==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 10-Q
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
- OR -
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
_________________________
Texas Utilities Company
A Texas Corporation I.R.S. Employer Identification
Commission File Number 1-12833 No. 75-2669310
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600
__________________
Texas Utilities Electric Company
A Texas Corporation I.R.S. Employer Identification
Commission File Number 1-11668 No. 75-1837355
ENERGY PLAZA, 1601 BRYAN STREET, DALLAS, TEXAS 75201-3411
(214) 812-4600
___________________
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject
to such filing requirements for the last 90 days.
Yes X No
--
Common Stock outstanding at November 6, 1998:
Texas Utilities Company: 282,332,634 shares, without par value.
Texas Utilities Electric Company: 123,832,600 shares, without par value.
This combined Form 10-Q is filed separately by Texas Utilities Company and
Texas Utilities Electric Company. Information contained herein relating to an
individual registrant is filed by that registrant on its own behalf except that
the information with respect to Texas Utilities Electric Company, other than
the condensed consolidated financial statements of Texas Utilities Electric
Company, is filed by each of Texas Utilities Company and Texas Utilities
Elecric Company. Each registrant make no representation as to information
filed by the other registrant.
==============================================================================
<PAGE>
<PAGE>
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
Part I. Financial information Page
Item 1. Financial Statements
Texas Utilities Company and Subsidiaries
Condensed Statements of Consolidated Income -
Three, Nine and Twelve Months Ended September 30, 1998 and 1997 . 3
Condensed Statements of Consolidated Comprehensive Income -
Three, Nine and Twelve Months Ended September 30, 1998 and 1997 . 4
Condensed Statements of Consolidated Cash Flows -
Nine Months Ended September 30, 1998 and 1997 . . . . . . . . . . 5
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997. . . . . . . . . . . . . 6
Texas Utilities Electric Company and Subsidiaries
Condensed Statements of Consolidated Income -
Three, Nine and Twelve Months Ended September 30, 1998 and 1997 . 8
Condensed Statements of Consolidated Cash Flows -
Nine Months Ended September 30, 1998 and 1997 . . . . . . . . . . 9
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997. . . . . . . . . . . . . 10
Notes to Condensed Consolidated Financial Statements. . . . . . . . 12
Independent Accountants' Reports. . . . . . . . . . . . . . . . . . 25
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operation. . . . . . . . . . . . . . . . . . . . . 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk. . . . 43
Part II. Other Information
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 45
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . 46
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
APPENDIX A - Financial Information of ENSERCH Corporation and Subsidiaries
2
<PAGE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<captions>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ --------------------- -------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . $4,379,632 $2,265,302 $10,115,574 $5,347,591 $12,714,490 $6,813,209
---------- ---------- ----------- ---------- ----------- ----------
OPERATING EXPENSES
Fuel and purchased power. . . . . . . . . . . . . . . 1,157,219 670,460 2,470,541 1,661,855 3,021,375 2,161,032
Gas and electricity purchased for resale. . . . . . . 1,135,203 210,075 2,852,957 210,075 3,705,641 210,075
Operation and maintenance . . . . . . . . . . . . . . 750,701 387,426 1,796,713 1,058,579 2,277,401 1,414,421
Depreciation and amortization . . . . . . . . . . . . 397,786 172,865 843,845 489,656 1,020,637 646,744
Taxes other than income . . . . . . . . . . . . . . . 156,065 140,413 469,196 401,627 626,242 545,743
---------- ---------- ----------- ---------- ----------- ----------
Total operating expenses. . . . . . . . . . . . . . 3,596,974 1,581,239 8,433,252 3,821,792 10,651,296 4,978,015
---------- ---------- ----------- ---------- ----------- ----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . 782,658 684,063 1,682,322 1,525,799 2,063,194 1,835,194
OTHER INCOME (DEDUCTIONS) - NET . . . . . . . . . . . . 49,809 (11,158) 17,257 (36,126) 4,135 (49,405)
---------- --------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST, OTHER CHARGES
AND INCOME TAXES . . . . . . . . . . . . . . . . . . 832,467 672,905 1,699,579 1,489,673 2,067,329 1,785,789
---------- --------- ---------- ---------- ---------- ----------
INTEREST INCOME . . . . . . . . . . . . . . . . . . . . 65,791 8,504 100,064 23,603 108,121 30,957
---------- --------- ---------- ---------- ---------- ----------
INTEREST EXPENSE AND OTHER CHARGES
Interest. . . . . . . . . . . . . . . . . . . . . . . 399,304 201,104 903,256 564,795 1,101,398 752,686
Allowance for borrowed funds used during
construction. . . . . . . . . . . . . . . . . . . . (2,386) (1,785) (7,210) (6,723) (9,377) (8,719)
Distributions on subsidiary obligated, mandatorily
redeemable, preferred securities of subsidiary
trusts holding solely debentures of
subsidiaries. . . . . . . . . . . . . . . . . . . . 19,825 18,127 54,155 51,423 72,433 59,675
Preferred stock dividends of subsidiaries . . . . . . 4,022 5,476 12,610 21,494 19,099 34,008
---------- --------- ---------- ---------- ---------- ----------
Total interest and other charges. . . . . . . . . . 420,765 222,922 962,811 630,989 1,183,553 837,650
---------- --------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . 477,493 458,487 836,832 882,287 991,897 979,096
INCOME TAX EXPENSE. . . . . . . . . . . . . . . . . . . 183,904 168,877 333,591 317,132 393,357 347,348
---------- --------- ---------- ---------- ---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . $ 293,589 $ 289,610 $ 503,241 $ 565,155 $ 598,540 $ 631,748
========== ========= ========== =========== ========== ==========
Average shares of common stock outstanding
(thousands) . . . . . . . . . . . . . . . . . . . . . 281,396 233,283 259,476 227,500 254,940 226,776
Per share of common stock:
Basic earnings. . . . . . . . . . . . . . . . . . . . $1.04 $ 1.24 $1.94 $ 2.48 $2.35 $2.79
Diluted earnings. . . . . . . . . . . . . . . . . . . $1.04 $ 1.24 $1.94 $ 2.48 $2.34 $2.79
Dividends declared. . . . . . . . . . . . . . . . . . $0.55 $0.525 $1.65 $1.575 $2.20 $2.10
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ ------------------- -------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C> <C> <C>
NET INCOME. . . . . . . . . . . . . . . . $293,589 $289,610 $503,241 $565,155 $598,540 $631,748
-------- -------- -------- -------- -------- --------
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment 13,352 (25,195) 20,787 (60,418) (46,597) (57,561)
Income tax effect . . . . . . . . . . . . 265 (28,313) 265 (265) 265
-------- -------- -------- -------- -------- --------
Total . . . . . . . . . . . . . . . . 13,352 (24,930) (7,526) (60,153) (46,862) (57,296)
-------- -------- -------- -------- -------- --------
COMPREHENSIVE INCOME. . . . . . . . . . . $306,941 $264,680 $495,715 $505,002 $551,678 $574,452
======== ======== ======== ======== ======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
------------------
1998 1997
---- ----
Thousands of Dollars
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $503,241 $565,155
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel) . . . . . . . . . . . . . 958,538 620,415
Deferred income taxes - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 180,900 81,642
Investment tax credits - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,140) (17,095)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,663) 76,243
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 226,955 (291,519)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,818) (4,724)
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (34,214) 122,105
Interest and taxes accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,549 21,723
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,712) 94,590
Over/(under)-recovered fuel revenue - net of deferred taxes . . . . . . . . . . . . . . . (7,541) (63,245)
Energy marketing risk management assets and liabilities . . . . . . . . . . . . . . . . . (26,124) (25,536)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (389,095) 86,821
---------- ----------
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . 1,374,876 1,266,575
---------- -----------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities:
Acquisition and interim facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,135,827
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,689,022 508,604
Subsidiary obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding
solely debentures of subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . 150,000 493,273
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,369
Retirements/repurchases of securities:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,217,820) (1,258,350)
Preferred stock of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (114,139) (553,093)
Subsidiary obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding
solely debentures of subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . (47,374)
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97,333)
Change in notes payable:
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,031,691 784,739
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,696 (269,789)
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (414,236) (356,591)
Debt premium, discount, financing and reacquisition expenses. . . . . . . . . . . . . . . . . (203,372) (31,399)
---------- -----------
Cash provided by (used in) financing activities . . . . . . . . . . . . . . . . . . . . . 5,021,664 (779,939)
---------- -----------
CASH FLOWS - INVESTING ACTIVITIES
Acquisition of The Energy Group (net of cash acquired of $3,261,887,000). . . . . . . . . . . . (2,466,157)
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (751,302) (376,914)
Nuclear fuel (excluding allowance for equity funds used during construction) (20,887) (39,637)
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (120,289) (45,842)
---------- -----------
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,358,635) (462,393)
---------- -----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,739 1,761
---------- -----------
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,175,644 26,004
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 44,435 15,845
---------- -----------
CASH AND CASH EQUIVALENTS - ENDING BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,220,079 $ 41,849
========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30,
1998 December 31,
(Unaudited) 1997
------------ ------------
Thousands of Dollars
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
United States (US):
Electric. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,002,673 $22,780,305
Gas distribution and pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,117,313 1,068,708
Telecommunications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,915 145,125
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 576,701 528,374
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,858,602 24,522,512
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,284,148 6,652,473
----------- -----------
Net of accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,574,454 17,870,039
Construction work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 404,131 307,978
Nuclear fuel (net of accumulated amortization: 1998 - $523,999,000;
1997 - $456,490,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,478 242,018
Held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,086 24,087
Less reserve for regulatory disallowances . . . . . . . . . . . . . . . . . . . . . . . . . . 836,005 836,005
----------- -----------
Net US property, plant and equipment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,363,144 17,608,117
Non-US:
United Kingdom - Electric, Gas and Other (net of accumulated depreciation of $64,554,000) 3,181,173
Australia - Electric (net of accumulated depreciation: 1998 - $107,667,000;
1997 - $63,189,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 892,596 962,913
----------- -----------
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,436,913 18,571,030
----------- -----------
INVESTMENTS
Goodwill (net of accumulated amortization: 1998 - $108,177,000; 1997- $33,444,000) 6,817,297 1,423,420
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,238,811 851,320
----------- -----------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,056,108 2,274,740
----------- -----------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,220,079 44,435
Accounts receivable (net of allowance for uncollectible accounts:
1998 - $46,958,000; 1997- $11,322,000) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,240,898 981,067
Inventories - at average cost:
Materials and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253,558 209,825
Fuel stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 308,724 81,490
Gas stored underground. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,368 156,637
Energy marketing risk management assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 590,241 365,650
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154,050 59,809
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,540 76,307
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 205,080 19,628
----------- -----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,247,538 1,994,848
----------- -----------
DEFERRED DEBITS
Unamortized regulatory assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,831,122 1,876,228
Prepayments for non-US leases and pensions. . . . . . . . . . . . . . . . . . . . . . . . . . 1,098,784
Other deferred debits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449,591 157,283
----------- -----------
Total deferred debits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,379,497 2,033,511
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,120,056 $24,874,129
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
6
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
September 30,
1998 December 31,
(Unaudited) 1997
----------- -----------
Thousands of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares - 500,000,000
Outstanding shares - 1998 - 282,898,405 and 1997 - 245,237,559 . . . . . . . . . . . . . . $6,949,593 $5,587,200
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383,417 1,311,875
Accumulated other comprehensive income-
Cumulative currency translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . (63,539) (56,013)
----------- ----------
Total common stock equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,269,471 6,843,062
Preferred stock of subsidiaries:
Not subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . 190,055 304,194
Subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,611 20,600
Subsidiary obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . 969,756 875,146
Long-term debt, less amounts due currently . . . . . . . . . . . . . . . . . . . . . . . . . 15,300,307 8,759,379
----------- ----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,750,200 16,802,381
----------- ----------
CURRENT LIABILITIES
Notes payable:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,891,279 570,000
Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615,740 44,442
Long-term debt due currently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901,933 772,071
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,396,186 879,593
Energy marketing risk management liabilities . . . . . . . . . . . . . . . . . . . . . . . . 572,941 357,044
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,522 139,994
Customers' deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,740 91,440
Taxes accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645,918 182,532
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,500 193,125
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,867 7,919
Over-recovered fuel revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,987
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 963,497 271,853
----------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,540,123 3,522,000
----------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,862,258 2,989,254
Unamortized investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553,143 570,283
Other deferred credits and noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . 2,414,332 990,211
----------- ----------
Total deferred credits and other noncurrent liabilities. . . . . . . . . . . . . . . . . 6,829,733 4,549,748
----------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $40,120,056 $24,874,129
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
7
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ ----------------- --------------------
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Thousands of Dollars
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . $2,123,197 $1,851,356 $5,120,813 $4,668,356 $6,587,874 $6,003,446
---------- ---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES
Fuel and purchased power . . . . . . . . . . . . . . . . 674,578 637,943 1,662,280 1,540,005 2,184,984 1,995,390
Operation and maintenance. . . . . . . . . . . . . . . . 301,383 289,096 917,543 892,983 1,250,944 1,211,608
Depreciation and amortization. . . . . . . . . . . . . . 286,039 143,468 613,678 429,213 756,742 571,327
Income taxes . . . . . . . . . . . . . . . . . . . . . . 230,554 178,991 429,003 355,132 493,552 393,020
Taxes other than income. . . . . . . . . . . . . . . . . 132,282 124,948 385,459 372,375 520,390 509,202
---------- ---------- ---------- ---------- ---------- ----------
Total operating expenses. . . . . . . . . . . . . . . 1,624,836 1,374,446 4,007,963 3,589,708 5,206,612 4,680,547
---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . 498,361 476,910 1,112,850 1,078,648 1,381,262 1,322,899
---------- ---------- ---------- ---------- ---------- ----------
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during
construction. . . . . . . . . . . . . . . . . . . . . 1,524 3,153 4,639 3,800 6,041 4,077
Other income (deductions) - net . . . . . . . . . . . . (5,813) (2,127) (4,220) (6,828) (5,865) (9,278)
Income tax benefit (expense). . . . . . . . . . . . . . 1,444 (2,464) 463 11,694 (1,096) 12,025
-------- ---------- ---------- ---------- ---------- ----------
Total other income (deductions). . . . . . . . . . . (2,845) (1,438) 882 8,666 (920) 6,824
-------- ---------- ---------- ---------- ---------- ----------
INCOME BEFORE INTEREST AND
OTHER CHARGES . . . . . . . . . . . . . . . . . . . . . 495,516 475,472 1,113,732 1,087,314 1,380,342 1,329,723
--------- ---------- ---------- ---------- ---------- ----------
INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . 258 1,662 1,395 6,088 2,081 7,678
--------- ---------- ---------- ---------- ---------- ----------
INTEREST EXPENSE AND OTHER CHARGES
Interest. . . . . . . . . . . . . . . . . . . . . . . . 115,890 138,598 363,243 400,240 490,269 535,378
Distributions on TU Electric obligated, mandatorily
redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric . . . . . . . 17,115 18,127 51,445 51,423 69,723 59,675
Allowance for borrowed funds used during
construction . . . . . . . . . . . . . . . . . . . . . (2,043) (1,583) (6,224) (6,251) (8,116) (8,245)
--------- ---------- ---------- ---------- ---------- ----------
Total interest and other charges . . . . . . . . . . 130,962 155,142 408,464 445,412 551,876 586,808
--------- ---------- ---------- ---------- ---------- ----------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . 364,812 321,992 706,663 647,990 830,547 750,593
PREFERRED STOCK DIVIDENDS . . . . . . . . . . . . . . . . 3,087 3,598 9,441 23,160 13,131 35,674
--------- ---------- ---------- ---------- ---------- ----------
NET INCOME AVAILABLE FOR
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . $361,725 $ 318,394 $ 697,222 $ 624,830 $ 817,416 $ 714,919
======== ========== ========== ========== ========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
8
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Nine Months Ended
September 30,
------------------
1998 1997
---- ----
Thousands of Dollars
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $706,663 $ 647,990
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel). . . . . . . . . . . . . . . . . 723,948 537,365
Deferred income taxes - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,663 102,302
Investment tax credits - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,917) (15,916)
Allowance for equity funds used during construction. . . . . . . . . . . . . . . . . . . . . . . . (4,639) (3,800)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,061
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161,312) (249,350)
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,822) 189
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,824 77,639
Interest and taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135,544 71,108
Other working capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,351 45,933
Over/(under) - recovered fuel revenue - net of deferred taxes. . . . . . . . . . . . . . . . . . . (7,833) (63,282)
Other - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,038 66,144
---------- ---------
Cash provided by operating activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,545,508 1,296,383
---------- ---------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 428,965 498,640
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding
solely debentures of TU Electric. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493,273
Retirements/repurchases of securities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (772,060) (635,350)
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,139) (553,093)
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding
solely debentures of TU Electric. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,374)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (429,714) (136,416)
Change in notes receivable/payable:
Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (227,738) (15,982)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (253,151)
Preferred stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,746) (32,495)
Common stock dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (272,832)
Debt premium, discount, financing and reacquisition expenses . . . . . . . . . . . . . . . . . . . . (58,354) (25,742)
---------- ---------
Cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,130,160) (933,148)
---------- ---------
CASH FLOWS - INVESTING ACTIVITIES
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (369,121) (310,298)
Allowance for equity funds used during construction (excluding amount for nuclear fuel). . . . . . . 3,557 1,973
Nuclear fuel (excluding allowance for equity funds used during construction) . . . . . . . . . . . . (20,887) (39,637)
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,535) (11,898)
---------- ---------
Cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (417,986) (359,860)
NET CHANGE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,638) 3,375
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,829 13,005
---------- ----------
CASH AND CASH EQUIVALENTS - ENDING BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,191 $ 16,380
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
9
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30,
1998 December 31,
(Unaudited) 1997
------------ ------------
Thousands of Dollars
<S> <C> <C>
ELECTRIC PLANT
In service:
Production . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,369,906 $15,369,306
Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,686,393 1,669,259
Distribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,947,017 4,745,270
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 441,266 436,059
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,444,582 22,219,894
Less accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,672,191 6,120,309
----------- -----------
Electric plant in service, less accumulated depreciation . . . . . . . . . . . . . 15,772,391 16,099,585
Construction work in progress. . . . . . . . . . . . . . . . . . . . . . . . . . . . 254,998 190,579
Nuclear fuel (net of accumulated amortization: 1998 - $523,999,000;
1997 - $456,490,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196,478 242,017
Held for future use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,966 23,966
----------- -----------
Electric plant, less accumulated depreciation and amortization . . . . . . . . . . 16,247,833 16,556,147
Less reserve for regulatory disallowances . . . . . . . . . . . . . . . . . . . . . . 836,005 836,005
----------- -----------
Net electric plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,411,828 15,720,142
----------- -----------
INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567,857 534,487
CURRENT ASSETS
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,191 11,829
Notes receivable - affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,809
Accounts receivable (net of allowance for uncollectible accounts: 1998 - $8,078,000;
1997 - $6,049,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 519,014 357,702
Inventories - at average cost:
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 186,175 181,157
Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83,293 81,489
Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,108 31,338
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,670 49,359
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,370 1,818
----------- -----------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 955,630 714,692
DEFERRED DEBITS
Unamortized regulatory assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,772,506 1,796,516
Under-recovered fuel revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548
Other deferred debits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,594 67,596
----------- -----------
Total deferred debits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,850,648 1,864,112
----------- -----------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,785,963 $18,833,433
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
10
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
September 30,
1998 December 31,
(Unaudited) 1997
------------- -------------
Thousands of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares - 180,000,000
Outstanding shares - 1998 - 128,607,200 and 1997 - 142,931,000. . . . . . . . . . . . . . $3,886,521 $4,316,235
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,679,432 1,982,210
---------- ----------
Total common stock equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,565,953 6,298,445
Preferred stock:
Not subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,055 129,194
Subject to mandatory redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,611 20,600
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely debentures of TU Electric . . . . . . . . . . . . . . . . . . . . . . . . . 823,279 875,146
Long-term debt, less amounts due currently . . . . . . . . . . . . . . . . . . . . . . . . . 5,533,067 5,475,447
---------- ----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,057,965 12,798,832
---------- ----------
CURRENT LIABILITIES
Notes payable - affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,929
Long-term debt due currently. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357,729 752,645
Accounts payable:
Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 296,948 289,075
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,146 152,367
Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,262 2,567
Customers' deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,789 74,256
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325,162 167,009
Interest accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,928 140,538
Over-recovered fuel revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,987
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,509 134,369
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,527,473 1,907,742
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,263,332 3,216,951
Unamortized investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 540,827 556,743
Other deferred credits and noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . 396,366 353,165
---------- ----------
Total deferred credits and other noncurrent liabilities . . . . . . . . . . . . . . . 4,200,525 4,126,859
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 8)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,785,963 $18,833,433
=========== ===========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
11
<PAGE>
<PAGE>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
TEXAS UTILITIES ELECTRIC COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS, MERGERS AND ACQUISITIONS
The Company
Texas Utilities Company (TUC, or the Company) is a holding company that
owns all of the outstanding common stock of Texas Energy Industries, Inc.
(TEI), ENSERCH Corporation (ENSERCH), TU United Kingdom Holdings, Inc. and TU
Finance (No. 2) Holdings, Inc. (together with TU United Kingdom Holdings,
Inc., TU Holdings). Through subsidiaries and divisions of TEI (parent of
Texas Utilities Electric Company [TU Electric], Texas Utilities Australia Pty.
Ltd. [TU Australia] and several other companies), ENSERCH and TU Holdings, the
Company engages in the generation, transmission and distribution of
electricity; the processing, transmission and distribution of natural gas; and
energy marketing, telecommunications, power development and other businesses
primarily in the United States (US), the United Kingdom (UK) and Australia.
The Company is currently determining its reportable segments under Statement
of Financial Accounting Standards (SFAS) No. 131, "Disclosures About Segments
of an Enterprise and Related Information" which becomes effective for purposes
of reporting the full year 1998 results of operations.
In August 1998, the Company completed its acquisition of The Energy Group
PLC (TEG). Substantially all of TEG's continuing operations were conducted
through Eastern Group plc (Eastern Group). In October 1998, the Company
completed a restructuring of its investment in TEG. After the restructuring,
TU Acquisitions PLC (TU Acquisitions) (an indirect subsidiary of the Company)
owns TEG, which has been re-registered as a private limited company
incorporated in England and Wales and is now known as Energy Holdings (No. 3)
Limited, and, through an intermediate holding company owns Eastern Group, one
of the largest integrated electricity and gas groups in the UK. The Company's
offer for TEG was declared unconditional on May 19, 1998, which was determined
to be the date the Company acquired TEG. From March through the acquisition
date, TU Acquisitions owned approximately 22% of TEG's shares. As of
September 30, 1998, TU Acquisitions had acquired all of TEG's outstanding
shares. The Company recorded its approximate 22% equity interest in the net
income of TEG for the period March 1998 to May 19, 1998 and has accounted for
TEG and Eastern Group as consolidated subsidiaries since May 19, 1998.
Prior to being acquired by the Company, TEG completed the sale of its US
and Australian coal business and US energy marketing operations (Peabody
Sale). The TEG businesses acquired by TUC, which exclude those representing
the Peabody Sale, are referred to as "TEG Businesses Acquired". The total
purchase consideration for the TEG Businesses Acquired was approximately $7.3
billion, including cash paid of $5.7 billion and non-cash consideration of
$1.6 billion primarily consisting of the value assigned to the shares of TUC
common stock issued. At the date of the acquisition, TEG had assets of $9.1
billion, including cash of $3.3 billion and liabilities of $7.0 billion,
including debt of $3.6 billion. As of September 30, 1998, TUC had issued
37,258,740 shares of TUC common stock to those holders of TEG shares who
elected to receive shares of TUC common stock in exchange for their TEG
shares. The process of determining the fair value of assets acquired and
liabilities assumed of TEG has not been completed; however, the excess of the
purchase consideration plus acquisition costs over a preliminary estimate of
net fair value of tangible and identifiable intangible assets acquired and
liabilities assumed resulted in goodwill of $5.2 billion, which is being
amortized over 40 years. This amount is subject to revision as additional
information about the fair value of TEG's assets acquired, liabilities assumed
and contingencies existing at the acquisition date becomes better known.
12
<PAGE>
<PAGE>
On August 5, 1997, the merger transactions (Merger) involving the former
Texas Utilities Company, now known as TEI, and ENSERCH were completed. On
November 21, 1997, the Company acquired Lufkin-Conroe Communications Co.
(LCC). The acquisitions of ENSERCH and LCC were accounted for as purchase
business combinations. The assets and liabilities of each acquired company at
the respective acquisition dates were adjusted to their estimated fair
values. For each company acquired, the excess of the purchase price paid over
the estimated fair value of the net assets acquired and liabilities assumed
was recorded as goodwill and is being amortized over 40 years. The process of
determining the fair value of assets acquired, liabilities assumed and
contingencies existing at the acquisition date of ENSERCH was completed in the
third quarter of 1998 and resulted in an increase in goodwill of approximately
$60,000,000 over the preliminary allocation primarily due to refinement of
estimates and settlement of preacquisition contingencies. The process of
determining the fair value of assets acquired and liabilities assumed of LCC
as of the date of acquisition is continuing, and the final results await
primarily the resolution of contingencies and finalization of certain
preliminary estimates. The results of operations of the acquired businesses
are reflected in the consolidated financial statements of the Company from
their respective dates of acquisition.
The following summary of unaudited pro forma consolidated results of the
Company's operations reflects the operations of the TEG Businesses Acquired,
ENSERCH and LCC as though each acquisition had occurred at the beginning of
the respective periods presented. Expenses of the acquisitions, the 22%
equity in earnings of TEG recorded by TUC and the windfall profits tax imposed
on TEG have been eliminated. Amounts are in thousands of dollars, except per
share amounts.
<TABLE>
<CAPTION>
Nine Months Ended Twelve Months
---------------------------- Ended
September 30, September 30, September 30,
1998 1997 1998
------------ ------------ --------------
<S> <C> <C> <C>
Revenues $12,702,628 $10,461,556 $17,035,444
Operating income 2,087,688 2,067,732 2,795,989
Net income 674,318 668,185 890,940
Average shares outstanding 282,643 281,960 282,630
Earnings per share of common stock
Basic $2.39 $2.37 $3.15
Diluted $2.38 $2.36 $3.14
</TABLE>
The above pro forma results are based on the most current estimate of the
fair value of assets acquired, liabilities assumed and contingencies existing
as of the acquisition dates of the TEG Businesses Acquired, ENSERCH and LCC.
Such estimates have been adjusted in the third quarter of 1998 to reflect
additional information that became known. These results are not necessarily
indicative of what the actual results would have been had the acquisitions
occurred at the beginning of these periods. Further, the pro forma results
are not intended to be a projection of the future results of the combined
companies. Comparison of the results of operations between the periods are
impacted by TU Electric's rate settlement agreement which was effective as of
January 1, 1998 (see Note 7), and the $55.4 million after-tax impact of TU
Electric's fuel reconciliation disallowance recognized in August 1997. The
impact of Eastern Group's after-tax income of $17 million ($.06 per share
basic) from a non-recurring transaction in the first quarter of 1998 is
reflected in these pro forma results. A substantial portion of Eastern
Group's earnings is expected to occur during the first and fourth quarters of
the year which include the periods of peak electricity usage in the UK. For
the twelve-month period ending September 30, 1998, assuming that
13
<PAGE>
<PAGE>
the TEG businesses had not been acquired, TUC's consolidated net income would
have been $731 million or $2.98 per share of common stock.
Throughout this document, references to Eastern Energy Ltd. (Eastern
Energy) shall mean the Company's primary operations in Australia, and
references to TEG or Eastern Group shall mean the Company's primary continuing
operations in the UK.
The following exchange rates (rounded) have been used to convert foreign
currency denominated amounts into US dollars:
Income Statement
Balance Sheet (average for periods
(at September 30, 1998) ended September 30, 1998)
---------------------- ------------------------
UK pounds sterling (pounds) $1.70 $1.65
Australian dollars (AUS$) $ .59 $ .59
2.SIGNIFICANT ACCOUNTING POLICIES
TUC and TU Electric
Basis of Presentation -- The condensed consolidated financial statements
of TUC and its subsidiaries (System Companies) and TU Electric and its
subsidiaries have been prepared on the same basis as those in their respective
1997 Annual Report on Form 10-K (1997 Form 10-K) and, in the opinion of TUC or
TU Electric, as the case may be, all adjustments (constituting only normal
recurring accruals) necessary for a fair presentation of the results of
operation and financial position have been included therein. 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. Certain previously reported amounts have
been reclassified to conform to current classifications.
Consolidation -- The consolidated financial statements include the
accounts of the Company and all of its subsidiaries. The Company recorded
its approximate 22% equity interest in the net income of TEG for the period
March to May 19, 1998 and has accounted for TEG and Eastern Group as
consolidated subsidiaries since May 19, 1998. Since the acquisitions of TEG,
ENSERCH and LCC were purchase business combinations, no financial or other
information for those companies is presented for periods prior to their dates
of acquisition. The consolidated financial statements of TU Electric include
all of its business trusts.
TUC
Earnings Per Share -- Basic earnings per share applicable to common stock
is based on the weighted average number of common shares outstanding during
the period reported. Diluted earnings per share include the effect of
potential common shares that could be issued after the Merger date resulting
from the assumed exercise of all outstanding stock options and the assumed
conversion of the 6.375% Convertible Subordinated Debentures due 2002
(Convertible Debentures) of ENSERCH through March 1998 when the Convertible
Debentures were redeemed for cash or converted into common stock. For the
three-, nine-, and twelve-month periods ended September 30, 1998, 122,038
shares, 864,368 shares and 1,269,786 shares, respectively, were added to the
average shares outstanding and $-0-, $898,000 and $1,859,000, respectively,
of after-tax interest expense was added to earnings applicable to common stock
for the purpose of calculating diluted earnings per share.
14
<PAGE>
<PAGE>
Energy Marketing Activities -- The Company, through its energy marketing
subsidiary, Enserch Energy Services, Inc. (EES), enters into a variety of
transactions in the US, including forward contracts involving physical
delivery of natural gas or electrical power commodities, as well as swaps,
futures, options and other derivative contractual arrangements. As part of
these business activities, EES offers price risk management services to the
energy sector. These transactions are primarily conducted with retail end
users, established energy companies and major financial institutions. EES
uses the mark-to-market method of valuing and accounting for these
activities. Under this method, the current market value of EES' energy
portfolio, net of future servicing costs, is reflected within the Company's
consolidated balance sheets, with resulting unrealized gains and losses, as
"Energy Marketing Risk Management Assets" or "Energy Marketing Risk Management
Liabilities". The actual timing of cash receipts and payments may, however,
vary as contracts may be settled at intervals other than their scheduled
maturities. (See Note 6).
UK Derivative Financial Instruments -- Eastern Group defers the effect of
changes in the market value of derivative financial instruments (including
contracts for differences and electricity forward agreements) which are used
to hedge future transactions to the period when the related transaction is
completed. Eastern Group evaluates its net open energy trading position,
including derivative financial instruments entered into as part of Eastern
Group's energy trading activity, and provides for any anticipated future
losses.
3. COMPREHENSIVE INCOME
TUC and TU Electric
SFAS 130, "Reporting Comprehensive Income," became effective as of the
first quarter of 1998. This statement requires companies to report and
display comprehensive income and its components (revenues, expenses, gains and
losses). Comprehensive income includes all changes in common stock equity
during a period except those resulting from investments by owners and
distributions to owners. For the Company, comprehensive income consists of
net income reported in the statements of consolidated income and the change in
the accumulated currency translation adjustment, net of tax, as included in
common stock equity. For TU Electric, comprehensive income is the same as net
income reported in the statements of consolidated income, since there were no
other items of comprehensive income for the periods presented.
4. LINES OF CREDIT
At September 30, 1998, TUC, TU Electric and ENSERCH had joint US
dollar-denominated lines of credit under revolving credit facility agreements
(US Credit Agreements) with a group of banking institutions. The US Credit
Agreements have two facilities. Facility A provides for short-term borrowings
aggregating up to $2,921,000,000 outstanding at any one time at variable
interest rates and terminates March 1, 1999. Under this facility,
$2,800,000,000 was restricted to use in financing the acquisition of TEG.
This commitment is automatically reduced upon the occurrence of certain events
specified in the facility agreement. As a result of certain recent financings
(see Note 5), as of September 30, 1998, $2,121,000,000 is available for
financing the acquisition of TEG. The remaining $800,000,000 can be used for
working capital and other general corporate purposes, including commercial
paper backup. Facility B provides for borrowings aggregating up to
$1,400,000,000 outstanding at any one time at variable interest rates and
terminates March 2, 2003. Borrowings under this facility can be used for
working capital and other general corporate purposes, including commercial
paper backup. Excluding the $2,121,000,000 which is restricted to use in
financing the acquisition of TEG, the combined borrowings of TUC, TU Electric
and ENSERCH under both facilities are limited to an aggregate of
$2,200,000,000 outstanding at any one time. TU Electric's borrowings under
both facilities are limited to an aggregate of $1,250,000,000 outstanding at
any one time. ENSERCH's borrowings under both facilities are limited to an
aggregate of $650,000,000
15
<PAGE>
<PAGE>
outstanding at any one time. At September 30, 1998,
commercial paper borrowings supported by both facilities totaled
$3,592,131,000 including $2,091,279,000 related to the acquisition of TEG,
$800,000,000 related to general corporate borrowings and $700,852,000
classified as long-term debt. On October 21, 1998, the commitment under
Facility A and these borrowings were reduced by approximately $506,000,000
primarily as a result of recent financings (see Note 5).
TUC
At September 30, 1998, TU Finance (No. 1) Limited (UK Finance 1), TU
Finance (No. 2) Limited (UK Finance 2), TU 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 September 30,
1998, the Sterling Credit Agreement provides for borrowings of up to
pounds 3,375,000,000 and has three facilities. The Acquisition Facility
provides for borrowings aggregating pounds 1,775,000,000 outstanding at any
one time and terminates March 2, 2003. The Interim Facility provides for
short-term borrowings aggregating pounds 1,150,000,000 at any one time and
terminates January 2, 1999. Borrowings under these two facilities provides
financing to acquire TEG and pay acquisition related expenses. The Revolving
Credit Facility provides for short-term borrowings aggregating
pounds 450,000,000 outstanding at any one time and terminates March 2, 2003.
Under this facility, borrowings can be used by UK Finance 1 and, subject to
satisfaction of certain conditions, subsidiaries of TU Acquisitions
(excluding Eastern Electricity plc) [Eastern Electricity], the primary
subsidiary of Eastern Group) for general corporate purposes and for interest
payments on the facilities until six months after the date of acquisition of
TEG. A separate Eastern Electricity Revolving Credit Facility provides for
short-term borrowings by Eastern Electricity aggregating pounds 250,000,000
outstanding at any one time and terminates March 2, 2003. Under this
facility, borrowings can be used by Eastern Electricity for general corporate
purposes. As of September 30, 1998, UK Finance 1 had entered into various
interest rate swaps as required by the Sterling Credit Agreements. The
Acquisition Facility 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 the interest rate swaps entered into is pounds 800,000,000
($1,359,000,000). The swaps have an average maturity of six years and an
average fixed rate of 7.83%. At September 30, 1998, borrowings totaled
pounds 1,655,700,000 ($2,812,700,000) under the Acquisition Facility and
pounds 243,000,000 ($412,800,000) under the Interim Facility. As of September
30, 1998, there was pounds 31,000,000 ($52,700,000) outstanding under the
Revolving Credit Facility and there were no borrowings outstanding under the
separate Eastern Electricity Revolving Credit Facility. On October 23, 1998,
the Company used approximately pounds 1,314,000,000 ($2,232,000,000),
primarily proceeds from the Peabody Sale, to reduce borrowings under the
Acquisition Facility and Interim Facility and pay interest thereon.
In addition, certain non-US subsidiaries have revolving credit agreements
(denominated in both foreign currencies and US dollars) aggregating
approximately $84,300,000, of which $33,600,000 was outstanding at September
30, 1998. These revolving credit agreements expire at various dates through
2000.
5. CAPITALIZATION
TUC
Common Stock -- During the nine months ended September 30, 1998, common
stock equity was increased by $1,446,700,000 (net of issuance costs) as a
result of the non-cash issuance of 37,258,740 shares of TUC common stock in
connection with the acquisition of TEG, by $6,239,000 due to an allocation of
TUC common stock held by the Trustee of the TUC Employees' Thrift Plan to the
accounts of participants, by $912,000 for the amortization of costs of
Long-Term Incentive Plans, by $3,005,000 from the conversion of the portion of
ENSERCH's Convertible Debentures into 77,963 shares of TUC common stock and by
$7,022,000 for other direct purchases and exercise of
16
<PAGE>
<PAGE>
stock options. Common stock equity was reduced by $75,760,000 for the present
value of future contract adjustment payments and related issuance costs
associated with the equity-linked securities issued by the Company in July and
August 1998 (see "Equity-Linked Securities"), and by $25,725,000 treated as
treasury shares related to deferred compensation plans.
Preferred Stock of Subsidiaries -- During the nine months ended September
30, 1998, ENSERCH redeemed $100,000,000 of Series E adjustable rate preferred
stock at par. At September 30, 1998, ENSERCH had outstanding its Series F
adjustable rate preferred stock, which had an aggregate liquidation amount of
$75,000,000. (See also "TU Electric-Preferred Stock".)
TUC and TU Electric
Subsidiary Obligated, Mandatorily Redeemable, Preferred Securities of
Subsidiary Trusts Holding Solely Debentures of Subsidiaries -- In July 1998, a
statutory business trust, ENSERCH Capital I, established as a financing
subsidiary for ENSERCH for the purpose of issuing common and preferred trust
securities, issued $150,000,000 of floating rate capital securities. The
proceeds were used by ENSERCH for general corporate purposes, including the
acquisition or redemption of outstanding securities of ENSERCH. Distributions
on these capital securities are payable quarterly based on an annual floating
rate determined quarterly with reference to a three-month LIBOR plus a
margin. The interest rate for the period from July 2, 1998 to September 30,
1998 was 7.06875% and for the period from October 1, 1998 to December 31, 1998
is 6.6625%. On October 1, 1998, an interest rate swap was entered into which
effectively fixes the rate on $100,000,000 of the capital securities at 6.629%
to July 1, 2003.
At September 30, 1998 and December 31, 1997, the statutory business trust
subsidiaries of TU Electric and ENSERCH had preferred trust securities
outstanding, as follows:
<TABLE>
<CAPTION>
Preferred Securities Trust Assets
-------------------------------------------------- ---------------------------------
Units Outstanding Amount Amount Maturity
------------------------ ----------------------- ------------------------ --------
Sept. 30, December 31, Sept. 30, December 31, Sept. 30, December 31,
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
Thousands of Dollars
TU Electric
- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
TU Electric Capital I (8.25% Series) 5,871,044 5,871,044 $140,986 $140,851 $154,869 $154,869 2030
TU Electric Capital II (9.00% Series) -- 1,991,253 -- 47,374 -- 51,419 --
TU Electric Capital III (8.00% Series) 8,000,000 8,000,000 193,638 193,510 206,186 206,186 2035
TU Electric Capital IV (floating rate
Capital Securities)(a) 100,000 100,000 96,635 97,570 103,093 103,093 2037
TU Electric Capital V (8.175% Capital
Securities) 400,000 400,000 392,020 395,841 412,372 412,372 2037
---------- ---------- -------- -------- ---------- --------
Total TU Electric 14,371,044 16,362,297 823,279 875,146 876,520 927,939
---------- ---------- -------- -------- ---------- --------
ENSERCH
- -------
ENSERCH Capital I (floating rate Capital
Securities)(b) 150,000 -- 146,477 -- 154,639 -- 2028
---------- ---------- -------- -------- ---------- --------
Total 14,521,044 16,362,297 $969,756 $875,146 $1,031,159 $927,939
========== ========== ======== ======== ========== ========
<FN>
(a) Floating rate is determined quarterly based on LIBOR. A related
interest rate swap, expiring 2002, effectively fixes the rate on the TU
Electric Capital IV securities at 7.183%. (See Note 6.)
(b) On October 1, 1998, an interest rate swap was entered into which
effectively fixes the rate on $100 million of the ENSERCH floating rate
Capital Securities at 6.629% to July 1, 2003. (See Note 6.)
</FN>
</TABLE>
17
<PAGE>
<PAGE>
The sole trust assets of each subsidiary trust are Junior Subordinated
Debentures of its parent having a principal amount set forth under "Trust
Assets" in the table above. Interest on each series of Junior Subordinated
Debentures is payable at a rate equal to that of the corresponding preferred
trust securities.
In January 1998, TU Electric redeemed $47,374,000 aggregate liquidation
amounts of preferred securities of TU Electric Capital II at par.
TUC
Long-Term Debt -- In January 1998, TUC issued $200,000,000 aggregate
principal amount of 6.375% Series C Senior Notes due 2008, and ENSERCH issued
$125,000,000 of 6.25% Series A Notes due 2003 and $125,000,000 of Remarketed
Reset Notes due 2008. In July 1998, the interest rate on the Remarketed Reset
Notes was reset to a fixed rate of 6.564% payable until July 1, 2005. In July
1998, ENSERCH redeemed at par $100,000,000 principal amount of its 8.875%
Senior Notes due 2001.
In March 1998, holders of $3,005,000 principal amount of ENSERCH
Convertible Debentures converted such debentures into shares of TUC common
stock, and the remaining $87,745,000 principal amount was redeemed by
ENSERCH at par for cash.
On October 21, 1998, the Company issued $375,000,000 aggregate principal
amount of 5.94% Mandatory Putable/Remarketable Securities. On October 15,
2001, the notes will be subject to mandatory tender to a remarketing dealer,
if the remarketing dealer chooses to remarket the notes. If the remarketing
dealer does not purchase the notes, they must be repurchased by the Company.
If the remarketing dealer chooses to remarket, the Company may elect to have
the notes remarketed on October 15, 2001, for an interim period of up to 26
weeks at an interest rate to be reset weekly. On October 15, 2001 or, if
applicable, at the end of the interim period, the notes will be remarketed at
a reset interest rate to maturity or repurchased by the Company. The notes
are scheduled to mature on October 15, 2011, but that maturity date will be
extended by the length of any interim period.
Also on October 21, 1998, the Company issued $125,000,000 aggregate
principal amount of its Floating Rate Senior Notes due April 20, 2000.
Interest on the notes will be set quarterly based on LIBOR for three month
deposits plus a margin. On October 21, 1998, the interest rate on the
Floating Rate Senior Notes was effectively fixed through an interest rate swap
at a rate of 5.248% through maturity.
The proceeds of the issuance in October 1998 of the above described
securities were used to repay short-term debt. (See Note 4.)
Equity-Linked Securities -- In July and August of 1998, the Company
issued a total of 14,000,000 equity-linked securities consisting of 12,700,000
units of income equity-linked securities with a stated amount per security of
$50 and 1,300,000 units of growth equity-linked securities with a stated
amount per security of $50. The Company also issued $32,500,000 aggregate
principal amount of 6.37% Series D Senior Notes due August 16, 2003 (Series
D Notes) and $32,500,000 aggregate principal amount of 6.50% Series E
Senior Notes due August 16, 2004 (Series E Notes).
18
<PAGE>
<PAGE>
Each income equity-linked security initially consists of: a unit
comprised of (i) a purchase contract (Purchase Contract) under which the
holder will purchase from the Company by not later than August 16, 2001 (first
settlement date) for $25 cash a specified number of shares of the Company's
common stock (based on a formula using the market price of the Company's
common stock) and will purchase from the Company by not later than August 16,
2002 (second settlement date) for $25 cash a specified number of shares of the
Company's common stock (based on a formula using the market price of the
Company's common stock), (ii) until the first settlement date, a Series D Note
having a principal amount of $25, and (iii) until the second settlement date,
a Series E Note having a principal amount of $25. Initially, $317,500,000
aggregate principal amount of Series D Notes and $317,500,000 aggregate
principal amount of Series E Notes were issued to be held as a component of
the equity-linked securities. The holder of an income equity-linked security
is entitled to receive from the Company quarterly payments, in arrears, at
9.25% per annum of the stated amount of such security ($50) prior to the first
settlement date and 9.25% per annum of the remaining stated amount ($25) from
that date to the second settlement date, consisting of contract adjustment
payments of 2.815% per annum of the stated amount and interest on the Series D
Note and the Series E Note through the first settlement date and 2.75% per
annum of the remaining stated amount and interest on the Series E Note through
the second settlement date.
Each growth equity-linked security initially consists of: a unit
comprised of (i) a Purchase Contract, (ii) until the first settlement date,
beneficial ownership interest in a 1/40th undivided interest in a 3-year
Treasury security having a principal amount at maturity equal to $1,000, and
(iii) until the second settlement date, a 1/40th undivided interest in a
4-year Treasury security having a principal amount at maturity equal to
$1,000. The holder of a growth equity-linked security will receive from the
Company, quarterly in arrears, contract adjustment payments of 3.315% per
annum of the stated amount of such security ($50) to the first settlement date
and 3.25% per annum of the remaining stated amount ($25) from the first to the
second settlement date.
Under the terms of the Purchase Contracts, the Company will issue between
7,115,267 and 8,395,802 shares of common stock by the first settlement date
and between 7,115,267 and 8,395,802 additional shares by the second settlement
date. A total of 16,791,604 shares of the Company's common stock is reserved
for issuance in connection with the equity-linked securities.
All of the proceeds from the sale of the growth equity-linked securities
were used to purchase the underlying Treasury securities to be transferred to
holders of the growth equity-linked securities pursuant to the terms thereof.
All of the proceeds from the sale of the Series D and Series E Notes that are
not components of income equity-linked securities and all of the proceeds from
the sale of the income equity-linked securities were paid to the Company. The
net proceeds to the Company of $679,000,000 (after deducting the underwriting
commissions) from the sale of the separate Series D and Series E Notes and the
income equity-linked securities, were used to repay short-term indebtedness
incurred in connection with the acquisition of TEG. (See Note 4.)
The Company recorded as a reduction of common stock equity, the present
value of the contract adjustment payments and a portion of the costs in
connection with the issuance of the equity-linked securities aggregating
approximately $76,000,000. A liability was recorded for the contract
adjustment payments and will be reduced as the contract adjustment payments
are made. The Company has the right to defer the contract adjustment
payments, but any such election will subject the Company to restrictions on
the payment of dividends on and redemption of outstanding shares of its common
stock.
19
<PAGE>
<PAGE>
TU Electric
Common Stock -- During the nine months ended September 30, 1998, TU
Electric purchased and retired a total of 14,323,800 shares of its
issued and outstanding common stock at a total cost of $429,714,000. On
October 1, 1998, TU Electric purchased and retired 4,774,600 shares at a cost
of $143,238,000.
Preferred Stock -- During the nine months ended September 30, 1998, TU
Electric redeemed 146,501 shares of its $8.20 Series preferred stock at a
total cost of $14,139,000. At September 30, 1998, TU Electric had 17,000,000
shares of preferred stock authorized by its Articles of Incorporation of which
1,169,062 shares were issued and outstanding.
Long-Term Debt -- In April 1998, TU Electric issued $350,000,000
aggregate principal amount of Floating Rate Debentures due April 24, 2000.
The interest rate on the debentures will be set quarterly based on a three-
month LIBOR plus a margin. The interest rate for the period from April 24,
1998 to July 24,1998 and for the period from July 24, 1998 to October 23, 1998
was 5.9575%. The interest rate for the period from October 24, 1998 to
January 23, 1999 is 5.47438%. In May 1998, the Brazos River Authority
(Brazos Authority) issued $78,965,000 aggregate principal amount of 5.55%
Pollution Control Revenue Refunding Bonds, Series 1998A, due May 1, 2033.
Proceeds were used to refund the 9.25% Brazos Authority Series 1988A Bonds and
a portion of the Brazos Authority Taxable Series 1991D Bonds. Pursuant to an
Installment Payment and Bond Amortization Agreement with the Brazos Authority,
TU Electric is obligated to make payments of the principal and interest on
the bonds. Such payments on the new bonds are insured.
In June 1998, TU Electric exercised its option to convert the
$118,355,000 Brazos Authority Revenue Refunding Bonds Series 1995B and the
$118,355,000 Brazos Authority Revenue Refunding Bonds Series 1995C from a
daily mode to a multiannual mode. The Series 1995B Bonds bear interest from
June 18, 1998 to the mandatory tender date of June 18, 1999 at a rate of 4.15%
per annum, and will be remarketed prior to the mandatory tender date. The
interest rate on the Series 1995C Bonds will be 5.55% per annum from June 18,
1998, to maturity at June 1, 2030. TU Electric's obligations under these
bonds are now unsecured.
During the nine months ended September 30, 1998, TU Electric retired or
repurchased $692,108,000 principal amount of first mortgage bonds and
$987,000 principal amount of other long-term debt. On October 1, 1998, TU
Electric retired $125,000,000 principal amount of 5.5% Series First Mortgage
Bonds due on that date.
6. DERIVATIVE INSTRUMENTS
TUC and TU Electric
The Company enters into derivative instruments, including options, swaps,
futures and other contractual commitments to manage market risks related to
changes in interest rates, commodity prices and foreign currency exposures.
The Company's participation in derivative transactions, except for its energy
marketing activities conducted by EES, has been designated for hedging
purposes, and those derivative instruments are not held or issued for trading
purposes.
20
<PAGE>
<PAGE>
Interest Rate Risk Management -- At September 30, 1998, TU Australia's
principal subsidiary, Eastern Energy, had interest rate swaps and forward rate
agreements outstanding, denominated in Australian dollars and/or US dollars,
with an aggregate notional amount of $979,000,000. These agreements establish
a mix of fixed and variable interest rates on outstanding debt and have
remaining terms up to 19 years.
At September 30, 1998, UK Finance 1 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 the interest rate swaps
entered into is pounds 800,000,000 ($1,359,000,000) with an average maturity
of six years and an average fixed rate of 7.83%. Eastern Electricity had
interest rate swaps outstanding with an aggregate notional amount of
pounds 100,000,000 ($169,900,000) that swap fixed interest rates for floating
rates expiring in 2004 and forward rate agreements totaling pounds 255,000,000
($433,200,000) for a maximum duration of one year to swap floating rate
deposits into fixed rates.
At September 30, 1998, TU Electric had an interest rate swap agreement
with respect to preferred securities of TU Electric Capital IV, with a
notional principal amount of $100,000,000 that effectively fixed the rate at
7.183% per annum through 2002. On October 1, 1998, ENSERCH entered into an
interest rate swap agreement with respect to floating rate capital securities
of ENSERCH Capital I, with a notional principal amount of $100,000,000 that
effectively fixed the rate at 6.629% per annum through 2003. On October 21,
1998, TUC entered into an interest rate swap agreement with respect to
Floating Rate Senior Notes, with a notional principal amount of $125,000,000
expiring 2000 that effectively fixed the rate at 5.248% per annum.
Foreign Currency Risk Management -- The Company has entered into
short-term foreign currency exchange contracts in connection with the
acquisition of TEG to hedge a portion of the Company's exposure to changes in
the dollar to pound exchange rate. The Company has contracted to deliver
pounds 875,000,000 and will receive $1,428,000,000.
Eastern Energy maintains cross currency swaps for its US dollar
denominated debts. These cross currency swaps mature in December 2006 and
December 2016 for $250,000,000 and $200,000,000 respectively. The maturity of
these swaps coincides with the maturity of the US dollar denominated debt.
Electricity Price Risk Management
United Kingdom -- Almost all electricity generated in England and Wales
must be sold to the electricity trading market in England and Wales (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 UK government. Eastern Group enters into
derivative 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)
which 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 2009. From 1998, 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.
21
<PAGE>
<PAGE>
Australia -- Eastern Energy and the other distribution companies in the
state of Victoria, Australia purchase their power from a competitive power
pool operated by a statutory, independent corporation. Eastern Energy
purchases about 95% of its energy from this pool, the cost of which is based
on spot market prices. Eastern Energy and other distribution companies were
required to enter into wholesale market contracts to cover a substantial
majority of their forecasted franchise load through the end of 2000. Eastern
Energy also maintains a strategy of seeking hedging contracts with individual
generators to cover a portion of forecasted contestable loads. These
contracts fix the price of energy within a certain range for the purpose of
hedging or protecting against fluctuations in the spot market price. At
September 30, 1998, Eastern Energy's contracts related to its forecasted
contestable and franchise load cover a notional volume of approximately 9.7
million MWh's for the period from October 1998 through 2001. Further hedge
contracts may be required in that period to service forecasted sales. Under
these contracts, payments are made between Eastern Energy and the generators
representing the difference between the wholesale electricity market price and
the contract price. The net payable or receivable is recognized in earnings
as adjustments to purchased power expense in the period the related
transactions are completed.
Energy Marketing Activities -- EES' energy portfolio is comprised of
forward commitments, futures, swaps, options and other derivative instruments
related to natural gas and electricity marketing activities. The notional
amounts and terms of the portfolio as of September 30, 1998 included financial
instruments that provide for fixed price receipts of 2,599 trillion British
thermal units equivalent (TBtue) and fixed price payments of 2,689 TBtue, with
a maximum term of eight years. Additionally, sales and purchase commitments
totaling 1,245 TBtue, with terms extending up to nine years, are included in
the portfolio as of September 30, 1998.
Notional amounts reflect the volume of transactions but do not represent
the amounts exchanged by the parties to the financial instruments.
Accordingly, the notional amounts represented above do not necessarily measure
EES' exposure to market or credit risks. Additionally, the maximum term in
years are not indicative of likely future cash flows as these positions may be
offset in the markets at any time in response to EES' risk management needs.
7. REGULATION AND RATES
TUC And TU Electric
Docket 18490 -- The Public Utility Commission of Texas (PUC)
approved the stipulation filed on December 17, 1997, by TU Electric, together
with the PUC General Counsel, the Office of Public Utility Counsel and various
other parties interested in TU Electric's rates and services. The
stipulation, modified to incorporate changes made by the PUC, resulted in base
rate credits beginning January 1, 1998, of 4% for residential customers, 2%
for general service secondary customers and 1% for all other retail customers
and additional base rate credits for residential customers of 1.4% beginning
January 1, 1999. All other provisions of the stipulation were approved. They
(i) impose an annual earnings cap on TU Electric's rate of return on rate base
during 1998 and 1999, based in part on an 11.35% return on average common
equity and a cap on operations and maintenance expense at a specified level,
with any sums earned above the earnings cap being applied as additional
nuclear production depreciation, (ii) allow TU Electric to record depreciation
applicable to transmission and distribution assets in 1998 and 1999 as
additional depreciation of nuclear production assets, (iii) establish an
updated cost of service study that includes interruptible customers as
customer classes, (iv) result in the permanent dismissal of pending appeals of
prior PUC orders, including Docket No. 11735, if all other parties that have
filed appeals of those dockets also dismiss their appeals, (v) result in the
stay of any proceedings in the remand of Docket No. 9300 prior to January 1,
2000, and (vi) flow all gains from off-system sales of electricity in excess
of the amount included in base rates to customers through the fuel factor.
Modifications that were also approved by the PUC include: (i) imputing $16
million of revenues from discounted rates in the calculation of the return
cap, (ii) limiting the recovery of interest on any new debt issued prior
22
<PAGE>
<PAGE>
to December 31, 1999 to the interest rate available to TU Electric at its
bond rating as of January 1, 1998 in the calculation of the return cap, (iii)
limiting the amount of annual capital additions to production plant to 1.5%
of TU Electric's net plant in service on December 31, 1996 in the calculation
of the return cap, and (iv) permitting TU Electric, at its discretion, to
apply earnings as additional depreciation of nuclear production assets, after
the determinations have been made under the return cap. Certain parties that
did not sign the stipulation have appealed the PUC's approval by filing suit
in state district court. The Company cannot predict the outcome of these
appeals.
For the three months and nine months ended September 30, 1998, TU
Electric recorded $141,100,000 and $180,300,000, respectively, as additional
depreciation of nuclear production assets, a pro rata portion of expected 1998
earnings in excess of the stipulated return cap. In addition, for the three
months and nine months there was $45,900,000 and $136,300,000, respectively,
of depreciation expense reclassified from transmission and distribution to
nuclear production assets. Including deferred income tax effects, the net
effect was a $109,500,000 reduction in net income for the three months and a
$146,600,000 reduction for the nine months of 1998.
8. COMMITMENTS AND CONTINGENCIES
TU Electric
Nuclear Decommissioning -- TU Electric has established a reserve,
charged to depreciation expense and included in accumulated depreciation, for
the decommissioning of the Comanche Peak nuclear generating station (Comanche
Peak), whereby decommissioning costs are being recovered from customers over
the life of the plant and deposited in an external trust fund (included in
other investments). At September 30, 1998, such reserve totaled
$138,869,000 which includes accruals of $13,634,000 and $18,179,000 for the
nine and twelve months ended September 30, 1998, respectively. As of
September 30, 1998, the market value of assets in the external trust fund for
the decommissioning of Comanche Peak was $184,684,000. Any difference between
the market value of the external trust fund and the decommissioning reserve
that represents unrealized gains or losses of the trust fund is treated as a
regulatory liability or a regulatory asset. Realized earnings on funds
deposited in the external trust are recognized in the reserve. Based on a
site-specific study completed during 1997 using the prompt dismantlement
method and 1997 dollars, decommissioning costs for Comanche Peak Unit 1 and
for Unit 2 and common facilities were estimated to be $271,000,000 and
$404,000,000, respectively. Decommissioning activities are projected to begin
in 2030 for Comanche Peak Unit 1 and in 2033 for Unit 2 and common
facilities. TU Electric is recovering decommissioning costs based upon a 1992
site-specific study through rates placed in effect under its January 1993 rate
increase request. Actual decommissioning costs are expected to differ from
estimates due to possible changes in the assumed dates of decommissioning
activities, regulatory requirements, technology and costs of labor, materials
and equipment. In addition, the marketable fixed income debt and equity
securities in which assets of the external trust are invested are subject to
interest rate and equity price sensitivity.
Financial Guarantees -- TU Electric has entered into contracts with
public agencies to purchase cooling water for use in the generation of
electric energy. In connection with certain contracts, TU Electric has
agreed, in effect, to guarantee the principal, $27,985,000 at September 30,
1998, and interest on bonds issued to finance the reservoirs from which the
water is supplied. The bonds mature at various dates through 2011 and have
interest rates ranging from 5.5% to 7%. TU Electric is required to make
periodic payments equal to such principal and interest. Payments made by TU
Electric are net of amounts assumed by a third party under such contracts. In
addition, TU Electric is obligated to pay certain variable costs of operating
and maintaining the reservoirs. TU Electric has assigned to a municipality
all contract rights and obligations of TU Electric in connection with
$69,395,000 remaining principal amount of bonds at September 30, 1998 issued
for similar purposes, which had previously been
23
<PAGE>
<PAGE>
guaranteed by TU Electric. TU Electric is, however, contingently liable in
the unlikely event of default by the municipality.
TUC
In the third quarter of 1998, the Company settled its advance royalty
obligations for Chaco Coal reserves with a cash payment of approximately
$136,000,000 and a transfer of rights to the coal reserves and related land,
recognizing a pretax gain of $16,600,000 ($10,800,000 after-tax). The advance
royalty obligations amounted to $16,000,000 per year through 2017.
ENSERCH and/or its subsidiaries are the guarantors on various other
commitments and obligations of others aggregating approximately $32,520,000 at
September 30, 1998.
TEG has guaranteed up to $110 million of certain liabilities which may be
incurred and payable by the purchasers of its Peabody Coal and Citizens Power
businesses 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.
TUC and TU Electric
General -- In addition to the above, and as described in Part II. Item 1.
Legal Proceedings, the Company and TU Electric are each involved in various
legal and administrative proceedings among others, which, in the opinion of
the management of each, should not have a material effect upon their financial
positions, results of operations or cash flows.
24
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Texas Utilities Company and subsidiaries (Company) as of September 30, 1998,
and the related condensed statements of consolidated income and of
comprehensive income for the three-month, nine-month and twelve-month periods
ended September 30, 1998 and 1997, and of consolidated cash flows for
the nine-month periods ended September 30, 1998 and 1997. These financial
statements are the responsibility of the Company's management.
We were furnished with the report of other accountants on their review of the
interim financial information of Texas Utility Finance (No. 1) Limited ( a
consolidated subsidiary acquired May 19, 1998), whose total assets constituted
37% of consolidated total assets at September 30, 1998, and whose total
revenues constituted 23%, 15% and 12% of consolidated total revenues for the
three-month, nine-month and twelve-month periods ended September 30, 1998,
respectively.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review and the report of other accountants, we are not aware of
any material modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Company as of December 31,
1997, and the related consolidated statements of income, cash flows and common
stock equity for the year then ended (not presented herein); and in our report
dated February 24, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1997 is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12, 1998
25
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
Texas Utilities Electric Company:
We have reviewed the accompanying condensed consolidated balance sheet of
Texas Utilities Electric Company and subsidiaries (TU Electric) as of
September 30, 1998, and the related condensed statements of consolidated
income for the three-month, nine-month and twelve-month periods ended
September 30, 1998 and 1997, and of consolidated cash flows for the nine-month
periods ended September 30, 1998 and 1997. These financial statements are the
responsibility of TU Electric's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
to financial data and making inquiries of persons responsible for financial
and accounting matters. It is substantially less in scope than an audit in
accordance with generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of TU Electric as of December 31,
1997, and the related consolidated statements of income, retained earnings and
cash flows for the year then ended (not presented herein); and in our report
dated February 24, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1997, is fairly stated in all material respects in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12, 1998
26
<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
FORWARD-LOOKING STATEMENTS
TUC and TU Electric
This report and other presentations made by Texas Utilities Company (the
Company or TUC) and its direct and indirect subsidiaries (System Companies) or
Texas Utilities Electric Company and its subsidiaries (TU Electric) contain
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. Although the Company and TU Electric each
believes that in making any such statement its expectations are based on
reasonable assumptions, any such statement involves uncertainties and is
qualified in its entirety by reference to factors contained in the
Forward-Looking Statements section of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation in TUC's and TU
Electric's Annual Reports on Form 10-K for the year 1997 (1997 Form 10-K),
among others, that could cause the actual results of the Company or TU
Electric to differ materially from those projected in such forward-looking
statement. As a result of the acquisition and subsequent restructuring of
the investment in The Energy Group PLC (now known as Energy Holdings (No.3)
Limited)(TEG), substantially all of whose continuing operations are
conducted through Eastern Group plc (Eastern Group), additional important
factors which could cause actual results to differ materially from those
discussed in such forward-looking statements include: with respect to Eastern
Group's power operations, regulation of power station emissions, increasing
competition in the United Kingdom (UK) electricity supply business as it is
progressively opened to competition starting in September 1998, fluctuations
in the purchase prices of electricity from the electricity trading market in
England and Wales and the continuing availability of counterparties for
contracts for differences and, with respect to Eastern Group's distribution
business, price regulations of electricity distribution and environmental and
other regulatory changes. Any forward-looking statements are also qualified
by reference to these additional factors.
Any forward-looking statement speaks only as of the date on which such
statement is made, and neither the Company nor TU Electric undertakes any
obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the
occurrence of unanticipated events. New factors emerge from time to time, and
it is not possible for the Company or TU Electric to predict all of such
factors, nor can they assess the impact of each such factor or the extent to
which any factor, or combination of factors, may cause results to differ
materially from those contained in any forward-looking statement.
MERGERS AND ACQUISITIONS
TUC
Certain comparisons in this Form 10-Q have been affected by the May 1998
acquisition of TEG, the August 1997 acquisition of ENSERCH Corporation
(ENSERCH) and the November 1997 acquisition of Lufkin-Conroe Communications
Co. (LCC) by the Company and/or its subsidiaries. The results of each
acquired company are included only for the periods subsequent to acquisition.
In August 1998, the Company completed its acquisition of TEG.
Substantially all of TEG's continuing operations were conducted through
Eastern Group. In October 1998, the Company completed a restructuring of its
investment in TEG. After the restructuring, TU Acquisitions PLC (TU
Acquisitions) (an indirect subsidiary of the Company) owns TEG, which has been
re-registered as a private limited company incorporated in England and Wales
and is now known as Energy Holdings (No. 3) Limited, and, through an
intermediate holding company owns Eastern Group, one of the largest integrated
electricity and gas groups in the UK. The Company's offer for TEG was
declared unconditional on May 19, 1998, which was determined to be the date
the Company acquired TEG. From March through the acquisition date, TU
Acquisitions owned approximately 22% of TEG's shares. As of September 30,
1998, TU Acquisitions had acquired all of TEG's outstanding shares. The
27
<PAGE>
<PAGE>
Company recorded its approximate 22% equity interest in the net income of TEG
for the period March 1998 to May 19, 1998 and has accounted for TEG and
Eastern Group as consolidated subsidiaries since May 19, 1998.
Prior to being acquired by the Company, TEG completed the sale of its US
and Australian coal business and US energy marketing operations (Peabody
Sale). The TEG businesses acquired by TUC, which exclude those representing
the Peabody Sale, are referred to as "TEG Businesses Acquired". The total
purchase consideration for the TEG Businesses Acquired was approximately $7.3
billion, including cash paid of $5.7 billion and non-cash consideration of
$1.6 billion primarily consisting of the value assigned to the shares of TUC
common stock issued. At the date of the acquisition, TEG had assets of $9.1
billion, including cash of $3.3 billion and liabilities of $7.0 billion,
including debt of $3.6 billion. As of September 30, 1998, TUC had issued
37,258,740 shares of TUC common stock to those holders of TEG shares who
elected to receive shares of TUC common stock in exchange for their TEG
shares. The process of determining the fair value of assets acquired and
liabilities assumed of TEG has not been completed; however, the excess of the
purchase consideration plus acquisition costs over a preliminary estimate of
net fair value of tangible and identifiable intangible assets acquired and
liabilities assumed resulted in goodwill of $5.2 billion, which is being
amortized over 40 years. This amount is subject to revision as additional
information about the fair value of TEG's assets acquired, liabilities assumed
and contingencies existing at the acquisition date becomes better known.
On August 5, 1997, the merger transactions (Merger) involving the former
Texas Utilities Company, now known as TEI, and ENSERCH were completed. On
November 21, 1997, the Company acquired LCC. The acquisitions of ENSERCH and
LCC were accounted for as purchase business combinations. The assets and
liabilities of each acquired company at the respective acquisition dates were
adjusted to their estimated fair values. For each company acquired, the
excess of the purchase price paid over the estimated fair value of the net
assets acquired and liabilities assumed was recorded as goodwill and is being
amortized over 40 years. The process of determining the fair value of assets
acquired, liabilities assumed and contingencies existing at the acquisition
date of ENSERCH was completed in the third quarter of 1998 and resulted in an
increase in goodwill of approximately $60 million over the preliminary
allocation primarily due to refinement of estimates and settlement of
preacquisition contingencies. The process of determining the fair value of
assets acquired and liabilities assumed of LCC as of the date of acquisition
is continuing, and the final results await primarily the resolution of
contingencies and finalization of certain preliminary estimates. The results
of operations of the acquired businesses are reflected in the consolidated
financial statements of the Company from their respective dates of
acquisition.
The Company continues to seek potential investment opportunities from
time to time when it concludes that such investments are consistent with its
business strategies and are likely to enhance the long-term return to its
shareholders.
FINANCIAL CONDITION
Liquidity and Capital Resources
TUC and TU Electric
For information concerning liquidity and capital resources, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation in TUC's and TU Electric's 1997 Form 10-K. Results for the three-
and nine-month periods presented herein are not necessarily indicative of
expectations for a full year's operations because of seasonal and other
factors, including variations in maintenance and other operating expense
patterns. No significant changes or events which might affect the financial
condition of the Company or TU Electric have occurred subsequent to year-end
other than as disclosed in other reports of TUC or TU Electric or included
herein.
28
<PAGE>
<PAGE>
Cash flows provided from operating activities for the Company before
changes in operating assets and liabilities for the nine months ended
September 30, 1998 were $1.6 billion compared with $1.3 billion for the
comparable period in 1997 ($1.5 billion versus $1.3 billion for TU Electric).
Increased depreciation and amortization expense (primarily resulting from TU
Electric's earnings in excess of the return cap as discussed below) more than
offset a reduction in net income for the Company. Changes in operating assets
and liabilities for the Company for the nine months ended September 30, 1998
used $246 million versus $60 million for the comparable nine-month period in
1997.
Cash flows used for investing activities for the nine months ended
September 30, 1998 were $3.4 billion, which included $2.5 billion used for the
acquisition of TEG, compared with $462 million for the same period of 1997.
Construction expenditures used $751 million for the current nine-month period
compared with $377 million for the comparable nine-month period in 1997,
primarily resulting from higher TU Electric expenditures and the inclusion of
expenditures for Eastern Group, ENSERCH and LCC.
External funds of a permanent or long-term nature are obtained through
the issuance of common stock, preferred stock, preferred securities and
long-term debt by the System Companies. The capitalization ratios of the
Company at September 30, 1998 consisted of approximately 61.8% long-term debt,
3.9% preferred securities of trusts, .9% preferred stock and 33.4% common
stock equity. The capitalization ratios of TU Electric at September 30, 1998
consisted of approximately 42.4% long-term debt, 6.3% preferred securities of
trusts, 1.0% preferred stock and 50.3% common stock equity.
During the nine months ended September 30, 1998, common stock equity was
increased by $1,446.7 million (net of issuance costs) as a result of the
non-cash issuance of 37,258,740 shares of TUC common stock in connection with
the acquisition of TEG, by $6.2 million due to an allocation of TUC common
stock held by the Trustee of the TUC Employees' Thrift Plan to the accounts of
participants, by $912 thousand for the amortization of costs of Long-Term
Incentive Plans, by $3.0 million from the conversion of the portion of
ENSERCH's Convertible Debentures into 77,963 shares of TUC common stock and by
$7.0 million for other direct purchases and exercise of stock options. Common
stock equity was reduced by $75.8 million for the present value of future
contract adjustment payments and related issuance costs associated with the
equity-linked securities issued by the Company in July and August 1998, and by
$25.7 million treated as treasury shares related to deferred compensation
plans.
In July 1998, a statutory business trust, ENSERCH Capital I, established
as a financing subsidiary for ENSERCH for the purpose of issuing common and
preferred trust securities, issued $150 million of floating rate capital
securities. The proceeds were used by ENSERCH for general corporate purposes,
including the acquisition or redemption of outstanding securities of ENSERCH.
Distributions on these capital securities are payable quarterly based on an
annual floating rate determined quarterly with reference to a three-month
LIBOR plus a margin. The interest rate for the period from July 2, 1998
to September 30, 1998 was 7.06875% and for the period from October 1, 1998 to
December 31, 1998 is 6.6625%. On October 1, 1998, an interest rate swap was
entered into which effectively fixes the rate on $100 million of the capital
securities at 6.629% to July 1, 2003.
In July and August of 1998, the Company issued a total of 14 million
equity-linked securities consisting of 12,700,000 units of income
equity-linked securities with a stated amount per security of $50 and
1,300,000 units of growth equity-linked securities with a stated amount per
security of $50. The Company also issued $32.5 million aggregate
principal amount of 6.37% Series D Senior Notes due August 16, 2003 (Series D
Notes) and $32.5 million aggregate principal amount of 6.50% Series E Senior
Notes due August 16, 2004 (Series E Notes).
29
<PAGE>
<PAGE>
Each income equity-linked security initially consists of: a unit
comprised of (i) a purchase contract (Purchase Contract) under which the
holder will purchase from the Company by not later than August 16, 2001 (first
settlement date) for $25 cash a specified number of shares of the Company's
common stock (based on a formula using the market price of the Company's
common stock) and will purchase from the Company by not later than August 16,
2002 (second settlement date) for $25 cash a specified number of shares of the
Company's common stock (based on a formula using the market price of the
Company's common stock), (ii) until the first settlement date, a Series D Note
having a principal amount of $25, and (iii) until the second settlement date,
a Series E Note having a principal amount of $25. Initially, $317.5 million
aggregate principal amount of Series D Notes and $317.5 million aggregate
principal amount of Series E Notes were issued to be held as a component of
the equity-linked securities. The holder of an income equity-linked security
is entitled to receive from the Company quarterly payments, in arrears, at
9.25% per annum of the stated amount of such security ($50) prior to the first
settlement date and 9.25% per annum of the remaining stated amount ($25) from
that date to the second settlement date, consisting of contract adjustment
payments of 2.815% per annum of the stated amount and interest on the Series D
Note and the Series E Note through the first settlement date and 2.75% per
annum of the remaining stated amount and interest on the Series E Note through
the second settlement date.
Each growth equity-linked security initially consists of: a unit
comprised of (i) a Purchase Contract, (ii) until the first settlement date,
beneficial ownership interest in a 1/40th undivided interest in a 3-year
Treasury security having a principal amount at maturity equal to $1,000, and
(iii) until the second settlement date, a 1/40th undivided interest in a
4-year Treasury security having a principal amount at maturity equal to
$1,000. The holder of a growth equity-linked security will receive from the
Company, quarterly in arrears, contract adjustment payments of 3.315% per
annum of the stated amount of such security ($50) to the first settlement date
and 3.25% per annum of the remaining stated amount ($25) from the first to the
second settlement date.
Under the terms of the Purchase Contracts, the Company will issue between
7,115,267 and 8,395,802 shares of common stock by the first settlement date
and between 7,115,267 and 8,395,802 additional shares by the second settlement
date. A total of 16,791,604 shares of the Company's common stock is reserved
for issuance in connection with the equity-linked securities.
All of the proceeds from the sale of the growth equity-linked securities
were used to purchase the underlying Treasury securities to be transferred to
holders of the growth equity-linked securities pursuant to the terms thereof.
All of the proceeds from the sale of the Series D and Series E Notes that are
not components of income equity-linked securities and all of the proceeds from
the sale of the income equity-linked securities were paid to the Company. The
net proceeds to the Company of $679 million (after deducting the underwriting
commissions) from the sale of the separate Series D and Series E Notes and the
income equity-linked securities, were used to repay short-term indebtedness
incurred in connection with the acquisition of TEG.
The Company recorded as a reduction of common stock equity, the present
value of the contract adjustment payments and a portion of the costs in
connection with the issuance of the equity-linked securities aggregating
approximately $76 million. A liability was recorded for the contract
adjustment payments and will be reduced as the contract adjustment payments
are made. The Company has the right to defer the contract adjustment
payments, but any such election will subject the Company to restrictions on
the payment of dividends on and redemption of outstanding shares of its common
stock.
In April 1998, TU Electric issued $350 million aggregate principal
amount of Floating Rate Debentures due April 24, 2000. The interest rate on
the debentures will be set quarterly based on a three- month LIBOR plus a
margin. The interest rate for the period from April 24, 1998 to July 24,1998
and for the period from July 24, 1998 to October 23, 1998 was 5.9575%. The
interest rate for the period from October 24, 1998 to January 23, 1999 is
5.47438%. In May 1998, the Brazos River Authority (Brazos Authority) issued
$79.0 million aggregate principal amount of 5.55% Pollution Control Revenue
Refunding Bonds, Series 1998A, due May 1, 2033. Proceeds were used to refund
the 9.25% Brazos Authority Series 1988A Bonds and a portion of the Brazos
Authority Taxable Series 1991D Bonds. Pursuant to an Installment Payment and
Bond Amortization Agreement with the Brazos
30
<PAGE>
<PAGE>
Authority, TU Electric is obligated to make payments of the principal and
interest on the bonds. Such payments on the new bonds are insured.
In June 1998, TU Electric exercised its option to convert the $118.4
million Brazos Authority Revenue Refunding Bonds Series 1995B and the $118.4
million Brazos Authority Revenue Refunding Bonds Series 1995C from a daily
mode to a multi annual mode. The Series 1995B Bonds bear interest from June
18, 1998 to the mandatory tender date of June 18, 1999 at a rate of 4.15% per
annum, and will be remarketed prior to the mandatory tender date. The
interest rate on the Series 1995C Bonds will be 5.55% per annum from June 18,
1998, to maturity at June 1, 2030. TU Electric's obligations under these
bonds are now unsecured.
During the nine months ended September 30, 1998, TU Electric retired or
repurchased $692. 1 million principal amount of first mortgage bonds and $987
thousand principal amount of other long-term debt. On October 1, 1998, TU
Electric retired $125 million principal amount of 5.5% Series First Mortgage
Bonds due on that date.
In January 1998, TUC issued $200 million aggregate principal amount of
6.375% Series C Senior Notes due 2008, and ENSERCH issued $125 million of
6.25% Series A Notes due 2003 and $125 million of Remarketed Reset Notes due
2008. In July 1998, the interest rate on the Remarketed Reset Notes was reset
to a fixed rate of 6.564% payable until July 1, 2005. In July 1998, ENSERCH
redeemed at par $100 million principal amount of its 8.875% Senior Notes due
2001.
In March 1998, holders of $3.0 million principal amount of ENSERCH
Convertible Debentures converted such debentures into shares of TUC common
stock, and the remaining $87.7 million principal amount was redeemed by
ENSERCH at par for cash.
During the nine-month period ended September 30, 1998, the Company
(including TU Electric) issued, redeemed, reacquired or made scheduled
principal payments on long-term debt, preferred stock and preferred securities
for cash , as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Issuances Retirements
<S> <C> <C>
TU Electric:
$8.20 Series Preferred Stock $ -- $ 14,139
Capital II 9.00% Series Preferred Securities -- 47,374
Long-term Debt:
Brazos River Authority Pollution Control Bonds 78,965 78,965
First Mortgage Bonds -- 692,108
Other 350,000 987
--------- ----------
Total TU Electric 428,965 833,573
TUC:
Long-term Debt (including Equity-Linked Securities) 900,000 --
ENSERCH:
Capital I Preferred Securities 150,000 --
Series E Preferred Stock -- 100,000
6.375% Convertible Debentures -- 87,745
Long-term Debt 250,000 100,000
UK:
Acquisition and Interim Facilities 3,135,827 --
Other 51,119 180,662
All Other Subsidiaries:
Long-term Debt 58,938 77,353
---------- ----------
Total TUC $4,974,849 $1,379,333
========== ==========
</TABLE>
On October 1, 1998, the entire $125 million principal amount of TU
Electric 5.5% Series First Mortgage Bonds was retired, and $10.5 million of a
subsidiary's debt was redeemed.
31
<PAGE>
<PAGE>
On October 21, 1998, the Company issued $375 million aggregate principal
amount of 5.94% Mandatory Putable/Remarketable Securities. On October 15,
2001, the notes will be subject to mandatory tender to a remarketing dealer,
if the remarketing dealer chooses to remarket the notes. If the remarketing
dealer does not purchase the notes, they must be repurchased by the Company.
If the remarketing dealer chooses to remarket, the Company may elect to have
the notes remarketed on October 15, 2001, for an interim period of up to 26
weeks at an interest rate to be reset weekly. On October 15, 2001 or, if
applicable, at the end of the interim period, the notes will be remarketed at
a reset interest rate to maturity or repurchased by the Company. The notes
are scheduled to mature on October 15, 2011, but that maturity date will be
extended by the length of any interim period.
Also on October 21, 1998, the Company issued $125 million aggregate
principal amount of its Floating Rate Senior Notes due April 20, 2000.
Interest on the notes will be set quarterly based on LIBOR for three month
deposits plus a margin. On October 21, 1998, the interest rate on the
Floating Rate Senior Notes was effectively fixed through an interest rate swap
at a rate of 5.248% through maturity.
The proceeds of the issuance in October 1998 of the above described
securities were used to repay short-term debt.
At September 30, 1998, TUC, TU Electric and ENSERCH had joint US
dollar-denominated lines of credit under revolving credit facility agreements
(US Credit Agreements) with a group of banking institutions. The US Credit
Agreements have two facilities. Facility A provides for short-term borrowings
aggregating up to $2,921 million outstanding at any one time at variable
interest rates and terminates March 1, 1999. Under this facility, $2,800
million was restricted to use in financing the acquisition of TEG. This
commitment is automatically reduced upon the occurrence of certain events
specified in the facility agreement. As a result of certain recent financings
(see Note 5), as of September 30, 1998, $2,121 million is available for
financing the acquisition of TEG. The remaining $800 million can be used for
working capital and other general corporate purposes, including commercial
paper backup. Facility B provides for borrowings aggregating up to $1,400
million outstanding at any one time at variable interest rates and terminates
March 2, 2003. Borrowings under this facility can be used for working capital
and other general corporate purposes, including commercial paper backup.
Excluding the $2,121 million which is restricted to use in financing the
acquisition of TEG, the combined borrowings of TUC, TU Electric and ENSERCH
under both facilities are limited to an aggregate of $2,200 million
outstanding at any one time. TU Electric's borrowings under both facilities
are limited to an aggregate of $1,250 million outstanding at any one time.
