subsidiaries and the Company and by the trustee under each
Subsidiary Indenture, and
c. the Boards of Directors of each Issuing Subsidiary and the
Company, or officers or representatives duly authorized thereby,
shall have taken such action as may be necessary, pursuant to the
terms of the Subsidiary Indentures, to fix and determine the terms
of the Subsidiary Debentures and the Subsidiary Guarantees, and the
Subsidiary Debentures and the Subsidiary Guarantees, and the
Subsidiary Debentures and the Subsidiary Guarantees shall have been
issued and delivered in accordance with the terms and provisions of
the Subsidiary Indentures.
I express no opinion as to any laws other than the laws of England in
force at the date of this opinion. As to all matters of New York law, I have
with your consent relied upon an opinion of even date herewith addressed to you
by Thelen Reid & Priest LLP, special United States counsel to the Company and
Funding.
I hereby consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of my name in the Registration Statement.
Yours faithfully,
/s/ E. J. Lean
E. J. LEAN
- - - - ----------
General Counsel
Exhibit 5(b)
(Letterhead of Worsham, Forsythe & Wooldridge, L.L.P.)
December 22, 1999
TXU Europe Limited
TXU Eastern Funding Company
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Ladies and Gentlemen:
We have acted as United States counsel to TXU Europe Limited, a
private limited company incorporated under the laws of England and Wales
(Company), TXU Eastern Funding Company, a private unlimited company incorporated
under the laws of England and Wales (Funding), TXU Europe Funding I, L.P., a
Delaware limited partnership (Partnership) and TXU Europe Capital I, a Delaware
statutory business trust (Trust), in connection with the preparation and filing
by the Company, Funding, the Partnership and the Trust with the Securities and
Exchange Commission of a Registration Statement on Form S-1 (Registration
Statement) under the Securities Act of 1933, as amended, with respect to (i)
the preferred trust securities (Preferred Trust Securities) to be issued by
the Trust, (ii) the guarantee (Trust Guarantee) to be issued by the Company to
The Bank of New York, as trustee, for the benefit of the holders of the
Preferred Trust Securities, (iii) the preferred partnership securities
(Preferred Partnership Securities) to be issued by the Partnership, (iv) the
guarantee (Partnership Guarantee) to be issued by the Company to The Bank of
New York, as trustee, for the benefit of holders of the Preferred Partnership
Securities, (v) the junior subordinated debentures (Funding Debentures) to be
issued by Funding pursuant to an indenture (Funding Indenture), (vi) the
guarantee (Funding Guarantee) to be issued by the Company to The Bank of New
York, as trustee, for the benefit of the holders of Funding Debentures pursuant
to the terms of the Funding Indenture, and (vii) the guarantees (Subsidiary
Guarantees) to be issued by the Company to The Bank of New York, as
trustee, for the benefit of the holders of junior subordinated debentures
(Subsidiary Debentures) to be issued by one or more of the Company's eligible
subsidiaries (each, an Issuing Subsidiary and together, the Issuing
Subsidiaries), each pursuant to the terms of one or more indentures (Subsidiary
Indentures), each substantially in the form filed as exhibits to the
Registration Statement. In connection therewith, we have reviewed such
documents and records as we have deemed necessary to enable us to express our
opinion on the matters covered hereby.
Based upon the foregoing, we are of the opinion that:
1. Funding is a company duly incorporated and validly existing
under the laws of England and Wales.
<PAGE>
2. The Company is a company duly incorporated and validly existing
under the laws of England and Wales.
3. All requisite action necessary to make the Trust Guarantee a
valid, legal and binding obligation of the Company will have been taken when:
a. the Board of Directors of the Company shall have taken such
action as may be necessary to authorize the issuance of the
Trust Guarantee,
b. the Board of Directors of the Company, or officers or
representatives duly authorized thereby, shall have taken
such action as may be necessary to fix and determine the
terms of the Trust Guarantee,
c. the Preferred Trust Securities shall be issued and sold in the
manner contemplated by the Registration Statement, and
d. the Trust Guarantee shall have been duly executed and delivered
by the parties thereto.
4. All requisite action necessary to make the Partnership Guarantee
a valid, legal and binding obligation of the Company will have been taken when:
a. the Board of Directors of the Company shall have taken such
action as may be necessary to authorize the issuance of the
Partnership Guarantee,
b. the Board of Directors of the Company, or officers or
representatives duly authorized thereby, shall have taken such
action as may be necessary to fix and determine the terms of the
Partnership Guarantee,
c. the Preferred Partnership Securities shall be issued and sold in
the manner contemplated by the Registration Statement, and
d. the Partnership Guarantee shall have been duly executed and
delivered by the parties thereto.
5. All requisite action necessary to make the Funding Debentures
and the Funding Guarantee valid, legal and binding obligations of Funding and
the Company, respectively, will have been taken when:
a. the Boards of Directors of Funding and the Company, as the case
may be, shall have taken such action as may be necessary to
authorize the issuance of the Funding Debentures and the Funding
Guarantee,
b. the Funding Indenture shall have been executed and delivered by
duly authorized officers or representatives of Funding and the
Company and by the trustee under the Funding Indenture, and
2
<PAGE>
c. the Boards of Directors of Funding and the Company, or officers
or representatives duly authorized thereby, shall have taken
such action as may be necessary, pursuant to the terms of the
Funding Indenture, to fix and determine the terms of the Funding
Debentures and the Funding Guarantee, and the Funding Debentures
and the Funding Guarantee shall have been issued and delivered
in accordance with the terms and provisions of the Funding
Indenture.
6. All requisite action necessary to make the Subsidiary Guarantees
valid, legal and binding obligations of the Company will have been taken when:
a. the Boards of Directors of each Issuing Subsidiary and the
Company, as the case may be, shall have taken such action as
may be necessary to authorize the issuance of the Subsidiary
Debentures and the Subsidiary Guarantees,
b. the Subsidiary Indentures shall have been executed and
delivered by duly authorized officers or representatives
of the Issuing Subsidiaries and the Company and by the
trustee under each Subsidiary Indenture, and
c. the Boards of Directors of each Issuing Subsidiary and the
Company, or officers or representatives duly authorized
thereby, shall have taken such action as may be necessary,
pursuant to the terms of the Subsidiary Indentures, to fix
and determine the terms of the Subsidiary Debentures and the
Subsidiary Guarantees, and the Subsidiary Debentures and the
Subsidiary Guarantees, and the Subsidiary Debentures and the
Subsidiary Guarantees shall have been issued and delivered in
accordance with the terms and provisions of the Subsidiary
Indentures.
We are members of the State Bar of Texas and do not hold ourselves
out as experts on the laws of England or on the laws of New York. As to all
matters of English law, we have with your consent relied upon an opinion of
even date herewith addressed to you by E.J. Lean, General Counsel to the
Company and Funding. As to all matters of New York law, we have with your
consent relied upon an opinion of even date herewith addressed to you by Thelen
Reid & Priest LLP, special United States counsel to the Company and Funding.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
Very truly yours,
WORSHAM, FORSYTHE &WOOLDRIDGE, L.L.P.
By: /s/ T. A. Mack
--------------------------
A Partner
3
Exhibit 5(c) and 8(a)
THELEN REID & PRIEST LLP
NEW YORK ATTORNEYS AT LAW NEW YORK OFFICE
SAN FRANCISCO 40 WEST 57TH STREET
WASHINGTON, D.C. NEW YORK, N.Y. 10019-4097
LOS ANGELES TEL (212) 603-2000 FAX (212) 603-2001
SAN JOSE WWW.THELENREID.COM
December 22, 1999
TXU Europe Capital I
TXU Europe Funding I, L.P.
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
TXU Europe Limited
TXU Eastern Funding Company
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Ladies and Gentlemen:
We have acted as special United States counsel to TXU Europe Limited,
a private limited company incorporated under the laws of England and Wales
(Company), TXU Eastern Funding Company, a private unlimited company incorporated
under the laws of England and Wales (Funding), TXU Europe Funding I, L.P., a
Delaware limited partnership (Partnership) and TXU Europe Capital I, a Delaware
statutory business trust (Trust), in connection with the preparation and filing
by the Company, Funding, the Partnership and the Trust with the Securities and
Exchange Commission of a Registration Statement on Form S-1 (Registration
Statement) under the Securities Act of 1933, as amended, with respect to (i) the
preferred trust securities (Preferred Trust Securities) to be issued by the
Trust, (ii) the guarantee (Trust Guarantee) to be issued by the Company to
The Bank of New York, as trustee, for the benefit of the holders of the
Preferred Trust Securities, (iii) the preferred partnership securities
(Preferred Partnership Securities) to be issued by the Partnership, (iv) the
guarantee (Partnership Guarantee) to be issued by the Company to The Bank of
New York, as trustee, for the benefit of holders of the Preferred Partnership
Securities, (v) the junior subordinated debentures (Funding Debentures) to be
issued by Funding pursuant to an indenture (Funding Indenture), (vi) the
guarantee (Funding Guarantee) to be issued by the Company to The Bank of New
York, as trustee, for the benefit of the holders of Funding Debentures pursuant
to the terms of the Funding Indenture, and (vii) the guarantees (Subsidiary
Guarantees) to be issued by the Company to The Bank of New York, as trustee,
for the benefit of the holders of junior subordinated debentures (Subsidiary
<PAGE>
Debentures) to be issued by one or more of the Company's eligible subsidiaries
(each, an Issuing Subsidiary and together, the Issuing Subsidiaries), each
pursuant to the terms of one or more indentures (Subsidiary Indentures), each
substantially in the form filed as exhibits to the Registration Statement.
In connection therewith, we have reviewed such documents and records as we have
deemed necessary to enable us to express our opinion on the matters covered
hereby.
Based upon the foregoing, we are of the opinion that:
1. Funding is a company duly incorporated and validly existing
under the laws of England and Wales.
2. The Company is a company duly incorporated and validly existing
under the laws of England and Wales.
3. All requisite action necessary to make the Trust Guarantee a
valid, legal and binding obligation of the Company will have been taken when:
a. the Board of Directors of the Company shall have taken such
action as may be necessary to authorize the issuance of the
Trust Guarantee,
b. the Board of Directors of the Company, or officers or
representatives duly authorized thereby, shall have taken such
action as may be necessary to fix and determine the terms of
the Trust Guarantee,
c. the Preferred Trust Securities shall be issued and sold in the
manner contemplated by the Registration Statement, and
d. the Trust Guarantee shall have been duly executed and delivered
by the parties thereto.
4. All requisite action necessary to make the Partnership Guarantee
a valid, legal and binding obligation of the Company will have been taken when:
a. the Board of Directors of the Company shall have taken such
action as may be necessary to authorize the issuance of the
Partnership Guarantee,
b. the Board of Directors of the Company, or officers or
representatives duly authorized thereby, shall have taken such
action as may be necessary to fix and determine the terms of the
Partnership Guarantee,
c. the Preferred Partnership Securities shall be issued and sold in
the manner contemplated by the Registration Statement, and
d. the Partnership Guarantee shall have been duly executed and
delivered by the parties thereto.
2
<PAGE>
5. All requisite action necessary to make the Funding Debentures
and the Funding Guarantee valid, legal and binding obligations of Funding and
the Company, respectively, will have been taken when:
a. the Boards of Directors of Funding and the Company, as the case
may be, shall have taken such action as may be necessary to
authorize the issuance of the Funding Debentures and the Funding
Guarantee,
b. the Funding Indenture shall have been executed and delivered by
duly authorized officers or representatives of Funding and the
Company and by the trustee under the Funding Indenture, and
c. the Boards of Directors of Funding and the Company, or officers
or representatives duly authorized thereby, shall have taken
such action as may be necessary, pursuant to the terms of the
Funding Indenture, to fix and determine the terms of the Funding
Debentures and the Funding Guarantee, and the Funding Debentures
and the Funding Guarantee shall have been issued and delivered
in accordance with the terms and provisions of the Funding
Indenture.