ENSERCH's borrowings under both facilities are limited to an aggregate of $650
million outstanding at any one time. At September 30, 1998, commercial paper
borrowings supported by both facilities totaled $3,592.1 million including
$2,091.3 million related to the acquisition of TEG, $800 million related to
general corporate borrowings and $700.9 million classified as long-term
debt. On October 21, 1998, the commitment under Facility A and these
borrowings were reduced by approximately $506 million primarily as a result of
recent financings (see Note 5).
At September 30, 1998, TU Finance (No. 1) Limited(UK Finance 1), TU
Finance (No. 2) Limited(UK Finance 2), TU 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 September 30,
1998, the Sterling Credit Agreement provides for borrowings of up to
pounds 3,375 million and has three facilities. The Acquisition Facility
provides for borrowings aggregating pounds 1,775 million outstanding at any
one time and terminates March 2, 2003. The Interim Facility provides for
short-term borrowings aggregating pounds 1,150 million at any one time and
terminates January 2, 1999. Borrowings under these two facilities provides
financing to acquire TEG and pay acquisition related expenses. The Revolving
Credit Facility provides for short-term borrowings aggregating pounds 450
million outstanding at any one time and terminates March 2, 2003. Under this
facility, borrowings can be used by UK Finance 1 and, subject to satisfaction
of certain conditions, subsidiaries of TU Acquisitions (excluding Eastern
Electricity plc) [Eastern Electricity], the primary subsidiary of Eastern
Group) for general corporate purposes and for interest payments on the
facilities until six months after the date of acquisition of TEG. A separate
Eastern Electricity Revolving Credit Facility provides for short-term
borrowings by Eastern Electricity aggregating pounds 250 million outstanding
at any one time and terminates March 2, 2003. Under this facility, borrowings
can be used by Eastern Electricity for general corporate purposes. As of
September 30, 1998, UK Finance 1 had entered into
32
<PAGE>
<PAGE>
various interest rate swaps
as required by the Sterling Credit Agreements. The Acquisition Facility
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 the interest rate
swaps entered into is pounds 800 million ($1,359 million). The swaps have an
average maturity of six years and an average fixed rate of 7.83%. At
September 30, 1998, borrowings totaled pounds 1,655.7 million ($2,812.7
million) under the Acquisition Facility and pounds 243 million ($412.8
million) under the Interim Facility. As of September 30, 1998, there was
pounds 31 million ($52.7 million) outstanding under the Revolving Credit
Facility and there were no borrowings outstanding under the separate Eastern
Electricity Revolving Credit Facility. On October 23, 1998, the Company used
approximately pounds 1,314 million ($2,232 million), primarily proceeds from
the Peabody Sale, to reduce borrowings under the Acquisition Facility and
Interim Facility and pay interest thereon.
In addition, certain non-US subsidiaries have revolving credit agreements
(denominated in both foreign currencies and US dollars) aggregating
approximately $84.3 million of which $33.6 million was outstanding at
September 30, 1998. These revolving credit agreements expire at various dates
through 2000.
The Company, TU Electric, ENSERCH and or other subsidiaries of the
Company may issue additional debt and equity securities as needed, including
the possible future sale: (i) by TU Electric of up to $498.9 million principal
amount of debt securities, (ii) by TU Electric of up to $25 million of its
Cumulative Preferred Stock, and (iii) by ENSERCH of up to $100 million
aggregate principal amount of securities, all of which are currently
registered with the Securities and Exchange Commission (SEC) for offering
pursuant to Rule 415 under the Securities Act of 1933. In addition, the
Company may offer and issue, together or separately, up to $170 million of (i)
debt securities, (ii) shares of its common stock, (iii) contracts to purchase
shares of common stock and (iv) units pledged to secure the holder's
obligation to purchase common stock under stock purchase contracts.
Sales of Accounts Receivable -- TU Electric has facilities with financial
institutions whereby it is entitled to sell and such financial institutions
may purchase, on an ongoing basis, undivided interests in customer accounts
receivables representing up to an aggregate of $450 million. ENSERCH has a
similar facility for up to $100 million, and Eastern Group has a facility for
up to pounds 300 million ($510 million). Additional receivables are
continually sold to replace those collected. At September 30, 1998, TU
Electric had sold $450 million of accounts receivable, ENSERCH companies had
sold $100 million and Eastern Group had sold pounds 289 million ($491 million)
under such agreements.
Risk Management -- The Company's and TU Electric's operations involve
managing market risks related to changes in interest rates and, for the
Company, foreign exchange and commodity price exposures. Derivative
instruments including swaps and forward contracts are used to reduce and
manage a portion of those risks. With the exception of the energy marketing
activities of a subsidiary, Enserch Energy Services, Inc. (EES), the Company's
and TU Electric's participations in derivative transactions are designed for
hedging purposes; and derivative instruments are not held or issued for
trading purposes. Credit risk relates to the risk of loss that the Company
and TU Electric would incur as a result of nonperformance by counterparties to
their respective derivative instruments. The Company and TU Electric believe
the risk of nonperformance by counterparties is minimal. For other
information regarding derivative instruments, see Note 6 to Condensed
Consolidated Financial Statements.
As part of its energy marketing business activities, EES enters into a
variety of transactions, including forward contracts involving physical
delivery of natural gas or electrical power commodities, as well as swaps,
futures, options and other derivative contractual arrangements. These
activities involve price commitments into the future and, therefore, give rise
to market risk. EES uses the mark-to-market method of valuing and accounting
for these activities.
33
<PAGE>
<PAGE>
EES' energy portfolio is comprised of forward commitments, futures,
swaps, options and other derivative instruments. The notional amounts and
terms of the portfolio as of September 30, 1998 included financial instruments
that provide for fixed price receipts of 2,599 trillion British thermal units
equivalent (TBtue) and fixed price payments of 2,689 TBtue, with a maximum
term of eight years. Additionally, sales and purchase commitments totaling
1,245 TBtue, with terms extending up to nine years, are included in the
portfolio as of September 30, 1998.
Eastern Group's electricity supply business generally involves entering
into fixed price contracts to supply electricity to customers. Eastern Group
obtains substantially all of the electricity to satisfy its obligations under
such contracts through purchases from the wholesale trading market for
electricity in England and Wales (the Pool). Within the Pool, the prices are
set for each half hour period and are fixed only one day ahead. In order to
reduce their exposure to Pool prices, generators and suppliers enter into
financial hedging contracts with each other. These contracts are in the form
of contracts for differences (CfDs) and electricity forward agreements
(EFAs). CfDs and EFAs in effect fix the price which a supplier pays and a
generator receives for electricity and are therefore used to reduce the price
risk that would otherwise be associated with the sale and purchase of
electricity through the Pool. Differences between the actual prices set by
the Pool and the agreed prices give rise to difference payments between the
parties to the particular CfD. EFAs are similar in nature to CfDs, except
they tend to last for shorter time periods and are based on standard industry
terms rather than being individually negotiated. In a competitive supply
market, Eastern Group is exposed to two principal risks associated with such
contracts: (i) purchasing price risk (Eastern Group's cost of purchased
electricity relative to the price Eastern Group receives from the supply
customer) and (ii) load shape risk (the risk associated with a shift in the
customer's usage pattern, including absolute amounts demanded and timing of
amounts demanded). Eastern Group seeks to hedge purchasing price risk through
CfDs and EFAs. Long-term CfDs are in place to hedge a proportion of
electricity purchased up to 2009. From 1998 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.
Eastern Group's ability to manage its purchasing price risk depends, in
part, on the future availability of appropriately priced risk management
mechanisms such as CfDs and EFAs. No assurance can be given that an adequate,
transparent market for such products will continue to be available. No
assurance can be given that this risk will be effectively mitigated. Load
shape risk is mitigated by careful forecasting of demand.
In the gas retail business, Eastern Group contracts to supply gas to
customers at fixed prices. Eastern Group purchases the gas mostly through a
portfolio of gas purchase contracts. The overall net exposure of the Eastern
Group to the gas spot market, including other gas wholesale contracts, is
managed by Eastern Power and Energy Trading Limited (EPETL), a subsidiary of
Eastern group, within a limit set by the Board of Directors of Eastern Group.
The Company has entered into short-term foreign currency exchange contracts
in connection with the acquisition of TEG to hedge a portion of the Company's
exposure to changes in the dollar to pound exchange rate. The Company has
contracted to deliver pounds 875 million and will receive $1,428 million.
Eastern Energy maintains cross currency swaps for its US dollar
denominated debts. These cross currency swaps mature in December 2006 and
December 2016 for $250 million and $200 million respectively. The maturity of
these swaps coincides with the maturity of the US dollar denominated debt.
34
<PAGE>
<PAGE>
Regulation, Rates and Competition
TUC and TU Electric
Docket 18490 -- The Public Utility Commission of Texas (PUC)
approved the stipulation filed on December 17, 1997, by TU Electric, together
with the PUC General Counsel, the Office of Public Utility Counsel and various
other parties interested in TU Electric's rates and services. The
stipulation, modified to incorporate changes made by the PUC, resulted in base
rate credits beginning January 1, 1998, of 4% for residential customers, 2%
for general service secondary customers and 1% for all other retail customers
and additional base rate credits for residential customers of 1.4% beginning
January 1, 1999. All other provisions of the stipulation were approved. They
(i) impose an annual earnings cap on TU Electric's rate of return on rate base
during 1998 and 1999, based in part on an 11.35% return on average common
equity and a cap on operations and maintenance expense at a specified level,
with any sums earned above the earnings cap being applied as additional
nuclear production depreciation, (ii) allow TU Electric to record depreciation
applicable to transmission and distribution assets in 1998 and 1999 as
additional depreciation of nuclear production assets, (iii) establish an
updated cost of service study that includes interruptible customers as
customer classes, (iv) result in the permanent dismissal of pending appeals of
prior PUC orders, including Docket No. 11735, if all other parties that have
filed appeals of those dockets also dismiss their appeals, (v) result in the
stay of any proceedings in the remand of Docket No. 9300 prior to January 1,
2000, and (vi) flow all gains from off-system sales of electricity in excess
of the amount included in base rates to customers through the fuel factor.
Modifications that were also approved by the PUC include: (i) imputing $16
million of revenues from discounted rates in the calculation of the return
cap, (ii) limiting the recovery of interest on any new debt issued prior to
December 31, 1999 to the interest rate available to TU Electric at its bond
rating as of January 1, 1998 in the calculation of the return cap, (iii)
limiting the amount of annual capital additions to production plant to 1.5%
of TU Electric's net plant in service on December 31, 1996 in the calculation
of the return cap, and (iv) permitting TU Electric, at its discretion, to
apply earnings as additional depreciation of nuclear production assets, after
the determinations have been made under the return cap. Certain parties that
did not sign the stipulation have appealed the PUC's approval by filing suit
in state district court. The Company cannot predict the outcome of these
appeals.
TUC
Under a settlement of the Railroad Commission of Texas (RRC) rate inquiry
approved in June 1998, Lone Star Gas agreed to credit residential and
commercial customers $18 million to be spread over the next two heating
seasons (November through March). Earnings are not affected by the settlement
due to previously established reserves.
Capital Expenditures
TUC and TU Electric
The re-evaluation of growth expectations, the effects of inflation,
additional regulatory requirements and the availability of fuel, labor,
materials and capital may result in changes to the estimated construction
costs and dates of completion in TUC's and TU Electric's construction
programs (see Item 2. Properties -- Capital Expenditures in the 1997 Form
10-K). Commitments in connection with the construction program are generally
revocable subject to reimbursement to manufacturers for expenditures incurred
or other cancellation penalties. Eastern Group's capital expenditures program
is being evaluated in light of the acquisition.
RESULTS OF OPERATION
TU Electric
Net income for TU Electric for the three months, nine months and twelve
months ended September 30, 1998 increased approximately 13%, 9% and 11%,
respectively, from the same periods of 1997. In April 1998, the PUC approved
a permanent rate settlement agreement which was effective as of January 1,
1998, that will reduce TU
35
<PAGE>
<PAGE>
Electric's revenues by an estimated $118 million in
1998 and $145 million in 1999 for a total of $263 million over the two year
period. For the three months and nine months ended September 30, 1998, TU
Electric recorded $141.1 million and $180.3 million, respectively, as
additional depreciation of nuclear production assets, a pro rata portion of
expected 1998 earnings in excess of the stipulated return cap. In addition,
for the three months and nine months there was $45.9 million and $136.3
million, respectively, of depreciation expense reclassified from transmission
and distribution to nuclear production assets. Including deferred income tax
effects, the net effect was a $109.5 million reduction in net income for the
three months and a $146.6 million reduction for the nine months of 1998.
Results for the 1997 periods were reduced by the recognition in August
1997 of an $81.1 million fuel disallowance (including interest) and a charge
of $10.1 million from the sale of sulfur dioxide allowances previously
recognized. After related taxes, these settlements reduced 1997 income by
$55.4 million. Excluding these nonrecurring items, net income for the twelve
months September 30, 1998 was $25 million (3%) above that for the comparable
1997 period. Results for the twelve months ended September 30, 1997 were also
reduced by the recognition of the $80.0 million rate settlement refund
recorded in July 1997.
For the three-, nine- and twelve-month periods ended September 30, 1998,
TU Electric's operating revenues increased significantly from the comparable
period of 1997. The following table details the factors contributing to these
changes:
<TABLE>
<CAPTION>
Increase (Decrease)
----------------------------------------
Three Months Nine Months Twelve Months
------------ ----------- -------------
Thousands of Dollars
<S> <C> <C> <C>
Base rate revenue $155,483 $253,745 $299,904
Fuel revenue (including over/under- recovered) 26,034 100,458 158,995
Fuel disallowance (August 1997) 68,556 68,556 68,556
Transmission service revenue 5,015 9,538 38,667
Other revenue 16,753 20,160 18,306
-------- -------- --------
Total $271,841 $452,457 $584,428
======== ======== ========
Percentage increase 14.7% 9.7% 9.7%
Excluding fuel disallowance 11.0% 8.2% 8.6%
</TABLE>
The increases in energy sales and base rate revenues were primarily due
to exceptionally high temperatures during 1998 and to growth, partially offset
by the implementation in January 1998 of the rate settlement agreement, and,
as to the twelve-month period, the $80 million rate settlement refund recorded
in July 1997.
Fuel revenues increased in the 1998 periods as compared to 1997 due to
higher energy sales and increased usage of fuel gas. The increase in
transmission revenues for the twelve-month period reflects implementation of
the PUC's Open Access Transmission Rule effective January 1, 1997.
Fuel and purchased power expense for the three-, nine- and twelve-month
periods ended September 30, 1998 increased 5.7%, 7.9%, and 9.5%, respectively,
from the comparable 1997 periods as a result of higher energy sales and
increased usage of fuel gas, partially offset by lower gas prices.
Depreciation and amortization expense increased 99%, 43% and 32%,
respectively, for the three-, nine- and twelve-month periods ending September
30, 1998, reflecting the adjustment to nuclear depreciation expense as a
result of expected 1998 earnings in excess of the stipulated return cap under
the rate agreement.
TU Electric's effective income tax rate differs from the US statutory
rate of 35% due to the impact of amortization of prior period flow-through
amounts, which impact increased in the 1998 periods due to the acceleration of
depreciation on nuclear production assets in conjunction with the rate
settlement.
Interest on mortgage bonds decreased from 1997 to 1998 for all periods
due to the retirement of mortgage bonds, while interest in 1998 on other
long-term debt increased due to the issuance of unsecured debt. Other
interest decreased for all periods due primarily to interest in 1997 of $12
million related to the PUC's disallowance of
36
<PAGE>
<PAGE>
eligible fuel related costs. The increase in distributions on
preferred securities of trusts reflects a full
year effect in the 1998 twelve-month period of the issuance of preferred
securities of subsidiary trusts in January 1997, partially offset by a
redemption of TU Electric Capital II preferred trust securities in January
1998.
Preferred stock dividends decreased from 1997 to 1998 for all periods
presented, reflecting the repurchases of a significant portion of TU
Electric's preferred stock.
TUC
Earnings for the third quarter of 1998 were $293.6 million ($1.04 per
share, basic and diluted) compared with $289.6 million ($1.24 per share,
basic and diluted) for the third quarter of 1997. Earnings for the nine
months ended September 30, 1998 were $503.2 million ($1.94 per share, basic
and diluted) compared with $565.2 million ($2.48 per share, basic and diluted)
for 1997. Earnings for the twelve-month period ended September 30, 1998 were
$598.5 million ($2.35 per share basic, $2.34 per share diluted) compared with
$631.7 million ($2.79 per share, basic and diluted) for the prior twelve-month
period. Excluding non-recurring items in 1997 for TU Electric as described
above, earnings per share were $1.48 for the three months, $2.73 for the nine
months and $3.03 for the twelve months ended September 30, 1997. Earnings and
earnings per share comparisons for all periods were affected by the
acquisitions of TEG, ENSERCH and LCC and the issuance of additional shares of
common stock for the acquisitions, partially offset by the repurchases of
common stock in the third and fourth quarters of 1997.
Earnings for the periods ended September 30, 1998 reflect continued
strong core domestic electric sales growth aided by warmer than normal weather
offset by reduced revenues and increased depreciation at TU Electric as a
result of the two-year rate settlement and by the results of Eastern Group.
For all periods presented, the factors affecting the results of TU
Electric, as discussed above, are also major factors affecting the results of
TUC. Operations since the dates of acquisition of Eastern Group (including
certain one-time acquisition transaction-related costs which totaled $31
million after-tax), ENSERCH and LCC also impacted the Company's net income.
For the three-, nine- and twelve-month periods ended September 30, 1998,
contributions to consolidated operating revenues were as follows (in millions
of dollars):
<TABLE>
<CAPTION>
Periods Ended September 30, 1998 Periods Ended September 30, 1997
-------------------------------- --------------------------------
Three Nine Twelve Three Nine Twelve
Months Months Months Months Months Months
<S> <C> <C> <C> <C> <C> <C>
TU Electric $2,123 $ 5,121 $ 6,588 $1,851 $4,668 $6,003
Eastern Group 1,005 1,550 1,550 -- -- --
TU Australia 123 344 457 129 376 496
ENSERCH 1,090 2,983 3,984 276 276 276
LCC and Other 39 118 135 9 28 38
------- ------- ------- ------ ------ ------
Consolidated $4,380 $10,116 $12,714 $2,265 $5,348 $6,813
======= ======= ======= ====== ====== ======
</TABLE>
In accordance with the TU Electric settlement agreement, TU Electric also
recorded increased depreciation on its Comanche Peak nuclear power plant of
approximately $187 million in the third quarter of 1998. Of the $187 million
of accelerated depreciation, $46 million is related to the transfer of
Transmission and Distribution depreciation and $141 million is related to TU
Electric's return cap.
Other income (deductions) -- net for the nine- and twelve-month periods
ended September 30, 1998, includes $10 million representing equity in earnings
of TEG prior to acquisition on May 19, 1998, $26 million in gains from the
sale of properties, and $37 million in dividend income from investments by
Eastern Group. Partially offsetting was the $39.7 million cost of foreign
currency options expired or resold in the second quarter of 1998 associated
with the acquisition of TEG and equity in losses of a telecommunications
partnership.
37
<PAGE>
<PAGE>
The increase in interest income for the 1998 periods over the same
periods of 1997 reflects the interest earned by TEG on proceeds from the
Peabody Sale that were unavailable for use to repay interim borrowings and
were invested until October 1998.
Year-to-year comparisons of interest expense and distributions on
preferred securities and preferred stock of subsidiaries have been affected by
the Company's capital restructuring and debt reduction programs, the debt and
preferred stock assumed in connection with the acquisitions of TEG, ENSERCH
and LCC and debt incurred to finance the TEG acquisition.
The effective income tax rate differs from the US statutory rate of 35%
due primarily to the impact of amortization of prior period flow-through
amounts, differences in the tax rates applicable to results of non-US
operations, the amortization of goodwill, which is not deductible for tax
purposes, and a reduction in the UK tax rate from 31% to 30%.
On a pro forma basis, as if TEG and LCC had been acquired at October 1,
1997, consolidated revenues for the twelve months ended September 30, 1998
would have been $17 billion, consolidated net income would have been $891
million and basic earnings per share would have been $3.15. The after-tax
income of $17 million from a non-recurring transaction in the first quarter of
1998 is reflected in these pro forma results. On a pro forma basis, as if TEG
had been acquired at January 1, 1998, net income would have been $674 million
($2.39 per share) for the nine months ended September 30, 1998. A substantial
portion of Eastern Group's earnings occur during the first and fourth quarters
of the year which are the periods of peak electricity usage in the UK.
ENSERCH's earnings also are expected to occur primarily in the first and
fourth quarters. The second quarter is now expected to be the Company's
period of lowest earnings during the year. For the twelve-month period
ending September 30, 1998, assuming that the TEG businesses had not been
acquired, TUC's consolidated net income would have been $731 million or $2.98
per share of common stock.
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1998. This
statement requires companies to report and display comprehensive income and
its components (revenues, expenses, gains and losses). Comprehensive income
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. For the Company,
comprehensive income consists of net income reported in the statements of
consolidated income and the change in the foreign currency translation
adjustment, net of tax as included in common stock equity. For TU Electric,
comprehensive income is the same as net income reported in the statements of
consolidated income, since there were no other items of comprehensive income
for the periods presented. (See Condensed Statements of Consolidated
Comprehensive Income).
CHANGE IN ACCOUNTING STANDARDS
SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," will become effective in 1998 for reporting full year results of
operations. This statement establishes standards for defining and reporting
business segments. TUC is currently determining its reportable segments.
SFAS 132, "Employer's Disclosures about Pensions and Other Postretirement
Benefits" revises existing rules for employers' disclosures about pensions and
other postretirement benefit plans. It does not change the measurement or
recognition of those plans. This standard will become effective in 1998 for
year end disclosures. The adoption of SFAS 131 and 132 will not affect the
Company's or TU Electric's consolidated financial position, results of
operations or cash flows.
38
<PAGE>
<PAGE>
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities",
is effective for fiscal years beginning after June 15, 1999. This standard
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 which deal with hedge accounting
and derivatives. The Company and TU Electric have not yet determined the
effect adopting this standard will have on their financial statements.
YEAR 2000 ISSUES
Overview
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.
The Company began its efforts to address Year 2000 (Y2K) issues in 1996
by focusing on its US information technology mainframe-based application
systems (IT Corporate Applications). In early 1997, an infrastructure project
to address the Company's information technology related equipment, operating
systems and desktop software was begun (IT Infrastructure). In late 1997, a
project was begun to address Y2K issues throughout the Company related to
embedded systems, such as process controls for energy production and delivery,
and business unit owned applications (Non-IT Equipment and Applications).
Applications and equipment in each of these three major initiatives have
been inventoried and categorized based on their criticality to the Company's
business operations. Assessments of the potential impact due to Y2K issues
are being performed. This process involves the solicitation of vendor
feedback, comparing information with other energy companies, and in many cases
internal verification by testing. The majority of assessment work has
occurred and the rest is scheduled to be completed by the end of 1998. The
remediation and replacement work on the majority of IT Corporate Applications
and IT Infrastructure is scheduled to be completed by the end of 1998. A
majority of the assessment work on embedded systems has been completed.
Remediation work is scheduled to be completed by September of 1999. A number
of tests on operational equipment has been performed. The Company will
continue to test this equipment throughout the remainder of 1998 and into the
spring of 1999.
Readiness
The IT Corporate Applications assessment, testing and remediation
activities are fully active. Twenty-seven percent of applications have been
tested and certified as Y2K compliant. Sixty percent of applications are
scheduled to be certified by the end of 1998. The remaining applications are
scheduled to be certified by March 31, 1999. The Company has established a
certification protocol to be followed for remediation of software
applications. That protocol includes testing procedures to be followed before
remediated applications are returned to production.
The IT Infrastructure project involves assessing the compliance of
standard computer hardware, network systems including gateways, hubs and
routers, telecommunications equipment, operating systems and IT standard
software products. Equipment is being individually tested using software
products and applicable test procedures. Network system tests are scheduled
to be performed prior to the end of 1998. Most of the IT Infrastructure is
scheduled to be Y2K ready by the end of 1998. Certain vendor supplied program
products will not have Y2K ready versions available until the first quarter of
1999. These product upgrades will be tested and implemented as soon as they
are available.
Non-IT Equipment and Applications involve the hardware and software
products that reside in individual business units. These products include the
embedded systems that are used in the production, energy delivery, and other
processes of the Company. Inventories have been conducted to identify these
embedded systems in the individual business units. Initial assessments are
essentially complete. More detailed assessments involving equipment and
39
<PAGE>
<PAGE>
software validation testing are scheduled throughout the spring of 1999.
Remediation activities are underway. Although much of the work is expected to
be completed by the end of 1998, equipment outage schedules necessitate that
some remediation activities will not be completed until September 1999.
The Company is analyzing the potential impact on its operations relating
to third parties. Over 2000 suppliers and service providers have been
contacted to determine the status of their Y2K efforts. Approximately sixty
percent of these vendors have responded. They are being prioritized and the
programs and status of the most significant among them will be analyzed in
detail. Companies that are considered to be critical are telecommunications
and gas suppliers. This analysis is expected to be completed by the end of
1998.
Costs
The costs associated with the Company's Y2K effort for its US energy
businesses are currently estimated to be approximately $36 million. These
costs reflect new, incremental costs and the reallocation of resources in
pre-existing maintenance budgets. The costs related to the three major
initiatives are estimated to be as follows: IT Corporate Applications - $14.1
million, IT Infrastructure - $7.2 million and Non IT-Equipment and
Applications - $14.2 million. These costs are being expensed as incurred over
the period 1996 to 2000, and it is estimated that a total of $13.6 million has
already been expended. There can be no assurance that these estimated costs
will not increase as the Company's Y2K program continues.
Strategic initiatives were begun in two areas prior to beginning work on
the Y2K issue, and the costs for these initiatives are not included in the
estimate above. The Company's energy management system for the Company's
transmission grid and the Company's principal financial and accounting systems
are being replaced. Each of these projects will eliminate potential Y2K
deficiencies; however, that was not a significant consideration at the time
replacement decisions were made.
LCC continues to work on its Y2K project. IT applications affected by
Y2K issues will be replaced by systems with dramatically increased
functionality. The cost of this effort is estimated to be $4.1 million, which
is being expended during 1998 and 1999. As of September 30, 1998, estimated
costs expended were approximately $1.5 million. Assessment work on LCC
embedded systems was completed in the second quarter of 1998. The cost of
remediation work related to those systems is an additional $.6 million. While
the majority of LCC's remediation activities are scheduled to be complete by
year end 1998, some will extend into 1999.
In Australia, Eastern Energy initiated a Y2K project in the third quarter
of 1997. All hardware, software and embedded technology have been identified
and preliminary risk assessment completed. Y2K testing and remediation will
be completed for the majority of systems and assets by December 1998. All Y2K
activities are expected to be completed by June 1999. The estimated costs of
the project including embedded systems is $3.3 million. Most of the cost is
expected to be incurred by June 1999. As of September 30, 1998, estimated
costs expended were approximately $284 thousand. All critical suppliers have
been contacted and their Y2K readiness has been assessed. Contingency plans
are being developed for suppliers determined to have unacceptable Y2K risk.
In addition, Eastern Energy is also participating in the Victorian Electric
Supply Industry Y2K Forum to address the concerns of electricity supply and
transmission reliability.
In the UK, Eastern Group has been engaged in a Y2K project since August
1996. The project is addressing the business applications and equipment,
power generation and power distribution facilities of Eastern Group.
Inventories were completed in February 1998. Testing is scheduled for
completion in June 1999. Remediation work in all areas is expected to be
complete in August 1999. Contingency plans and business continuity plans that
already exist are being reviewed and updated in preparation for Y2K failure
scenarios. Eastern Group has contacted its suppliers to determine the
potential risk of their products and services. The current cost estimate for
the project is $33 million. Most of the cost is expected to be incurred by
August 1999. As of September 30, 1998, estimated costs expended were
approximately $2 million ($1 million prior to acquisition). Eastern Group is
co-operating with other utility companies as active members of the Utilities
Group of the UK Y2K Interest Group.
40
<PAGE>
<PAGE>
Risk Issues
With respect to internal risks, the Company's current assessment of the
most reasonable likely worst case scenario is that impacts on either service
or financial performance will not be materially adverse. The Company
believes, based on the results of testing that has already occurred on a large
portion of operating equipment, that if any disruption to service occurs, it
will be isolated and of short-term duration. The Company continues to
collaborate with other major energy suppliers through the joint Electric Power
Research Institute's embedded systems project.
The North American Electric Reliability Council (NERC) has conducted an
initial assessment of the electric infrastructure, in which the Company
participated. The NERC status report, issued in September 1998, indicates
that the impact of Y2K on electrical systems may be less than first
anticipated and that, with continued work and coordinated contingency
planning, operating risks can be effectively mitigated. NERC will perform
scenario analyses of potential risks to the electric infrastructure. Until
this work is complete, the Company cannot assess a worst case scenario
relating to external forces.
As the Company's Y2K program proceeds, the Company will continue to
assess its internal and external risks, not all of which are within its
control; and it will consider the most reasonably likely worst case scenario.
There can be no assurance that all material Y2K risks within the Company's
control will have been adequately identified and corrected before the end of
1999. In addition, the Company 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 such systems or parties.
Contingency Plans
The Company utilizes detailed emergency response and disaster recovery
plans to ensure high reliability of service to customers. These plans are
currently available and are utilized routinely for abnormal service
conditions. These plans are being reviewed to incorporate required actions
specific to the Y2K issue. The resulting contingency plan will address both
Company activities and actions necessary to mitigate the impact of third party
disruptions. These contingency plans will be coordinated with those of the
regional independent system operator and NERC. This contingency planning is
scheduled to be completed by June 1999.
41
<PAGE>
<PAGE>
LEGAL PROCEEDINGS
On August 3, 1998, the Gracy Fund, L.P. filed suit in the United States
District Court for the Northern District of Texas against EEX Corporation,
formerly Enserch Exploration, Inc. (EEX), the Company, David W. Biegler, Gary
J. Junco, Erle Nye, Thomas Hamilton and J. Phillip McCormick. The plaintiff
seeks to represent a class comprised of all purchasers of the common stock of
ENSERCH or EEX between January 26, 1996 and August 4, 1997, including former
shareholders of ENSERCH who received shares of EEX and the Company pursuant to
the merger agreement between ENSERCH and the Company dated April 13, 1996, all
EEX shareholders solicited pursuant to a proxy statement/prospectus issued by
EEX dated October 2, 1996 and all ENSERCH shareholders solicited by a joint
proxy statement/prospectus issued by ENSERCH and the Company dated September
23, 1996. The individual defendants are current or former officers and/or
directors of the Company or EEX. The plaintiffs allege that the defendants
participated in a fraudulent scheme and course of business by disseminating
materially false and misleading statements regarding EEX's and ENSERCH's
business which caused the plaintiffs and other members of the class to
purchase EEX and ENSERCH stock at artificially inflated prices. In such
connection, the plaintiffs allege that the defendants violated various
provisions of the Securities Act of 1933 and the Securities Exchange Act of
1934 (Exchange Act). No amount of damages is specified. It has been agreed
by the parties to this suit that the Thorne suit described below will be
consolidated with this suit. The Company is evaluating these claims and is
unable at this time to predict the outcome of this proceeding, but it intends
to vigorously defend this suit.
Also on August 3, 1998, Stan C. Thorne filed suit in the United States
District Court for the Southern District of Texas against EEX, ENSERCH,
DeGolyer & MacNaughton (D&M), David W. Biegler, Gary J. Junco, Fredrick S.
Addy and B. K. Irani. The plaintiff seeks to represent a class comprised of
all purchasers of the common stock of EEX during the period of August 3, 1995
through August 5, 1997. The individual defendants are current or former
officers and/or directors of EEX and Mr. Biegler has been an officer and
director of ENSERCH. D&M served as independent petroleum consultants to EEX.
The plaintiff alleges that the defendants engaged in a course of conduct
designed to mislead the plaintiff and the investing public in order to
maintain the price of EEX common stock at artificially high levels through
false and misleading representations concerning the gas reserves of EEX in
violation of Sections 10(b) and 20(a) of the Exchange Act of 1934 and Rule
10b-5 thereunder. The plaintiff also alleges that the defendants were
negligent in making such misrepresentations and that they constituted common
law fraud against the defendants. No amount of damages is specified in this
action. This suit has been transferred to the Northern District of Texas and
the parties have agreed to consolidate it with the Gracy Fund suit described
above. The Company is evaluating these claims and is unable at this time to
predict the outcome of this proceeding, but it intends to vigorously defend
this suit.
42
<PAGE>
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required hereunder for TUC and TU Electric related to
Energy Marketing Activities and Foreign Currency Risk Management is set forth
in Note 6 to Condensed Consolidated Financial Statements of Item 1 Financial
Statements. Additional information concerning Eastern Group is also presented
therein. All other information required hereunder for TUC and TU Electric is
not significantly different from the information set forth in Item 7A.
Quantitative and Qualitative Disclosures About Market Risk included in the
1997 Form 10-K and is therefore not presented herein.
Eastern Group is exposed to a number of different market risks including
changes in gas and electricity prices, interest rates and foreign currency
exchange rates. Eastern Group has developed a control framework of policies
and procedures to manage and monitor the exposures arising from volatility in
these markets. In accordance with these policies and procedures Eastern Group
enters into various derivative instruments. In both the energy trading and
the treasury operations, which make use of such instruments, only well
understood derivative instruments are used.
The following discussion about Eastern Group's risk management activities
includes "forward looking" statements that involve risk and uncertainties.
Actual results could differ materially from those projected in forward looking
statements.
Interest rate risk
Eastern Group's exposure to interest rate risk is managed by maintaining a
balance of fixed and floating rate borrowings and deposits within a specified
range as set out below.
Number of Months Proportion of fixed
ahead rate exposure
1 - 3 50 - 100%
3 - 6 40 - 75%
6 - 9 25 - 60%
9 - 12 15 - 50%
Managing the exposure within the specified range is achieved by the use of
derivatives, in particular interest rate swaps and forward rate agreements.
The following swaps effectively convert a portion of fixed rate bonds into
floating rate and were outstanding at September 30, 1998:
Interest rate swaps pounds 35 million expiring 2004 at LIBOR
pounds 65 million expiring 2004 at LIBOR - 0.7625%
Forward rate agreements totaling a notional amount of pounds 255 million for a
maximum duration of one year to swap floating rate deposits into fixed rates
were outstanding at September 30, 1998.
43
<PAGE>
<PAGE>
Energy risk management
In the electricity retail business, Eastern Group contracts to supply
electricity to customers at fixed prices and buys output from the Pool to meet
the demand of those customers. As the price of electricity purchased from the
Pool can be volatile, Eastern 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. Eastern
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.
Eastern Group's overall exposure to such risks is managed by its energy
trading business, Eastern Power and Energy Trading Limited (EPETL), which also
enters into derivatives principally to hedge the portfolio and maintain energy
price exposure to within a limit set by the Board of Directors of Eastern
Group. The derivatives used are contracts for differences (CfDs) and
electricity forward agreements (EFAs). CfDs are bilaterally negotiated
contracts which 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 but are on standard terms and tend to be for smaller quantities and
shorter durations.
The hypothetical loss in fair value of Eastern Group's CfDs and EFAs in
existence at September 30, 1998 arising from a 10% adverse movement in future
electricity prices is estimated at pounds 94.6 million ($161 million). This
loss is calculated by modeling the contracts against an internal forecast of
Pool prices, using discounted cash flow techniques.
In the gas retail business, Eastern Group contracts to supply gas to
customers at fixed prices. Eastern Group purchases the gas mostly through a
portfolio of gas purchase contracts. The overall net exposure of Eastern
Group to the gas spot market, including other gas wholesale contracts, is also
managed by EPETL within a limit set by the Board of Directors of Eastern
Group.
Management of the market risks associated with the portfolio of physical
electricity generation assets, gas assets and gas and electricity sales and
derivative contracts is critical to the success of Eastern Group and therefore
comprehensive risk management processes, policies and procedures have been
established to monitor and control these markets risks.
44
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On August 3, 1998, the Gracy Fund, L.P. filed suit in the United States
District Court for the Northern District of Texas against EEX Corporation,
formerly Enserch Exploration, Inc. (EEX), the Company, David W. Biegler, Gary
J. Junco, Erle Nye, Thomas Hamilton and J. Phillip McCormick. The plaintiff
seeks to represent a class comprised of all purchasers of the common stock of
ENSERCH or EEX between January 26, 1996 and August 4, 1997, including former
shareholders of ENSERCH who received shares of EEX and the Company pursuant to
the merger agreement between ENSERCH and the Company dated April 13, 1996, all
EEX shareholders solicited pursuant to a proxy statement/prospectus issued by
EEX dated October 2, 1996 and all ENSERCH shareholders solicited by a joint
proxy statement/prospectus issued by ENSERCH and the Company dated September
23, 1996. The individual defendants are current or former officers and/or
directors of the Company or EEX. The plaintiffs allege that the defendants
participated in a fraudulent scheme and course of business by disseminating
materially false and misleading statements regarding EEX's and ENSERCH's
business which caused the plaintiffs and other members of the class to
purchase EEX and ENSERCH stock at artificially inflated prices. In such
connection, the plaintiffs allege that the defendants violated various
provisions of the Securities Act of 1933 and the Securities Exchange Act of
1934 (Exchange Act). No amount of damages is specified. It has been agreed
by the parties to this suit that the Thorne suit described below will be
consolidated with this suit. The Company is evaluating these claims and is
unable at this time to predict the outcome of this proceeding, but it intends
to vigorously defend this suit.
Also on August 3, 1998, Stan C. Thorne filed suit in the United States
District Court for the Southern District of Texas against EEX, ENSERCH,
DeGolyer & MacNaughton (D&M), David W. Biegler, Gary J. Junco, Fredrick S.
Addy and B. K. Irani. The plaintiff seeks to represent a class comprised of
all purchasers of the common stock of EEX during the period of August 3, 1995
through August 5, 1997. The individual defendants are current or former
officers and/or directors of EEX and Mr. Biegler has been an officer and
director of ENSERCH. D&M served as independent petroleum consultants to EEX.
The plaintiff alleges that the defendants engaged in a course of conduct
designed to mislead the plaintiff and the investing public in order to
maintain the price of EEX common stock at artificially high levels through
false and misleading representations concerning the gas reserves of EEX in
violation of Sections 10(b) and 20(a) of the Exchange Act of 1934 and Rule
10b-5 thereunder. The plaintiff also alleges that the defendants were
negligent in making such misrepresentations and that they constituted common
law fraud against the defendants. No amount of damages is specified in this
action. This suit has been transferred to the Northern District of Texas and
the parties have agreed to consolidate it with the Gracy Fund suit described
above. The Company is evaluating these claims and is unable at this time to
predict the outcome of this proceeding, but it intends to vigorously defend
this suit.
45
<PAGE>
<PAGE>
Item 6.EXHIBITS AND REPORTS ON FORM 8-K
TUC and TU Electric
(a) Exhibits filed as a part of Part II are:
4 Instruments defining the rights of security holders
4(a) -Indenture (For Unsecured Debt Securities Series
F), dated as of October 1, 1998,
between the Company and The Bank of New York.
4(b) -Officer's Certificate establishing the terms of the
Company's Mandatory Putable/Remarketable Securities
(Series F Notes).
4(c) -Remarketing Agreement relating to the Series F Notes.
4(d) -Indenture (For Unsecured Debt Securities Series
G), dated as of October 1, 1998,
between the Company and The Bank of New York.
4(e) -Officer's Certificate establishing the terms of the
Company's Floating Rate Senior Notes.
10 Material contracts
10(a) -Facilities Agreement for Credit Facilities, dated
March 2, 1998, as amended through July 16, 1998,
among TU Finance (No. 1) Limited, TU Finance
(No.2) Limited, TU Acquisitions PLC and Chase
Manhattan plc, Lehman 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(b) -Guarantee and Debenture, dated May 19, 1998, among
TU Finance(No. 1) Limited and certain of its
subsidiaries (as Charging Companies) and Chase
Manhattan International Limited (as Security Agent).
10(c) -Share Charge, dated May 19, 1998, between TU Finance
(No. 2) Holdings, Inc. (as Chargor) and Chase Manhattan
International Limited (as Security Agent).
15 Letters from independent accountants as to unaudited interim
financial information
15(a) Deloitte & Touche LLP -Texas Utilities Company
15(b) Deloitte & Touche LLP -Texas Utilities Electric Company
27 Financial Data Schedules
27(a) Texas Utilities Company
27(b) Texas Utilities Electric Company
99 Other exhibits
99(a) Facility Agreement for pounds 250,000,000 Revolving
Credit Facility, dated May 21, 1998, among Eastern
Electricity plc, and Chase Manhattan plc, Lehman
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.
46
<PAGE>
<PAGE>
(b) Reports on Form 8-K filed since June 30, 1998:
Date of Report Item Reported
TUC
Amendment No. 2 to May 19, 1998 Item 2. Acquisition or Disposition of
8-K (filed July 17, 1998) Assets
Item 7. Financial Statements and
Exhibits
August 6, 1998 Item 5. Other Events
August 31, 1998 Item 5. Other Events
47
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS UTILITIES COMPANY
By /s/ J. W. Pinkerton
---------------------------
J. W. Pinkerton
Controller and Principal
Accounting Officer
Date: November 13, 1998
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ J. W. Pinkerton
----------------------------
J. W. Pinkerton
Controller and Principal
Accounting Officer
Date: November 13, 1998
48
<PAGE>
<PAGE>
Appendix A
ENSERCH CORPORATION AND SUBSIDIARIES
(A WHOLLY-OWNED SUBSIDIARY OF TEXAS UTILITIES COMPANY)
INDEX TO FINANCIAL INFORMATION
September 30, 1998
Page
Condensed Statements of Consolidated Income -
Three, Nine and Twelve Months Ended September 30, 1998 and 1997. . . . A-2
Condensed Statements of Consolidated Cash Flows -
Nine Months Ended September 30, 1998 and 1997. . . . . . . . . . . . . A-4
Condensed Consolidated Balance Sheets -
September 30, 1998 and December 31, 1997 . . . . . . . . . . . . . . . A-5
Notes to Condensed Consolidated Financial Statements . . . . . . . . . A-7
Independent Accountants' Report. . . . . . . . . . . . . . . . . . . . A-12
Management's Discussion and Analysis of Financial
Condition and Results of Operation . . . . . . . . . . . . . . . . . A-13
A-1
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended September 30 Nine Months Ended September 30
---------------------------------------------- --------------------------------------
1998 1997 1998 1997
------------ ---------------------------- ----------- -----------------------------
Predecessor Predecessor
------------- ---------------
Period From Period From Period From Period From
Three Months Acquisition July 1, 1997 Nine Months Acquisition January 1, 1997
Ended Date to Through Ended Date to Through
September 30, September 30, Acquisition September 30, September 30 Acquisition
1998 1997 Date 1998 1997 Date
---- ---- ---- ---- ---- ----
Thousands of dollars
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES. . . . . . . . . . . . $1,089,815 $276,263 $135,492 $2,983,066 $276,263 $1,279,678
---------- -------- -------- ---------- -------- ----------
OPERATING EXPENSES
Gas and electricity purchased for resale 982,724 208,486 86,471 2,593,355 208,486 955,261
Operation and maintenance . . . . . . . 79,021 53,198 28,710 250,616 53,198 197,482
Depreciation and amortization . . . . . 19,636 12,584 4,793 58,268 12,584 33,693
Taxes other than income . . . . . . . . 12,548 8,296 3,712 51,725 8,296 46,358
---------- -------- -------- ---------- -------- ----------
Total operating expenses. . . . . . 1,093,929 282,564 123,686 2,953,964 282,564 1,232,794
---------- -------- -------- ---------- -------- ----------
OPERATING INCOME (LOSS) . . . . . . . . . (4,114) (6,301) 11,806 29,102 (6,301) 46,884
OTHER INCOME (DEDUCTIONS) - NET . . . . . 315 697 (17,939) 1,087 697 (23,845)
---------- -------- -------- ---------- -------- ----------
INCOME (LOSS) BEFORE INTEREST
AND INCOME TAXES . . . . . . . . . . (3,799) (5,604) (6,133) 30,189 (5,604) 23,039
INTEREST INCOME . . . . . . . . . . . . . 104 83 81 198 83 1,509
INTEREST CHARGES. . . . . . . . . . . . . (18,830) (12,178) (6,581) (55,868) (12,178) (44,537)
---------- ------- -------- ---------- -------- ----------
LOSS BEFORE INCOME TAXES . . . . . . . . (22,525) (17,699) (12,633) (25,481) (17,699) (19,989)
INCOME TAX BENEFIT . . . . . . . . . . . (6,124) (5,428) (256) (4,188) (5,428) (4,612)
---------- ------- -------- ---------- -------- ----------
LOSS FROM CONTINUING
OPERATIONS . . . . . . . . . . . . . . (16,401) (12,271) (12,377) (21,293) (12,271) (15,377)
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS . . . . . . . . . . . . . . 3,321 (224,691)
---------- ------- -------- ---------- -------- ----------
NET LOSS. . . . . . . . . . . . . . . . . (16,401) (12,271) (9,056) (21,293) (12,271) (240,068)
PREFERRED STOCK DIVIDENDS . . . . . . . . 935 1,878 970 3,169 1,878 6,725
---------- -------- -------- ---------- -------- ----------
NET LOSS AVAILABLE FOR
COMMON STOCK . . . . . . . . . . . . . $ (17,336) $(14,149) $(10,026) $ (24,462) $(14,149) $ (246,793)
========== ======== ======== ========== ======== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-2
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Twelve Months Ended September 30
------------------------------------------------------
1998 1997
-------------- ----------------------------------
Predecessor
---------------
Period From Period From
Twelve Months Acquisition October 1, 1996
Ended Date to Through
September 30, September 30, Acquisition
1998 1997 Date
---- ---- ----
Thousands of dollars
<S> <C> <C> <C>
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . $3,983,809 $276,263 $1,871,229
---------- -------- ----------
OPERATING EXPENSES
Gas and electricity purchased for resale. . . . . . . . . 3,447,309 208,486 1,374,680
Operation and maintenance . . . . . . . . . . . . . . . . 339,104 53,198 291,628
Depreciation and amortization . . . . . . . . . . . . . . 75,404 12,584 47,568
Taxes other than income . . . . . . . . . . . . . . . . . 66,765 8,296 63,321
---------- -------- ----------
Total operating expenses. . . . . . . . . . . . . . . 3,928,582 282,564 1,777,197
---------- -------- ----------
OPERATING INCOME (LOSS) . . . . . . . . . . . . . . . . . . 55,227 (6,301) 94,032
OTHER INCOME (DEDUCTIONS) - NET . . . . . . . . . . . . . . 1,041 697 (30,696)
---------- -------- ----------
INCOME (LOSS) BEFORE INTEREST
AND INCOME TAXES . . . . . . . . . . . . . . . . . . . . 56,268 (5,604) 63,336
INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . 345 83 2,058
INTEREST CHARGES. . . . . . . . . . . . . . . . . . . . . . (75,445) (12,178) (64,251)
---------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES . . . . . . . . . . . . . (18,832) (17,699) 1,143
INCOME TAX EXPENSE (BENEFIT). . . . . . . . . . . . . . . . (245) (5,428) 6,051
---------- -------- ----------
LOSS FROM CONTINUING
OPERATIONS . . . . . . . . . . . . . . . . . . . . . . . (18,587) (12,271) (4,908)
LOSS FROM DISCONTINUED OPERATIONS . . . . . . . . . . . . . (221,817)
---------- -------- ----------
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . (18,587) (12,271) (226,725)
PREFERRED STOCK DIVIDENDS . . . . . . . . . . . . . . . . . 5,968 1,878 9,602
---------- -------- ----------
NET LOSS AVAILABLE FOR
COMMON STOCK . . . . . . . . . . . . . . . . . . . . . . $ (24,555) $(14,149) $ (236,327)
========== ======== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-3
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED
CASH FLOWS (Unaudited)
Nine Months Ended September 30
------------------------------------------------------
1998 1997
--------------------------------
Predecessor
---------------
Period From Period From
Nine Months Acquisition January 1, 1997
Ended Date to Through
September 30, September 30, Acquisition
1998 1997 Date
---- ---- ----
Thousands of Dollars
<S> <C> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Loss from continuing operations. . . . . . . . . . . . . . . . . . . . $(21,293) $(12,271) $(15,377)
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . 57,827 12,584 33,693
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . 32,908 5,422 (8,803)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . 162,357 3,318 132,763
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,979) (19,409) 14,776
Accounts payable
Parent and affiliates . . . . . . . . . . . . . . . . . . . . . . 6,479
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,998) 22,413 (148,859)
Interest and taxes accrued. . . . . . . . . . . . . . . . . . . . . (2,980) (8,887) (8,627)
Other working capital . . . . . . . . . . . . . . . . . . . . . . . (32,977) 8,694 12,123
Energy marketing risk management assets and liabilities . . . . . . (26,124) (25,536) 2,924
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . (66,036) 4,533 9,669
--------- ------- -------
Cash (used in) provided by operating activities . . . . . . . . . (4,816) (9,139) 24,282
--------- ------- -------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . 250,000 100,000
Preferred securities. . . . . . . . . . . . . . . . . . . . . . . . 150,000
Common stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,757
Retirements of securities:
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . (190,750) (260,361) (100,784)
Preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . (100,000)
Change in notes payable:
Commercial paper. . . . . . . . . . . . . . . . . . . . . . . . . . (204,540) 66,540
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,168)
Parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,498 512,300
Cash dividends paid. . . . . . . . . . . . . . . . . . . . . . . . . . (4,413) (2,909) (12,771)
Debt financing expenses. . . . . . . . . . . . . . . . . . . . . . . . (4,613)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)
--------- ------- -------
Cash provided by financing activities . . . . . . . . . . . . . . 119,554 44,490 56,735
--------- ------- -------
CASH FLOWS - INVESTING ACTIVITIES
Construction expenditures. . . . . . . . . . . . . . . . . . . . . . . (107,278) (21,558) (62,074)
Other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . (7,275) (7,564) 2,899
--------- ------- -------
Cash used in investing activities . . . . . . . . . . . . . . . . (114,553) (29,122) (59,175)
--------- ------- -------
CASH USED FOR DISCONTINUED OPERATIONS. . . . . . . . . . . . . . . . . . (695) (1,862) (27,414)
--------- ------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . (510) 4,367 (5,572)
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE. . . . . . . . . . . . . . 11,770 12,143 17,715
--------- ------- -------
CASH AND CASH EQUIVALENTS - ENDING BALANCE . . . . . . . . . . . . . . . $ 11,260 $ 16,510 $ 12,143
========= ======== ========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
September 30,
1998 December 31,
(Unaudited) 1997
------------ ------------
Thousands of Dollars
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
Gas distribution and pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,117,313 $1,068,708
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60,151 46,400
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,177,464 1,115,108
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,607 24,669
---------- ----------
Net of accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 1,109,857 1,090,439
Construction work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,291 85,635
Held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 121
---------- ----------
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . 1,225,269 1,176,195
---------- ----------
INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,005 37,041
---------- ----------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,260 11,770
Accounts receivable (net of allowance for
uncollectible accounts: 1998 - $7,288,000;
1997 - $3,902,000). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 359,699 524,908
Energy marketing risk management assets . . . . . . . . . . . . . . . . . . . . . . . . 590,241 365,650
Inventories - at average cost:
Materials and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,434 6,544
Gas stored underground . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,333 114,244
Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,737 1,527
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,663 22,663
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,375 7,678
---------- ----------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135,742 1,054,984
---------- ----------
DEFERRED DEBITS
Goodwill (net of accumulated amortization: 1998 - $23,249,000;
1997 - $8,113,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835,876 791,401
Energy marketing risk management assets . . . . . . . . . . . . . . . . . . . . . . . . 92,109 41,522
Unamortized regulatory assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,368 52,336
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,040 72,631
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,725 14,038
---------- ----------
Total deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,051,118 971,928
---------- ----------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,456,134 $3,240,148
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-5
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
ENSERCH CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
September 30,
1998 December 31,
(Unaudited) 1997
--------------- ------------
Thousands of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock (par value - $.01 per share):
Authorized shares - 100,000,000
Outstanding shares - 201,000 . . . . . . . . . . . . . . . . . . . . . . . . . $ 2 $ 2
Paid in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776,031 771,207
Retained deficit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,401) (9,565)
---------- ----------
Total common stock equity. . . . . . . . . . . . . . . . . . . . . . . . . . 743,632 761,644
Preferred stock not subject to mandatory redemption . . . . . . . . . . . . . . . 75,000 175,000
ENSERCH obligated, mandatorily redeemable, preferred securities of subsidiary
trust holding solely debentures of ENSERCH . . . . . . . . . . . . . . . . . 146,477
Advances from parent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316,710 293,843
Long-term debt, less amounts due currently. . . . . . . . . . . . . . . . . . . . 550,712 646,796
---------- ----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,832,531 1,877,283
---------- ----------
CURRENT LIABILITIES
Notes payable - banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,899 6,067
Long-term debt due currently. . . . . . . . . . . . . . . . . . . . . . . . . . . 151,125
Accounts payable:
Parent and affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,405 4,926
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 381,975 491,645
Energy marketing risk management liabilities. . . . . . . . . . . . . . . . . . . 572,941 357,044
Taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,190 19,010
Interest accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,583 20,264
Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 616 1,859
Customers' deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,117 7,751
Other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,031 79,078
---------- ----------
Total current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . 1,251,882 987,644
---------- ----------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 10,088 10,498
Unamortized investment tax credits. . . . . . . . . . . . . . . . . . . . . . . . 3,319 3,364
Pensions and other postretirement benefits. . . . . . . . . . . . . . . . . . . . 144,307 165,514
Energy marketing risk management liabilities. . . . . . . . . . . . . . . . . . . 64,481 31,324
Other deferred credits and noncurrent liabilities . . . . . . . . . . . . . . . . 149,526 164,521
---------- ----------
Total deferred credits and other noncurrent liabilities . . . . . . . . . . 371,721 375,221
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 7)
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,456,134 $3,240,148
========== ==========
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
A-6
<PAGE>
<PAGE>
ENSERCH CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1.MERGERS AND DISPOSITIONS
On August 5, 1997 (Merger Date or Acquisition Date), the merger
transactions involving the former Texas Utilities Company, now known as Texas
Energy Industries, Inc., and ENSERCH Corporation (ENSERCH or the Corporation)
were completed. All of the common stock of ENSERCH was converted into common
stock of a new holding company now known as Texas Utilities Company (TUC), and
ENSERCH became a wholly-owned subsidiary of TUC. Immediately prior to
ENSERCH's merger with TUC, Enserch Exploration, Inc. (EEX) and Lone Star
Energy Plant Operations, Inc. (LSEPO), former subsidiaries of the Corporation,
were merged to form a new company (New EEX), and ENSERCH distributed to its
common shareholders its ownership interest in these businesses.
TUC accounted for its acquisition of ENSERCH as a purchase, and purchase
accounting adjustments, including goodwill, have been pushed down and are
reflected in the financial statements of ENSERCH and its subsidiaries for the
period subsequent to August 5, 1997. The financial statements of ENSERCH for
the periods ended before August 5, 1997 were prepared using ENSERCH's
historical basis of accounting and are designated as "Predecessor". The
comparability of the operating results for the Predecessor and the periods
encompassing push down accounting are affected by the purchase accounting
adjustments, including the amortization of goodwill over a period of forty
years.
The fair value of the assets and liabilities of ENSERCH's rate-regulated
natural gas utility business (conducted through its Lone Star Gas Company and
Lone Star Pipeline Company divisions) is considered to be equivalent to the
historical basis of accounting and accordingly, no adjustment has been made to
the carrying value. The process of determining the fair value of assets
acquired, liabilities assumed and contingencies existing at the Merger Date
was completed in the third quarter of 1998 and resulted in an increase in
goodwill of approximately $60,000,000 over the preliminary allocation
primarily due to refinement of estimates and settlement of preacquisition
contingencies.
The Predecessor financial statements have been restated to reflect EEX
and LSEPO as a discontinued operation. The historical financial statements of
ENSERCH reflect certain reclassifications made to conform to TUC's
presentation style. On December 31, 1997, ENSERCH sold, to another subsidiary
of TUC, at net book value, the group of companies which had constituted the
Corporation's power development and international gas distribution
operations. For financial reporting purposes, the sale was deemed to have
occurred on August 5, 1997. Accordingly, operating results for periods
following the Merger Date exclude those operations. Prior periods were not
restated to reflect the sale.
2.SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation -- The condensed consolidated financial statements
of ENSERCH and its subsidiaries have been prepared on the same basis as those
in the 1997 Annual Report on Form 10-K (1997 Form 10-K) and, in the opinion of
ENSERCH, all adjustments (constituting only normal recurring accruals)
necessary for a fair presentation of the results of operation and financial
position have been included therein. 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 rules and regulations of the Securities and Exchange
Commission (SEC). Certain previously reported amounts have been reclassified
to conform to current classifications.
A-7
<PAGE>
<PAGE>
Consolidation -- The consolidated financial statements include the
accounts of the Corporation and all of its subsidiaries, including its
subsidiary business trust.
Energy Marketing Activities -- The Corporation, through its energy
marketing subsidiary, Enserch Energy Services, Inc. (EES), enters into a
variety of transactions, including forward contracts involving physical
delivery of natural gas or electrical power commodities, as well as swaps,
futures, options and other derivative contractual arrangements. As part of
these business activities, EES offers price risk management services to the
energy sector. These transactions are primarily conducted with retail end
users, established energy companies and major financial institutions. EES
uses the mark-to-market method of valuing and accounting for these activities.
Under this method, the current market value of EES' energy portfolio, net of
future servicing costs, is reflected within the Corporation's consolidated
balance sheets, with resulting unrealized gains and losses, as "Energy
Marketing Risk Management Assets" or "Energy Marketing Risk Management
Liabilities". The actual timing of cash receipts and payments may, however,
vary as contracts may be settled at intervals other than their scheduled
maturities. (See Note 6).
3.COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1998. This
statement requires companies to report and display comprehensive income and
its components (revenues, expenses, gains and losses). Comprehensive income
includes all changes in common stock equity during a period except those
resulting from investments by owners and distributions to owners. For the
Corporation, comprehensive income is the same as net income reported in the
statements of consolidated income, since there were no other items of
comprehensive income for the periods presented.
4.LINES OF CREDIT
At September 30, 1998, TUC, Texas Utilities Electric Company (a
subsidiary of TUC) (TU Electric) and ENSERCH had joint US dollar-denominated
lines of credit under revolving credit facility agreements (US Credit
Agreements) with a group of banking institutions. The US Credit Agreements
have two facilities. At September 30, 1998, Facility A provided for
short-term borrowings aggregating up to $2,921,000,000 outstanding at any one
time at variable interest rates and terminates March 1, 1999. Facility B
provides for borrowings aggregating up to $1,400,000,000 outstanding at any
one time at variable interest rates and terminates March 2, 2003. Excluding
$2,121,000,000 which is restricted to TUC's use in financing the acquisition
of a United Kingdom based entity, the combined borrowings of TUC, TU Electric
and ENSERCH under both facilities are limited to an aggregate of
$2,200,000,000 outstanding at any one time, which may be used for working
capital and other general corporate purposes, including commercial paper
backup. ENSERCH's borrowings under both facilities are limited to an
aggregate of $650,000,000 outstanding at any one time. At September 30,
1998, ENSERCH had no borrowings outstanding under these facilities.
5.CAPITALIZATION
Preferred Stock -- In January 1998, the Corporation redeemed the
$100,000,000 principal amount of its Adjustable Rate Preferred Stock, Series
E, at par value, plus accrued and unpaid dividends.
ENSERCH Obligated, Mandatorily Redeemable, Preferred Securities of
Subsidiary Trust Holding Solely Debentures of ENSERCH -- In July 1998, a
statutory business trust, ENSERCH Capital I, established as a financing
subsidiary of ENSERCH for the purpose of issuing common and preferred trust
securities, issued $150,000,000 of floating rate capital securities. The
proceeds were used by ENSERCH for general
A-8
<PAGE>
<PAGE>
corporate purposes, including the
acquisition or redemption of outstanding securities of ENSERCH. Distributions
on these capital securities are payable quarterly based on an annual floating
rate determined quarterly with reference to a three-month LIBOR plus a
margin. The only assets held by the trust are $154,600,000 principal amount
of Floating Rate Junior Subordinated Debentures Series A (Series A Debentures)
of ENSERCH. The interest on the Series A Debentures is payable at a rate
equal to that of the preferred trust securities. The interest rate for the
period from July 2, 1998 to September 30, 1998 was 7.06875% and for the period
from October 1, 1998 to December 31, 1998 is 6.6625%. The Series A
Debentures will mature on July 1, 2028 and ENSERCH has the right to redeem the
Series A Debentures and the capital securities in whole or in part on or after
July 1, 2003.
On October 1, 1998, an interest rate swap was entered into which
effectively fixes the rate on $100,000,000 notional amount of the ENSERCH
floating rate capital securities at 6.629% to July 1, 2003.
Long-Term Debt -- In January 1998, the Corporation issued $125,000,000 of
6.25% Series A Notes due January 1, 2003 (Series A Notes) and $125,000,000 of
Remarketed Reset Notes due January 1, 2008 (Reset Notes). Net proceeds from
these borrowings were used to refinance or redeem like amounts of higher rate
debt and preferred stock. In July 1998, the interest rate on the Reset Notes
was reset to a fixed rate of 6.564% payable until July 1, 2005.
In March 1998, ENSERCH redeemed the outstanding balance of its 6.375%
Convertible Subordinated Debentures. Holders of $3,005,000 principal amount
of the debentures elected to convert such debentures into 77,963 shares of TUC
common stock, and the remaining $87,745,000 principal amount was redeemed at
par for cash.
In July 1998, ENSERCH redeemed at par its $100,000,000 principal amount
8.875% Senior Notes due 2001.
6.DERIVATIVE INSTRUMENTS
The Corporation enters into derivative instruments, including
options, swaps, futures and other contractual commitments to manage market
risks related to changes in interest rates and commodity prices. The
Corporation's participation in derivative transactions, except for its energy
marketing activities conducted by EES, has been designated for hedging
purposes, and those derivative instruments are not held or issued for trading
purposes.
Energy Marketing Activities -- EES' energy portfolio is comprised of
forward commitments, futures, swaps, options and other derivative instruments
related to natural gas and electricity marketing activities. The notional
amounts and terms of the portfolio as of September 30, 1998 included financial
instruments that provide for fixed price receipts of 2,599 trillion British
thermal units equivalent (TBtue) and fixed price payments of 2,689 TBtue, with
a maximum term of eight years. Additionally, sales and purchase commitments
totaling 1,245 TBtue, with terms extending up to nine years, are included in
the portfolio as of September 30, 1998.
Notional amounts reflect the volume of transactions but do not represent
the amounts exchanged by the parties to the financial instruments.
Accordingly, the notional amounts represented above do not necessarily measure
EES' exposure to market or credit risks. Additionally, the maximum term in
years are not indicative of likely future cash flows as these positions may be
offset in the markets at any time in response to EES' risk management needs.
A-9
<PAGE>
<PAGE>
7.COMMITMENTS AND CONTINGENCIES
Guarantees -- The Corporation and/or its subsidiaries are the guarantors
on various commitments and obligations of others aggregating approximately
$32,520,000 at September 30, 1998. The Corporation is exposed to loss in the
event of nonperformance by other parties. However, the Corporation does not
anticipate nonperformance by the counterparties.
Legal Proceedings -- On August 3, 1998, the Gracy Fund, L.P. filed suit
in the United States District Court for the Northern District of Texas against
New EEX, formerly EEX, TUC, David W. Biegler, Gary J. Junco, Erle Nye, Thomas
Hamilton and J. Phillip McCormick. The plaintiff seeks to represent a class
comprised of all purchasers of the common stock of ENSERCH or EEX between
January 26, 1996 and August 4, 1997, including former shareholders of ENSERCH
who received shares of EEX and TUC pursuant to the merger agreement between
ENSERCH and TUC dated April 13, 1996, all EEX shareholders solicited pursuant
to a proxy statement/prospectus issued by EEX dated October 2, 1996 and all
ENSERCH shareholders solicited by a joint proxy statement/prospectus issued by
ENSERCH and TUC dated September 23, 1996. The individual defendants are
current or former officers and/or directors of TUC or EEX. The plaintiffs
allege that the defendants participated in a fraudulent scheme and course of
business by disseminating materially false and misleading statements regarding
EEX's and ENSERCH's business which caused the plaintiffs and other members of
the class to purchase EEX and ENSERCH stock at artificially inflated prices.
In such connection, the plaintiffs allege that the defendants violated various
provisions of the Securities Act of 1933 and the Securities Exchange Act of
1934 (Exchange Act). No amount of damages is specified. It has been agreed
by the parties to this suit that the Thorne suit described below will be
consolidated with this suit. TUC is evaluating these claims and is unable at
this time to predict the outcome of this proceeding, but it intends to
vigorously defend this suit.
Also on August 3, 1998, Stan C. Thorne filed suit in the United States
District Court for the Southern District of Texas against EEX, ENSERCH,
DeGolyer & MacNaughton (D&M), David W. Biegler, Gary J. Junco, Fredrick S.
Addy and B. K. Irani. The plaintiff seeks to represent a class comprised of
all purchasers of the common stock of EEX during the period of August 3, 1995
through August 5, 1997. The individual defendants are current or former
officers and/or directors of EEX and Mr. Biegler has been an officer and
director of ENSERCH. D&M served as independent petroleum consultants to EEX.
The plaintiff alleges that the defendants engaged in a course of conduct
designed to mislead the plaintiff and the investing public in order to
maintain the price of EEX common stock at artificially high levels through
false and misleading representations concerning the gas reserves of EEX in
violation of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5
thereunder. The plaintiff also alleges that the defendants were negligent in
making such misrepresentations and that they constituted common law fraud
against the defendants. No amount of damages is specified in this action.
This suit has been transferred to the Northern District of Texas and the
parties have agreed to consolidate it with the Gracy Fund suit described
above. TUC is also evaluating these claims and is unable at this time to
predict the outcome of this proceeding, but it also intends to vigorously
defend this suit.
A-10
<PAGE>
<PAGE>
INDEPENDENT ACCOUNTANTS' REPORT
ENSERCH Corporation:
We have reviewed the accompanying condensed consolidated balance sheet of
ENSERCH Corporation and subsidiaries (the "Corporation") as of September 30,
1998, and the related condensed statements of consolidated income for the
three-month, nine-month and twelve-month periods ended September 30, 1998,
and the period from the acquisition date (August 5, 1997) through September
30, 1997 (Successor Company Operations) and the condensed statements of
consolidated income for the periods from July 1, 1997, January 1, 1997 and
October 1, 1996 through the acquisition date (Predecessor Company Operations)
and the condensed statements of consolidated cash flows for the nine-month
period ended September 30, 1998 and the period from the acquisition date to
September 30, 1997 (Successor Company), and the period from January 1, 1997
through the acquisition date (Predecessor Company). These financial
statements are the responsibility of the Corporation's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical review
procedures to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit in accordance with generally accepted auditing standards, the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that
should be made to such condensed consolidated financial statements for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of the Corporation as of December
31, 1997, and the related consolidated statements of income, cash flows and
common stock equity for the year then ended (not presented herein); and in our
report dated February 24, 1998, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of December 31,
1997, is fairly stated in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12, 1998
A-11
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
FORWARD-LOOKING STATEMENTS
This report and other presentations made by ENSERCH Corporation (ENSERCH
or the Corporation) and its subsidiaries contain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. Although ENSERCH believes that in making any such statement its
expectations are based on reasonable assumptions, any such statement involves
uncertainties and is qualified in its entirety by reference to factors
contained in the Forward-Looking Statements section of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operation in
ENSERCH's Annual Report on Form 10-K for the year 1997 (1997 Form 10-K), among
others, that could cause the actual results of ENSERCH to differ materially
from those projected in such forward-looking statement.
Any forward-looking statement speaks only as of the date on which such
statement is made, and ENSERCH undertakes no obligation to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time, and it is not possible for
ENSERCH to predict all of such factors, nor can it assess the impact of each
such factor or the extent to which any factor, or combination of factors, may
cause results to differ materially from those contained in any forward-looking
statement.
FINANCIAL CONDITION
Merger With TUC and Disposition
On August 5, 1997 (Merger Date or Acquisition Date), the merger
transactions involving the former Texas Utilities Company, now known as Texas
Energy Industries, Inc., and ENSERCH were completed. All of the common stock
of ENSERCH was converted into common stock of a new holding company now known
as Texas Utilities Company (TUC), and ENSERCH became a wholly-owned subsidiary
of TUC. Immediately prior to ENSERCH's merger with TUC, Enserch Exploration,
Inc. (EEX) and Lone Star Energy Plant Operations, Inc. (LSEPO), former
subsidiaries of the Corporation, were merged to form a new company (New EEX),
and ENSERCH distributed to its common shareholders its ownership interest in
these businesses.
TUC accounted for its acquisition of ENSERCH as a purchase, and purchase
accounting adjustments, including goodwill, have been pushed down and are
reflected in the financial statements of ENSERCH and its subsidiaries for the
period subsequent to August 5, 1997. The financial statements of ENSERCH for
the periods ended before August 5, 1997 were prepared using ENSERCH's
historical basis of accounting and are designated as "Predecessor". The
comparability of the operating results for the Predecessor and the periods
encompassing push down accounting are affected by the purchase accounting
adjustments, including the amortization of goodwill over a period of forty
years.
The fair value of the assets and liabilities of ENSERCH's rate-regulated
natural gas utility business (conducted through its Lone Star Gas Company and
Lone Star Pipeline Company divisions) is considered to be equivalent to the
historical basis of accounting and accordingly, no adjustment has been made to
the carrying value. The process of determining the fair value of assets
acquired, liabilities assumed and contingencies existing at the Merger Date
was completed in the third quarter of 1998 and resulted in an increase in
goodwill of approximately $60 million over the preliminary allocation
primarily due to refinement of estimates and settlement of preacquisition
contingencies.
A-12
<PAGE>
<PAGE>
The Predecessor financial statements have been restated to reflect EEX
and LSEPO as a discontinued operation. The historical financial statements of
ENSERCH reflect certain reclassifications made to conform to TUC's
presentation style. On December 31, 1997, ENSERCH sold, to another subsidiary
of TUC, at net book value, the group of companies which had constituted the
Corporation's power development and international gas distribution
operations. For financial reporting purposes, the sale was deemed to have
occurred on August 5, 1997. Accordingly, operating results for periods
following the Merger Date exclude those operations. Prior periods were not
restated to reflect the sale.
For purposes of the discussion of operating results provided herein, the
financial information of the Predecessor for the 1997 periods prior to the
merger date have been combined with the post-merger financial information.
The continuing business operations of ENSERCH were not significantly changed
as a result of the merger, and post-merger and pre-merger operating results,
except as noted, are comparable.
Liquidity and Capital Resources
For information concerning liquidity and capital resources, see Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operation in ENSERCH's 1997 Form 10-K. Results for the three- and nine-month
periods presented herein are not necessarily indicative of expectations for a
full year's operations because of seasonal and other factors, including
variations in maintenance and other operating expense patterns. No significant
changes or events which might affect the financial condition of the
Corporation have occurred subsequent to year-end other than as disclosed in
other reports of ENSERCH or included herein.
Continuing operations used cash of $4.8 million for operating activities
in the nine months of 1998 compared with cash provided of $15 million in the
same period of 1997. Discontinued operations used cash of $.7 million in
the 1998 nine months and $29.3 million in the 1997 period.
Investing activities required $115 million in the nine months of 1998
versus $88 million in 1997. Capital spending in the nine months of 1998 was
$24 million higher than the nine months of the prior year. Other investing
activities used cash of $7.3 million in 1998 and $4.7 million in 1997.
The capitalization ratios of the Corporation as of September 30, 1998
consisted of approximately 47.3% long-term debt (including amounts due
parent), 4.1% preferred stock, 8.0% preferred securities and 40.6% common
stock equity.
In January 1998, ENSERCH issued $125 million of 6.25% Series A Notes due
2003 and $125 million of Remarketed Reset Notes due 2008 (Reset Notes). Net
proceeds from these borrowings were used to refinance or redeem like amounts
of higher rate debt and preferred stock. In July 1998, the interest rate on
the Reset Notes was reset to a fixed rate of 6.564% payable until July 1,
2005. In January 1998, the $100 million principal amount of Series E
Adjustable Rate Preferred Stock was redeemed at 100% of its liquidation price
plus accrued and unpaid dividends. In March 1998, holders of $3.0 million
principal amount of 6.375% Convertible Subordinated Debentures converted such
debentures into 77,963 shares of TUC common stock, and the remaining $87.7
million principal amount was redeemed at par for cash. In July 1998, ENSERCH
redeemed at par its $100 million principal amount of 8.875% Senior Notes due
2001.
In July 1998, a statutory business trust, ENSERCH Capital I, established
as a financing subsidiary of ENSERCH for the purpose of issuing common and
preferred trust securities, issued $150 million of floating rate capital
securities. The proceeds were used by ENSERCH for general corporate purposes,
including the acquisition or redemption of outstanding securities of ENSERCH.
Distributions on these capital securities are payable quarterly based on an
annual floating rate determined quarterly with reference to a three-month
LIBOR plus a margin. The only assets held by the trust are $154.6 million
principal amount of Floating Rate Junior Subordinated Debentures Series A
(Series A Debentures) of ENSERCH. The interest on the Series A Debentures is
payable at a rate equal to that of the preferred trust securities. The
interest rate for the period from July 2, 1998 to September 30, 1998 was
A-13
<PAGE>
<PAGE>
7.06875% and for the period from October 1, 1998 to December 31, 1998 is
6.6625%. The Series A Debentures will mature on July 1, 2028 and ENSERCH has
the right to redeem the Series A Debentures and the capital securities in
whole or in part on or after July 1, 2003.
On October 1, 1998, an interest rate swap was entered into which
effectively fixes the rate on $100 million notional amount of the ENSERCH
floating rate capital securities at 6.629% to July 1, 2003.
ENSERCH may issued additional debt and equity securities as needed,
including the possible future sale of up to $100 million aggregate principal
amount of securities currently registered with the SEC for offering pursuant
to Rule 415 under the Securities Act of 1933.
At September 30, 1998, TUC, Texas Utilities Electric Company (a
subsidiary of TUC) (TU Electric) and ENSERCH had joint US dollar-denominated
lines of credit under revolving credit facility agreements (US Credit
Agreements) with a group of banking institutions. The US Credit
Agreements have two facilities. At September 30, 1998, Facility A provided
for short-term borrowings aggregating up to $2,921 million outstanding at any
one time at variable interest rates and terminates March 1, 1999. Facility B
provides for borrowings aggregating up to $1,400 million outstanding at any
one time at variable interest rates and terminates March 2, 2003. Excluding
$2,121 million which is restricted to TUC's use in financing the acquisition
of a United Kingdom based entity, the combined borrowings of TUC, TU Electric
and ENSERCH under both facilities are limited to an aggregate of $2,200
million outstanding at any one time, which may be used for working capital and
other general corporate purposes, including commercial paper backup.
ENSERCH's borrowings under both facilities are limited to an aggregate of
$650 million outstanding at any one time. At September 30, 1998, ENSERCH had
no borrowings outstanding under these facilities.
Sales of Accounts Receivable -- ENSERCH has facilities with financial
institutions whereby it is entitled to sell and such financial institutions
may purchase, on an ongoing basis, undivided interests in customer accounts
receivables representing up to an aggregate of $100 million. Additional
receivables are continually sold to replace those collected. At September 30,
1998, ENSERCH companies had sold $100 million of accounts receivable under
such agreements.
Risk Management -- The Corporation's operations involve managing market
risks related to changes in interest rates and commodity price exposures.
Derivative instruments including swaps and forward contracts are used to
reduce and manage a portion of those risks. With the exception of the energy
marketing activities of a subsidiary, Enserch Energy Services, Inc. (EES) the
Corporation's participation in derivative transactions are designed for
hedging purposes; and derivative instruments are not held or issued for
trading purposes. Credit risk relates to the risk of loss that the
Corporation would incur as a result of nonperformance by counterparties to
their respective derivative instruments. The Corporation believes the risk of
nonperformance by counterparties is minimal.
As part of its energy marketing business activities, EES enters into a
variety of transactions, including forward contracts involving physical
delivery of natural gas or electrical power commodities, as well as swaps,
futures, options and other derivative contractual arrangements. These
activities involve price commitments into the future and, therefore, give rise
to market risk. EES uses the mark-to-market method of valuing and accounting
for these activities.
EES' energy portfolio is comprised of forward commitments, futures,
swaps, options and other derivative instruments. The notional amounts and
terms of the portfolio as of September 30, 1998 included financial instruments
that provide for fixed price receipts of 2,599 trillion British thermal units
equivalent (TBtue) and fixed price payments of 2,689 TBtue, with a maximum
term of eight years. Additionally, sales and purchase commitments totaling
1,245 TBtue, with terms extending up to nine years, are included in the
portfolio as of September 30, 1998.
A-14
<PAGE>
<PAGE>
Regulation and Rates
Under a settlement of the Railroad Commission of Texas (RRC) rate inquiry
approved in June 1998, Lone Star Gas agreed to credit residential and
commercial customers $18 million to be spread over the next two heating
seasons (November through March). Earnings are not affected by the settlement
due to previously established reserves.
RESULTS OF OPERATION
For the three-, nine- and twelve-month periods ended September 30, 1998,
ENSERCH had losses from continuing operations of $16.4 million, $21.3 million
and $18.6 million, respectively, compared with losses of $24.6 million, $27.6
million and $17.2 million, respectively, for the Corporation and Predecessor,
as applicable, for the same periods of 1997.
The amortization of goodwill arising from the acquisition by Texas
Utilities was $5.1 million for the three months, $15.1 million for the
nine months and $20.1 million for the twelve months ended September 30, 1998.
Income for the 1997 nine and twelve month period was reduced by an $8.6
million pretax, $5.6 million after-tax, provision for a credit Lone Star
Pipeline Company made voluntarily to its customers.
Consolidated revenues for the three, nine and twelve months ended
September 30, 1998 increased 165%, 92% and 86% compared with the same periods
for 1997. The higher revenues reflect a significant increase in energy
marketing revenues in all periods from both gas and electricity marketing
activities.
Energy marketing revenues for the three, nine and twelve months ended
September 30, 1998 were $946 million, $2.3 billion and $3.0 billion compared
with $243 million, $784 million and $1.1 billion for the same periods last
year. Energy marketing revenues increased substantially as the trading
volumes of natural gas increased from earlier periods and as sales of
electricity contracts began in 1998. Gas distribution revenues for the three,
nine and twelve months ended September 30, 1998 were down 20.4%, 21.9% and
14.4%, respectively, from the same periods last year due to decreases in sales
volumes of 12.5%, 11.1% and 5.8%, respectively, reflecting the effects of
warmer weather, and lower flow-through of gas costs. Pipeline transportation
revenues for the three-, nine- and twelve-months periods decreased from the
prior year by 17.4%, 3.2% and 1.0%, respectively, on lower margins as
transportation volumes were higher for all comparable periods.
Gas and electricity purchased for resale increased 233%, 123% and 118% in
the three-, nine- and twelve-month 1998 periods, respectively, over the same
periods of 1997, reflecting the increase in energy marketing activity.
Other income-net for the three-, nine- and twelve-month periods ending
September 30, 1997 included merger related expenses incurred through the
acquisition date of $19.3 million, $25.1 million and $29.4 million,
respectively.
The loss from discontinued operations of $225 million for the nine months
and $222 million for the twelve months ended September 30, 1997, included the
effect of a $236 million after-tax write-down of the carrying value of EEX's
oil and gas properties due to the US cost center ceiling limitation at March
31, 1997, and a $9.7 million ($14.9 million pre-tax) provision for estimated
costs and expenses to wind-up engineering and construction operations.
A-15
<PAGE>
<PAGE>
COMPREHENSIVE INCOME
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income," became effective as of the first quarter of 1998. This
statement requires companies to report and display comprehensive income and
its components (revenues, expenses, gains and losses). Comprehensive income
includes all changes in equity during a period except those resulting from
investments by owners and distributions to owners. For the Corporation,
comprehensive income is the same as net income reported in the statements of
consolidated income, since there are no other items of comprehensive income
for the periods presented.