6. All requisite action necessary to make the Subsidiary Guarantees
valid, legal and binding obligations of the Company will have been taken when:
a. the Boards of Directors of each Issuing Subsidiary and the
Company, as the case may be, shall have taken such action as may
be necessary to authorize the issuance of the Subsidiary
Debentures and the Subsidiary Guarantees,
b. the Subsidiary Indentures shall have been executed and delivered
by duly authorized officers or representatives of the Issuing
Subsidiaries and the Company and by the trustee under each
Subsidiary Indenture, and
c. the Boards of Directors of each Issuing Subsidiary and the
Company, or officers or representatives duly authorized thereby,
shall have taken such action as may be necessary, pursuant to the
terms of the Subsidiary Indentures, to fix and determine the
terms of the Subsidiary Debentures and the Subsidiary Guarantees,
and the Subsidiary Debentures and the Subsidiary Guarantees, and
the Subsidiary Debentures and the Subsidiary Guarantees shall
have been issued and delivered in accordance with the terms and
provisions of the Subsidiary Indentures.
We are members of the New York Bar and do not hold ourselves out as
experts on the laws of England. As to all matters of English law, we have with
your consent relied upon an opinion of even date herewith addressed to you by
E.J. Lean, General Counsel to the Company and Funding.
3
<PAGE>
We confirm our opinion as set forth under the caption MATERIAL INCOME
TAX CONSIDERATIONS - "US Income Tax Considerations" in the prospectus
constituting a part of the Registration Statement.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the use of our name in the Registration Statement.
Very truly yours,
/s/ Thelen Reid & Priest LLP
THELEN REID & PRIEST LLP
4
Exhibit 5(d)
Richards, Layton & Finger
One Rodney Square
Wilmington, Delaware 19899
December 21, 1999
TXU Europe Funding I, L.P.
TXU Europe Capital I
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Re: TXU Europe Funding I, L.P. and TXU Europe Capital I
---------------------------------------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for TXU Eastern Funding
Company, a private unlimited company incorporated under the laws of England
and Wales ("TXU Eastern"), TXU Europe Limited, a private company incorporated
under the laws of England and Wales ("TXU Europe"), TXU Europe Funding I, L.P.,
a Delaware limited partnership (the "Partnership"), and TXU Europe Capital 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 Limited Partnership of the Partnership, dated
as of November 22, 1999, as filed in the office of the Secretary of State of
the State of Delaware (the "Secretary of State") on November 22, 1999;
(b) The Agreement of Limited Partnership of the Partnership, dated
as of November 22, 1999;
<PAGE>
TXU Europe Funding I, L.P.
TXU Europe Capital I
December 21, 1999
Page 2
(c) A form of Amended and Restated Agreement of Limited Partnership
of the Partnership (including Annex A thereto) (the "Partnership Agreement"),
to be entered into among TXU Europe, as general partner, and the Trust, as
limited partner, attached as an exhibit to the Registration Statement (as
defined below);
(d) The Certificate of Trust of the Trust, dated as of November 22,
1999 (the "Trust Certificate"), as filed in the office of the Secretary of State
on November 22, 1999;
(e) The Trust Agreement of the Trust, dated as of November 22, 1999,
among TXU Business Services Company, a Texas corporation ("TXU Business"), and
the trustees of the Trust named therein;
(f) A form of Amended and Restated Trust Agreement of the Trust
(including Exhibits A-1 and A-2 thereto) (the "Trust Agreement"), to be
entered into among TXU Business, as depositor, the trustees of the Trust named
therein, and the holders, from time to time, of undivided beneficial interests
in the assets of the Trust, attached as an exhibit to the Registration
Statement;
(g) The Registration Statement (the "Registration Statement") on
Form S-1, including a related preliminary prospectus (the "Prospectus"),
relating to Preferred Trust Securities of the Trust representing preferred
undivided beneficial interests in the assets of the Trust (each, a "Preferred
Trust Security" and collectively, the "Preferred Trust Securities"), and the
Preferred Partnership Securities of the Partnership representing limited
partner interests in the Partnership (each, a "Preferred Partnership Security"
and collectively, the "Preferred Partnership Securities"), as proposed to be
filed by the TXU Eastern, TXU Europe, the Partnership and the Trust with the
Securities and Exchange Commission on or about December 21, 1999;
(h) A Certificate of Good Standing for the Partnership, dated
December 21, 1999, obtained from the Secretary of State; and
(i) A Certificate of Good Standing for the Trust, dated December 21,
1999, obtained from the Secretary of State.
Capitalized terms used herein and not otherwise defined are used as
defined in the Partnership Agreement.
<PAGE>
TXU Europe Funding I, L.P.
TXU Europe Capital I
December 21, 1999
Page 3
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.
For purposes of this opinion, we have assumed (i) that the
Partnership Agreement constitutes the entire agreement among the parties thereto
with respect to the subject matter thereof, including with respect to the
admission of partners to, and the creation, operation and termination of, the
Partnership, and that the Partnership Agreement and the Partnership Certificate
are in full force and effect and have not been amended, (ii) that 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
Trust Certificate are in full force and effect and have not been amended, (iii)
except to the extent provided in paragraphs 1 and 5 below, the due creation or
the 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 or organization or formation, (iv)
the legal capacity of natural persons who are signatories to the documents
examined by us, (v) 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, (vi) that all documents examined by us have
been duly authorized, executed and delivered by all parties thereto, (vii) the
receipt by each Person to whom a Preferred Partnership Security is to be issued
by the Partnership (collectively, the "Preferred Partnership Security Holders")
of an L.P. Certificate and the payment for the Preferred Partnership Security
acquired by it, in accordance with the Partnership Agreement and the
Registration Statement, (viii) the receipt by each Person to whom a Preferred
Trust Security is to be issued by the Trust (collectively, the "Preferred Trust
Security Holders") of a Preferred Trust Security Certificate (as defined in the
Trust Agreement) and the payment for the Preferred Trust Security acquired
<PAGE>
TXU Europe Funding I, L.P.
TXU Europe Capital I
December 21, 1999
Page 4
by it, in accordance with the Trust Agreement and the Registration Statement,
(ix) that the books and records of the Partnership set forth all information
required by the Partnership Agreement and the Delaware Revised Uniform Limited
Partnership Act (6 Del. C. ss. 17-101, et seq.) (the "Partnership Act"),
------- -- ---
including all information with respect to all Persons to be admitted as Partners
and their contributions to the Partnership, (x) that the Partnership Preferred
Securities are issued and sold to the Partnership Preferred Security Holders
in accordance with the Registration Statement and the Partnership Agreement,
and (xi) that the Preferred Trust Securities are issued and sold to the
Preferred Trust Security Holders in accordance with the Registration Statement
and the Trust Agreement. 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.
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 Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the Partnership Act.
2. The Preferred Partnership Securities will represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully paid
and nonassessable limited partner interests in the Partnership.
3. Assuming that the Preferred Partnership Security Holders, as
limited partners of the Partnership, do not participate in the control of
the business of the Partnership, the Preferred Partnership Security Holders,
as limited partners of the Partnership, will have no liability in excess of
their obligations to make payments provided for in the Partnership Agreement
and their share of the Partnership's assets and undistributed profits (subject
to the obligation of a Preferred Partnership Security Holder to repay any funds
wrongfully distributed to it).
<PAGE>
TXU Europe Funding I, L.P.
TXU Europe Capital I
December 21, 1999
Page 5
4. There are no provisions in the Partnership Agreement the inclusion
of which, subject to the terms and conditions therein, or, assuming that the
Preferred Partnership Security Holders, as limited partners of the Partnership,
take no action other than actions permitted by the Partnership Agreement, the
exercise of which, in accordance with the terms and conditions therein, would
cause the Preferred Partnership Security Holders, as limited partners of the
Partnership, to be deemed to be participating in the control of the business
of the Partnership.
5. 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.).
- - - - - -- ---
6. The Preferred Trust Securities will represent valid and, subject to
the qualifications set forth in paragraph 7 below, fully paid and nonassessable
undivided beneficial interests in the assets of the Trust.
7. The Preferred 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 Preferred 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 "Legality" 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 hereunder. 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.
Exhibit 8(b)
(Letterhead of Norton Rose)
22nd December, 1999
TXU Europe Capital I
TXU Europe Funding I, L.P.
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
TXU Europe Limited
TXU Eastern Funding Company
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
Ladies and Gentlemen:
We have acted as English legal advisers to TXU Europe Limited, a
private limited company incorporated under the laws of England and Wales
(Company), TXU Eastern Funding Company, a private unlimited company incorporated
under the laws of England and Wales (Funding), TXU Europe Funding I, L.P., a
Delaware limited partnership (Partnership) and TXU Europe Capital I, a Delaware
statutory business trust (Trust), in connection with the preparation and filing
by the Company, Funding, the Partnership and the Trust with the Securities and
Exchange Commission of a Registration Statement on Form S-1 (Registration
Statement) under the Securities Act of 1933, as amended, with respect to (i) the
preferred trust securities (Preferred Trust Securities) to be issued by the
Trust, (ii) the guarantee to be issued by the Company to The Bank of New York,
as trustee, for the benefit of the holders of the Preferred Trust Securities,
(iii) the preferred partnership securities (Preferred Partnership Securities)
to be issued by the Partnership, (iv) the guarantee to be issued by the Company
to The Bank of New York, as trustee, for the benefit of holders of the Preferred
Partnership Securities, (v) the junior subordinated debentures (Funding
Debentures) to be issued by Funding pursuant to an indenture (Funding
Indenture), (vi) the guarantee to be issued by the Company to The Bank of New
York, as trustee, for the benefit of the holders of Funding Debentures
pursuant to the terms of the Funding Indenture, and (vii) the guarantees to be
issued by the Company to The Bank of New York, as trustee, for the benefit of
the holders of junior subordinated debentures to be issued by one or more of the
Company's eligible subsidiaries, each pursuant to the terms of one or more
indentures, each substantially in the form filed as exhibits to the Registration
Statement.
Our opinion is based upon facts described in the Registration
Statement and upon facts represented to us or determined by us as of the date
hereof. Our opinion is also based upon existing United Kingdom law, practice
and judicial and administrative precedent, all of which are subject to change
either prospectively or retroactively.
<PAGE>
Based upon the foregoing, it is our opinion that the summary of
current law and practice in the United Kingdom relating to taxation of interest
on the subsidiary debentures as set out under the heading MATERIAL INCOME TAX
CONSIDERATIONS - "UK Tax Considerations" is a summary of current United
Kingdom tax consequences in respect of such interest for those holders of
Preferred Trust Securities to whom that summary relates. We express no opinion
on the two statements of intention on the part of the partnership (a) as to the
collection of interest on the subsidiary debentures from a paying agent in New
York or Luxembourg, and (b) as to its not appointing a UK collecting agent in
respect of that interest.