CHANGES IN ACCOUNTING STANDARDS
SFAS 131, "Disclosures About Segments of an Enterprise and Related
Information," will become effective in 1998. This statement establishes
standards for defining and reporting business segments. The Corporation is
currently determining its reportable segments, if any. SFAS 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits" revises existing
rules for employers' disclosures about pensions and other postretirement
benefit plans. It does not change the measurement or recognition of those
plans. This standard will become effective in 1998 for year end disclosures.
The adoption of SFAS 131 and 132 will not affect the Corporation's
consolidated financial position, results of operations or cash flows.
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities,"
is effective for fiscal years beginning after June 15, 1999. This standard
requires that all derivatives be recognized as either assets or liabilities in
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 derivative and its
resulting designation. The new standard will supersede or amend existing
standards which deal with hedge accounting and derivatives. The Corporation
has not yet determined the effect adopting this standard will have on its
financial statements.
YEAR 2000
Year 2000 (Y2K) issues of ENSERCH are being addressed with those of its
parent company, TUC (the Company). The following disclosure regarding Y2K
issues of TUC's US energy business is included in TUC's Form 10-Q for the
period ended September 30, 1998:
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.
The Company began its efforts to address Year 2000 (Y2K) issues in 1996 by
focusing on its US information technology mainframe-based application systems
(IT Corporate Applications). In early 1997, an infrastructure project to
address the Company's information technology related equipment, operating
systems and desktop software was begun (IT Infrastructure). In late 1997, a
project was begun to address Y2K issues throughout the Company related to
embedded systems, such as process controls for energy production and delivery,
and business unit owned applications (Non-IT Equipment and Applications).
Applications and equipment in each of these three major initiatives have been
inventoried and categorized based on their criticality to the Company's
business operations. Assessments of the potential impact due to Y2K issues
are being performed. This process involves the solicitation of vendor
feedback, comparing information with other energy companies, and in many cases
internal verification by testing. The majority of assessment work has
occurred and the rest is scheduled to be completed by the end of 1998. The
remediation and replacement work on the majority of IT Corporate Applications
and IT Infrastructure is scheduled to be completed by the end of 1998. A
majority of the assessment work on embedded systems has been completed.
Remediation work is scheduled to be completed by September of 1999. A number
A-16
<PAGE>
<PAGE>
of tests on operational equipment has been performed. The Company will
continue to test this equipment throughout the remainder of 1998 and into the
spring of 1999.
The IT Corporate Applications assessment, testing and remediation activities
are fully active. Twenty-seven percent of applications have been tested and
certified as Y2K compliant. Sixty percent of applications are scheduled to be
certified by the end of 1998. The remaining applications are scheduled to be
certified by March 31, 1999. The Company has established a certification
protocol to be followed for remediation of software applications. That
protocol includes testing procedures to be followed before remediated
applications are returned to production.
The IT Infrastructure project involves assessing the compliance of standard
computer hardware, network systems including gateways, hubs and routers,
telecommunications equipment, operating systems and IT standard software
products. Equipment is being individually tested using software products and
applicable test procedures. Network system tests are scheduled to be
performed prior to the end of 1998. Most of the IT Infrastructure is
scheduled to be Y2K ready by the end of 1998. Certain vendor supplied program
products will not have Y2K ready versions available until the first quarter of
1999. These product upgrades will be tested and implemented as soon as they
are available.
Non-IT Equipment and Applications involve the hardware and software products
that reside in individual business units. These products include the embedded
systems that are used in the production, energy delivery, and other processes
of the Company. Inventories have been conducted to identify these embedded
systems in the individual business units. Initial assessments are essentially
complete. More detailed assessments involving equipment and software
validation testing are scheduled throughout the spring of 1999. Remediation
activities are underway. Although much of the work is expected to be
completed by the end of 1998, equipment outage schedules necessitate that some
remediation activities will not be completed until September 1999.
The Company is analyzing the potential impact on its operations relating to
third parties. Over 2000 suppliers and service providers have been contacted
to determine the status of their Y2K efforts. Approximately sixty percent of
these vendors have responded. They are being prioritized and the programs and
status of the most significant among them will be analyzed in detail.
Companies that are considered to be critical are telecommunications and gas
suppliers. This analysis is expected to be completed by the end of 1998.
The costs associated with the Company's Y2K effort for its US energy
businesses are currently estimated to be approximately $36 million. These
costs reflect new, incremental costs and the reallocation of resources in
pre-existing maintenance budgets. The costs related to the three major
initiatives are estimated to be as follows: IT Corporate Applications - $14.1
million, IT Infrastructure - $7.2 million and Non IT-Equipment and
Applications - $14.2 million. These costs are being expensed as incurred over
the period 1996 to 2000, and it is estimated that a total of $13.6 million has
already been expended. There can be no assurance that these estimated costs
will not increase as the Company's Y2K program continues.
Strategic initiatives were begun in two areas prior to beginning work on the
Y2K issue, and the costs for these initiatives are not included in the
estimate above. The Company's energy management system for the Company's
transmission grid and the Company's principal financial and accounting systems
are being replaced. Each of these projects will eliminate potential Y2K
deficiencies; however, that was not a significant consideration at the time
replacement decisions were made.
With respect to internal risks, the Company's current assessment of the most
reasonable likely worst case scenario is that impacts on either service or
financial performance will not be materially adverse. The Company believes,
based on the results of testing that has already occurred on a large portion
of operating equipment, that if any disruption to service occurs, it will be
isolated and of short-term duration. The
A-17
<PAGE>
<PAGE>
Company continues to collaborate
with other major energy suppliers through the joint Electric Power Research
Institute's embedded systems project.
The North American Electric Reliability Council (NERC) has conducted an
initial assessment of the electric infrastructure, in which the Company
participated. The NERC status report, issued in September 1998, indicates
that the impact of Y2K on electrical systems may be less than first
anticipated and that, with continued work and coordinated contingency
planning, operating risks can be effectively mitigated. NERC will perform
scenario analyses of potential risks to the electric infrastructure. Until
this work is complete, the Company cannot assess a worst case scenario
relating to external forces.
As the Company's Y2K program proceeds, the Company will continue to assess its
internal and external risks, not all of which are within its control; and it
will consider the most reasonably likely worst case scenario. There can be no
assurance that all material Y2K risks within the Company's control will have
been adequately identified and corrected before the end of 1999. In addition,
the Company 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 such systems or parties.
The Company utilizes detailed emergency response and disaster recovery plans
to ensure high reliability of service to customers. These plans are currently
available and are utilized routinely for abnormal service conditions. These
plans are being reviewed to incorporate required actions specific to the Y2K
issue. The resulting contingency plan will address both Company activities
and actions necessary to mitigate the impact of third party disruptions.
These contingency plans will be coordinated with those of the regional
independent system operator and NERC. This contingency planning is scheduled
to be completed by June 1999.
LEGAL PROCEEDINGS
See Note 7 to Condensed Consolidated Financial Statements for a
description of legal proceedings.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required hereunder for the Corporation is not
significantly different from the information set forth in Item 7A.
Quantitative and Qualitative Disclosures About Market Risk included in the
1997 Form 10-K and is therefore not presented herein.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0001023291
<NAME> TEXAS UTILITIES COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 21,436,913
<OTHER-PROPERTY-AND-INVEST> 9,056,108
<TOTAL-CURRENT-ASSETS> 6,247,538
<TOTAL-DEFERRED-CHARGES> 3,379,497
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 40,120,056
<COMMON> 6,949,593
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,383,417
<TOTAL-COMMON-STOCKHOLDERS-EQ> 8,269,471
990,367
190,055
<LONG-TERM-DEBT-NET> 15,300,307
<SHORT-TERM-NOTES> 615,740
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 2,891,279
<LONG-TERM-DEBT-CURRENT-PORT> 901,933
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 10,960,904
<TOT-CAPITALIZATION-AND-LIAB> 40,120,056
<GROSS-OPERATING-REVENUE> 10,115,574
<INCOME-TAX-EXPENSE> 333,591
<OTHER-OPERATING-EXPENSES> 8,433,252
<TOTAL-OPERATING-EXPENSES> 8,433,252
<OPERATING-INCOME-LOSS> 1,682,322
<OTHER-INCOME-NET> 17,257
<INCOME-BEFORE-INTEREST-EXPEN> 1,699,574
<TOTAL-INTEREST-EXPENSE> 962,811
<NET-INCOME> 503,241
0
<EARNINGS-AVAILABLE-FOR-COMM> 503,241
<COMMON-STOCK-DIVIDENDS> 414,236
<TOTAL-INTEREST-ON-BONDS> 903,256
<CASH-FLOW-OPERATIONS> 1,374,876
<EPS-PRIMARY> 1.94
<EPS-DILUTED> 1.94
</TABLE>
EXHIBIT 15(a)
Texas Utilities Company:
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Texas Utilities Company and
subsidiaries (the "Company") for the periods ended September 30, 1998 and
1997, as indicated in our report dated November 12, 1998; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, is incorporated by reference in Registration Statements No. 33-55931,
333-27989, 333-32831 and 333-56055 on Form S-3; Registration Statement No.
333-47135 on Form S-4; and Registration Statements No. 333-32833, 333-32835,
333-32837, 333-32839, 333-32841, 333-32843, 333-45657 and 333-46671 on Form
S-8 of Texas Utilities Company.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12,1998
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000710182
<NAME> TEXAS UTILITIES ELECTRIC COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 15,411,828
<OTHER-PROPERTY-AND-INVEST> 567,857
<TOTAL-CURRENT-ASSETS> 955,630
<TOTAL-DEFERRED-CHARGES> 1,850,648
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 18,785,963
<COMMON> 3,886,521
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 2,679,432
<TOTAL-COMMON-STOCKHOLDERS-EQ> 6,565,953
843,890
115,055
<LONG-TERM-DEBT-NET> 5,533,067
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 357,729
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 5,370,269
<TOT-CAPITALIZATION-AND-LIAB> 18,785,963
<GROSS-OPERATING-REVENUE> 5,120,813
<INCOME-TAX-EXPENSE> 429,003
<OTHER-OPERATING-EXPENSES> 3,578,960
<TOTAL-OPERATING-EXPENSES> 4,007,963
<OPERATING-INCOME-LOSS> 1,112,850
<OTHER-INCOME-NET> 882
<INCOME-BEFORE-INTEREST-EXPEN> 1,113,732
<TOTAL-INTEREST-EXPENSE> 408,464
<NET-INCOME> 706,663
9,441
<EARNINGS-AVAILABLE-FOR-COMM> 697,222
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 363,243
<CASH-FLOW-OPERATIONS> 1,545,508
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 15(b)
Texas Utilities Electric Company:
We have made a review, in accordance with standards established by the
American Institute of Certified Public Accountants, of the unaudited condensed
consolidated interim financial information of Texas Utilities Electric Company
and subsidiaries ("TU Electric") for the periods ended September 30, 1998 and
1997, as indicated in our report dated November 12, 1998; because we did not
perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in TU
Electric's Quarterly Report on Form 10-Q for the quarter ended September 30,
1998, is incorporated by reference in Registration Statements No. 33-69554 and
333-42985 on Form S-3; and Registration Statement No. 33-83976 on Post
Effective Amendment No. 1 to Form S-3, of Texas Utilities Electric Company.
We are also aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
November 12,1998
Exhibit 4(a)
-----------------------------------------------
TEXAS UTILITIES COMPANY
TO
THE BANK OF NEW YORK
Trustee
---------
INDENTURE
(FOR UNSECURED DEBT SECURITIES SERIES F)
DATED AS OF OCTOBER 1, 1998
--------------------------------------------
<PAGE>
i
TABLE OF CONTENTS
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITAL OF THE COMPANY
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101. Definitions . . . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . . . 2
Authorized Officer . . . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . . . . 3
Company Request or Company Order . . . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . . . 3
Discount Security . . . . . . . . . . . . . . . . . 3
Dollar or $ . . . . . . . . . . . . . . . . . . . . 3
Eligible Obligations . . . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . . . . . . . 3
Governmental Authority . . . . . . . . . . . . . . 3
Government Obligations . . . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . . . 4
Officer's Certificate . . . . . . . . . . . . . . . 4
Opinion of Counsel . . . . . . . . . . . . . . . . 4
Outstanding . . . . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . . . 6
Periodic Offering . . . . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . . . 6
Redemption Date . . . . . . . . . . . . . . . . . . 6
Redemption Price . . . . . . . . . . . . . . . . . 6
Regular Record Date . . . . . . . . . . . . . . . . 6
Required Currency . . . . . . . . . . . . . . . . . 6
Note: This table of contents shall not, for any purpose, be
deemed to be part of the Indenture.
<PAGE>
ii
Responsible Officer . . . . . . . . . . . . . . . . 6
Securities . . . . . . . . . . . . . . . . . . . . 6
Security Register and Security Registrar . . . . . 6
Special Record Date . . . . . . . . . . . . . . . . 7
Stated Interest Rate . . . . . . . . . . . . . . . 7
Stated Maturity . . . . . . . . . . . . . . . . . . 7
Subsidiary . . . . . . . . . . . . . . . . . . . . 7
Tranche . . . . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act . . . . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . . . . 7
United States . . . . . . . . . . . . . . . . . . . 7
SECTION 102. Compliance Certificates and Opinions . . . 7
SECTION 103. Form of Documents Delivered to Trustee . . 8
SECTION 104. Acts of Holders . . . . . . . . . . . . . 9
SECTION 105. Notices, etc. to Trustee and Company . . . 11
SECTION 106. Notice to Holders of Securities; Waiver . 12
SECTION 107. Conflict with Trust Indenture Act . . . . 12
SECTION 108. Effect of Headings and Table of Contents . 12
SECTION 109. Successors and Assigns . . . . . . . . . . 12
SECTION 110. Separability Clause . . . . . . . . . . . 12
SECTION 111. Benefits of Indenture . . . . . . . . . . 13
SECTION 112. Governing Law . . . . . . . . . . . . . . 13
SECTION 113. Legal Holidays . . . . . . . . . . . . . . 13
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . . . 13
SECTION 202. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . . . . 14
ARTICLE THREE
The Securities
SECTION 301. Amount Unlimited; Issuable in Series . . . 14
SECTION 302. Denominations . . . . . . . . . . . . . . 18
SECTION 303. Execution, Authentication, Delivery and
Dating . . . . . . . . . . . . . . . . . . 18
SECTION 304. Temporary Securities . . . . . . . . . . . 21
SECTION 305. Registration, Registration of Transfer and
Exchange . . . . . . . . . . . . . . . . . 22
SECTION 306. Mutilated, Destroyed, Lost and Stolen
Securities . . . . . . . . . . . . . . . . 23
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . . . 24
SECTION 308. Persons Deemed Owners . . . . . . . . . . 25
SECTION 309. Cancellation by Security Registrar . . . . 25
SECTION 310. Computation of Interest . . . . . . . . . 26
SECTION 311. Payment to Be in Proper Currency . . . . . 26
SECTION 312. Extension of Interest Payment . . . . . . 26
<PAGE>
iii
ARTICLE FOUR
Redemption of Securities
SECTION 401. Applicability of Article . . . . . . . . . 26
SECTION 402. Election to Redeem; Notice to Trustee . . 27
SECTION 403. Selection of Securities to Be Redeemed . . 27
SECTION 404. Notice of Redemption . . . . . . . . . . . 28
SECTION 405. Securities Payable on Redemption Date . . 29
SECTION 406. Securities Redeemed in Part . . . . . . . 29
ARTICLE FIVE
Sinking Funds
SECTION 501. Applicability of Article . . . . . . . . . 30
SECTION 502. Satisfaction of Sinking Fund Payments
with Securities . . . . . . . . . . . . . 30
SECTION 503. Redemption of Securities for Sinking
Fund . . . . . . . . . . . . . . . . . . . 30
ARTICLE SIX
Covenants
SECTION 601. Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . . . . 31
SECTION 602. Maintenance of Office or Agency . . . . . 31
SECTION 603. Money for Securities Payments to Be Held
in Trust . . . . . . . . . . . . . . . . . 32
SECTION 604. Corporate Existence . . . . . . . . . . . 33
SECTION 605. Maintenance of Properties . . . . . . . . 34
SECTION 606. Annual Officer's Certificate as to
Compliance. . . . . . . . . . . . . . . . 34
SECTION 607. Waiver of Certain Covenants . . . . . . . 34
SECTION 608. Limitation on Liens . . . . . . . . . . . 35
ARTICLE SEVEN
Satisfaction and Discharge
SECTION 701. Satisfaction and Discharge of Securities . 37
SECTION 702. Satisfaction and Discharge of Indenture . 40
SECTION 703. Application of Trust Money . . . . . . . . 41
ARTICLE EIGHT
Events of Default; Remedies
SECTION 801. Events of Default . . . . . . . . . . . . 41
SECTION 802. Acceleration of Maturity; Rescission and
Annulment . . . . . . . . . . . . . . . . 43
SECTION 803. Collection of Indebtedness and Suits for
Enforcement by Trustee . . . . . . . . . . 44
SECTION 804. Trustee May File Proofs of Claim . . . . . 44
<PAGE>
iv
SECTION 805. Trustee May Enforce Claims Without
Possession of Securities . . . . . . . . . 45
SECTION 806. Application of Money Collected . . . . . . 45
SECTION 807. Limitation on Suits . . . . . . . . . . . 46
SECTION 808. Unconditional Right of Holders to Receive
Principal, Premium and Interest . . . . . 47
SECTION 809. Restoration of Rights and Remedies . . . . 47
SECTION 810. Rights and Remedies Cumulative . . . . . . 47
SECTION 811. Delay or Omission Not Waiver . . . . . . . 47
SECTION 812. Control by Holders of Securities . . . . . 47
SECTION 813. Waiver of Past Defaults . . . . . . . . . 48
SECTION 814. Undertaking for Costs . . . . . . . . . . 48
SECTION 815. Waiver of Stay or Extension Laws . . . . . 49
ARTICLE NINE
The Trustee
SECTION 901. Certain Duties and Responsibilities . . . 49
SECTION 902. Notice of Defaults . . . . . . . . . . . . 50
SECTION 903. Certain Rights of Trustee . . . . . . . . 50
SECTION 904. Not Responsible for Recitals or Issuance
of Securities . . . . . . . . . . . . . . 51
SECTION 905. May Hold Securities . . . . . . . . . . . 51
SECTION 906. Money Held in Trust . . . . . . . . . . . 51
SECTION 907. Compensation and Reimbursement . . . . . . 52
SECTION 908. Disqualification; Conflicting Interests. . 52
SECTION 909. Corporate Trustee Required; Eligibility . 53
SECTION 910. Resignation and Removal; Appointment of
Successor . . . . . . . . . . . . . . . . 53
SECTION 911. Acceptance of Appointment by Successor . . 55
SECTION 912. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . . . . 57
SECTION 913. Preferential Collection of Claims Against
Company . . . . . . . . . . . . . . . . . 57
SECTION 914. Co-trustees and Separate Trustees. . . . . 57
SECTION 915. Appointment of Authenticating Agent . . . 59
ARTICLE TEN
Holders' Lists and Reports by Trustee and Company
SECTION 1001. Lists of Holders . . . . . . . . . . . . 61
SECTION 1002. Reports by Trustee and Company . . . . . 61
ARTICLE ELEVEN
Consolidation, Merger, Conveyance or Other Transfer
SECTION 1101. Company May Consolidate, etc., Only on
Certain Terms . . . . . . . . . . . . . . 61
SECTION 1102. Successor Corporation Substituted . . . . 62
<PAGE>
v
ARTICLE TWELVE
Supplemental Indentures
SECTION 1201. Supplemental Indentures Without Consent
of Holders . . . . . . . . . . . . . . . 62
SECTION 1202. Supplemental Indentures With Consent of
Holders . . . . . . . . . . . . . . . . . 64
SECTION 1203. Execution of Supplemental Indentures . . 66
SECTION 1204. Effect of Supplemental Indentures . . . . 66
SECTION 1205. Conformity With Trust Indenture Act . . . 66
SECTION 1206. Reference in Securities to Supplemental
Indentures . . . . . . . . . . . . . . . 66
SECTION 1207. Modification Without Supplemental
Indenture . . . . . . . . . . . . . . . . 66
ARTICLE THIRTEEN
Meetings of Holders; Action Without Meeting
SECTION 1301. Purposes for Which Meetings May Be
Called . . . . . . . . . . . . . . . . . 67
SECTION 1302. Call, Notice and Place of Meetings . . . 67
SECTION 1303. Persons Entitled to Vote at Meetings . . 68
SECTION 1304. Quorum; Action . . . . . . . . . . . . . 68
SECTION 1305. Attendance at Meetings; Determination of
Voting Rights; Conduct and Adjournment
of Meetings . . . . . . . . . . . . . . . 69
SECTION 1306. Counting Votes and Recording Action of
Meetings . . . . . . . . . . . . . . . . 70
SECTION 1307. Action Without Meeting . . . . . . . . . 70
ARTICLE FOURTEEN
Immunity of Incorporators, Shareholders, Officers and Directors
SECTION 1401. Liability Solely Corporate . . . . . . . 70
ARTICLE FIFTEEN
Series F Notes
SECTION 1501. Designation of Series F Notes . . . . . 71
Testimonium . . . . . . . . . . . . . . . . . . . . . . . . 72
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 73
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . 74
<PAGE>
TEXAS UTILITIES COMPANY
Reconciliation and tie between Trust Indenture Act of 1939
and Indenture, dated as of October 1, 1998
Trust Indenture Act Section Indenture Section
310 (a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 909
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 909
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . 914
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 908
910
Section 311
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 913
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 913
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 913
Section 312
(a) . . . . . . . . . . . . . . . . . . . . . . . . . 1001
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1001
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 1001
Section 313
(a) . . . . . . . . . . . . . . . . . . . . . . . . . 1002
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1002
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 1002
Section 314
(a) . . . . . . . . . . . . . . . . . . . . . . . . . 1002
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . 606
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
903
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 902
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 814
Section 316
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 812
813
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 802
812
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 813
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 808
Section 317
(a)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 803
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 804
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 603
Section 318
(a) . . . . . . . . . . . . . . . . . . . . . . . . . . 107
<PAGE>
INDENTURE, dated as of October 1, 1998, between TEXAS
UTILITIES COMPANY, a corporation duly organized and existing
under the laws of the State of Texas (herein called the
"Company"), having its principal office at Energy Plaza, 1601
Bryan Street, Dallas, Texas 75201, 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 debentures, notes or other evidences of
indebtedness (herein called the "Securities"), in an unlimited
aggregate principal amount to be issued in one or more series as
contemplated herein; 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.
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
<PAGE>
-2-
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 govern-
mental 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 de-
fined in that Article.
"ACT", when used with respect to any Holder of a
Security, has the meaning specified in Section 104.
"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.
"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, the
President, any Vice President, the Treasurer, any Assistant
Treasurer, or any other officer or agent of the Company duly
authorized by the Board of Directors to act in respect of matters
relating to this Indenture.
"BOARD OF DIRECTORS" means either the board of directors
of the Company or any committee thereof duly authorized to act in
respect of matters relating to this Indenture.
"BOARD RESOLUTION" means a copy of a resolution certified
by the Secretary or an Assistant Secretary of the Company to have
been duly adopted by the Board of Directors and to be in full
force and effect on the date of such certification, and delivered
to the Trustee.
"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.
<PAGE>
-3-
"COMMISSION" means the Securities and Exchange Commis-
sion, 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, per-
forming 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 re-
quest 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 Indenture is located at 101
Barclay Street, New York, New York 10286.
"CORPORATION" means a corporation, association, company,
limited liability company, 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 the
United States or of any State or Territory thereof or of the
District of Columbia 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.
<PAGE>
-4-
"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 in-
struments which evidence a direct ownership interest in obli-
gations 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.
"HOLDER" means a Person in whose name a Security is registered
in the Security Register.
"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.
"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 and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who
may be counsel for the Company, 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:
<PAGE>
-5-
(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 Out-
standing, 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; and
(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;
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.
<PAGE>
-6-
"PAYING AGENT" means any Person, including the Company,
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.
"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, partnership, 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, 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 officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"SECURITIES" has the meaning stated in the first recital of
this Indenture and more particularly means any securities authen-
ticated and delivered under this Indenture.
"SECURITY REGISTER" and "SECURITY REGISTRAR" have the
respective meanings specified in Section 305.
<PAGE>
-7-
"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).
"SUBSIDIARY" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries,
or by the Company and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"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 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 to the Trustee to
take any action under any provision of this Indenture, the
Company shall, 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
<PAGE>
-8-
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 cer-
tificate 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.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer 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.
<PAGE>
-9-
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.
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 and the Company, 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.
<PAGE>
-10-
(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, no-
tice, 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 or the Company 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 authenticated
and delivered by the Trustee in exchange for Outstanding
Securities of such series or Tranche.
(g) If the Company 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 the
Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other 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
<PAGE>
-11-
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 AND COMPANY.
Any request, demand, authorization, direction, notice,
consent, election, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with, the Trustee by any Holder or by the
Company, or the Company by the Trustee or by any Holder, shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and delivered personally to an
officer or other responsible employee of the addressee, 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, or transmitted by certified or registered mail,
charges prepaid, to the applicable address set opposite such
party's name below or to such other address as either party
hereto may from time to time designate:
If to the Trustee, to:
The Bank of New York
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:
Texas Utilities Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Treasurer
Telephone: (214) 812-4646
Telecopy: (214) 812-3366
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 transmission, and if transmitted by certified or
registered mail, on the date of receipt.
<PAGE>
-12-
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 serv-
ice or by reason of any other cause it shall be impracticable to
give such notice to Holders by mail, 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.
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 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
shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby.
<PAGE>
-13-
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT THE LAW OF ANY OTHER JURISDICTION
SHALL BE MANDATORILY APPLICABLE.
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.
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 pursuant to such supplemental indenture or Board
Resolution, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such 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 officers executing such Securities, as
evidenced by their execution of the Securities. If the form or
forms of Securities of any series are established in a Board
Resolution or in an Officer's Certificate pursuant to a Board
<PAGE>
-14-
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 Sections
301 or 1201(g), the Securities of each series shall be issuable
in registered form without coupons. The definitive Securities
shall be produced in such manner as shall be determined by the
officers executing such Securities, 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 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, or in an Officer's Certificate pursuant
to a supplemental indenture or a Board Resolution:
(a) the title of the Securities of such series (which
shall distinguish the Securities of such series from
Securities of all other series);
<PAGE>
-15-
(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
<PAGE>
-16-
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 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, 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 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 $1,000 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;
<PAGE>
-17-
(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 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;
(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, assurance or guarantee for
the Securities of such series;
<PAGE>
-18-
(w) the non-applicability of Section 608 to the
Securities of such Series or any exceptions or modifications
of Section 608 with respect to the Securities of such Series;
(x) 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; and
(y) any other terms of the Securities of such series, or
any Tranche thereof, not inconsistent with the provisions of
this Indenture.
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
the clause (b) of Section 303.
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 $1,000 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 and may have the corporate seal of the Company
affixed thereto or reproduced thereon attested by any other
Authorized Officer 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
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.
<PAGE>
-19-
The Trustee shall authenticate and deliver Securities of
a series, 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 such series, 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) the Securities of such series, executed on behalf of
the Company by an Authorized Officer;
(d) an Opinion of Counsel to the effect that:
(i) the form or forms of such Securities have been duly
authorized by the Company and have been established in
conformity with the provisions of this Indenture;
(ii) the terms of such Securities have been duly
authorized by the Company and have been established in
conformity with the provisions of this Indenture; and
(iii) such Securities, when authenticated and delivered
by the Trustee and issued and delivered by the Company 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, 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);
<PAGE>
-20-
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 (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 shall have been
established pursuant to a Company 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, 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 will have
been established in conformity with the provisions of this
Indenture; and
(y) such Securities, when 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 and issued and delivered by the Company in
the manner and subject to any conditions specified in such
Opinion of Counsel, will have been duly issued under this In-
denture and will constitute valid and legally binding obliga-
tions of the Company, 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 Peri-
odic Offering, the Trustee may conclusively rely, as to the
authorization by the Company of any of such Securities, the form,
terms thereof and the legality, validity, binding effect and en-
forceability 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 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 subject to a Periodic Offering, the Trustee shall be
entitled to assume that the Company's instructions to
authenticate and deliver such Securities do not violate any
applicable law or any applicable rule, regulation or order of any
Governmental Authority having jurisdiction over the Company.
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
<PAGE>
-21-
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 shall be dated the date of its authentication.
Unless otherwise specified as contemplated by Section 301
with respect to any series of Securities, no Security shall be
entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form
provided for herein executed by the Trustee or an Authenticating
Agent by manual signature, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture. Notwithstanding
the foregoing, if any Security shall have been authenticated and
delivered hereunder 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 Trustee 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 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
Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the defi-
nitive Securities in lieu of which they are issued, with such
appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities;
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 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.
<PAGE>
-22-
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.
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 Securities of such series, or any Tranche
thereof, 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 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 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.
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 which the Holder making the exchange is
entitled to receive.
All Securities delivered upon any registration of
transfer or exchange of Securities shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for registration
of transfer or for exchange shall (if so required by the Company,
the Trustee or the Security Registrar) be duly endorsed or shall
be accompanied by a written instrument of transfer in form sat-
<PAGE>
-23-
isfactory to the Company, 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.
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 and bearing a
number not contemporaneously outstanding.
If there shall be delivered to the Company and the Trus-
tee (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 either of them harmless, then,
in the absence of notice to the Company 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 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 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 shall
<PAGE>
-24-
constitute an original additional contractual obligation of the
Company, whether or not the destroyed, lost or stolen Security
shall be at any time enforceable by anyone 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.
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, at its election in each case, as provided in clause (a)
or (b) below:
(a) The Company may elect to make payment of any
Defaulted Interest to the Persons in whose names the Secu-
rities 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 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 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 of
such Special Record Date and, in the name and at the expense
of the Company, 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 pro-
posed 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
<PAGE>
-25-
Securities of such series (or their respective Predecessor
Securities) are registered at the close of business on such
Special Record Date.
(b) The Company 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 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 Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such
Security is registered 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 neither the Company, the
Trustee nor any agent of the Company 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 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 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 a Company Order delivered to the Security
Registrar and the Trustee, and 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.
<PAGE>
-26-
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 other than Dollars
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 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, the Company 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.
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
<PAGE>
-27-
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. 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 shall furnish the Trustee with an Offi-
cer'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.
<PAGE>
-28-
SECTION 404. NOTICE OF REDEMPTION.
Notice of redemption shall be given in the manner pro-
vided 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.
<PAGE>
-29-
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
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 sat-
isfied, 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, 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, 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 or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), 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.
<PAGE>
-30-
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;
<PAGE>
-31-
(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 man-
datory 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, if
any, and interest, 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 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
in respect of such Securities and this Indenture may be served.
The Company 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
shall fail to maintain any such required office or agency in
<PAGE>
-32-
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 the Company hereby appoints the
Trustee as its agent for all such purposes in any such event.
The Company 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 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 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, in which event the Company 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 and premium, if any, and interest, 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 and premium or interest 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, if any, or
interest, 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 and
premium, if any, and interest, if any, on such Securities,
deposit with such Paying Agents sums sufficient (without
duplication) to pay the principal and premium or interest so
becoming due, such sums to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, 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 to the Trustee an
<PAGE>
-33-
instrument in which such Paying Agent shall agree with the
Trustee, 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 and premium, if any, or interest, 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, if any, or interest,
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, if any, or interest, if any, on any
Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and
payable shall be paid to the Company on Company Request, or, if
then held by the Company, shall be discharged from such trust;
and, 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.
<PAGE>
-34-
SECTION 604. CORPORATE EXISTENCE.
Subject to the rights of the Company under Article
Eleven, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its
corporate existence.
SECTION 605. MAINTENANCE OF PROPERTIES.
The Company shall cause (or, with respect to property
owned in common with others, make reasonable effort to cause) all
its properties used or useful in the conduct of its business to
be maintained and kept in good condition, repair and working
order and shall cause (or, with respect to property owned in
common with others, make reasonable effort to cause) to be made
all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as, in the judgment of the Company, may
be necessary so that the business carried on in connection
therewith may be properly conducted; provided, however, that
nothing in this Section shall prevent the Company from
discontinuing, or causing the discontinuance of, the operation
and maintenance of any of its properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of
its business.
SECTION 606. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
Not later than June 1 in each year, commencing June 1,
1999, the Company 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 the Company'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.
SECTION 607. WAIVER OF CERTAIN COVENANTS.
The Company 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, 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 604, 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 duties of the Trustee in respect of any such
<PAGE>
-35-
term, provision or condition shall remain in full force and
effect.
SECTION 608. LIMITATION ON LIENS.
(a) Except as otherwise specified as contemplated by
Section 301 for Securities of any series, so long as any
Securities of any series are Outstanding, the Company will not
pledge, mortgage, hypothecate or grant a security interest in, or
permit any mortgage, pledge, security interest or other lien
upon, any capital stock of any Subsidiary now or hereafter owned
by the Company, to secure any Indebtedness (hereinafter defined)
without making effective provision whereby the Outstanding
Securities shall (so long as such other Indebtedness shall be so
secured) be equally and ratably secured with any and all such
other Indebtedness and any other indebtedness similarly entitled
to be equally and ratably secured; provided, however, that this
restriction shall not apply to nor prevent the creation or
existence of:
(1) any mortgage, pledge, security interest, lien or
encumbrance upon any such capital stock created at the time of
the acquisition of such capital stock by the Company or within
one year after such time to secure all or a portion of the
purchase price for such capital stock;
(2) any mortgage, pledge, security interest, lien or
encumbrance upon any such capital stock existing thereon at
the time of the acquisition thereof by the Company (whether or
not the obligations secured thereby are assumed by the
Company); or
(3) any extension, renewal of refunding of any mortgage,
pledge, security interest, lien or encumbrance permitted by
Subsection (1) or (2) above on capital stock of any Subsidiary
theretofore subject thereto (or substantially the same capital
stock) or any portion thereof.
(4) any judgment, levy, execution, attachment or other
similar lien arising in connection with court proceedings,
provided that either
(i) the execution or enforcement of each such lien is
effectively stayed within 30 days after entry of the
corresponding judgment (or the corresponding judgment has been
discharged within such 30 day period) and the claims secured
thereby are being contested in good faith by appropriate
proceedings timely commenced and diligently prosecuted;
(ii) the payment of each such lien is covered in full by
insurance and the insurance company has not denied or
contested coverage thereof; or
(iii) so long as each such lien is adequately bonded,
any appropriate legal proceedings that may have been duly
<PAGE>
-36-
initiated for the review of the corresponding judgment, decree
or order shall not have been fully terminated or the period
within which such proceedings may be initiated shall not have
expired.
For purposes of this Section 608, "Indebtedness" means
all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, created or assumed by the
Company for the repayment of money borrowed. All indebtedness
for money borrowed secured by a lien upon property owned by the
Company and upon which indebtedness for money borrowed the
Company customarily pays interest, although the Company has not
assumed or become liable for the payment of such indebtedness for
money borrowed, shall for purposes of this Section 608 be deemed
to be Indebtedness of the Company. All indebtedness of others
for money borrowed which is guaranteed as to payment of principal
by the Company or in effect guaranteed by the Company through a
contingent agreement to purchase such indebtedness for money
borrowed shall for purposes of this Section 608 be deemed to be
Indebtedness of the Company, but no other contingent obligation
of the Company in respect of indebtedness for money borrowed or
other obligations incurred by others shall for purposes of this
Section 608 be deemed to be Indebtedness of the Company.
In case the Company shall propose to pledge, mortgage,
hypothecate or grant a security interest in any capital stock of
any Subsidiary owned by the Company to secure any Indebtedness,
other than as permitted by Subsections (a)(1) to (a)(3),
inclusive, of this Section, the Company will prior thereto give
written notice thereof to the Trustee, and the Company will prior
to or simultaneously with such pledge, mortgage, hypothecation or
grant of security interest, by supplemental indenture executed to
the Trustee (or to the extent legally necessary to another
trustee or an additional or separate trustee), in form
satisfactory to the Trustee, effectively secure (for so long as
such other Indebtedness shall be so secured) all the Securities
equally and ratably with such Indebtedness and with any other
indebtedness for money borrowed similarly entitled to be equally
and ratably secured.
(b) Except as otherwise specified as contemplated by
Section 301 for Securities of any series, the provisions of
Subsection (a) of this Section 608 shall not apply in the event
that the Company or any Subsidiary shall pledge, mortgage,
hypothecate or grant a security interest in or other lien upon
any capital stock of any Subsidiary now or hereafter owned by the
Company to secure any Indebtedness which would otherwise be
subject to the foregoing restriction up to an aggregate amount
which, together with all other Indebtedness (other than
mortgages, pledges, security interests, liens or encumbrances
permitted by Subsection (a) of this Section 608) which would
otherwise be subject to the foregoing restriction, does not at
the time exceed 5% of Consolidated Capitalization.
For purposes of this Section 608:
(1) The term "Consolidated Capitalization" means the sum
obtained by adding (i) Consolidated Shareholders' Equity, (ii)
Consolidated Indebtedness for money borrowed (exclusive of any
thereof which is due and payable within one year of the date
<PAGE>
-37-
such sum is determined) and, without duplication, (iii) any
preference or preferred stock of the Company or any
Consolidated Subsidiary which is subject to mandatory
redemption or sinking fund provisions.
(2) The term "Consolidated Shareholders' Equity" means
the total Assets of the Company and its Consolidated
Subsidiaries less all liabilities of the Company and its
Consolidated Subsidiaries. As used in this definition,
"liabilities" means all obligations which would, in accordance
with generally accepted accounting principles, be classified
on a balance sheet as liabilities, including without
limitation, (i) indebtedness secured by property of the
Company or any of its Consolidated Subsidiaries whether or not
the Company or such Consolidated Subsidiary is liable for the
payment thereof unless, in the case that the Company or such
Consolidated Subsidiary is not so liable, such property has
not been included among the Assets of the Company or such
Consolidated Subsidiary on such balance sheet, (ii) deferred
liabilities, (iii) indebtedness of the Company or any of its
Consolidated Subsidiaries that is expressly subordinated in
right and priority of payment to other liabilities of the
Company or such Consolidated Subsidiary. As used in this
definition, "liabilities" includes preference or preferred
stock of the Company or any Consolidated Subsidiary only to
the extent of any such preference or preferred stock that is
subject to mandatory redemption or sinking fund provisions.
(3) The term "Consolidated Subsidiary" means at any date
any Subsidiary the financial statements of which under
generally accepted accounting principles would be consolidated
with those of the Company in its consolidated financial
statements as of such date.
(4) The "Assets" of any Person means the whole or any
part of its business, property, assets, cash and receivables.
(5) The term "Consolidated Indebtedness" means total
indebtedness as shown on the consolidated balance sheet of the
Company and its Consolidated Subsidiaries.
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
the Company in respect thereof shall be deemed to have been
<PAGE>
-38-
satisfied and discharged, if there shall have been irrevocably
deposited with the Trustee or any Paying Agent (other than the
Company), in trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the Maturity
of such Securities or portions thereof, 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,
to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Securities or
portions thereof on or prior to Maturity; provided, however, that
in the case of the provision for payment or redemption of less
than all the Securities of any series 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
<PAGE>
-39-
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, 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 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.
<PAGE>
-40-
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 Federal or State bankruptcy, insolvency or other
similar law, such Security shall thereupon be deemed
retroactively not to have been paid and any satisfaction and
discharge of the Company's indebtedness in respect thereof shall
retroactively be deemed not to have been effected, and such
Security shall be deemed to remain Outstanding and (b) any
satisfaction and discharge of the Company's indebtedness in
respect of any Security shall be subject to the provisions of the
last paragraph of Section 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 has paid or caused to be paid all other
sums payable hereunder by the Company;
provided, however, that if, in accordance with the last paragraph
of Section 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 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 pro-
vided 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.
<PAGE>
-41-
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, if any, and interest, if
any, on the Securities or portions of principal amount thereof in
respect of which such deposit was made, all subject, however, to
the provisions of Section 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 inter-
est 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, if any, and interest, if any, then due on such
Securities shall be paid over to the Company free and clear of
any trust, lien or pledge under this Indenture except the lien
provided by Section 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 pay-
able; 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; or
<PAGE>
-42-
(c) failure to perform or breach of any covenant or
warranty of the Company 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 by the Trustee, or to the Company and the
Trustee by the Holders of at least 33% 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 an
extension of such period if corrective action is initiated by
the Company within such period and is being diligently
pursued; or
(d) the entry by a court having jurisdiction in the
premises of (1) a decree or order for relief in respect of the
Company in an involuntary case or proceeding under any appli-
cable Federal or State bankruptcy, insolvency, reorganization
or other similar law or (2) a decree or order adjudging the
Company a bankrupt or insolvent, or approving as properly
filed a petition by one or more Persons other than the Company
seeking reorganization, arrangement, adjustment or composition
of or in respect of the Company under any applicable Federal
or State law, or appointing a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official for
the Company 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
(e) the commencement by the Company of a voluntary case
or proceeding under any applicable Federal or State bank-
ruptcy, insolvency, reorganization or other similar law or of
any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by it to the entry of a decree or
order for relief in respect of the Company in a case or
proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or
proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any
applicable Federal or State law, or the consent by it to the
filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee,
trustee, sequestrator or similar official of the Company or of
any substantial part of its property, or the making by it of
an assignment for the benefit of creditors, or the admission
by it in writing of its inability to pay its debts generally
as they become due, or the authorization of such action by the
Board of Directors; or
<PAGE>
-43-
(f) any other Event of Default specified 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 33% 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. 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) or (e) shall have
occurred and be continuing, either the Trustee or the Holders of
not less than 33% 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. 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 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 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 in such Securities;
(3) to the extent that payment of such interest is
lawful, interest upon overdue interest, if any, at the rate or
rates prescribed therefor in such Securities;
(4) all amounts due to the Trustee under Section 907;
and
<PAGE>
-44-
(b) any other Event 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
shall, upon demand of the Trustee, pay to it, for the benefit of
the Holders of the Securities of the series with respect to which
such Event of Default shall have occurred, the whole amount then
due and payable on such Securities for principal and premium, if
any, and interest, if any, and, to the extent permitted by law,
interest on any overdue principal and interest, at the rate or
rates prescribed therefor in such Securities, and, in addition
thereto, such further amount as shall be sufficient to cover any
amounts due to the Trustee under Section 907.
If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of
an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of any
series shall have occurred and be continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the
rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company
or any other obligor upon the Securities or the property of the
Company or of such other obligor or their creditors, the Trustee
(irrespective of whether the principal of the Securities shall
then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made
<PAGE>
-45-
any demand on the Company for the payment of overdue principal or
interest) shall be entitled and empowered, by intervention in
such proceeding or otherwise,
(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 reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any
Holder thereof or to authorize the Trustee to vote in respect of
the claim of any Holder in any such proceeding.
SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders in respect of which such judgment has been recovered.
SECTION 806. APPLICATION OF MONEY COLLECTED.
Any money collected by the Trustee pursuant to this Arti-
cle 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;
<PAGE>
-46-
SECOND: To the payment of the amounts then due and un-
paid 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 proceed-
ing, 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.
<PAGE>
-47-
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, on such Security on the Stated Maturity or
Maturities expressed in such Security (or, in the case of redemp-
tion, 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, and 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
<PAGE>
-48-
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, if
any, or interest, 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 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 reason-
able attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or
defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Company, to
any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than
10% in 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
<PAGE>
-49-
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.
The Company covenants (to the extent that it may lawfully
do so) that it will not at any time insist upon, or plead, or in
any manner whatsoever claim or take the benefit or advantage of,
any stay or extension law wherever enacted, now or at any time
hereafter in force, which may affect the covenants or the
performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE 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.
(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.
<PAGE>
-50-
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 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,
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 mentioned
herein shall be sufficiently evidenced by a Company Request or
Company Order, or as otherwise expressly provided herein, and
any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Trustee (unless other evidence be herein
specifically prescribed) may, in the absence of bad faith on
its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at
the request or direction of any 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,
<PAGE>
-51-
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, 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, as the case may be, 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 of the default or Event of
Default, as the case may be, or (2) written notice of such
default or Event of Default, as the case may be, shall have
been given to the Trustee by the Company, 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 (ex-
cept the Trustee's certificates of authentication) shall be taken
as the statements of the Company, and neither the Trustee nor any
Authenticating Agent assumes responsibility for their correct-
ness. The Trustee makes no representations as to the validity or
sufficiency of this Indenture or of the Securities. Neither the
Trustee nor any Authenticating Agent shall be accountable for the
use or application by the Company of Securities or the proceeds
thereof.
SECTION 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.
<PAGE>
-52-
SECTION 907. COMPENSATION AND REIMBURSEMENT.
The Company shall
(a) 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,
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, wilful
misconduct or bad faith; and
(c) 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, wilful misconduct or bad
faith.
As security for the performance of the obligations of the
Company under this Section, the Trustee shall have a lien prior
to the Securities upon all property and funds held or collected
by the Trustee as such 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,
wilful 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 Federal or State 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
<PAGE>
-53-
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 the Securities of any
series, 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 any securities of any series issued under
the Indenture (For Unsecured Debt Securities Series A) dated as
of October 1, 1997 of the Company to The Bank of New York, as
trustee, the Indenture (For Unsecured Debt Securities Series B)
dated as of October 1, 1997 of the Company to The Bank of New
York, as trustee, the Indenture (For Unsecured Debt Securities
Series C), dated as of January 1, 1998 of the Company to The Bank
of New York, as trustee, the Purchase Contract Agreement dated as
of July 1, 1998 of the Company to The Bank of New York, as agent,
attorney-in-fact and trustee, the Indenture (For Unsecured Debt
Securities Series D and Series E), dated as of July 1, 1998 of
the Company to The Bank of New York, as trustee, or the Indenture
(For Unsecured Debt Securities Series G), dated as of October 1,
1998 of the Company to The Bank of New York, as trustee.
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 or State authority, or
(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
<PAGE>
-54-
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. 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 with respect
to the Securities of any series by Act of the Holders of a
majority in principal amount of the Outstanding Securities of
such series delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 908
after written request therefor by the Company 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 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 by a Board Resolution
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, by a Board
Resolution, shall promptly appoint a successor Trustee or
Trustees with respect to the Securities of that or those
series (it being understood that any such successor Trustee
may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only
one Trustee with respect to the Securities of any particular
series) and shall comply with the applicable requirements of
Section 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
<PAGE>
-55-
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 succes-
sor 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. If
no successor Trustee with respect to the Securities of any
series shall have been so appointed by the Company 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 shall have
delivered to the Trustee (i) a Board Resolution 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 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 and to the retiring Trustee an
instrument accepting such appointment, and thereupon the
resignation or removal of the retiring Trustee shall become
effective and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on the
request of the Company or the successor Trustee, such retiring
Trustee shall, upon payment of all sums owed to it, execute
<PAGE>
-56-
and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring
Trustee and shall duly assign, transfer and deliver to such
successor Trustee all property and money held by such retiring
Trustee hereunder.
(b) In case of the appointment hereunder of a successor
Trustee with respect to the Securities of one or more (but not
all) series, the Company, the retiring Trustee and each
successor Trustee with respect to the Securities of one or
more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall
accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Trustee all the
rights, powers, trusts and duties of the retiring Trustee with
respect to the Securities of that or those series to which the
appointment of such successor Trustee relates, (2) if the
retiring Trustee is not retiring with respect to all
Securities, shall contain such provisions as shall be deemed
necessary or desirable to confirm that all the rights, powers,
trusts and duties of the retiring Trustee with respect to the
Securities of that or those series as to which the retiring
Trustee is not retiring shall continue to be vested in the
retiring Trustee and (3) shall add to or change any of the
provisions of this Indenture as shall be necessary to provide
for or facilitate the administration of the trusts hereunder
by more than one Trustee, it being understood that nothing
herein or in such supplemental indenture shall constitute such
Trustees co-trustees of the same trust and that each such
Trustee shall be trustee of a trust or trusts hereunder
separate and apart from any trust or trusts hereunder
administered by any other such Trustee; and upon the execution
and delivery of such supplemental indenture the resignation or
removal of the retiring Trustee shall become effective to the
extent provided therein and each such successor Trustee,
without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any succes-
sor 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 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.
<PAGE>
-57-
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 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 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
<PAGE>
-58-
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
<PAGE>
-59-
(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
issued upon original issuance and upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States,
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 or State
authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of
this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may be
merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving
written notice thereof to the Trustee and to the Company. The
Trustee may at any time terminate the agency of an Authenticating
Agent by giving written notice thereof to such Authenticating
Agent and to the Company. Upon receiving such a notice of
resignation or upon such a termination, or in case at any time
such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company. 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
<PAGE>
-60-
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 ap-
plicable 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 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.
<PAGE>
-61-
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 1001. LISTS OF HOLDERS.
Semiannually, not later than June 1 and December 1 in
each year, commencing December 1, 1998, and at such other times
as the Trustee may request in writing, the Company 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 AND COMPANY.
Not later than November 1 in each year, commencing
November 1, 1998, 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 September
15, 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
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 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 MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
The Company shall not 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 is merged or the Person which acquires by
conveyance or transfer, or which leases, the properties and
assets of the Company substantially as an entirety shall be a
Person organized and validly existing under the laws of the
<PAGE>
-62-
United States, any State thereof or the District of Columbia,
and shall expressly assume, by an indenture supplemental
hereto, executed and delivered to the Trustee, in form sat-
isfactory to the Trustee, the due and punctual payment of the
principal of and premium, if any, and interest, if any, on all
Outstanding Securities and the performance of every covenant
of this Indenture on the part of the Company to be per-
formed 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 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 with or merger by
the Company into any other corporation or any conveyance, or
other transfer or lease of the properties and assets of the
Company substantially as an entirety in accordance with Section
1101, the successor corporation formed by such consolidation or
into which the Company 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 under this Indenture with the same effect as if such
successor Person had been named as the Company 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.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to the
Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities, all as
provided in Article Eleven; or
(b) to add one or more covenants of the Company 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
<PAGE>
-63-
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
(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 Inden-
ture 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 as contemplated by Sections 201 and 301; or
(g) to provide for the authentication and delivery of
bearer securities and coupons appertaining thereto
representing interest, if any, thereon and for the procedures
for the registration, exchange and replacement thereof and for
the giving of notice to, and the solicitation of the vote or
consent of, the holders thereof, and for any and all other
matters incidental thereto; or
(h) to evidence and provide for the acceptance of
appointment hereunder by a separate or successor Trustee or
co-trustee with respect to the Securities of one or more
series and to add to or change any of the provisions of this
Indenture as 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 Securi-
ties; or
(j) to change any place or places where (1) the
principal of and premium, if any, and interest, if any, on all
or any series of Securities, 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 in respect of all or any series of
Securities, or any Tranche thereof, and this Indenture may be
served; or
<PAGE>
-64-
(k) to cure any ambiguity, to correct or supplement any
provision herein which may be defective or inconsistent with
any other provision herein, or to make any other changes to
the provisions hereof or to add other provisions with respect
to matters or questions arising under this Indenture, provided
that such other changes or additions shall not adversely
affect the interests of the Holders of Securities of any
series 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 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 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 and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, this Indenture or
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
<PAGE>
-65-
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 conse-
quences, 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.
<PAGE>
-66-
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.
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 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 any such
supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series 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
<PAGE>
-67-
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 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 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, 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 and the Trustee
<PAGE>
-68-
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 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 and its 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 pre-
sented 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
<PAGE>
-69-
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 Inden-
ture, 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 by Holders as
provided in Section 1302(b), in which case the Company 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
<PAGE>
-70-
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
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
SECTION 1401. 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, or
any part thereof, or for any claim based thereon or otherwise in
respect thereof, or of the indebtedness represented thereby, or
<PAGE>
-71-
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 of any
predecessor or successor corporation (either directly or through
the Company or a predecessor or successor corporation), 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 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 any predecessor or successor corporation, either directly or
indirectly through the Company 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 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.
ARTICLE FIFTEEN
SERIES F NOTES
SECTION 1501. DESIGNATION OF SERIES F NOTES.
There is hereby created a series of Securities designated
"5.94% MAndatory Putable/remarketable Securities" (herein
sometimes referred to as "Series F Notes") and limited in
aggregate principal amount (except as contemplated in Section
301(b) hereof) to $375,000,000. The form and terms of the Series
F Notes shall be established in an Officer's Certificate pursuant
to Sections 201 and 301.
----------------------------
This instrument may be executed in any number of counter-
parts, 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>
-72-
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first
above written.
TEXAS UTILITIES COMPANY
By: /s/ Robert S. Shapard
-----------------------------
Treasurer
THE BANK OF NEW YORK, Trustee
By: /s/ W.N. Gitlin
-----------------------------
W.N. GITLIN
Vice President
Exhibit 4(b)
TEXAS UTILITIES COMPANY
OFFICER'S CERTIFICATE
Robert S. Shapard, the Treasurer of Texas Utilities Company
(the "Company"), pursuant to the authority granted in the Board
Resolutions of the Company dated February 19, February 20 and
April 13, 1998, and Sections 201, 301 and 1501 of the Indenture
defined herein, does hereby certify to The Bank of New York (the
"Trustee"), as Trustee under the Indenture of the Company (For
Unsecured Debt Securities Series F) dated as of October 1, 1998
(as amended by this Officer's Certificate, the "Indenture") that:
1. The Securities of the first series to be issued under the
Indenture shall be designated "5.94% MAndatory
Putable/remarketable Securities" (the "Series F Notes").
All capitalized terms used in this certificate which are not
defined herein shall have the meanings set forth in Exhibit
A hereto; all capitalized terms used in this certificate
which are not defined herein or in Exhibit A hereto shall
have the meanings set forth in the Indenture.
2. The Series F Notes shall be limited in aggregate principal
amount to $375,000,000 at any time Outstanding, except as
contemplated in Section 301(b) of the Indenture.
3. The Series F Notes shall mature and the principal thereof
shall be due and payable together with all accrued and
unpaid interest thereon on October 15, 2011, provided
however, that this scheduled maturity date shall be extended
by the length of the Interim Period, if any.
4. The Series F Notes shall be issued in the denominations of
$1,000 and integral multiples thereof.
5. The Series F Notes shall have such terms and provisions as
are provided in the form thereof set forth in Exhibit A
hereto and shall be issued in substantially such form.
6. The Series F Notes shall bear interest as provided in
Exhibit A.
The amount of interest payable on the Series F Notes will be
computed on the basis of a 360-day year of twelve 30-day
months, except that the interest accruing during the Interim
Period, if any, will be computed on the basis of the actual
number of days in such period over a 360-day year.
7. The principal and each installment of interest on the Series
F Notes shall be payable at, and registration and
registration of transfers and exchanges in respect of the
Series F Notes may be effected at, the office or agency of
the Company in The City of New York; provided that payment
of interest may be made at the option of the Company by
check mailed to the address of the persons entitled thereto
or by wire transfer to an account designated by the person
entitled thereto. Notices and demands to or upon the
Company in respect of the Series F Notes may be served at
the office or agency of the Company in The City of New
York. The Corporate Trust Office of the Trustee will
initially be the agency of the Company for such payment,
registration and registration of transfers and exchanges and
service of notices and demands and the Company hereby
<PAGE>
appoints the Trustee as its agent for all such purposes;
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. The Trustee will initially
be the Security Registrar and the Paying Agent for the
Series F Notes.
8. The Trustee, the Security Registrar and the Company will
have no responsibility under the Indenture for transfers of
beneficial interests in the Series F Notes.
9. Initially the Series F Notes will be issued in global form
registered in the name of Cede & Co. (as nominee for the
Depository Trust Company ("DTC"), the initial securities
depositary for the Series F Notes), and may bear such
legends as DTC may reasonably request. So long as the
Series F Notes are held solely in global form, the Regular
Record Date shall be the Business Day immediately preceding
the relevant Interest Payment Date; if the Series F Notes
are registered in the names of additional Holders, the
Company shall have the right to select a Regular Record Date
for such Series F Notes, which shall be at least one
Business Day but not more than 60 Business Days prior to the
relevant Interest Payment Date. So long as the Series F
Notes are Outstanding in global form registered in the name
of DTC or its nominee, all payments of principal and
interest will be made by the Company in immediately
available funds. In case the Company shall be required to
repurchase the Series F Notes held by DTC or its nominee,
payment will be made by the Company by book entry through
DTC by the close of business on the applicable Remarketing
Date against delivery through DTC of such Series F Notes.
10. No service charge shall be made for the registration of
transfer or exchange of the Series F Notes; 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.
11. If the Company shall make any deposit of money and/or
Eligible Obligations with respect to any Series F Notes, 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 Series F Notes, shall assume the obligation
(which shall be absolute and unconditional) 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 on such Series F Notes 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 Series F Notes, or portions
-2-
<PAGE>
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.
12. The obligations of the Company under the Series F Notes and
under the Indenture to the extent related to such series
will be subject to assignment by the Company to and
assumption by a wholly owned Subsidiary of the Company at
any time, as provided in the form of the Series F Notes set
forth in Exhibit A.
In the event that such Subsidiary assumes the obligations
under the Series F Notes, the Company will unconditionally
guarantee payment of the Series F Notes and will execute a
guarantee in form and substance satisfactory to the Trustee.
Pursuant to the guarantee, the Company will fully and
unconditionally guarantee the payment of the obligations of
such assuming Subsidiary under the Series F Notes and under
the Indenture, including, without limitation, payment, as
and when due, of the principal of, premium, if any, and
interest on, the Series F Notes. Other than the obligation
to make such payments, the Company will be released and
discharged from all of its other obligations under the
Indenture. The foregoing assignment and assumption shall be
in compliance with applicable law.
13. The undersigned has read all of the covenants and conditions
contained in the Indenture relating to the issuance of the
Series F Notes, and the definitions in the Indenture
relating thereto, in respect of which this certificate is
made.
14. The statements contained in this certificate are based upon
the familiarity of the undersigned with the Indenture, the
documents accompanying this certificate, and upon
discussions by the undersigned with officers and employees
of the Company familiar with the matters set forth herein.
15. In the opinion of the undersigned, he has made such
examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such
covenants and conditions have been complied with.
16. In the opinion 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 Series
F Notes as requested in the accompanying Company Order 1-D-1
have been complied with.
-3-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's
Certificate this 21st day of October, 1998.
/s/ Robert S. Shapard
------------------------------
Treasurer
<PAGE>
EXHIBIT A
[depository legend]
[Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for registration
of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]
[FORM OF FACE OF SERIES F NOTE]
No.
-----------
CUSIP 882848AN4
TEXAS UTILITIES COMPANY
5.94% MANDATORY PUTABLE/REMARKETABLE SECURITIES
Scheduled Maturity Date: October 15, 2011
Initial Interest Rate: 5.94%
Initial Remarketing Date: October 15, 2001
Initial Interest Payment Dates: April 15 and October 15
TEXAS UTILITIES COMPANY, a corporation duly organized
and existing under the laws of the State of Texas (herein
referred to as the "Company", which term includes any successor
Person under the Indenture), for value received, hereby promises
to pay to
or registered assigns, the principal sum of ____________________
Dollars on the Scheduled Maturity Date, which shall be extended
if there is an Interim Period (as defined below), and to pay
interest on said principal sum semi-annually on each Initial
Interest Payment Date commencing April 15, 1999, at the Initial
Interest Rate per annum, during the period from and including
October 21, 1998 to but excluding the Initial Remarketing Date.
After the Initial Remarketing Date, interest will be payable at
the rate determined by the Remarketing Dealer in accordance with
the procedures set forth on the reverse hereof, under the caption
"Tender of the Securities of this Series; Remarketing" until the
principal hereof is paid or made available for payment. The
interest on the Securities of this series accruing from the
Initial Remarketing Date (if such date is not the Interim Period
Remarketing Date (as defined below)) or from the Final Period
Remarketing Date (as defined below) (if the Initial Remarketing
Date is the Interim Period Remarketing Date), will be payable
semi-annually on each day that is a six-month anniversary of such
date (such days and the Initial Interest Payment Dates, to and
including the Initial Remarketing Date, are sometimes referred to
as the "Interest Payment Dates"). The interest accruing during
the period from and including the Initial Remarketing Date (if
such date is the Interim Period Remarketing Date) to but
excluding the Final Period Remarketing Date (the "Interim
Period"), if applicable, will be payable on the Final Period
A-1
<PAGE>
Remarketing Date. Prior to the Initial Remarketing Date,
interest on the Securities of this series will accrue from
October 21, 1998, to the first Initial Interest Payment Date, and
thereafter will accrue from the last Initial 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, as provided in such
Indenture, be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest, which
shall be the Business Day next preceding the corresponding
Interest Payment Date, except that in the case of the Interest
Payment Date relating to the Interim Period, interest will be
payable to the persons to whom the purchase price of tendered
Securities of this series is payable on the Final Period
Remarketing Date. "Business Day" means any day on which
commercial banks are open for business (including dealings in
foreign exchange and foreign currency deposits) in The City of
New York and, in the case of the determination of the Reference
Rate that is based upon U.S. Dollar Deposits in London, the City
of London. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on
such Regular Record Date and may either be paid to the Person in
whose name this Security (or one or more Predecessor Securities)
is registered at the close of business on a Special Record Date
for the payment of such Defaulted Interest to be fixed by the
Trustee, notice whereof shall be given to Holders of Securities
of this series not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on
which the Securities of this series may be listed, and upon such
notice as may be required by such exchange, all as more fully
provided in the Indenture referred to on the reverse hereof.
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 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, provided, however, that, at
the option of the Company, interest on this Security may be paid
by check mailed to the address of the person entitled thereto, as
such address shall appear on the Security Register or by wire
transfer to an account designated by the person entitled thereto.
Reference is hereby made to the further provisions of
this Security set forth on the reverse hereof, which further
provisions shall for all purposes have the same effect as if set
forth at this place.
Unless the certificate of authentication hereon has
been executed by the Trustee referred to on the reverse hereof by
manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any
purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this
instrument to be duly executed.
TEXAS UTILITIES COMPANY
By:------------------------------
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By: ------------------------------
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE OF SERIES F NOTE]
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 Debt Securities Series F), dated as of October 1,
1998 (herein, together with any amendments thereto, called the
"Indenture", which term shall have the meaning assigned to it in
such instrument), between the Company 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 October 21, 1998
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 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,
limited in aggregate principal amount to $375,000,000.
The Remarketing Dealer for Securities of this series
shall be Salomon Smith Barney Inc. or its successor appointed by
the Company.
If the Remarketing Dealer elects to remarket the
Securities of this series, except in the limited circumstances
described herein, (i) the Securities of this series will be
subject to mandatory tender to the Remarketing Dealer at 100% of
the principal amount thereof for remarketing on each Remarketing
Date, on the terms and subject to the conditions described
herein, and (ii) on and after any Remarketing Date, the
Securities of this series will bear interest at the applicable
rate determined by the Remarketing Dealer in accordance with the
procedures set forth below.
Under the circumstances described below, the Securities
of this series are subject to redemption by the Company from the
Remarketing Dealer on each Remarketing Date. See -- "Redemption"
below. If the Remarketing Dealer for any reason does not
purchase all Securities of this series on a Remarketing Date or
elects not to remarket the Securities of this series, or in
certain other limited circumstances described herein, the Company
will be required to repurchase the Securities of this series from
the Holders thereof on such Remarketing Date, at 100% of the
principal amount thereof plus accrued interest, if any. See
-- "Repurchase" below.
TENDER OF THE SECURITIES OF THIS SERIES; REMARKETING
Mandatory Tender
Provided that the Remarketing Dealer gives notice to
the Company and the Trustee on a Business Day which is not
earlier than 15 nor later than five Business Days prior to the
Initial Remarketing Date (the "Notification Date") of its
intention to purchase the Securities of this series as a whole
for remarketing, each Security of this series will be
automatically tendered, or deemed tendered, to the Remarketing
Dealer for purchase on each of (i) the Initial Remarketing Date,
and (ii) if the Initial Remarketing Date is designated as the
Interim Period Remarketing Date as described under "Remarketing
Dates", the Final Period Remarketing Date thereafter, except in
the circumstances described under "Repurchase" or "Redemption"
below. The purchase price of such Security of this series will
be equal to 100% of the principal amount thereof. See --
"Notification of Results; Settlement." Upon such tender or
deemed tender, the Remarketing Dealer may remarket the Securities
of this series for its own account at varying prices to be
determined by the Remarketing Dealer at the time of each sale.
From and after the Initial Remarketing Date (if such date is not
the Interim Period Remarketing Date) or the Final Period
Remarketing Date (if the Initial Remarketing Date is the Interim
Period Remarketing Date), the Securities of this series will bear
A-4
<PAGE>
interest at the Interest Rate to Maturity, determined as set
forth under "Determination of Applicable Interest Rate." During
the Interim Period, if any, the Securities of this series will
bear interest at the Interim Period Interest Rate, determined as
set forth under "Determination of Applicable Interest Rate." If
the Remarketing Dealer elects to remarket the Securities of this
series, the obligation of the Remarketing Dealer to purchase the
Securities of this series on the applicable Remarketing Date is
subject, among other things, to the conditions that, since the
Notification Date, no material adverse change in the business,
property or financial condition of the Company and its
subsidiaries, considered as a whole, shall have occurred and that
no Event of Default (as defined in the Indenture), or any event
which, with the giving of notice or passage of time, or both,
would constitute an Event of Default, with respect to the
Securities of this series shall have occurred and be continuing.
If for any reason the Remarketing Dealer does not purchase all
such Securities of this series on the applicable Remarketing
Date, the Company will be required to repurchase the Securities
of this series from the Holders thereof at a price equal to the
principal amount thereof plus all accrued and unpaid interest, if
any, on the Securities of this series to such Remarketing Date.
See -- "Repurchase" below.
Remarketing Dates
If the Remarketing Dealer gives notice of its intention to
purchase the Securities of this series on the Initial Remarketing
Date, then not later than 4:00 p.m., New York City time, on the
fourth Business Day prior to the Initial Remarketing Date, the
Company may notify the Remarketing Dealer, the Trustee and DTC by
telephone, confirmed in writing that it elects the Initial
Remarketing Date to be the Interim Period Remarketing Date (the
"Interim Period Remarketing Date"). The Company will be eligible
to make such notification if at such time its senior unsecured
debt is rated at least "Baa3" by Moody's Investors Service and
"BBB-" by Standard & Poor's Ratings Group or the equivalent
thereof by such rating agency at the time of such notification or
if the Remarketing Dealer waives this requirement in its sole
discretion. If the Company does not provide such notification,
the Initial Remarketing Date will be the only Remarketing Date
and the maturity date of the principal of the Securities of this
series (the "Maturity Date") will be the Scheduled Maturity Date.
If the Company provides such notification, then (i) the Final
Period Remarketing Date will be one of the 26 following one-week
anniversary dates of the Initial Remarketing Date (or if any such
day is not a Business Day, the next following Business Day)
designated by the Company not later than the fifth Business Day
prior to such one-week anniversary date (the "Final Period
Remarketing Date") except that, if the Company fails to so
designate the Final Period Remarketing Date, the Final Period
Remarketing Date will be the date that is 26 weeks after the
Initial Remarketing Date (or if such day is not a Business Day,
the next following Business Day) and (ii) the Maturity Date of
the Securities of this series will be the date that is the tenth
anniversary of the Final Period Remarketing Date (whether or not
a Business Day).
Determination of Applicable Interest Rate
From and including the Initial Remarketing Date (if such
date is not the Interim Period Remarketing Date) or the Final
Period Remarketing Date (if the Initial Remarketing Date is the
Interim Period Remarketing Date), to but excluding the Maturity
Date, the Securities of this series will bear interest at the
Interest Rate to Maturity (as defined below). During the Interim
Period, if any, the Securities of this series will bear interest
at the Interim Period Interest Rate (as defined below).
The "Interest Rate to Maturity" will be determined by
the Remarketing Dealer by 3:30 p.m., New York City time, on the
third Business Day immediately preceding the Initial Remarketing
Date (if such date is not the Interim Period Remarketing Date) or
the Final Period Remarketing Date (if the Initial Remarketing
Date is the Interim Period Remarketing Date) (the "Determination
A-5
<PAGE>
Date"), to the nearest one hundred-thousandth (0.00001) of one
percent per annum, and will be equal to the sum of 4.59% per
annum (Base Rate) plus the Applicable Spread (as defined below).
The "Applicable Spread" shall be the lowest firm
commitment bid expressed as a spread (in the form of a percentage
or in basis points) above the Base Rate, obtained by the
Remarketing Dealer on the Determination Date from the bids quoted
by five Reference Corporate Dealers (as defined below) for the
full aggregate principal amount of the Securities of this series
at the Dollar Price (as defined below), but assuming (i) that the
purchase date is the Initial Remarketing Date (if such date is
not the Interim Period Remarketing Date) or the Final Period
Remarketing Date (if the Initial Remarketing Rate is the Interim
Period Remarketing Date) with settlement on such date without
accrued interest, (ii) that the Maturity Date is the Scheduled
Maturity Date and (iii) a stated annual interest rate, payable
semi-annually, equal to the Base Rate plus the spread bid by the
applicable Reference Corporate Dealer. If fewer than five
Reference Corporate Dealers bid as described above, then the
Applicable Spread shall be the lowest of such firm commitment
bids obtained as described above; provided, however, that the
Remarketing Dealer shall obtain bids from at least three Primary
Corporate Dealers (as defined below). The Interest Rate to
Maturity determined by the Remarketing Dealer, absent manifest
error, shall be binding and conclusive upon the Holders of the
Securities of this series, the Company and the Trustee.
"Dollar Price" means, with respect to the Securities of
this series, the present value, as of the Initial Remarketing
Date, of the Remaining Scheduled Payments (as defined below)
discounted to the Initial Remarketing Date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day months) at
the Treasury Rate (as defined below), except that (i) in the case
of the Final Period Remarketing Date, the Dollar Price will be
the Adjusted Dollar Price (as defined below) and (ii) in the case
of the Initial Remarketing Date or the Final Period Remarketing
Date the Dollar Price may be any other amount agreed to in
writing by the Remarketing Dealer and the Company.
"Adjusted Dollar Price" means, with respect to the
Final Period Remarketing Date, the Dollar Price as of the Initial
Remarketing Date (determined by the Remarketing Dealer on the
third Business Day prior to the Initial Remarketing Date) plus
the product of (i) such Dollar Price less the aggregate principal
amount of the Securities of this series Outstanding as of the
Initial Remarketing Date, (ii) the weighted average per annum
Interim Period Interest Rate for the Interim Period, and (iii)
the number of days in the Interim Period divided by 360.
"Reference Corporate Dealers" means each of Salomon
Smith Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc.,
Morgan Stanley & Co. Incorporated and a fifth Reference Corporate
Dealer to be selected by the Company and their respective
successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a leading dealer of publicly
traded debt securities of the Company in The City of New York (a
"Primary Corporate Dealer"), the Remarketing Dealer shall
substitute therefor another Primary Corporate Dealer.
"Remaining Scheduled Payments" means, with respect to
the Securities of this series, the remaining scheduled payments
of the principal thereof and interest thereon calculated at the
Base Rate only, that would be due after the Initial Remarketing
Date to and including the Scheduled Maturity Date, assuming that
the Company did not elect the Initial Remarketing Date to be the
Interim Period Remarketing Date; provided, however, that if the
Initial Remarketing Date is not an Interest Payment Date with
respect to the Securities of this series, the amount of the next
succeeding scheduled interest payment thereon, calculated at the
Base Rate only, will be reduced by the amount of interest accrued
thereon, calculated at the Base Rate only, to the Initial
Remarketing Date.
A-6
<PAGE>
"Treasury Rate" means the rate per annum equal to the
semi-annual equivalent yield to maturity or interpolated (on a
day count basis) yield to maturity of the Comparable Treasury
Issues (as defined below), assuming a price for the Comparable
Treasury Issues (expressed as a percentage of its principal
amount), equal to the Comparable Treasury Price (as defined
below).
"Comparable Treasury Issues" means the United States
Treasury security or securities selected by the Remarketing
Dealer as having an actual or interpolated maturity or maturities
comparable to the remaining term of the Securities of this series
being purchased.
"Comparable Treasury Price" means (a) the offer prices
for the Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) on the third Business Day
prior to the Initial Remarketing Date, as set forth on "Telerate
Page 500" (as defined below) or (b) if such page (or any
successor page) is not displayed or does not contain such offer
prices on such date, (i) the average of the Reference Treasury
Dealer Quotations, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (ii) if the Remarketing
Dealer obtains fewer than four such Reference Treasury Dealer
Quotations, the average of all such Reference Treasury Dealer
Quotations.
"Telerate Page 500" means the display designated as
"Telerate Page 500" on Dow Jones Markets Limited (or such other
page as may replace Telerate Page 500 on such service) or such
other service displaying the offer prices specified in (a) above
as may replace Dow Jones Markets Limited.
"Reference Treasury Dealer Quotations" means, with
respect to each Reference Treasury Dealer, the offer prices for
the Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) quoted in writing to the
Remarketing Dealer by such Reference Treasury Dealer by 3:30
p.m., on the Determination Date.
"Reference Treasury Dealer" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and the fifth Reference Treasury
Dealer to be selected by the Company and their respective
successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a primary United States
Government securities dealer in The City of New York (a "Primary
Treasury Dealer"), the Remarketing Dealer shall substitute
therefor another Primary Treasury Dealer.
The interest rate for the Interim Period, if any, will be
reset on each Interest Reset Date (as defined below) during the
Interim Period and will be equal to the Reference Rate (as
defined below) in respect of the applicable Interest Reset Date
plus the Basic Spread (as defined below), in each case as
calculated by the Remarketing Dealer (the "Interim Period
Interest Rate"). The Wednesday of each week during the Interim
Period will be an "Interest Reset Date." The "Interest
Determination Date" applicable to an Interest Reset Date will be
the second Business Day preceding such Interest Reset Date. The
interest rate in effect from and including the Interim Period
Remarketing Date (which is the first day of the Interim Period)
to but excluding the first Interest Reset Date during such
Interim Period will be determined as if the Interim Period
Remarketing Date were an Interest Reset Date and the Interest
Determination Date for such Interest Reset Date were the second
Business Day prior to the Interim Period Remarketing Date.
The "Reference Rate" means, with respect to the Interim
Period, one of the following reference rates selected by the
Company and notified to the Remarketing Dealer no later than four
Business Days prior to the Interim Period Remarketing Date: (i)
the per annum rate for deposits in Dollars for a period of one
week shown on Telerate page 3750 (or any successor page) at 11:00
a.m., London time, on the applicable Interest Determination Date,
(ii) the per annum rate equal to the average of the federal funds
A-7
<PAGE>
rates shown on Telerate page 5 (or any successor page) as of
11:00 a.m., New York City time, on the applicable Interest
Determination Date and each of the four Business Days prior to
such Interest Determination Date, or (iii) the one-week "AA"
non-financial commercial paper rate shown on the Internet world
wide web page of the Board of Governors of the Federal Reserve
System at www.bog.frb.fed.us/releases/CP/ (or any successor page)
as of 11:00 a.m., New York City time, on the applicable Interest
Determination Date.
The "Basic Spread" will be the lowest firm commitment bid
expressed as a spread (in the form of a percentage or a number of
basis points) above the Reference Rate, obtained by the
Remarketing Dealer on the third Business Day prior to the Interim
Period Remarketing Date from the bids quoted from five Reference
Money Market Dealers (as defined below) on such date for the full
aggregate principal amount of the Securities of this series at a
dollar price equal to par, but assuming (i) that the purchase
date is the Interim Period Remarketing Date, with settlement on
such date without accrued interest, (ii) that the maturity date
is the day that is 26 weeks from the Interim Period Remarketing
Date, (iii) that the Securities of this series are callable by
the Remarketing Dealer on a weekly basis after the Interim Period
Remarketing Date, (iv) that the Securities of this series will be
repurchased by the Company at par on the day that is 26 weeks
from the Interim Period Remarketing Date if not previously called
by the Remarketing Dealer, and (v) a stated annual interest rate,
payable on the Final Period Remarketing Date, equal to the
Reference Rate plus the spread bid by the applicable Reference
Money Market Dealer.
"Reference Money Market Dealers" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and a fifth Reference Money Market
Dealer to be selected by the Company and their respective
successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a leading dealer of publicly
traded debt securities of the Company in The City of New York
which is also a leading dealer in money market instruments (a
"Primary Money Market Dealer"), the Remarketing Dealer shall
substitute therefore another Primary Money Market Dealer.
The Interim Period Interest Rates and the amount of interest
payable on the Final Period Remarketing Date shall each be
determined by the Remarketing Dealer and, absent manifest error,
shall be binding and conclusive upon the beneficial owners and
Holders of the Securities of this series, the Company and the
Trustee.
Notification of Results; Settlement
Provided the Remarketing Dealer has previously notified
the Company and the Trustee on the Notification Date of its
intention to purchase all Securities of this series tendered (or
deemed to have been tendered) to the Remarketing Dealer on the
Initial Remarketing Date, the Remarketing Dealer will notify the
Company, the Trustee and DTC by telephone, confirmed in writing,
by 4:00 p.m., New York City time, on the Determination Date, of
the Interest to Maturity Rate. If the Initial Remarketing Date
is the Interim Period Remarketing Date, the Remarketing Dealer
will provide the Company, the Trustee and DTC notice in
accordance with the preceding sentence, on the second Business
Day prior to the Initial Remarketing Date, of the Interim Period
Interest Rate which will initially be in effect.
All of such Securities of this series will be
automatically delivered to the account of the Trustee, by book-
entry through DTC pending payment of the purchase price therefor,
on each Remarketing Date.
The Remarketing Dealer will make or cause the Trustee
to make payment of the purchase price for such Securities of this
series through DTC by the close of business on each Remarketing
A-8
<PAGE>
Date against delivery through DTC of the Securities of this
series. The purchase price of such Securities of this series
will be equal to 100% of the principal amount thereof. If the
Remarketing Dealer does not purchase all of the Securities of
this series on a Remarketing Date, it will be the obligation of
the Company to make or cause to be made such payment for the
entire principal amount of the Securities of this series, as
described below under "Repurchase." In any case, the Company
will make or cause the Trustee to make payment of interest due on
a Remarketing Date by book entry through DTC by the close of
business on such Remarketing Date. In the event that the Company
elects to redeem the Securities of this series from the
Remarketing Dealer on a Remarketing Date (following the
Remarketing Dealer's purchase of the Securities of this series
from the Holders on such Remarketing Date), the Company will make
or cause the Trustee to make payment to the Remarketing Dealer by
book-entry through DTC by the close of business on such date
against delivery through DTC of such Securities of this series.
The transactions described above will be executed on
the applicable Remarketing Date through DTC in accordance with
the procedures of DTC, and the accounts of the respective
Participants will be debited and credited and the Securities of
this series delivered by book entry by DTC as necessary to effect
the purchases and sales thereof.
So long as the Securities of this series are issued in
global form registered in the name of DTC or its nominee,
transactions involving the sale and purchase of Securities of
this series remarketed by the Remarketing Dealer on and after a
Remarketing Date will settle in immediately available funds
through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures described above,
including provisions for payment by purchasers of Securities of
this series in the remarketing or for payment to sellers of
Securities of this series, may be modified, notwithstanding any
contrary terms of the Indenture, (i) to the extent required by
DTC or a successor securities depositary, (ii) if the book-entry
system is no longer available for the Securities of this series
at the time of the remarketing, to the extent required to
facilitate the remarketing of Securities of this series in
certificated form, or (iii) to the extent required in the
reasonable opinion of the Remarketing Dealer to facilitate the
settlement process. The Holders of this Security, by their
purchase of this Security or interest therein, irrevocably
consent to such modifications.
As long as DTC or its nominee holds the certificates
representing any Securities of this series in the book-entry
system of DTC, no certificates for such Securities of this series
will be delivered by any Holder to reflect any transfer of such
Securities of this series effected in a remarketing or otherwise.
The Remarketing Dealer
On or prior to the date of original issuance of the
Securities of this series, the Company and the Remarketing Dealer
will enter into a Remarketing Agreement (the "Remarketing
Agreement").
In the event that the Remarketing Dealer elects to
remarket the Securities of this series as described herein, the
obligation of the Remarketing Dealer to purchase Securities of
this series will be subject to several conditions precedent set
forth in the Remarketing Agreement, including certain conditions
that are customary in the Company's public offerings and the
conditions that, since the Notification Date, no material adverse
change in the business, property or financial condition of the
Company and its subsidiaries, considered as a whole, shall have
occurred and that no Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or
passage of time, or both, would constitute an Event of Default,
with respect to the Securities of this series shall have occurred
A-9
<PAGE>
and be continuing. In addition, the Remarketing Agreement will
provide for the termination thereof, or redetermination of the
Interest Rate to Maturity, by the Remarketing Dealer on or before
the Initial Remarketing Date (if such date is not the Interim
Period Remarketing Date) or the Final Period Remarketing Date (if
the Initial Remarketing Date is the Interim Period Remarketing
Date), upon the occurrence of certain events that are also
customary in the Company's public securities offerings.