Yours faithfully,
/s/ Norton Rose
NORTON ROSE
2
Exhibit 12(b)
TXU EUROPE LIMITED (FORMERLY KNOWN AS
TXU EASTERN HOLDINGS LIMITED)
(SUCCESSOR COMPANY)
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
((POUND) MILLION, EXCEPT RATIOS)
<TABLE>
<CAPTION>
PERIOD FROM PERIOD FROM NINE MONTHS PERIOD
FORMATION FORMATION ENDED FROM FORMATION
THROUGH THROUGH SEPT 30, 1999 THROUGH
DECEMBER 31, 1998 MARCH 31, 1999 SEPT 30, 1998
----------------- --------------
EARNINGS:
<C> <S> <S> <S> <S>
Net income (loss) 77 126 71 (25)
Add: Minority income (loss) 11 21 7 (3)
Income tax
expense (benefit) 67 106 68 (19)
Fixed charges
(see details below) 281 369 263 183
Less: Interest capitalized (4) (5) 0 (3)
---------- ---------- ---------- ----------
Total earnings 432 617 409 133
---------- ---------- ---------- ----------
FIXED CHARGES:
Interest expense 269 356 259 174
Add: Interest capitalized 4 5 0 3
Rentals representative
of the interest
factor 8 8 4 6
---------- ---------- ---------- ----------
Total fixed charges 281 369 263 183
---------- ---------- ---------- ----------
RATIO OF EARNINGS TO FIXED
CHARGES 1.5 1.7 1.6 0.7(a)
========== ========== ========== ==========
</TABLE>
(a) For the period from formation to September 30, 1998, fixed charges
exceeded earnings by (pound) 50 million
Exhibit 21(a)
MATERIAL SUBSIDIARIES OF TXU EUROPE LIMITED
TXU Europe Group plc
Eastern Electricity plc
TXU EUROPE POWER LIMITED
Anglian Power Generators Limited
Eastern Generation Services Limited
Eastern Generation Research limited
Eastern Merchant Generation Limited
Eastern Merchant Properties Limited
Eastern Renewable Generation Limited
Eastern Gas Generation Maintenance Limited
Peterborough Power Limited
Shotton Combined Heat Limited
Nedalo (UK) Ltd
BG Cogen Limited
Citigen (London) Limited
Eastern Group Finance Limited
EASTERN POWER AND ENERGY TRADING LIMITED
Eastern Natural Gas (Trading) Limited
Eastern Natural Gas (Offshore) Limited
Eastern Ten Limited
Eastern Power and Energy Trading Poland Sp zoo
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
----------------------------------
We hereby consent to the use in this Registration Statement on Form S-1 of
TXU Eastern Funding Company, TXU Europe Limited (formerly known as TXU Eastern
Holdings Limited) and Subsidiaries, TXU Europe Capital I, and TXU Europe
Funding I, L.P. of our reports (i) dated June 30, 1999 relating to the
financial statements of TXU Europe Limited (formerly known as TXU Eastern
Holdings Limited) and Subsidiaries; (ii) dated April 26, 1999 relating to
the financial statements of Eastern Group plc; and (iii) dated April 26, 1999
relating to the financial statements of Energy Group Overseas BV, which
appear in such Registration Statement. We also consent to the references to
us under the headings "Experts" and "Selected Financial Information" in such
Registration Statement.
/s/ PricewaterhouseCoopers
PricewaterhouseCoopers
London, England
December 21, 1999
Exhibit 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of TXU Eastern Funding
Company, TXU Europe Limited, TXU Europe Capital I and TXU Europe Funding I,
L.P. on Form S-1 of our reports for TXU Europe Captial I and for TXU Europe
Funding I, L.P., each dated December 22, 1999, appearing in the Prospectus,
which is part of this Registration Statement.
We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ Deloitte & Touche LLP
Dallas, Texas
December 22, 1999
Exhibit 25(a)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
-----------------
TXU EASTERN FUNDING COMPANY
(Exact name of obligor as specified in its charter)
England and Wales 98-0203668
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
(Address of principal executive offices) (Zip code)
-----------------
<PAGE>
TXU EUROPE LIMITED
(Exact name of obligor as specified in its charter)
England and Wales 98-0188080
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
(Address of principal executive offices) (Zip code)
-----------------
UNSECURED SUBORDINATED DEBT SECURITIES OF TXU EASTERN FUNDING COMPANY,
AND TXU EUROPE LIMITED GUARANTEE WITH RESPECT TO UNSECURED SUBORDINATED
DEBT SECURITIES OF TXU EASTERN FUNDING COMPANY*
(Title of the securities)
* Specific title to be determined in connection with sale of TXU Eastern Funding
Company Unsecured Subordinated Debt Securities.
<PAGE>
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C.
New York Clearing House Association 20429
New York, N.Y. 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 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.
ss.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.)
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.
- - - - ----------------
*Pursuant to General Instruction B, the Trustee has responded only to
Items 1, 2 and 16 of this form since to the best of the knowledge of the
Trustee the obligor is not in default under any indenture under which the
Trustee is a trustee.
<PAGE>
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
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 December, 1999.
THE BANK OF NEW YORK
By: /s/ Walter N. Gitlin
----------------------------
Walter N. Gitlin
Vice President
<PAGE>
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business September 30, 1999, published in accordance
with a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
------ -------------
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin....................................... $ 6,394,412
Interest-bearing balances..................................... 3,966,749
Securities:
Held-to-maturity securities.................................... 805,227
Available-for-sale securities.................................. 4,152,260
Federal funds sold and Securities
purchased under agreements to resell........................ 1,449,439
Loans and lease financing
receivables:
Loans and leases, net of unearned
income........................................... 37,900,739
LESS: Allowance for loan and
lease losses..................................... 572,761
LESS: Allocated transfer risk
reserve.......................................... 11,754
Loans and leases, net of unearned
income, allowance, and reserve.............................. 37,316,224
Trading Assets................................................... 1,646,634
Premises and fixed assets (including
capitalized leases)............................................ 678,439
Other real estate owned.......................................... 11,571
Investments in unconsolidated subsid-
iaries and associated companies................................ 183,038
Customers' liability to this bank on
acceptances outstanding......................................... 349,282
Intangible assets................................................. 790,558
Other assets...................................................... 2,498,658
-----------
Total assets......................................................$60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 2 of 3)
LIABILITIES
- - - - -----------
Deposits:
In domestic offices............................................ $26,030,231
Noninterest-bearing............................... 11,348,986
Interest-bearing.................................. 14,681,245
In foreign offices, Edge and
Agreement subsidiaries, and IBFs................................ 18,530,950
Noninterest-bearing............................... 156,624
Interest-bearing................................... 18,374,326
Federal funds purchased and Securities
sold under agreements to repurchase ............................ 2,094,678
Demand notes issued to the U.S.
Treasury....................................................... 232,459
Trading liabilities.............................................. 2,081,462
Other borrowed money:
With remaining maturity of one year or less..................... 863,201
With remaining maturity of more than
one year through three years ................................ 449
With remaining maturity of more than
three years................................................. 31,080
Bank's liability on acceptances
executed and outstanding....................................... 351,286
Subordinated notes and debentures................................ 1,308,000
Other liabilities................................................ 3,055,031
----------
Total liabilities................................................ 54,578,827
----------
EQUITY CAPITAL
- - - - --------------
Common stock..................................................... 1,135,284
Surplus.......................................................... 815,314
Undivided profits and capital
reserves....................................................... 3,759,164
Net unrealized holding gains (losses)
on available-for-sale securities.............................. (15,440)
Cumulative foreign currency
translation adjustments......................................... (30,658)
Total equity capital............................................. 5,663,664
-----------
Total liabilities and equity capital............................. $60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 3 of 3)
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance 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.
Thomas J. Mastro
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. Griffith ) Directors
Gerald L. Hassell )
Exhibit 25(b)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE LIMITED
(Exact name of obligor as specified in its charter)
England and Wales 98-0188080
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE LIMITED GUARANTEE WITH RESPECT TO UNSECURED SUBORDINATED DEBT
SECURITIES OF ONE OR MORE ELIGIBLE SUBSIDIARIES OF TXU EUROPE LIMITED*
(Title of the securities)
- - - - -------------------------
* Specific title to be determined in connection with sale of Unsecured
Subordinated Debt Securities of one or more eligible subsidiaries of TXU Europe
Limited.
<PAGE>
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C.
New York Clearing House Association 20429
New York, N.Y. 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 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.
ss.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.)
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.
- - - - ----------------
*Pursuant to General Instruction B, the Trustee has responded only to
Items 1, 2 and 16 of this form since to the best of the knowledge of the
Trustee the obligor is not in default under any indenture under which the
Trustee is a trustee.
<PAGE>
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
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 December, 1999.
THE BANK OF NEW YORK
By: /s/ Walter N. Gitlin
----------------------------
Walter N. Gitlin
Vice President
<PAGE>
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business September 30, 1999, published in accordance
with a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
------ -------------
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin....................................... $ 6,394,412
Interest-bearing balances..................................... 3,966,749
Securities:
Held-to-maturity securities.................................... 805,227
Available-for-sale securities.................................. 4,152,260
Federal funds sold and Securities
purchased under agreements to resell........................ 1,449,439
Loans and lease financing
receivables:
Loans and leases, net of unearned
income........................................... 37,900,739
LESS: Allowance for loan and
lease losses..................................... 572,761
LESS: Allocated transfer risk
reserve.......................................... 11,754
Loans and leases, net of unearned
income, allowance, and reserve.............................. 37,316,224
Trading Assets................................................... 1,646,634
Premises and fixed assets (including
capitalized leases)............................................ 678,439
Other real estate owned.......................................... 11,571
Investments in unconsolidated subsid-
iaries and associated companies................................ 183,038
Customers' liability to this bank on
acceptances outstanding......................................... 349,282
Intangible assets................................................. 790,558
Other assets...................................................... 2,498,658
-----------
Total assets......................................................$60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 2 of 3)
LIABILITIES
- - - - -----------
Deposits:
In domestic offices............................................ $26,030,231
Noninterest-bearing............................... 11,348,986
Interest-bearing.................................. 14,681,245
In foreign offices, Edge and
Agreement subsidiaries, and IBFs................................ 18,530,950
Noninterest-bearing............................... 156,624
Interest-bearing................................... 18,374,326
Federal funds purchased and Securities
sold under agreements to repurchase ............................ 2,094,678
Demand notes issued to the U.S.
Treasury....................................................... 232,459
Trading liabilities.............................................. 2,081,462
Other borrowed money:
With remaining maturity of one year or less..................... 863,201
With remaining maturity of more than
one year through three years ................................ 449
With remaining maturity of more than
three years................................................. 31,080
Bank's liability on acceptances
executed and outstanding....................................... 351,286
Subordinated notes and debentures................................ 1,308,000
Other liabilities................................................ 3,055,031
----------
Total liabilities................................................ 54,578,827
----------
EQUITY CAPITAL
- - - - --------------
Common stock..................................................... 1,135,284
Surplus.......................................................... 815,314
Undivided profits and capital
reserves....................................................... 3,759,164
Net unrealized holding gains (losses)
on available-for-sale securities.............................. (15,440)
Cumulative foreign currency
translation adjustments......................................... (30,658)
Total equity capital............................................. 5,663,664
-----------
Total liabilities and equity capital............................. $60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 3 of 3)
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance 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.
Thomas J. Mastro
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. Griffith ) Directors
Gerald L. Hassell )
Exhibit 25(c)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE CAPITAL I
(Exact name of obligor as specified in its charter)
Texas to be applied for
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE CAPITAL I PREFERRED TRUST SECURITIES*
(Title of the securities)
- - - - -------------------------
* Specific title to be determined in connection with sale of TXU Europe
Capital I Preferred Trust Securities.
<PAGE>
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C.
New York Clearing House Association 20429
New York, N.Y. 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 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.
ss.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.)
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.
- - - - ----------------
*Pursuant to General Instruction B, the Trustee has responded only to
Items 1, 2 and 16 of this form since to the best of the knowledge of the
Trustee the obligor is not in default under any indenture under which the
Trustee is a trustee.
<PAGE>
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
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 December, 1999.