No Holder or beneficial owner of any Securities of this
series shall have any rights or claims under the Remarketing
Agreement or against the Company or the Remarketing Dealer as a
result of the Remarketing Dealer not purchasing such Securities
of this series.
The Remarketing Agreement will also provide that the
Remarketing Dealer may resign at any time as Remarketing Dealer,
prior to the twentieth Business Day prior to the Initial
Remarketing Date, such resignation to be effective 10 Business
Days after the delivery to the Company and the Trustee of written
notice of such resignation. In such case, it shall be the sole
obligation of the Company to appoint a successor Remarketing
Dealer.
REPURCHASE
In the event that (i) the Remarketing Dealer for any
reason does not notify the Company of the Interest Rate to
Maturity or the Interim Period Interest Rate with respect to the
Interim Period Remarketing Date by (a) in the case of the
Interest Rate to Maturity, 4:00 p.m., New York City time, on the
Determination Date, or (b) in the case of the Interim Period
Interest Rate, 4:00 p.m., New York City time, on the second
Business Day prior to the Interim Period Remarketing Date, or
(ii) prior to the fifth Business Day immediately preceding the
Initial Remarketing Date, the Remarketing Dealer has resigned or
has been terminated and no successor has been appointed on or
before the third Business Day immediately preceding the Initial
Remarketing Date, or (iii) since the Notification Date, a
material adverse change in the business, property or financial
condition of the Company and its subsidiaries, considered as a
whole, shall have occurred or an Event of Default, or any event
which, with the giving of notice or passage of time, or both,
would constitute an Event of Default, with respect to the
Securities of this series shall have occurred and be continuing,
or any other event constituting a termination event under the
Remarketing Agreement shall have occurred and the Remarketing
Dealer elects to terminate the Remarketing Agreement, or (iv) the
Remarketing Dealer elects not to remarket the Securities of this
series, or (v) the Remarketing Dealer for any reason does not
purchase all Securities of this series tendered (or deemed
tendered) to it on any Remarketing Date, the Company will
repurchase the Securities of this series as a whole on any
Remarketing Date at a price equal to 100% of the principal amount
of the Securities of this series plus all accrued and unpaid
interest, if any, on the Securities of this series to any
Remarketing Date. In any such case, payment will be made by the
Company by book-entry through DTC upon delivery through the DTC
of the Securities of this series on or after the close of
business on such Remarketing Date.
REDEMPTION
If the Remarketing Dealer elects to remarket the
Securities of this series on a Remarketing Date, the Securities
of this series will be subject to mandatory tender to the
Remarketing Dealer for remarketing on such date, subject to the
conditions described above under "Tender of Securities of this
Series; Remarketing" and "Repurchase" and to the Company's right
to redeem the Securities of this series from the Remarketing
Dealer as described in the next sentence. The Company will
notify the Remarketing Dealer and the Trustee, not later than the
fourth Business Day immediately preceding the applicable
Remarketing Date, if the Company irrevocably elects to exercise
its right to redeem the Securities of this series, in whole but
not in part, from the Remarketing Dealer on such date at the
A-10
<PAGE>
Optional Redemption Price (as defined below). In any such case,
payment will be made by the Company to the Remarketing Dealer by
book-entry transfer through DTC by the close of business on such
Remarketing Date against delivery through DTC of the Securities
of this series.
The "Optional Redemption Price" shall be the sum of (i) the
greater of (a) 100% of the full aggregate principal amount of the
Securities of this series and (b) the Dollar Price as of the
applicable Remarketing Date (which, if the applicable Remarketing
Date is the Final Period Remarketing Date, will equal the
Adjusted Dollar Price) plus (ii) in the case of either (a) or (b)
above, accrued and unpaid interest on the principal amount being
redeemed to the applicable Remarketing Date.
The Optional Redemption Price will be determined by the
Remarketing Dealer by 3:30 p.m., New York City time, on the third
Business Day immediately preceding the applicable Remarketing
Date. The Remarketing Dealer will notify the Company, the
Trustee and DTC by telephone, confirmed in writing, by 4:00 p.m.,
New York City time, on such third Business Day immediately
preceding the applicable Remarketing Date, of the Optional
Redemption Price. The Optional Redemption Price determined by
the Remarketing Dealer, absent manifest error, shall be binding
and conclusive upon the Holders of the Securities of this series,
the Company and the Trustee.
The provisions of Sections 402 and 404 of the Indenture,
shall not be applicable to the Securities of this series.
ASSUMPTION BY SUBSIDIARY
Unless an Event of Default, or an event which, after
notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing, the obligations
of the Company under the Securities of this series and the
Indenture to the extent related to such series may be assigned by
the Company to, and be assumed in whole, on a full recourse
basis, by a wholly owned Subsidiary of the Company at any time;
provided, however, that such assumption shall be subject to, and
-------- -------
permitted only upon the fulfillment and satisfaction of, the
following terms and conditions: (a) an assumption agreement and
a supplemental indenture to the Indenture evidencing such
assumption shall be in substance and form reasonably satisfactory
to the Trustee and shall, inter alia, include modifications and
----- ----
amendments to the Indenture making the obligations under the
Securities of this series and under the Indenture to the extent
related to such series primary obligations of such Subsidiary,
substituting such Subsidiary of the Company for the Company in
the form of the Securities of this series and in provisions of
the Indenture to the extent related to such series and releasing
and discharging the Company from its obligations under the
Securities of this series and the Indenture to the extent related
to such series; and (b) the Trustee shall have received (i) an
executed counterpart of such assumption agreement and supplemental
indenture; (ii) evidence satisfactory to the Trustee and the
Company that all necessary authorizations, consents, orders,
approvals, waivers, filings and declarations of or with, Federal,
state, county, municipal, regional or other governmental
authorities, agencies or boards (collectively, "Governmental
Actions") relating to such assumption have been duly obtained and
are in full force and effect, (iii) evidence satisfactory to the
Trustee that any security interest intended to be created by the
Indenture is not in any material way adversely affected or
impaired by any of the agreements or transactions relating to
such assumption and (iv) an Opinion of Counsel for such
Subsidiary, reasonably satisfactory in substance, scope and form
to the Trustee and the Company, to the effect that (A) the
supplemental indenture evidencing such assumption has been duly
authorized, executed and delivered by such Subsidiary, (B) the
execution and delivery by such Subsidiary of such supplemental
indenture and the consummation of the transactions contemplated
thereby do not contravene any provision of law or any
governmental rule applicable to such Subsidiary or any provision
of such Subsidiary's charter documents or by-laws and do not
contravene any provision of, or constitute a default under, or
A-11
<PAGE>
result in the creation or imposition of any lien upon any of such
Subsidiary's properties or assets under any indenture, mortgage,
contract or other agreement to which such Subsidiary is a party
or by which such Subsidiary or any of its properties may be bound
or affected, (C) all necessary Governmental Actions relating to
such assumption have been duly obtained and are in full force and
effect and (D) such agreement and supplemental indenture
constitute the legal, valid and binding obligations of such
Subsidiary, enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws at the time in effect affecting the rights of
creditors generally.
At the time of such assumption the Company will
unconditionally guarantee payment of the Securities of this
series and will execute a guarantee in form and substance
satisfactory to the Trustee. Pursuant to the guarantee, the
Company will fully and unconditionally guarantee the payment of
the obligations of such assuming Subsidiary under the Securities
of this series and under the Indenture, including, without
limitation, payment, as and when due, of the principal of,
premium, if any, and interest on, the Securities of this series.
Other than the obligation to make such payments, the Company
shall be released and discharged from all other obligations under
the Indenture.
GENERAL
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 contains provisions permitting the Holders of a
majority in aggregate principal amount of the Securities of all
series then Outstanding to waive compliance by the Company with
certain provisions of the Indenture. 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
A-12
<PAGE>
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.
The Securities of this series are issuable only in
registered form without coupons in denominations of $1,000. 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 Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security
is registered as the absolute owner hereof for all purposes,
whether or not this Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the
contrary.
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.
A-13
<PAGE>
----------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
5.94% MAndatory Putable/Remarketing Securities to:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(Insert assignee's social security or tax identification number)
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
agent to transfer this Security on the Security Register. The
agent may substitute another to act for him or her.
Date: ------------------------------------
Signature:
--------------------------
Signature Guarantee:
----------------
(Sign exactly as your name appears on the other side of this Security)
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar, which
requirements include membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-14
Exhibit 4(c)
REMARKETING AGREEMENT
REMARKETING AGREEMENT, dated as of October 21, 1998 (the
"REMARKETING AGREEMENT"), among Texas Utilities Company, a Texas
corporation (the "COMPANY"), and Salomon Smith Barney Inc.
("SALOMON SMITH BARNEY" and, in its capacity as the remarketing
dealer hereunder, the "REMARKETING DEALER").
WHEREAS, the Company will issue $375,000,000 aggregate
principal amount of its 5.94% MAndatory Putable/remarketable
Securities (the "MAPS SM"), pursuant to an Indenture (For
Unsecured Debt Securities Series F), dated as of October 1, 1998
(together with any amendments or supplements thereto, the
"INDENTURE"), between the Company and The Bank of New York, as
trustee (the "TRUSTEE"); and
WHEREAS, the MAPS are being sold initially pursuant to an
underwriting agreement, dated October 14, 1998 (the "UNDERWRITING
AGREEMENT"), between the Company and the underwriters specified
therein; and
WHEREAS, the Company has filed with the Securities and
Exchange Commission (the "COMMISSION") a registration statement
on Form S-3 (No. 333-56055) under the Securities Act of 1933, as
amended (together with the rules and regulations of the
Commission thereunder (the "SECURITIES ACT")), in connection with
the offering of securities, including the MAPS, which
registration statement, as amended, was declared effective by
order of the Commission on June 29, 1998, has filed Post-
Effective Amendment No. 1 to such registration statement, which
Post-Effective Amendment No. 1 became effective on July 13, 1998,
has filed Post-Effective Amendment No. 2 to such registration
statement, which Post-Effective Amendment No. 2 became effective
on July 21, 1998, and has filed such amendments thereto and such
amended prospectuses as may have been required to the date
hereof, and will file such additional amendments thereto and such
additional amended prospectuses as may hereafter be required
(such registration statement and any amendments thereto including
any prospectus relating to the offering of MAPS by the Company
constituting a part thereof, and all documents incorporated
therein by reference, as from time to time amended or
supplemented pursuant to the Securities Exchange Act of 1934, as
amended (together with the rules and regulations of the
Commission thereunder (the "EXCHANGE ACT")), the Securities Act,
or otherwise, are referred to herein as the "REGISTRATION
STATEMENT" and the "PROSPECTUS," respectively, except that if
(i) any new registration statement shall be filed by the Company
with respect to the remarketing of the MAPS, the term
"Registration Statement" shall refer to such registration
statement from and after the date it is declared effective by the
Commission and (ii) any prospectus shall be provided to the
Remarketing Dealer by the Company for use in connection with the
--------------------
"MAPS SM" is a service mark owned by Salomon Smith Barney Inc.
<PAGE>
remarketing of the MAPS which differs from the Prospectus filed
with the Commission in connection with the initial sale of the
MAPS (whether or not such revised prospectus is required to be
filed by the Company pursuant to Rule 424 of the Securities Act)
the term "PROSPECTUS" shall refer to such revised prospectus from
and after the time it is first provided to the Remarketing Dealer
for such use; and
WHEREAS, Salomon Smith Barney will pay a premium to the
Company for, and the Company will grant to Salomon Smith Barney,
the right to purchase from the holders and remarket the MAPS on
October 15, 2001 and, if the Company elects October 15, 2001 to
be the Interim Period Remarketing Date (as defined herein), on
the Final Period Remarketing Date (as defined herein) (each, a
"REMARKETING DATE"); and
WHEREAS, Salomon Smith Barney is prepared to act as the
Remarketing Dealer with respect to the remarketing of the MAPS on
any Remarketing Date in accordance with the terms and subject to
the conditions set forth in this Agreement;
NOW, THEREFORE, for and in consideration of the covenants
herein made, and subject to the conditions herein set forth, the
parties hereto agree as follows:
SECTION 1. Definitions. Capitalized terms used and not
defined in this Agreement shall have the meanings assigned to
them in the Indenture (including the form of the MAPS) or the
Underwriting Agreement, as applicable.
SECTION 2. Representations and Warranties. (a) The Company
represents and warrants to the Remarketing Dealer as of the date
hereof that the representations and warranties contained in the
Underwriting Agreement are true and correct with the same force
and effect as though expressly made at and as of the date hereof.
(b) The Company further represents and warrants to the
Remarketing Dealer as of the Notification Date (as defined
herein), the Determination Date (as defined herein), the second
Business Day prior to October 15, 2001 (if October 15, 2001 is
the Interim Period Remarketing Date), October 15, 2001 and the
Final Period Remarketing Date:
(i) the applicable Remarketing Materials (as defined
herein) will, as of any Remarketing Date, comply as to form
in all material respects with the Securities Act, the
Exchange Act and the Trust Indenture Act and will not, as of
any Remarketing Date, include an untrue statement of
material fact or omit to state a material fact required to
be stated therein or necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading;
(ii) the consummation of the transactions herein
contemplated and the fulfillment of the terms hereof will
not result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed
-2-
<PAGE>
of trust, charter, by-laws or other agreement or instrument
to which the Company is now a party; and
(iii) each direct and indirect material subsidiary of
the Company has been incorporated and is validly existing as
a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power
and authority to own, lease and operate its properties and
to conduct its business as presently conducted and as set
forth in or contemplated by the Prospectus, and is qualified
as a foreign corporation to transact business and 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 Company and its subsidiaries,
considered as a whole; except as otherwise set forth in or
contemplated by the Remarketing Materials, all of the issued
and outstanding shares of capital stock of direct and
indirect material subsidiaries of the Company have been
authorized and validly issued, are fully paid and non-
assessable and (except for any directors' qualifying shares)
are owned by the Company, directly or through its
subsidiaries, free and clear of any security interest,
mortgage, pledge, lien, encumbrance, claim or equity; and
none of the outstanding shares of capital stock of such
material subsidiaries was issued in violation of preemptive
or other similar rights arising by operation of law, under
the charter or by-laws of any subsidiary or under any
agreement to which the Company or any subsidiary is a party.
(c) Additional Certifications. Any certificate signed by
any director or officer of the Company and delivered to the
Remarketing Dealer or to counsel for the Remarketing Dealer in
connection with the remarketing of the MAPS shall be deemed a
representation and warranty as of the date thereof by the Company
to the Remarketing Dealer as to the matters covered thereby.
SECTION 3. Covenants of the Company. The Company covenants
with the Remarketing Dealer as follows:
(a) The Company will provide prompt notice by telephone,
confirmed in writing (which may include facsimile or other
electronic transmission), to the Remarketing Dealer (i) if,
during the Remarketing Period (as defined herein), the Company's
senior unsecured debt shall be rated below "Baa3" in the case of
Moody's Investors Service and "BBB-" by Standard & Poor's Ratings
Group or the equivalent thereof by each such rating agency at
that time, (ii) of the occurrence at any time of any event set
forth in Sections 8(c)(i), (iii) and (vi) of this Agreement or
(iii) of the occurrence during the Remarketing Period of any
event relating specifically to the Company set forth in Sections
8(c)(ii), (iv) and (vii) of this Agreement.
(b) The Company will furnish to the Remarketing Dealer:
-3-
<PAGE>
(i) the Registration Statement and the Prospectus
(including in each case any amendment or supplement thereto
and each document incorporated therein by reference); and
(ii) each document filed by the Company pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
("EXCHANGE ACT DOCUMENT") after the date hereof.
The Company agrees to provide the Remarketing Dealer with as
many copies of the foregoing written materials and other Company-
approved information as the Remarketing Dealer may reasonably
request for use in connection with the remarketing of MAPS and
consents to the use thereof for such purpose.
(c) If, at any time during the period commencing 15 days
prior to the first day which could be the Notification Date (as
defined herein) to the later of (i) October 15, 2001, (ii) if
October 15, 2001 is the Interim Period Remarketing Date, the
Final Period Remarketing Date or (iii) such later date, if any,
as Remarketing Materials (as defined herein) may be required to
be delivered in connection with the remarketing of MAPS by the
Remarketing Dealer (the "REMARKETING PERIOD"), any event or
condition known to the Company relating to or affecting the
Company, any subsidiary thereof or the MAPS shall occur which
could reasonably be expected to cause any Registration Statement
with respect to, or any Prospectus to be delivered in connection
with, any remarketing of the MAPS or any of the reports,
documents, materials or information referred to in paragraph
3(b)(ii) above or any document incorporated therein by reference
(collectively, the "REMARKETING MATERIALS") to contain an untrue
statement of a material fact or omit to state a material fact,
the Company shall promptly notify the Remarketing Dealer in
writing of the circumstances and details of such event or
condition.
(d) So long as the MAPS are outstanding, the Company will
file all documents required to be filed with the Commission
pursuant to the Exchange Act within the time periods required by
the Exchange Act.
(e) In connection with any remarketing of the MAPS, if and
to the extent required (in the opinion of counsel for either the
Remarketing Dealer or the Company) by applicable law, regulations
or interpretations in effect at the time of such remarketing, the
Company (i) shall use its reasonable efforts to have a
Registration Statement relating to the MAPS declared effective
under the Securities Act no later than the applicable Remarketing
Date and (ii) shall furnish a current Prospectus and/or
Prospectus supplement to be used in such remarketing by the
Remarketing Dealer; if a new Registration Statement or a new,
amended or supplemented Prospectus is required, the Company also
shall furnish to the Remarketing Dealer an officer's certificate,
opinions of Company counsel and letters of the Company's
independent accountants, in each case, in form and substance
reasonably satisfactory to counsel for the Remarketing Dealer, of
the same tenor as the officer's certificate, opinions of counsel
and letters of independent accountants delivered pursuant to the
Underwriting Agreement, but modified to relate to such new
Registration Statement or new, amended or supplemented
-4-
<PAGE>
Prospectus. If during such period of time (not exceeding nine
months) after any Remarketing Date as in the opinion of counsel
for the Remarketing Dealer a prospectus is required by the
Securities Act to be delivered in connection with sales of the
MAPS, any event known to the Company relating to or affecting the
Company or of which the Company shall be advised in writing by
the Remarketing Dealer shall occur that in the Company's
reasonable opinion after consultation with counsel for the
Remarketing Dealer 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 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 the Remarketing Dealer, then the
Remarketing Dealer shall assume the expense of preparing and fur-
nishing any such amendment or supplement. In case the
Remarketing Dealer is required to deliver a prospectus after the
expiration of nine months from the applicable Remarketing Date,
the Company, upon the Remarketing Dealer's request, will furnish
to the Remarketing Dealer, at its expense, a reasonable quantity
of a supplemental prospectus or supplements to the Prospectus
complying with Section 10(a) of the Securities Act.
(f) The Company agrees that neither it nor any of its
subsidiaries or affiliates shall defease, purchase or otherwise
acquire, or enter into any agreement to defease, purchase or
otherwise acquire, any of the MAPS prior to the remarketing
thereof by the Remarketing Dealer on October 15, 2001 (if such
date is not the Interim Period Remarketing Date) or the Final
Period Remarketing Date (if October 15, 2001 is the Interim
Period Remarketing Date), or other than pursuant to Section 4(h)
or 4(i) of this Agreement.
(g) Notwithstanding any provision to the contrary set forth
in the Indenture, the Company shall, prior to the end of the
Remarketing Period, (i) use its best efforts to maintain the MAPS
in book-entry form with The Depository Trust Company ("DTC") or
any successor thereto and to appoint a successor depositary to
the extent necessary to maintain the MAPS in book-entry form, and
(ii) waive any discretionary right it otherwise has under the
Indenture to cause the MAPS to be issued in certificated form.
(h) In connection with any remarketing, the Company will
furnish such proper information as may be lawfully required and
otherwise cooperate in qualifying the MAPS for offer and sale
under the blue-sky laws of such jurisdictions as the Remarketing
Dealer may designate, provided that the Company shall not be
required to qualify as a foreign corporation or dealer in se-
curities, to file any consents to service of process under the
laws of any jurisdiction, or to meet any other requirements
deemed by the Company to be unduly burdensome.
-5-
<PAGE>
(i) The Company will, except as herein provided, pay all
fees, expenses and taxes (except transfer taxes) in connection
with (i) the preparation and any filing by it of any new
Registration Statement or Prospectus required pursuant to Section
3(e) hereof, (ii) the qualification of the MAPS under blue-sky
laws (including counsel fees not to exceed $7,500) and (iii) the
printing and delivery to the Remarketing Dealer of reasonable
quantities of such new Registration Statement and Prospectus and,
except as provided in Section 3(e) hereof, of any amendments or
supplements thereto. The Company shall not, however, be required
to pay any amount for any expenses of the Remarketing Dealer,
except as set forth in Section 10(d) hereof.
(j) The Company will comply with any reasonable request of
the Remarketing Dealer pursuant to Section 4(i) hereof to modify
the tender and settlement procedures set forth in the Indenture.
(k) During the Remarketing Period, the Company will furnish
to the Remarketing Dealer such information as the Remarketing
Dealer may reasonably request from time to time, in such form as
the Remarketing Dealer may reasonably request, including, but not
limited to, information with respect to the financial condition
of the Company or any material subsidiary thereof.
SECTION 4. Appointment and Obligations of the Remarketing
Dealer. (a) Unless this Agreement is otherwise terminated in
accordance with Section 10 hereof, in accordance with the terms,
but subject to the conditions, of this Agreement, the Company
hereby appoints Salomon Smith Barney, and Salomon Smith Barney
hereby accepts such appointment, as the exclusive Remarketing
Dealer with respect to $375,000,000 aggregate principal amount of
MAPS, subject further to repurchase of the MAPS in accordance
with clause (h) of this section or redemption of the MAPS in
accordance with clause (i) of this section. In consideration of
the right to require mandatory tender of the MAPS in accordance
with the terms of the Indenture, Salomon Smith Barney will pay
the Company the premium set forth in Schedule I to the
Underwriting Agreement in accordance with Section 4 of the
Underwriting Agreement.
(b) It is expressly understood and agreed by the parties
hereto that the obligations of the Remarketing Dealer hereunder
with respect to the MAPS to be remarketed on any Remarketing Date
are conditioned on (i) the issuance and delivery of such MAPS
pursuant to the terms and conditions of the Underwriting
Agreement and (ii) the Remarketing Dealer's election on the
Notification Date to purchase the MAPS for remarketing on the
Remarketing Date. It is further expressly understood and agreed
by and between the parties hereto that, if the Remarketing Dealer
has elected to remarket the MAPS pursuant to clause (c) below and
except as otherwise set forth in Section 10 of this Agreement,
the Remarketing Dealer shall not be obligated to set a new
interest rate on the MAPS (the "INTEREST RATE TO MATURITY") for
the period from and including October 15, 2001 (if such date is
not the Interim Period Remarketing Date) or the Final Period
Remarketing Date (if October 15, 2001 is the Interim Period
Remarketing Date) or a new interest rate on the MAPS (the
-6-
<PAGE>
"INTERIM PERIOD INTEREST RATE") for the period from and including
October 15, 2001 (if such date is the Interim Period Remarketing
Date) to but excluding the Final Period Remarketing Date (the
"INTERIM PERIOD"), to remarket any MAPS or to perform any of the
other duties set forth herein at any time after the Notification
Date if this Agreement shall have been terminated pursuant to
Section 10(b) hereof.
(c) On a Business Day which is not earlier than 15 nor
later than five Business Days prior to October 15, 2001 (the
"NOTIFICATION DATE"), the Remarketing Dealer will notify the
Company and the Trustee as to whether it elects to purchase the
MAPS on October 15, 2001. If, and only if, the Remarketing
Dealer so elects, the MAPS shall be subject to mandatory tender
to the Remarketing Dealer for remarketing on the October 15,
2001 and, if the Company elects pursuant to clause (d) below that
October 15, 2001 be the Interim Period Remarketing Date, on the
Final Period Remarketing Date subject to the conditions described
herein.
(d) If the Remarketing Dealer gives notice of its intention
to purchase the MAPS on October 15, 2001, then not later than
4:00 p.m., New York City time, on the fourth Business Day prior
to October 15, 2001, the Company may notify the Remarketing
Dealer, the Trustee and DTC by telephone, confirmed in writing
that it elects October 15, 2001 to be the Interim Period
Remarketing Date. The Company will be eligible to make such
notification if at such time its senior unsecured debt is rated
at least "Baa3" by Moody's Investors Service and "BBB-" by
Standard & Poor's Ratings Group or the equivalent thereof by such
rating agency at the time of such notification or if the
Remarketing Dealer waives this requirement in its sole
discretion. If the Company does not provide such notification,
October 15, 2001 will be the only Remarketing Date and the
Maturity Date will be October 15, 2011. If the Company provides
such notification, then (i) the Final Period Remarketing Date
will be one of the 26 following one-week anniversary dates of
October 15, 2001 (or if any such day is not a Business Day, the
next following Business Day) designated by the Company not later
than the fifth Business Day prior to such one-week anniversary
date (the "FINAL PERIOD REMARKETING DATE") except that, if the
Company fails to so designate the Final Period Remarketing Date,
the Final Period Remarketing Date will be the date that is 26
weeks after October 15, 2001 (or if such day is not a Business
Day, the next following Business Day) and (ii) the Maturity Date
of the MAPS will be the date that is the tenth anniversary of the
Final Period Remarketing Date (whether or not a Business Day).
(e) Subject to the Remarketing Dealer's election to
remarket the MAPS as provided in clause (c) above, (i) from and
including October 15, 2001 (if such date is not the Interim
Period Remarketing Date) or the Final Period Remarketing Date (if
October 15, 2001 is the Interim Period Remarketing Date), to but
excluding the Maturity Date, the MAPS will bear interest at the
Interest Rate to Maturity and (ii) during the Interim Period, if
any, the MAPS will bear interest at the Interim Period Interest
Rate.
The Interest Rate to Maturity will be determined by the
Remarketing Dealer by 3:30 p.m., New York City time, on the third
Business Day immediately preceding October 15, 2001 (if such date
-7-
<PAGE>
is not the Interim Period Remarketing Date) or the Final Period
Remarketing Date (if October 15, 2001 is the Interim Period
Remarketing Date) (the "DETERMINATION DATE"), to the nearest one
hundred-thousandth (0.00001) of one percent per annum, and will
be equal to the sum of 4.59% per annum (the "BASE RATE") plus the
Applicable Spread (as defined herein).
The "APPLICABLE SPREAD" shall be the lowest firm commitment
bid, expressed as a spread (in the form of a percentage or number
of basis points) above the Base Rate, obtained by the Remarketing
Dealer on the Determination Date from the bids quoted by five
Reference Corporate Dealers (as defined herein) for the full
aggregate principal amount of the MAPS at the Dollar Price (as
defined herein), but assuming (i) that the purchase date is
October 15, 2001 (if such date is not the Interim Period
Remarketing Date) or the Final Period Remarketing Date (if
October 15, 2001 is the Interim Period Remarketing Date) with
settlement on such date without accrued interest, (ii) that the
maturity date is the Maturity Date of the MAPS, and (iii) a
stated annual interest rate, payable semi-annually, equal to the
Base Rate plus the spread bid by the applicable Reference
Corporate Dealer. If fewer than five Reference Corporate Dealers
bid as described above, then the Applicable Spread shall be the
lowest of such firm commitment bids obtained as described above;
provided, however, that the Remarketing Dealer shall obtain bids
from at least three Primary Corporate Dealers. The Interest Rate
to Maturity announced by the Remarketing Dealer, absent manifest
error, shall be binding and conclusive upon the beneficial owners
and Holders of the MAPS, the Company and the Trustee.
"DOLLAR PRICE" means, with respect to the MAPS, the present
value, as of October 15, 2001, of the Remaining Scheduled
Payments (as defined herein) discounted to October 15, 2001 on a
semi-annual basis (assuming a 360-day year consisting of twelve
30-day months) at the Treasury Rate (as defined herein), except
that (i) in the case of the Final Period Remarketing Date, the
Dollar Price will be the Adjusted Dollar Price (as defined
herein) and (ii) in the case of October 15, 2001 or the Final
Period Remarketing Date, the Dollar Price may be any other amount
agreed to in writing by the Remarketing Dealer and the Company.
"ADJUSTED DOLLAR PRICE" means, with respect to the Final
Period Remarketing Date, the Dollar Price as of October 15, 2001
(determined by the Remarketing Dealer on the third Business Day
prior to October 15, 2001) plus the product of (i) such Dollar
Price less the aggregate principal amount of MAPS outstanding as
of October 15, 2001, (ii) the weighted average per annum Interim
Period Interest Rate for the Interim Period, and (iii) the number
of days in the Interim Period divided by 360.
"REFERENCE CORPORATE DEALERS" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and a fifth Reference Corporate Dealer
to be selected by the Company and their respective successors;
provided, however, that if any of the foregoing or their
affiliates shall cease to be a leading dealer of publicly traded
debt securities of the Company in The City of New York ("PRIMARY
-8-
<PAGE>
CORPORATE DEALER"), the Remarketing Dealer shall substitute
therefor another Primary Corporate Dealer.
"REMAINING SCHEDULED PAYMENTS" means, with respect to the
MAPS, the remaining scheduled payments of the principal thereof
and interest thereon calculated at the Base Rate only, that would
be due after October 15, 2001 to and including October 15, 2011,
assuming that the Company did not elect October 15, 2001 to be
the Interim Period Remarketing Date; provided, however, that if
October 15, 2001 is not an Interest Payment Date with respect to
the MAPS, the amount of the next succeeding scheduled interest
payment thereon, calculated at the Base Rate only, will be
reduced by the amount of interest accrued thereon, calculated at
the Base Rate only, to October 15, 2001.
"TREASURY RATE" means the rate per annum equal to the semi-
annual equivalent yield to maturity or interpolated (on a day
count basis) yield to maturity of the Comparable Treasury Issues
(as defined herein), assuming a price for the Comparable Treasury
Issues (expressed as a percentage of its principal amount), equal
to the Comparable Treasury Price (as defined herein).
"COMPARABLE TREASURY ISSUES" means the United States
Treasury security or securities selected by the Remarketing
Dealer as having an actual or interpolated maturity or maturities
comparable to the remaining term of the MAPS being purchased.
"COMPARABLE TREASURY PRICE" means (a) the offer prices for
the Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) on the third business day
prior to October 15, 2001, as set forth on Telerate Page 500 (as
defined herein) or (b) if such page (or any successor page) is
not displayed or does not contain such offer prices on such date,
(i) the average of the Reference Treasury Dealer Quotations,
after excluding the highest and lowest of such Reference Treasury
Dealer Quotations, or (ii) if the Remarketing Dealer obtains
fewer than four such Reference Treasury Dealer Quotations, the
average of all such Reference Treasury Dealer Quotations.
"TELERATE PAGE 500" means the display designated as
"Telerate Page 500" on Dow Jones Markets Limited (or such other
page as may replace Telerate Page 500 on such service) or such
other service displaying the offer prices specified in (a) above
as may replace Dow Jones Markets Limited.
"REFERENCE TREASURY DEALER QUOTATIONS" means, with respect
to each Reference Treasury Dealer, the offer prices for the
Comparable Treasury Issues (expressed in each case as a
percentage of its principal amount) quoted in writing to the
Remarketing Dealer by such Reference Treasury Dealer by 3:30
p.m., on the Determination Date.
"REFERENCE TREASURY DEALER" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
Stanley & Co. Incorporated and a fifth Reference Treasury Dealer
to be selected by the Company and their respective successors;
-9-
<PAGE>
provided, however, that if any of the foregoing or their
affiliates shall cease to be a primary United States Government
securities dealer in The City of New York ("PRIMARY TREASURY
DEALER"), the Remarketing Dealer shall substitute therefor
another Primary Treasury Dealer.
The Interim Period Interest Rate for the Interim Period, if
any, will be reset on each Interest Reset Date (as defined
herein) during the Interim Period and will be equal to the
Reference Rate (as defined herein) in respect of the applicable
Interest Reset Date plus the Basic Spread (as defined herein), in
each case as calculated by the Remarketing Dealer. The Wednesday
of each week during the Interim Period will be an "INTEREST RESET
DATE." The "INTEREST DETERMINATION DATE" applicable to an
Interest Reset Date will be the second Business Day preceding
such Interest Reset Date. The interest rate in effect from and
including October 15, 2001 (which is the first day of any Interim
Period) to but excluding the first Interest Reset Date during
such Interim Period will be determined as if October 15, 2001
were an Interest Reset Date and the Interest Determination Date
for such Interest Reset Date were the second Business Day prior
to October 15, 2001.
The "REFERENCE RATE" means one of the following reference
rates selected by the Company and notified to the Remarketing
Dealer no later than four Business Days prior to October 15,
2001: (i) the per annum rate for deposits in U.S. dollars for a
period of one week shown on Telerate page 3750 (or any successor
page) at 11:00 a.m., London time, on the applicable Interest
Determination Date, (ii) the per annum rate equal to the average
of the federal funds rates shown on Telerate page 5 (or any
successor page) as of 11:00 a.m., New York City time, on the
applicable Interest Determination Date and each of the four
Business Days prior to such Interest Determination Date, or (iii)
the one-week "AA" non-financial commercial paper rate shown on
the Internet world wide web page of the Board of Governors of the
Federal Reserve System at www.bog.frb.fed.us/releases/CP/ (or any
successor page) as of 11:00 a.m., New York City time, on the
applicable Interest Determination Date.
The "BASIC SPREAD" will be the lowest firm commitment bid
expressed as a spread (in the form of a percentage or a number of
basis points) above the Reference Rate, obtained by the
Remarketing Dealer on the third Business Day prior to October 15,
2001 from the bids quoted from five Reference Money Market
Dealers (as defined herein) on such date for the full aggregate
principal amount of the MAPS at a dollar price equal to par, but
assuming (i) that the purchase date is October 15, 2001, with
settlement on such date without accrued interest, (ii) that the
maturity date is the day that is 26 weeks from October 15, 2001,
(iii) that the MAPS are callable by the Remarketing Dealer on a
weekly basis after October 15, 2001, (iv) that the MAPS will be
repurchased by the Company at par on the day that is 26 weeks
from October 15, 2001 if not previously called by the Remarketing
Dealer, and (v) a stated annual interest rate, payable on the
Final Period Remarketing Date, equal to the Reference Rate plus
the spread bid by the applicable Reference Money Market Dealer.
"REFERENCE MONEY MARKET DEALERS" means each of Salomon Smith
Barney Inc., CIBC Oppenheimer Corp., Lehman Brothers Inc., Morgan
-10-
<PAGE>
Stanley & Co. Incorporated and a fifth Reference Money Market
Dealer to be selected by the Company and their respective
successors; provided, however, that if any of the foregoing or
their affiliates shall cease to be a leading dealer of publicly
traded debt securities of the Company in The City of New York
which is also a leading dealer in money market instruments
("PRIMARY MONEY MARKET DEALER"), the Remarketing Dealer shall
substitute therefor another Primary Money Market Dealer.
The Interim Period Interest Rates and the amount of interest
payable on the Final Period Remarketing Date shall each be
determined by the Remarketing Dealer and, absent manifest error,
shall be binding and conclusive upon the beneficial owners and
Holders of the MAPS, the Company and the Trustee.
(f) Subject to the Remarketing Dealer's election to
remarket the MAPS as provided in clause (c) above, the
Remarketing Dealer will notify the Company, the Trustee and DTC
by telephone, confirmed in writing, by 4:00 p.m., New York City
time, on the Determination Date, of the Interest Rate to Maturity
and, if October 15, 2001 is the Interim Period Remarketing Date,
the Remarketing Dealer will notify the Company, the Trustee and
DTC by telephone, confirmed in writing, by 4:00 p.m., New York
City time, on the second Business Day prior to October 15, 2001,
of the Interim Period Interest Rate which will initially be in
effect.
(g) In the event that the MAPS are remarketed as provided
herein, the Remarketing Dealer shall make, or cause the Trustee
to make, payment of the purchase price for such MAPS through DTC
by the close of business on each Remarketing Date against
delivery through DTC of MAPS. The purchase price for the MAPS
will be equal to 100% of the principal amount thereof. The
Company shall make, or cause the Trustee to make, payment of
interest due on any Remarketing Date by book entry through DTC by
the close of business on such Remarketing Date.
(h) Subject to Section 10(c) of this Agreement, in the
event that (i) the Remarketing Dealer for any reason does not
notify the Company of the Interest Rate to Maturity or the
Interim Period Interest Rate by, (A) in the case of the Interest
Rate to Maturity, 4:00 p.m., New York City time, on the
Determination Date, or (B) in the case of the Interim Period
Interest Rate, 4:00 p.m. New York City time, on the second
business day prior to October 15, 2001, or (ii) prior to the
fifth Business Day immediately preceding October 15, 2001, the
Remarketing Dealer has resigned and no successor has been
appointed on or before the third Business Day prior to October
15, 2001, or (iii) at any time after the Remarketing Dealer
elects on the Notification Date to remarket MAPS this Agreement
is terminated by the Remarketing Dealer pursuant to Section 10
hereof, or (iv) the Remarketing Dealer for any reason does not
elect, by notice to the Company and the Trustee not later than
the fifth Business Day immediately preceding October 15, 2001,
to purchase the MAPS for remarketing on October 15, 2001, or
(v) the Remarketing Dealer for any reason does not purchase all
MAPS tendered (or deemed to have been tendered) to it on any
Remarketing Date, the Company shall repurchase the MAPS as a
whole on any Remarketing Date at a price equal to 100% of the
-11-
<PAGE>
principal amount of the MAPS plus all accrued and unpaid
interest, if any, on the MAPS to such Remarketing Date. In any
such case, payment will be made by the Company by book-entry
through DTC by the close of business on such Remarketing Date
against delivery through DTC of the MAPS.
(i) If the Remarketing Dealer elects to remarket the MAPS
as provided in clause (c) above, then not later than the fourth
Business Day immediately preceding the applicable Remarketing
Date, the Company shall notify the Remarketing Dealer and the
Trustee if the Company irrevocably elects to exercise its right
to redeem the MAPS, in whole but not in part, from the
Remarketing Dealer on such Remarketing Date at the Optional
Redemption Price. The "OPTIONAL REDEMPTION PRICE" shall be the
greater of (i) 100% of the principal amount of the MAPS and
(ii) the Dollar Price as of the applicable Remarketing Date, plus
in either case accrued and unpaid interest from the applicable
Remarketing Date on the principal amount being redeemed to the
date of redemption. If the Company elects to redeem the MAPS, it
shall pay the Optional Redemption Price to the Remarketing Dealer
by book-entry transfer through DTC by the close of business on
such Remarketing Date against delivery through DTC of the MAPS.
The Remarketing Dealer will determine the Optional Redemption
Price and notify the Company, the Trustee and DTC by telephone,
confirmed in writing, by 4:00 p.m., New York City time, on the
third Business Day prior to the applicable Remarketing Date of
the Optional Redemption Price. Absent manifest error, the
Optional Redemption Price determined by the Remarketing Dealer
shall be binding upon the beneficial owners and Holders of the
MAPS, the Company and the Trustee.
(j) The Remarketing Dealer may request that the Company, in
accordance with the terms of the Indenture, modify the put and
settlement procedures described above, including provisions for
payment by purchasers of MAPS in the remarketing or for payment
to sellers of tendered MAPS, (i) to the extent required by DTC or
a successor securities depositary, (ii) if agreed to by the
Remarketing Dealer in accordance with Section 8(c)(vi) of this
Agreement, to the extent required to facilitate the remarketing
of MAPS in certificated form, if the book-entry system is no
longer available for the MAPS at the time of the remarketing, or
(iii) to the extent required in the reasonable opinion of the
Remarketing Dealer, to facilitate the settlement process .
SECTION 5. Fees and Expenses. Subject to Section 10 of this
Agreement, for its services in performing its duties set forth
herein, the Remarketing Dealer will not receive any fees or
reimbursement of expenses from the Company.
SECTION 6. Resignation of the Remarketing Dealer. At its
option, the Remarketing Dealer may resign and be discharged from
its duties and obligations hereunder at any time prior to the
twentieth Business Day prior to October 15, 2001, such
resignation to be effective 10 Business Days after delivery of a
written notice to the Company and the Trustee of such
resignation. The Remarketing Dealer also may resign and be
discharged from its duties and obligations hereunder at any time,
-12-
<PAGE>
such resignation to be effective immediately, upon termination of
this Agreement in accordance with Section 10(b) hereof. It shall
be the sole obligation of the Company to appoint a successor
Remarketing Dealer.
SECTION 7. Dealing in the MAPS; Purchase of MAPS by the
Company. (a) Salomon Smith Barney, when acting as the
Remarketing Dealer or in its individual or any other capacity,
may, to the extent permitted by law, buy, sell, hold and deal in
any of the MAPS. Salomon Smith Barney, as Holder or beneficial
owner of the MAPS, may exercise any vote or join as a Holder or
beneficial owner, as the case may be, in any action which any
Holder or beneficial owner of MAPS may be entitled to exercise or
take pursuant to the Indenture with like effect as if it did not
act in any capacity hereunder. The Remarketing Dealer, in its
capacity either as principal or agent, may also engage in or have
an interest in any financial or other transaction with the
Company as freely as if it did not act in any capacity hereunder.
(b) The Company may purchase MAPS in the remarketing on
October 15, 2001 (if such date is not the Interim Period
Remarketing Date) or the Final Period Remarketing Date (if
October 15, 2001 is the Interim Period Remarketing Date),
provided that the Interest Rate to Maturity established with
respect to MAPS in such remarketing is not different from the
Interest Rate to Maturity that would have been established if the
Company had not purchased such MAPS.
SECTION 8. Conditions to Remarketing Dealer's Obligations.
The obligations of the Remarketing Dealer under this Agreement
have been undertaken in reliance on, and shall be subject to, (a)
the due performance in all material respects by the Company of
its obligations and agreements as set forth in this Agreement and
the accuracy of the representations and warranties in this
Agreement and any certificate delivered pursuant hereto, (b) the
due performance in all material respects by the Company of its
obligations and agreements set forth in, and the accuracy in all
material respects as of the dates specified therein of the
representations and warranties contained in, the Underwriting
Agreement, and (c) the further condition that none of the
following events shall have occurred after the Remarketing Dealer
elects on the Notification Date to remarket the MAPS:
(i) without the prior written consent of the
Remarketing Dealer, the Indenture (including the MAPS) shall
have been amended in any manner, or otherwise contain any
provision not contained therein as of the date hereof, that
in either case in the judgment of the Remarketing Dealer
materially changes the nature of the MAPS or the remarketing
procedures (it being understood that, notwithstanding the
provisions of this clause (i), the Company shall not be
prohibited from amending the Indenture);
(ii) (A) there shall have occurred any suspension or
material limitation of trading in any of the Company's
securities on the New York Stock Exchange, Inc. ("NYSE") or
any general suspension of trading in securities on the NYSE,
-13-
<PAGE>
the American Stock Exchange, Inc. ("AMEX") or the NASDAQ
Stock Market, Inc. ("NASDAQ") or there shall have been
established by the NYSE, AMEX or NASDAQ or by the Commission
or by any federal or state agency 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 or
federal authorities, or (B) there shall have occurred any
(1) new material outbreak of hostilities or (2) new material
other national or international calamity or crisis,
including, but not limited to, an escalation of hostilities
that existed prior to the Notification Date or (3) material
adverse change in the financial markets in the United
States, and the effect of any such event specified in
clause (A) or (B) above on the financial markets of the
United States shall be such as to make it impracticable, in
the reasonable judgment of the Remarketing Dealer, for the
Remarketing Dealer to remarket the MAPS or to enforce
contracts for the sale of the MAPS;
(iii) an Event of Default (as defined in the
Indenture), or any event which, with the giving of notice or
passage of time, or both, would constitute an Event of
Default, with respect to the MAPS shall have occurred and be
continuing;
(iv) there shall have occurred since the Notification
Date or since the respective dates as of which information
is given in the Exchange Act Documents a material adverse
change in the business, property or financial condition of
the Company and its subsidiaries, considered as a whole,
whether or not in the ordinary course of business, that, in
the reasonable judgment of the Remarketing Dealer,
materially impairs the marketability of the MAPS;
(v) if a prospectus is required under the Securities
Act to be delivered in connection with any remarketing of
the MAPS, the Company shall fail to furnish to the
Remarketing Dealer on the applicable Remarketing Date the
officer's certificate, opinions and comfort letters referred
to in Section 3(e) of this Agreement and such other
documents and opinions as counsel for the Remarketing Dealer
may reasonably require for the purpose of enabling such
counsel to pass upon the sale of MAPS in the remarketing as
herein contemplated and related proceedings, or in order to
evidence the accuracy and completeness of any of the
representations and warranties, or the fulfillment of any of
the conditions, herein contained; or
(vi) prior to October 15, 2001 (if such date is not the
Interim Period Remarketing Date) or the Final Period
Remarketing Date (if October 15, 2001 is the Interim Period
Remarketing Date), the MAPS are not maintained in book-entry
form with DTC or any successor thereto; provided, that the
Remarketing Dealer, in its sole discretion and subject to
receipt of an opinion of counsel for the Company reasonably
satisfactory to the Remarketing Dealer, may waive the
foregoing condition if in the Remarketing Dealer's judgment
the Indenture and the MAPS can be amended, and they are
-14-
<PAGE>
amended, so as to permit the remarketing of the MAPS in
certificated form and otherwise as contemplated herein;
(vii) if, subsequent to the Notification Date, the
ratings of the MAPS shall have been downgraded or withdrawn
by any nationally recognized statistical rating agency.
and the Remarketing Dealer shall have received on each
Remarketing Date a certificate of an officer of the Company,
dated as of such Remarketing Date, to the effect that (i) the
representations and warranties in this Agreement are true and
correct at and as of such Remarketing Date, (ii) the Company has
complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to such Remarketing
Date and (iii) none of the events specified in the preceding
clause (c) has occurred.
(d) In furtherance of the foregoing, the effectiveness of
the Remarketing Dealer's election on the Notification Date to
remarket the MAPS shall be subject to the condition that the
Remarketing Dealer shall have received a certificate of an
officer of the Company, dated as of the Notification Date, to the
effect that (i) the Company has, prior to the Remarketing
Dealer's election on the Notification Date to remarket the MAPS,
provided the Remarketing Dealer with notice of all events as
required under Section 3(a) of this Agreement, (ii) the
representations and warranties in this agreement are true and
correct at and as of the Notification Date and (iii) the Company
has complied with all agreements and satisfied all conditions on
its part to be performed or satisfied at or prior to the
Notification Date. Such certificate shall be delivered by the
Company to the Remarketing Dealer as soon as practicable
following notification by the Remarketing Dealer to the Company
on the Notification Date of its election to remarket the MAPS and
in any event prior to the third Business Day prior to October 15,
2001.
In the event of the failure of any of the foregoing
conditions, the Remarketing Dealer may terminate its obligations
under this Agreement or redetermine the Interest Rate to Maturity
or Interim Period Interest Rate as provided in Section 10.
SECTION 9. Indemnification. (a) The Company shall
indemnify, defend and hold harmless the Remarketing Dealer and
each person who controls the Remarketing Dealer within the mean-
ing 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 the
Remarketing Dealer 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 (i) any untrue statement or alleged untrue
statement of a material fact contained in the Remarketing
Materials, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make
-15-
<PAGE>
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 the
Company by the Remarketing Dealer, or counsel for the Remarketing
Dealer, expressly for use in the Remarketing Materials; and
provided further, that if a Prospectus is required to be
delivered, the indemnity agreement contained in this Section 9
shall not inure to the benefit of the Remarketing Dealer (or of
any person controlling the Remarketing Dealer) on account of any
such losses, claims, damages, liabilities, expenses or actions
arising from the sale of the MAPS to any person if a copy of the
Prospectus (exclusive of any incorporated documents) shall not
have been given or sent to such person by or on behalf of the
Remarketing Dealer 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, (ii) any acts or omissions of the
Remarketing Dealer in connection with its duties and obligations
to determine any of the Interest Rate to Maturity, the Interim
Period Interest Rates, the amount of interest, if any, payable on
the Final Period Remarketing Date, the Optional Redemption Price
or the Call Price hereunder except those that are due to its
negligence or willful misconduct and (iii) any violation by the
Company of, or any failure by the Company to perform any of its
obligations under, this Agreement, except those violations or
failures to perform that are due to the negligence or willful
misconduct of the Remarketing Dealer. The indemnity agreement of
the Company contained in this Section 9 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 the Remarketing Dealer or any such controlling
person, and shall survive the delivery of the MAPS.
(b) The Remarketing Dealer shall indemnify, defend and hold
harmless the Company, its officers and directors, and each person
who controls the Company 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 Remarketing
Materials, 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 Company by or on behalf
of the Remarketing Dealer, for use in connection with the
preparation of the Remarketing Materials. The indemnity agree-
ment of the Remarketing Dealer 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
-16-
<PAGE>
on behalf of the Company, its directors or its officers, the
Remarketing Dealer, or any such controlling person, and shall
survive the delivery of the MAPS.
(c) The Company and the Remarketing Dealer 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 indemnifying 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 (it
being understood, however, that the indemnifying party shall not
be liable for the 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 Company and the
Remarketing Dealer agrees that without the other party's 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
-17-
<PAGE>
have resulted in such losses, claims, damages, liabilities and
expenses, (ii) the relative benefits received by the Company on
the one hand and the Remarketing Dealer on the other hand from
the remarketing of the MAPS 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 Company and the
Remarketing Dealer agree that it would not be just and equitable
if contributions pursuant to this subparagraph (d) were to be
determined by pro rata allocation 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, the Remarketing Dealer shall not be required
to contribute in excess of the amount equal to the excess of (i)
the greater of the price at which the MAPS remarketed by it were
sold to the public on (A) October 15, 2001 or (B) the Final
Period Remarketing Date, whichever is applicable, over (ii) the
amount of any damages which the Remarketing Dealer has otherwise
been required to pay by reason of any such untrue or alleged
untrue statement or omission or alleged omission or any act or
failure to act for which the Remarketing Dealer is responsible
under this Agreement.
SECTION 10. Termination of Remarketing Agreement or
Redetermination of Interest Rate to Maturity. (a) This Agreement
shall terminate as to the Remarketing Dealer on the effective
date of the resignation of the Remarketing Dealer pursuant to
Section 6 hereof or the repurchase of the MAPS by the Company
pursuant to Section 4(h) hereof or the redemption of the MAPS by
the Company pursuant to Section 4(i) hereof.
(b) In addition, the Remarketing Dealer may terminate all
of its obligations under this Agreement immediately by notifying
the Company and the Trustee of its election to do so, at any time
on or before any Remarketing Date, in the event that: (i) any of
the conditions referred to or set forth in Section 8(a) or (b)
hereof have not been met or satisfied in full, (ii) any of the
events set forth in Section 8(c) shall have occurred after the
Remarketing Dealer elects on the Notification Date to remarket
the MAPS or (iii) the Remarketing Dealer reasonably determines
after consultation with the Company, that it shall not have
received all of the information of a material nature, whether or
not specifically referenced herein, necessary to fulfill its
obligations under this Agreement.
(c) Notwithstanding any provision herein to the contrary,
in lieu of terminating this Agreement pursuant to Section 10(b)
above, upon the occurrence of any of the events set forth
therein, the Remarketing Dealer, in its sole discretion may waive
its right to terminate this Agreement as a result of the
occurrence of such event and (i) in the case of the Interest Rate
to Maturity, at any time between the Determination Date and 3:30
p.m., New York City time, on the Business Day immediately
-18-
<PAGE>
preceding the applicable Remarketing Date and (ii) in the case of
the Interim Period Interest Rate, at any time between the second
Business Day prior to October 15, 2001 and 3:30 p.m., New York
City time, on the Business Day immediately preceding October 15,
2001, may elect to purchase the MAPS for remarketing and
determine a new Interest Rate to Maturity or Interim Period
Interest Rate, as the case may be, in the manner provided in
Section 4(d) of this Agreement, except that for purposes of
determining the new Interest Rate to Maturity or Interim Period
Interest Rate, as the case may be, pursuant to this paragraph the
Determination Date or Interest Determination Date, as the case
may be, referred to therein shall be the date of such election
and redetermination. The Remarketing Dealer shall notify the
Company, the Trustee and DTC by telephone, confirmed in writing
(which may include facsimile or other electronic transmission),
by 4:00 p.m., New York City time, on the date of such election,
of the new Interest Rate to Maturity or Interim Period Interest
Rate, as the case may be, applicable to the MAPS. Thereupon,
such new Interest Rate to Maturity or Interim Period Interest
Rate, as the case may be, shall supersede and replace any
Interest Rate to Maturity or Interim Period Interest Rate
previously determined by the Remarketing Dealer and, absent
manifest error, shall be binding and conclusive upon the
beneficial owners and Holders of the MAPS on or after the
applicable Remarketing Date, the Company and the Trustee;
provided, however, that the Remarketing Dealer, by redetermining
the Interest Rate to Maturity or Interim Period Interest Rate, as
the case may be, upon the occurrence of any event set forth in
Section 10(b) as set forth above, shall not thereby be deemed to
have waived its right to determine a new Interest Rate to
Maturity or Interim Period Interest Rate, as the case may be, or
terminate this Agreement upon the later occurrence of any other
event set forth in Section 10(b).
(d) If this Agreement is terminated pursuant to this
Section, such termination shall be without liability of any party
to any other party, except that, in the case of termination
pursuant to Section 10(b) of this Agreement, the Company shall
reimburse the Remarketing Dealer for its reasonable out-of-pocket
expenses, in an aggregate amount not exceeding $10,000, and the
reasonable fees and disbursements of counsel for the Remarketing
Dealer, and except further as set forth in Section 10(e) below.
Sections 1, 9, 10(d) and 10(e) shall survive such termination and
remain in full force and effect.
(e) In the case of either (i) termination of this Agreement
pursuant to Section 10(b) or (ii) termination of this Agreement
due to the occurrence, prior to the Remarketing Dealer's election
on the Notification Date to remarket the MAPS, of any event set
forth in Section 8(c)(i), (iii) or (vi), upon the request of the
Remarketing Dealer, the Company shall immediately following the
Call Price Determination Date (as defined herein) pay the
Remarketing Dealer, in same-day funds by wire transfer to an
account designated by the Remarketing Dealer, the fair market
value, calculated as set forth below, of the Remarketing Dealer's
right to purchase and remarket the MAPS pursuant to this
Agreement (the "CALL PRICE").
In the case of termination of this Agreement pursuant to
Section 10(b), the Call Price shall be equal to the excess of (i)
the present value of the Remaining Scheduled Payments determined
as provided in Section 4 over (ii) the aggregate principal amount
of the MAPS.
-19-
<PAGE>
In the case of the occurrence, prior to the Remarketing
Dealer's election on the Notification Date to remarket the MAPS,
of any event set forth in Section 8(c)(i), (iii) or (vi), the
Call Price shall be determined in good faith by the Remarketing
Dealer after consultation with the Company on a commercially
reasonable basis by reference to, among other factors, the
formulation set forth in the preceding paragraph.
The Remarketing Dealer shall determine the applicable Call
Price on the Business Day immediately following the date of
termination or as soon as practicable thereafter (the "CALL PRICE
DETERMINATION DATE"). The Remarketing Dealer shall promptly
notify the Company of the Call Price Determination Date and the
Call Price by telephone, confirmed in writing (which may include
facsimile or other electronic transmission). The Call Price,
absent manifest error, shall be binding and conclusive upon the
parties hereto.
(f) This Agreement shall not be subject to termination by
the Company.
SECTION 11. Remarketing Dealer Performance, Duty of Care.
The duties and obligations of the Remarketing Dealer shall be
determined solely by the express provisions of this Agreement and
the Indenture. No implied covenants or obligations of or against
the Remarketing Dealer shall be read into this Agreement or the
Indenture. In the absence of bad faith on the part of the
Remarketing Dealer, the Remarketing Dealer may conclusively rely
upon any document furnished to it, which purports to conform to
the requirements of this Agreement and the Indenture, as to the
truth of the statements expressed in any of such documents. The
Remarketing Dealer shall be protected in acting upon any document
or communication reasonably believed by it to have been signed,
presented or made by the proper party or parties. The
Remarketing Dealer shall incur no liability to the Company or to
any beneficial owner or Holder of MAPS in its individual capacity
or as Remarketing Dealer for any action or failure to act in
connection with the remarketing or otherwise, except as a result
of negligence or willful misconduct on its part.
SECTION 12. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN SUCH STATE.
SECTION 13. Term of Agreement. Unless otherwise terminated
in accordance with the provisions hereof, this Agreement shall
remain in full force and effect from the date hereof until the
earlier of the first day thereafter on which no MAPS are
outstanding or the completion of the remarketing of the MAPS.
Regardless of any termination of this Agreement pursuant to any
of the provisions hereof, the obligations of the Company and the
Remarketing Dealer pursuant to Sections 9 and 10 hereof shall
remain operative and in full force and effect until fully
satisfied.
SECTION 14. Successors and Assigns. The rights and
obligations of the Company hereunder may not be assigned or
delegated to any other person without the prior written consent
-20-
<PAGE>
of the Remarketing Dealer, except that the rights and obligations
of the Company may be assigned and delegated to any successor of
the Company permitted by the Indenture. The rights and
obligations of the Remarketing Dealer hereunder may not be
assigned or delegated to any other person without the prior
written consent of the Company. This Agreement shall inure to
the benefit of and be binding upon the Company and the
Remarketing Dealer and their respective successors and assigns,
and will not confer any benefit upon any other person,
partnership, association or corporation other than the Company's
officers and directors, persons, if any, controlling the
Remarketing Dealer or the Company within the meaning of Section
15 of the Securities Act, or any indemnified party, or any person
entitled to contribution to the extent provided in Section 9
hereof. The terms "SUCCESSORS" and "ASSIGNS" shall not include
any purchaser of any MAPS merely because of such purchase.
SECTION 15. Headings. Section headings have been inserted
in this Agreement as a matter of convenience of reference only,
and it is agreed that such section headings are not a part of
this Agreement and will not be used in the interpretation of any
provisions of this Agreement.
SECTION 16. Severability. If any provision of this
Agreement shall be held or deemed to be or shall, in fact, be
invalid, inoperative or unenforceable as applied in any
particular case in any or all jurisdictions because it conflicts
with any provision of any constitution, statute, rule or public
policy or for any other reason, such circumstances shall not have
the effect of rendering the provision in question invalid,
inoperative or unenforceable in any other case, circumstance or
jurisdiction, or of rendering any other provision or provisions
of this Agreement invalid, inoperative or unenforceable to any
extent whatsoever.
SECTION 17. Counterparts. This Agreement may be executed
in several counterparts, each of which shall be regarded as an
original and all of which shall constitute one and the same
document.
SECTION 18. Amendments. This Agreement may be amended by
any instrument in writing signed by each of the parties hereto so
long as this Agreement as amended is not inconsistent with the
Indenture in effect as of the date of any such amendment.
SECTION 19. Notices. Unless otherwise specified, any
notices, requests, consents or other communications given or made
hereunder or pursuant hereto shall be made in writing (which may
include facsimile or other electronic transmission) and shall be
deemed to have been validly given or made when delivered or
mailed, registered or certified mail, return receipt requested
and postage prepaid, addressed as follows:
-21-
<PAGE>
(a) to the Company:
Texas Utilities Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Treasurer
Telephone No.: (214) 812-4646
Facsimile No.: (214) 812-2488
(b) to Salomon Smith Barney:
Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
and
Salomon Smith Barney Inc.
7 World Trade Center, 42nd Floor
New York, New York 10048
Attention: Kimberly Blue
Telephone No.: (212) 783-2655
Facsimile No.: (212) 783-2319
or to such other address as the Company or the Remarketing
Dealer shall specify in writing.
-22-
<PAGE>
IN WITNESS WHEREOF, each of the Company and the Remarketing
Dealer has caused this Remarketing Agreement to be executed in
its name and on its behalf by one of its duly authorized officers
as of the date first above written.
TEXAS UTILITIES COMPANY
By: /s/ Robert S. Shapard
---------------------------------------
Name: Robert S. Shapard
Title: Treasurer
SALOMON SMITH BARNEY INC.
By: /s/ Paul R. Bitler
-----------------------------------------
Name: Paul R. Bitler
Title: Vice President
-23-
-----------------------------------------
TEXAS UTILITIES COMPANY
TO
THE BANK OF NEW YORK
TRUSTEE
-------------
INDENTURE
(FOR UNSECURED DEBT SECURITIES SERIES G)
DATED AS OF OCTOBER 1, 1998
-----------------------------------------
<PAGE>
i
TABLE OF CONTENTS
PARTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITAL OF THE COMPANY
ARTICLE ONE
Definitions and Other Provisions of General Application
SECTION 101. Definitions . . . . . . . . . . . . . 1
Act . . . . . . . . . . . . . . . . . . . . . 2
Affiliate . . . . . . . . . . . . . . . . . . 2
Authenticating Agent . . . . . . . . . . . . . 2
Authorized Officer . . . . . . . . . . . . . . 2
Board of Directors . . . . . . . . . . . . . . 2
Board Resolution . . . . . . . . . . . . . . . 2
Business Day . . . . . . . . . . . . . . . . . 2
Commission . . . . . . . . . . . . . . . . . . 3
Company . . . . . . . . . . . . . . . . . . . 3
Company Request or Company Order . . . . . . . 3
Corporate Trust Office . . . . . . . . . . . . 3
corporation . . . . . . . . . . . . . . . . . 3
Defaulted Interest . . . . . . . . . . . . . . 3
Discount Security . . . . . . . . . . . . . . 3
Dollar or $ . . . . . . . . . . . . . . . . . 3
Eligible Obligations . . . . . . . . . . . . . 3
Event of Default . . . . . . . . . . . . . . . 3
Governmental Authority . . . . . . . . . . . . 3
Government Obligations . . . . . . . . . . . . 4
Holder . . . . . . . . . . . . . . . . . . . . 4
Indenture . . . . . . . . . . . . . . . . . . 4
Interest Payment Date . . . . . . . . . . . . 4
Maturity . . . . . . . . . . . . . . . . . . . 4
Officer's Certificate . . . . . . . . . . . . 4
Opinion of Counsel . . . . . . . . . . . . . . 4
Outstanding . . . . . . . . . . . . . . . . . 4
Paying Agent . . . . . . . . . . . . . . . . . 6
Periodic Offering . . . . . . . . . . . . . . 6
Person . . . . . . . . . . . . . . . . . . . . 6
Place of Payment . . . . . . . . . . . . . . . 6
Predecessor Security . . . . . . . . . . . . . 6
Redemption Date . . . . . . . . . . . . . . . 6
Redemption Price . . . . . . . . . . . . . . . 6
Regular Record Date . . . . . . . . . . . . . 6
Required Currency . . . . . . . . . . . . . . 6
Note: This table of contents shall not, for any purpose, be
deemed to be part of the Indenture.
<PAGE>
ii
Responsible Officer . . . . . . . . . . . . . 6
Securities . . . . . . . . . . . . . . . . . . 6
Security Register and Security Registrar . . . 6
Special Record Date . . . . . . . . . . . . . 7
Stated Interest Rate . . . . . . . . . . . . . 7
Stated Maturity . . . . . . . . . . . . . . . 7
Subsidiary . . . . . . . . . . . . . . . . . . 7
Tranche . . . . . . . . . . . . . . . . . . . 7
Trust Indenture Act . . . . . . . . . . . . . 7
Trustee . . . . . . . . . . . . . . . . . . . 7
United States . . . . . . . . . . . . . . . . 7
SECTION 102. Compliance Certificates and
Opinions . . . . . . . . . . . . . . 7
SECTION 103. Form of Documents Delivered to
Trustee . . . . . . . . . . . . . . . 8
SECTION 104. Acts of Holders . . . . . . . . . . . 9
SECTION 105. Notices, etc. to Trustee and
Company . . . . . . . . . . . . . . . 11
SECTION 106. Notice to Holders of Securities;
Waiver . . . . . . . . . . . . . . . 12
SECTION 107. Conflict with Trust Indenture Act . . 12
SECTION 108. Effect of Headings and Table of
Contents . . . . . . . . . . . . . . 12
SECTION 109. Successors and Assigns . . . . . . . 12
SECTION 110. Separability Clause . . . . . . . . . 12
SECTION 111. Benefits of Indenture . . . . . . . . 13
SECTION 112. Governing Law . . . . . . . . . . . . 13
SECTION 113. Legal Holidays . . . . . . . . . . . 13
ARTICLE TWO
Security Forms
SECTION 201. Forms Generally . . . . . . . . . . . 13
SECTION 202. Form of Trustee's Certificate of
Authentication . . . . . . . . . . . 14
ARTICLE THREE
The Securities
SECTION 301. Amount Unlimited; Issuable in
Series . . . . . . . . . . . . . . . 14
SECTION 302. Denominations . . . . . . . . . . . . 18
SECTION 303. Execution, Authentication, Delivery
and Dating . . . . . . . . . . . . . 18
SECTION 304. Temporary Securities . . . . . . . . 21
SECTION 305. Registration, Registration of
Transfer and Exchange . . . . . . . . 22
SECTION 306. Mutilated, Destroyed, Lost and
Stolen Securities . . . . . . . . . . 23
SECTION 307. Payment of Interest; Interest Rights
Preserved . . . . . . . . . . . . . . 24
SECTION 308. Persons Deemed Owners . . . . . . . . 25
SECTION 309. Cancellation by Security Registrar . 25
SECTION 310. Computation of Interest . . . . . . . 26
SECTION 311. Payment to Be in Proper Currency . . 26
SECTION 312. Extension of Interest Payment . . . . 26
<PAGE>
iii
ARTICLE FOUR
Redemption of Securities
SECTION 401. Applicability of Article . . . . . . 26
SECTION 402. Election to Redeem; Notice to
Trustee . . . . . . . . . . . . . . . 27
SECTION 403. Selection of Securities to Be
Redeemed . . . . . . . . . . . . . . 27
SECTION 404. Notice of Redemption . . . . . . . . 28
SECTION 405. Securities Payable on Redemption
Date . . . . . . . . . . . . . . . . 29
SECTION 406. Securities Redeemed in Part . . . . . 29
ARTICLE FIVE
Sinking Funds
SECTION 501. Applicability of Article . . . . . . 30
SECTION 502. Satisfaction of Sinking Fund
Payments with Securities . . . . . . 30
SECTION 503. Redemption of Securities for Sinking
Fund . . . . . . . . . . . . . . . . 30
ARTICLE SIX
Covenants
SECTION 601. Payment of Principal, Premium and
Interest . . . . . . . . . . . . . . 31
SECTION 602. Maintenance of Office or Agency . . . 31
SECTION 603. Money for Securities Payments to Be
Held in Trust . . . . . . . . . . . . 32
SECTION 604. Corporate Existence . . . . . . . . . 33
SECTION 605. Maintenance of Properties . . . . . . 34
SECTION 606. Annual Officer's Certificate as to
Compliance. . . . . . . . . . . . . . 34
SECTION 607. Waiver of Certain Covenants . . . . . 34
SECTION 608. Limitation on Liens . . . . . . . . . 35
ARTICLE SEVEN
Satisfaction and Discharge
SECTION 701. Satisfaction and Discharge of
Securities . . . . . . . . . . . . . 37
SECTION 702. Satisfaction and Discharge of
Indenture . . . . . . . . . . . . . . 40
SECTION 703. Application of Trust Money . . . . . 41
ARTICLE EIGHT
Events of Default; Remedies
SECTION 801. Events of Default . . . . . . . . . . 41
SECTION 802. Acceleration of Maturity; Rescission
and Annulment . . . . . . . . . . . . 43
SECTION 803. Collection of Indebtedness and Suits
for Enforcement by Trustee . . . . . 44
SECTION 804. Trustee May File Proofs of Claim . . 44
<PAGE>
iv
SECTION 805. Trustee May Enforce Claims Without
Possession of Securities . . . . . . 45
SECTION 806. Application of Money Collected . . . 45
SECTION 807. Limitation on Suits . . . . . . . . . 46
SECTION 808. Unconditional Right of Holders to
Receive Principal,
Premium and Interest . . . . . . . . 47
SECTION 809. Restoration of Rights and Remedies . 47
SECTION 810. Rights and Remedies Cumulative . . . 47
SECTION 811. Delay or Omission Not Waiver . . . . 47
SECTION 812. Control by Holders of Securities . . 47
SECTION 813. Waiver of Past Defaults . . . . . . . 48
SECTION 814. Undertaking for Costs . . . . . . . . 48
SECTION 815. Waiver of Stay or Extension Laws . . 49
ARTICLE NINE
The Trustee
SECTION 901. Certain Duties and Responsibilities . 49
SECTION 902. Notice of Defaults . . . . . . . . . 50
SECTION 903. Certain Rights of Trustee . . . . . . 50
SECTION 904. Not Responsible for Recitals or
Issuance of Securities . . . . . . . 51
SECTION 905. May Hold Securities . . . . . . . . . 51
SECTION 906. Money Held in Trust . . . . . . . . . 51
SECTION 907. Compensation and Reimbursement . . . 52
SECTION 908. Disqualification; Conflicting
Interests. . . . . . . . . . . . . . 52
SECTION 909. Corporate Trustee Required;
Eligibility . . . . . . . . . . . . . 53
SECTION 910. Resignation and Removal; Appointment
of Successor . . . . . . . . . . . . 53
SECTION 911. Acceptance of Appointment by
Successor . . . . . . . . . . . . . . 55
SECTION 912. Merger, Conversion, Consolidation or
Succession to Business . . . . . . . 57
SECTION 913. Preferential Collection of Claims
Against Company . . . . . . . . . . . 57
SECTION 914. Co-trustees and Separate Trustees. . 57
SECTION 915. Appointment of Authenticating Agent . 59
ARTICLE TEN
Holders' Lists and Reports by Trustee and Company
SECTION 1001. Lists of Holders . . . . . . . . . . 61
SECTION 1002. Reports by Trustee and Company . . . 61
ARTICLE ELEVEN
Consolidation, Merger, Conveyance or Other Transfer
SECTION 1101. Company May Consolidate, etc., Only
on Certain Terms . . . . . . . . . . 61
SECTION 1102. Successor Corporation Substituted . 62
<PAGE>
v
ARTICLE TWELVE
Supplemental Indentures
SECTION 1201. Supplemental Indentures Without
Consent of Holders . . . . . . . . . 62
SECTION 1202. Supplemental Indentures With
Consent of Holders . . . . . . . . . 64
SECTION 1203. Execution of Supplemental
Indentures . . . . . . . . . . . . . 66
SECTION 1204. Effect of Supplemental Indentures . . 66
SECTION 1205. Conformity With Trust Indenture
Act . . . . . . . . . . . . . . . . . 66
SECTION 1206. Reference in Securities to
Supplemental Indentures . . . . . . . 66
SECTION 1207. Modification Without Supplemental
Indenture . . . . . . . . . . . . . . 66
ARTICLE THIRTEEN
Meetings of Holders; Action Without Meeting
SECTION 1301. Purposes for Which Meetings May Be
Called . . . . . . . . . . . . . . . 67
SECTION 1302. Call, Notice and Place of Meetings . 67
SECTION 1303. Persons Entitled to Vote at
Meetings . . . . . . . . . . . . . . 68
SECTION 1304. Quorum; Action . . . . . . . . . . . 68
SECTION 1305. Attendance at Meetings;
Determination of Voting Rights;
Conduct and Adjournment of Meetings . 69
SECTION 1306. Counting Votes and Recording Action
of Meetings . . . . . . . . . . . . . 70
SECTION 1307. Action Without Meeting . . . . . . . 70
ARTICLE FOURTEEN
Immunity of Incorporators, Shareholders, Officers and Directors
SECTION 1401. Liability Solely Corporate . . . . . 70
ARTICLE FIFTEEN
Series G Notes
SECTION 1501. Designation of Series G Notes . . . . 71
Testimonium . . . . . . . . . . . . . . . . . . . . . . . . . 72
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . 74
<PAGE>
TEXAS UTILITIES COMPANY
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939
AND INDENTURE, DATED AS OF OCTOBER 1, 1998
TRUST INDENTURE ACT SECTION INDENTURE SECTION
Section 310 (a)(1) . . . . . . . . . . . . . . . . . . . . 909
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 909
(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . . 914
(a)(4) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 908
910
Section 311 (a) . . . . . . . . . . . . . . . . . . . . . 913
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 913
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 913
Section 312 (a) . . . . . . . . . . . . . . . . . . . . 1001
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1001
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 1001
Section 313 (a) . . . . . . . . . . . . . . . . . . . . 1002
(b) . . . . . . . . . . . . . . . . . . . . . . . . . 1002
(c) . . . . . . . . . . . . . . . . . . . . . . . . . 1002
Section 314 (a) . . . . . . . . . . . . . . . . . . . . 1002
(a)(4) . . . . . . . . . . . . . . . . . . . . . . . . . 606
(b) . . . . . . . . . . . . . . . . . . . . Not Applicable
(c)(1) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 102
(c)(3) . . . . . . . . . . . . . . . . . . . Not Applicable
(d) . . . . . . . . . . . . . . . . . . . . Not Applicable
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 102
Section 315 (a) . . . . . . . . . . . . . . . . . . . . . 901
903
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 902
(c) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
(d) . . . . . . . . . . . . . . . . . . . . . . . . . . 901
(e) . . . . . . . . . . . . . . . . . . . . . . . . . . 814
Section 316 (a) . . . . . . . . . . . . . . . . . . . . . 812
813
(a)(1)(A) . . . . . . . . . . . . . . . . . . . . . . . 802
812
(a)(1)(B) . . . . . . . . . . . . . . . . . . . . . . . 813
(a)(2) . . . . . . . . . . . . . . . . . . . Not Applicable
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 808
Section 317 (a)(1) . . . . . . . . . . . . . . . . . . . . 803
(a)(2) . . . . . . . . . . . . . . . . . . . . . . . . . 804
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . 603
Section 318 (a) . . . . . . . . . . . . . . . . . . . . . 107
<PAGE>
INDENTURE, dated as of October 1, 1998, between TEXAS
UTILITIES COMPANY, a corporation duly organized and existing
under the laws of the State of Texas (herein called the
"Company"), having its principal office at Energy Plaza, 1601
Bryan Street, Dallas, Texas 75201, 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 debentures, notes or other evidences of
indebtedness (herein called the "Securities"), in an unlimited
aggregate principal amount to be issued in one or more series as
contemplated herein; 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.
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
<PAGE>
-2-
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.
"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.
"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,
the President, any Vice President, the Treasurer, any Assistant
Treasurer, or any other officer or agent of the company duly
authorized by the Board of Directors to act in respect of matters
relating to this Indenture.
"BOARD OF DIRECTORS" means either the board of
directors of the Company or any committee thereof duly authorized
to act in respect of matters relating to this Indenture.
"BOARD RESOLUTION" means a copy of a resolution
certified by the Secretary or an Assistant Secretary of the
Company to have been duly adopted by the Board of Directors and
to be in full force and effect on the date of such certification,
and delivered to the Trustee.
"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.
<PAGE>
-3-
"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 Indenture is located at
101 Barclay Street, New York, New York 10286.
"CORPORATION" means a corporation, association,
company, limited liability company, 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 the
United States or of any State or Territory thereof or of the
District of Columbia 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.
<PAGE>
-4-
"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.
"HOLDER" means a Person in whose name a Security is
registered in the Security Register.
"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.
"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 and delivered to the Trustee.
"OPINION OF COUNSEL" means a written opinion of counsel, who
may be counsel for the Company, 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:
<PAGE>
-5-
(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; and
(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;
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.
<PAGE>
-6-
"PAYING AGENT" means any Person, including the Company,
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.
"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, partnership,
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, 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 officer of the Trustee assigned by the Trustee
to administer its corporate trust matters.
"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.
<PAGE>
-7-
"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).
"SUBSIDIARY" means a corporation more than 50% of the
outstanding voting stock of which is owned, directly or
indirectly, by the Company or by one or more other Subsidiaries,
or by the Company and one or more other Subsidiaries. For the
purposes of this definition, "voting stock" means stock that
ordinarily has voting power for the election of directors,
whether at all times or only so long as no senior class of stock
has such voting power by reason of any contingency.
"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 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 to the
Trustee to take any action under any provision of this Indenture,
the Company shall, if requested by the Trustee, furnish to the
Trustee an Officer's Certificate stating that all
<PAGE>
-8-
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.
In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
Any certificate or opinion of an officer of the Company
may be based, insofar as it relates to legal matters, upon a
certificate or opinion of, or representations by, counsel, unless
such officer 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.
<PAGE>
-9-
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. 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 and the
Company, 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.
<PAGE>
-10-
(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 or the Company 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 authenticated and delivered by the Trustee
in exchange for Outstanding Securities of such series or
Tranche.
(g) If the Company 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 the
Company shall have no obligation to do so. If such a record
date is fixed, such request, demand, authorization,
direction, notice, consent, waiver or other 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
<PAGE>
-11-
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 AND COMPANY.
Any request, demand, authorization, direction, notice,
consent, election, waiver or Act of Holders or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with, the Trustee by any Holder or by the
Company, or the Company by the Trustee or by any Holder, shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and delivered personally to an
officer or other responsible employee of the addressee, 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, or transmitted by certified or registered mail,
charges prepaid, to the applicable address set opposite such
party's name below or to such other address as either party
hereto may from time to time designate:
If to the Trustee, to:
The Bank of New York
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:
Texas Utilities Company
Energy Plaza
1601 Bryan Street
Dallas, Texas 75201
Attention: Treasurer
Telephone: (214) 812-4646
Telecopy: (214) 812-3366
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 transmission, and if transmitted by certified or
registered mail, on the date of receipt.
<PAGE>
-12-
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, 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.
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 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 shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby.
<PAGE>
-13-
SECTION 111. BENEFITS OF INDENTURE.
Nothing in this Indenture or the Securities, express or
implied, shall give to any Person, other than the parties hereto,
their successors hereunder and the Holders, any benefit or any
legal or equitable right, remedy or claim under this Indenture.
SECTION 112. GOVERNING LAW.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, EXCEPT TO THE EXTENT THAT THE LAW OF ANY OTHER JURISDICTION
SHALL BE MANDATORILY APPLICABLE.
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.
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 pursuant to such supplemental indenture or Board
Resolution, in each case with such appropriate insertions,
omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers
or other marks of identification and such 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 officers executing such Securities, as
evidenced by their execution of the Securities. If the form or
forms of Securities of any series are established in a Board
Resolution or in an Officer's Certificate pursuant
<PAGE>
-14-
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 Sections
301 or 1201(g), the Securities of each series shall be issuable
in registered form without coupons. The definitive Securities
shall be produced in such manner as shall be determined by the
officers executing such Securities, 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 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, or in an Officer's Certificate pursuant
to a supplemental indenture or a Board Resolution:
(a) the title of the Securities of such series (which
shall distinguish the Securities of such series from
Securities of all other series);
<PAGE>
-15-
(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
<PAGE>
-16-
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 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, 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 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 $1,000 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;
<PAGE>
-17-
(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 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;
(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, assurance or guarantee
for the Securities of such series;
<PAGE>
-18-
(w) the non-applicability of Section 608 to the
Securities of such Series or any exceptions or modifications
of Section 608 with respect to the Securities of such
Series;
(x) 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; and
(y) any other terms of the Securities of such series,
or any Tranche thereof, not inconsistent with the provisions
of this Indenture.
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
the clause (b) of Section 303.
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 $1,000 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 and may have the corporate seal
of the Company affixed thereto or reproduced thereon attested by
any other Authorized Officer 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 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.
<PAGE>
-19-
The Trustee shall authenticate and deliver Securities
of a series, 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 such series, 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) the Securities of such series, executed on behalf
of the Company by an Authorized Officer;
(d) an Opinion of Counsel to the effect that:
(i) the form or forms of such Securities have
been duly authorized by the Company and have been
established in conformity with the provisions of this
Indenture;
(ii) the terms of such Securities have been duly
authorized by the Company and have been established in
conformity with the provisions of this Indenture; and
(iii) such Securities, when authenticated and
delivered by the Trustee and issued and delivered by
the Company 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,
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);
<PAGE>
-20-
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 (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 shall have
been established pursuant to a Company 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, 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 will have been
established in conformity with the provisions of this
Indenture; and
(y) such Securities, when 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 and
issued and delivered by the Company 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, 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 of any of such Securities, the form,
terms thereof and 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 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 subject to a Periodic Offering, the Trustee shall be
entitled to assume that the Company's instructions to
authenticate and deliver such Securities do not violate any
applicable law or any applicable rule, regulation or order of any
Governmental Authority having jurisdiction over the Company.