THE BANK OF NEW YORK
By: /s/ Walter N. Gitlin
----------------------------
Walter N. Gitlin
Vice President
<PAGE>
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business September 30, 1999, published in accordance
with a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
------ -------------
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin....................................... $ 6,394,412
Interest-bearing balances..................................... 3,966,749
Securities:
Held-to-maturity securities.................................... 805,227
Available-for-sale securities.................................. 4,152,260
Federal funds sold and Securities
purchased under agreements to resell........................ 1,449,439
Loans and lease financing
receivables:
Loans and leases, net of unearned
income........................................... 37,900,739
LESS: Allowance for loan and
lease losses..................................... 572,761
LESS: Allocated transfer risk
reserve.......................................... 11,754
Loans and leases, net of unearned
income, allowance, and reserve.............................. 37,316,224
Trading Assets................................................... 1,646,634
Premises and fixed assets (including
capitalized leases)............................................ 678,439
Other real estate owned.......................................... 11,571
Investments in unconsolidated subsid-
iaries and associated companies................................ 183,038
Customers' liability to this bank on
acceptances outstanding......................................... 349,282
Intangible assets................................................. 790,558
Other assets...................................................... 2,498,658
-----------
Total assets......................................................$60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 2 of 3)
LIABILITIES
- - - - -----------
Deposits:
In domestic offices............................................ $26,030,231
Noninterest-bearing............................... 11,348,986
Interest-bearing.................................. 14,681,245
In foreign offices, Edge and
Agreement subsidiaries, and IBFs................................ 18,530,950
Noninterest-bearing............................... 156,624
Interest-bearing................................... 18,374,326
Federal funds purchased and Securities
sold under agreements to repurchase ............................ 2,094,678
Demand notes issued to the U.S.
Treasury....................................................... 232,459
Trading liabilities.............................................. 2,081,462
Other borrowed money:
With remaining maturity of one year or less..................... 863,201
With remaining maturity of more than
one year through three years ................................ 449
With remaining maturity of more than
three years................................................. 31,080
Bank's liability on acceptances
executed and outstanding....................................... 351,286
Subordinated notes and debentures................................ 1,308,000
Other liabilities................................................ 3,055,031
----------
Total liabilities................................................ 54,578,827
----------
EQUITY CAPITAL
- - - - --------------
Common stock..................................................... 1,135,284
Surplus.......................................................... 815,314
Undivided profits and capital
reserves....................................................... 3,759,164
Net unrealized holding gains (losses)
on available-for-sale securities.............................. (15,440)
Cumulative foreign currency
translation adjustments......................................... (30,658)
Total equity capital............................................. 5,663,664
-----------
Total liabilities and equity capital............................. $60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 3 of 3)
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance 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.
Thomas J. Mastro
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. Griffith ) Directors
Gerald L. Hassell )
Exhibit 25(d)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE LIMITED
(Exact name of obligor as specified in its charter)
England and Wales 98-0188080
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE LIMITED GUARANTEE WITH RESPECT TO TXU EUROPE CAPITAL I PREFERRED
TRUST SECURITIES*
(Title of the securities)
- - - - -------------------------
* Specific title to be determined in connection with sale of TXU Europe
Capital I Preferred Trust Securities.
<PAGE>
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C.
New York Clearing House Association 20429
New York, N.Y. 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 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.
ss.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.)
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.
- - - - ----------------
*Pursuant to General Instruction B, the Trustee has responded only to
Items 1, 2 and 16 of this form since to the best of the knowledge of the
Trustee the obligor is not in default under any indenture under which the
Trustee is a trustee.
<PAGE>
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
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 December, 1999.
THE BANK OF NEW YORK
By: /s/ Walter N. Gitlin
----------------------------
Walter N. Gitlin
Vice President
<PAGE>
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business September 30, 1999, published in accordance
with a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
------ -------------
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin....................................... $ 6,394,412
Interest-bearing balances..................................... 3,966,749
Securities:
Held-to-maturity securities.................................... 805,227
Available-for-sale securities.................................. 4,152,260
Federal funds sold and Securities
purchased under agreements to resell........................ 1,449,439
Loans and lease financing
receivables:
Loans and leases, net of unearned
income........................................... 37,900,739
LESS: Allowance for loan and
lease losses..................................... 572,761
LESS: Allocated transfer risk
reserve.......................................... 11,754
Loans and leases, net of unearned
income, allowance, and reserve.............................. 37,316,224
Trading Assets................................................... 1,646,634
Premises and fixed assets (including
capitalized leases)............................................ 678,439
Other real estate owned.......................................... 11,571
Investments in unconsolidated subsid-
iaries and associated companies................................ 183,038
Customers' liability to this bank on
acceptances outstanding......................................... 349,282
Intangible assets................................................. 790,558
Other assets...................................................... 2,498,658
-----------
Total assets......................................................$60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 2 of 3)
LIABILITIES
- - - - -----------
Deposits:
In domestic offices............................................ $26,030,231
Noninterest-bearing............................... 11,348,986
Interest-bearing.................................. 14,681,245
In foreign offices, Edge and
Agreement subsidiaries, and IBFs................................ 18,530,950
Noninterest-bearing............................... 156,624
Interest-bearing................................... 18,374,326
Federal funds purchased and Securities
sold under agreements to repurchase ............................ 2,094,678
Demand notes issued to the U.S.
Treasury....................................................... 232,459
Trading liabilities.............................................. 2,081,462
Other borrowed money:
With remaining maturity of one year or less..................... 863,201
With remaining maturity of more than
one year through three years ................................ 449
With remaining maturity of more than
three years................................................. 31,080
Bank's liability on acceptances
executed and outstanding....................................... 351,286
Subordinated notes and debentures................................ 1,308,000
Other liabilities................................................ 3,055,031
----------
Total liabilities................................................ 54,578,827
----------
EQUITY CAPITAL
- - - - --------------
Common stock..................................................... 1,135,284
Surplus.......................................................... 815,314
Undivided profits and capital
reserves....................................................... 3,759,164
Net unrealized holding gains (losses)
on available-for-sale securities.............................. (15,440)
Cumulative foreign currency
translation adjustments......................................... (30,658)
Total equity capital............................................. 5,663,664
-----------
Total liabilities and equity capital............................. $60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 3 of 3)
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance 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.