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
<PAGE>
-21-
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 shall be dated the date of its
authentication.
Unless otherwise specified as contemplated by Section
301 with respect to any series of Securities, no Security shall
be entitled to any benefit under this Indenture or be valid or
obligatory for any purpose unless there appears on such Security
a certificate of authentication substantially in the form
provided for herein executed by the Trustee or an Authenticating
Agent by manual signature, and such certificate upon any Security
shall be conclusive evidence, and the only evidence, that such
Security has been duly authenticated and delivered hereunder and
is entitled to the benefits of this Indenture. Notwithstanding
the foregoing, if any Security shall have been authenticated and
delivered hereunder 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 Trustee 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 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
Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed,
typewritten, mimeographed or otherwise produced, in any
authorized denomination, substantially of the tenor of the
definitive Securities in lieu of which they are issued, with such
appropriate insertions, omissions, substitutions and other
variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities;
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 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.
<PAGE>
-22-
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.
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 Securities of such series, or any Tranche
thereof, 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 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 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.
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 which the Holder making
the exchange is entitled to receive.
All Securities delivered upon any registration of
transfer or exchange of Securities shall be valid obligations of
the Company, evidencing the same debt, and entitled to the same
benefits under this Indenture, as the Securities surrendered upon
such registration of transfer or exchange.
Every Security presented or surrendered for
registration of transfer or for exchange shall (if so required by
the Company, the Trustee or the Security Registrar) be duly
endorsed or shall be accompanied by a written
<PAGE>
-23-
instrument of transfer in form satisfactory to the Company, 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.
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 and bearing a number not contemporaneously outstanding.
If there shall be delivered to the Company 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 either of them harmless, then,
in the absence of notice to the Company 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 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 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
shall constitute an original additional contractual obligation of
the Company, whether or not the
<PAGE>
-24-
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.
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, at its election in each case, as provided in clause (a)
or (b) below:
(a) The Company 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 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 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 of such Special
Record Date and, in the name and at the expense of the
Company, 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
<PAGE>
-25-
Predecessor Securities) are registered at the close of
business on such Special Record Date.
(b) The Company 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 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 Trustee and any agent of the
Company or the Trustee may treat the Person in whose name such
Security is registered 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 neither the Company, the
Trustee nor any agent of the Company 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 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 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 a Company Order delivered to the Security
Registrar and the Trustee, and 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.
<PAGE>
-26-
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 other than Dollars
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 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, the Company 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.
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
<PAGE>
-27-
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. 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 shall 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.
<PAGE>
-28-
SECTION 404. NOTICE OF REDEMPTION.
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.
<PAGE>
-29-
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
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, 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, 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 or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or
his attorney duly authorized in writing), 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.
<PAGE>
-30-
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;
<PAGE>
-31-
(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, if
any, and interest, 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 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
in respect of such Securities and this Indenture may be served.
The Company 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
shall fail to maintain any such
<PAGE>
-32-
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 the Company hereby
appoints the Trustee as its agent for all such purposes in any
such event.
The Company 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 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 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, in which event the Company 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 and premium, if any, and interest, 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 and premium or interest 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, if any, or
interest, 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 and
premium, if any, and interest, if any, on such Securities,
deposit with such Paying Agents sums sufficient (without
duplication) to pay the principal and premium or interest so
becoming due, such sums to be held in trust for the benefit of
the Persons entitled to such principal, premium or interest, 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
<PAGE>
-33-
execute and deliver to the Trustee an instrument in which such
Paying Agent shall agree with the Trustee, subject to the
provisions of this Section, that such Paying Agent shall:
(a) hold all sums held by it for the payment of the
principal of and premium, if any, or interest, 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, if any, or interest,
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, if any, or interest, if any, on any
Security and remaining unclaimed for two years after such
principal and premium, if any, or interest has become due and
payable shall be paid to the Company on Company Request, or, if
then held by the Company, shall be discharged from such trust;
and, 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.
<PAGE>
-34-
SECTION 604. CORPORATE EXISTENCE.
Subject to the rights of the Company under Article
Eleven, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its
corporate existence.
SECTION 605. MAINTENANCE OF PROPERTIES.
The Company shall cause (or, with respect to property
owned in common with others, make reasonable effort to cause) all
its properties used or useful in the conduct of its business to
be maintained and kept in good condition, repair and working
order and shall cause (or, with respect to property owned in
common with others, make reasonable effort to cause) to be made
all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as, in the judgment of the Company, may
be necessary so that the business carried on in connection
therewith may be properly conducted; provided, however, that
nothing in this Section shall prevent the Company from
discontinuing, or causing the discontinuance of, the operation
and maintenance of any of its properties if such discontinuance
is, in the judgment of the Company, desirable in the conduct of
its business.
SECTION 606. ANNUAL OFFICER'S CERTIFICATE AS TO COMPLIANCE.
Not later than June 1 in each year, commencing June 1,
1999, the Company 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 the Company'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.
SECTION 607. WAIVER OF CERTAIN COVENANTS.
The Company 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, 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 604, 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
<PAGE>
-35-
duties of the Trustee in respect of any such term, provision or
condition shall remain in full force and effect.
SECTION 608. LIMITATION ON LIENS.
(a) Except as otherwise specified as contemplated by
Section 301 for Securities of any series, so long as any
Securities of any series are Outstanding, the Company will not
pledge, mortgage, hypothecate or grant a security interest in, or
permit any mortgage, pledge, security interest or other lien
upon, any capital stock of any Subsidiary now or hereafter owned
by the Company, to secure any Indebtedness (hereinafter defined)
without making effective provision whereby the Outstanding
Securities shall (so long as such other Indebtedness shall be so
secured) be equally and ratably secured with any and all such
other Indebtedness and any other indebtedness similarly entitled
to be equally and ratably secured; provided, however, that this
restriction shall not apply to nor prevent the creation or
existence of:
(1) any mortgage, pledge, security interest, lien or
encumbrance upon any such capital stock created at the time
of the acquisition of such capital stock by the Company or
within one year after such time to secure all or a portion
of the purchase price for such capital stock;
(2) any mortgage, pledge, security interest, lien or
encumbrance upon any such capital stock existing thereon at
the time of the acquisition thereof by the Company (whether
or not the obligations secured thereby are assumed by the
Company); or
(3) any extension, renewal of refunding of any
mortgage, pledge, security interest, lien or encumbrance
permitted by Subsection (1) or (2) above on capital stock of
any Subsidiary theretofore subject thereto (or substantially
the same capital stock) or any portion thereof.
(4) any judgment, levy, execution, attachment or other
similar lien arising in connection with court proceedings,
provided that either
(i) the execution or enforcement of each such
lien is effectively stayed within 30 days after entry
of the corresponding judgment (or the corresponding
judgment has been discharged within such 30 day period)
and the claims secured thereby are being contested in
good faith by appropriate proceedings timely commenced
and diligently prosecuted;
(ii) the payment of each such lien is covered in
full by insurance and the insurance company has not
denied or contested coverage thereof; or
(iii) so long as each such lien is adequately
bonded, any appropriate legal proceedings that may have
been duly initiated
<PAGE>
-36-
for the review of the corresponding judgment, decree or
order shall not have been fully terminated or the
period within which such proceedings may be initiated
shall not have expired.
For purposes of this Section 608, "Indebtedness" means
all indebtedness, whether or not represented by bonds,
debentures, notes or other securities, created or assumed by the
Company for the repayment of money borrowed. All indebtedness
for money borrowed secured by a lien upon property owned by the
Company and upon which indebtedness for money borrowed the
Company customarily pays interest, although the Company has not
assumed or become liable for the payment of such indebtedness for
money borrowed, shall for purposes of this Section 608 be deemed
to be Indebtedness of the Company. All indebtedness of others
for money borrowed which is guaranteed as to payment of principal
by the Company or in effect guaranteed by the Company through a
contingent agreement to purchase such indebtedness for money
borrowed shall for purposes of this Section 608 be deemed to be
Indebtedness of the Company, but no other contingent obligation
of the Company in respect of indebtedness for money borrowed or
other obligations incurred by others shall for purposes of this
Section 608 be deemed to be Indebtedness of the Company.
In case the Company shall propose to pledge, mortgage,
hypothecate or grant a security interest in any capital stock of
any Subsidiary owned by the Company to secure any Indebtedness,
other than as permitted by Subsections (a)(1) to (a)(3),
inclusive, of this Section, the Company will prior thereto give
written notice thereof to the Trustee, and the Company will prior
to or simultaneously with such pledge, mortgage, hypothecation or
grant of security interest, by supplemental indenture executed to
the Trustee (or to the extent legally necessary to another
trustee or an additional or separate trustee), in form
satisfactory to the Trustee, effectively secure (for so long as
such other Indebtedness shall be so secured) all the Securities
equally and ratably with such Indebtedness and with any other
indebtedness for money borrowed similarly entitled to be equally
and ratably secured.
(b) Except as otherwise specified as contemplated by
Section 301 for Securities of any series, the provisions of
Subsection (a) of this Section 608 shall not apply in the event
that the Company or any Subsidiary shall pledge, mortgage,
hypothecate or grant a security interest in or other lien upon
any capital stock of any Subsidiary now or hereafter owned by the
Company to secure any Indebtedness which would otherwise be
subject to the foregoing restriction up to an aggregate amount
which, together with all other Indebtedness (other than
mortgages, pledges, security interests, liens or encumbrances
permitted by Subsection (a) of this Section 608) which would
otherwise be subject to the foregoing restriction, does not at
the time exceed 5% of Consolidated Capitalization.
For purposes of this Section 608:
(1) The term "Consolidated Capitalization" means the
sum obtained by adding (i) Consolidated Shareholders'
Equity, (ii) Consolidated Indebtedness for money borrowed
(exclusive of any thereof
<PAGE>
-37-
which is due and payable within one year of the date such
sum is determined) and, without duplication, (iii) any
preference or preferred stock of the Company or any
Consolidated Subsidiary which is subject to mandatory
redemption or sinking fund provisions.
(2) The term "Consolidated Shareholders' Equity" means
the total Assets of the Company and its Consolidated
Subsidiaries less all liabilities of the Company and its
Consolidated Subsidiaries. As used in this definition,
"liabilities" means all obligations which would, in
accordance with generally accepted accounting principles, be
classified on a balance sheet as liabilities, including
without limitation, (i) indebtedness secured by property of
the Company or any of its Consolidated Subsidiaries whether
or not the Company or such Consolidated Subsidiary is liable
for the payment thereof unless, in the case that the Company
or such Consolidated Subsidiary is not so liable, such
property has not been included among the Assets of the
Company or such Consolidated Subsidiary on such balance
sheet, (ii) deferred liabilities, (iii) indebtedness of the
Company or any of its Consolidated Subsidiaries that is
expressly subordinated in right and priority of payment to
other liabilities of the Company or such Consolidated
Subsidiary. As used in this definition, "liabilities"
includes preference or preferred stock of the Company or any
Consolidated Subsidiary only to the extent of any such
preference or preferred stock that is subject to mandatory
redemption or sinking fund provisions.
(3) The term "Consolidated Subsidiary" means at any
date any Subsidiary the financial statements of which under
generally accepted accounting principles would be
consolidated with those of the Company in its consolidated
financial statements as of such date.
(4) The "Assets" of any Person means the whole or any
part of its business, property, assets, cash and
receivables.
(5) The term "Consolidated Indebtedness" means total
indebtedness as shown on the consolidated balance sheet of
the Company and its Consolidated Subsidiaries.
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
the Company in respect thereof shall be deemed
<PAGE>
-38-
to have been satisfied and discharged, if there shall have been
irrevocably deposited with the Trustee or any Paying Agent (other
than the Company), in trust:
(a) money in an amount which shall be sufficient, or
(b) in the case of a deposit made prior to the
Maturity of such Securities or portions thereof, 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,
to pay when due the principal of and premium, if any, and
interest, if any, due and to become due on such Securities or
portions thereof on or prior to Maturity; provided, however, that
in the case of the provision for payment or redemption of less
than all the Securities of any series 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
<PAGE>
-39-
(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, 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 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.
<PAGE>
-40-
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 Federal or State bankruptcy,
insolvency or other similar law, such Security shall thereupon be
deemed retroactively not to have been paid and any satisfaction
and discharge of the Company's indebtedness in respect thereof
shall retroactively be deemed not to have been effected, and such
Security shall be deemed to remain Outstanding and (b) any
satisfaction and discharge of the Company's indebtedness in
respect of any Security shall be subject to the provisions of the
last paragraph of Section 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 has paid or caused to be paid all other
sums payable hereunder by the Company;
provided, however, that if, in accordance with the last paragraph
of Section 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 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.
<PAGE>
-41-
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, if any, and
interest, if any, on the Securities or portions of principal
amount thereof in respect of which such deposit was made, all
subject, however, to the provisions of Section 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, if any, and
interest, if any, then due on such Securities shall be paid over
to the Company free and clear of any trust, lien or pledge under
this Indenture except the lien provided by Section 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; 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; or
<PAGE>
-42-
(c) failure to perform or breach of any covenant or
warranty of the Company 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 by the Trustee, or to the Company and the
Trustee by the Holders of at least 33% 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 an extension of such period if
corrective action is initiated by the Company within such
period and is being diligently pursued; or
(d) the entry by a court having jurisdiction in the
premises of (1) a decree or order for relief in respect of
the Company in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or (2) a decree or order
adjudging the Company a bankrupt or insolvent, or approving
as properly filed a petition by one or more Persons other
than the Company seeking reorganization, arrangement,
adjustment or composition of or in respect of the Company
under any applicable Federal or State law, or appointing a
custodian, receiver, liquidator, assignee, trustee,
sequestrator or other similar official for the Company 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
(e) the commencement by the Company of a voluntary
case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law
or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of
a decree or order for relief in respect of the Company in a
case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law
or to the commencement of any bankruptcy or insolvency case
or proceeding against it, or the filing by it of a petition
or answer or consent seeking reorganization or relief under
any applicable Federal or State law, or the consent by it to
the filing of such petition or to the appointment of or
taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or similar official of the
Company or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors,
or the admission by it in writing of its inability to pay
its debts generally as they become due, or the authorization
of such action by the Board of Directors; or
<PAGE>
-43-
(f) any other Event of Default specified 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 33% 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. 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) or (e) shall have
occurred and be continuing, either the Trustee or the Holders of
not less than 33% 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. 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 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 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 in such Securities;
(3) to the extent that payment of such interest
is lawful, interest upon overdue interest, if any, at
the rate or rates prescribed therefor in such
Securities;
(4) all amounts due to the Trustee under Section
907;
and
<PAGE>
-44-
(b) any other Event 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
shall, upon demand of the Trustee, pay to it, for the benefit of
the Holders of the Securities of the series with respect to which
such Event of Default shall have occurred, the whole amount then
due and payable on such Securities for principal and premium, if
any, and interest, if any, and, to the extent permitted by law,
interest on any overdue principal and interest, at the rate or
rates prescribed therefor in such Securities, and, in addition
thereto, such further amount as shall be sufficient to cover any
amounts due to the Trustee under Section 907.
If the Company shall fail to pay such amounts forthwith
upon such demand, the Trustee, in its own name and as trustee of
an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such
proceeding to judgment or final decree and may enforce the same
against the Company or any other obligor upon such Securities and
collect the moneys adjudged or decreed to be payable in the
manner provided by law out of the property of the Company or any
other obligor upon such Securities, wherever situated.
If an Event of Default with respect to Securities of
any series shall have occurred and be continuing, the Trustee may
in its discretion proceed to protect and enforce its rights and
the rights of the Holders of Securities of such series by such
appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.
SECTION 804. TRUSTEE MAY FILE PROOFS OF CLAIM.
In case of the pendency of any receivership,
insolvency, liquidation, bankruptcy, reorganization, arrangement,
adjustment, composition or other judicial proceeding relative to
the Company or any other obligor upon the Securities or the
property of the Company or of such other obligor or their
creditors, the Trustee (irrespective of whether the principal of
the Securities shall then be due and payable as therein expressed
or by declaration or otherwise and irrespective of whether the
Trustee shall have made any demand on the
<PAGE>
-45-
Company 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 reorganization, arrangement,
adjustment or composition affecting the Securities or the rights
of any Holder thereof or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 805. TRUSTEE MAY ENFORCE CLAIMS WITHOUT POSSESSION OF
SECURITIES.
All rights of action and claims under this Indenture or
the Securities may be prosecuted and enforced by the Trustee
without the possession of any of the Securities or the production
thereof in any proceeding relating thereto, and any such
proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of
the Holders 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;
<PAGE>
-46-
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.
<PAGE>
-47-
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, 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, and 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
<PAGE>
-48-
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, if
any, or interest, 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 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, 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
<PAGE>
-49-
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.
The Company covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, or
plead, or in any manner whatsoever claim or take the benefit or
advantage of, any stay or extension law wherever enacted, now or
at any time hereafter in force, which may affect the covenants or
the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit
or advantage of any such law and covenants that it will not
hinder, delay or impede the execution of any power herein granted
to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.
ARTICLE 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.
(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.
<PAGE>
-50-
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 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,
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 mentioned
herein shall be sufficiently evidenced by a Company Request
or Company Order, or as otherwise expressly provided herein,
and any resolution of the Board of Directors may be
sufficiently evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture
the Trustee shall deem it desirable that a matter be proved
or established prior to taking, suffering or omitting any
action hereunder, the Trustee (unless other evidence be
herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officer's Certificate;
(d) the Trustee may consult with counsel and the
written advice of such counsel or any Opinion of Counsel
shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it
hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any 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,
<PAGE>
-51-
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, 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, as the case may be, 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 of the default or
Event of Default, as the case may be, or (2) written notice
of such default or Event of Default, as the case may be,
shall have been given to the Trustee by the Company, 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
(except the Trustee's certificates of authentication) shall be
taken as the statements of the Company, and neither the Trustee
nor any Authenticating Agent assumes responsibility for their
correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Securities.
Neither the Trustee nor any Authenticating Agent shall be
accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 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.
<PAGE>
-52-
SECTION 907. COMPENSATION AND REIMBURSEMENT.
The Company shall
(a) 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,
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,
wilful misconduct or bad faith; and
(c) 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, wilful
misconduct or bad faith.
As security for the performance of the obligations of
the Company under this Section, the Trustee shall have a lien
prior to the Securities upon all property and funds held or
collected by the Trustee as such 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, wilful 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 Federal or State 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
<PAGE>
-53-
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
the Securities of any series, 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 any securities
of any series issued under the Indenture (For Unsecured Debt
Securities Series A) dated as of October 1, 1997 of the Company
to The Bank of New York, as trustee, the Indenture (For Unsecured
Debt Securities Series B) dated as of October 1, 1997 of the
Company to The Bank of New York, as trustee, the Indenture (For
Unsecured Debt Securities Series C), dated as of January 1, 1998
of the Company to The Bank of New York, as trustee, the Purchase
Contract Agreement dated as of July 1, 1998 of the Company to The
Bank of New York, as agent, attorney-in-fact and trustee, the
Indenture (For Unsecured Debt Securities Series D and Series E),
dated as of July 1, 1998 of the Company to The Bank of New York,
as trustee, or the Indenture (For Unsecured Debt Securities
Series F), dated as of October 1, 1998 of the Company to The Bank
of New York, as trustee.
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 or State authority, or
(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
<PAGE>
-54-
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. 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 with
respect to the Securities of any series by Act of the
Holders of a majority in principal amount of the Outstanding
Securities of such series delivered to the Trustee and to
the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section
908 after written request therefor by the Company 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 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 by a Board
Resolution 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, by a Board Resolution, shall promptly appoint a
successor Trustee or Trustees with respect to the Securities
of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the
Securities of one or more or all of such series and that at
any time there shall be only one Trustee with respect to the
Securities of any particular series) and shall comply with
the applicable requirements of Section 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
<PAGE>
-55-
extent supersede the successor Trustee appointed by the
Company. If no successor Trustee with respect to the
Securities of any series shall have been so appointed by the
Company 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
shall have delivered to the Trustee (i) a Board Resolution
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 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 and to the
retiring Trustee an instrument accepting such appointment,
and thereupon the resignation or removal of the retiring
Trustee shall become effective and such successor Trustee,
without any further act, deed or conveyance, shall become
vested with all the rights, powers, trusts and duties of the
retiring Trustee; but, on the request of the Company or the
successor Trustee, such retiring Trustee shall, upon payment
of all sums owed to it, execute and deliver an
<PAGE>
-56-
instrument transferring to such successor Trustee all the
rights, powers and trusts of the retiring Trustee and shall
duly assign, transfer and deliver to such successor Trustee
all property and money held by such retiring Trustee
hereunder.
(b) In case of the appointment hereunder of a
successor Trustee with respect to the Securities of one or
more (but not all) series, the Company, the retiring Trustee
and each successor Trustee with respect to the Securities of
one or more series shall execute and deliver an indenture
supplemental hereto wherein each successor Trustee shall
accept such appointment and which (1) shall contain such
provisions as shall be necessary or desirable to transfer
and confirm to, and to vest in, each successor Trustee all
the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those
series to which the appointment of such successor Trustee
relates, (2) if the retiring Trustee is not retiring with
respect to all Securities, shall contain such provisions as
shall be deemed necessary or desirable to confirm that all
the rights, powers, trusts and duties of the retiring
Trustee with respect to the Securities of that or those
series as to which the retiring Trustee is not retiring
shall continue to be vested in the retiring Trustee and
(3) shall add to or change any of the provisions of this
Indenture as shall be necessary to provide for or facilitate
the administration of the trusts hereunder by more than one
Trustee, it being understood that nothing herein or in such
supplemental indenture shall constitute such Trustees co-
trustees of the same trust and that each such Trustee shall
be trustee of a trust or trusts hereunder separate and apart
from any trust or trusts hereunder administered by any other
such Trustee; and upon the execution and delivery of such
supplemental indenture the resignation or removal of the
retiring Trustee shall become effective to the extent
provided therein and each such successor Trustee, without
any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the
retiring Trustee with respect to the Securities of that or
those series to which the appointment of such successor
Trustee relates; but, on request of the Company or any
successor Trustee, such retiring Trustee, 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 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.
<PAGE>
-57-
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 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 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
<PAGE>
-58-
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
<PAGE>
-59-
(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
issued upon original issuance and upon exchange, registration of
transfer or partial redemption thereof or pursuant to Section
306, and Securities so authenticated shall be entitled to the
benefits of this Indenture and shall be valid and obligatory for
all purposes as if authenticated by the Trustee hereunder.
Wherever reference is made in this Indenture to the
authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be
deemed to include authentication and delivery on behalf of the
Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an
Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation
organized and doing business under the laws of the United States,
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 or State
authority. If such Authenticating Agent publishes reports of
condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for
the purposes of this Section, the combined capital and surplus of
such Authenticating Agent shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of
this Section, such Authenticating Agent shall resign immediately
in the manner and with the effect specified in this Section.
Any corporation into which an Authenticating Agent may
be merged or converted or with which it may be consolidated, or
any corporation resulting from any merger, conversion or
consolidation to which such Authenticating Agent shall be a
party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall
continue to be an Authenticating Agent, provided such corporation
shall be otherwise eligible under this Section, without the
execution or filing of any paper or any further act on the part
of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by
giving written notice thereof to the Trustee and to the Company.
The Trustee may at any time terminate the agency of an
Authenticating Agent by giving written notice thereof to such
Authenticating Agent and to the Company. Upon receiving such a
notice of resignation or upon such a termination, or in case at
any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section, the Trustee may
appoint a successor Authenticating Agent which shall be
acceptable to the Company. 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
<PAGE>
-60-
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 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.
<PAGE>
-61-
ARTICLE TEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE AND COMPANY
SECTION 1001. LISTS OF HOLDERS.
Semiannually, not later than June 1 and December 1 in
each year, commencing December 1, 1998, and at such other times
as the Trustee may request in writing, the Company 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 AND COMPANY.
Not later than November 1 in each year, commencing
November 1, 1998, 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 September
15, 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
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 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 MAY CONSOLIDATE, ETC., ONLY ON CERTAIN
TERMS.
The Company shall not 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 is merged or the Person which
acquires by conveyance or transfer, or which leases, the
properties and assets of the Company substantially as an
entirety shall be a Person organized and validly existing
under the laws of the United States, any State thereof or
<PAGE>
-62-
the District of Columbia, 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 and the
performance of every covenant of this Indenture on the part
of the Company 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 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 with or merger by
the Company into any other corporation or any conveyance, or
other transfer or lease of the properties and assets of the
Company substantially as an entirety in accordance with Section
1101, the successor corporation formed by such consolidation or
into which the Company 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 under this Indenture with the same effect as if such
successor Person had been named as the Company 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.
ARTICLE TWELVE
SUPPLEMENTAL INDENTURES
SECTION 1201. SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF
HOLDERS.
Without the consent of any Holders, the Company and the
Trustee, at any time and from time to time, may enter into one or
more indentures supplemental hereto, in form satisfactory to the
Trustee, for any of the following purposes:
(a) to evidence the succession of another Person to
the Company and the assumption by any such successor of the
covenants of the Company herein and in the Securities, all
as provided in Article Eleven; or
(b) to add one or more covenants of the Company or
other provisions for the benefit of all Holders or for the
benefit of the Holders of, or to remain in effect only so
<PAGE>
-63-
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
(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 as contemplated by Sections 201 and
301; or
(g) to provide for the authentication and delivery of
bearer securities and coupons appertaining thereto
representing interest, if any, thereon and for the
procedures for the registration, exchange and replacement
thereof and for the giving of notice to, and the
solicitation of the vote or consent of, the holders thereof,
and for any and all other matters incidental thereto; or
(h) to evidence and provide for the acceptance of
appointment hereunder by a separate or successor Trustee or
co-trustee with respect to the Securities of one or more
series and to add to or change any of the provisions of this
Indenture as 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, if any, and interest, 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 in respect of all
or any series of Securities, or any Tranche thereof, and
this Indenture may be served; or
<PAGE>
-64-
(k) to cure any ambiguity, to correct or supplement
any provision herein which may be defective or inconsistent
with any other provision herein, or to make any other
changes to the provisions hereof or to add other provisions
with respect to matters or questions arising under this
Indenture, provided that such other changes or additions
shall not adversely affect the interests of the Holders of
Securities of any series 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 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 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 and the Trustee, the
Company, when authorized by a Board Resolution, and the Trustee
may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to, or changing in any
manner or eliminating any of the provisions of, this Indenture or
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
<PAGE>
-65-
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.
<PAGE>
-66-
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.
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 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 any such
supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in
exchange for Outstanding Securities of such series 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
<PAGE>
-67-
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
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 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, 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 and the Trustee are present, or if notice is waived
<PAGE>
-68-
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 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 and its 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
<PAGE>
-69-
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 by Holders
as provided in Section 1302(b), in which case the Company 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
<PAGE>
-70-
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
IMMUNITY OF INCORPORATORS, SHAREHOLDERS, OFFICERS AND DIRECTORS
SECTION 1401. 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, 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,
<PAGE>
-71-
covenant or agreement under this Indenture, against any
incorporator, shareholder, officer or director, as such, past,
present or future of the Company or of any predecessor or
successor corporation (either directly or through the Company or
a predecessor or successor corporation), 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 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 any predecessor or successor
corporation, either directly or indirectly through the Company 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 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.
ARTICLE FIFTEEN
SERIES G NOTES
SECTION 1501. DESIGNATION OF SERIES G NOTES.
There is hereby created a series of Securities
designated "Floating Rate Senior Notes due April 20, 2000"
(herein sometimes referred to as "Series G Notes") and limited in
aggregate principal amount (except as contemplated in Section
301(b) hereof) to $125,000,000. The form and terms of the Series
G Notes shall be established in an Officer's Certificate pursuant
to Sections 201 and 301.
---------------------
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>
-72-
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, all as of the day and year first
above written.
TEXAS UTILITIES COMPANY
By: /s/ Robert S. Shapard
--------------------------------
Treasurer
THE BANK OF NEW YORK, Trustee
By: /s/ W.N. Gitlin
--------------------------------
W.N. GITLIN
Vice President
Exhibit 4(e)
TEXAS UTILITIES COMPANY
OFFICER'S CERTIFICATE
Robert S. Shapard, the Treasurer of Texas Utilities Company
(the "Company"), pursuant to the authority granted in the Board
Resolutions of the Company dated February 19 and 20, 1998 and
April 13, 1998, and Sections 201, 301 and 1501 of the Indenture
defined herein, does hereby certify to The Bank of New York (the
"Trustee"), as Trustee under the Indenture of the Company (For
Unsecured Debt Securities Series G) dated as of October 1, 1998
(the "Indenture") that:
1. The Securities of the first series to be issued under
the Indenture shall be designated "Floating Rate Senior
Notes due April 20, 2000" (the "Series G Notes"). All
capitalized terms used in this certificate which are
not defined herein shall have the meanings set forth in
Exhibit A hereto; all capitalized terms used in this
certificate which are not defined herein or in Exhibit
A hereto shall have the meanings set forth in the
Indenture;
2. The Series G Notes shall be limited in aggregate
principal amount to $125,000,000 at any time
Outstanding, except as contemplated in Section 301(b)
of the Indenture;
3. The Series G Notes shall mature and the principal
thereof shall be due and payable together with all
accrued and unpaid interest thereon on April 20, 2000;
4. The Series G Notes shall bear interest as provided in
the form set forth in Exhibit A hereto;
5. The principal and each installment of interest on the
Series G Notes shall be payable at, and registration
and registration of transfers and exchanges in respect
of the Series G Notes may be effected at, the office or
agency of the Company in The City of New York; provided
that payment of interest may be made at the option of
the Company by check mailed to the address of the
persons entitled thereto or by wire transfer to an
account designated by the person entitled thereto.
Notices and demands to or upon the Company in respect
of the Series G Notes may be served at the office or
agency of the Company in The City of New York. The
Corporate Trust Office of the Trustee will initially be
the agency of the Company for such payment,
registration and registration of transfers and
exchanges and service of notices and demands and the
Company hereby appoints the Trustee as its agent for
all such purposes; 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.
The Trustee will initially be the Security Registrar
and the Paying Agent for the Series G Notes;
6. The Calculation Agent for the Series G Notes shall be
The Bank of New York, or its successor as Calculation
Agent. At any time, the Company may designate a
successor Calculation Agent, who may be any person or
entity who is eligible to be a successor Trustee or
co-trustee under the Indenture or who (a) is in fact
independent, (b) does not have any direct material
financial interest in the Company or in any affiliate
<PAGE>
of the Company, (c) is not connected with the Company
as an officer, employee, promoter, underwriter,
partner, director or person performing similar
functions, (d) is selected by an Authorized Officer and
(e) is approved by the Trustee in the exercise of
reasonable care;
7. The Series G Notes will not be redeemable prior to
maturity;
8. The Series G Notes will be initially issued in global
form registered in the name of Cede & Co. (as nominee
for The Depository Trust Company ("DTC"), New York, New
York). The Series G Notes in global form shall bear
the depository legend in substantially the form set
forth in Exhibit A hereto. So long as the Series G
Notes are held solely in global form, the Regular
Record Date shall be the Business Day immediately
preceding the relevant Interest Payment Date; if the
Series G Notes are registered in the names of
additional Holders, the Company shall have the right to
select a Regular Record Date for such Series G Notes,
which shall be at least one Business Day but not more
than 60 Business Days prior to the relevant Interest
Payment Date. So long as the Series G Notes are
outstanding in global form registered in the name of
DTC or its nominee, all payments of principal and
interest will be made by the Company in immediately
available funds;
9. The Trustee, the Security Registrar and the Company
will have no responsibility under the Indenture for
transfers of beneficial interests in the Series G
Notes;
10. No service charge shall be made for the registration of
transfer or exchange of the Series G Notes; 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;
11. If the Company shall make any deposit of money and/or
Eligible Obligations with respect to any Series G
Notes, 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 Series G Notes, shall
assume the obligation (which shall be absolute and
unconditional) 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 on such Series G Notes 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
-2-
<PAGE>
(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 Series G Notes,
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.
12. The obligations of the Company under the Series G Notes
and under the Indenture to the extent related to such
series will be subject to assignment by the Company to
and assumption by a wholly owned Subsidiary of the
Company at any time, as provided in the form of the
Series G Notes set forth in Exhibit A hereto.
In the event that such Subsidiary assumes the
obligations under the Series G Notes, the Company will
unconditionally guarantee payment of the Series G Notes
and will execute a guarantee in form and substance
satisfactory to the Trustee. Pursuant to the
guarantee, the Company will fully and unconditionally
guarantee the payment of the obligations of such
assuming Subsidiary under the Series G Notes and under
the Indenture, including, without limitation, payment,
as and when due, of the principal of, premium, if any,
and interest on, the Series G Notes. Other than the
obligation to make such payments, the Company will be
released and discharged from all of its other
obligations under the Indenture. The foregoing
assignment and assumption shall be in compliance with
applicable law.
13. The Series G Notes shall have such other terms and
provisions as are provided in the form thereof set
forth in Exhibit A hereto, and shall be issued in
substantially such form;
14. The undersigned has read all of the covenants and
conditions contained in the Indenture relating to the
issuance of the Series G Notes, and the definitions in
the Indenture relating thereto, in respect of which
this certificate is made;
15. The statements contained in this certificate are based
upon the familiarity of the undersigned with the
Indenture, the documents accompanying this certificate,
and upon discussions by the undersigned with officers
and employees of the Company familiar with the matters
set forth herein;
16. In the opinion of the undersigned, he has made such
examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not
such covenants and conditions have been complied with;
and
17. In the opinion 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 Series G Notes requested in the accompanying
Company Order 1-D-1 have been complied with.
-3-
<PAGE>
IN WITNESS WHEREOF, I have executed this Officer's
Certificate this 21st day of October, 1998.
/s/ Robert Shapard
----------------------------
Robert Shapard
Treasurer
<PAGE>
EXHIBIT A
[depository legend]
Unless this Certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Company or its agent for registration
of transfer, exchange, or payment, and any certificate issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC), ANY TRANSFER, PLEDGE, OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.
NO.
------------------
CUSIP NO. 882848AP9
[FORM OF FACE OF SERIES G NOTE]
TEXAS UTILITIES COMPANY
FLOATING RATE SENIOR NOTES DUE APRIL 20, 2000
Texas Utilities Company, a corporation duly organized and
existing under the laws of the State of Texas (herein referred to
as the "Company", which term includes any successor Person under
the Indenture), for value received, hereby promises to pay to
[Cede & Co.]
or registered assigns, the principal sum of
Dollars
---------------------------------------------------------
on April 20, 2000 (Maturity Date), and to pay interest on said
principal sum, quarterly on January 21, April 21, July 21 and
October 21 of each year and on the Maturity Date (each an
Interest Payment Date), commencing January 21, 1999, at the per
annum interest rate determined by the Calculation Agent on each
Interest Determination Date, as such terms are defined herein,
until the principal hereof is paid or made available for payment.
The amount of interest payable on any Interest Payment Date shall
be computed on the basis of the actual number of days for which
interest is payable in the relevant Interest Period, divided by
360. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in
such Indenture, be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest,
which shall be the [____] Business Day immediately preceding such
Interest Payment Date. Any such interest not so punctually paid
or duly provided for will forthwith cease to be payable to the
Holder on such Regular Record Date and may either be paid to the
Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest to be
fixed by the Trustee, notice whereof shall be given to Holders of
Securities of this series not less than 10 days prior to such
Special Record Date, or be paid at any time in any other lawful
manner not inconsistent with the requirements of any securities
exchange on which the Securities of this series may be listed,
and upon such notice as may be required by such exchange, all as
more fully provided in the Indenture referred to on the reverse
hereof.
<PAGE>
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 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, provided, however, that, at
the option of the Company, interest on this Security may be paid
by check mailed to the address of the person entitled thereto, as
such address shall appear on the Security Register, or by wire
transfer to an account designated by the person entitled thereto.
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.
TEXAS UTILITIES COMPANY
By:
------------------------------
[FORM OF CERTIFICATE OF AUTHENTICATION]
CERTIFICATE OF AUTHENTICATION
Dated:
This is one of the Securities of the series designated
therein referred to in the within-mentioned Indenture.
THE BANK OF NEW YORK, as Trustee
By:
--------------------------------
Authorized Signatory
A-2
<PAGE>
[FORM OF REVERSE OF SERIES G NOTE]
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 Debt Securities Series G), dated as of October 1,
1998 (herein, together with any amendments thereto, called the
"Indenture", which term shall have the meaning assigned to it in
such instrument), between the Company 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 October 21, 1998,
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 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,
limited in aggregate principal amount to $125,000,000.
The Securities of this series will bear interest at a
per annum rate (Interest Rate) determined by The Bank of New
York, or its successor appointed by the Company as permitted by
the Indenture, acting as calculation agent (Calculation Agent).
The Interest Rate for each Interest Period will be equal to LIBOR
(as defined below) on the second London Business Day (as defined
below) immediately preceding the first day of such Interest
Period (Interest Determination Date), plus 0.70%; provided,
however, that in certain circumstances described below, the
Interest Rate will be determined in an alternative manner without
reference to LIBOR. Promptly upon such determination, the
Calculation Agent will notify the Trustee of the Interest Rate
for such Interest Period. The determination of the Calculation
Agent, absent manifest error, shall be binding and conclusive
upon the holders of this Security, the Company and the Trustee.
Interest on the Securities of this series will accrue
from and including October 21, 1998 (Issue Date) to but excluding
January 21, 1999 (the first Interest Payment Date) and thereafter
from and including each Interest Payment Date to but excluding
the next succeeding Interest Payment Date or Maturity Date, as
the case may be.
"London Business Day" shall mean a day on which
dealings in deposits in U.S. dollars are transacted, or with
respect to any future date, are expected to be transacted, in the
London interbank market.
"LIBOR" for any Interest Determination Date will be the
offered rate for deposits in U.S. dollars having an index
maturity of three months for a period commencing on the second
London Business Day immediately following the Interest
Determination Date (Three Month Deposits) in amounts of not less
than $1,000,000, as such rate appears on Telerate Page 3750 (as
defined below), or a successor reporter of such rates selected by
the Calculation Agent and acceptable to the Company, at
approximately 11:00 A.M., London time, on the Interest
Determination Date (Reported Rate).
"Telerate Page 3750" means the display designated on
page "3750" on Dow Jones Markets Limited (or such other page as
may replace the 3750 page on that service or such other service
or services as may be nominated by the British Bankers'
Association for the purpose of displaying London interbank
offered rates for U.S. Dollar deposits).
A-3
<PAGE>
If the following circumstances exist on any Interest
Determination Date, the Calculation Agent shall determine the
Interest Rate for the Offered Bonds as follows:
(i) In the event no Reported Rate appears on Telerate
Page 3750 as of approximately 11:00 a.m. London time on an
Interest Determination Date, the Calculation Agent shall request
the principal London offices of each of four major banks in the
London interbank market selected by the Calculation Agent (after
consultation with the Company) to provide a quotation of the rate
(Rate Quotation) at which Three Month Deposits in amounts of not
less than $1,000,000 are offered by it to prime banks in the
London interbank market, as of approximately 11:00 a.m. London
time on such Interest Determination Date, that is representative
of single transactions at such time (Representative Amounts). If
at least two Rate Quotations are provided, the Interest Rate will
be the arithmetic mean of the Rate Quotations obtained by the
Calculation Agent, plus 0.70%.
(ii) In the event no Reported Rate appears on Telerate
Page 3750 and there are fewer than two Rate Quotations, the
Interest Rate will be the arithmetic mean of the rates quoted at
approximately 11:00 A.M. New York City time on such Interest
Determination Date, by three major banks in New York City,
selected by the Calculation Agent, for loans in Representative
Amounts in U.S. dollars to leading European banks, having an
index maturity of three months for a period commencing on the
second London Business Day immediately following such Interest
Determination Date, plus 0.70%; provided, however, that if fewer
than three banks selected by the Calculation Agent are quoting
such rates, the Interest Rate for the applicable period will be
the same as the Interest Rate in effect for the immediately
preceding Interest Period.
Upon the request of the Holder of this Security, the
Calculation Agent will provide to such Holder the Interest Rate
in effect on the date of such request and, if determined, the
Interest Rate for the next Interest Period.
"Interest Period" shall mean the period commencing on
an Interest Payment Date and ending on the day preceding the next
succeeding Interest Payment Date, with the exception that the
first Interest Period shall begin on the Issue Date and extend
through the day preceding the first Interest Payment Date.
If an Interest Payment Date or the Maturity Date for
the Securities of this series falls on a day that is not a
Business Day in The City of New York, the related payment of
interest or principal and interest may be made on the next
succeeding Business Day with the same force and effect as if it
were made on the date such payment was due, and no interest will
accrue on the amounts so payable for the period from and after
such dates.
All percentages resulting from any calculation of any
interest rate for the Securities of this series will be rounded,
if necessary, to the nearest one hundred thousandth of a
percentage point, with five one millionths of a percentage point
rounded upward and all dollar amounts will be rounded to the
nearest cent, with one-half cent being rounded upward.
The Securities of this series will not be redeemable
prior to maturity.
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.
A-4
<PAGE>
If an Event of Default with respect to Securities of
this series shall occur and be continuing, the principal of the
Securities of this series may be declared due and payable in the
manner and with the effect provided in the Indenture.
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 contains provisions permitting the Holders of a
majority in aggregate principal amount of the Securities of all
series then Outstanding to waive compliance by the Company with
certain provisions of the Indenture. 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.
The Securities of this series are issuable only in
registered form without coupons in denominations of $5,000 and
any integral multiples of $1,000 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.
A-5
<PAGE>
The Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security
is registered as the absolute owner hereof for all purposes,
whether or not this Security be overdue, and neither the Company,
the Trustee nor any such agent shall be affected by notice to the
contrary.
Unless an Event of Default, or an event which, after
notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing, the obligations
of the Company under the Securities of this series and the
Indenture to the extent related to such series may be assigned by
the Company to, and be assumed in whole, on a full recourse
basis, by a wholly owned Subsidiary of the Company at any time;
provided, however, that such assumption shall be subject to, and
-------- -------
permitted only upon the fulfillment and satisfaction of, the
following terms and conditions: (a) an assumption agreement and
a supplemental indenture to the Indenture evidencing such
assumption shall be in substance and form reasonably satisfactory
to the Trustee and shall, inter alia, include modifications and
----- ----
amendments to the Indenture making the obligations under the
Securities of this series and under the Indenture to the extent
related to such series primary obligations of such Subsidiary,
substituting such Subsidiary of the Company for the Company in
the form of the Securities of this series and in provisions of
the Indenture to the extent related to such series and releasing
and discharging the Company from its obligations under the
Securities of this series and the Indenture to the extent related
to such series; and (b) the Trustee shall have received (i) an
executed counterpart of such assumption agreement and
supplemental indenture; (ii) evidence satisfactory to the Trustee
and the Company that all necessary authorizations, consents,
orders, approvals, waivers, filings and declarations of or with,
Federal, state, county, municipal, regional or other governmental
authorities, agencies or boards (collectively, "Governmental
Actions") relating to such assumption have been duly obtained and
are in full force and effect, (iii) evidence satisfactory to the
Trustee that any security interest intended to be created by the
Indenture is not in any material way adversely affected or
impaired by any of the agreements or transactions relating to
such assumption and (iv) an Opinion of Counsel for such
Subsidiary, reasonably satisfactory in substance, scope and form
to the Trustee and the Company, to the effect that (A) the
supplemental indenture evidencing such assumption has been duly
authorized, executed and delivered by such Subsidiary, (B) the
execution and delivery by such Subsidiary of such supplemental
indenture and the consummation of the transactions contemplated
thereby do not contravene any provision of law or any
governmental rule applicable to such Subsidiary or any provision
of such Subsidiary's charter documents or by-laws and do not
contravene any provision of, or constitute a default under, or
result in the creation or imposition of any lien upon any of such
Subsidiary's properties or assets under any indenture, mortgage,
contract or other agreement to which such Subsidiary is a party
or by which such Subsidiary or any of its properties may be bound
or affected, (C) all necessary Governmental Actions relating to
such assumption have been duly obtained and are in full force and
effect and (D) such agreement and supplemental indenture
constitute the legal, valid and binding obligations of such
Subsidiary, enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other
similar laws at the time in effect affecting the rights of
creditors generally.
At the time of such assumption the Company will
unconditionally guarantee payment of the Securities of this
series and will execute a guarantee in form and substance
satisfactory to the Trustee. Pursuant to the guarantee, the
Company will fully and unconditionally guarantee the payment of
the obligations of such assuming Subsidiary under the Securities
of this series and under the Indenture, including, without
limitation, payment, as and when due, of the principal of,
premium, if any, and interest on, the Securities of this series.
Other than the obligation to make such payments, the Company
shall be released and discharged from all other obligations under
the Indenture.
A-6
<PAGE>
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.
A-7
<PAGE>
-----------------
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this
Floating Rate Senior Note due April 20, 2000 to:
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(Insert assignee's social security or tax identification number)
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
-----------------------------------------------------------------
-----------------------------------------------------------------
-----------------------------------------------------------------
agent to transfer this Security on the Security Register. The
agent may substitute another to act for him or her.
Date:
-------------------------------------
Signature:
-------------------------
Signature Guarantee:
---------------
(Sign exactly as your name appears on the other side of this Security)
SIGNATURE GUARANTEE
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar, which
requirements include membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such other
"signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as amended.
A-8
CONFORMED COPY
FACILITIES AGREEMENT
(dated 2 March 1998 and as amended on 3 March 1998,
21 April 1998, 19 May 1998, 28 May 1998 and 16 July 1998)
for
(pound)3,625,000,000 Credit Facilities
TU Finance (No. 1) Limited (1)
TU Finance (No. 2) Limited (2)
TU Acquisitions PLC
Chase Manhattan plc (3)
Lehman Brothers International (Europe)
Merrill Lynch Capital Corporation
as Joint Lead Arrangers
The Chase Manhattan Bank (4)
Lehman Commercial Paper Inc.
Merrill Lynch Capital Corporation
as Underwriters
The Chase Manhattan Bank (5)
as Issuing Bank
Chase Manhattan International Limited (6)
as Facility Agent
Chase Manhattan International Limited (7)
as Security Agent
For the Primary Borrower For the Facility Agent
Norton Rose Lovell White Durrant
London London
<PAGE>
CONTENTS
1. PURPOSE AND DEFINITIONS...............................................1
2. THE COMMITMENTS......................................................28
3. THE CONDITIONS.......................................................29
4. ADVANCES UNDER THE FACILITIES........................................30
5. INTEREST AND INTEREST PERIODS........................................37
6. REPAYMENT, PREPAYMENT, CANCELLATION AND REDUCTIONS...................40
7. FEES AND EXPENSES....................................................43
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS........................45
9. REPRESENTATIONS AND WARRANTIES.......................................50
10. POSITIVE UNDERTAKINGS................................................55
11. NEGATIVE UNDERTAKINGS................................................62
12. EVENTS OF DEFAULT....................................................71
13. INDEMNITIES..........................................................76
14. UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES............78
15. SET-OFF AND PRO-RATA PAYMENTS........................................81
16. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES.........................83
17. FACILITY AGENT AND SECURITY AGENT....................................87
18. POWERS ..............................................................90
19. DUTIES ..............................................................94
20. EXONERATION..........................................................96
21. ENFORCEMENT AND RECOVERIES..........................................102
22. DETERMINATION OF MATTERS............................................103
23. BASIS OF DECISIONS..................................................105
24. MATTERS CONCERNING THE BORROWERS....................................107
25. NOTICES AND OTHER MATTERS...........................................109
26. GOVERNING LAW AND JURISDICTION......................................112
<PAGE>
Schedule 1
The Banks and their Commitments..............................................113
Schedule 2
Forms of Drawdown Notice.....................................................114
Schedule 3
Conditions Precedent.........................................................117
Schedule 4
Calculation of Additional Cost...............................................121
Schedule 5
Form of Substitution Certificate.............................................123
Schedule 6
Form of Accession Certificate................................................127
Schedule 7
Terms of Borrowers' Indemnity................................................129
Schedule 8
Terms of Interbank Guarantee and Indemnity...................................132
Schedule 9...................................................................134
Projects which may be financed under clause 11.1(g)(iii).....................134
<PAGE>
THIS AGREEMENT is made the 2nd day of March 1998
BETWEEN:
(1) TU Finance (No. 1) Limited (a company registered in England and Wales with
company number 3505836) as Primary Borrower and the initial Permitted
Borrower;
(2) TU Finance (No. 2) Limited a company registered in England and Wales with
company number 3514100 ("Finco 2") and TU Acquisitions PLC, a company
registered in England and Wales with company number 3455523 ("Bidco");
(3) Chase Manhattan plc, Lehman Brothers International (Europe) and Merrill
Lynch Capital Corporation as joint lead arrangers (the "Arrangers");
(4) The Chase Manhattan Bank, Lehman Commercial Paper Inc. and Merrill Lynch
Capital Corporation as the original Banks (the "Underwriters");
(5) The Chase Manhattan Bank as the initial Issuing Bank;
(6) Chase Manhattan International Limited as the initial Facility Agent; and
(7) Chase Manhattan International Limited as the initial Security Agent.
IT IS AGREED as follows:
1. PURPOSE AND DEFINITIONS
1.1 Purpose
This Agreement sets out the terms and conditions upon and subject to which
the Banks agree, according to their several obligations, to make available:
(a) Acquisition Facility and Interim Facility
to the Primary Borrower, an Acquisition Facility in Sterling of up to
(pound)1,775,000,000 and an Interim Facility in Sterling of up to
(pound)1,150,000,000, each to be used for the purposes of on-lending to
Finco 2 by way of debt bearing interest at a rate at least equivalent to
the Facilities, to be, in turn, on-lent to Bidco in order to assist Bidco
in the financing or refinancing of the following (but only after the Offer
is declared or becomes unconditional in all respects as permitted by this
Agreement):
(i) any consideration payable by Bidco to shareholders of the Target in
respect of open market purchases of Target Shares;
(ii) the acquisition of Target Shares by Bidco pursuant to the Offer;
(iii) fees and expenses of the Primary Borrower and Bidco in relation to
the Offer, and/or out of pocket expenses of the Parent (up to an
amount reasonably satisfactory to the Arrangers), in relation to the
Offer;
<PAGE>
(iv) the consideration payable pursuant to the operation by Bidco of the
procedures contained in sections 428 - 430 of the Companies Act
1985;
(v) the consideration payable to share option holders in the Target
pursuant to any relevant offer to them by Bidco to purchase or
cancel such share options; and
(vi) in payment to the Parent of the Excess Equity Funding (if any);
(vii) paying amounts due to Loan Note Holders if the Loan Note Facility
comes into existence or in funding the Loan Note Collateral Account
with the principal amount of the Loan Note Obligation if the Loan
Note Facility does not come into existence;
(b) Revolving Credit Facility
to the Primary Borrower and (subject to accession to this Agreement under
clause 24) the Permitted Borrowers, a Revolving Credit Facility in Sterling
(and in the case of Letters of Credit, such other currencies as are
permitted by this Agreement) of up to (pound)700,000,000 to be used for the
purpose of refinancing certain of the Target Group's Borrowed Money, for
the Target Group's general corporate purposes, to the Primary Borrower for
payment of interest on the Advances drawn by the Primary Borrower falling
due not more than 6 months after the Unconditional Date, for the issue of
Letters of Credit by the Issuing Bank and, in part, for the REC's general
corporate purposes as provided in clause 24.5. For the avoidance of doubt,
the Revolving Credit Facility will not be available for the financing or
refinancing of the Acquisition.
No amounts borrowed under any of the Facilities may be used, directly or
indirectly, to repay or refinance the minimum equity contribution referred to in
paragraph (c) of Part B of Schedule 3 or otherwise make payments to the Parent
or any of its Affiliates (except the Primary Borrower and its Subsidiaries),
other than (i) to pay certain out of pocket expenses of the Parent in accordance
with clause 1.1(a)(iii) above and (ii) as contemplated in clause 1.1(a)(vi)
above.
1.2 Definitions
In this Agreement, unless the context otherwise requires:
"Accession Certificate" means an accession certificate (by way of deed) in
the form or substantially the form of schedule 6 and entered into or to be
entered into by a Permitted Borrower as an acceding Borrower and the
Facility Agent;
"Acquisition" means the acquisition by Bidco of the Target Shares whether
pursuant to the Offer or pursuant to the procedures contained in Part XIIIA
of the Act or by way of open market purchases (and includes where the
context admits payments by Bidco to the Target's share option holders to
purchase or cancel the benefit of such options);
"Acquisition Advance" means each borrowing under the Acquisition Facility
(and all advances made under the Loan Note Facility shall be deemed to be
Acquisition Advances) or (as the context requires) the principal amount of
that borrowing outstanding at any relevant time;
"Acquisition Facility" means the facility granted by the Banks under clause
2.1(a);
<PAGE>
"Acquisition Facility Repayment Date" means each of the scheduled repayment
dates for the Acquisition Facility referred to in clause 6.1;
"Act" means the Companies Act 1985;
"acting in concert" has the meaning given to that term in the Code;
"Additional Cost" means, in relation to any period, a percentage calculated
for such period at an annual rate determined in accordance with schedule 4;
"Adjusted Share Capital and Reserves" means the aggregate of the following
items namely:
(a) the nominal amount of the share capital of Finco 2 for the time being
issued and paid up or credited as paid up;
(b) the amounts standing to the credit of the consolidated reserves of the
Group (including any share premium account and capital redemption
reserve),
but adjusted, to the extent that the following items have not already been
added, deducted or excluded in arriving at the figures referred to in (a)
or (b) above:
(c) by deducting the amounts standing to the debit of the consolidated
reserves of the Group;
(d) by deducting any amounts attributable to interests of non-Group
members in Group Subsidiaries;
(e) by deducting any reserves set aside for deferred taxation;
(f) by deducting the amount by which the net book value of any fixed asset
has been written up after the date of this Agreement (or, in the case
of a person becoming a member of the Group after that date, the date
on which it becomes a member of the Group) by way of revaluation or on
its transfer from one member of the Group to another (but no such
deduction shall be made if the amount of this write up is supported by
and does not exceed the amount shown by an independent written
valuation);
(g) by deducting any amounts attributable to the consolidation of the
assets and liabilities of Project Finance Subsidiaries or, if the
value of such Project Finance Subsidiaries is represented by
`investment in subsidiaries' (or other investments) in the books of
their relevant holding companies, deducting the amount of such
investment;
(h) by deducting the amount of any outstanding loan or guarantee to
Project Finance Subsidiaries (to the extent not deducted under
paragraph (g) above);
(i) by adding back (aa) to capital reserves, goodwill written off by
reason of the Acquisition and (bb) to cumulative revenue reserves, any
goodwill arising on the Acquisition and subsequently amortised through
the profit and loss account;
but so that no amount to be added, deducted or excluded as a result of any
of the foregoing shall be added, deducted or excluded more than once in the
same calculation and, where the calculation is being made as at the end of
a Test Period, each such amount shall be determined
<PAGE>
by reference to the most recent financial statements and compliance
certificates delivered hereunder as adjusted pursuant to the provisions of
clause 10.3(c);
"Advance" means any Acquisition Advance, Interim Advance or Revolving
Advance and, as the context requires, includes the making of any of the
same or the amount of the same which is outstanding at any relevant time;
"Affected Bank" has the meaning given to it in clause 14.4;
"Affiliate" means, in relation to any person, any Subsidiary or subsidiary
undertaking (as defined in section 258 of the Act) of that person, any
holding company of that person and any other Subsidiary or subsidiary
undertaking of that holding company;
"Agreed Projections" means the projections for the Group dated 2 March 1998
as amended by the supplemental projections of 3 March 1998, both in the
agreed form as further amended by projections dated 31 March 1998 and
revised projections issued on 8 April 1998;
"Applicable Fees Rate" means at any time in respect of:
(a) the Acquisition Facility and the Interim Facility, 0.5 per cent per
annum at all times and on the Loan Note Facility, 0.5 per cent per
annum at all times;
(b) the Revolving Credit Facility, 0.375 per cent. per annum;
(c) if the Stand-alone facility referred to in Clause 24.5 is executed,
the figures for the Applicable Fees Rate for the Revolving Credit
Facility shall be 0.5 per cent per annum.
"Applicable Margin" means, at any time, 1.25% per annum or if the most
recent determination of the Leverage Ratio under clause 10.3 shows that the
Leverage Ratio is less than 65%, the rate per annum determined as follows:
Leverage Ratio and not less than: Applicable Margin is:
is less than:
65% 60% 1%
60% - 0.75%
(a) any reduction in the Applicable Margin shall have effect 5 Banking
Days following the date of delivery of any set of audited or
management accounts for a Quarter under clause 10.1(b)(i) and (ii),
together with the financial covenant compliance certificate by the
Primary Borrower referred to in clause 10.1(b)(iii), until (but
excluding) the effective date for any subsequent change in the
Applicable Margin in accordance with this definition;
(b) during the continuance of any Default, any margin reduction under this
definition will not apply, and the Applicable Margin shall be 1.25%;
(c) until Target has become a wholly-owned Subsidiary of Bidco and no
amount is outstanding under the Interim Facility, there shall be no
reduction in the Applicable Margin below 1.25%;
<PAGE>
"Appropriate Accounting Principles" means (i) the accounting principles,
policies, standards, practices and bases (being generally accepted in the
United Kingdom), as adopted in the last audited consolidated accounts of
Target published prior to 1 February 1998 or (ii) where any change has been
agreed under clause 10.3(c), such accounting principles, standards,
practices and bases as have been so agreed;
"Arrangers" means Chase Manhattan plc, Lehman Brothers International
(Europe) and Merrill Lynch Capital Corporation;
"Auditors" means Deloitte & Touche L.L.P. or such other internationally
recognised firm of chartered accountants as may be auditors to the Group
for the time being;
"Available Commitment" means, in relation to a Bank and save as otherwise
provided herein:
(a) in respect of the Acquisition Facility at any time, its Commitment in
respect of such Facility at such time less its Contribution to all
outstanding Acquisition Advances at such time;
(b) in respect of the Interim Facility at any time, its Commitment in
respect of such Facility at such time less its Contribution to all
outstanding Interim Advances at such time;
(c) in respect of the Revolving Credit Facility at any time, its
Commitment in respect of such Facility at such time less:
(i) its Contribution to all outstanding Revolving Advances at such
time;
(ii) its Proportion of the Sterling Amount at that time of the
Outstanding Contingent Liabilities under all Letters of Credit
then outstanding; and
(iii) its proportion of any amount paid out by the Issuing Bank under
a Letter of Credit and not yet reimbursed;
"Available Commitment Termination Date" means save as otherwise provided
herein:
(a) in relation to the Revolving Credit Facility, the Final Repayment
Date;
(b) in relation to the Loan Note Facility, the Final Repayment Date; and
(c) in relation to the balance of the Acquisition Facility and the Interim
Facility, the date falling ten months after the date of this
Agreement;
"Available Facility Amount" means, at any time and in respect of any
Facility, the aggregate of the Available Commitments of all the Banks in
respect of such Facility at such time;
"Banking Day" means a day (other than Saturday or Sunday) on which banks
are open for business in London and in New York;
"Banks" means the original banks listed in schedule 1 and includes their
successors in title, assignees and Substitutes;
"Bidco" means TU Acquisitions PLC (company no. 3455523);
<PAGE>
"Borrowed Money" includes any Indebtedness of a person in respect of
(without double counting):
(a) borrowed money of that person; or
(b) the principal amount outstanding in respect of any debentures (within
the meaning of Section 744 of the Act) of that person (notwithstanding
that the same are or were issued in whole or in part for a
consideration other than cash) which are not beneficially owned by
another member of the Group; or
(c) the principal amount raised by that person by acceptances (not being
an acceptance in relation to the purchase or sale of goods in the
ordinary course of trading) or under any acceptance credit opened by
any bank or accepting house on behalf of that person; or
(d) receivables sold or discounted to the extent of any potential or
contingent recourse save for recourse for disputed or ineligible debts
or similar rights of recourse typical in a securitisation transaction;
or
(e) the acquisition cost of any asset to the extent payable after the time
of acquisition or possession by the party liable where the deferred
payment is not normal trade credit, is deferred for a period of more
than 90 days or is arranged primarily as a method of raising finance
or financing the acquisition of that asset from or through a bank or
financial institution, except that, if the deferred payment is
amortising, only the amount which remains to be paid shall be taken
into account; or
(f) the nominal amount of any share capital and the principal amount of
any debentures or other indebtedness of any other person, the
redemption or repayment of which is guaranteed or secured by or is the
subject of an indemnity given by that person; or
(g) any fixed or minimum premium payable on final redemption or repayment
of any debenture, share capital or other borrowed moneys falling to be
taken into account under the other paragraphs of this definition; or
(h) any net liability under any Derivative Transactions; or
(i) the capital element of any Finance Leases; or
(j) any amount raised under any other transaction having the commercial
effect of a borrowing or entered into primarily as a means of raising
finance;
but does not include:
(i) items of the type described in paragraphs (a) to (j) (inclusive) above
which are owed by one wholly-owned member of the Group to another
wholly-owned member of the Group; or
(ii) Project Finance Borrowings of Project Finance Subsidiaries;
"Borrowers" means the Primary Borrower as the borrower of the Acquisition
Facility and the Interim Facility, and the Revolving Credit Facility
Borrowers, and "Borrower" means any one of them;
<PAGE>
"Cancellation Date" means the earliest of:
(a) the date on which the Offer lapses or is withdrawn, or is referred as
provided for in paragraph c of Appendix 1 of the Press Release;
(b) the date falling six months after the Posting Date, if the Offer has
not become or been declared unconditional in all respects at that
date; and
(c) the seventh day after the date of this Agreement, if the Offer has not
by then been announced;
"Capitalisation" means at any time the aggregate of Adjusted Share Capital
and Reserves and Consolidated Net Borrowings:
"Certain Funds Period" means, in respect of the Acquisition Facility, the
period from the date of this Agreement and ending on the earliest of:
(a) the Cancellation Date;
(b) the date falling fifteen days after the Closing Date, or if prior to
such fifteenth day the procedures under sections 428-430 of the Act
have been implemented, the date which they are completed and all
payments thereunder have been made; and
(c) the date falling seven months after the date of this Agreement;
"Change in Control" shall be deemed to have occurred if:
(a) any person or group of related persons (other than the Parent, any
Subsidiary of the Parent, or any pension, savings or other employee
benefit plan for the benefit of employees of the Parent and/or any
Subsidiary of the Parent) shall have acquired beneficial ownership of
more than 30% of the outstanding Voting Shares of the Parent (within
the meaning of section 13(d) or 14(d) of the Securities Exchange Act
of 1934 of the United States of America, as amended, and the
applicable rules and regulations thereunder); provided that a Change
in Control shall not be deemed to have occurred if such acquisition
has been approved, prior to the Parent Acquisition Date and the date
on which any tender offer for Voting Shares of the Parent was
commenced, by a majority of the Disinterested Directors of the Parent;
or
(b) during any period of 12 consecutive months, commencing before or after
the date of this Agreement, individuals who on the first day of such
period were directors of the Parent (together with any replacement or
additional directors who were nominated or elected by a majority of
directors then in office) cease to constitute a majority of the board
of directors of the Parent;
"Charged Assets" means any property, assets and/or rights over which
security is granted and/or created under any of the Security Documents;
"Closing Date" means the effective date on which the Offer is finally
closed in accordance with the Code;
<PAGE>
"Coalco" means, collectively, Citizens Power LLC, a limited liability
company organised in the State of Delaware, Gold Fields Mining Corporation,
a Delaware corporation, Peabody Holding Company Inc, a New York
corporation, Darex Capital Inc, a company incorporated in the Republic of
Panama and Peabody Australia Ltd, a private limited company incorporated in
England and Wales;
"Coalco Disposal Agreement" means the agreement for the sale of Coalco
dated 2 March 1998 entered into between the Target and P&L Coal Holdings
Corporation, a Delaware corporation, in the agreed form;
"Coal Proceeds" means (pound)1,313,950,000;
"Code" means the City Code on Takeovers and Mergers;
"Commitment" means, in relation to a Bank and in respect of any Facility at
any relevant time, the amount set opposite its name in relation to the
relevant Facility in schedule 1 and/or, in the case of a Substitute, the
amount novated in relation to the relevant Facility as specified in the
relevant Substitution Certificate, as reduced, in each case, by any
relevant term of this Agreement;
"Consolidated Net Borrowings" means, at any time, in respect of the Group,
the aggregate of the Borrowed Money of the Group, as shown in the then
latest audited or unaudited consolidated balance sheet of the Primary
Borrower then most recently delivered to the Facility Agent pursuant to
clause 10.1 (the "relevant balance sheet"), less the aggregate book value
(as included in the relevant balance sheet) of:
(a) all Liquid Assets which are freely transferable to the United Kingdom
and which are owned by wholly-owned members of the Group or (in the
case of the Liquid Assets of a member of the Group which is a
partly-owned Subsidiary) the proportion of the total amount for the
time being of Liquid Assets owned by such member which corresponds to
the proportion of the total nominal amount of the issued equity share
capital of such Subsidiary or subsidiary undertaking which is
beneficially owned directly or indirectly by the Primary Borrower
(exclusive of Liquid Assets constituting or representing obligations
of any member or members of the Group); and
(b) in the case of a member of the Group which is a partly-owned
Subsidiary, the proportion of total amounts for the time being
outstanding of Borrowed Money owing by such Subsidiary otherwise than
to the Primary Borrower or another member of the Group which
corresponds to the proportion of the total nominal amount of the
issued equity share capital of such Subsidiary not beneficially owned
directly or indirectly by the Primary Borrower (the "Minority
Proportion");
but adding the aggregate book value (as included in the relevant balance
sheet) of the Minority Proportion of the total amount, if any, for the time
being outstanding of Borrowed Money owing to a partly-owned Subsidiary by
any other member of the Group, and excluding Borrowed Money arising from
the Derivatives Transactions provided for in clause 11.1(b)(x);
"Contribution" means, in relation to a Bank, the principal amount of any or
all (as the context requires) of the Acquisition Advances, the Interim
Advances and/or the Revolving Advances owing to such Bank at any relevant
time;
<PAGE>
"Debenture" means a composite guarantee and debenture in the agreed form
creating first fixed and floating charges over all its assets to be entered
into by the Primary Borrower, Finco 2 and Bidco in favour of the Security
Agent;
"Default" means any Event of Default or any event or circumstance which in
the reasonable opinion of the Majority Banks would reasonably be expected,
upon the giving of a notice by the Facility Agent and/or the expiry of the
relevant period and/or the fulfilment of any other condition (in each case
as specified in clause 12.1), to constitute an Event of Default;
"Derivatives Transaction" means a contract, agreement or transaction which
is:
(a) a rate swap, basis swap, forward rate transaction, equity (or equity
or other index) swap or option, bond option, interest rate option,
foreign exchange transaction, cap, collar or floor, currency swap,
currency option or any other similar transaction; and/or
(b) any combination of such transactions,
in each case, whether on-exchange or otherwise;
"Director General" means the person appointed from time to time by the
Secretary of State to hold office as the Director General of Electricity
Supply for the purposes of the Electricity Act;
"Director General of Gas Supply" means the person appointed from time to
time by the Secretary of State to hold office as the Director General of
Gas Supply for the purposes of the Gas Acts 1986 and 1995;
"Disinterested Director" shall mean any member of the Board of Directors of
the Parent who:
(a) is not affiliated, directly or indirectly, with, or appointed by, a
person or group of related persons (other than the Parent, any
Subsidiary of the Parent, or any pension, savings or other employee
benefit plan for the benefit of employees of the Parent and/or any
Subsidiary of the Parent) acquiring the beneficial ownership of more
than 30% of the outstanding Voting Shares of the Parent (within the
meaning of section 13(d) or 14(d) of the Securities Exchange Act of
1934 of the United States of America, as amended, and the applicable
rules and regulations thereunder); and
(b) either was a member of the board of directors of the Parent prior to
the Parent Acquisition Date or was recommended for election by a
majority of the Disinterested Directors in office prior to the Parent
Acquisition Date;
"Distribution Business" means the business of REC, or any successor
undertaking to that business within the Group, in or ancillary to the
distribution (whether for its own account or that of any other party) of
electricity through the Group's distribution system and includes any
business of providing connections to the Group's distribution system;
"double taxation treaty" means any convention or agreement between the
government of the United Kingdom and any other government for the avoidance
of double taxation and the prevention of fiscal evasion with respect to
taxes on income and capital gains;
"Drawdown Date" means the date on which an Advance is, or is to be, made;
<PAGE>
"Drawdown Notice" means, in respect of a Facility, a notice substantially
in the terms of the relevant Part of schedule 2;
"EBITDA" means, in respect of any Test Period, the total operating profit
of the Group for continuing operations, acquisitions (as a component of
continuing operations) and discontinued operations before taking into
account (a) interest payable and interest receivable, (b) all amounts
provided for depreciation, and amortisation of goodwill (c) all
extraordinary items, (d) all Taxes, (e) the deduction of any Offer costs in
each case, and (f) any share of consolidated profits or losses which is
attributable to Project Finance Subsidiaries, for that Test Period
(calculated on a consolidated basis disregarding any portion of any item
taken into account in that calculation which is attributable to any
minority interests in Subsidiaries, other than the minority interest in
Finco 2) all as determined by reference to the most recent financial
statements and compliance certificates delivered under clause 10.1(b), as
adjusted pursuant to clause 10.3(c);
"Electricity Act" means the Electricity Act 1989;
"Enforcement Date" means the date of the first declaration made by the
Facility Agent pursuant to clause 12.2;
"Environmental Claim" means any claim, prosecution, demand, action,
official warning, abatement, penalty or other order (conditional or
otherwise) arising as a result of or in connection with any Environmental
Matter against any member or former member of the Group or associated
company and including any formal written notification or order requiring
compliance with the terms of any Environmental Licence or Environmental
Law;
"Environmental Laws" means all or any laws, statutes, rules, regulations,
treaties, directives, by-laws, statutory codes of practices, circulars,
guidance notes, orders, notices and demands, decisions of the courts or
anything like any of the foregoing of any Government Entity or any other
body whatsoever in any jurisdiction or the European Union relating to
Environmental Matters and includes the Environmental Protection Act 1990
and the Environment Act 1995;
"Environmental Licence" means any permit, licence, authorisation, consent
or other approval required at any time by any Environmental Law;
"Environmental Matters" means:
(a) the generation, deposit, disposal, escape, keeping, treatment,
transportation, transmission, handling, importation, exportation,
processing, collection, sorting, presence or manufacture of any
"waste" (as defined in the Environmental Protection Act 1990 or in any
other Environmental Laws), or any Relevant Substance which gives rise
to a risk of causing harm to man or any other living organism
supported by the environment, or damaging the environment or public
health or welfare;
(b) nuisance, noise, health and safety at work or elsewhere; and
(c) the pollution, conservation or protection of the environment (both
natural and built) or of man or any living organisms supported by the
environment or any other matter whatsoever affecting the environment
or any part of it;
<PAGE>
"Escrow Agreement" means the escrow agreement made between the parties to
the Coalco Disposal Agreement, in the agreed form;
"Euro" means the single currency of participating member states (so
described in any legislative measures of the European Council for the
introduction of, changeover to or operation of a single or unified European
currency);
"Event of Default" means any of the events or circumstances described in
clause 12.1;
"Excess Equity Funding" means an amount (which shall not exceed the amount
required to be subscribed in cash under paragraph (c) of Part B of Schedule
3), which shall be equal to the aggregate price (which would have been
payable by Bidco to persons accepting the Offer in cash) of Target Shares
acquired by Bidco pursuant to the Share Alternative and in accordance with
clause 6 of the Investment Agreement;
"Expiry Date" means the date stated in a Letter of Credit to be its expiry
date or (if later) the latest date on which demand may be made under it;
"Facilities" means all or any (as the context requires) of the Acquisition
Facility, Interim Facility, Loan Note Facility and the Revolving Credit
Facility and (as the context requires) "Facility" means any of them;
"Facility Agent" means Chase Manhattan International Limited of 125 London
Wall, London EC2Y 5AJ or such other person as may be appointed Facility
Agent for the Banks pursuant to clause 17;
"Facility Office" means, in relation to the Facility Agent, Security Agent
or any Bank, the office identified in Schedule 1 (or, in the case of a
Substitute, at the end of the Substitution Certificate to which it is a
party as a Substitute) or such other office as it may from time to time
select provided written notice thereof has been given by the Facility
Agent, Security Agent or such Bank to the Primary Borrower;
"Fee Letters" means the fee letters referred to in clause 7.1, in the
agreed form, and "Fee Letter" shall mean any one of them;
"Fee Payment Date" means each of the dates falling at three monthly
intervals after the date of this Agreement;
"Final Repayment Date" means the fifth anniversary of the date of this
Agreement;
"Finance Documents" means this Agreement, any L/C-Related Document, each
Drawdown Notice, each Accession Certificate, the Fee Letters, the
Syndication Letter and the Security Documents;
"Finance Lease" means any lease under which a member of the Group is the
lessee which is or should be treated as a finance or capital lease under
the Appropriate Accounting Principles (and includes any hire purchase
contract or other arrangement which is or should be similarly treated);
"Finance Parties" means the Facility Agent, the Issuing Bank, the
Arrangers, the Banks, and the Security Agent and (as the context requires)
"Finance Party" means any one of them;
<PAGE>
"Finance Period" means the period from the date of this Agreement until the
date on which the Facility Agent confirms that none of the Finance Parties
and none of the Obligors has any actual or contingent liabilities or
obligations under any of the Finance Documents;
"Financial Covenants" means the financial undertakings in clauses 10.3(a)
and (b);
"Financial Definitions" means the definitions of Adjusted Share Capital and
Reserves, Capitalisation, Consolidated Net Borrowings, EBITDA, Leverage
Ratio, Net Interest Costs and Test Period;
"Gas Framework Agreement" means the agreement dated 1st March 1996 between
British Gas Transco and Eastern Natural Gas (Retail) Limited;
"Generation Business" means the business of the Group in or ancillary to
the generation of electricity (whether for its own account or that of any
other party);
"Government Entity" means and includes (whether having a distinct legal
personality or not) any supra-national, national or local government
authority, regulatory body, central bank, board, commission, department,
division, organ, instrumentality, court or agency and any association,
organisation or institution of which any of the foregoing is a member of or
whose jurisdiction any of the foregoing is subject or in whose activities
any of the foregoing is a participant and (if the context requires) which,
in relation to Environmental Matters, has regulatory or administrative
authority under Environmental Laws;
"Group" means the Primary Borrower and all its Subsidiaries for the time
being (except Project Finance Subsidiaries) save that where the reference
to "Group" is used in respect of the Financial Definitions used in
calculating the Leverage Ratio, "Group" shall mean Finco 2 and all its
Subsidiaries for the time being (except Project Finance Subsidiaries);