Thomas J. Mastro
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. Griffith ) Directors
Gerald L. Hassell )
Exhibit 25(e)
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST
INDENTURE ACT OF 1939 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A
TRUSTEE PURSUANT TO SECTION 305(b)(2) ____________
-----------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(Jurisdiction of incorporation (I.R.S. Employer
if not a U.S. national bank) Identification No.)
One Wall Street, New York, New York 10286
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE LIMITED
(Exact name of obligor as specified in its charter)
England and Wales 98-0188080
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
The Adelphi
1-11 John Adam Street
London, England WC2N 6HT
(Address of principal executive offices) (Zip code)
-----------------
TXU EUROPE LIMITED GUARANTEE WITH RESPECT TO TXU EUROPE FUNDING I, L.P.
PREFERRED PARTNERSHIP SECURITIES*
(Title of the securities)
- - - - -------------------------
* Specific title to be determined in connection with sale of TXU Europe
Funding I, L.P. Preferred Partnership Securities.
<PAGE>
ITEM 1. GENERAL INFORMATION.*
Furnish the following information as to the Trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
Superintendent of Banks of the 2 Rector Street, New York, N.Y. 10006
State of New York and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045
Federal Deposit Insurance Corporation 550 17th Street, N.W., Washington, D.C.
New York Clearing House Association 20429
New York, N.Y. 10005
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None. (See Note on page 2.)
ITEM 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.
ss.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.)
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.
- - - - ----------------
*Pursuant to General Instruction B, the Trustee has responded only to
Items 1, 2 and 16 of this form since to the best of the knowledge of the
Trustee the obligor is not in default under any indenture under which the
Trustee is a trustee.
<PAGE>
NOTE
Inasmuch as this Form T-1 is being filed prior to the ascertainment by
the Trustee of all facts on which to base a responsive answer to Item 2, the
answer to said Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an
amendment to this Form T-1.
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 December, 1999.
THE BANK OF NEW YORK
By: /s/ Walter N. Gitlin
----------------------------
Walter N. Gitlin
Vice President
<PAGE>
EXHIBIT 7
(Page 1 of 3)
Consolidated Report of Condition of
THE BANK OF NEW YORK
of One Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business September 30, 1999, published in accordance
with a call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
------ -------------
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin....................................... $ 6,394,412
Interest-bearing balances..................................... 3,966,749
Securities:
Held-to-maturity securities.................................... 805,227
Available-for-sale securities.................................. 4,152,260
Federal funds sold and Securities
purchased under agreements to resell........................ 1,449,439
Loans and lease financing
receivables:
Loans and leases, net of unearned
income........................................... 37,900,739
LESS: Allowance for loan and
lease losses..................................... 572,761
LESS: Allocated transfer risk
reserve.......................................... 11,754
Loans and leases, net of unearned
income, allowance, and reserve.............................. 37,316,224
Trading Assets................................................... 1,646,634
Premises and fixed assets (including
capitalized leases)............................................ 678,439
Other real estate owned.......................................... 11,571
Investments in unconsolidated subsid-
iaries and associated companies................................ 183,038
Customers' liability to this bank on
acceptances outstanding......................................... 349,282
Intangible assets................................................. 790,558
Other assets...................................................... 2,498,658
-----------
Total assets......................................................$60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 2 of 3)
LIABILITIES
- - - - -----------
Deposits:
In domestic offices............................................ $26,030,231
Noninterest-bearing............................... 11,348,986
Interest-bearing.................................. 14,681,245
In foreign offices, Edge and
Agreement subsidiaries, and IBFs................................ 18,530,950
Noninterest-bearing............................... 156,624
Interest-bearing................................... 18,374,326
Federal funds purchased and Securities
sold under agreements to repurchase ............................ 2,094,678
Demand notes issued to the U.S.
Treasury....................................................... 232,459
Trading liabilities.............................................. 2,081,462
Other borrowed money:
With remaining maturity of one year or less..................... 863,201
With remaining maturity of more than
one year through three years ................................ 449
With remaining maturity of more than
three years................................................. 31,080
Bank's liability on acceptances
executed and outstanding....................................... 351,286
Subordinated notes and debentures................................ 1,308,000
Other liabilities................................................ 3,055,031
----------
Total liabilities................................................ 54,578,827
----------
EQUITY CAPITAL
- - - - --------------
Common stock..................................................... 1,135,284
Surplus.......................................................... 815,314
Undivided profits and capital
reserves....................................................... 3,759,164
Net unrealized holding gains (losses)
on available-for-sale securities.............................. (15,440)
Cumulative foreign currency
translation adjustments......................................... (30,658)
Total equity capital............................................. 5,663,664
-----------
Total liabilities and equity capital............................. $60,242,491
===========
<PAGE>
EXHIBIT 7
(Page 3 of 3)
I, Thomas J. Mastro, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance 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.
Thomas J. Mastro
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. Griffith ) Directors
Gerald L. Hassell )
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0001088691
<NAME> TXU EUROPE LIMITED
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,678
<OTHER-PROPERTY-AND-INVEST> 1,003
<TOTAL-CURRENT-ASSETS> 917
<TOTAL-DEFERRED-CHARGES> 168
<OTHER-ASSETS> 3,663
<TOTAL-ASSETS> 8,429
<COMMON> 1,467
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 147
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,607
0
0
<LONG-TERM-DEBT-NET> 4,495
<SHORT-TERM-NOTES> 157
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 383
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,787
<TOT-CAPITALIZATION-AND-LIAB> 8,429
<GROSS-OPERATING-REVENUE> 2,686
<INCOME-TAX-EXPENSE> 68
<OTHER-OPERATING-EXPENSES> 2,332
<TOTAL-OPERATING-EXPENSES> 2,332
<OPERATING-INCOME-LOSS> 354
<OTHER-INCOME-NET> 5
<INCOME-BEFORE-INTEREST-EXPEN> 359
<TOTAL-INTEREST-EXPENSE> 259
<NET-INCOME> 71
0
<EARNINGS-AVAILABLE-FOR-COMM> 71
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 259
<CASH-FLOW-OPERATIONS> 447
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