"Guarantees" means any guarantees issued by members of the Target Group
under clause 10.6 or Part B of Schedule 3;
"Indebtedness" means any obligation of a person for the payment or
repayment of money, whether as principal or as surety and whether present
or future, actual or contingent;
"Interest Payment Date" means the last day of an Interest Period;
"Interest Period" means in relation to any Acquisition Advance, each period
for the calculation of interest in respect of such Advance ascertained in
accordance with clause 5.2 (or otherwise in this Agreement);
"Interim Advance" means each borrowing under the Interim Facility or (as
the context requires) the principal amount of that borrowing outstanding at
any relevant time;
"Interim Facility" means the facility granted by the Banks under 2.1(b);
"Investment Agreement" means the Investment Agreement in the agreed form
dated on or about the date of this Agreement between the Parent, the
Minority Shareholder, the Primary Borrower, Finco 2 and Bidco as amended by
a Supplemental Agreement between the same parties dated 21 April 1998 and a
further supplemental agreement between the same parties dated on or about
18 May 1998;
<PAGE>
"Issue" means with respect to any Letter of Credit, to issue or extend the
expiry of, or to renew or increase the amount of, such Letter of Credit;
and the terms "Issued", "Issuing" and "Issuance" have corresponding
meanings;
"Issue Date" means in relation to a Letter of Credit, the date on which
that Letter of Credit was Issued, or, as the context requires, is to be
Issued under clause 4.3 (Issue of Letters of Credit);
"Issuing Bank" means The Chase Manhattan Bank or any alternative Bank which
has been notified to the Primary Borrower by the Facility Agent as the
issuer of any Letter of Credit in accordance with the terms of this
Agreement;
"L/C-Related Documents" means each Letter of Credit, any Drawdown Notice or
other application for a Letter of Credit and any other document relating to
any Letter of Credit;
"Letter of Credit" means a letter of credit or a bank guarantee (as the
case may be) Issued or to be Issued by the Issuing Bank on the terms of
this Agreement;
"Leverage Ratio" means, at any relevant date, the percentage that
Consolidated Net Borrowings is of Capitalisation of the Group;
"LIBOR" means, in relation to any Advance or unpaid sum, the rate per annum
determined by the Facility Agent to be equal to:
(a) the offered rate (if any) appearing on page 3750 of the Telerate
screen, or such other pages as may replace such page of the Telerate
screen, which displays "BBA LIBOR" for deposits in Sterling and for
the specified period (where "specified period" means the Interest
Period or Maturity Period of such Advance or, as the case may be, the
period for which LIBOR falls to be determined in relation to such
unpaid sum); or
(b) if the Telerate screen is generally inaccessible or if the relevant
rate does not appear on page 3750 or such other page as may replace
such page of the Telerate screen, the arithmetic mean (rounded
upwards, if not already such a multiple, to four decimal places) of
the rates (as notified to the Facility Agent) at which each of the
Reference Banks was offering to leading banks in the London inter-bank
market deposits in Sterling and for the specified period,
in each case at or about 11.00 am on the Quotation Date for such period;
"Licence Undertaking" means any and each undertaking or assurance given in
connection with the Offer by any one or more of the Parent, the Primary
Borrower, Finco 2, Bidco or the Target or any Affiliate of any of them to
the Director General, the Director General of Gas Supply or the Secretary
of State concerning the management and/or ownership of and/or other matters
concerning the Licensee once the Target has become a Subsidiary of the
Primary Borrower;
"Licences" means those licences granted by the Secretary of State:
(a) under section 6 of the Electricity Act authorising the relevant
Licensee to carry on the Distribution Business and supply of
electricity and the Generation Business and any activities ancillary
thereto;
<PAGE>
(b) under section 7 of the Gas Act 1986; or
(c) being replacement Licence or Licences granted from time to time to REC
or any member of the Group (or, if more than one, the most recent such
replacement), as amended and/or extended from time to time;
"Licensee" means REC or such other member of the Group which, at any time,
is the licensee under a Licence;
"Liquid Assets" means as at any date, the aggregate (calculated on a
consolidated basis) of:
(a) cash at bank and in hand in a jurisdiction where such amounts are
transferable out of that jurisdiction and convertible into currencies
dealt in on the London foreign exchange market;
(b) short term deposits and money at call;
(c) certificates of deposit the term of which has twelve months or less
remaining to maturity;
(d) gilts the term of which has twelve months or less remaining to
maturity;
(e) deposits made with the Commissioners of Inland Revenue in respect of
which certificates of tax deposit have been issued by Her Majesty's
Treasury;
(f) Sterling bills of exchange eligible for rediscount at the Bank of
England;
(g) any other negotiable money market instrument with a maximum maturity
of 12 months or less excluding commercial paper issued by any person
other than a state entity;
provided that:
(i) where Liquid Assets are deposited subject to restrictions in order
that they are held as security for a liability or can be offset
against a liability, such Liquid Assets shall be taken into account
only to the extent that such liability is taken into account under
Consolidated Net Borrowings; and
(ii) when the aggregate amount of Liquid Assets required to be taken into
account for the purposes of this definition on any particular day is
being ascertained, any such Liquid Assets denominated or repayable or
in respect of which monies are payable in a currency other than
Sterling shall be converted for the purposes of calculating the
Sterling equivalent at the rate of exchange prevailing on that day in
London by taking the Facility Agent's spot rates as of 11.00 a.m. on
such date for the purchase of such currency with Sterling;
"Loan Note Alternative" means the option made available to holders of
Target Shares in the Offer Document to elect to receive Loan Notes in place
of the cash consideration otherwise payable;
"Loan Note Collateral Account" means an account with the Security Agent
into which amounts drawn down under the Loan Note Facility which, by reason
of the requirements for
<PAGE>
Advances to be of a minimum amount, are greater than the amounts
immediately required to satisfy Loan Note Obligations, are to be paid;
"Loan Note Facility" means a sub-limit of the Acquisition Facility equal to
the nominal amount of Loan Notes issued pursuant to the Loan Note
Alternative;
"Loan Note Holders" means the holders from time to time of the Loan Notes;
"Loan Note Instrument" means the agreed form deed or instrument
constituting the Loan Notes dated on or about the date of this Agreement
and any certificates evidencing issued Loan Notes;
"Loan Note Obligations" means the obligations of Bidco (or any other person
who Bidco may substitute as principal debtor in respect of the Loan Notes
pursuant to clause 7 of the Loan Note Instrument) to make the payments
required to be made from time to time to the Loan Note Holders;
"Loan Notes" means the loan notes issued or to be issued to accepting
shareholders in the Target under the Loan Note Alternative;
"Majority Banks" means subject to clause 23.2 at any relevant time Banks:
(a) the aggregate of whose Contributions to all the Facilities exceeds
66 2/3 per cent. of the Total Contributions in respect of all the
Facilities; or
(b) (if no principal amounts are outstanding under this Agreement) the
aggregate of whose Commitments in respect of all the Facilities
exceeds 66 2/3 per cent. of the Total Commitments in respect of all
the Facilities but so that if at such time the Total Commitments in
respect of any Facility have been reduced to zero references to a
Bank's Commitment in relation to such Facility shall be construed as
amongst the Finance Parties (and not so as to give any rights to any
other person) as a reference to that Bank's Commitment in relation
to such Facility immediately prior to such reduction to zero;
"Major Default" means, any one or more of the events set out below (whether
or not caused by any reason outside the control of any Relevant Offeror
Company):
(a) any Relevant Offeror Company is deemed pursuant to applicable law
unable to pay its debts as they fall due or commences negotiations
with its creditors with a view to a general re-scheduling of
indebtedness;
(b) any administrative or other receiver or any manager is appointed over
any Relevant Offeror Company or any material part of the assets,
business and/or undertaking of any such company;
(c) a winding-up order or an administration order is made in relation to
any Relevant Offeror Company;
(d) any Relevant Offeror Company threatens to pass or passes a resolution
for (or petitions for) its winding-up or administration;
<PAGE>
(e) any event occurs in any jurisdiction which corresponds with, or has an
effect equivalent to, any of (a) to (d) above in any country or
territory in relation to a Relevant Offeror Company;
(f) an event falling within clause 12.1(w) occurs;
(g) a breach of any of clauses 10.4(a)(iii), (iv), (v) or (vi), 10.4(b),
10.4(c) or 10.4(d) occurs;
(h) any of the representations and warranties in clauses 9.1 or 9.2(a)
being incorrect in any material respect in relation to a Relevant
Offeror Company; or
(i) any other Default occurs which is within the power of a Relevant
Offeror Company to remedy within 7 days of receiving notice of the
Default, but which it chooses not to remedy having been given at least
7 days' prior written notice by the Facility Agent requesting it to do
so;
(j) so far only as concerns an Offer Advance falling within paragraph (ii)
of that definition, any of the matters referred to in paragraphs (a),
(b), (c), or (d) of this definition occurs in relation to the Target,
one of its Principal Subsidiaries or any Licensee;
"Material Adverse Effect" is a reference to:
(a) something having a material adverse effect on the ability of any
Borrower to perform its payment or Financial Covenant obligations
under any of the Finance Documents; or
(b) something (other than the Reservations) which results in any of the
Finance Documents not being legal, valid and binding on, or
enforceable in accordance with their terms against, any of the
Obligors in a manner and to an extent reasonably considered by the
Majority Banks to be materially adverse to the interests of the Banks;
"Maturity Date" means, in relation to any Revolving Advance, the last day
of the period for which that Revolving Advance is drawn down;
"Maturity Period" means, in relation to any Revolving Advance, the period
beginning on its Drawdown Date and ending on its Maturity Date;
"Minority Shareholder" means TU Finance (No. 2) Holdings, Inc.;
"month" or "months" means a period beginning in one calendar month and
ending in the relevant later calendar month on the day numerically
corresponding to the day of the calendar month in which it started,
provided that (a) if the period started on the last Banking Day in a
calendar month or if there is no such numerically corresponding day, it
shall end on the last Banking Day in such later calendar month and (b) if
such numerically corresponding day is not a Banking Day, the period shall
end on the next following Banking Day in such later calendar month but if
there is no such Banking Day it shall end on the preceding Banking Day and
"monthly" shall be construed accordingly;
"Net Interest Costs" means, in respect of any period, the aggregate
accruing during such period (whether or not paid or payable within such
period) of:
<PAGE>
(a) interest, guarantee and other ancillary facility fees, letter of
credit commission and fronting fees and commitment fees incurred by
the Group (disregarding any portion attributable to any minority
interests in Subsidiaries, other than the minority interest in Finco
2) (including any agency fees or arrangement fees or other costs
associated with the Acquisition or the financing thereof charged and
amortised under FRS4, and including the interest element of Finance
Leases); and
(b) net amounts payable (or reduced by net amounts receivable) in respect
of interest rate hedging for the Facilities;
and:
(i) deducting credit interest receivable (on an accruals basis) in cash
during such period which would be shown as interest receivable in the
relevant accounts delivered under clause 10.1(b)(i) and (ii), as
adjusted pursuant to clause 10.3(c); and
(ii) excluding any nominal imputed interest charge that arises only as a
result of an accounting procedure;
"Non Cash Shares" means Target Shares acquired pursuant to the Share
Alternative or the Loan Note Alternative;
"Obligor" means a member of the Group party to a Finance Document;
"Offer" means the offer proposed to be made by and on behalf of Bidco, in
the agreed form and on terms and conditions set out in the Press Release,
to acquire the whole of the ordinary share capital (whether in issue or
falling to be allotted) of the Target not already owned by Bidco, as such
offer may from time to time be amended, added to, revised, renewed or
waived in accordance with clause 10.4;
"Offer Advance" means an Advance made or to be made under the Acquisition
Facility or the Interim Facility (i) for the purpose of meeting the
obligations of Bidco in respect of the Offer or (ii) for financing payments
by Bidco required under the procedures in sections 428- 430 of the Act;
"Offer Documents" means each of the documents issued, or to be issued, by
Bidco to the shareholders of the Target in respect of the Offer (including
the forms of acceptance), in the agreed form;
"Outstanding Contingent Liabilities" at any time under a Letter of Credit
means the face value of that Letter of Credit at that time in accordance
with its express provisions less:
(a) the aggregate amount of any cash cover (not including any cash cover
lodged by any Bank) held in relation to that Letter of Credit at that
time; and
(b) (save to the extent that this is taken into account in the express
provisions of that Letter of Credit or unless the context otherwise
requires) the aggregate of all payments made by the Issuing Bank,
pursuant to demands made under that Letter of Credit on or prior to
such time, for which it has been reimbursed by the relevant Borrower;
<PAGE>
or such lesser amount as the Facility Agent and the Issuing Bank may agree
in good faith represents the maximum liability of the Issuing Bank in
respect thereof;
"Parent" means Texas Utilities Company whose principal place of business is
at 1601 Bryan Street, Dallas, Texas, 15201;
"Parent Acquisition Date" shall mean the date as of which a person or group
of related persons first acquires more than 30% of the outstanding Voting
Shares of the Parent (within the meaning of section 13(d) or 14(d) of the
Securities Exchange Act of 1934 of the United States of America, as
amended, and the applicable rules and regulations thereunder);
"Permitted Borrower" means any of the Target and the other members of the
Target Group, except the REC and any other member of the REC Group which is
a Borrower under the stand-alone facility referred to in clause 24.5;
"Permitted Capital Market Instrument" means a capital market instrument
which is for a term expiring after the Final Repayment Date and has no
option on the part of the holders of such instrument to request earlier
repayment other than on the occurrence of events of default which are
reasonably standard for capital market instruments;
"Permitted Security Interest" means a Security Interest created by any
member of the Target Group being any of the following, namely:
(a) any lien arising solely by operation of law in the ordinary course of
business and securing amounts not more than 90 days overdue or which
are being contested with due diligence and in good faith, and other
liens agreed to in writing by the Majority Banks;
(b) any Security Interest existing on or over the assets of any member of
the Target Group as at the Unconditional Date (or which any such
member is obliged to create under a contract existing at such date),
but only if:
(i) the Security Interest was not created in contemplation of such
member becoming a member of the Group;
(ii) the maximum principal amount of the indebtedness secured by the
Security Interest is not increased after the Unconditional
Date; and
(iii) any such Security Interest which is created between the date of
this Agreement and the Unconditional Date is discharged within
180 days after the Unconditional Date (unless the Security
Interest was created pursuant to an obligation existing as at
the date of this Agreement);
(c) any Security Interest existing on or over the assets of such member at
the time it becomes a member of the Target Group after the date the
Target becomes a member of the Group, but only if:
(i) the Security Interest was not created in contemplation of the
company becoming a member of the Target Group; and
(ii) the maximum principal amount of the indebtedness secured by the
Security Interest is not subsequently increased;
<PAGE>
(iii) such Security Interest is discharged within 180 days after the
date such member became a member of the Group;
(d) any Security Interest existing on or over an asset acquired by a
member of the Target Group after the date of this Agreement, but only
if:
(i) the Security Interest was not created in contemplation of the
acquisition; and
(ii) the maximum principal amount of the indebtedness secured by the
Security Interest is not subsequently increased;
(iii) such Security Interest is discharged within 180 days after the
date such member became a member of the Group;
(e) any Security Interest over any asset acquired by a member of the
Target Group after the date of this Agreement as security for
Indebtedness incurred to finance or refinance (within 6 months of the
acquisition) all or part of the consideration for the acquisition of
that asset, provided that the Indebtedness secured by Security
Interests under this subclause (e) shall not exceed (pound)1,000,000
in aggregate at any time;
(f) any Security Interest arising over
(i) accounts with any bank or financial institution as a result of
netting and set-off arrangements existing with such person to
the extent that such arrangements are in support of net
overdraft facilities extended by such person or
(ii) documents of title to goods and insurances under trade finance
facilities provided to any member of the Target Group as part
of the Target Group's normal day to day banking business;
(g) any Security Interest over goods purchased in the ordinary course of
business arising by virtue of the supplier's retention of title clause
in its standard conditions of supply to secure only the purchase price
of the goods;
(h) any Security Interest created by a Project Finance Subsidiary to
secure Project Finance Borrowings, or over the shares or other
investment in a Project Finance Subsidiary provided that it is
entirely without recourse to any member of the Group beyond
enforcement of such Security Interest;
(i) so far as they relate to netting, settlement or pooling arrangements
or as required by the regulatory framework or arrangements in which
the relevant business operates, any Security Interest arising under
the Relevant Arrangements;
(j) any Security Interest arising under the terms of Derivatives
Transactions or as a result of trading of shares or other securities
where such Security Interest arises under the rules of the relevant
exchange or clearing system;
(k) (i) any Security Interest constituted by a Finance Lease if the
capital value of such Finance Lease would be permitted under this
Agreement as Borrowed Money under clause 11.1(b)
<PAGE>
(ii) any Security Interest constituted by the grant to any person or
persons of any lease or leases with respect to the King's Lynn
generating facility owned by a member of the Group Provided that
none of the parties to any such lease or related transaction is
the Parent or an Affiliate of the Parent (other than a member of
the Group); and
(l) any Security Interests (other than any Security Interest permitted by
sub-paragraphs (a) to (k) above) securing indebtedness not exceeding
in aggregate (pound)100,000,000, or in respect of indebtedness
incurred at a time when the Leverage Ratio is less than 60%,
(pound)150,000,000, or its equivalent in other currencies at any time;
"Pooling and Settlement Agreement" means the pooling and settlement
agreement dated 30 March 1990 made between REC and the National Grid
Company Plc and others setting out the rules and procedures for the
operation of an electricity trading pool and of a settlement system in
England and Wales;
"Posting Date" means the date on which the Offer is posted;
"Press Release" means the press announcement in the agreed form proposed to
be released in connection with the Offer;
"Principal Subsidiary" means:
(a) any member of the Group whose unconsolidated net assets or pre-tax
profit, at any time after the date of this Agreement, equals or
exceeds 10 per cent of the net assets or pre-tax profit of the Group
at that time, and for the purpose of the above:
(i) the net assets or pre-tax profit of the Group shall be
ascertained by reference to the latest audited consolidated
accounts of the Group or the latest management accounts delivered
to the Facility Agent in accordance with clause 10.1(b)(ii); and
(ii) the net assets or pre-tax profit of any such member shall be
ascertained by reference to the latest audited accounts of that
Subsidiary or the latest management accounts delivered to the
Facility Agent in accordance with clause 10.1(b)(ii),
for the purposes of the above, "net assets" in respect of the Group or
any such member means the fixed assets and current assets of the Group
or that member (as the case may be) but excluding investments in any
Subsidiary and any loan to another member of the Group; or
(b) a member of the Group to which has been transferred (whether by one
transaction or a series of transactions, related or not) the whole or
a material part of the business, undertaking or assets of a Subsidiary
which immediately prior to those transactions was a Principal
Subsidiary;
(c) any member of the Group which is a holding company, directly or
indirectly, of a Principal Subsidiary;
<PAGE>
Provided that if at any time members of the Group which are not Principal
Subsidiaries have in aggregate unconsolidated net assets or pre-tax profits
at any time equal to or exceeding 20% of the net assets or pre-tax profits
of the Group at that time, one or more of such other members of the Group
(beginning with the companies with the greatest net assets or pre-tax
profits as the case may be) shall also be treated as Principal Subsidiaries
until the 20% threshold for members of the Group which are not Principal
Subsidiaries is no longer exceeded;
"Project Finance Borrowings" means any Indebtedness of a type referred to
in any of paragraphs (a) to (j) of the definition of "Borrowed Money" which
is owed otherwise than to a member of the Group and finances the
acquisition, construction, development, ownership and/or operation of an
asset:
(a) which is incurred by a Project Finance Subsidiary; and
(b) in respect of which the person or persons to whom such Borrowed Money
is or may be owed by the relevant Project Finance Subsidiary has or
have no recourse whatsoever to any member of the Group for the
repayment thereof (save for enforcement of a Permitted Security
Interest under (h) of the definition thereof);
"Project Finance Subsidiary" means any Subsidiary of the Target:
(a) which is a company that is either (i) not an existing Subsidiary of
the Target as at the date of this Agreement or (ii) has no
Subsidiaries of its own (other than Subsidiaries which are Project
Finance Subsidiaries), and whose principal assets and business are
constituted by the ownership, acquisition, development and/or
operation of an asset or assets whether directly or indirectly;
(b) none of whose Borrowed Money or Indebtedness in respect of the
financing of the ownership, acquisition, development and/or operation
of such assets, or other arrangements, benefits from any recourse
whatsoever to any other member of the Group (including as shareholder
in an unlimited company) in respect of the repayment thereof (save as
permitted by clause 11.1(g)), and none of whose activities, business
or undertaking will under any applicable law or regulation result in
any member of the Group having any material risk of a liability which
might reasonably be expected to have a Material Adverse Effect; and
(c) which has been designated as such by the Facility Agent after the
Primary Borrower has given written notice to the Facility Agent
requiring such designation to be made;
or any Subsidiary of a company falling within (a), (b) and (c) above;
"Proportion" means, in relation to a Bank, the proportion borne by its
Commitment to the Total Commitments (or, if the Total Commitments are then
zero, by its Commitment to the Total Commitments immediately prior to their
reduction to zero);
"Qualifying Bank" means:
(a) a person which:
(i) is a bank within the meaning of Section 840A of the Income and
Corporation Taxes Act 1988;
<PAGE>
(ii) will be beneficially entitled to any interest to be paid to it
(as a Bank) under this Agreement; and
(iii) is within the charge to United Kingdom corporation tax as
respects such interest,
except that, if Section 349 or Section 840A of the Income and
Corporation Taxes Act 1988 is repealed, modified, extended or
re-enacted, the Facility Agent may at any time and from time to time
(after consultation with the Primary Borrower and the Banks) amend
this paragraph (a) in such manner as it may determine acting
reasonably to be appropriate by giving notice of the amended paragraph
(a) to the Primary Borrower and the Banks and, so far as practicable
to put the Banks in the same position as they would otherwise have
been in; or
(b) a Treaty Lender;
"Quarter" means each three-month period ending on the last Banking Day in
March, June, September and December in each year;
"Quarter Date" means 31 March, 30 June, 30 September and 31 December;
"Quotation Date" means, in relation to an Interest Period, Maturity Period
or other period for which LIBOR is to be determined, the date on which
quotations would customarily be provided by leading banks in the London
Interbank Market for deposits in Sterling for delivery on the first day of
that Interest Period, Maturity Period or other period;
"REC" means Eastern Electricity plc (company no. 2366906);
"REC Group" means REC and its Subsidiaries (except for any Project Finance
Subsidiaries);
"Receiver" has the meaning given to that term in the Debenture;
"Recovering Bank" has the meaning given to that term in clause 15.2;
"Reference Banks" means The Chase Manhattan Bank and any two other banks
selected by the Facility Agent with the consent of the Primary Borrower
(which is not to be unreasonably withheld), or if any of them cease to so
act, such other bank or banks selected by the Facility Agent in accordance
with clause 23.7;
"Related Persons" each of the Facility Agent, the Security Agent, the
Issuing Bank, any successor Facility Agent, Security Agent or Issuing Bank
arising under clause 17, the Arrangers and the Underwriters, together with
their respective Affiliates and the officers, directors, employees, agents,
trustees and attorneys-in-fact of such persons and Affiliates;
"Relevant Arrangements" means any arrangements under or in connection with
any pooling and settlement or onshore transportation arrangements or
agreements of the electricity distribution, supply or generation, or gas
transportation, distribution and/or supply industry or energy trading
(including (but without limitation) the Pooling and Settlement Agreement or
the Gas Framework Agreement) or telecommunications or water industry or
energy or energy-
<PAGE>
related business or in connection with any transactions or arrangements
entered into in the ordinary course of its business in a form usual in any
such industry or business;
"Relevant Company" means any of the Primary Borrower, the other Revolving
Credit Borrowers, Finco 2, Bidco, the Target and the Principal
Subsidiaries;
"Relevant Offeror Company" means any of the Primary Borrower, Finco 2 and
Bidco;
"Relevant Substance" means any radioactive emissions, radiation, noise, any
natural or artificial substance whatsoever (whether in a solid or liquid
form or in the form of a gas or vapour and whether alone or in combination
with any other substance) and includes, without limitation, "waste" (as
defined in the Environmental Protection Act 1990 or in any equivalent
legislation or regulation in force in any jurisdiction in which any member
of the Group is incorporated, owns property or assets or carries on any
business or operations);
"Reservations" means (a) the principle that equitable remedies may be
granted or refused at the discretion of the court, (b) the limitation on
enforcement by laws of general application relating to insolvency,
liquidation, reorganisation, court schemes or administration, (c) the time
barring of claims under the Limitation Act 1980 and (d) the possibility
that an undertaking to assume liability for or to indemnify against
non-payment of UK stamp duty may be void;
"Revolving Advance" means each borrowing made or to be made by way of an
advance under the Revolving Credit Facility or (as the context requires)
the principal amount of that borrowing outstanding at any relevant time;
"Revolving Credit Facility" means the facility granted by the Banks to the
Borrowers in accordance with clause 2.1(b);
"Revolving Credit Facility Borrowers" means the Primary Borrower and any
Permitted Borrower which accedes to this Agreement as a Revolving Credit
Facility Borrower pursuant to clause 24;
"Secretary of State" means the Secretary of State for Trade and Industry
from time to time or such other person as may for the time being be
fulfilling the functions of the Secretary of State under the Electricity
Act or the Gas Acts;
"Security Agent" means Chase Manhattan International Limited or such other
person as may be appointed security agent and trustee pursuant to clause 17
of this Agreement;
"Security Documents" means the Debenture, the Guarantees, the Share Charge
and any further guarantees or security provided to the Security Agent from
time to time under or in connection with this Agreement;
"Security Interest" means any mortgage, pledge, lien, charge, assignment,
right of set-off, arrangement for retention of title, hypothecation or
security interest, or any other agreement or arrangement having the effect
of conferring security or a security interest, or any agreement to sell or
otherwise dispose of any asset on terms whereby such asset is acquired or
reacquired by any member of the Group;
<PAGE>
"Share Alternative" means the limited option made available to holders of
Target Shares in the Offer Documents to elect to receive common stock of
the Parent in place of the cash consideration otherwise payable;
"Share Charge" means the share charge, in the agreed form, dated on or
about the date hereof granted by the Minority Shareholder in favour of the
Security Agent over its shares in Finco 2;
"Share Value" means, at any time until Bidco has acquired shares carrying
the right to vote 75% of the votes of each class of shares at a general
meeting, the value of the Target Shares acquired pursuant to the Offer and
effectively charged in favour of the Security Agent, which shall at all
times be deemed to be calculated by reference to the price per share
contained in the Offer;
"Spot Rate" means, in respect of any sum denominated in any currency other
than Sterling at any date, the Facility Agent's spot rate of exchange for
purchase of that sum in that currency in the London foreign exchange market
with Sterling at or about 11.00 am on that date for delivery of such sum
two Banking Days thereafter;
"Sterling" and "(pound)" mean the lawful currency for the time being of the
United Kingdom and in respect of all payments to be made under this
Agreement in Sterling mean immediately available, freely transferable
cleared funds;
"Sterling Amount" means in respect of Outstanding Contingent Liabilities,
the sum of the amount in Sterling of the Outstanding Contingent Liabilities
under Letters of Credit denominated in Sterling and the amount of Sterling
required to purchase the currency amount of the Outstanding Contingent
Liabilities under Letters of Credit denominated in each other currency at
the Spot Rate at that time and so that such Sterling Amount shall be
recalculated by the Facility Agent:
(a) in any event, on every Quarter Date; and
(b) on each date on which the Majority Banks request the Facility Agent to
do so in accordance with the provisions of clause 4.11 (Currency
Fluctuations),
and the recalculated amount shall thereupon and until the next
recalculation required by this Agreement constitute the Sterling Amount of
Outstanding Contingent Liabilities under any Letters of Credit for all
purposes of this Agreement;
"Subsidiary" means:
(a) a subsidiary within the meaning of section 736 of the Act; and
(b) for the purposes of the definition of "Affiliate" and "Group" and
clauses 10.1(a), 10.3, 20.7 and schedule 6 only, a subsidiary
undertaking within the meaning of section 258 of the Act;
"Substitute" has the meaning given to that term in clause 16.3;
"Substitution Certificate" means a certificate substantially in the terms
of schedule 5;
<PAGE>
"Syndication Date" means the date as determined by the Arrangers and
notified by them to the Primary Borrower on which syndication of the
Facilities has been fully completed;
"Syndication Letter" means the syndication letter from the Arrangers and
the Underwriters to the Primary Borrower dated on or about the date of this
Agreement, in the agreed form;
"Takeover Operative Date" means the date falling 120 days after the
Unconditional Date;
"Target" means The Energy Group PLC (company no. 3257256);
"Target Group" means the Target and its Subsidiaries from time to time
(except any Project Finance Subsidiary);
"Target PES Subsidiaries" means any Subsidiary of the Target which holds a
Licence;
"Target Shares" means the issued and to be issued shares in the capital of
the Target (including the Target's American Depositary Shares) which are
the subject of the Offer;
"Taxes" includes all present and future taxes, levies, imposts, duties,
fees or charges of whatever nature including without limitation any
interest or penalties payable in connection with any failure or delay in
paying any of the same and "Taxation" shall be construed accordingly;
"Test Period" means:
(a) each twelve-month period ending on the last day of each Quarter
beginning with the last day of the second complete Quarter following
the Unconditional Date; and
(b) each Accounting Reference Period of the Primary Borrower ending on 31
December in each year;
"Third Amendment Agreement" means the agreement between the parties to this
Agreement dated on or about 18 May 1998 amending and restating this
Agreement;
"Total Commitments" means, in respect of a Facility or (as the context
requires) the Facilities at any relevant time, and save as otherwise
provided herein, the total of the Commitments of all the Banks in respect
of such Facility or Facilities (as appropriate) at such time;
"Total Contributions" means, in respect of any Facility or (as the context
requires) the Facilities at any relevant time, the total of the
Contributions of all the Banks in respect of such Facility or Facilities
(as appropriate) at such time;
"Treaty Lender" means a person which is resident (as such term is defined
in the appropriate double taxation treaty) in a country with which the
United Kingdom has a double taxation treaty giving residents of that
country complete exemption from the imposition of any withholding or
deduction for or on account of United Kingdom Taxes on interest (and which
does not carry on business in the United Kingdom through a permanent
establishment with which the Indebtedness under this Agreement in respect
of which the interest is paid is effectively connected);
"Trust Period" means the period ending on the last day of the period of 80
years from the date of this Agreement, which period (and no other) shall be
the applicable perpetuity period;
<PAGE>
"Trust Property" means all or any part of the rights, titles, interests,
assets and income that may now or hereafter be mortgaged, charged, assigned
or granted or the subject of a Security Interest in favour of the Security
Agent or the Finance Parties by or pursuant to the Finance Documents and
the proceeds of any such security;
"Unconditional Date" means the date the Offer becomes or is declared
unconditional in all respects;
"Utilisation" means the making of an Advance or the Issue of a Letter of
Credit; and
"Voting Shares" means outstanding shares of capital stock of any class of
the Parent entitled to vote in the election of directors, excluding shares
entitled so to vote only upon the happening of some contingency.
1.3 Headings
Clause headings and the table of contents are inserted for convenience of
reference only and shall be ignored in the interpretation of this
Agreement.
1.4 Construction of certain terms
In this Agreement, unless the context otherwise requires:
(a) references to clauses and schedules are to be construed as references
to the clauses of, and schedules to, this Agreement and references to
this Agreement include its schedules;
(b) references to (or to any specified provision of) this Agreement or any
other document shall be construed as references to this Agreement
(including any Accession Certificate and Substitution Certificate),
that provision or that document as in force for the time being and as
from time to time amended, novated or supplemented in accordance with
its terms, or, as the case may be, with the agreement of the relevant
parties and (where such consent is, by the terms of this Agreement or
the relevant document, required to be obtained as a condition to such
amendment being permitted) the prior written consent of the Facility
Agent;
(c) references to a "regulation" include any present or future regulation,
rule, directive, requirement, request or guideline (whether or not
having the force of law) of any Government Entity;
(d) references to an "authorisation" mean and include any consent,
authorisation, licence, approval and permit;
(e) words importing the plural shall include the singular and vice versa;
(f) references to a time of day are to London time;
(g) references to a "person" shall be construed as including references to
an individual, firm, company, corporation, unincorporated body of
persons or any State or any of its agencies;
<PAGE>
(h) references to "assets" include all or part of any business,
undertaking, real property, personal property, shareholdings, assets,
revenues, uncalled capital and any rights (whether actual or
contingent, present or future) to receive, or require delivery of, any
of the foregoing;
(i) references to the "equivalent" of an amount specified in a particular
currency (the "specified currency amount") shall be construed as a
reference to the amount of the other relevant currency which can be
purchased with the specified currency amount in the London foreign
exchange market at or about 11 a.m. on the day on which the
calculation falls to be made for spot delivery, as conclusively
determined by the Facility Agent (with the relevant exchange rate of
any such purchase being the "spot rate");
(j) references to any enactment shall be deemed to include references to
such enactment as re-enacted, amended or extended;
(k) references to documents being in the "agreed form" mean documents
initialled by both Lovell White Durrant (on behalf of the Facility
Agent and the Arrangers) and Norton Rose (on behalf of the Borrowers),
or otherwise in the form required by the Facility Agent;
(l) references to "VAT" are to be construed as including references to any
similar Tax;
(m) "including" and "in particular" shall not be construed restrictively
but shall mean "including, without prejudice to the generality of the
foregoing" and "in particular, but without prejudice to the generality
of the foregoing" respectively;
(n) obligations of more than one Obligor under this Agreement are joint
and several;
(o) references to documents being "certified copies" mean copies certified
as being true, complete and up-to-date copies as of a date no earlier
than the date of this Agreement by an officer of the Primary Borrower
who is at such time duly authorised to execute or certify such
documents on behalf of the Primary Borrower;
(p) "arms length terms" means on terms which are fair and reasonable to
the relevant member of the Group and no more or less favourable to the
other party to the relevant transaction than could reasonably be
expected to be obtained in a comparable transaction with a person
unconnected with the Group;
(q) references to "holding company", save as otherwise defined, shall bear
the same meaning as in section 736 of the Act, as if extended to
bodies corporate wherever incorporated;
(r) a Letter of Credit being "repaid" or "prepaid" is effected by:
(i) providing the Issuing Bank with cash cover in the currency in
which that Letter of Credit is denominated;
(ii) reducing (in accordance with the terms of this Agreement and
the relevant Letter of Credit) the amount that may be demanded
under that Letter of Credit (or by such amount automatically
reducing in accordance with the terms of the relevant Letter of
Credit); or
<PAGE>
(iii) cancelling that Letter of Credit by returning the original to
the Issuing Bank together with written confirmation (in form
and substance satisfactory to the Issuing Bank) from the
beneficiary that the Issuing Bank has no further liability
under that Letter of Credit.
2. THE COMMITMENTS
2.1 The Facilities
The Banks, relying upon each of the representations and warranties in
clause 9 and upon and subject to the conditions hereof, agree to make
available:
(a) to the Primary Borrower, the Acquisition Facility in the principal sum
of (pound)1,775,000,000;
(b) to the Primary Borrower, the Interim Facility in the principal sum of
(pound)1,150,000,000;
(c) to the Revolving Credit Facility Borrowers, the Revolving Credit
Facility in the principal sum of (pound)700,000,000 (including the
stand-alone facility for REC provided for in clause 24.5).
The obligations of each Bank under this Agreement shall be to participate
in each Advance in the proportion which its Commitment in respect of the
relevant Facility bears to the Total Commitments in respect of the relevant
Facility but so that no Bank shall be under any obligation to participate
in an Advance if and to the extent its Commitment in respect of the
relevant Facility would thereby be exceeded.
2.2 Finance Parties' obligations several
The obligations of each Finance Party under this Agreement are several; the
failure of any Finance Party to perform such obligations shall not relieve
any other Finance Party or any Borrower of any of their respective
obligations or liabilities under this Agreement nor shall any Finance Party
be responsible for the obligations of any other Finance Party under this
Agreement.
2.3 Finance Parties' interests several
Notwithstanding any other term of this Agreement (but without prejudice to
the provisions of this Agreement relating to or requiring action by the
Majority Banks) the interests of the Finance Parties are several and the
amount due to each of the Finance Parties (for its own account) is a
separate and independent debt. Without prejudice to any other provision of
this Agreement (including any requirement for action to be approved or
instigated by, or with the consent or approval of, the Majority Banks) each
of the Finance Parties shall have the right to protect and enforce its
rights to amounts which have become due and payable to it under this
Agreement and it shall not be necessary for any other Finance Party to be
joined as an additional party in any proceedings for this purpose.
<PAGE>
3. THE CONDITIONS
3.1 Documents and evidence
Subject to clause 4.2(d), no Utilisation may be made until the
Unconditional Date and until the Facility Agent, or its duly authorised
representative, shall have received the documents and evidence specified in
Parts A and B of Schedule 3, in each case in form and substance
satisfactory to the Facility Agent which the Facility Agent shall, once it
is so satisfied, confirm in writing to the Primary Borrower.
3.2 General conditions precedent
Subject to clause 3.3, in respect of each Facility, the obligation of each
Bank to contribute to a Utilisation is subject to the further conditions
that at the date of each Drawdown Notice and on each Drawdown Date:
(a) the applicable representations and warranties set out in clause 9 are
true and correct on and as of each such date as if each were made with
respect to the facts and circumstances existing at such date; and
(b) no Default shall have occurred and be continuing or would result from
the making of such Utilisation,
but this clause 3.2(b) shall not prevent the rollover of an existing
Revolving Credit Advance (without increasing the amount thereof) for a
Maturity Period of no more than one month at any time when no Event of
Default has occurred and is continuing.
3.3 Conditions relating to Offer Advances during Certain Funds Period
To ensure that the Primary Borrower has resources available to advance to
Finco 2 funds to on-lend to Bidco funds to enable Bidco to fulfil its
obligations in respect of the Offer, the Banks agree that, in relation to
each Offer Advance requested and to be advanced during the Certain Funds
Period, clause 3.2 shall not be applicable and subject to satisfying the
requirements of clause 3.1 and to providing the appropriate Drawdown Notice
at the appropriate time in accordance with this Agreement, the only further
condition to the obligations of the Banks to make such Offer Advance is
that at the date of each Drawdown Notice and on each Drawdown Date no Major
Default shall have occurred and be continuing or would result from the
making of such Offer Advance.
It is further confirmed, for the avoidance of doubt, that the commitment in
this clause 3.3 operates notwithstanding any contrary provisions of the
Finance Documents and that no Bank shall be entitled to rescind this
Agreement or to fail to contribute to an Offer Advance where the conditions
in clause 3.3 are fulfilled.
3.4 Waiver of conditions precedent
The conditions specified in this clause 3 are inserted solely for the
benefit of the Banks and may be waived on their behalf in whole or in part
and with or without conditions by the Facility Agent acting on the
instructions of the Majority Banks in respect of any Advance.
<PAGE>
4. ADVANCES UNDER THE FACILITIES
4.1 The Acquisition Facility, Interim Facility and Loan Note Facility
(a) Drawdown
Subject to the terms and conditions of this Agreement, Acquisition
Advances and Interim Advances shall be made to the Primary Borrower
following receipt by the Facility Agent from the Primary Borrower of
an appropriately completed Drawdown Notice relating to the respective
Facility not later than 11 a.m. two Banking Days before the proposed
Drawdown Date or in the case of the first Drawdown Date of the
Acquisition Facility only, not later than 9.30 a.m. on such Drawdown
Date.
(b) Amount
Each Drawdown Notice delivered pursuant to clause 4.1(a) shall be
irrevocable and specify:
(i) the proposed Drawdown Date, which shall be a Banking Day prior
to the relevant Available Commitment Termination Date;
(ii) the amount of the proposed Advance, which shall be of
(pound)10,000,000 (or any larger sum which is an integral
multiple of (pound)5,000,000) or, if less, the Available
Facility Amount in respect of the Acquisition Facility or the
Interim Facility (as the case may be) on the relevant Drawdown
Date;
(iii) subject to clause 4.1(c), the first Interest Period relating to
the Advance in question (in the case of the Acquisition
Facility, (being a period of 1, 2, 3 or 6 months or such other
duration as the Primary Borrower and the Banks may agree, and
in the case of the Interim Facility being one month) will begin
on the proposed Drawdown Date and end on a Banking Day which is
or precedes the Final Repayment Date (and in the case of
Interim Advances, the relevant Available Commitment Termination
Date); and
(iv) the account to which the proceeds of the proposed Advance are
to be paid.
There shall be no more than 10 Acquisition Advances and 10 Interim
Advances outstanding at any time and not more than one Acquisition
Advance and/or Interim Advance may be made in any period of 5
consecutive Banking Days.
(c) Interest Periods at time of syndication
The Primary Borrower shall until the Syndication Date select one month
Interest Periods or such other periods as the Facility Agent and the
Primary Borrower agree as being necessary to effect the transfer of
participations following syndication.
(d) Acquisition Facility
No Interim Advances shall be made unless and until the Acquisition
Facility has been drawn down in full, save that in order to ensure
that the Loan Note Facility (which will increase with the receipt of
further acceptances of the Offer which specify the Loan
<PAGE>
Note Alternative) remains as a sub-facility of the Acquisition
Facility, prior to the date of each Advance, the Facility Agent shall
deduct from the Available Facility Amount of the Acquisition Facility,
the amount of Loan Note Facility already required to cover Loan Note
Obligations created by acceptances of the Offer prior to that date,
and a reserve for the maximum amount of Loan Note Facility which may
be required to meet further Loan Note Obligations which may arise from
subsequent acceptances of the Offer, and shall notify the Banks
accordingly, with the result that Interim Advances may be drawn down
prior to the Acquisition Facility being fully drawn, Provided that the
Facility Agent shall in the light of further acceptances of the Offer
periodically adjust the Available Facility Amount in respect of the
Acquisition Facility in such a manner as will ensure that as early as
possible and in any event not later than the date of the making of the
final Offer Advance under this Agreement the aggregate of:
(i) the Acquisition Advances drawn down (other than under the Loan
Note Facility); and
(ii) the amount of the Loan Note Facility,
shall be equal to the Total Commitments under the Acquisition
Facility. The Banks shall participate in each Offer Advance on the
basis of the notifications made by the Facility Agent under this
clause and if necessary to achieve the above, the Facility Agent shall
require the making of Acquisition Advances (and matching mandatory
prepayments of the Interim Facility), which may (to the extent that
the amounts to be paid and received by any Bank are the same) be by
way of book entries, to ensure that the Facilities are drawn in the
manner described in the proviso to this clause.
(e) Loan Note Obligations
The Loan Note Facility shall be available until the Final Repayment
Date and Advances may be drawn down by the Primary Borrower from time
to time under the Loan Note Facility to be on-lent to Finco 2 to be
used by it to on-lend to Bidco to be used to fund Loan Note
Obligations. To the extent that, by reason of the minimum drawdown
requirements set out above, an Advance drawn down under the Loan Note
Facility exceeds the then outstanding Loan Note Obligations, any
excess shall be retained by the Primary Borrower and paid into the
Loan Note Collateral Account which shall be a blocked account
maintained by the Security Agent. The Security Agent shall permit the
Primary Borrower to draw amounts from the Loan Note Collateral Account
from time to time:
(i) to the extent of Loan Note Obligations then due, to be on-lent to
Finco 2 to be used by it to on-lend to Bidco to be used by Bidco
to fund such Loan Note Obligations; provided that
(ii) at the relevant time, no Event of Default shall have occurred
which has not been remedied or waived to the reasonable
satisfaction of the Security Agent.
The Loan Note Collateral Account shall not be a trust account and sums
standing to its credit from time to time shall be charged by way of
fixed charge under the Debenture and available to the Security Agent
by way of security.
<PAGE>
(f) Cancellation on Available Commitment Termination Date
If there is any Available Facility Amount outstanding in relation to
the Acquisition Facility or the Interim Facility on the Available
Commitment Termination Date in respect of such Facility, such
Available Facility Amount (other than the Loan Note Facility as at
such date) shall thereupon be automatically cancelled and no further
Advance may be made under the Acquisition Facility (other than the
Loan Note Facility) or the Interim Facility.
4.2 The Revolving Credit Facility
(a) Drawdown
Subject to the terms and conditions of this Agreement, and to the
prior delivery of a notice of cancellation of the agreement dated 5th
August 1996 between the Target and Citibank International plc as
agent, Barclays Bank PLC and Midland Bank plc so that it is no longer
available for drawing, Revolving Advances shall be made to the
relevant Revolving Credit Facility Borrower following receipt by the
Facility Agent from such Borrower of an appropriately completed
Drawdown Notice relating to the Revolving Credit Facility not later
than 11 a.m. two Banking Days before the proposed Drawdown Date
(which, in respect of the first Revolving Advance to be made for the
purpose of refinancing certain Target Group Borrowed Money will be the
Unconditional Date).
(b) Amount
Each Drawdown Notice delivered to the Facility Agent pursuant to
clause 4.2(a) shall be irrevocable and shall specify:
(i) the proposed Drawdown Date, which shall be a Banking Day
falling prior to the Available Commitment Termination Date;
(ii) the amount of the Revolving Advance, which shall be of
(pound)10,000,000 or any larger sum which is an integral
multiple of (pound)5,000,000 or, if less, the Available
Facility Amount in respect of the Revolving Credit Facility on
the relevant Drawdown Date;
(iii) the Maturity Period which shall be of 1, 2, 3 or 6 months (or
such other period as the Facility Agent, acting on the
instructions of the Majority Banks, shall agree) ending not
later than the Final Repayment Date;
(iv) the account to which the proceeds of the proposed Advance are
to be paid.
(c) Number of Advances
There shall be no more than 10 Revolving Advances outstanding at any
time, and not more than one Revolving Advance may be made in any
period of 5 consecutive Banking Days.
<PAGE>
(d) First drawdown
No Revolving Advance may be made unless and until the first
Acquisition Advance could have been drawn down (but for the delayed
settlement of acceptances of the Offer) Provided that, notwithstanding
the conditions precedent in paragraphs (b), (c), (d), (f) and (g) of
Part B of Schedule 3 have not been satisfied and a notice of
cancellation has not been delivered as required under clause 4.2(a) of
this Agreement but subject otherwise to the terms and conditions of
this Agreement, the Revolving Facility may be utilised to issue
certain Letters of Credit agreed with the Facility Agent in advance
with an aggregate face value not exceeding US$100,000,000 and, subject
to the accession of The Energy Group PLC as an additional Borrower, a
further (pound)100,000,000 of Advances.
(e) Calculation of Available Commitment
For the purpose of calculating the Available Commitment, the
Outstanding Contingent Liabilities under a Letter of Credit will
initially be its Sterling Amount on the Issue Date, subject to
recalculation by the Facility Agent in accordance with the definition
of "Sterling Amount" and clause 4.11 (Currency Fluctuations).
(f) Cancellation on the Available Commitment Termination Date
Without prejudice to any other provision of this Agreement, the Total
Commitments under the Revolving Credit Facility shall in any event be
reduced to zero on the Available Commitment Termination Date in
respect of such Facility and no Advance may be drawn by the Revolving
Credit Facility Borrowers under the Revolving Credit Facility
thereafter.
4.3 Issue of Letters of Credit
Subject to the provisions of this Agreement, the Issuing Bank will Issue a
Letter of Credit specified in a Drawdown Notice at the request of a
Revolving Credit Facility Borrower, if the Agent has received the Drawdown
Notice for a Letter of Credit in the form set out in Part C of Schedule 2
(Letters of Credit) signed on behalf of that Borrower not later, save in
the case of the first Issue of Letters of Credit requested on 15 May 1998,
than 11.00 am five Banking Days prior to the proposed Issue Date: and
(a) the proposed Issue Date is a Banking Day on or before the Final
Repayment Date;
(b) the face value of each Letter of Credit is a minimum Sterling Amount
of (pound)1,000,000;
(c) the Expiry Date falls on or before the earlier of 12 months from the
Issue Date and the Final Repayment Date;
(d) the Issuing Bank and (if different) the Facility Agent has agreed its
terms;
(e) the Sterling Amount of the Letter of Credit requested does not exceed
the Available Facility Amount in respect of the Revolving Credit
Facility;
(f) after such Issue, there will be no more than ten Letters of Credit
outstanding;
<PAGE>
(g) no order, judgment or decree of any Governmental Entity or arbitrator
shall be outstanding which by its terms purports to enjoin or restrain
the Issuing Bank from Issuing such Letter of Credit, nor shall any
requirement of law applicable to the Issuing Bank or any request or
directive (whether or not having the force of law) from any
Governmental Entity with jurisdiction over the Issuing Bank prohibit,
or request that the Issuing Bank refrain from, the Issuance of Letters
of Credit generally or such Letter of Credit in particular or shall
impose upon the Issuing Bank with respect to such Letter of Credit any
restriction, reserve or capital requirement (for which the Issuing
Bank is not otherwise compensated hereunder and which is not in effect
on the date of this Agreement), or shall impose upon the Issuing Bank
any unreimbursed loss, cost or expense which was not applicable on the
date of this Agreement and which the Issuing Bank in good faith deems
material to it;
(h) the currency in which the relevant Letter of Credit is to be
denominated is, in the opinion of the Issuing Bank, not likely to be
subject to undue fluctuation against Sterling and is likely to be
freely convertible and available in sufficient amounts to enable the
Issuing Bank to discharge its obligations as they fall due;
(i) the Issuing Bank has approved (and been approved by) the relevant
beneficiary; and
(j) the total Sterling Amount of all Outstanding Contingent Liabilities
under all Letters of Credit then outstanding would not exceed
(pound)400,000,000.
4.4 Advances generally
(a) A Drawdown Notice (or notice purporting to be such) shall only be
effective if it complies with this Agreement and only upon actual
receipt by the Facility Agent and, once given, shall be irrevocable.
(b) As soon as practicable after receipt of each Drawdown Notice complying
with this Agreement the Facility Agent shall notify each Bank of such
receipt and of the date on which the proposed Advance is to be made
and of the relevant Interest Period or, as the case may be, the
relevant Maturity Period and each Bank shall on such Drawdown Date or,
the case may be, on the first day of the relevant Interest Period
participate in such Advance by making available to the Facility Agent
its portion of such Advance in accordance with clause 8.2.
4.5 Application of proceeds
Without prejudice to the Borrowers' obligations under clause 10.2(a), none
of the Finance Parties shall have any responsibility for the application of
the proceeds of any Advance by any Borrower.
4.6 Letters of Credit
(a) Issuing Bank as principal: the Issuing Bank will act as principal of
each Letter of Credit Issued by it and each Bank will
counter-indemnify the Issuing Bank in respect of the Outstanding
Contingent Liabilities thereunder in the relevant Proportion;
(b) Borrowers' Authorisation and Indemnity: each Borrower unconditionally
and irrevocably:
<PAGE>
(i) authorises the Issuing Bank to comply with any demand which
appears to be duly made by a third party in respect of a Letter
of Credit without any further reference to the relevant
Borrower on the terms set out in Schedule 7 (Terms of
Borrowers' Indemnity);
(ii) agrees that its authorisation under clause 4.6(b)(i) and its
indemnity under clause 4.6(b)(iv) shall remain in full force
and effect and shall not be discharged until such date as the
Facility Agent (acting on the instructions of the Issuing Bank)
shall notify the relevant Borrower that it is satisfied (acting
reasonably) that the Issuing Bank remains under no liability
(actual or contingent) in respect of any Letter of Credit;
(iii) agrees that each Letter of Credit is Issued subject to and with
the benefit of the provisions of Schedule 7 (Terms of
Borrowers' Indemnity); and
(iv) if a Finance Party suffers any liabilities, damages, costs,
expenses, losses and charges whatsoever in relation to or
arising out of any Letter of Credit Issued or clause 4.7
(Banks' Guarantee and Indemnity), the benefit of Schedule 7
(Terms of Borrowers' Indemnity) shall extend to such Finance
Party. A Borrower may finance a payment under such indemnity by
drawing down a Revolving Advance if it is then entitled to do
so in accordance with the terms of this Agreement.
4.7 Banks' Guarantee and Indemnity
Each Bank hereby irrevocably and unconditionally:
(a) subject to clause 4.7(b), guarantees to and indemnifies on the terms
set out in Schedule 8 (Terms of Interbank Guarantee and Indemnity) the
Issuing Bank severally in its Proportion and on demand by the Issuing
Bank, the due and punctual performance by any relevant Borrower of all
its obligations in respect of each Letter of Credit Issued by the
Issuing Bank;
(b) if it is not permitted by its constitutional documents or any
applicable law to grant guarantees, agrees that, upon any failure of a
relevant Borrower to make timely payment of any amount due in respect
of a Letter of Credit, such Bank shall take (and upon the occurrence
of an Event of Default specified in clauses 12.1(e) to (n) (Events of
Default) (or any event occurs which under the applicable law of any
relevant jurisdiction has an analogous, similar or equivalent effect
to any such events) shall be deemed to have taken without any further
action, as of the Issue Date of each outstanding Letter of Credit), an
undivided participating interest from the Issuing Bank in each Letter
of Credit outstanding at such time in a proportion equal to such
Bank's Proportion. Each Bank shall hold the Issuing Bank harmless and
indemnify the Issuing Bank for such Bank's proportionate share of any
drawing under any Letter of Credit in which it has taken an undivided
participating interest under this clause 4.7;
(c) as a separate and independent stipulation agrees that any sum of money
intended to be the subject of the guarantee in clause 4.7(a), and
subject to clause 4.7(b) and Schedule 8 (Terms of Interbank Guarantee
and Indemnity), shall be recoverable from it (in its Proportion) as
sole principal debtor even if such sum would not be recoverable from
<PAGE>
any relevant Borrower by reason of any legal limitation, disability or
incapacity or liquidation of any of them or any other fact or
circumstance (whether known to the Issuing Bank or not) but which
would have been recoverable from such Bank if it were the sole or
principal debtor in respect of such liability in place of any such
Borrower;
4.8 Calculation of Interest if Bank makes a Guarantee or Indemnity Payment
Any payment made or to be made by a Bank pursuant to clause 4.7 (Banks'
Guarantee and Indemnity) and any unreimbursed amount on the part of the
Issuing Bank shall (for the purpose of calculating interest thereon which
is due from the relevant Borrower) be deemed to have been made available to
that Borrower by way of a Revolving Advance on the date such payment is
made or is to be made (or reimbursed) and accordingly is subject to the
terms and conditions hereof and, after the earliest date on which a
Revolving Advance could have been drawn down to fund such liability, such
amount shall be treated as if it were an overdue sum with an initial term
of one month but (for all other purposes) shall be immediately due and
payable by the relevant Borrower.
4.9 Defaulting Banks
If a Bank (a "Defaulting Bank") fails to make payment on its due date of
any amount (an "overdue amount") due from it for the account of the Issuing
Bank pursuant to clause 4.7 (Banks' Guarantee and Indemnity) then until the
Issuing Bank (or the Agent on its behalf) has received payment of such
overdue amount in full (and without prejudice to any other rights or
remedies of the Issuing Bank in respect of such failure):
(a) the Issuing Bank shall be entitled to receive any remuneration which
such Defaulting Bank would otherwise have been entitled to receive in
respect of the Revolving Credit Facility; and
(b) the overdue amount shall bear interest at the rate of one per cent per
annum over LIBOR plus the Additional Cost for the time being from the
due date until the date of payment and any such interest which accrues
shall be compounded monthly.
4.10 Subrogation of Banks making guarantee payments
(a) Each Obligor agrees that if any Bank makes any payment under clause
4.7 (Banks' Guarantee and Indemnity) it will immediately be subrogated
to any rights that the Issuing Bank may then have against the relevant
Borrower in respect of the amount paid and such subrogation will be
subject to the terms set out in Schedule 7 (Terms of Borrowers'
Indemnity).
(b) Each Obligor agrees to indemnify the Bank making such a payment in
respect of such payment and all costs and expenses properly incurred
by the Bank in recovering or attempting to recover any amount pursuant
to such rights of subrogation.
4.11 Currency Fluctuations
In addition and without prejudice to the Banks' other rights hereunder, the
Facility Agent shall on every Quarter Date (and at any other time at which
it is requested to do so by the Majority Banks) calculate the aggregate of
the Sterling Amounts of all Outstanding Contingent Liabilities under all
Letters of Credit then outstanding.
<PAGE>
4.12 Clawback
If the Facility Agent at any time issues a certificate addressed to the
Primary Borrower that in its opinion the aggregate of the Sterling Amounts
of Outstanding Contingent Liabilities under all Letters of Credit then
outstanding is equal to or exceeds 105% of the aggregate amount of the
Banks' Commitments under the Revolving Credit Facility less the amount of
all outstanding Revolving Advances at that time, the Agent may give notice
to the Primary Borrower requiring it within five Banking Days either to:
(a) make arrangements to repay Revolving Advances and/or reduce the amount
of the Letters of Credit outstanding so as to bring the Sterling
Amount of all such Outstanding Contingent Liabilities to an amount
equal to or below 100% of that aggregate amount; or
(b) provide the Issuing Bank with cash cover in the currency in which any
Letter of Credit is denominated of such amount as would cause the
requirements of this clause 4.12 to be satisfied.
4.13 Cash Cover
Where cash cover is provided by an Obligor under clause 4.12 (Clawback) or
otherwise under this Agreement, the Issuing Bank or other recipient Bank
undertakes to place the relevant cash deposit in an account with it
(subject to such security arrangements as the Facility Agent may specify)
bearing interest at a rate and on the standard terms (other than as to the
security arrangements) applicable to corporate customers of such Bank
making deposits of an equivalent size and for an equivalent duration (or on
such other terms as such Bank and the relevant Obligor may agree). Interest
accruing on cash deposited as cash cover shall be for the account of and
paid to such Obligor but shall not be paid to any Obligor during the
continuance of an Event of Default.
5. INTEREST AND INTEREST PERIODS
5.1 Interest on the Acquisition Advances and Interim Advances
The Primary Borrower shall pay interest on each Acquisition Advance and
Interim Advance in respect of each Interest Period on the relevant Interest
Payment Date (or, in the case of Interest Periods of more than six months,
by instalments, every six months from the commencement of the relevant
Interest Period and on the relevant Interest Payment Date) at the rate per
annum determined by the Facility Agent to be the aggregate of (a) the
Applicable Margin, (b) the Additional Cost and (c) LIBOR.
5.2 Interest Periods for the Acquisition Advances and Interim Advances
(a) The Primary Borrower may by notice received by the Facility Agent not
later than 11 a.m. on the second Banking Day before the beginning of
each Interest Period in respect of each Acquisition Advance specify
whether such Interest Period shall have a duration of 1, 2, 3 or 6
months (or such other period as the Facility Agent, acting on the
instructions of the Majority Banks, may agree). All Interest Periods
for the Interim Facility shall have a duration of one month, save as
provided in (b) below.
<PAGE>
(b) Every Interest Period in respect of each Acquisition Advance and
Interim Advance shall be of the duration specified by the Primary
Borrower pursuant to clause 5.2(a) but so that:
(i) the initial Interest Period in respect of each such Advance will
commence on the relevant Drawdown Date and each subsequent
Interest Period in respect of each such Advance shall commence on
the date of the expiry of the previous Interest Period, and until
the Syndication Date the provisions of clause 4.1(c) shall apply
to the selection of Interest Periods;
(ii) if otherwise there would be more than 10 Acquisition Advances or
10 Interim Advances outstanding with different Interest Payment
Dates, the Primary Borrower shall select Interest Periods for
such Advances ending on the same day as the then current Interest
Period for another such Advance and on the last day of such
Interest Period, such Advances shall be consolidated into and
shall thereafter constitute a single Advance;
(iii)if any Interest Period in respect of an Acquisition Advance
would otherwise overrun the Final Repayment Date or the date the
First Repayment is due, such Interest Period shall end on such
date;
(iv) if any Interest Period in respect of an Interim Advance would
otherwise overrun the Available Commitment Termination Date for
the Interim Facility, it shall end on such Available Commitment
Termination Date; and
(v) if the Primary Borrower fails to select the duration of an
Interest Period in respect of an Advance in accordance with the
provisions of clause 5.2(a) and this clause 5.2(b) such Interest
Period shall have a duration of 3 months or such other period as
shall comply with this clause 5.2(b) selected at the Facility
Agent's sole discretion.
5.3 Interest under the Revolving Credit Facility
The relevant Revolving Credit Facility Borrower shall pay interest on each
Revolving Advance on its Maturity Date (or, in the case of a Revolving
Advance having a Maturity Period of more than six months, by instalments,
every six months from the relevant Drawdown Date and on the relevant
Maturity Date) at the rate per annum determined by the Facility Agent to be
the aggregate of (i) the Applicable Margin, (ii) the Additional Cost and
(iii) LIBOR.
5.4 Interest on unpaid sums
(a) If any Borrower fails to pay any sum (including, without limitation,
any sum payable pursuant to this clause 5.4) on its due date for
payment under this Agreement such Borrower shall pay interest on such
sum from the due date up to the date of actual payment (as well after
as before judgment) at a rate determined by the Facility Agent
pursuant to this clause 5.4.
(b) The period beginning on the due date for payment and ending on the
date of actual payment shall be divided into successive periods of not
more than three months as selected by the Facility Agent (after
consultation with the Banks so far as reasonably
<PAGE>
practicable in the circumstances) each of which (other than the first,
which shall commence on such due date) shall commence on the last day
of the preceding such period but so that if the unpaid sum is an
amount of principal which shall have become due and payable prior to
the next succeeding Interest Payment Date relating thereto or, as the
case may be, prior to the relevant Maturity Date, then the first such
period selected by the Facility Agent shall end on such Interest
Payment Date or, as the case may be, such Maturity Date.
(c) The rate of interest applicable to each period referred to in clause
5.4(b) shall (subject to clause 5.6) be the aggregate (as determined
by the Facility Agent) of (i) one per cent per annum, (ii) the
Applicable Margin (iii) the Additional Cost and (iv) LIBOR but so that
if the unpaid sum is an amount of principal (as referred to in clause
5.4(b)) interest shall be payable on such unpaid sum during the first
period determined pursuant to clause 5.4(b) at a rate one per cent
above the rate applicable thereto immediately before it fell due.
(d) Interest under this clause 5.4 shall be due and payable on the last
day of each period determined by the Facility Agent pursuant to this
clause 5.4 or, if earlier, on the date on which the sum in respect of
which such interest is accruing shall actually be paid or on such date
or other dates which the Facility Agent may specify by written notice
to the Primary Borrower (but not more frequently than once a month).
Any interest payable under this clause 5.4 which is not paid when due
shall be deemed an unpaid sum and shall itself bear interest
accordingly.
5.5 Notification of Interest Periods and interest rate
The Facility Agent shall notify the Primary Borrower (who shall notify any
other relevant Borrower) and the Banks promptly of the duration of each
Interest Period, Maturity Period or other period for the calculation of
interest (or, as the case may be, default interest) and of each rate of
interest determined by it under this clause 5.
5.6 Alternative interest rates
If:
(a) in attempting to calculate LIBOR under paragraph (b) of the definition
of LIBOR for a specified period the Facility Agent determines at 11.00
a.m. (London time) on the Quotation Date that it is unable to obtain
quotations for LIBOR from any of the Reference Banks in respect of the
relevant Advance or unpaid sum for the specified period; or
(b) before its close of business on such day, the Facility Agent has been
notified in writing by a Bank or group of Banks to which 35% or more
of the relevant Advance or unpaid sum is (or, if the relevant Advance
were made, would then be) owed that LIBOR calculated in accordance
with its definition in this Agreement does not accurately reflect the
cost to them of funding their participation; or
(c) the Facility Agent, acting reasonably, determines that, by reason of
circumstances affecting the London inter-bank market, adequate and
fair means do not or will not exist for determining the rate of
interest applicable to the specified period,
<PAGE>
then:
(i) the Facility Agent shall promptly notify in writing the Primary
Borrower and the Banks of such event or circumstance;
(ii) the Facility Agent (on behalf of and after consultation with
the Banks) shall, within three Banking Days of such notice,
negotiate with the Primary Borrower with a view to agreeing a
substitute basis on which the relevant part of the Facility may
be maintained;
(iii) any substitute basis agreed in writing by the Facility Agent
(on behalf of and with the consent of all the Banks) and the
Primary Borrower within 30 days of such notice shall take
effect in accordance with its terms and interest shall be
calculated as if the substitute basis had come into effect from
the beginning of the relevant specific period;
(iv) in default of agreement within 30 days, each Bank's
participation in the Advance or unpaid sum (if any) shall
during that specific period bear interest at the annual rate
equal to the cost to that Bank (as certified by it to the
Primary Borrower within ten days of the end of that 30 day
period and expressed as a percentage rate per annum) of funding
its participation during that specific period by whatever means
that Bank determines to be most appropriate plus the Applicable
Margin and the Additional Cost and if clause 5.4 (Interest on
unpaid sums) applies, a further one per cent.
6. REPAYMENT, PREPAYMENT, CANCELLATION AND REDUCTIONS
6.1 Repayment of the Acquisition and Interim Advances
The Primary Borrower shall repay in full:
(a) Acquisition Advances
all outstanding Acquisition Advances on the following dates and in the
following amounts:
Date Amount ((pound))
Second anniversary of the date 600,000,000 (less voluntary
of this Agreement prepayments previously made) (the
"First Repayment")
Final Repayment Date All remaining Acquisition Advances
outstanding (the "Final Repayment")
(b) Interim Advances
all outstanding Interim Advances on the Available Commitment
Termination Date of the Interim Facility.
<PAGE>
6.2 Mandatory Repayment equal to Coal Proceeds
(a) On the Available Commitment Termination Date of the Interim Facility
the Primary Borrower shall prepay outstanding Acquisition Advances in
an amount equal to the product of the Coal Proceeds and the fraction
of the share capital of the Target acquired by Bidco at such date less
the amount of the Interim Advances repaid under clause 6.1(b).
(b) Amounts repaid and/or prepaid in accordance with this clause 6.2 shall
be applied in accordance with clause 6.6(c).
6.3 Repayment of Revolving Advances
The relevant Revolving Credit Facility Borrower shall repay each Revolving
Advance in full on its Maturity Date but, subject to the terms of this
Agreement, amounts repaid may be reborrowed.
On the Final Repayment Date the balance of all outstanding Revolving
Advances shall in any event be repaid in full and may not be reborrowed.
6.4 Optional prepayment of all the Banks
The relevant Borrower may, subject to clause 6.6, prepay:
(a) an Acquisition Advance or an Interim Advance in whole or part (if in
part, being (pound)10,000,000 or any larger sum which is an integral
multiple of (pound)5,000,000) on the next succeeding Interest Payment
Date in respect of such Advance or, together with any relevant amounts
payable pursuant to clause 13.1, any other Banking Day, Provided that
in prepaying such Advance, the Banks to whom such Advance is owing are
prepaid on a pro rata basis;
(b) Revolving Advances in whole (but not in part) together with any
relevant amounts payable pursuant to clause 13.1.
6.5 Affected Banks
(a) The relevant Borrower may and, where required under this Agreement
shall prepay (in whole but not in part only), without premium or
penalty, subject to clause 6.6, the whole of the Contributions to all
the Facilities of any Affected Bank. Upon any such notice of such
prepayment being given, or as provided for in clause 14.1, the
Commitments of the relevant Bank to all the relevant Facilities shall
be reduced to zero and the undrawn amount of the Total Commitments in
respect of all the Facilities shall be reduced accordingly.
(b) Instead of or, in addition to, its rights under clause 6.5(a) the
relevant Borrower may on payment of the fee under clause 16.5, without
prejudice to clause 14.4, require the Affected Bank to transfer
pursuant to clause 16.5 at par all of its Commitments and
Contributions to a Qualifying Bank nominated by the Borrower provided
that the relevant Qualifying Bank agrees (in its absolute discretion)
to accept the transfer to it and, in the case of clause 14.1, that
Bank is lawfully able to do so and the transfer is to take effect
prior to the prepayment date specified by the Facility Agent
thereunder.
<PAGE>
6.6 Prepayments generally
(a) No prepayment may be made pursuant to clauses 6.2, 6.4 or 6.5 unless
the Primary Borrower shall have given the Facility Agent 5 Banking
Days prior notice (or in the case of a prepayment pursuant to clause
14.1 such notice as is required under clause 14.1) specifying the
proposed date of the prepayment and the amount to be prepaid. Every
such notice shall be effective only on actual receipt by the Facility
Agent, shall be irrevocable and shall oblige the relevant Borrower to
make the relevant prepayment on the date specified.
(b) No amount of the Acquisition Facility or the Interim Facility which is
repaid or prepaid may be reborrowed.
(c) Prepayments (other than under clause 6.5) shall be applied in the
following order:
(i) against outstanding Interim Advances;
(ii) against outstanding Acquisition Advances, in inverse order of
maturity save that:
(aa) prepayments of Coal Proceeds under Clause 6.2(a) shall be
applied against the First Repayment and thereafter against
the Final Repayment; and
(bb) voluntary prepayments shall be applied first against the
First Repayment and thereafter against the Final Repayment;
(iii) in repayment of outstanding Revolving Advances and in permanent
reduction of the Revolving Credit Facility;
(iv) to provide cash cover for the Outstanding Contingent
Liabilities under the Revolving Credit Facility.
(d) All prepayments shall be made together with (to the extent these
relate to the amounts prepaid) (i) accrued interest to the date of
prepayment; (ii) any additional amount payable under clauses 8.5 or
14.2; and (iii) all other sums payable by the Borrower to the relevant
Banks under this Agreement including, without limitation, any accrued
commitment commission payable under clause 7.2, any Letter of Credit
commission and fees under clause 7.3, expenses under clause 7.4 and
any amounts payable under clause 13.1.
(e) No Borrower shall prepay all or any part of an Advance outstanding
hereunder except at the times and in the manner expressly provided
herein.
6.7 Cancellation of the Facilities
The Primary Borrower may at any time prior to the Available Commitment
Termination Date in respect of the relevant Facility by notice to the
Facility Agent (effective only on actual receipt) cancel with effect from a
date not less than 10 Banking Days after the receipt by the Facility Agent
of such notice the whole or any part (if in part, being (pound)10,000,000
or any larger
<PAGE>
sum which is an integral multiple of (pound)5,000,000) of the Available
Facility Amount of the relevant Facility, in each case which is not the
subject of a Drawdown Notice at such time. Such notice shall specify the
Facility to which it refers, the date upon which such cancellation is to be
made and the amount of such cancellation. Any such notice of cancellation,
once given, shall be irrevocable and upon such cancellation taking effect
the Commitments of the Banks in respect of the relevant Facility shall be
reduced accordingly (pro-rata their respective Commitments in respect of
the relevant Facility).
6.8 Termination
The Commitment of each Bank shall be automatically cancelled and reduced to
zero at the close of business in London on the relevant Available
Commitment Termination Date or, if it occurs, the Cancellation Date.
7. FEES AND EXPENSES
7.1 Arrangement, underwriting, participation and agency fees
The Primary Borrower shall pay to the Facility Agent or shall procure that
there is paid, whether or not any part of the Commitments is ever advanced:
(a) on the date of this Agreement, for the account of the Arrangers, fees
of an amount agreed between the Primary Borrower and the Arrangers in
a letter dated on or about the date of this Agreement;
(b) on the date of this Agreement and on each anniversary thereof until
the end of the Finance Period, for the account of the Facility Agent,
an agency fee and for the account of the Security Agent, a security
agency fee, in each case of an amount agreed between the Primary
Borrower and the Facility Agent in a letter dated on or about the date
of this Agreement.
7.2 Commitment fees
The Primary Borrower shall pay to the Facility Agent, whether or not any
part of the Commitments is ever advanced, from the date of this Agreement
on each Fee Payment Date after the date of this Agreement and on the
Available Commitment Termination Date in respect of each Facility (or the
Cancellation Date if earlier), for the account of each of the Banks
(pro-rata their respective Commitments for the relevant Facility),
commitment commission computed in arrears at the Applicable Fees Rate on
the daily amount by which the Total Commitments in respect of the relevant
Facility exceeds the aggregate of the Contributions in respect of the
relevant Facility. Accrued commitment commission will also be payable on
the amount of any Commitment when cancelled on the date of its
cancellation.
7.3 Letter of Credit Fees
(a) Each relevant Borrower shall (on the dates set out in clause 7.3(c))
pay commission in Sterling to the Facility Agent for the account of
the Banks (in their respective Proportions) on the Issue of any Letter
of Credit requested by such Borrower in Sterling at a percentage rate
per annum equal to the Applicable Margin on the Sterling Amount of the
Outstanding Contingent Liabilities under such Letter of Credit
calculated
<PAGE>
in each case on the date of Issue and recalculated on each Quarter
Date from the Issue Date of such Letter of Credit until the earlier of
its Expiry Date or such date as the Issuing Bank and the Banks have
ceased to be under any liability (actual or contingent) in respect
thereof, and on the basis of a 365 day year. If the relevant Borrower
has provided cash cover for any Letter of Credit, the percentage rate
per annum payable on cash covered amounts shall instead be 0.25%.
(b) Each relevant Borrower shall pay a fronting fee to the Facility Agent
for the account of the Issuing Bank on the Issue of any Letter of
Credit at a rate of 0.2% per annum on the Sterling Amount of the face
amount of the relevant Letter of Credit payable in advance on the date
of Issue and on each Quarter Date thereafter.
(c) The commission and fronting fee payable under clauses 7.3(a) and
7.3(b) in respect of each Letter of Credit shall be paid in advance on
the relevant Issue Date and on each Quarter Date in each year during
the continuance of such Letter of Credit (or if such day is not a
Banking Day, on the preceding Banking Day) commencing on the first
Quarter Date falling on or after the Issue of the relevant Letter of
Credit. If a Letter of Credit is terminated leaving no Outstanding
Contingent Liabilities before a Quarter Date, any commission paid in
advance for the period from the date of cancellation until the next
Quarter Date shall be repaid to the Borrower which made the advance
commission payment by set-off against any amounts then due from the
Borrower to any Finance Party or, if no such amounts are due, by
payment in cash.
(d) For the avoidance of doubt, the Issuing Bank's Proportion of the
commission at the rate and calculated in the manner specified in
clause 7.3(a) shall be payable to the Issuing Bank in respect of its
residual liability in its capacity as a Bank, notwithstanding that it
does not purport to guarantee itself in its capacity as Issuing Bank.
(e) The Borrowers shall pay interest on the amount demanded and
outstanding under the indemnity given by them in respect of Letters of
Credit in accordance with clause 4.8 (Calculation of Interest if Bank
makes a Guarantee or Indemnity Payment) in addition to the commission
and other fees payable under this Agreement in respect of the
Revolving Credit Facility.
7.4 Expenses
The Primary Borrower shall reimburse the Arrangers, the Banks, the Security
Agent and the Facility Agent from time to time within three Banking Days of
demand:
(a) all reasonable costs and expenses (including without limitation legal,
printing and out-of-pocket expenses) together with any VAT thereon
incurred by the Facility Agent and the Arrangers in connection with
the negotiation, preparation and execution of the Finance Documents
and the completion and syndication of the transactions therein
contemplated, and the negotiation, preparation and execution of any
amendment or extension of, or the granting of any waiver or consent
under, any of the Finance Documents; and
(b) without prejudice to the generality of (c) below, all expenses and
costs (including without limitation the fees and expenses of lawyers,
accountants, surveyors, valuers, environmental consultants and other
professional advisers and out-of-pocket expenses) incurred by the
Facility Agent in connection with the obtaining of reports and/or
advice
<PAGE>
and/or the undertaking of investigations by or on behalf of the
Facility Agent into or concerning the Primary Borrower or the Group
following the occurrence of a Default and whilst it is continuing (or
where the Majority Banks' reasonable opinion is that a Default may
have occurred) and the Primary Borrower undertakes to give, and to
procure that its Subsidiaries give, all such reasonable assistance
(including, without limitation, access to its and/or their properties
and financial and other records) at all times as the Facility Agent
shall reasonably require for the purpose of enabling such reports or
advice to be prepared or such investigations to be undertaken; and
(c) after a Default has occurred, all costs and expenses (including
without limitation legal and out-of-pocket expenses) incurred by any
of the Finance Parties in contemplation of, or otherwise in connection
with, the enforcement or attempted enforcement of, or preservation or
attempted preservation of any rights under, any of the Finance
Documents, or otherwise in respect of the recovery, or attempted
recovery, of moneys owing under the same, together with interest at
the rate referred to in clause 5.4 from the date on which such
expenses were incurred to the date of payment (as well after as before
judgment).
7.5 Value Added Tax
All fees, costs and expenses payable pursuant to this clause 7 shall be
paid together with an amount equal to any VAT thereon payable by any of the
Finance Parties in respect of such fees and expenses.
7.6 Stamp and other duties
The Primary Borrower shall pay all stamp, documentary, registration,
notarisation or other duties or Taxes (including any duties or Taxes
payable by, or assessed on, the Finance Parties) imposed on or in
connection with the negotiation, preparation, implementation and execution
of any of the Finance Documents and the syndication of the Facilities and
shall indemnify the Finance Parties against any liability arising by reason
of any delay or omission by the Primary Borrower to pay such duties or
Taxes.
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS
8.1 No set-off or counterclaim; distribution to the Banks
All payments to be made by any Borrower under this Agreement shall be made
in full, without any set-off or counterclaim whatsoever and, subject as
provided in clause 8.5, free and clear of any deductions or withholdings,
in Sterling (except for costs, charges or expenses which shall be payable
in the currency in which they are incurred) on the due date to the account
of the Facility Agent at such bank as the Facility Agent may from time to
time specify for this purpose. Save where this Agreement provides for a
payment to be made for the account of a particular Finance Party or Finance
Parties, in which case the Facility Agent shall distribute the relevant
payment to the relevant Finance Party or Finance Parties concerned,
payments to be made by any Borrower under this Agreement shall be for the
account of all the Banks and the Facility Agent shall forthwith distribute
such payments in like funds as are received by the Facility Agent to the
Banks rateably for the account of such Banks' respective Facility Offices
in accordance with their Commitments or Contributions, as the case may be.
<PAGE>
8.2 Payments by the Banks
All sums to be advanced by the Banks to any Borrower under this Agreement
shall be remitted in Sterling in immediately available funds not later than
11 a.m. on the relevant Drawdown Date or, as the case may be, the first day
of the relevant Interest Period to the account of the Facility Agent at
such bank as the Facility Agent may have notified to the Banks and shall be
paid by the Facility Agent on such date to the account of the relevant
Borrower in England specified in the relevant Drawdown Notice.
8.3 Non-Banking Days
When any payment under this Agreement would otherwise be due on a day which
is not a Banking Day, the due date for payment shall be postponed to the
next following Banking Day unless such Banking Day falls in the next
calendar month, in which case payment shall be made on the immediately
preceding Banking Day.
8.4 Facility Agent may assume receipt
Where any sum is to be paid under this Agreement to the Facility Agent for
the account of another person, the Facility Agent may assume that the
payment will be made when due and may (but shall not be obliged to) make
such sum available to the person so entitled. If it proves to be the case
that such payment was not made to the Facility Agent, then the person to
whom such sum was so made available shall on request refund such sum to the
Facility Agent together with interest thereon sufficient to compensate the
Facility Agent for the cost of making available such sum up to (and/or, as
the case may be, the cost to the relevant other person of not receiving
such sum until) the date of such repayment and the person by whom such sum
was payable shall indemnify the Facility Agent (or the relevant other
person) for any and all loss or expense which the Facility Agent (or the
relevant other person) may sustain or incur as a consequence of such sum
not having been paid on its due date together with any interest, expenses
and penalties payable or incurred in connection therewith.
8.5 Grossing-up for Taxes
If at any time any Borrower is required to make any deduction or
withholding in respect of Taxes from any payment due under any Finance
Document for the account of any Finance Party (or if the Facility Agent, or
as the case may be, the Security Agent is required to make any such
deduction or withholding from a payment to a Finance Party), the sum due
from the relevant Borrower in respect of such payment shall, subject to
clause 8.6, be increased to the extent necessary to ensure that, after the
making of such deduction or withholding (and any further deduction and
withholding which may be levied on the additional amounts paid by reason of
this clause), each Finance Party receives on the due date for such payment
(and retains, free from any liability in respect of such deduction or
withholding) a net sum equal to the sum which it would have received and so
retained had no such deduction or withholding been made or required to be
made and (without prejudice to the foregoing provisions of this clause 8.5)
each Borrower shall indemnify each Finance Party on demand by the Facility
Agent against any losses or costs incurred by any of them together with any
interest, expenses and penalties payable or incurred in connection
therewith by reason of any failure of such Borrower to make any such
deduction or withholding.
<PAGE>
Each Borrower shall promptly deliver to the Facility Agent any receipts,
certificates or other proof evidencing the amounts (if any) paid or payable
in respect of any such deduction or withholding.
8.6 Qualifying Bank
(a) If:
(i) any Bank is not or ceases to be a Qualifying Bank; and
(ii) as a result an Obligor is required to deduct or withhold United
Kingdom income tax in respect of payments of interest to be made
by such Obligor to that Bank under any Finance Document or would
otherwise have been required to make an indemnity payment or a
greater indemnity payment under clause 8.5 or 14.2,
then such Obligor shall (as the case may be) not be liable to pay
under clause 8.5 in respect of any such payment of interest any amount
in excess of the amount it would have been obliged to pay if such Bank
were a Qualifying Bank, nor shall it be liable to make an indemnity
payment or a greater indemnity payment under clause 8.5 or, as the
case may be, Clause 14.2 than would have been required if the
aforesaid Bank had been or had not ceased to be a Qualifying Bank
Provided that this Clause 8.6 shall not apply, and such Obligor shall
be obliged to comply with its obligations under clause 8.5, or as the
case may be 14.2, if on or after the date hereof:
(aa) there shall have been any change in, or in the official
interpretation or application of, any relevant law or the
practice of the United Kingdom Inland Revenue (or, in the case of
a Treaty Lender, any Government Entity in the country in which it
is resident for the purpose of the relevant double taxation
treaty) and as a result thereof the Bank is not or ceases to be a
Qualifying Bank, or
(bb) the Bank referred to in clause 8.6(a) has transferred its
Facility Office in respect of any Facility outside the United
Kingdom or has become a Bank hereunder with a Facility Office
outside the United Kingdom in respect of any Facility, in each
case, with the consent of the Primary Borrower if and insofar as
required under this Agreement.
(b) A person intending to make a claim pursuant to clause 8.5 shall,
promptly after such person becomes aware of the circumstances giving
rise to such claim and the amount of such claim, deliver to the
Primary Borrower through the Facility Agent a certificate to that
effect specifying the amount of such claim and setting out in
reasonable detail the basis of such claim, provided that nothing shall
require such person to disclose any confidential information relating
to the organisation of its affairs.
(c) If at any time after the date of this Agreement any Bank is aware that
it is not or will cease to be a Qualifying Bank (for whatever reason),
it shall promptly notify the Primary Borrower.
(d) A Treaty Lender will submit such claim to the appropriate authorities
(together with such forms, papers, other documents and/or evidence as
necessary) as may be required
<PAGE>
for the Obligors to make payment of interest to such Treaty Lender on
its Advances free of withholding or deduction on account of United
Kingdom Tax. No Obligor will be liable to pay any additional amount
under clause 8.5 in respect of the withholding or deduction on account
of United Kingdom income tax from any such interest unless such claim
has been submitted to those authorities promptly after that Treaty
Leader became a party to this Agreement as a Treaty Lender or the
proviso to clause 8.6(a) applies.
8.7 Claw-back of Tax benefit
If following any such deduction or withholding as is referred to in clause
8.5 any Finance Party determines in its sole discretion that it has
received or been granted a credit against or remission for any Taxes
payable by it, such Finance Party shall, subject to the relevant Borrower
having made any increased payment in accordance with clause 8.5 and subject
to there not being any Default which is continuing, and to the extent that
such Finance Party can do so without prejudicing the retention of the
amount of such credit or remission and without prejudice to the right of
such Finance Party to obtain any other relief or allowance which may be
available to it, reimburse the relevant Borrower with such amount as such
Finance Party shall in its absolute discretion certify to be the proportion
of such credit or remission as will leave such Finance Party (after such
reimbursement) in no worse position than it would have been in had there
been no such deduction or withholding from the payment by the relevant
Borrower as aforesaid. Such reimbursement shall be made forthwith upon such
Finance Party certifying that the amount of such credit or remission has
been received by it, provided that the Finance Party shall be the sole
judge of the amount of any such benefit and of the date on which it was
received. Nothing contained in this Agreement shall interfere with the
right of any Finance Party to arrange its tax affairs in whatever manner it
thinks fit nor oblige any Finance Party to disclose any information
regarding its tax affairs and computations. Without prejudice to the
generality of the foregoing, no Borrower shall, by virtue of this clause
8.7, be entitled to enquire about any Finance Party's tax affairs or
computations. The Finance Parties are under no obligation to investigate
whether any tax credit is available or to claim any tax credit. Any amount
paid by any Finance Party to a Borrower under this clause shall be
conclusive evidence of the amount payable and will be accepted by the
Borrower in full and final settlement of its claim.
8.8 Bank accounts
Each Bank shall maintain, in accordance with its usual practices, an
account or accounts evidencing the amounts from time to time lent by, owing
to and paid to it under this Agreement. The Facility Agent shall maintain a
control account showing the utilisation of the Facilities and other sums
owing by each Borrower under this Agreement and all payments in respect
thereof made by each Borrower from time to time. In any legal action
arising out of or in connection with the Finance Documents the entries made
in the accounts maintained pursuant to this clause 8.8 shall, in the
absence of manifest error, be conclusive as to the amount from time to time
owing by each Borrower under this Agreement.
8.9 Partial payments
If:
(a) on any date on which a payment is due to be made by any Borrower under
this Agreement, the amount received by the Facility Agent from such
Borrower falls short of the total amount of the payment due to be made
by such Borrower on such date; or
<PAGE>
(b) on any date on which the Facility Agent receives any payment from the
Security Agent or otherwise receives any amount representing proceeds
of realisations or other recoveries under any of the Security
Documents, the amount of such payment or other receipt falls short of
the total amount owing to the Finance Parties under this Agreement on
such date
then (in any such case), without prejudice to any rights or remedies
available to the Finance Parties under any of the Finance Documents, the
Facility Agent shall apply the amount actually received by it in or towards
discharge of the obligations of such Borrower under this Agreement in the
following order, notwithstanding any appropriation made, or purported to be
made, by such Borrower:
(i) first, in or towards payment, on a pro-rata basis, of any
unpaid costs and expenses of the Facility Agent, Security Agent
or the Arrangers under this Agreement;
(ii) secondly, in or towards payment to the Banks, on a pro-rata
basis, of any amount owing to the Banks under clause 20.2;
(iii) thirdly, in or towards payment to the Arrangers, on a pro-rata
basis, of any portion of the fees payable under clause 7.1(a)
which remains unpaid;
(iv) fourthly, in or towards payment to the Facility Agent and the
Security Agent, on a pro-rata basis, of any portion of the fees
payable under clause 7.1(b) which remains unpaid;
(v) fifthly, in or towards payment to the Banks, on a pro-rata
basis, of any accrued commitment commission payable under
clause 7.2 which shall have become due but remains unpaid;
(vi) sixthly, in or towards payment to the Banks, on a pro-rata
basis, of any accrued interest, Letter of Credit commission and
(in the case of the Issuing Bank) Letter of Credit fronting
fees or commission which shall have become due but remain
unpaid, but so that any amount payable by virtue of clause 8.5
shall be excluded;
(vii) seventhly, in or towards payment to the Banks, on a pro-rata
basis, of any principal which shall have become due but remains
unpaid;
(viii) eighthly, in or towards payment to any such Banks, on a
pro-rata basis, of any amount payable to any Banks by virtue of
clause 8.5 which remains unpaid; and
(ix) ninthly, in or towards payment of any other sum which shall
have become due but remains unpaid (and, if more than one such
sum so remains unpaid, on a pro-rata basis).
Each reference in clause 8.9(i) to (ix) (inclusive) to a category of unpaid
sums shall include interest thereon payable in accordance with this
Agreement (including, without limitation,
<PAGE>
default interest under clause 5.4). Accordingly, clause 8.9(vi) shall be
construed as referring to interest on principal and accrued interest
thereon which remain unpaid to the extent due.
The order of application set out in this clause 8.9(v) to 8.9(ix) shall be
varied by the Facility Agent if the Majority Banks so direct, without any
reference to, or consent or approval from, the Borrowers.
8.10 Calculations
All interest and other payments of an annual nature under this Agreement or
any of the Security Documents shall accrue from day to day and be
calculated on the basis of the actual number of days elapsed, and in the
case of Sterling a 365 day year and in the case of other currencies a 360
day year. In calculating the actual number of days elapsed in a period
which is one of a series of consecutive periods with no interval between
them or a period on the last day of which any payment falls to be made in
respect of such period, the first day of such period shall be included but
the last day excluded.
Where the Applicable Margin or Additional Cost changes during any period,
interest and commitment fees shall be calculated on the rate prevailing
from day to day.
8.11 Certificates conclusive
Any certificate of, or determination by, a Finance Party as to any rate of
interest or any other amount payable under this Agreement or any of the
Security Documents shall, in the absence of manifest error, be conclusive
and binding evidence of such rate or amount on each Borrower and (in the
case of a certificate of or determination by the Facility Agent) on the
Banks.
8.12 Effect of monetary union
If the country of any national currency in which any amount is expressed to
be payable under this Agreement participates in economic and monetary union
in accordance with Article 109J of the Treaty on European Union, then:
(a) any amount expressed to be payable under this Agreement in that
national currency shall (until the end of the transitional period) be
made in that national currency or in Euros as the Facility Agent may,
by not less than two Banking Days' notice to the Primary Borrower and
the Banks to that effect, require;
(b) any amount so required under clause 8.12(a) to be paid in Euros shall
be converted from that national currency at the rate stipulated
pursuant to Article 109L(4) of the Treaty on European Union and
payment of the amount in Euro derived from such conversion shall
discharge the obligation of the relevant party to pay such national
currency amount; and
(c) after consultation with the Primary Borrower and the Banks and
notwithstanding clause 22, the Facility Agent shall be entitled to
make from time to time such amendments to this Agreement as it may
determine to be necessary to take account of monetary union and any
consequent changes in market practices (whether as to the settlement
or rounding of obligations, the calculation of interest or otherwise
howsoever).
<PAGE>
Any amendment so made to this Agreement by the Facility Agent shall be
promptly notified to the other Finance Parties and the Primary
Borrower by the Facility Agent and shall be binding on all the other
Finance Parties and any Borrower and any other party to this
Agreement.
9. REPRESENTATIONS AND WARRANTIES
9.1 Repeated representations and warranties
Each Obligor party hereto represents and warrants to each Finance Party
that (subject to clause 9.5):
(a) Due incorporation: it and the other members of the Group from time to
time are duly incorporated and validly existing under the laws of
England as limited liability companies and have power to carry on
their respective businesses as they are now being conducted and to own
their respective property and other assets;
(b) Corporate Power: it and the other Obligors have power to execute,
deliver and perform their respective obligations under each of the
Finance Documents to which they are parties and to borrow the
Commitments; all necessary corporate, shareholder and other action has
been taken to authorise the making of the Offer and the issue of the
Press Release and the Offer Documents, and the execution, delivery and
performance of the same and no limitation on the powers of any Obligor
to borrow will be exceeded as a result of any Advance under any of the
Finance Documents and no limitation on any of their respective powers
to give guarantees and/or to create security will be exceeded as a
result of the execution and delivery of any of the Security Documents;
(c) Binding obligations: (subject, in the case of the Security Documents,
to registration under section 395 Companies Act 1985) (i) each of the
Finance Documents when executed and delivered by any Obligor will
(subject to the Reservations) constitute, valid, legally binding and
enforceable obligations of it in accordance with their respective
terms and (ii) it is not necessary, to ensure the legality, validity,
enforceability or admissibility in evidence of any Finance Document
that they or any other instrument be notarised, filed, recorded,
registered or enrolled in any court, public office or elsewhere in the
United Kingdom or elsewhere or that any stamp, registration or similar
tax or charge be paid in the United Kingdom or elsewhere on or in
relation to any Finance Documents;
(d) No conflict with other obligations: the execution and delivery of, the
exercise of its rights and the performance of its obligations under,
and compliance with the provisions of, the Finance Documents by it and
all other Obligors will not (i) contravene any existing applicable
law, statute, rule or regulation or any judgment, decree or permit to
which any of them are subject, (ii) conflict with, or result in any
breach of any of the terms of, or constitute a default under any of
the Licences or the Pooling and Settlement Agreement, or under any
other agreement or other instrument to which any of them are a party
or are subject or by which any of their property is bound to an extent
which is reasonably likely in the reasonable opinion of the Majority
Banks to have a Material Adverse Effect, (iii) contravene or conflict
with any provision of their respective Memorandum or Articles of
Association or (iv) result, other than pursuant to the provisions of
any of the Finance Documents, in the creation or imposition of, or
<PAGE>
oblige any member of the Group to create, any Security Interest (save
in favour of the Finance Parties) on any member of the Group's,
assets, rights or revenues; and
(e) Pari passu: in the case of each Borrower, its obligations under this
Agreement are its direct, general and unconditional obligations and
rank at least pari passu with all its other present and future
unsecured and unsubordinated Indebtedness with the exception of any
obligations which are mandatorily preferred by law and not by
contract.
9.2 Non-repeating representations and warranties
Each Obligor party hereto further represents and warrants to each of the
Finance Parties that (subject to clause 9.5):
(a) Clean company: (other than as may result from entry into the Finance
Documents, the Offer Documents and the documents ancillary thereto,
copies of which have been provided to the Arrangers) prior to the date
of this Agreement neither the Primary Borrower nor Finco 2 nor Bidco
has undertaken any trading or incurred any material liabilities of any
nature whatsoever whether actual or contingent other than liabilities
for professional fees and any liability which would arise if the
relevant company were wound up;
(b) Winding Up: no meeting has been convened for the winding up or
administration of the Primary Borrower, Finco 2, Bidco or (so far as
the Primary Borrower is aware) any other member of the Group and so
far as the Primary Borrower is aware, no such step is intended by any
of them and no petition, application or the like is outstanding for
the winding up or administration of any of them;
(c) Full Disclosure: so far as the Primary Borrower, Finco 2 and Bidco are
aware, the written factual information supplied by or on behalf of the
Primary Borrower, Finco 2, Bidco or the Parent, to any of the Finance
Parties in connection with this Agreement, the Parent and its
Subsidiaries, the Offer and/or the Target Group (including but not
limited to the Press Release and the Offer Document and any other
information concerning the Borrowed Monies, cash balances and Security
Interests of the Target Group) was and remains (except insofar as
superseded by later material supplied to the Finance Parties by the
Primary Borrower prior to the date of this Agreement) true and
accurate in all material respects and it is not aware of any material
facts or circumstances that have not been disclosed to the Finance
Parties and which might reasonably be expected to have a Material
Adverse Effect, or which might reasonably be expected to be material
to a bidder in the context of whether to make an offer or whether the
offer is correctly priced;
(d) Agreed Projections: the Agreed Projections delivered to the Arrangers
prior to the date of this Agreement in the agreed form were arrived at
after careful consideration, were fair and were based on assumptions
which were reasonable having regard to the state of knowledge of the
officers of the Primary Borrower, Finco 2 and Bidco;
(e) No Default: no Default has occurred and is continuing;
(f) Existing Security: no Security Interest exists on or over any member
of the Group's assets except as permitted by clause 11.1(a); and
<PAGE>
(g) Litigation:
(i) no litigation, alternative dispute resolution, arbitration or
administration proceeding is taking place, pending or, to the
knowledge of the officers of the Primary Borrower, Finco 2 or
Bidco, threatened against the Primary Borrower, Finco 2 or Bidco;
and
(ii) so far as it is aware, no litigation, alternative dispute
resolution, arbitration or administration proceeding is taking
place, pending or threatened against any other member of the
Group which is reasonably likely (in the reasonable opinion of
the Majority Banks) in either case to have a Material Adverse
Effect.
9.3 Representations on and from the Takeover Operative Date
Each Obligor party hereto represents and warrants to each Finance Party
that on the Takeover Operative Date:
(a) Compliance with Environmental Laws: each member of the Group:
(i) as at the Takeover Operative Date complies; and
(ii) has (to the extent that non-compliance would be reasonably likely
to give rise to a material liability as at the Takeover Operative
Date) at all times complied,
in all material respects with all Environmental Laws, where
non-compliance, in each case, would be reasonably likely to have a
Material Adverse Effect;
(b) No Environmental Claims:
(i) no Environmental Claim is pending or has been made or threatened
against any member of the Group or any of their respective
officers in their capacity as such; and
(ii) no member of the Group is aware of any circumstances or situation
which would be reasonably likely to result in it having any
liability in relation to Environmental Matters,
which, in either case, would be reasonably likely to have a Material
Adverse Effect;
(c) The Licensees:
(i) each relevant Licensee has been duly authorised by the Secretary
of State under Section 6 of the Electricity Act to generate,
and/or distribute and/or supply electricity and/or, as the case
may be, section 7 of the Gas Act 1986 to supply and transport
gas; and
(ii) no Licensee is in contravention of:
(A) any term or condition of any Licence; or
<PAGE>
(B) any requirement of the Electricity Act or Gas Acts or any
regulations made thereunder; or
(C) any other statutory requirement or any final order or
confirmed provisional order made under the Electricity Act
or Gas Acts; or
(D) any undertaking given by it to the Director General,
Director General of Gas Supply or the Secretary of State in
relation to the conduct of its business as a generator of
electricity or, as the case may be, as a public electricity
supplier or (as the case may be) public gas supplier or
transporter;
the contravention or consequence of which is reasonably likely to
have a Material Adverse Effect;
(d) The Licences:
(i) each Licence is in full force and effect and neither the
Director General nor the Director General of Gas Supply nor the
Secretary of State has given notice to revoke a Licence;
(ii) no amendment of any of the terms of a Licence has been made or
proposed;
(iii) no other material licence, consent, undertaking or
authorisation necessary for the carrying on by any member of
the Group of its business substantially as it is currently
carried on has been terminated or breached or not obtained or
is otherwise not in full force and effect;
which in either case is reasonably likely to have a Material Adverse
Effect.
9.4 Repetition
The representations and warranties in clauses 9.1 and 9.3 shall be deemed
to be repeated on and as of the first Drawdown Date (or in the case of
clause 9.3, the Takeover Operative Date), each subsequent Drawdown Date and
each Interest Payment Date, as if made with reference to the facts and
circumstances existing on each such date, and shall, after the first set of
financial statements have been delivered under clauses 10.1(b)(i) and (ii),
be deemed to include a representation that the then latest financial
statements delivered to the Banks under clauses 10.1(b)(i) and (ii) have
been prepared in accordance with the Appropriate Accounting Principles
which have been consistently applied and give a true and fair view of (or
in the case of unaudited accounts, present with reasonable accuracy) the
financial position of the Primary Borrower and the consolidated financial
position of the Group respectively as at the date to which such financial
statements were made up and the results of the operations of the Primary
Borrower and the results of the operations of the Group respectively for
the relevant period, and in the case of audited accounts are not subject to
any qualifications save of a technical and non-adverse nature.
9.5 Application to Target Group
Each representation or warranty given in respect of Target or any member of
the Target Group on any date up to (but not including) the Takeover
Operative Date shall be given only by the
<PAGE>
Primary Borrower, Finco 2 and Bidco and only on a qualified basis, namely
that the representation and warranty is true and accurate with regard to
the Target and the Target Group so far as the Primary Borrower, Finco 2 and
Bidco are aware as at the date of this Agreement.
9.6 Obligors' Acknowledgement
Each Obligor party hereto acknowledges that the Finance Parties are relying
on the representations and warranties but not on any other information
contradictory to them or varying them of which the Finance Parties or any
of them or their respective agents or advisers may have actual or
constructive knowledge.
9.7 Representation at time of Third Amendment Agreement
Each Obligor party hereto represents and warrants to each Finance Party
that so far as it is aware (subject to clause 9.5) all written factual
information (including all supplements and updates to the Agreed
Projections) supplied on or prior to the date of the Third Amendment
Agreement by or on behalf of the Primary Borrower, Finco 2, Bidco or the
Parent to any Finance Party or prospective Finance Party for the purposes
of the information memorandum referred to in clause 16.16(f) and the
Syndication Letter was and remains (except insofar as superseded by later
material supplied to the Finance Parties by the Primary Borrower, Finco 2,
Bidco or the Parent prior to the date of the Second Supplemental Agreement)
true and accurate in all material respects and does not omit to state a
material fact necessary in order to make the statements contained therein
not materially misleading in the light of the circumstances under which the
statements were made.
10. POSITIVE UNDERTAKINGS
10.1 Information Undertakings
Each Obligor party hereto undertakes with each of the Finance Parties that,
throughout the Finance Period (but subject to clause 11.2):
(a) Preparation of financial statements: it will:
(i) Annual audited financial statements: beginning with the financial
year ending 31 December 1998, prepare financial statements in
respect of itself and consolidated financial statements in
respect of the Group and consolidated financial statements of
Finco 2 in accordance with the Appropriate Accounting Principles
(consistently applied) in respect of each financial year and
cause the same to be reported on by the Auditors; and
(ii) Quarterly financial statements: after the Unconditional Date,
prepare unaudited consolidated financial statements of the Group
and the consolidated financial statements of Finco 2 in respect
of each Quarter in each financial year in accordance with the
Appropriate Accounting Principles (consistently applied);
(b) Delivery of financial statements: it will deliver to the Facility
Agent, for distribution to the Banks, sufficient copies for all the
Banks of each of the following documents:
<PAGE>
(i) Annual audited financial statements: at the time of issue
thereof to the shareholders of the Primary Borrower and Finco
2, but in any event not later than 120 days after the end of
the financial year to which they relate, the audited financial
statements referred to in clause 10.1(a)(i) for each financial
year together, in each case, with the report of the Auditors
thereon, the notes thereto, the directors' report thereon and
the certificate referred to in clause 10.1(b)(iii);
(ii) Unaudited management accounts: within 45 days after the end of
each Quarter in each financial year, consolidated management
accounts for the Group and for Finco 2 in respect of such
Quarter prepared in accordance with the requirements of clause
10.1(a)(ii) together with the certificate referred to in clause
10.1(b)(iii);
(iii) Compliance with Financial Undertakings: with each set of
accounts delivered by it under clauses 10.1(b)(i) and (ii)
above (except the first Quarter's accounts under clause
10.1(b)(ii)), the Primary Borrower will deliver to the Facility
Agent a certificate signed by a director of the Primary
Borrower:
(aa) confirming compliance with the financial undertakings in
clause 10.3(a) as at the end of the relevant Test Period;
and
(bb) setting out in reasonable detail and in a form satisfactory
to the Facility Agent the computations necessary to
demonstrate such compliance;
(iv) Regulatory Accounts: at the time of their issue to the relevant
Government Entity or regulator, all accounts and other
financial statements or information required under any law or
regulation to be provided to any Government Entity, industry
regulator or similar body or person;
(v) Reports and notices to shareholders and creditors: at the time
of issue thereof every report, circular, notice or like
document issued by the Primary Borrower, Finco 2 and/or Bidco
to its shareholders or creditors generally and every notice
convening a meeting of its shareholders or any class of its
shareholders; and
(vi) Further information: promptly upon request, such further
information concerning the financial position of the Group (or
any member of it) as the Facility Agent shall reasonably
require;
(c) Notice of Default: it will promptly upon becoming aware of the same
inform the Facility Agent of any Default;
(d) Notice of litigation: it will, upon becoming aware that the same is
threatened or pending and in any case promptly after the commencement
thereof, give to the Facility Agent notice in writing of any
litigation, alternative dispute resolution, arbitration or
administrative proceedings or any dispute affecting any member of the
Group or any of their respective assets, rights or revenues which if
determined against it could reasonably be expected to result in a
liability (including costs) of more than (pound)10,000,000 or
otherwise have a Material Adverse Effect; and
<PAGE>
(e) Environmental Claims: promptly upon receipt of formal written notice
of the same inform the Facility Agent of any material Environmental
Claim.
10.2 General Undertakings
Each Obligor party hereto undertakes with each of the Finance Parties that,
throughout the Finance Period but subject to clause 11.2:
(a) Use of proceeds: it will procure that the proceeds of Advances under
the Facilities are used exclusively for their respective purposes
specified in clause 1.1;
(b) Consents etc relating to the Finance Documents: it will obtain or
cause to be obtained, maintain in full force and effect and comply in
all material respects with the conditions and restrictions (if any)
imposed in, or in connection with, every consent, authorisation,
licence or approval of any Government Entity or consents required by
it in connection with the execution, delivery, validity,
enforceability or admissibility in evidence of the Finance Documents
and do, or cause to be done, all other acts and things, which may from
time to time be necessary under applicable law for the continued due
performance of all its (or its Subsidiaries) obligations under the
Finance Documents;
(c) Pari passu: it will ensure that its obligations, and those of each
other Obligor, under each of the Finance Documents shall, at all times
be direct, general and unconditional obligations and rank at least
pari passu with all its other present and future unsecured and
unsubordinated Indebtedness with the exception of any obligations
which are mandatorily preferred by law and not by contract;
(d) Licences and Environmental Laws:
(i) it will obtain and maintain and procure that each member of the
Group obtains and maintains in full force and effect each Licence
required for the carrying on of their respective businesses; and
(ii) it will obtain and maintain and procure that each member of the
Group obtains and maintains in full force and effect all other
material Environmental Licences and ensures that its business and
the business of each of its Subsidiaries complies in all respects
with all material Environmental Laws and all other material
Environmental Licences;
(e) Clear Market: from the date of this Agreement until the Syndication
Date it will not and will procure that no member of the Group will,
except with the prior written consent of the Arrangers or in relation
to the refinancing in full of the Facilities, mandate or place in the
syndicated or bilateral loan markets any Borrowed Money, or issue any
floating rate notes, other than the Facilities;
(f) Hedging Transactions: within 150 days of the date of this Agreement
the Primary Borrower shall enter into one or more hedging agreements
so as to swap the floating element of interest on the Facilities to a
fixed rate in respect of at least 50% of the Acquisition Facilities,
such hedging agreements to be:
(i) with a counterparty having a credit rating with Standard & Poors
of at least A; and
<PAGE>
(ii) for a period or periods such that the average maturity of the
hedging agreements is at least 2 years after the date on which
the hedging agreements are entered into;
any such hedging agreement to which it is at any time party governing
the terms of a hedging transaction required by this Agreement must be
entered into with one of the Banks and should be in the form of the
ISDA 1992 Master Agreement (Multicurrency Cross-Border) and will
provide for "two way payments" in the event of a termination of that
hedging transaction entered into under such hedging agreement whether
upon a Termination Event or an Event of Default (as defined therein)
meaning that the "Defaulting Party" under that hedging agreement will
be entitled to receive payment under the relevant termination
provisions if the net replacement value of all terminated transactions
effected under that hedging agreement is in its favour;
(g) Upstreaming:
(i) it will take all steps available to it to ensure that sufficient
funds are lawfully (and subject to compliance with applicable
regulations including the Licences) upstreamed (directly or
indirectly) to it by the Target Group, Finco 2 and Bidco (by way
of dividend or otherwise) to ensure that it is able to meet its
obligations under this Agreement;
(ii) in particular, it will take all steps available to it to ensure
that an amount equal to the proceeds of the Coalco Disposal
Agreement (or as much of such proceeds as it is or can be made
lawful and in compliance with regulations as are referred to in
(i) above to upstream) are lawfully upstreamed (directly or
indirectly) from the Target to the Primary Borrower (and not to
any minority shareholder in Finco 2, unless such minority
shareholder makes a simultaneous equity investment of an equal
amount into the Primary Borrower, the proceeds of which are
applied in immediate prepayment of the Facilities in accordance
with clause 6) as soon as is practicable following the
Unconditional Date, provided that the Primary Borrower may
refrain from requiring the upstreaming of such proceeds for so
long as:
(aa) it does not own 100% of the issued share capital of Target;
and
(bb) the Offer is still open for acceptance, and/or Bidco is
still entitled to implement or is in the course of
implementing the procedures in Section 428-30 of the
Companies Act;
(h) Insurance: it will procure that each member of the Group maintains
insurances on and in relation to its business and assets with
reputable underwriters or insurance companies against such risks and
to such extent that is usual for companies carrying on a business such
as that carried on by such member of the Group;
<PAGE>
(i) Investment Agreement: the Primary Borrower, Finco 2 and Bidco will
comply with their obligations under the Investment Agreement save if
and insofar as they conflict with clause 11.1(f).
10.3 Financial Undertakings
(a) Each Obligor party hereto undertakes with each of the Finance Parties
that, from the Unconditional Date and thereafter throughout the
Finance Period, it will procure that:
(i) for each Test Period, the ratio of EBITDA to Net Interest Costs
is not less than 2:1;
(ii) as at the last day of each Test Period, the Leverage Ratio is not
more than 70% until and including 30 September 2000, and
thereafter 65%;
where a Test Period commences prior to the Unconditional Date the
calculation of the Financial Definitions shall be amended so that:
(aa) for the purposes of calculating Net Interest Costs the whole
amount of the Advances drawn down and other Utilisations as
at the end of the relevant Test Period shall be deemed to
have been made on the first day of such Test Period and no
amount in respect of Net Interest Costs attributable to
Indebtedness which is refinanced in connection with the
Acquisition shall be brought into account; and
(bb) for all purposes Coalco will be deemed not to have been part
of the Group;
(b) Each Obligor party hereto shall procure that:
(i) as from the Unconditional Date until such time as Bidco shall
have acquired shares carrying the right to vote 75% of each class
of shares of the Target, the Share Value of all the Target Shares
acquired and effectively charged to the Security Agent shall not
at any time be less than twice the aggregate of the outstanding
Advances (excluding Revolving Credit Advances) at that time;
(ii) on each Drawdown Date, the sum of:
(aa) 50% of the Share Value of all the Target Shares consisting
of American Depositary Receipts acquired and effectively
charged to the Security Agent, plus;
(bb) the Share Value of all other Target Shares acquired and
effectively charged to the Security Agent,
shall not be less than the aggregate of the outstanding Advances;
(c) Each of the Primary Borrower and Finco 2 undertakes with each of the
Finance Parties that it will not adopt any accounting policy or change
the consistency of application of its accounting principles from the
Appropriate Accounting Principles unless:
<PAGE>
(i) the revised policy and practice adopted from time to time is in
accordance with generally accepted accounting practice in the
United Kingdom, and
(ii) prior to any revised policy and practice being adopted the
Primary Borrower has notified the Facility Agent thereof and, if
required by the Facility Agent, will negotiate in good faith with
the Facility Agent in order that the Financial Covenants may be
amended as required by the Facility Agent in order for it to be
able to make the same judgments as to the financial performance
of the Group as it is able to under the present accounting
policy.
If such negotiations are not concluded to the satisfaction of the
Facility Agent within a period of 30 days from the commencement of
such negotiations each of the Primary Borrower and Finco 2 agrees that
it will procure that the Auditors provide financial statements
reflecting the Appropriate Accounting Policies, and any reference in
this Agreement to financial statements under this Agreement shall be
construed as a reference to such financial statements as adjusted to
reflect the Appropriate Accounting Policies;
(d) For the purposes of calculating Net Interests Costs, any incremental
impact of interest rate hedging transactions or refinancings entered
into by the Primary Borrower from time to time shall be treated as
varying the Net Interest Costs payable by Finco 2, whether or not they
actually do so;
(e) Each of the Primary Borrower and Finco 2 undertakes with each of the
Finance Parties that it will not vary or waive the terms of the
Investment Agreement, and undertakes to procure that the principal
amount of the intercompany loan from the Primary Borrower to Finco 2
is not reduced save by way of amounts which are repaid by Finco 2 to
the Primary Borrower and promptly applied by the Principal Borrower in
repayment and permanent reduction of sums outstanding under the
Facilities.
10.4 The Offer
(a) The Primary Borrower, Finco 2 and Bidco each undertake with each of
the Finance Parties that it shall (or shall procure that Bidco shall,
as applicable):
(i) until the earlier of the date the Offer lapses or is finally
closed, comply in all material respects with the Code, the
Financial Services Act 1986 and the Act and all other
applicable laws and regulations relevant in the context of the
Offer;
(ii) provide the Facility Agent with such information regarding the
progress of the Offer as it may reasonably request and,
provided no breach of the Code would result, all material
written advice given to it in respect of the Offer;
(iii) not declare the Offer unconditional at a level of acceptances
below that required by Rule 10 of the Code;
(iv) ensure that at no time shall circumstances arise whereby a
mandatory offer is required to be made by the terms of Rule 9
of the Code in respect of the Target Shares;
<PAGE>
(v) not, without the prior consent of the Arrangers (acting on the
instructions of the Majority Banks), waive, amend or agree or
decide not to enforce, in whole or in part, the conditions of the
Offer set out in paragraphs (c) (Referral) or (b) (Coalco
Disposal Agreement) of Appendix 1 to the Press Release;
(vi) not, without the prior consent of the Arrangers (acting on the
instructions of the Majority Banks), such consent not to be
unreasonably withheld or delayed, waive, amend (but not including
extending the Offer period, which shall be at the Primary
Borrower's discretion provided that the Offer is closed within
the period required by clause 10.4(f) below) or agree or decide
not to invoke, in whole or in part, in any material respect, any
of the other material conditions of the Offer (and the Primary
Borrower, Finco 2 and Bidco acknowledge that the total
Indebtedness of the Target Group requiring to be refinanced, and
the amount of any contingent liabilities of the Target Group
which would or might crystallise upon the Offer becoming
unconditional, are material), provided that the Primary Borrower,
Finco 2 and Bidco shall not be in breach of this clause (vi) if
they fail to invoke a condition of the Offer because the Takeover
Panel has directed that they may not do so.
(b) Each of the Primary Borrower, Finco 2 and Bidco acknowledges and
confirms to the Finance Parties that if any event or circumstance
occurs which under the conditions of the Offer may entitle Bidco to
lapse the Offer, Bidco will promptly notify the Facility Agent and if
in the reasonable opinion of the Majority Banks such event or
circumstance would have a material and adverse affect on the ability
of the Borrowers to comply with their material obligations under this
Agreement (or the adequacy of the facilities available for refinancing
indebtedness or other liabilities of the Target Group) and the
Facility Agent acting on the instructions of the Majority Banks so
requests, Bidco will promptly seek the consent of the Takeover Panel
to lapse the Offer. If the Takeover Panel consents to Bidco's lapsing
the Offer in the light of such event or circumstance, Bidco shall then
lapse the Offer promptly.
(c) Each of the Primary Borrower, Finco 2 and Bidco shall keep the
Arrangers informed and consult with them as to:
(i) the terms of any undertaking or assurance proposed to be given
by it, any of its Affiliates or any member of the Target Group
to the Director General, the Director General of Gas Supply or
the Secretary of State for Trade and Industry in connection
with the Offer;
(ii) the terms of any modification to any of the Licences proposed
in connection with the Offer;
(iii) any terms proposed in connection with any authorisation or
determination necessary or appropriate in connection with the
Offer;
If the Majority Banks (acting reasonably) state that in their opinion
such proposed undertakings(s), assurance(s), modification(s) and/or
term(s), or compliance therewith, would materially and adversely
affect the ability of the Group to comply with its material
obligations under the Finance Documents, Bidco shall promptly request
the Takeover Panel to confirm (and shall use its reasonable endeavours
to ensure that the Takeover Panel does confirm) that the Takeover
Panel will not object to the lapsing of
<PAGE>
the Offer as a result of the non-satisfaction of whichever of the
conditions in Appendix 1 to the Press Release is relevant, provided
that Bidco will not be obliged to lapse the Offer as a result of any
proposed modifications of any Licence or any proposed undertakings or
assurances from the Primary Borrower, Finco 2, Bidco or any member of
the Target Group to be given to the Director General to the extent
that such modifications, undertakings or assurances (as the case may
be) are no more onerous than those set out and required by the
Director General from Pacificorp and/or the Target Group in accordance
with the terms of the Monopolies and Mergers Commission Report dated
19 December 1997 into the original Pacificorp offer for the Target. If
the Takeover Panel gives a confirmation substantially in those terms,
Bidco shall at the earliest opportunity declare the Offer lapsed by
reason of the non- fulfilment of such condition(s).
(d) Each of the Primary Borrower, Finco 2 and Bidco acknowledges and
confirms to the Finance Parties that the Offer, or an accompanying
circular to shareholders of the Target, should also contain a super
class one resolution to be passed by the shareholders of the Target,
seeking approval of the completion of the Coalco Disposal Agreement
with effect on and from the Unconditional Date. Where the context
permits, all references in this Agreement (and in the Offer) to the
Offer being accepted and/or becoming unconditional shall be construed
to include such approval being granted.
(e) Each of the Primary Borrower, Finco 2 and Bidco undertakes to the
Finance Parties that within 15 days of the date on which acceptances
of the Offer are received from holders of not less than 90% of the
Target Shares to which the Offer relates, Bidco shall procure that a
director of Bidco issues a statutory declaration pursuant to section
429(4) of the Companies Act 1985, gives notice to all remaining
holders of the Target Shares that it intends to acquire their shares
pursuant to section 429 of the Companies Act 1985, and Bidco shall
subsequently purchase all such shares.
(f) Each of the Primary Borrower, Finco 2 and Bidco undertakes to the
Finance Parties that Bidco shall in any event give notice to close the
Offer no later than 120 days after the date of this Agreement, unless
the Arrangers agree in their absolute discretion to extend such
period.
10.5 Delisting
Each of the Primary Borrower, Finco 2 and Bidco undertakes to the Finance
Parties to procure that, as soon as legally and practically possible after
the Unconditional Date, the American Depositary Shares represented by the
American Depositary Receipts tendered to Bidco shall be converted into
ordinary shares of the Target or otherwise held in form satisfactory to the
Security Agent, the Target shall be removed from the Official List of the
London Stock Exchange Limited and reregistered as a private company and its
American Depositary Shares shall be delisted from the New York Stock
Exchange.
<PAGE>
11. NEGATIVE UNDERTAKINGS
11.1 Negative undertakings
Each Obligor party hereto undertakes with each of the Finance Parties that
throughout the Finance Period (but subject to clause 11.2), without the
prior written consent of the Facility Agent acting on the instructions of
the Majority Banks:
(a) Negative pledge: it will not permit, and will procure that no other
member of the Group will permit, any Security Interest by it or any
other member of the Group to subsist, arise or be created or extended
over all or any part of their respective present or future
undertakings, assets, rights or revenues, save for any Permitted
Security Interest;
(b) No other Borrowed Money: it will not, and will procure that no member
of the Group will, incur or permit to exist on its behalf any
obligations in respect of Borrowed Money (excluding any guarantees,
indemnities or other forms of assurance against financial loss in
respect of Borrowed Money, which are referred to in clause 11.1(d)
below) to any person except:
(i) the Facilities;
(ii) the Loan Notes;
(iii) Borrowed Money owed by any member of the Group to another
member of the Group;
(iv) Borrowed Money incurred under the hedge transactions entered
into pursuant to clause 10.2(f) and/or clause (l) of Schedule
3, Part A or any other transaction entered into to hedge the
transactions referred to in such clause (l);
(v) Borrowed Money to the extent secured by a Security Interest
permitted by paragraphs (c) (d) (e) (f) and (l) of the
definition of Permitted Security Interest, but only for so long
as such Security Interest remains a Permitted Security Interest
and, with respect to paragraph (l) only, secures Borrowed Money
which is intended to be a temporary bridging loan to be
refinanced by a Project Finance Borrowing;
(vi) Borrowed Money incurred to repay and discharge the Facilities
in full;
(vii) Borrowed Money of the Target Group as at the Unconditional Date
(and refinancings thereof) provided that:
(aa) each refinancing extends the tenor of the refinanced
amount to beyond the Final Repayment Date; and
(bb) all refinancings shall be of a like nature to the
Indebtedness or facility being refinanced or shall be by
way of capital markets instruments which are of a similar
nature to the Target Group's existing instruments having
regard to market conditions and the issuer's credit
status, or are structurally or contractually subordinated
to the Facilities and the Guarantees in a manner
satisfactory to the Majority Banks (acting reasonably);
and
(cc) any new facilities for Borrowed Money entered into by the
Target Group between the date of this Agreement and the
Unconditional Date
<PAGE>
(except the REC's facility referred to in clause 24.5)
shall be cancelled and repaid in full within 180 days of
the Unconditional Date;
(viii) provided that as a result of Borrowed Money incurred under this
paragraph (viii) the outstanding Advances under the Acquisition
Facility would be not more than(pound)1,011,000,000 and the
total Borrowed Money in the Primary Borrower (excluding
Borrowed Money which is subordinated to the Facilities as
referred to in (ix) below) would not
exceed(pound)1,611,000,000, Borrowed Money may be incurred by
way of a Permitted Capital Markets Instrument issued by the
Primary Borrower provided that the proceeds are applied solely
to repay or prepay all or any part of the Facilities.
If the Primary Borrower shall exercise its rights to incur
Borrowed Money and repay or prepay all or part of the
Facilities under and in compliance with this sub-paragraph
(viii) and no Default has occurred and is continuing, the
Facility Agent and the Security Agent shall permit the lenders
under the relevant Permitted Capital Markets Instrument (in
this clause, the "New Capital Markets Lenders") to take
security over the shares in Finco 2 held by the Primary
Borrower and by the Minority Shareholder (in terms satisfactory
to the Majority Banks) and shall execute a pari passu agreement
with the New Capital Markets Lenders (in terms satisfactory to
the Majority Banks) agreeing that the Finance Parties' and the
New Capital Markets Lenders' security over the Finco 2 shares
shall rank pari passu, and in addition the Facility Agent
acting on the instructions of the Majority Banks shall elect in
its discretion which of the following alternatives it wishes to
occur so as to put the New Capital Markets Lenders in a pari
passu position with the Finance Parties:
(aa) the Security Agent to release all of the remaining
guarantees and security constituted by the Debenture and
the Guarantees, save for the Finance Parties' security
over the Finco 2 shares referred to above; or
(bb) the Security Agent to retain all or part of the security
and guarantees referred to in (aa) above, but permit the
New Capital Markets Lenders to take identical security
and/or guarantees to that retained and to execute a pari
passu agreement with the Finance Parties (on terms
satisfactory to the Majority Banks) agreeing that the
guarantees and/or security held by the Finance Parties and
the New Capital Markets Lenders shall rank pari passu;
(ix) to the extent that it is necessary to repay the outstanding
Interim Advances under clause 6.1(b), or prepay Acquisition
Advances under clause 6.2 but the Primary Borrower is either
unable or elects not to meet such payments by upstreaming Coal
Proceeds, Borrowed Money incurred which is contractually and/or
structurally subordinated to the Facilities and Guarantees in a
manner satisfactory to the Majority Banks;
(x) contracts for differences and contracts to hedge commodity and
energy related exposures and positions in the ordinary course
of trading;
(xi) in respect of the Target, Borrowed Money in addition to that
permitted by sub-clauses (i) to (x) above, provided that:
<PAGE>
(aa) the Target has provided a guarantee to the Security Agent
in respect of all of the obligations of the Borrowers
hereunder; and
(bb) such Borrowed Money would not result in a breach of the
Leverage Ratio if it were added to Consolidated Net
Borrowings as at the end of the last Test Period (and
calculating the Leverage Ratio taking into account any
assets acquired with such Borrowed Money), and the
Leverage Ratio was recalculated;
(xii) Borrowed Money arising under the Standby Credit Facility dated
28 October, 1996 to the extent that it is used to fund the
consideration payable by any third party to acquire rent
participations under and in accordance with the documentation
(as amended in July 1998) relating to the Deed of Assignment of
Rents dated 28th October, 1996;
(c) Disposals: it shall procure that neither it nor any member of the
Group will, either in a single transaction or in a series of
transactions, whether related or not and whether voluntarily or
involuntarily, sell, factor, discount, transfer, licence, lend, grant
or lease or otherwise dispose of:
(i) any shares in Finco 2, Bidco, any Target Shares and any shares in
REC or in any holding company thereof; or
(ii) all or any part of the assets or undertaking of the Target Group
(except the assets referred to in paragraph (i) above), other
than:
(aa) to another member of the Group;
(bb) pursuant to the Coalco Disposal Agreement;
(cc) disposals in the ordinary course of trading;
(dd) disposals of obsolete or redundant plant and equipment;
(ee) other disposals to third parties on arm's length terms,
provided that the consideration for such disposals does not
exceed (pound)50,000,000 in aggregate for the Group in any
financial year;
(ff) in any financial year, disposals of assets by any member of
the Target Group, (1) the gross value of which (based, in
relation to a disposal occurring before the first delivery
of any annual audited accounts in accordance with clause
10.1(b), on the annual audited accounts in respect of the
financial year to 31 December 1997 and, in relation to
disposals occurring thereafter, on the audited consolidated
accounts of the Target Group most recently delivered to the
Facility Agent) when aggregated with all other disposals by
each member of the Target Group during such financial year
not permitted by any other paragraph of this clause 11.1(c),
does not exceed an amount equal to 10% of the consolidated
gross assets of the Target Group as shown in such annual
audited consolidated accounts (excluding Coalco and its
Subsidiaries)
<PAGE>
and (2) in respect of which the net proceeds of such
disposal will be applied (A) within one year of their
receipt in or towards acquiring for any member of the Target
Group assets of a type ordinarily employed in the operation
of any business permitted by clause 11.1(i) or (B) in
prepayment of any Acquisition Advance or Interim Advance in
accordance with clause 6.6;
(gg) disposals constituting the creation of Permitted Security
Interests;
(hh) securitisations of receivables of the REC in accordance with
the REC's securitisation programme in existence at the date
of this Agreement (or comparable programme(s)) Provided that
the amount advanced against the billed, unbilled and future
flow receivables in such programmes at any one time does not
exceed (pound)400,000,000 in aggregate in all such
programmes; or
(ii) other disposals where the proceeds are upstreamed promptly
to the Primary Borrower and used in repayment or prepayment
of the Advances in accordance with clause 6.6;
(d) Restriction on Guarantees: it shall not and shall procure that no
other member of the Group shall give any guarantee (which
includes an indemnity or other form of assurance against
financial loss), except:
(i) where the guarantee is given by a member of the Group in
connection with cash management and netting facilities
extended to the Group by a bank or financial institution
in the normal course of business; or
(ii) any guarantee, indemnity, letter of credit or similar
assurance against financial loss under any Relevant
Arrangements;
(iii) guarantees in favour of the Finance Parties;
(iv) guarantees of Borrowed Money or other obligations of other
members of the Group, where such guarantees are already in
existence as at the Unconditional Date (including
guarantees given by the same guarantor companies as had
previously guaranteed the relevant obligation in respect
of a new obligation which refinances or replaces the
existing obligation) provided that any such guarantees of
Borrowed Money entered into between the date of this
Agreement and the Unconditional Date shall be discharged
and released within 180 days of the Unconditional Date
(unless the guarantee was created pursuant to an
obligation existing as at the date of this Agreement);
(v) any guarantee permitted under clause 11.1(b)(xi)(aa) or
clause 11.1(b)(viii)(bb);
(vi) any other guarantees given with the prior written consent
of the Majority Banks;
(vii) any guarantees given in respect of Borrowed Money falling
within clause 11,1(b)(v) by virtue of the reference to
paragraph (l) of the Permitted Security
<PAGE>
Interest definition (or prospective liabilities which on
being drawn down, would fall under that heading) of a
member of the Group (which is intended to become a Project
Finance Subsidiary) for so long as it is not a Project
Finance Subsidiary and the potential liabilities which are
secured by such guarantees, when aggregated with any
amount of Borrowed Money which is permitted under clause
11.1(b)(v) by virtue of the reference in clause 11.1(b)(v)
to paragraph (l) of the Permitted Security Interest
definition (but without double counting) would not exceed
the limit set out in that paragraph (l);
(viii) any guarantee permitted from time to time in accordance
with clause 11.1(g)(iii) or (iv);
(ix) guarantees not exceeding $147,000,000 in aggregate in
favour of the Pension Benefit Guaranty Corporation;
(x) any guarantee given in connection with cross-border
leasing arrangements in relation to the King's Lynn
generating facility owned by a member of the Group and
which is constituted by or relates to:
(aa) the payment of rental amounts or termination amounts
by any person pursuant to such arrangements to the
extent that the obligations of the person(s)
primarily liable for such amounts are collateralised
in full by means of investments in US Treasury zero
coupon bonds and/or cash deposited with a financial
institution rated AA or higher by Standard & Poor's
Rating Group and/or Aa2 or higher by Moody's Investor
Services Group;
(bb) the payment of termination amounts (other than those
permitted to be guaranteed by virtue of (aa) above or
(cc) below) by any person pursuant to such
arrangements or any obligation of any person to
reimburse or counterindemnify an issuer of a letter
of credit to the extent that the letter of credit
secures such termination amounts Provided that the
maximum aggregate amount of such termination amounts
does not exceed US$125 million;
(cc) the payment of any other termination amount not
otherwise permitted to be guaranteed under (aa) or
(bb) above to the extent such amount arises from a
reduction in the value of the US Treasury zero coupon
bonds referred to in (aa) above on account of a
fluctuation in US interest rates; and/or
(dd) the guaranteeing of indemnity obligations customary
in finance lease transactions and/or which relate to
the continued possession and operation by any member
of the Group of the King's Lynn generating facility.
(xi) guarantees in respect of the payment of fees and
indemnities in respect of liabilities, losses or claims
and any costs and expenses arising, suffered or incurred
in connection with the amendment and waiver in July 1998,
as a result of the Acquisition, of certain terms of the
rent factoring transaction governed
<PAGE>
by the Deed of Assignment of Rents dated 28 October 1996
and the documentation relating thereto; and
(xii) guarantees given with respect to Borrowed Money permitted
under Clause 11.1(b)(xii).
(e) The Licences: it shall procure that each Licensee will:
(i) take all appropriate steps efficiently to perform and
discharge the duties and functions of a generator of
electricity or, as the case may be, public electricity
supplier in accordance with the provisions of the
Electricity Act and, in particular, to comply with:
(aa) the terms and conditions of the Licence;
(bb) the provisions of any final order or confirmed
provisional order made under the Electricity Act; and
(cc) all Licence Undertakings given by it to the Director
General and/or the Secretary of State in respect of
the matters referred to in Section 25(5) of the
Electricity Act;
(ii) not consent to any amendment to the terms and conditions
of the Licence if that amendment is reasonably likely to
have a Material Adverse Effect;
(iii) not consent to any revocation of the Licence except where
a replacement Licence is to be granted to a member of the
Group in its place;
(iv) promptly inform the Facility Agent of any material Licence
Undertakings given by it or any Affiliate to the Director
General, and/or the Secretary of State and subsequently
comply with its terms;
(v) promptly supply to the Facility Agent:
(aa) certified copies of all notices or orders served on
it by the Director General or the Secretary of State
in exercise of the powers conferred on him by the
Electricity Act;
(bb) details of any references to the Monopolies and
Mergers Commission; and
(cc) details of the exercise or purported exercise by the
Secretary of State or the Director General of the
powers conferred on him by the Fair Trading Act 1973,
the Competition Act 1980 and/or Section 12 of the
Electricity Act;
(vi) ensure that all times the Licensee has sufficient working
capital to finance the performance and discharge of its
duties as a generator of electricity or, as the case may
be, public electricity supplier, in accordance with the
provisions of the Electricity Act and the terms and
conditions of any Licence; and
<PAGE>
(vii) not permit any person other than a member of the Group to
perform or manage on its behalf any of its functions as a
public electricity supplier, as set out in any Licence and
the Electricity Act;
(f) Dividend payments: neither the Primary Borrower nor Finco 2 will:
(i) redeem or purchase any of its shares or otherwise reduce
its share capital, or declare or pay (including, without
limitation, by way of set-off, combination of accounts or
otherwise) any dividend or make any other distribution or
payment (whether in cash or in specie), including any
interest and/or unpaid dividends, to its shareholders or
their Affiliates for the time being; or
(ii) make any payment (including, without limitation, by way of
set-off, combination of accounts or otherwise) of interest
or principal, or make any other payment, in respect of any
loan stock or similar instrument issued by the Primary
Borrower or Finco 2 (other than payments in respect of the
intercompany loan from the Primary Borrower to Finco 2
referred to in the Investment Agreement),
unless:
(aa) the Primary Borrower or, as the case may be, Finco 2
has notified the Facility Agent in writing of the
proposed payment or distribution at least 15 days in
advance of the proposed payment date; and
(bb) to the extent that the most recent financial
statements provided to the Facility Agent under
clause 10.1(b)(ii) and the accompanying financial
covenant compliance certificates confirm in a manner
satisfactory to the Facility Agent (acting
reasonably) that there is no breach of the Leverage
Ratio covenant, and there would still be no breach of
the Leverage Ratio covenant as at the end of the
financial Quarter if the proposed payment or
distribution (and any related advance corporation tax
or similar tax) was deducted from Adjusted Share
Capital and Reserves at the end of such preceding
Quarter and if Consolidated Net Borrowings was
increased to reflect any increase in Consolidated Net
Borrowings since the end of the preceding Quarter,
and the relevant financial covenant recalculated; and
(cc) no Default has occurred and is continuing; and
(dd) Bidco holds at least 90% of the Target Shares;
(g) Contracts and arrangements between the Group and the Parent: it
will not, and will procure that no other member of the Group
will, enter into any arrangement or contract with the Parent or
any of its Subsidiaries or Affiliates (not being a member of the
Group), or any Project Finance Subsidiaries, save for contracts
entered into on an arm's length basis in the ordinary course of
trade (and in any event neither it nor any member of the Group
will make any loan to or give any guarantee in respect of the
Parent or any of its Subsidiaries or Affiliates (not being a
member of the Group) or Project Finance Subsidiaries) except
that:
<PAGE>
(i) the Primary Borrower may provide loans to Bidco to enable
Bidco to at any time after the Unconditional Date repay to
the Parent the Excess Equity Funding; or
(ii) any member of the Group may make equity investments in or
loans to Project Finance Subsidiaries if and to the extent
such loans or equity investments are financed directly or
indirectly by further equity subscribed by the Parent and/or
the Minority Shareholder or subordinated loans permitted in
accordance with clause 11.1(b)(ix) made by the Parent and/or
the Minority Shareholder to the Primary Borrower or Finco 2;
or
(iii) to the extent that:
(aa) the conditions in clause 11.1(f)(aa) to (dd) are
satisfied, and
(bb) neither the Primary Borrower nor Finco 2 is able to
make any payment or distribution under clause
11.1(f)(i) or (ii) in a sufficient amount,
any member of the Group may give any guarantee in respect of
the obligations of or make any loan to or equity investment
in a Project Finance Subsidiary to finance any particular
project identified in Schedule 9 up to a maximum amount
equal to 20% of the identified total investment required as
set out in Schedule 9 alongside the name of the particular
project provided that any such guarantee, loan or equity
investment is to be used only for that project (and no other
project);
(iv) any member of the Group may give any guarantee or make any
loan to or equity investment in a Project Finance Subsidiary
to the extent that at the time the conditions in clause
11.1(f)(aa) to (dd) are satisfied and such guarantee, loan
or equity investment does not exceed the maximum amount
available to the Primary Borrower and Finco 2 to make any
payment or distribution under clause 11.1(f)(i) or (ii),
Provided that any payment or distribution otherwise capable of
being made under and for the purposes of clause 11.1(f)(i) or
(ii) or capable of being utilised for the purposes of clause
11.1(g)(iii) or (iv) shall be reduced (a) by the amount of any
outstanding guarantee, loan or equity investment made or given
and permitted under clauses 11.1(g)(iii) or (iv) and (b) the
amount (if any) of the Coal Proceeds which have been distributed
to the Borrower by way of dividend.
(h) Amalgamation and merger: it will not, and will procure that no
other member of the Group will, amalgamate or merge with any
other company or person (other than intra- Group or if a member
of the Group is the surviving corporation, and such merger or
amalgamation would not result in an Event of Default);
(i) Change in business: it will not, and will ensure that no other
member of the Group will, carry on any business other than those
which are usual for electricity companies in the United Kingdom
including, without limitation, electricity distribution, supply
and generation and energy trading and business activities related
to the gas, telecommunications and water industries. Provided
that the limitation of business activities contained in this
clause 11.1(i) will not apply to any other business activities
<PAGE>
carried on by members of the Group as long as such other business
activities do not in aggregate account for more than 10% of the
consolidated gross assets or gross revenues of the Group;
(j) Primary Borrower, Finco 2 and Bidco business and Subsidiaries:
the Primary Borrower, Finco 2 and Bidco will not (save as
permitted under clause 11.1(g)) (i) carry on any business or own
any material assets other than their shareholdings in Finco 2,
Bidco and the Target respectively, intra-group credit balances
and credit balances in bank accounts (which shall be held with
the Security Agent or as it directs), (ii) establish or acquire
any company or other entity or (iii) incur any liabilities other
than in connection with this Agreement and the Acquisition;
(k) Target Group Acquisitions: the Primary Borrower, Finco 2 and
Bidco shall procure that the Target and its Subsidiaries shall
not acquire any business, assets or shares without the prior
written consent of the Majority Banks, save for:
(i) where the business, assets or shares acquired fall
within the Group's general business as described in
subclause 11.1(i) above (disregarding the business
activities referred to in the proviso to that clause)
and are subject to regulation by a Government Entity as
to pricing and operations, or constitute any other
business within the limits permitted by the proviso to
subclause 11.1(i) above;
(ii) acquisitions by Project Finance Subsidiaries where no
funds or assets of, or other financial support by, the
Primary Borrower, Bidco or any member of the Group are
invested in, lent to or otherwise provided to such
Project Finance Subsidiary in connection with or at any
time after the acquisition, save as provided by clause
11.1(g); and
(iii) acquisitions by Project Finance Subsidiaries where any
equity investment or subordinated debt required to be
invested in the Project Finance Subsidiary is obtained
by the Project Finance Subsidiary from third parties (or
the Parent) and not from resources of the Group, save as
provided by clause 11.1(g);
(iv) acquisitions by members of the Group which are intended
to become Project Finance Subsidiaries, provided that
the financing for any such acquisition complies with
sub-paragraphs 11.1(b)(v) and 11.1(d)(vii).
(l) Treasury Transactions: it will not, and will procure that no
other member of the Group will, enter into any Derivatives
Transactions, save for hedging financial exposures of the Group
arising in the ordinary course of business and the hedging
agreements contemplated by clause 10.2(f) and clause (l) of
Schedule 3, Part A or any other transaction entered into to hedge
the transactions referred to in such clause (l); and
(m) Regulations G, T, U and X: it will not use the Facilities or the
proceeds of the Facilities in contravention of Regulations G, T,
U or X of the Board of Governors of the Federal Reserve System of
the United States of America.
11.2 Application to Target Group
No covenant or undertaking (except the financial covenants in clause
10.3(a)) shall apply to the Target Group until the Takeover Operative Date,
but the Primary Borrower, Finco 2 and Bidco
<PAGE>
shall use all commercially reasonable endeavours to procure that the Target
Group is run as if the covenants and undertakings in this Agreement applied
to it as from the Unconditional Date.
12. EVENTS OF DEFAULT
12.1 Events of Default
Each of the events set out below is an Event of Default (whether or not
caused by any reason whatsoever outside the control of any Relevant Company
(or any other person)) namely if:
(a) Non-payment: any Borrower or Obligor fails to pay any sum due from it
under any of the Finance Documents on its due date in the manner
stipulated in the relevant Finance Document (or within three Banking
Days of the due date if the delay is caused by technical difficulties
or administrative error in the transfer of funds); or
(b) Breach of certain obligations: any Borrower or other Obligor commits
any breach or omits to observe any of the obligations or undertakings
expressed to be assumed by it under clause 10.3, 10.4, 11.1(a),
11.1(f) or 11.1(i); or
(c) Breach of other obligations: any Borrower or other Obligor commits any
breach of or omits to observe any of the obligations or undertakings
expressed to be assumed by it under any of the Finance Documents
(other than any such obligations referred to in clause 12.1(a) and
(b)) and in respect of any such breach or omission which, in the
reasonable opinion of the Majority Banks, is capable of remedy, such
action as shall remedy the same to the reasonable satisfaction of the
Majority Banks shall not have been taken within 21 days of the
relevant Obligor becoming aware of such default; or
(d) Misrepresentation: any representation, warranty or statement made or
deemed to be made or repeated by or on behalf of any Borrower or other
Obligor in, or in connection with, any of the Finance Documents or in
any notice, accounts, certificate or statement referred to in or
delivered under any of the Finance Documents is or proves to have been
incorrect or misleading and if capable of being remedied, in the
reasonable opinion of the Majority Banks, is not remedied to the
reasonable satisfaction of the Majority Banks 21 days after the date
on which the relevant Group Company becomes aware of such
misrepresentation; or
(e) Cross-default:
(i) any Borrowed Money of a member of the Group is not paid when due
or within any originally stated applicable grace period; or
(ii) any Borrowed Money of a member of the Group is declared or
becomes capable of being declared (by reason of an event of
default or default howsoever described) to be or otherwise
becomes due and payable prior to its specified maturity; or
(iii) any Borrowed Money of a member of the Group which is repayable
on demand is not repaid on demand being made,
<PAGE>
in circumstances where, in all or any of the above paragraphs,
the Borrowed Money amounts in aggregate at any one time to more
than (pound)20,000,000 or its equivalent in other currencies,
unless the Borrowed Money concerned is being disputed in good
faith and the Primary Borrower has shown to the Facility Agent's
satisfaction (acting reasonably) that it has adequate cash
reserves to pay that Borrowed Money and its other outstanding
debts; or
(f) Legal process: (without prejudice to any other provision of this
Agreement) any final judgment or order in an amount exceeding
(pound)2,000,000 (or its equivalent in other currencies) made against
any Relevant Company is not stayed or complied with or paid within 28
days (or in the case of payments, when due (if later)) or a creditor
attaches or takes possession of, or a distress, execution,
sequestration or other process is levied or enforced upon or sued out
against, any part of the undertakings, assets, rights or revenues of
any Relevant Company with a book value or market value in excess of
(pound)2,000,000 and is not discharged or stayed within 14 days; or
(g) Insolvency: any Relevant Company (i) is deemed unable to pay its debts
in accordance with Section 123(1)(a), (b) or (e) or (2) of the
Insolvency Act 1986 unless, in the case of Section 123(1)(a) only, a
statutory notice has been withdrawn, stayed or dismissed within 14
days or (ii) is unable generally to pay its debts as they fall due; or
(h) Administration: (i) any meeting of any Relevant Company is convened
for the purpose of considering any resolution to present an
application for an administration order or (ii) a petition on
administration order is presented to the Court in relation to any
Relevant Offeror Company or (iii) a petition for an administration
order in relation to any other Relevant Company is presented to the
court or an administration order is sought of the court on the basis
of an undertaking to subsequently present a petition which is being
contested by the Relevant Company in good faith with appropriate
proceedings diligently pursued, and is not discharged within 21 days
or (iv) any Relevant Company passes a resolution to present an
application for an administration order or (v) an administration order
is made in relation to any Relevant Company; or
(i) Compositions etc: any steps are taken, or negotiations commenced, by
any Relevant Company or by any of its creditors with a view to
proposing any kind of composition, scheme of arrangement, compromise
or arrangement, in each case involving such company and any of its
creditors; or
(j) Appointment of receivers and managers: (i) any administrative or other
receiver or any manager is appointed of any Relevant Company or any
material part of its assets and/or undertaking or (ii) the directors
of any Relevant Company request any person to appoint such a receiver
or manager or (iii) any other steps are taken to enforce any Security
Interest over all or any material part of the assets and/or
undertakings of any Relevant Company; or
(k) Winding up: (i) any meeting of any Relevant Company is convened for
the purpose of considering any resolution for (or to petition for) its
winding up or (ii) any Relevant Company passes such a resolution; or
(iii) any person presents any petition for the winding up of any
Relevant Company (not being a petition which the Primary Borrower can
demonstrate to the satisfaction of the Facility Agent is frivolous
vexatious or an abuse of the process of the court) which is not
discharged within 14 days or (iv) an order for the winding up of any
Relevant Company is made, not (in any case) being a
<PAGE>
winding-up of a Subsidiary of the Primary Borrower involving an
amalgamation or reorganisation on a solvent basis which has been
approved in advance by the Facility Agent (acting reasonably); or
(l) Dissolution: any corporate, legal or administrative proceedings are
commenced by any person (including, without limitation, the Registrar
of Companies) with a view to the dissolution of any Relevant Company,
not being a dissolution involving an amalgamation or reorganisation on
a solvent basis which has been approved in advance by the Facility
Agent (acting reasonably); or
(m) Analogous proceedings: there occurs, in relation to any Relevant
Company, in any country or territory in which any of them carries on
business or to the jurisdiction of whose courts any part of their
assets is subject, any event which, in the reasonable opinion of the
Majority Banks, appears in that country or territory to correspond
with, or have an effect equivalent to, any of those mentioned in
clauses 12.1(f) to (l) (inclusive) or any Relevant Company otherwise
becomes subject, in any such country or territory, to the operation of
any law relating to insolvency, bankruptcy or liquidation; or
(n) Cessation of business: other than in relation to a disposal permitted
under this Agreement, any Relevant Company suspends or ceases or
threatens to suspend or cease to carry on its business; or
(o) Change of Control:
(i) Bidco ceases to be a wholly owned subsidiary (as that term is
used in section 736 of the Act) of Finco 2; or
(ii) Finco 2 ceases to be a wholly owned Subsidiary of the Parent
(other than as permitted by paragraph (iii) below) and at least
a 90% owned direct subsidiary of the Primary Borrower; or
(iii) less than 100% (until the first anniversary of the Unconditional
Date) or 75% (until the second anniversary of the Unconditional
Date) or 60% (thereafter) of the equity share capital of the
Primary Borrower is held by the Parent (directly or indirectly)
at any time; or
(iv) Bidco at any time reduces its shareholding in the Target; or
(v) REC, any other Licensee ceases to be a wholly-owned Subsidiary
of the Target; or
(vi) there is a Change in Control of the Parent; or
(p) Distribution Business/Generation Business:
(i) the Group ceases, or threatens to cease, to carry on the
Distribution Business;
(ii) all or a majority of the issued shares of the Licensee or any
other Relevant Company or the whole or any material part of the
assets or revenues of the Distribution Business or Generation
Business are seized, nationalised,
<PAGE>
expropriated or compulsorily acquired by or under the authority
of a Government Entity;
(iii) any change is made in the statutory or regulatory requirements
applicable to the Distribution Business or Generation Business
or any new statutory or regulatory requirements are imposed on
it which would be reasonably likely to have a Material Adverse
Effect; or
(q) Licences:
(i) the Secretary of State gives notice in writing of the revocation
of a Licence for any reason or a Licence ceases to be in full
force and effect in any material respect except where a similar
licence is or licences are granted to a member of the Group in
its place;
(ii) without prejudice to paragraph (i) above, any legislation
(whether primary or subordinate) with regard to the creditors of
Licensees or the ability of Licensees to raise finance under a
Licence or with regard to generators or electricity or public
electricity suppliers generally is enacted and that enactment
would be reasonably likely to have a Material Adverse Effect;
(iii) any amendment is made to the terms and conditions of a Licence
and the amendment would be reasonably likely to have a Material
Adverse Effect;
(r) Electricity Act:
(i) any of the provisions of the Electricity Act (or any subordinate
legislation) detailing the rights, powers, authorities,
obligations and duties of the Secretary of State or the Director
General, or the manner in or time at which they are to be
exercised, are repealed or amended in a manner which would be
reasonably likely (in the opinion of the Majority Banks) to have
a Material Adverse Effect; or
(ii) the Licensee fails to comply with a final order (within the
meaning of section 25 of the Electricity Act) or with a
provisional order (within the meaning of that section) which has
been confirmed under that section and in either case which has
not been revoked under that section or the validity of which has
not been questioned under section 27 of the Electricity Act, if
such failure to comply would be reasonably likely to have a
Material Adverse Effect; or
(s) Pooling and Settlement Agreement: REC or any other member of the Group
ceases to be a party to the Pooling and Settlement Agreement, or any
notice requiring REC or any other member of the Group to cease to be a
party to the Pooling and Settlement Agreement is given to such company
under the relevant clauses of the Pooling and Settlement Agreement,
except where another member of the Group becomes a party to that
agreement in its place;
(t) Gas Framework Agreement: REC or any other member of the Group ceases
to be a party to the Gas Framework Agreement where this would be
reasonably likely to lead to a Material Adverse Effect, except where
another member of the Group becomes a party to that agreement in its
place;
<PAGE>
(u) Finance Documents: any Finance Document is not or ceases to be legal,
valid and binding on or enforceable against any Obligor or is alleged
by any Borrower or other Obligor to be ineffective for any reason; or
(v) Unlawfulness: it becomes unlawful at any time for any Borrower or
other Obligor to perform all or any of its material obligations under
any of the Finance Documents;
(w) Coalco Disposal Agreement: the Target varies, waives or amends any
material provision of the Coalco Disposal Agreement or the Escrow
Agreement (save with the prior written consent of the Majority Banks).
12.2 Acceleration
The Facility Agent may, and, if so requested by the Majority Banks, shall,
without prejudice to any other rights of the Finance Parties:
(a) Certain Funds Period: during the Certain Funds Period, at any time
after the happening of a Major Default; or
(b) Other times: at any other time, after the happening of an Event of
Default,
and so long as the same is continuing, by notice to the Primary Borrower:
(i) declare that the obligation of each Bank to make its Commitments
available shall be terminated, whereupon the Total Commitments
in respect of all Facilities shall be reduced to zero forthwith;
and/or
(ii) declare that the Advances and all interest, fees and commitment
commission accrued and all other sums payable under the Finance
Documents have become due and payable or have become due and
payable on demand, whereupon the same shall, immediately or in
accordance with the terms of such notice, become due and
payable; and/or
(iii) demand full cash cover for the Outstanding Contingent
Liabilities under all Letters of Credit then outstanding in the
currency in which those Letters of Credit are denominated;
and/or
(iv) declare that the Security Documents (or any of them) have become
enforceable (in whole or in part).
On or at any time after the making of any such declaration, the
Facility Agent shall be entitled, to the exclusion of the Borrowers,
to select the duration of Interest Periods.
12.3 Limited rights of rescission during the Certain Funds Period
Priorto the end of the Certain Funds Period, except as expressly permitted
by clause 12.2(a), none of the Finance Parties shall have or seek to
exercise any right of rescission or other remedy in consequence of any of
the representations or warranties in the Finance Documents being or being
proved to have been incorrect in any respect or any Borrower having failed
to perform, observe or comply with any of its obligations, undertakings or
agreements under the
<PAGE>
Finance Documents or otherwise (except for the Security Agent's rights
under the Debenture to take control of and vote the Target Shares).
12.4 Application to Target Group
Without limitation to clauses 9.5, 11.2 and 12.3, the occurrence of any
event falling within clause 12.1 in respect of the Target or any member of
the Target Group at any time prior to the Takeover Operative Date shall not
(unless it constitutes a breach of clause 11.2) constitute an Event of
Default or a Default if:
(a) the same arises under clauses 12.1(e), (f), (i) or (u); and
(b) the event is remedied to the satisfaction of the Majority Banks by the
Takeover Operative Date.
13. INDEMNITIES
13.1 Miscellaneous indemnities
The Primary Borrower shall within three Banking Days of demand indemnify
each Finance Party, without prejudice to any of their other rights under
any of the Finance Documents, against any cost, loss, claim, expense
(including loss of Applicable Margin and legal fees) or liability together
with any Tax thereon which such Finance Party shall certify as sustained or
incurred by it as a consequence of:
(a) any default in payment by any Borrower of any sum under any of the
Finance Documents when due,
(b) the occurrence of any other Default,
(c) any prepayment of the Facilities or part thereof being made otherwise
than on an Interest Payment Date or, as the case may be, Maturity Date
relative thereto,
(d) any Advance not being made for any reason (excluding, but only to the
extent of the indemnification of a particular Finance Party, any gross
negligence or wilful default by such Finance Party) after a Drawdown
Notice has been given, or
(e) any notice sent by telefax failing to be received,
including, in any such case, but not limited to, any loss or expense
sustained or incurred in maintaining or funding its Contributions or any
part thereof or in liquidating or re-employing deposits from third parties
acquired or contracted for to fund all or any part of its Contributions or
any other amount owing to such Finance Party.
13.2 Currency of account; currency indemnity
(a) No payment by any Borrower under any of the Finance Documents which is
made in a currency other than the currency ("Contractual Currency") in
which such payment is required to be made pursuant to the relevant
Finance Documents shall discharge the obligation in respect of which
it is made except to the extent of the net proceeds in the
<PAGE>
Contractual Currency received by the Facility Agent upon the sale of
the currency so received, after taking into account any premium and
costs of exchange in connection with such sale.
(b) The Finance Parties shall not be obliged to accept any such payment in
a currency other than the Contractual Currency nor shall the Finance
Parties be liable to any Borrower for any loss or alleged loss arising
from fluctuations in exchange rates between the date on which such
payment is so received by the Facility Agent and the date on which the
Facility Agent effects such sale, as to which the Facility Agent shall
(as against each Borrower) have an absolute discretion.
(c) If any sum due from any Borrower under any Finance Documents or any
order or judgment given or made in relation hereto is required to be
converted from the Contractual Currency or the currency in which the
same is payable under such order or judgment (the "first currency")
into another currency (the "second currency") for the purpose of (i)
making or filing a claim or proof against any Borrower, (ii) obtaining
an order or judgment in any court or other tribunal or (iii) enforcing
any order or judgment given or made in relation to any of the Finance
Documents, each Borrower shall indemnify and hold harmless each
Finance Party from and against any loss suffered as a result of any
difference between (A) the rate of exchange used for such purpose to
convert the sum in question from the first currency into the second
currency and (B) the rate or rates of exchange at which each such
Finance Party may in the ordinary course of business purchase the
first currency with the second currency upon receipt of a sum paid to
it in satisfaction, in whole or in part, of any such order, judgment,
claim or proof.
(d) Any amount due from any Borrower under the indemnity contained in this
clause 13.2 shall be due as a separate debt and shall not be affected
by judgment being obtained for any other sums due under or in respect
of any of the Finance Documents and the term "rate of exchange"
includes any premium and costs of exchange payable in connection with
the purchase of the first currency with the second currency.
13.3 Acquisition finance indemnity
The Primary Borrower shall forthwith on demand indemnify each Finance Party
and each of their respective Affiliates and Subsidiaries and its respective
directors officers and employees (each being an "Indemnified Person") from
and against any cost, claim, loss, expense (including without limitation,
the fees, costs and expenses of legal advisors arising from any legal
procedures (including, without limitation, any administrative regulatory or
judicial actions or investigations) to which that Indemnified Person
becomes subject or joined as a party or which may be threatened or pending
against it) or liability together with any Tax thereon which may be
incurred or asserted against such Indemnified Person arising out of or in
connection with the Offer (whether or not made) or it agreeing to finance
or refinance any acquisition by Bidco or any person acting in concert with
Bidco of any shares or share options of any class in Target or the use of
the proceeds of any Advance (save to the extent any such loss or liability
arises as a result of the gross negligence or wilful default of the
relevant Finance Party).
13.4 No settlement without consent
The Primary Borrower agrees on its own behalf and on behalf of each other
member of the Group that, without the prior written consent of each
relevant Agent and the Majority Banks,
<PAGE>
no member of the Group will settle, compromise or consent to the entry of
any judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification could be sought under the
indemnification provisions of clauses 8.4, 8.5, 8.6, 7.6, 13, 16.14, 20.2
or 20.3 (whether or not any indemnitee thereunder (the "Indemnitee") is an
actual or potential party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent does not include any
statement as to an admission of fault, culpability or failure to act by or
on behalf of any Indemnitee and does not involve any payment of money or
other value by any Indemnitee or any injunctive relief or factual findings
or stipulations binding on any Indemnitee.
14. UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES
14.1 Unlawfulness
(a) If it is or becomes contrary to any law or regulation or contrary to
any request from or requirement of any fiscal monetary or other
authority (with which such Finance Party would normally comply) for a
Finance Party to contribute to any Utilisation or to maintain its
Commitments in respect of a Facility or fund its Contribution to a
Facility, such Finance Party shall promptly after becoming aware of
the same, through the Facility Agent, notify the Primary Borrower
whereupon (a) such Finance Party's Commitments shall be reduced to
zero (and, if it is the Issuing Bank, it shall have no further
obligation to Issue Letters of Credit if to do so would in the opinion
of the Issuing Bank be or become contrary to any law or regulation or
contrary to any request from or requirement of any fiscal monetary or
other authority (with which such Finance Party would normally comply))
and (b) if the Facility Agent on behalf of the Finance Party so
requires each relevant Borrower shall be obliged to prepay the
Contribution of such Finance Party to such Facility and provide full
cash cover for any Outstanding Contingent Liabilities of the relevant
Finance Party on a future date specified by the Facility Agent not
being earlier than the latest date permitted by the relevant law or
regulation or not contrary to such request or requirement. Any
prepayment pursuant to this clause 14.1 shall be made together with
all amounts referred to in clause 6.6.
(b) When any relevant Borrower makes any prepayment under this clause 14.1
the Facility Agent shall not release the amount of such prepayment
which is cash cover for any Outstanding Contingent Liabilities of the
relevant Finance Party to such Finance Parties but shall place such
monies on suspense account and such money may be used as collateral
for the actual and the contingent liabilities of that Finance Party to
the Issuing Bank, which liabilities shall remain in full force and
effect notwithstanding such prepayment; and such Finance Party shall
remain liable under all the relevant provisions of this Agreement to
the Issuing Bank to pay in cash any shortfall between the amount held
by the Facility Agent and its liabilities under this Agreement.
14.2 Increased costs
If the result of any change in, or in the interpretation or application of,
or the introduction of, (after the date of this Agreement):
(a) any law (including, the introduction of the proposed Bank of England
Act following the publication of the Bank of England Bill 1997) or
<PAGE>
(b) any regulation, request or requirement (which if not having the force
of law is one of a kind with which the relevant Finance Party or, as
the case may be, its holding company habitually complies), including
those relating to Taxation, capital adequacy, European monetary union,
liquidity, reserve assets, cash ratio deposits and special deposits or
requested or required by any central bank (including without
limitation any European Central Bank) or other fiscal monetary or
other authority,
is to:
(i) subject any Finance Party or its holding company to Taxes or
change the basis of Taxation of any Finance Party with respect
to any payment under this Agreement (other than Taxes or
Taxation on the overall net income, profits or gains of such
Finance Party imposed in the jurisdiction in which its
principal office or Facility Office is located); and/or
(ii) increase the cost to, or impose an additional cost on, any
Finance Party or its holding company in entering into or
performing its obligations under the Finance Documents and/or
in making or keeping available all or part of such Finance
Party's Commitments and/or maintaining or funding all or part
of such Finance Party's Contributions (and/or providing any
guarantee or indemnity of any other Finance Party's
obligations); and/or
(iii) reduce the amount payable or the effective return to any
Finance Party under this Agreement; and/or
(iv) reduce any Finance Party's or its holding company's rate of
return on its overall capital by reason of a change in the
manner in which it is required to allocate capital resources in
respect of all or any of the advances or obligations comprised
in a class of advances or obligations formed by or including
such Finance Party's share in Utilisations made or to be made
under this Agreement; and/or
(v) require any Finance Party or its holding company to make a
payment or forgo a return calculated by reference to or on any
amount received or receivable by such Finance Party under this
Agreement; and/or
(vi) require any Finance Party or its holding company to incur or
sustain a loss (including a loss of future potential profits)
by reason of being obliged to deduct all or part of such
Finance Party's Commitments or Contributions from its capital
for regulatory purposes,
then and in each such case (but subject to clause 8.6 and 14.3):
(aa) such Finance Party shall notify the Primary Borrower
through the Facility Agent in writing of such event
promptly upon its becoming aware of the same; and
(bb) following such notification the Primary Borrower shall,
whether or not such Finance Party's Contribution to any
Facility has been repaid, pay to the Facility Agent on
demand for the account of such Finance Party the amount
which such Finance Party specifies (in a certificate
setting
<PAGE>
forth the basis of the computation of such amount but not
including any matters which such Finance Party or its
holding company regards as confidential) is required to
compensate such Finance Party and/or its holding company
in its sole discretion for such liability to Taxes,
increased or additional cost, reduction, payment, forgone
return or loss.
For the purposes of this clause 14.2 each Finance Party may in good faith
allocate or spread costs and/or losses among its assets and liabilities (or
any class thereof) on such basis as it considers appropriate.
Each Finance Party shall use all reasonable endeavours to notify the
Primary Borrower as soon as reasonably practicable of any such increased
cost, reduction, payment or forgone return which is to result in a demand
under clause 14.2(bb).
For the purposes of this clause 14.2 and clause 14.4 "holding company"
means, in relation to a Finance Party, the company or entity (if any)
within the consolidated supervision of which such Finance Party is
included.
For the purposes of this clause 14.2, the Borrowers acknowledge that any
requirement that the Finance Parties treat interest hereunder as anything
other than interest shall be a change in law or the interpretation thereof.
14.3 Exceptions
Nothing in clause 14.2 shall entitle any Finance Party to receive any
amount in respect of compensation for any such liability to Taxes,
increased or additional cost, reduction, payment, forgone return or loss to
the extent that the same:
(a) is taken into account in calculating the Additional Cost; or
(b) is the subject of an additional payment under clause 8.5; or
(c) arises as a consequence of (or of any law or regulation implementing)
(i) the proposals for international convergence of capital measurement
and capital standards published by the Basle Committee on Banking
Regulations and Supervisory Practices in July 1988 and/or (ii) any
applicable directive of the European Union (in each case) unless it
results from any change in, or in the interpretation or application
of, such proposals or any such applicable directive (or any law or
regulation implementing the same) occurring after the date hereof; or
(d) is attributable to Taxation save where it is recovered under clause
14.2(i); or
(e) is attributable to the wilful default or gross negligence of a Finance
Party.
For the purposes of clause 14.3(c) the term "applicable directive" means
(exclusively) each of the Own Funds Directive (89/299/EEC of 17th April
1989) and the Solvency Ratio Directive (89/647/EEC of 18th December 1989).
<PAGE>
14.4 Mitigation
If, in respect of any Finance Party (an "Affected Bank"), circumstances
arise or exist which would result in:
(a) any Borrower being required to make an increased payment to that
Finance Party pursuant to clause 8.5;
(b) the reduction of that Finance Party's Commitment in respect of any
Facility to zero or any Borrower being required to prepay that Finance
Party's Contribution to any Facility pursuant to clause 14.1;
(c) any Borrower being required to make a payment to any Finance Party to
compensate such Finance Party or its holding company for a liability
to Taxes, increased or additional cost, reduction, payment, forgone
return or loss pursuant to clause 14.2(bb); or
(d) any Borrower not being entitled to a deduction for UK corporation tax
purposes in respect of interest payable under this Agreement to that
Finance Party;
then, without in any way limiting, reducing or otherwise qualifying the
obligations of any Borrower under clause 8 and this clause 14 (and subject
to the Borrower's rights under clause 6.5), such Finance Party shall, in
consultation with the Facility Agent, endeavour to take such reasonable
steps (and/or, in the case of clause 14.2(bb) and where the increased or
additional cost, reduction, payment, forgone return or loss is that of its
holding company, endeavour to procure that its holding company takes such
reasonable steps) as are open to it (or, as the case may be, its holding
company) to mitigate or remove such circumstances unless the taking of such
steps might (in the opinion of such Finance Party) be prejudicial to such
Finance Party (or, as the case may be, its holding company) and provided
that such Finance Party shall be under no obligation to take any such
action if in the opinion of such Finance Party to do so might have any
adverse effect upon its business, operations or financial condition.
15. SET-OFF AND PRO-RATA PAYMENTS
15.1 Set-off
Each Borrower hereby agrees that each Finance Party may at any time, whilst
any Default shall be continuing notwithstanding any settlement of account
or other matter whatsoever, combine or consolidate all or any of its then
existing accounts wheresoever situate (including accounts in the name of
such Finance Party or of such Borrower jointly with others), whether such
accounts are current, deposit, loan or of any other nature whatsoever,
whether they are subject to notice or not and whether they are denominated
in Sterling or in any other currency, and set-off or transfer any sum
standing to the credit of any one or more such accounts in or towards
satisfaction of any moneys, obligations or liabilities which are due and
payable by such Borrower to such Finance Party under the Finance Documents
but are unpaid. For this purpose each Finance Party is authorised to
purchase with the moneys standing to the credit of such account such other
currencies as may be necessary to effect such application. No Finance Party
shall be obliged to exercise any right given to it by this clause 15.1.
Each Finance Party shall notify the Facility Agent promptly upon the
exercise or purported exercise of any right of
<PAGE>
set-off in relation to any member of the Group giving full details in
relation thereto and the Facility Agent shall inform the other Finance
Parties.
15.2 Pro-rata payments
(a) If at any time any Bank (the "Recovering Bank") receives or recovers
any amount owing to it by any Borrower under this Agreement by direct
payment, set-off or in any manner other than by payment through the
Facility Agent (not being a payment received from a Substitute or a
sub-participant in such Bank's Contribution to any Facility or any
other payment of an amount due to the Recovering Bank for its sole
account), the Recovering Bank shall, within two Banking Days of such
receipt or recovery (a "Relevant Receipt") notify the Facility Agent
of the amount of the Relevant Receipt. If the Relevant Receipt exceeds
the amount which the Recovering Bank would have received if the
Relevant Receipt had been received by the Facility Agent then:
(i) within two Banking Days of demand by the Facility Agent, the
Recovering Bank shall pay to the Facility Agent an amount equal
to the excess;
(ii) the Facility Agent shall treat the excess amount so paid by the
Recovering Bank as if it were a payment made by the relevant
Borrower and shall distribute the same to the Banks (other than
the Recovering Bank); and
(iii) as between the relevant Borrower and the Recovering Bank, the
excess amount so re-distributed shall be treated as not having
been paid but the obligations of the relevant Borrower to the
other Banks shall, to the extent of the amount so re-distributed
to them, be treated as discharged.
(b) If any part of a Relevant Receipt subsequently has to be wholly or
partly refunded by the Recovering Bank (whether to a liquidator or
otherwise) each Bank to which any part of such Relevant Receipt was so
re-distributed shall on request from the Recovering Bank repay to the
Recovering Bank such Bank's pro-rata share of the amount which has to
be refunded by the Recovering Bank.
(c) Each Bank shall on request supply to the Facility Agent such
information as the Facility Agent may from time to time request for
the purpose of this clause 15.2.
(d) Notwithstanding the foregoing provisions of this clause 15.2, no
Recovering Bank shall be obliged to share any Relevant Receipt which
it receives or recovers pursuant to legal proceedings taken by it to
recover any sums owing to it under this Agreement with any other party
which has a legal right to, but does not, either join in such
proceedings or commence and diligently pursue separate proceedings to
enforce its rights in the same or another court (unless the
proceedings instituted by the Recovering Bank are instituted by it in
breach of clause 18.2).
(e) The amounts due from each relevant Borrower to each of the Banks shall
reflect any payments and receipts among the Banks prescribed by this
clause.
(f) Nothing in this clause 15.2 shall prevent the Issuing Bank from
recovering from the relevant Borrowers any amounts due under a Letter
of Credit issued by the Issuing Bank.
<PAGE>
15.3 No release
For the avoidance of doubt it is hereby declared that failure by any
Recovering Bank to comply with the provisions of clause 15.2 shall not
release any other Recovering Bank from any of its obligations or
liabilities under clause 15.2.
15.4 No charge
The provisions of this clause 15 are not intended to, shall not, and shall
not be construed so as to, constitute a charge by a Bank. In particular it
is not intended to create a charge over all or any part of a sum received
or recovered by any Bank in the circumstances mentioned in clause 15.2.
16. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES
16.1 Benefit and burden
This Agreement shall be binding upon, and enure for the benefit of, the
Finance Parties and the Borrowers and their respective successors,
transferees and assigns.
16.2 No assignment by the Borrowers
The Borrowers may not assign or otherwise transfer any of their respective
rights or obligations under any of the Finance Documents.
16.3 Substitution
Each Bank (an "Existing Bank") may at any time assign all or any of its
rights and benefits under the Finance Documents or novate in accordance
with clause 16.5 all or any part of its rights, benefits and/or obligations
under the Finance Documents to another Qualifying Bank (a "Substitute")
with the consent of the Issuing Bank, and with the consent of the Primary
Borrower (not to be unreasonably withheld or delayed), save that such
consent of the Primary Borrower will not be required to assignments or
novations which take place prior to the Syndication Date.
16.4 Assignment
If any Bank assigns all or any of its rights and benefits under the Finance
Documents in accordance with clause 16.3, then, unless and until the
assignee has agreed with the other Finance Parties that it shall be under
the same obligations towards each of them as it would have been if it had
been an original party thereto as a Bank, the other Finance Parties shall
not be obliged to recognise that assignee as having the rights against each
of them which it would have had if it had been such a party thereto.
16.5 Substitution Certificate
Subject to clause 16.5 (b), if a duly completed Substitution Certificate
duly executed by the Existing Bank and the Substitute is five Banking Days
before the proposed Effective Date (unless the Facility Agent otherwise
agrees) delivered to and counter-signed by the Facility
<PAGE>
Agent (for itself and the other parties to this Agreement other than the
Existing Bank), then on the Effective Date (as specified in that
Substitution Certificate) to the extent that the Existing Bank's rights,
benefits and obligations under the Finance Documents are expressed in such
Substitution Certificate to be the subject of a novation in favour of the
Substitute effected pursuant to this clause 16.5:
(i) the existing parties to the Finance Documents and the Existing
Bank shall be released from their respective obligations towards
one another under the Finance Documents ("discharged
obligations") except for any obligation which the Existing Bank
has to the Issuing Bank under clause 4.7 (Bank's Guarantee and
Indemnity) before the date on which the novation takes place
unless otherwise agreed in writing by the Issuing Bank and their
respective rights against one another under the Finance
Documents ("discharged rights") shall be cancelled;
(ii) the Substitute party to such Substitution Certificate and the
existing parties to the Finance Documents shall assume
obligations towards each other which differ from the discharged
obligations only insofar as they are owed to or assumed by such
Substitute instead of to or by such Existing Bank;
(iii) the Substitute party to such Substitution Certificate and the
existing parties to the Finance Documents shall acquire rights
against each other which differ from the discharged rights only
insofar as they are exercisable by or against such Substitute
instead of by or against such Existing Bank; and
(iv) the Finance Parties shall acquire the same rights and benefits
and assume the same obligations between themselves as they would
have acquired and assumed had such Substitute been an original
party hereto as a Bank with the rights, benefits and/or
obligations acquired or assumed by it as a result of such
transfer;
and, on such Effective Date, the Substitute shall (unless such
novation is part of the syndication process carried out by the
Arrangers) pay to the Facility Agent for its own account a fee of
(pound)750. The Facility Agent shall promptly notify the other Banks
of the receipt by it of any Substitution Certificate and shall
promptly deliver a copy of such Substitution Certificate to the
Primary Borrower.
16.6 Reliance on Substitution Certificate
The Facility Agent (on behalf of itself and the Security Agent) and the
Borrowers shall be fully entitled to rely on any Substitution Certificate
delivered to the Facility Agent in accordance with the foregoing provisions
of this clause 16 which is complete and regular on its face as regards its
contents and purportedly signed on behalf of the relevant Existing Bank(s)
and the Substitute(s) and none of the Facility Agent, the Security Agent
and the Borrowers shall have any liability or responsibility to any party
as a consequence of placing reliance on and acting in accordance with any
such Substitution Certificate if it proves to be the case that the same was
not authentic or duly authorised.
<PAGE>
16.7 Authorisation of Facility Agent
Each party to this Agreement irrevocably authorises the Facility Agent to
counter-sign each Substitution Certificate on its behalf for the purposes
of clause 16.5 without any further consent of, or consultation with, such
party except, in the case of the Primary Borrower, any consent required
pursuant to clause 16.3.
16.8 Accession Deeds
The Obligors shall from time to time at the request of the Facility Agent
promptly execute any accession deed to any of the Security Documents and do
any other act or thing or execute such further documents as directed by the
Facility Agent in connection with the transfer of rights or benefits under
clause 16.3.
16.9 Costs and Expenses
The Primary Borrower shall, promptly after demand by the Facility Agent,
pay to the Facility Agent and the Security Agent the reasonable costs and
expenses incurred by them or any other Finance Party in connection with the
creation of valid security in respect of any Substitute taking an
assignment of rights and/or an assumption of obligations pursuant to clause
16 in those jurisdictions requiring further steps to be taken following
such assignment or assumption.
16.10 Construction of certain references
If any Bank novates all or any part of its rights, benefits and obligations
as provided in clause 16.3 all relevant references in this Agreement to
such Bank shall thereafter be construed as a reference to such Bank and/or
its Substitute to the extent of their respective interests.
16.11 Lending offices
Each Bank shall lend through its office at the address specified in
schedule 1 or, as the case may be, in or pursuant to any relevant
Substitution Certificate or through any other office of such Bank selected
from time to time by such Bank through which such Bank wishes to lend for
the purposes of this Agreement. If the office through which a Bank is
lending is changed pursuant to this clause 16.11, such Bank shall notify
the Facility Agent promptly of such change. No Bank shall exercise its
rights under this clause in any manner which might reasonably be expected
to result in it not being a Qualifying Bank.
16.12 Disclosure of information
The Obligors party to this Agreement agree that the Finance Parties may at
any time disclose such information relating to the Obligors, their
Affiliates and associated companies as shall come into their possession,
whether or not in relation to the Facilities:
(a) to any prospective assignee, Substitute or sub-participant;
(b) to their respective advisers, professional or otherwise;
(c) to any Affiliate of such Finance Party;
(d) to the other Finance Parties;
(e) if required to do so by an order of a court in any jurisdiction;
<PAGE>
(f) under any law or regulation or to any applicable regulatory authority
(including the Bank of England) in any jurisdiction; and
(g) where such information shall have already entered the public domain,
and in the case of (a) and (b) above, subject to requiring and receiving a
written confirmation from the recipient of the information that it will
treat in confidence any confidential information so disclosed to it and not
use it for any unauthorised purpose and, upon receipt of such confirmation,
such Finance Party shall in no way be liable or responsible for such
information not being kept confidential by such proposed assignee,
Substitute or other person.
16.13 Restrictions on novations
Any novation by an Existing Bank which is transferring part (but not all)
of its Commitment may only be made under this clause 16 if (i) it is made
in respect of a Commitment of (pound)5,000,000 or any larger integral
multiple of (pound)5,000,000 and (ii) as a consequence of such novation (or
as a consequence of that and any other novation between the same or related
parties taking effect at or about the same time) the Commitment of the
Existing Bank would be not less than (pound)5,000,000. If part (but not
all) of a Bank's Contribution is being transferred, the previous sentence
shall be read as if it referred to "Contribution", "Contributions" and
assignment instead of "Commitment" and "Commitments" and "novation"
respectively.
16.14 No obligation
The Existing Bank shall not be obliged by any Finance Document to:
(a) accept a re-transfer from the Substitute of any of the rights and/or
obligations assigned or transferred under this clause 16; or
(b) indemnify the Substitute for any losses arising by reason of any
Obligor's failure to perform its obligations under any Finance
Documents or otherwise.
16.15 Syndication
It is acknowledged that at the date of this Agreement the Facilities are
being made available by the Underwriters with the intention that each
Underwriter may transfer any part of its participation in accordance with
clause 16.5 (Substitution) and, accordingly, references to the Banks shall,
before the first date on which such transfer shall be made of the
Underwriter's rights, benefits and obligations under this Agreement in
accordance with clause 16.5 (Substitution), be construed as a reference
solely to the Underwriters.
16.16 Obligors' undertakings in connection with syndication
The Obligors acknowledge that syndication of the Facilities in accordance
with this clause 16.16 and the Syndication Letter will take place and
undertake to take reasonable steps to assist and co-operate with the
Arrangers, the Facility Agent and the Underwriters in syndication by, among
other things:
(a) co-operating with site visits by the Banks and persons invited by the
Arrangers to participate (in this clause 16.16 only, together the
"Banks");
<PAGE>
(b) participating at an appropriate senior management level in
presentations to the Banks concerning the Parent, the members of the
Group and their activities;
(c) using reasonable endeavours to obtain appropriate authorisations from
the Auditors, other accountants, consultants and professional advisers
to release for the benefit of the Banks any information addressed to
any Obligor and/or the Facility Agent;
(d) refraining from making any statement, announcement or publication or
doing any act or thing which may obstruct syndication in any way;
(e) providing the Banks with such information relating to the Parent and
members of the Group, and their associated companies and their
activities as the Banks reasonably request;
(f) assisting the Facility Agent and the Arrangers in the preparation and
review of any information which such Facility Agent and/or the
Arrangers reasonably require for the purposes of syndication,
including assisting in the preparation of any information memorandum
and the giving of such additional warranties as the Facility Agent may
reasonably request of the contents of the information and/or the
warranties in clause 9, provided that any such warranties are
expressed to be to the best of the relevant Obligor's knowledge,
information and belief and that the Obligors may disclose against such
warranties such matters as they deem appropriate;
(g) passing on to the Facility Agent any enquiries received by them from
potential Banks; and
(h) agreeing to amendments to the Finance Documents of an administrative
or technical nature or to correct typographical or other clerical
errors.
17. FACILITY AGENT AND SECURITY AGENT
17.1 Appointment of Facility Agent and Security Agent
Each Finance Party (except the relevant agent) appoints the Facility Agent
to act as its agent in connection with the Finance Documents to which the
Facility Agent is a party and the Security Agent to act as its agent and
trustee in relation to the Security Documents, and authorises each of the
Facility Agent and the Security Agent to exercise such rights, remedies,
powers and discretions as are specifically delegated to them by the terms
of this Agreement and the Security Documents together with all reasonably
incidental rights, powers and discretions. The Obligors shall be entitled
to assume that the Facility Agent and the Security Agent represent the
Finance Parties (except the relevant agent), the Reference Banks or the
Majority Banks (as the case may be), and that all consents and notices
given by the Facility Agent or the Security Agent on their behalf are
validly given.
17.2 Separate treatment of syndication division
In acting as Facility Agent or Security Agent, the Facility Agent's or, as
the case may be, the Security Agent's syndication division (or such other
division as may undertake such task) shall be treated as a separate entity
from any other of its divisions or departments and, despite the
<PAGE>
provisions of clauses 17 to 21, if the Facility Agent or Security Agent or
any Related Person acts for or transacts business with any member of a
group comprising the Parent and its Affiliates or associated companies (the
"Parent Group") or any other person which may be a trade competitor of the
Parent Group or Target Group or any member of either such group or may
otherwise have commercial interests similar to those of any member of such
groups in any capacity in relation to any other matter (including as a Bank
under this Agreement), any information acquired by the Facility Agent or
Security Agent or any Related Person in such other capacity may be treated
as confidential by the Facility Agent or Security Agent. The Borrowers and
Bidco hereby expressly acknowledge that the Finance Parties and Related
Persons may be providing debt financing, equity capital or other services
(including financial advisory services) to other persons with whom the
Parent or the Group may have conflicting interests in respect of the
Facilities or otherwise.
17.3 Actions of Facility Agent and Security Agent
Each action taken or decision made by the Facility Agent or the Security
Agent under or in relation to any Finance Document with requisite authority
under this Agreement, including on the basis of the requisite instructions,
shall be binding on all the Finance Parties.
17.4 Notification of retirement of Facility Agent, Security Agent or Issuing
Bank
Each of the Facility Agent, the Security Agent and/or the Issuing Bank may
resign its appointment under this Agreement at any time without assigning
any reason therefor by giving not less than 30 days' prior written notice
to that effect to each of the other parties to this Agreement Provided that
no such resignation shall be effective until a successor for such Facility
Agent, Security Agent or Issuing Bank (as the case may be) is appointed in
accordance with the succeeding provisions of this clause.
17.5 Successor Facility Agent, Security Agent or Issuing Bank
If the Facility Agent, Security Agent or Issuing Bank gives notice of its
resignation pursuant to clause 17.4, then any reputable and experienced
bank or other financial institution with an office in London may after
consultation with the Primary Borrower be appointed as a successor to such
Facility Agent, Security Agent or Issuing Bank (as the case may be) by the
Majority Banks but, if no such successor is so appointed, the Facility
Agent, Security Agent or Issuing Bank (as the case may be) may appoint such
a successor itself.
17.6 Provisions relating to successor Facility Agent, Security Agent or Issuing
Bank
With effect from the date that a successor is appointed and accepts the
office of Facility Agent, Security Agent or, as the case may be, Issuing
Bank and executes such necessary documentation under this clause 17:
(a) as regards the other Finance Parties and the Obligors, such successor
shall become bound by all the obligations of the Facility Agent,
Security Agent or, as the case may be, the Issuing Bank and become
entitled to all the rights, privileges, powers, authorities and
discretions of the Facility Agent, Security Agent or, as the case may
be, the Issuing Bank under the Finance Documents;
(b) the agency of the retiring Facility Agent, the trusteeship of the
retiring Security Agent or, as the case may be, the duties of the
Issuing Bank shall terminate and the retiring
<PAGE>
Facility Agent, Security Agent or, as the case may be, the retiring
Issuing Bank shall be discharged from any further liability or
obligation under the Finance Documents, but without prejudice to any
liabilities which the retiring Facility Agent, Security Agent or, as
the case may be, the retiring Issuing Bank may have incurred
(including with respect to the retiring Issuing Bank any then
outstanding Issued Letter of Credit) before the termination of its
agency, trusteeship and/or duties;
(c) the costs, charges and expenses of the retiring Facility Agent,
Security Agent or, as the case may be, the retiring Issuing Bank shall
be discharged if recoverable under the provisions of this Agreement;
(d) the provisions of the Finance Documents shall continue in effect for
the benefit of any retiring Facility Agent, Security Agent or, as the
case may be, the retiring Issuing Bank in respect of any actions taken
or omitted to be taken by it or any event occurring before the
termination of its agency, trusteeship and/or duties (including with
respect to the retiring Issuing Bank any then outstanding Issued
Letter of Credit);
(e) it is intended that (except only as may be agreed in writing between
any retiring Security Agent and its successor with the prior approval
of the Majority Banks), in the case of the appointment of successor to
the Security Agent, the property, assets and rights vested in the
retiring Security Agent pursuant to the Security Documents should,
with immediate effect, be vested in such successor Security Agent
under the provisions of the Trustee Act 1925, either by operation of
law or, failing that, by assignment or other form of transfer or
conveyance;
(f) at any time and from time to time following such appointment of a
successor to the Security Agent, the retiring Security Agent shall do
and execute all acts, deeds and documents reasonably required by such
successor in order to transfer to such successor Security Agent (or
its nominee, as such successor may direct) any such property, assets
and rights which shall not have vested in such successor by operation
of law and all such acts, deeds and documents under clauses 17.6(e)
and (f) shall be done or, as the case may be, executed at the cost of
the retiring Security Agent; and
(g) the retiring Facility Agent, Security Agent or Issuing Bank shall (at
the expense of the Primary Borrower) provide its successor with copies
of such of its records as its successor reasonably requires to carry
out its functions as such.
17.7 Merger of Facility Agent, Security Agent or Issuing Bank
Any corporation into which the Facility Agent, the Security Agent or the
Issuing Bank may be merged or converted or any corporation with which the
Facility Agent, the Security Agent or the Issuing Bank may be consolidated
or any corporation resulting from any merger, conversion, amalgamation,
consolidation or other reorganisation to which the Facility Agent, the
Security Agent or the Issuing Bank shall be a party shall, to the extent
permitted by applicable law, be the successor Facility Agent, Security
Agent or, as the case may be, Issuing Bank under this Agreement and the
other Finance Documents (as appropriate) without the execution or filing of
any document or any further act on the part of any of the parties to this
Agreement or, as the case may be, the other Finance Documents save that
notice of merger, conversion, amalgamation, consolidation or other
reorganisation shall forthwith be given to the Primary Borrower and the
Banks.
<PAGE>
17.8 Role of Issuing Bank
The Issuing Bank shall act on behalf of the Banks with respect to any
Letters of Credit Issued by it and the documents associated therewith until
such time and except for so long as the Facility Agent may agree at the
request of the Majority Banks to act for such Issuing Bank with respect
thereto.
18. POWERS
18.1 General powers
Each of the Facility Agent, the Security Agent, the Arrangers and the
Underwriters may:
(a) assume that the Facility Office of each Bank is that identified with
its signature below (or, in the case of a Substitute, that identified
in the Substitution Certificate under which it became a party to this
Agreement) until it has received from such Bank a notice designating
some other office of such Bank as its Facility Office, and may act
upon any such notice until the same is superseded by a further such
notice;
(b) engage and pay for the advice or services of any lawyers, accountants
or other advisers whose advice or services may seem necessary,
expedient or desirable to it and may rely upon any advice so obtained;
(c) rely as to matters of fact which might reasonably be expected to be
within the knowledge of an Obligor upon a certificate or statement
signed by or on behalf of that Obligor;
(d) rely upon any communication or document believed by it to be genuine
and correct and to have been communicated or signed by the person by
whom it purports to be communicated or signed;
(e) refrain from exercising any right, power or discretion vested in it
under any Finance Document unless and until instructed by the Majority
Banks or, where required, all of the Banks as to whether or not such
right, power or discretion is to be exercised and, if it is to be
exercised, as to the manner in which it should be exercised, and it
shall not be liable for acting or refraining from acting in accordance
with or in the absence of such instructions;
(f) refrain from taking any step to protect or enforce the rights of any
Finance Party under any Finance Document and from beginning any legal
action or proceeding arising out of or in connection with any Finance
Document until it has been indemnified and/or secured as it may
require (whether by way of payment in advance or otherwise) against
all costs, claims, expenses (including legal fees) and liabilities
which it will or may expend or incur in complying with such
instructions;
(g) refrain from doing anything which would or might in its opinion be
contrary to any applicable law or any requirements (whether or not
having the force of law) of any governmental, judicial or regulatory
body or otherwise render it liable to any person, and do anything
which is in its opinion necessary to comply with any such applicable
law or requirement;
<PAGE>
(h) do any act or thing in the exercise of any of its powers and duties
under the Finance Documents which may lawfully be done and which in
its absolute discretion it deems advisable for the protection and
benefit of the Finance Parties collectively;
(i) perform any of its duties, obligations and responsibilities under the
Finance Documents by or through its personnel or agents; and
(j) accept deposits from, lend money (secured or unsecured) to and
generally engage in any kind of banking or other business with, be the
owner or holder of any shares or other securities of, and provide
advisory or other services to the Parent and its Affiliates, and/or
the Group or any of the Finance Parties, without any liability to
account.
18.2 Specific powers of Facility Agent and Security Agent
Each of the Facility Agent and the Security Agent:
(a) may assume that:
(i) any representation made by the Obligors in or in connection with
the Finance Documents is true;
(ii) no Default has occurred;
(iii) no Obligor is in breach of or default under its obligations
under any Finance Document; and
(iv) any right, power, authority or discretion vested in any of the
Finance Documents upon the Majority Banks, all Banks, or any
other person or group of persons has not been exercised,
unless the Facility Agent or, as the case may be, the Security Agent
has in its capacity as agent (or where relevant, as agent and trustee)
for the relevant Finance Parties received actual notice to the
contrary from any other party to any Finance Document;
(b) shall be at liberty to place any Finance Document and any other
instruments, documents or deeds delivered to it pursuant thereto or in
connection therewith for the time being in its possession in any safe
deposit, safe or receptacle selected by the Security Agent or Facility
Agent, as the case may be, or with any bank, any company whose
business includes undertaking the safe custody of documents or any
firm of lawyers of good repute and may make any such arrangements as
it thinks fit for allowing the Primary Borrower access to, or its
solicitors or auditors possession of, such documents when necessary or
convenient and, in the absence of gross negligence or wilful default
on its part, shall not be responsible for any loss thereby incurred;
(c) may, whenever it thinks fit, delegate by power of attorney or
otherwise to any person or persons all or any of the rights, trusts,
powers, authorities and discretion vested in it by any Finance
Document and such delegation may be made upon such terms and subject
to such conditions and subject to such regulations as the Security
Agent or Facility Agent, as the case may be, may think fit and shall
not be bound to supervise
<PAGE>
the proceedings or (in the absence of gross negligence or wilful
default on its part) be in any way responsible for any loss incurred
by reason of any misconduct or default on the part of any such
delegate;
(d) notwithstanding anything else herein contained, may refrain from doing
anything which would or might in its opinion be contrary to any
relevant law of any jurisdiction or any relevant directive or
regulation of any agency of any state or which would or might
otherwise render it liable to any persons and may do anything which
is, in its opinion, necessary or desirable to comply with any such
law, directive or regulations;
(e) may indemnify itself and/or every attorney, agent or other person
appointed by it under any Finance Document out of the Trust Property
against all Liabilities (as defined in clause 20.3) and/or in respect
of any other matter or thing done or omitted to be done in any way
relating to any Finance Document or by law and/or acting as Facility
Agent or Security Agent (as the case may be);
(f) shall have the power to institute, prosecute and defend any suits or
actions or other proceedings affecting the Facility Agent or Security
Agent respectively or the Trust Property and to compromise any matter
or difference or submit any such matter to arbitration and to
compromise or compound any debts owing to the Facility Agent or
Security Agent respectively or any other claims against it or any such
terms as it shall deem sufficient and to make petition upon such terms
as it shall deem desirable;
(g) save as otherwise expressly provided herein, shall have absolute
discretion as to the exercise or non exercise (and as to the manner
and time of any such exercise) of all rights, trust, powers,
authorities and discretions vested in it by any of the Finance
Documents but shall be entitled to refrain from exercising any right,
power or discretion vested in it as agent or trustee under any Finance
Document unless and until instructed by the Majority Banks or, where
required under this Agreement, all Banks as to whether or not such
right, power or discretion is to be exercised and, if it is to be
exercised, as to the manner in which it should be exercised; and
(h) shall have absolute discretion as to the exercise or non-exercise (and
as to the manner and time of any such exercise) of all rights, trust,
powers, authorities and discretions in relation to any matter, or in
any context, not expressly provided for by this Agreement to act or,
as the case may be, refrain from acting in accordance with the
instructions of the Majority Banks;
(i) shall have the power to give or enter into any indemnity, warranty,
guarantee, undertaking or covenant or to enter into any type of
agreement as it shall, with the approval of the Majority Banks (or,
where required under this Agreement, all Banks) and subject to all
other provisions of the Finance Documents, think fit in relation to
the Trust Property;
(j) shall (subject to clause 19) be entitled (in its own name or in the
names of nominees) to invest moneys from time to time including in the
case of the Security Agent moneys forming part of the Trust Property
or otherwise held by it as a consequence of any enforcement of the
security constituted by the Security Documents which, in the opinion
of the Facility Agent or (as the case may be) the Security Agent, it
would not be practicable to distribute immediately by placing the same
on deposit in the name or under the control of itself as it may think
fit without being under any duty to diversify
<PAGE>
the same and it shall not be responsible for any loss due to interest
rate or exchange rate fluctuations;
(k) with respect to its own Commitments and Contributions (if any), shall
have the same rights and powers under this Agreement and the other
Finance Documents as any other Bank and may exercise the same as
though it were not performing the duties and functions delegated to it
under this Agreement and/or the other Finance Documents and the term
"Banks" shall, unless the context clearly otherwise indicates, include
the Security Agent and the Facility Agent in their individual
capacities as Banks.
18.3 Specific powers of Security Agent
The Security Agent:
(a) shall have all the powers and discretions conferred upon trustees by
the Trustee Act 1925 (to the extent not inconsistent herewith) and
upon the Security Agent by this Agreement and the other Finance
Documents and upon a receiver appointed under any Finance Documents
(as though the Security Agent were a receiver thereunder);
(b) shall, without prejudice to any of the powers, discretions and
immunities conferred upon trustees by law (and to the extent not
inconsistent with the provisions of this Agreement or any of the
Security Documents), have all the same powers and discretions as a
natural person acting as the beneficial owner of such property and/or
as are conferred upon the Security Agent by this Agreement and/or any
Security Document but so that the Security Agent may only exercise
such powers and discretions to the extent that it is authorised to do
so by the provisions of this Agreement;
(c) shall have full power to determine all questions and doubts arising in
relation to the interpretation or application of any of the provisions
of this Agreement or any of the Security Documents as it affects the
Security Agent and every such determination (whether made upon a
question actually raised or implied in the acts or proceedings of the
Security Agent) shall be conclusive and shall bind all the other
parties to this Agreement and the Security Documents;
(d) may at any time appoint any person (whether or not a trust
corporation) to act either as a separate trustee or as a co-trustee
jointly with it (i) if it considers such appointment to be in the
interests of the Finance Parties or (ii) for the purposes of
conforming to any legal requirements, restrictions or conditions which
the Security Agent deems relevant for the purposes hereof, and shall
give prior notice to the Primary Borrower and the Facility Agent of
any such appointment; and any person so appointed shall have such
powers, authorities and discretions (including the receipt and payment
of money) and such duties and obligations as shall be conferred or
imposed on such person by the instrument of appointment and shall have
the same benefits under clauses 17 to 23 as the Security Agent; and
the Security Agent shall have power in like manner to remove any
person so appointed; and may pay to any person so appointed, and any
costs, charges and expenses incurred by such person in performing its
functions pursuant to such appointment, shall for the purposes hereof
be treated as costs, charges and expenses incurred by the Security
Agent in performing its function as trustee hereunder;
<PAGE>
(e) has at its absolute discretion the right to make or retain or register
in the names of nominees any investment of any part or all of the
Trust Property;
(f) without prejudice to the provisions of any of the Finance Documents,
shall have the right to, but shall not be under any obligation to,
insure any of the Trust Property or to require any other person to
maintain any such insurance and (in the absence of gross negligence or
wilful default on the part of the Security Agent) shall not be
responsible for any loss which may be suffered by any person as a
result of the lack of or inadequacy or insufficiency of any such
insurance;
(g) may at its sole discretion, and without reference to the Finance
Parties, release any asset or assets from the Security Documents to
the extent that their disposal or release is permitted or required by
the terms of this Agreement or any of the Security Documents;
(h) shall be entitled to make the deductions and withholdings (on account
of Taxes or otherwise) from payments to the Facility Agent hereunder
which it is required by any applicable law to make, and to pay all
Taxes which may be assessed against it in respect of any of the Trust
Property, in respect of anything done by it in its capacity as trustee
or otherwise by virtue of its capacity as trustee;
(i) shall be entitled to carry out all dealings with the other Finance
Parties through the Facility Agent and shall be entitled to rely on
the Facility Agent's certificate as to the entitlement of all or any
of the Finance Parties; and
(j) shall be authorised to execute each of the Security Documents on
behalf of the Finance Parties.
19. DUTIES
19.1 Specific duties of the Facility Agent and the Security Agent
Each of the Facility Agent and the Security Agent (for the benefit of the
other Finance Parties only) shall:
(a) promptly upon receipt inform each Bank of the contents of any notice
or document or other information received by it on or after the date
of this Agreement in its capacity as Facility Agent under this
Agreement from any Obligor or as Security Agent under the Security
Documents from any Obligor;
(b) promptly notify each Bank of the occurrence of any Default or any
material breach by any Obligor in the due performance of its
obligations under this Agreement or any Security Document of which the
Facility Agent or, as the case may be, the Security Agent (in its
capacity as such) has received written notice from any other party to
any Finance Document;
(c) save as otherwise provided herein, act in accordance with any
instructions given to it by the Majority Banks (which instructions
shall be binding on all of the Finance Parties);
<PAGE>
(d) if so instructed by the Majority Banks (or, where so required under
this Agreement, all Banks), refrain from exercising any right, remedy
power or discretion vested in it under the Finance Documents;
(e) except as regards purely administrative acts, consult whenever
reasonably practicable with the Banks before doing or refraining from
doing any act or thing in the exercise of its powers as agent and/or
trustee;
(f) to the extent that it receives or recovers monies following the
service of a notice in accordance with Clause 12.2 pursuant to or as a
result of any breach of any Finance Document to be applied in
discharging any obligation (whether actual or contingent, present or
future) of any Obligor under any Finance Document, apply such monies
(without prejudice to the respective rights of the Facility Agent or
the Security Agent pursuant to any Finance Document to credit any
monies received by it to any suspense account) as between the Finance
Parties in accordance with clause 8.9 as if they were a partial
payment; and
(g) shall make each such application and/or distribution as soon as is
practicable after the relevant moneys are received by, or otherwise
become available to, it save that (without prejudice to any other
provision contained in any of the Security Documents) the Security
Agent (acting on the instructions of the Facility Agent), the Facility
Agent or any Receiver may credit any moneys received by it to a
suspense account for so long and in such manner as the Security Agent,
Facility Agent or such Receiver may from time to time determine with a
view to preserving the rights of the Finance Parties or any of them to
prove for the whole of their respective claims against any Borrower or
any other person liable.
19.2 Specific duties of Security Agent
The Security Agent (for the benefit of the other Finance Parties only)
shall:
(a) during the Trust Period hold the Trust Property as trustee upon trust
for the Finance Parties from time to time and (as well after as before
enforcement) perform and exercise (as the case may be) the
obligations, rights and benefits vested or to be vested in the
Security Agent by the Finance Documents or any document entered into
pursuant thereto in accordance with the provisions of Clauses 17 to
23.
(b) (subject to the provisions contained in clause 3.3 (Certain Funds
Period)) only make demand under the Security Documents and to the
extent practicable enforce the security constituted by the Security
Documents:
(i) before the Final Repayment Date at the direction of the Majority
Banks, if any of the Facilities has been declared to be
immediately due and payable by the Facility Agent under clause
12.2; or
(ii) on or after the Final Repayment Date at the direction of any
Bank, if any Borrower defaults in repaying the Facilities in
full on the Final Repayment Date or in paying any other amount
due by any Borrower to any Finance Party, under the Finance
Documents; or
<PAGE>
(iii) at any time, if requested to do so by a member of the Group
which has granted security to the Security Agent;
(c) hold any recoveries which it receives under the security constituted
by the Security Documents on trust for distribution to the Finance
Parties, in accordance with the provisions of this clause 19 and shall
hold the security constituted by the Security Documents on trust for
the Finance Parties, to give effect to this Agreement and shall
exercise its rights, powers and duties under the Security Documents
(and particularly those concerned with the protection and enforcement
of the security afforded by such documents) and/or under this
Agreement for the benefit of all Finance Parties; and
(d) carry out all dealings with the other Finance Parties through the
Facility Agent.
20. EXONERATION
20.1 Absence of obligation on initial Finance Parties
Despite anything to the contrary expressed or implied in any Finance
Document, each of the Facility Agent, the Security Agent, the Issuing Bank,
the Arrangers and the Underwriters shall:
(a) not be bound to enquire as to and will have no liability in respect
of:
(i) whether or not any representation or warranty made by any
Obligor under or in connection with any Finance Document is true
complete or adequate;
(ii) the occurrence or otherwise of any Default;
(iii) the performance by any Obligor of its obligations under any
Finance Document; or
(iv) any breach or default by any Obligor of or under its obligations
under any Finance Document;
(b) not be bound to account to any Finance Party for any fee or other sum
or the profit element of any sum received by it for its own account;
(c) not be bound to disclose to any other person any information relating
to any member of the Group if such disclosure would or might in its
opinion constitute a breach of any law or regulation or duty of
confidentiality or be otherwise actionable at the suit of any person;
(d) not be under any fiduciary or other duty towards any Finance Party or
under any obligations other than those expressly provided for in any
Finance Documents;
(e) not be liable (in the absence of its own gross negligence or wilful
default):
(i) for any failure, omission, or defect in the due execution,
delivery, validity, legality, adequacy, performance,
enforceability, or admissibility in evidence of any Finance
Document or any communication, report or other document delivered
under any Finance Document; or
<PAGE>
(ii) in respect of its exercise or failure to exercise any of its
powers and duties under any Finance Document; or
(f) not have any duties, obligations or liabilities other than those
expressly provided for in this Agreement and (in the case of the
Security Agent) the Security Documents and have no liability or
responsibility (in the absence of its own gross negligence or wilful
default) of any kind to:
(i) any member of the Group arising out of or in relation to any
failure or delay in the performance or breach by any Finance
Party (other than itself) of any of its obligations under or in
connection with any Finance Document; or
(ii) any Finance Party arising out of or in relation to:
(aa) the financial condition of any member of the Group; or
(bb) any failure or delay in the performance or breach by any
Obligor of any of its obligations under or in connection
with any Finance Document or the Facilities;
(g) not be bound to check or enquire on behalf of any other Finance Party
into or liable for the adequacy, accuracy, execution, genuineness,
enforceability, admissibility in evidence or completeness of any
communication delivered to it under any of the Finance Documents, any
legal or other opinions, reports, valuations, certificates, appraisals
or other documents delivered or made or required to be delivered or
made at any time in connection with any of the Finance Documents, any
security to be constituted thereby or any other report or other
document, statement or information circulated, delivered or made,
whether orally or otherwise and whether before, on or after the date
of this Agreement;
(h) be entitled to accept without enquiry, requisition or objection such
right and title as any Obligor may have to that part of the property
belonging to it (or any part thereof) which is the subject matter of
any Finance Document and not be bound or concerned to investigate or
make any enquiry into the right or title of such person to such
property (or any part thereof) or, without prejudice to the foregoing,
to require such person to remedy any defect in such person's right or
title as aforesaid;
(i) in enforcing the security constituted by the Finance Documents and in
determining the respective entitlements of the Finance Parties, be
entitled to rely on its own account;
(j) be entitled to invest monies which in the opinion of the Facility
Agent or Security Agent (as the case may be) may not be paid out
promptly following receipt in the name or under the control of such
Facility Agent or Security Agent (as the case may be) in any of the
investments for the time being authorised by law for the investment by
trustees of trust monies or in any other investments whether similar
to the aforesaid or not which may be requested by the Majority Banks
or by placing the same on deposit in the name or under the control of
the Facility Agent or the Security Agent as the Facility Agent or
Security Agent (as the case may be) may think fit and the Facility
Agent and Security Agent (as the case may be) may at any time vary or
transpose any such investments for or into any others of a like nature
and (in the absence of gross
<PAGE>
negligence or wilful default on the part of such Facility Agent or
Security Agent) shall not be responsible for any loss thereby incurred
whether due to depreciation in value of such investments or any other
reason whatever;
(k) not be bound to take any steps or perform any obligation or exercise
any right or fulfil any request if to do so might in its sole opinion
breach or conflict with or contradict or be contrary to any rule,
regulation, law, regulatory requirement, court order or judgment in
any jurisdiction or expose the Facility Agent, the Security Agent, the
Arrangers or the Underwriters to liabilities in any jurisdiction or be
otherwise actionable at the suit of any person;
(l) not be liable for any failure:
(i) to require the deposit with it of any deed or document
certifying, representing or constituting the title of any of
the Obligors to any of the property mortgaged, charged,
assigned or otherwise encumbered by or pursuant to any of the
Security Documents;
(ii) to obtain any licence, consent or other authority for the
execution, delivery, validity, legality, adequacy, performance,
enforceability or admissibility in evidence of any of the
Finance Documents;
(iii) to register or notify any of the foregoing in accordance with
the provisions of any of the documents of title of any of the
Obligors;
(iv) to effect or procure registration of or otherwise protect any
of the security created by the Security Documents by
registering the same under any applicable registration laws in
any territory;
(v) to take, or to require any of the Obligors to take, any steps
to render the security created by the Security Documents
effective or to secure the creation of any ancillary charge
under the laws of any other jurisdiction; or
(vi) to require any further assurances in relation to any of the
Security Documents;
(vii) to become or remain a mortgagee or heritable creditor in
possession (or equivalent in any foreign jurisdiction);
(viii) to take or omit to take any other action under or in connection
with the Security Documents or any aspect thereof (save as
otherwise expressly provided in clause 19); or
(ix) in the case of each of the Facility Agent, Arrangers and
Underwriters, by the Security Agent to perform or discharge any
of its duties or obligations under the Security Documents;
(m) in the case of the Security Agent, not be bound to supervise, or be
responsible for any loss incurred by reason of any act or omission of,
any trustee or co-trustee of the Security Agent if the Security Agent
shall have exercised reasonable care in the selection of such trustee
or co-trustee; and
<PAGE>
(n) have no liability (save as otherwise provided in clauses 17 to 23)
otherwise in connection with the Facilities or their negotiations or
for acting (or as the case may be refraining from acting) in
connection with the instructions of the Majority Banks.
20.2 Indemnity from Banks
Each Bank and the Issuing Bank shall, in its Proportion, on demand by the
Facility Agent, the Security Agent or any Arranger from time to time,
indemnify the Facility Agent or, as the case may be, the Security Agent or
the Arranger, against any and all fees (to the extent properly chargeable
by the Facility Agent or, as the case may be, the Security Agent or the
Arranger under any Finance Document but not promptly recovered from the
Obligors), costs, claims and expenses and liabilities including any VAT
thereon:
(a) to which the Facility Agent or, as the case may be, the Security Agent
becomes subject by reason of it acting as agent or security trustee;
or
(ii) incurred by the Facility Agent or, as the case may be, the
Security Agent or any attorney, agent, delegate or other person
appointed by the Facility Agent or the Security Agent under any
Finance Document in relation to or arising out of the taking or
holding of any of the security given or created by or pursuant
to any of the Finance Documents or in the execution or purported
or attempted execution of the rights, trusts, powers,
authorities, discretions and obligations vested in it; or
(iii) which it is otherwise entitled to recover from any Obligor,
in each case under any of the Finance Documents or by law, including
those relating to all actions, proceedings, claims and demands in
respect of any matter or thing done or omitted in any way relating to
the Finance Documents any exercise or non exercise of any right, power
or discretion, and all amounts due to the Facility Agent or the
Security Agent by way of remuneration for acting as agent or trustee
(as the case may be) under any of the Finance Documents (collectively
the "Liabilities"). Each Borrower shall counter-indemnify the Banks
and the Issuing Bank against all payments by them under this clause
20.2. If a Bank or the Issuing Bank (referred to in this clause 20.2
as a "defaulting Bank") fails to pay its due contribution under this
indemnity, then the Facility Agent or, as the case may be, the
Security Agent may (without prejudice to its other rights and
remedies) deduct the amount due from the defaulting Bank from any sums
which are then or afterwards in its possession which would otherwise
be payable to the defaulting Bank.
20.3 Indemnity from Trust Property
The Security Agent and every employee, officer, trustee or co-trustee or
other person appointed by it in connection with its appointment under the
Security Documents (each a "Protected Party") shall be entitled to be
indemnified out of the Trust Property in respect of all liabilities,
damages, costs, claims, charges or expenses whatsoever properly incurred or
suffered by any Protected Party:
(a) in the execution or exercise or bona fide purported execution or
exercise of the trusts, rights, powers, authorities, discretions and
duties created or conferred by or pursuant to the Security Documents;
<PAGE>
(b) as a result of any breach by a member of the Group of any of its
obligations under any Security Document;
(c) in respect of any Environmental Claim made or asserted against a
Protected Party which would not have arisen if the Security Documents
had not been executed; and
(d) in respect of any matter or thing done or omitted in any way relating
to the Trust Property or the provisions of any of the Security
Documents.
The rights conferred by this clause 20.3 are without prejudice to any right
to indemnity by law given to trustees generally and to any provision of the
Security Documents entitling the Security Agent or any other person to an
indemnity in respect of, and/or reimbursement of, any liabilities, damages,
costs, claims, charges or expenses incurred or suffered by it in connection
with any of the Security Documents or the performance of any duties under
any of the Security Documents. Nothing contained in this clause 20.3 shall
entitle any Protected Party to be indemnified in respect of any
liabilities, damages, costs, claims, charges or expenses to the extent that
the same arise from such person's own gross negligence or wilful
misconduct.
20.4 Disclaimer
Neither the Facility Agent, the Security Agent, nor any Arranger or
Underwriter accepts responsibility to any other Finance Party for the
accuracy and/or completeness of any information supplied in connection with
any Finance Document or for the legality, validity, effectiveness, adequacy
or enforceability of any Finance Document and neither the Facility Agent,
the Security Agent, nor any Arranger or Underwriter shall be under any
liability to any other Finance Party as a result of taking or omitting to
take any action in relation to any Finance Document (except in the case of
its gross negligence or wilful misconduct).
20.5 No actions against individuals
Each of the Banks agrees that it will not assert or seek to assert against
any director, officer or employee of the Facility Agent, the Security
Agent, any Arranger or Underwriter any claim it may have against any of
them in respect of the matters referred to in clause 20.4.
20.6 Credit appraisals
It is agreed by each Bank, by virtue of its execution of this Agreement or
its accession to this Agreement, that it has itself been, and will continue
to be, solely responsible for making its own independent appraisal of and
investigations into the financial condition, creditworthiness, condition,
affairs, status and nature of each member of the Group, and, accordingly,
each Bank confirms to the Facility Agent, the Security Agent, and each
Arranger and Underwriter that it:
(a) does not enter into this Agreement nor accede to it on the basis of
and has not relied on and will not rely on any statement, opinion,
forecast or other representation (whether negligent or innocent) or
warranty or other provision (in any case whether oral, written,
express or implied) made by, or agreed to, the Facility Agent, the
Security Agent, any Arranger, any Underwriter or any other Bank to
induce it to enter into this Agreement or any other Finance Document
except as expressly set out therein and the remedies available in
respect of any such misrepresentation or untrue statement made to such
Bank shall be limited to a claim for breach of contract under this
Agreement; and
<PAGE>
(b) has not relied on and will not rely on the Facility Agent, the
Security Agent, any Arranger, any Underwriter or any other Bank:
(i) to check or enquire on its behalf into the adequacy, accuracy or
completeness of any information provided by or on behalf of any
member of the Group in connection with any Finance Document
and/or the transactions contemplated in the Finance Documents
(whether or not such information has been or is after the date of
this Agreement circulated to such Bank by the Facility Agent, the
Security Agent, any Arranger or Underwriter or as the case may be
any other Bank); or
(ii) to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or nature
of any member of the Group.
Provided that clause 20.6(a) shall not apply to any statement or
representation made fraudulently, or to any provision of this Agreement
which was induced by fraud for which the remedies available shall be all
those available under English law.
20.7 Exoneration of Related Persons
All the provisions of this clause 20 and of any other provision of any
Finance Document protecting (including indemnifying) or limiting the
liability of any Finance Party, or exonerating it from liability or
responsibility, which may enure to the benefit of the such Finance Party
shall also be deemed to be given for the benefit of the Security Agent and
all Related Persons to whom they are capable of relating or in respect of
whom they are capable of taking effect.
20.8 Pre-contractual effect of exoneration
For the avoidance of doubt, the guarantee, indemnity, exonerations and
other protections in favour of the Facility Agent, the Security Agent, the
Arrangers, the Underwriters and the Related Persons contained in the
Finance Documents shall take effect in respect of all events, action and
omissions occurring before the execution and completion of this Agreement
as well as events, actions and omissions occurring on or after its
execution and completion and to the extent that any liability should be
adjudged to have arisen prior to the date of this Agreement, such liability
is hereby completely released.
20.9 Common Parties
Notwithstanding that the Facility Agent and the Security Agent may from
time to time be the same entity, the Facility Agent and the Security Agent
have entered into this Agreement in their separate capacities as agent or
(as appropriate) security agent and trustee for the Finance Parties
provided that, where this Agreement provides for the Facility Agent or
Security Agent to communicate with or provide instructions to another
Facility Agent or Security Agent while the two parties in question are the
same entity, it will not be necessary for there to be any such formal
communication or instructions.
<PAGE>
21. ENFORCEMENT AND RECOVERIES
21.1 Obligations owed by Obligors to Finance Parties
Each Obligor agrees that:
(a) the security comprised in the Security Documents may be enforced,
realised and distributed by the Security Agent and Facility Agent in
accordance with their respective powers and obligations to the Finance
Parties set out in clauses 18 and 19;
(b) the obligations and liabilities the subject of the Security Documents
shall only be discharged by virtue of receipt or recovery by the
Security Agent of monies, or of payments made by the Security Agent
hereunder, to the extent that the ultimate recipient actually receives
monies from the Security Agent hereunder;
(c) if it receives any sum from any person which, pursuant to the Finance
Documents, should have been paid to the Security Agent, such sum shall
be held on trust for the Finance Parties and shall forthwith be paid
over to the Security Agent;
(d) it hereby waives, to the extent permitted under applicable law, all
rights it may otherwise have to require that the security created
pursuant to the Facility Documents be enforced in any particular order
or manner or that any sum received or recovered from any person or by
virtue of the enforcement of any of the security or any other
Encumbrance of any nature over any assets or revenues, which is
capable of being applied in or towards discharge of any of the Secured
Obligations is so applied, whether on receipt or recovery or at any
time thereafter.
21.2 Obligations owed by Finance Parties to Facility Agent and Security Agent
The Finance Parties agree between themselves:
(a) to furnish to the Facility Agent, for transmission to the Security
Agent, such information as the Security Agent may reasonably specify
(through the Facility Agent) as being necessary or desirable for the
purpose of enabling the Security Agent to perform its functions as
trustee or administrator;
(b) to co-operate with each other and with the Security Agent and any
Receiver under the Security Documents in realising the property and
assets subject to the Security Documents and in ensuring that the net
proceeds realised under the Security Documents after deduction of the
expenses of realisation are applied in accordance with clause 19.1;
and
(c) not to take any action separately to enforce or attempt to enforce any
of the Security Documents or to exercise any rights, discretions or
powers or to grant any consents or releases under or pursuant to any
of the Security Documents or otherwise have direct recourse to the
security and/or guarantees constituted by any of the Security
Documents.
<PAGE>
21.3 Perpetuity period
The trusts constituted or evidenced in or by the Security Documents shall
remain in full force and effect during the Trust Period.
22. DETERMINATION OF MATTERS
22.1 Majority Bank matters: amendments and waivers
Except as provided in clause 22.4 and 22.5 (Unanimous consent), with the
prior written consent of the Majority Banks, the Facility Agent (or as the
case may be, the Security Agent) and the Primary Borrower may from time to
time:
(a) enter into written amendments, supplements or modifications to the
Finance Documents (however fundamental) for the purpose of adding any
provisions to the Finance Documents or changing in any manner the
rights and/or obligations of any of the Borrowers, the Facility Agent,
the Security Agent and the Banks; and
(b) execute and deliver to any Borrower a written instrument waiving
prospectively or retrospectively, on such terms and conditions as the
Facility Agent (or, as the case may be, Security Agent) may specify in
such instrument, any of the requirements of any of the Finance
Documents, or giving any consents or approvals thereunder.
22.2 Documentation of Majority Bank changes
Any action so authorised and effected by the Facility Agent or the Security
Trustee under clause 22.1 shall be documented in such manner as the
Facility Agent shall (with the approval of the Majority Banks) determine,
shall be promptly notified to the Banks by the Facility Agent and (without
prejudice to the generality of clause 17.3) shall be binding on all the
Banks.
22.3 Majority bank matters: enforcement
If the Facility Agent makes a declaration under clause 12.2 the Facility
Agent shall, in the names of all the Banks, take such action on behalf of
the Banks and conduct such negotiations with any Borrower and any other
members of the Group and generally administer the Advances in accordance
with the wishes of the Majority Banks. All the Banks shall be bound by the
provisions of this clause 22.3 and no Bank shall be entitled to take action
independently against any Borrower or any other member of the Group without
the prior consent of the Majority Banks.
22.4 All Bank matters: amendments and waivers
Except with the prior written consent of all the Banks, the Facility Agent
shall not have authority on behalf of the Banks to agree with any Borrower
any amendment or modification to this Agreement or to vary or waive
breaches of or defaults under or otherwise excuse performance of any
provision of this Agreement by any Obligor, if the effect of such would be
to:
(a) reduce the Applicable Margin;
<PAGE>
(b) postpone the due date or reduce the amount of any payment of
principal, interest, commitment commission or other amount payable by
any Borrower under this Agreement;
(c) change the currency in which any amount is payable by any Borrower
under this Agreement;
(d) have the effect of changing the amount of any Facility, any Bank's
Commitment or the principal or face amount or currency of any Advance;
(e) extend any period during which a Drawdown Notice may be delivered;
(f) change any provision of this Agreement which expressly requires the
approval or consent of all the Banks such that the relevant approval
or consent may be given otherwise than with the sanction of all the
Banks;
(g) change the definitions of Borrowed Moneys, Security Interests, Event
of Default, Major Default, Majority Banks, Default, Cancellation Date,
Certain Funds Period, Available Commitment Termination Date or
Substitution Certificate;
(h) change clause 15.2 (Pro-rata Payments) or clause 3.3; or
(i) change this clause 22 or clause 23.
22.5 All Bank matters: security
Except with the prior written consent of all the Banks, the Facility Agent
shall not have authority on behalf of the Banks to authorise the Security
Agent to agree amendments or modifications to the Security Documents with
the members of the Group (or the Parent on their behalf) and/or vary or
waive breaches of, or defaults under, or otherwise excuse performance of,
any provision of any of the Security Documents by any member of the Group
if the effect of such would be to:
(a) release any member of the Group from the security constituted by any
Security Document;
(b) release any of the Charged Assets from the security constituted by any
Security Document other than any such release (pursuant to (a) or (b))
as part of a disposal made pursuant to the terms of this Agreement or
once the Facilities have been repaid and/or discharged in full and the
Finance Period has terminated;
(c) agree with the Parent or any other member of the Group any amendment
of, or action in relation to, any of the Security Documents which
would have the effect of:
(i) extending the due date or reducing the amount of any payment
under any Security Document or
(ii) changing the currency in which any amount is payable under any
Security Document.
<PAGE>
22.6 Execution of new security
For the purposes of this clause 22 it is expressly agreed and acknowledged
that the execution of a guarantee and/or deed of adherence by a new
Subsidiary or other Obligor or proposed Obligor or any deed or instrument
pursuant to a further assurance provision in this Agreement or the other
Finance Documents shall not constitute an amendment or modification to, or
variation of, any of the Finance Documents.
22.7 Veto of Security Agent and Facility Agent
Regardless of any other provision in this Agreement, the Facility Agent, or
as the case may be, the Security Agent, shall not be obliged to agree to
any such waiver, amendment, supplement or modification if it would:
(a) amend, modify or waive any provision of clause 22; or
(b) otherwise amend, modify or waive any of the Facility Agent's, the
Arrangers' or the Security Agent's rights under any of the Finance
Documents or subject the Facility Agent or the Security Agent to any
additional obligations under such documents.
22.8 Administrative determinations
The Facility Agent may determine purely administrative matters without
reference to the Banks.
23. BASIS OF DECISIONS
23.1 Meaning of Majority Banks
Where this Agreement or any of the Security Documents provides for any
matter to be determined by reference to the opinion of, or to be subject to
the consent or request of, the Majority Banks or for any action to be taken
on the instructions of the Majority Banks, such opinion, consent, request
or instructions shall (as between the Banks) only be regarded as having
been validly given or issued by the Majority Banks if all the Banks shall
have received prior notice of the matter on which such opinion, consent,
request or instructions are required to be obtained and the relevant
majority of Banks shall have given or issued such opinion, consent, request
or instructions, but so that (as between the Obligors and the Finance
Parties) the Obligors shall each be entitled (and bound) to assume that
such notice shall have been duly received by each Bank and that the
relevant majority shall have been obtained to constitute Majority Banks
when notified to this effect by the Facility Agent whether or not this is
the case.
23.2 Notice to Majority Banks
If, within 10 Banking Days (or in the case of any approval sought under
clause 10.4, 2 Banking Days) of the Facility Agent despatching to each Bank
a notice requesting instructions (or confirmation of instructions) from the
Banks or the agreement of the Banks to any amendment, modification, waiver,
variation or excuse of performance for the purposes of, or in relation to,
any of the Finance Documents, the Facility Agent has not received a reply
specifically giving or confirming or refusing to give or confirm the
relevant instructions or, as the case may be, approving or refusing to
approve the proposed amendment, modification, waiver, variation or excuse
of performance, then (subject to clause 23.4) the Facility Agent shall
treat any Bank
<PAGE>
which has not so responded as having indicated a desire to be bound by the
wishes of 662/3 per cent. of those Banks (measured in terms of the relevant
Contributions or, if none, the relevant Commitments of those Banks) which
have so responded. Any Bank which notifies the Facility Agent of a wish or
intention to abstain on any particular issue shall be treated as if it had
not responded.
23.3 Meaning of all Banks
Where this Agreement or any other Finance Document, provides for any matter
to be determined by reference to the opinion of, or to be subject to the
consent of or request of all of the Banks or the Banks acting unanimously
or for any action to be taken on the instruction of all the Banks such
opinion, consent, request or instructions shall (as between the Banks) only
be regarded as having been validly given or issued by all the Banks (or the
Banks acting unanimously) if all the Banks shall have received prior notice
(the "Agent's Notice") of such matter containing a request for written
instructions from such Bank to be received by the Facility Agent or, as the
case may be, the Security Agent within ten Banking Days of the receipt (or
the deemed receipt pursuant to clause 25.1(b)) of the Agent's Notice. If,
in respect of a Bank, the Facility Agent or the Security Agent, as
appropriate:
(a) shall not have received written instructions in respect of such matter
from such Bank; and
(b) the Facility Agent or Security Agent shall have received written
instructions in respect of such matter from at least five other Banks,
in each case within such time period (and subject to clause 23.4), such
Bank shall be deemed to have irrevocably renounced and waived its right to
make any such determination, approval, consent or provide instructions to
the Facility Agent or the Security Agent in respect of such matter; shall
not have any rights, recourse or remedy against the Facility Agent or the
Security Agent in respect of such matter; and shall be bound (as shall each
of the Obligors) by the determination, approval, consent or instructions of
the other Banks in respect of such matter. Clauses 23.1 and 23.2 shall not
apply in relation to those matters which are to be decided by all the
Banks.
23.4 Late responses
In any case where a Bank fails to respond within the time limit set down
under clauses 23.2 or 23.3, such Bank's response, if it responds before any
determination or instruction is acted upon or communicated to any Obligor,
will be taken into account as if it had been received within the time limit
Provided that the Facility Agent has received actual notice of such
response before any such action or communication.
23.5 Costs
If any Borrower requests, or if the Facility Agent requires in accordance
with clause 10.3(c) or any other provision of this Agreement, any
amendment, supplement, modification or waiver under clause 22.1 (Majority
Bank matters) or clauses 22.4 or 22.5 (All Bank matters), then the
Borrowers shall, on demand by the Facility Agent, reimburse the Facility
Agent for all costs and expenses (including legal fees), together with any
VAT on them, incurred by the Facility Agent in the negotiation, preparation
and execution of any written instrument contemplated by clause 22.1
(Majority Bank matters) or clauses 22.4 or 22.5 (All Bank matters).
<PAGE>
23.6 No partnership
This Agreement shall not and shall not be construed so as to constitute a
partnership between the parties or any of them.
23.7 Change of Reference Banks
If:
(a) the whole of the Contributions (if any) of any Reference Bank are
prepaid;
(b) the Commitments (if any) of any Reference Bank are reduced to zero
prior to the end of the Finance Period;
(c) a Reference Bank novates the whole of its rights and obligations (if
any) as a Bank under this Agreement; or
(d) a Reference Bank ceases to provide quotations to the Facility Agent
upon request for the purposes of determining LIBOR (where such
quotations are required having regard to the definition of "LIBOR" in
clause 1.2)
the Facility Agent may, acting on the instructions of the Majority Banks,
terminate the appointment of such Reference Bank and after consultation
with the Primary Borrower appoint another Bank to replace such Reference
Bank.
24. MATTERS CONCERNING THE BORROWERS
24.1 Additional Borrower
The Primary Borrower may, at any time during the term of this Agreement
(unless a Default shall have occurred and be continuing), notify the
Facility Agent that a Permitted Borrower is to be designated as an
additional Borrower under the Revolving Credit Facility. Such notice shall
be in writing and signed by the Primary Borrower and the relevant Permitted
Borrower and shall take effect in accordance with its terms on the
condition that:
(a) such Permitted Borrower shall have entered into an Accession
Certificate with the Facility Agent which, subject to (b) below, the
Facility Agent shall execute on behalf of all the parties to this
Agreement (and all such parties so authorise the Facility Agent
without any further consent of, or consultation with, such party); and
(b) such Permitted Borrower, before entering into such an Accession
Certificate, shall have fulfilled all appropriate conditions
precedent, as notified to the Primary Borrower by the Facility Agent,
to the satisfaction of the Facility Agent including the delivery to
the Facility Agent of the documents and evidence referred to in Part C
of Schedule 3 in form and substance satisfactory to the Facility
Agent.
Upon satisfaction of such conditions such Permitted Borrower shall become a
party to this Agreement in the capacity of a Borrower in respect of the
Revolving Credit Facility and shall assume all the obligations and rights
of such a Borrower under this Agreement.
<PAGE>
24.2 Primary Borrower as Obligors' agent
Each Obligor by its execution of this Agreement or an Accession
Certificate, as the case may be, irrevocably appoints and authorises the
Primary Borrower:
(a) as agent for each Borrower and Bidco to receive all notices, requests,
demands or other communications under this Agreement which shall,
without prejudice to any other effective mode of serving the same, be
properly served on the Obligor concerned if served on the Primary
Borrower in accordance with clause 25.1; and
(b) to give all notices (including any Drawdown Notices) and instructions
and make such agreements expressed to be capable of being given or
made by such Obligor or Obligors in this Agreement (including an
agreement for the continuance of any guarantee or security)
notwithstanding that they may affect such Obligor without further
reference to, or the consent of, such Obligor and such Obligor shall,
as regards the Finance Parties, be bound thereby as though such
Obligor itself had given such notice or instructions or made such
agreement.
24.3 Obligations unconditional
The obligations of each Obligor under this Agreement and the Security
Documents are unconditional and irrevocable (subject to the express
provisions of this Agreement or any Security Document) and shall not be in
any way affected or discharged by reason of any matter affecting the Offer
or the Acquisition (or the Offer Documents). Each Obligor acknowledges that
any approval or authorisation given under this Agreement or a Security
Document by a Finance Party in relation to the Offer or the Acquisition (or
the Offer Documents) shall not constitute any representation or warranty by
such (or any) Finance Party as to the adequacy or effectiveness of such
Offer or the Acquisition (or the Offer Documents), the purchase
consideration payable by Bidco, the commercial advisability of any Obligor
or Bidco entering into the arrangements contemplated thereby or otherwise.
24.4 Obligations Several
The obligations of each Obligor under this Agreement and the Security
Documents are several and the failure of any Obligor to perform such
obligations shall not release any other Obligor of its obligations under
this Agreement.
24.5 Stand-alone Revolving Credit Facility to REC
The Finance Parties and the Obligors agree that they shall as soon as
reasonably practicable after the date of the Press Release agree the form
of an agreement for a stand-alone revolving credit facility to be made
available by the Banks to REC (the "REC Facility Agreement"). The REC
Facility Agreement shall be entered into between the Finance Parties and
REC upon the Unconditional Date and, upon such date, the Commitment of each
Bank in respect of the Revolving Credit Facility shall reduce by an amount
equal to the commitment assumed by such Bank under the REC Facility
Agreement. The REC Facility Agreement shall be on terms and subject to
conditions identical, mutatis mutandis, to the terms and conditions of the
Revolving Credit Facility as set out herein save that it shall:
(a) create a commitment on the part of each of the Banks (pro rata to
their respective Proportions) of an aggregate amount of
(pound)250,000,000;
<PAGE>
(b) be available for the general corporate purposes of REC;
(c) have an Applicable Fees Rate of 0.25% and an Applicable Margin of
0.50%;
(d) contain no covenants, representations and warranties or events of
default referencing any person other than REC and that all such
covenants, representations and warranties and events of default shall
be confined to, and to events occurring in respect of, the REC (but
otherwise corresponding where applicable, to the covenants,
representations and warranties and events of default in this Agreement
which by their terms herein operate to include the REC Group) and
without limitation to the above the following clauses shall not appear
in the REC Facility Agreement: 9.2, 10.2(e), (f), (g), 10.4, 10.5,
10.6, 11.1(f), 12.1(o)(i), (ii) or (iii), 12.1(w), and any covenant
contained in clause 10.3 shall be replaced by the covenant in clause
20.14(b) of the agreement between the Target, Citibank International
plc (as agent), Barclays Bank PLC and Midland Bank plc dated 5 August
1996.
Following such stand-alone REC facility being executed:
(i) the Revolving Credit Facility shall reduce by the principal
amount of the commitment created under such stand-alone REC
facility; and
(ii) amounts committed or outstanding thereunder shall not be deemed
to be committed or outstanding under this Agreement.
25. NOTICES AND OTHER MATTERS
25.1 Address for Notice
Every notice, request, demand or other communication under this Agreement
shall:
(a) be in writing delivered personally or by first-class prepaid letter
(airmail if available) or telefax;
(b) be deemed to have been received, subject as otherwise provided in this
Agreement, in the case of a letter, when delivered personally or 2
days after it has been put into the post and, in the case of a
telefax, when a complete and legible copy is received by the addressee
(unless the time of despatch of any telefax is after close of business
in which case it shall be deemed to have been received at the opening
of business on the next business day); and
(c) be sent:
(i) to the Primary Borrower (for itself, Bidco, Finco 2 and the
other Borrowers) at:
Kempson House
Camomile Street
London EC3A 7AN
<PAGE>
Telefax: +44 171 283 6500
Attention: Andrew Bamber/Marcus Dougherty
(ii) to the Facility Agent at:
Chase Manhattan International Ltd
Trinity Tower
9 Thomas More Street
London E1 9YT
Telefax: +44 171 777 2360
Attention: Stephen Clarke
(iii) to the Security Agent at:
Chase Manhattan International Ltd
Trinity Tower
9 Thomas More Street
London E1 9YT
Telefax: +44 171 777 2360
Attention: Stephen Clarke
(iv) to the Issuing Bank at:
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E1 9YT
Telefax: +44 171 777 2360
Attention: Stephen Clarke
(v) to each Bank at its address or telefax number specified in
schedule 1 or in, or pursuant to, any relevant Substitution
Certificate
(vi) to the Arrangers:
Chase Manhattan plc
125 London Wall
London EC2Y 5AJ
Telefax: +44 171 777 3840
Attention: Cheryl Boucher/Kristian Orssten
Lehman Brothers International (Europe)
3 World Financial Center
10th Floor
200 Vesey Street
New York
NY 10285
<PAGE>
Telefax: 001 212 528 0819
Attention: Michele Swanson
Merrill Lynch Capital Corporation
C/o Merrill Lynch & Co
World Financial Center
North Tower
250 Vesey Street
New York
NY 10281
Telefax: 001 212 447 9461
Attention: Pete Wersching
or to such other address or telefax number as is notified by the
Primary Borrower, or a Finance Party, as the case may be, to the other
parties to this Agreement.
25.2 Notice to Facility Agent
Every notice, request, demand or other communication under this Agreement
to be given by a Borrower shall be given by the Primary Borrower and by the
Primary Borrower to any other party shall be given to the Facility Agent
for onward transmission as appropriate and to be given to a Borrower shall
(except as otherwise provided in this Agreement) be given by the Facility
Agent to the Primary Borrower.
25.3 No implied waiver, remedies cumulative
No failure or delay on the part of the Finance Parties or any of them to
exercise any power, right or remedy under this Agreement or any Security
Document shall operate as a waiver thereof, nor shall any single or partial
exercise by the Finance Parties or any of them of any power, right or
remedy preclude any other or further exercise thereof or the exercise of
any other power, right or remedy. The remedies provided in this Agreement
and each of the Security Documents are cumulative and are not exclusive of
any remedies provided by law.
25.4 English translations
All certificates, instruments and other documents to be delivered under or
supplied in connection with this Agreement shall be in the English language
or shall be accompanied by a certified English translation upon which the
Finance Parties shall be entitled to rely.
25.5 Counterparts
This Agreement may be executed in any number of counterparts and by the
different parties on separate counterparts, each of which when so executed
and delivered shall be an original, but all counterparts shall together
constitute one and the same instrument.
25.6 Severance
If any provision of this Agreement is held to be illegal, invalid or
unforceable in whole or in part this Agreement shall continue to be valid
as to its other provisions and the remainder of the affected provision.
<PAGE>
26. GOVERNING LAW AND JURISDICTION
26.1 Law
This Agreement shall be governed by English law.
26.2 Submission to jurisdiction
The parties to this Agreement agree for the benefit of the Finance Parties
that:
(a) if any party has any claim against any other arising out of or in
connection with this Agreement, such claim shall (subject to clause
26.2(c)) be referred to the High Court of Justice in England, to the
jurisdiction of which each of the parties irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over any such
claim against any Finance Party shall be a non-exclusive jurisdiction
and no courts outside England shall have jurisdiction to hear or
determine any such claim; and
(c) nothing in this clause 26.2 shall limit the right of any Finance Party
to refer any such claim against any Borrower to any other court of
competent jurisdiction outside England, to the jurisdiction of which
any Borrower hereby irrevocably agrees to submit, nor shall the taking
of proceedings by any Finance Party before the courts in one or more
jurisdictions preclude the taking of proceedings in any other
jurisdiction whether concurrently or not.
IN WITNESS whereof the parties to this Agreement have caused this Agreement to
be duly executed on the date first above written.
<PAGE>
<TABLE>
<CAPTION>
Schedule 1
The Banks and their Commitments
=================================================================================================================
Commitments
- -----------------------------------------------------------------------------------------------------------------
Bank Acquisition Facility Interim Facility Revolving Credit
(pound) (pound) Facility
Address and telefax (pound)
number
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank 591,666,667 383,333,334 233,333,334
125 London Wall
London
EC2Y 5AJ
Fax: +44 171 777 3840
Attn: Jane Ritchie
- -----------------------------------------------------------------------------------------------------------------
Lehman Commercial Paper 591,666,666 383,333,333 233,333,333
Inc.
3 World Financial Center
10th Floor
200 Vesey Street
New York
NY 10285
Fax: +212 528 0819
Tel: +212 526 0330
Attn: Michele Swanson
- -----------------------------------------------------------------------------------------------------------------
Merrill Lynch Capital 591,666,667 383,333,333 233,333,333
Corporation
4 World Financial Center
C/o Merrill Lynch & Co
North Tower
7th Floor
250 Vesey Street
New York
NY 10281 - 1307
Tel: +212 449 9461
Attn: Pete Wersching
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 2
Forms of Drawdown Notice
Part A
The Acquisition and Interim Facility
To: [Name and address of Facility Agent] [DATE]
Attention: _____
(pound) Credit Facilities Agreement dated _____ 1998
1. We refer to the above Agreement and hereby give you notice that we wish to
draw down an [Acquisition/Interim] Advance [under the Loan Note Facility]:
(a) on |_| 19|_| ;
(b) in the sum of (pound)_____ ;
(c) [with a first Interest Period in respect thereof of
_____ months.] [with the first Interest Period in respect thereof
to expire on _____ 19]; and
(d) [the proceeds of such Advance to be credited to [name and number
of account] at [name of bank in London] [Loan Note Collateral
Account].
[2. We confirm that each condition specified in clause 3 is satisfied on the
date of this Drawdown Notice.] OR
[2. We confirm that:
(a) the Advance is an Offer Advance;
[(b) the date of this Drawdown Notice is within the Certain Funds Period;
and]
(c) each condition in clause 3.3 is satisfied on the date of this Drawdown
Notice.]
3. Words and expressions defined in the Agreement shall have the same meanings
where used herein.
For and on behalf of
TU Finance (No. 1) Ltd
______________________
Director
<PAGE>
Part B
The Revolving Credit Facility
To: [Name and address of Facility Agent] [DATE]
Attention: _____
(pound) Credit Facilities Agreement dated _____ 1998
1. We refer to the above Agreement and hereby give you notice that [name of
Borrower] wishes to draw a Revolving Credit Advance:
(a) on _____ 19 _____ ;
(b) in the sum of (pound)_____;
(c) with a Maturity Period in respect thereof of o months; and
(d) the proceeds of such fund to be credited to [name and number of
account] with [details of bank in London].
2. We confirm that:
(a) no event or circumstance has occurred and is continuing which
constitutes a Default; and
(b) the applicable representations and warranties contained in clause 9 of
the Agreement are true and correct at the date hereof as if made with
respect to the facts and circumstances existing at such date.
3. Words and expressions defined in the Agreement shall have the same meanings
where used herein.
For and on behalf of
[Name of Borrower]
____________________
Director
<PAGE>
Part C
Letters of Credit
To: [Name and address of Facility Agent]
Attention:_______________________
[DATE]
(pound) Credit Facilities Agreement dated o 1998
1. We refer to the above Agreement and hereby give you notice that [name of
Borrower] requests the Issue of a Letter of Credit as follows:
(a) Drawdown Date: [ _____ ]
(b) Expiry Date: [_____ ]
(c) Currency: [ _____ ]
(d) Beneficiary: [ _____ ]
(e) Amount: [_____ ]
(f) Purpose: [ _____ ]
(g) Issue instructions: [ _____ ]
(h) Documents required to be presented: [ _____ ].
2. We confirm that:
(a) no event or circumstance has occurred and is continuing which
constitutes a Default; and
(b) the applicable representations and warranties contained in clause 9 of
the Agreement are true and correct at the date hereof as if made with
respect to the facts and circumstances existing at such date.
3. Words and expressions defined in the Agreement shall have the same meanings
where used herein.
For and on behalf of
[Name of Borrower]
____________________
Director
<PAGE>
Schedule 3
Conditions Precedent
Part A - Documents and Evidence required as Conditions Precedent
prior to the issue of the Press Release
(a) Certified copies of the memorandum and articles of association and the
certificate of incorporation and any change of name certificates of the
Primary Borrower, Finco 2 and Bidco, in the agreed form.
(b) Certified copies of resolutions of the shareholders and the board of
directors of each of the Primary Borrower, Finco 2 and Bidco in the agreed
form approving:
(i) the execution and delivery of and the performance of their
respective obligations under the Finance Documents to which they are
a party;
(ii) the acquisition of the Target on the terms and subject to the
conditions set out in the Offer Documents and the issuing of the
Offer Documents;
(iii) the execution and completion of the Investment Agreement; and
(iv) (in the case of the shareholders' resolutions) the adoption of their
respective articles of association,
and authorising a person or persons (specified by name or office) on behalf
of each of them to sign such documents and any other documents to be
delivered by them under such documents.
(c) A certificate of a duly authorised signatory of each of the Primary
Borrower, Finco 2 and Bidco setting out the names and specimen signatures
of the persons authorised to sign on behalf of such companies the documents
referred to in clause (b) above and any other documents to be delivered by
such companies pursuant to them, and confirming that the resolutions
referred to in (b) above are still in effect and have not been varied or
rescinded.
(d) The opinions of Lovell White Durrant, English solicitors for the Facility
Agent and (in the agreed form) of the Parent's US counsel.
(e) Certified copies of the Press Release and the Offer Documents, each as
despatched by Bidco, and of the Loan Note Instrument (in the agreed form)
and the Investment Agreement (duly executed).
(f) The Agreed Projections.
(g) Certified copies of the Coalco Disposal Agreement and the Escrow Agreement.
(h) A side letter from the Parent to the Facility Agent in the agreed form
confirming that it is aware of the terms of this Agreement, that it and its
Subsidiaries will comply with clear market and syndication obligations in
the same terms as are in clause 10.2(e) and clause 16.16, and that it will:
<PAGE>
(i) not permit the memorandum and articles of association of the Primary
Borrower to be amended without the prior written consent of the
Facility Agent;
(ii) not receive any dividends, distributions or other payments from the
Primary Borrower or any other member of the Group save as permitted
by clause 11.1(f), and in the event that it does receive any such
payments in breach of clause 11.1(f), it will hold them on trust for
the payer and forthwith return them to the payer; and
(iii) provide and maintain appropriate senior management for the Group
during the continuance of the Facilities.
(i) A report from Coopers & Lybrand in the agreed form.
(j) The Fee Letters, duly executed and countersigned, and the fees and expenses
payable under the Fee Letters and under clause 7 on or before the date of
issue of the Press Release.
(k) The Syndication Letter, duly countersigned.
(l) Written confirmation that an option has been purchased to buy a fixed sum
of (pound) Sterling with the amount of the Coal Proceeds.
Part B - Documents and Evidence required as Conditions Precedent
to the First Drawdown
(a) Written confirmation from a duly authorised officer of the Primary Borrower
that the Office of Fair Trading has announced that it is not the intention
of the Secretary of State for Trade and Industry to refer the Acquisition,
or any matters arising from it, to the Monopolies and Mergers Commission.
(b) Evidence satisfactory to the Facility Agent, to the Arrangers and the Banks
dated as at the date of the first Drawdown Notice that completion of the
Coalco Disposal Agreement is unconditional in all respects save for any
condition or conditions relating to the Offer becoming unconditional in all
respects, and that the consideration required for the purchaser to complete
the Coalco Disposal Agreement has been received in full by the Escrow Agent
(as defined in the Escrow Agreement), subject to the Escrow Agreement, and
that such amount will be released unconditionally to the Target without the
need for any further confirmations, consents, permissions or actions from
or on the part of any person, save only for the confirmation (referred to
in (d) below) from the financial advisers to the Offer that the Offer has
become unconditional in all respects.
(c) Evidence satisfactory to the Facility Agent that
(i) the Parent (in respect of 90% of the required amount) and the Minority
Shareholder (in respect of 10%) have invested an amount
of(pound)1,678,082,000 in cash in subscription for equity share
capital in the Primary Borrower and Finco 2 respectively or by way of
capitalisation of intercompany loans made to the Primary Borrower or
Finco 2 respectively being loans on-lent to Bidco to finance the
purchase of Target on the open market Provided that, the Parent, as
contemplated by the Investment Agreement, may transfer all its shares
in Finco 1 to any other wholly-owned Subsidiary of the Parent if such
transfer is notified to the Agent in advance of such transfer, in
which case the
<PAGE>
investment referred to above will be that of such wholly-owned
Subsidiary not the Parent; and
(ii) the Primary Borrower has in turn invested the entire sum subscribed
under paragraph (i) above by way of equity share capital into Finco
2, and Finco 2 shall have invested the entire sum (including the
subscription monies provided by the Minority Shareholder) by way of
equity share capital into Bidco; and
(iii) the cash proceeds of such investments referred to in (ii) above have
been paid in full by Bidco to the receiving bankers for the
financing of the Acquisition; and
(iv) all shares acquired at such time pursuant to the Loan Note
Alternative and the Share Alternative have been transferred to and
are beneficially owned by Bidco.
(d) A certified copy of the announcement by the financial advisers to the Offer
that the Offer has become or has been declared unconditional in all
respects.
(e) All share certificates representing Target Shares which Bidco owns as at
the first Drawdown Date, together with stock transfer forms executed in
blank to enable the Security Agent or its nominee to become registered as
the owner of such shares, except to the extent that such share certificates
are lodged with the receiving bankers to the Offer or any brokers executing
market purchases on the Parent or Bidco's behalf and are covered by the
acknowledgement issued by such persons to the Security Agent referred to in
sub-clause (i)(ii) of Part B of this Schedule.
(f) Written confirmation from a duly authorised officer of the Primary Borrower
that the terms and conditions of the Offer have not been waived, amended,
varied or declared to be satisfied other than in compliance with the terms
of this Agreement.
(g) The fees and expenses payable under the Fees Letters and under clause 7 on
or before the Unconditional Date.
(h) The Loan Note Instrument, duly executed by the parties thereto; the
Debenture, duly executed by the Primary Borrower, Finco 2 and Bidco; and
the Share Charge duly executed by the Minority Shareholder, together with:
(i) such directions by Bidco to, and/or undertakings from, the trustees of
the American Depositary Receipts and American Depositary Shares and/or
the person performing similar functions to the Receiving Bankers to
the offer in the United States as the Agent, acting reasonably and on
counsel's advice, considers to be normal and appropriate for
perfecting a valid security interest in the United States over such
depositary receipts and depositary shares; and
(ii) share certificates and stock transfer forms executed in blank in
respect of the whole of the issued share capital of Finco 2 and Bidco;
(i) Certified copies of:
(i) the agreement appointing Royal Bank of Scotland plc as receiving
bankers to the Offer, in the agreed form; and
<PAGE>
(ii) the notice to the receiving bankers and any brokers engaged to
purchase Target Shares in the market and their acknowledgement, each
in the form set out in the Third Schedule to the Debenture.
Part C - To be delivered by each Permitted Borrower
(a) A certified copy of the certificate of incorporation and the memorandum and
articles of association of the Permitted Borrower.
(b) A certified copy of the resolutions of the board of directors of the
Permitted Borrower evidencing approval of this Agreement and the Security
Documents (to which that company is a party) and authorising its
appropriate duly authorised officers to execute and deliver this Agreement
and those Security Documents and to give all notices and take all other
action required by the relevant company under this Agreement and those
Security Documents.
(c) Specimen signatures, authenticated by the company secretary or a director
of the Permitted Borrower, of the persons authorised in the resolutions of
the board of directors referred to in paragraph (b) above.
(d) The Accession Certificate duly executed by the Permitted Borrower.
(e) A certificate of a director of the Permitted Borrower certifying that the
borrowing and/or guaranteeing of the Total Commitments in respect of the
Revolving Credit Facility would not cause any borrowing limit binding on
the Permitted Borrower to be exceeded.
(f) A cross-guarantee executed by the Permitted Borrower and the other
Revolving Credit Facility Borrowers in favour of the Security Agent of each
other's liabilities under the Revolving Credit Facility (excluding any such
liabilities which the relevant Borrower is not permitted by law to
guarantee), in the form required by the Facility Agent.
<PAGE>
Schedule 4
Calculation of Additional Cost
1. The Additional Cost for any period shall (subject to paragraph 5 below) be
calculated in accordance with the following formula:
BY + L(Y - X) + S(Y - Z) per cent per annum
------------------------
100 - (B + S)
where on the day of application of the formula:
B is the percentage of the Facility Agent's eligible liabilities which
the Bank of England then requires the Facility Agent to hold on a
non-interest-bearing deposit account in accordance with its cash ratio
requirements;
Y is the rate at which Sterling deposits are offered by the Facility
Agent to leading banks in the London Interbank Market at or about 11
a.m. on that day for the relevant period;
L is the percentage of eligible liabilities which (as a result of the
requirements of the Bank of England) the Facility Agent maintains as
secured money with members of the London Discount Market Association
or in certain marketable or callable securities approved by the Bank
of England;
X is the rate at which secured Sterling investments may be placed by the
Facility Agent with members of the London Discount Market Association
at or about 11 a.m. on that day for the relevant period or, if
greater, the rate at which Sterling bills of exchange (of a tenor
equal to the duration of the relevant period) eligible for
rediscounting at the Bank of England can be discounted in the London
Discount Market at or about 11 a.m. on that day;
S is the percentage of the Facility Agent's eligible liabilities which
the Bank of England requires the Facility Agent to place as a special
deposit; and
Z is the interest rate expressed as a percentage per annum allowed by
the Bank of England on special deposits.
2. For the purpose of this schedule 4:
2.1 "eligible liabilities" and "special deposits" have the meanings given to
them at the time of application of the formula by the Bank of England; and
2.2 "relevant period" in relation to each period for which Additional Cost
falls to be calculated means:
(a) if it is 3 months or less, that period; or
(b) if it is more than 3 months, 3 months.
<PAGE>
2.3 In the application of the formula, B, Y, L, X, S and Z are included in the
formula as figures and not as percentages, e.g. if B = 0.5 per cent and Y =
15 per cent BY is calculated as 0.5 x 15.
2.4 The formula shall be applied on the first day of each relevant period. Each
amount shall be rounded up to the nearest four decimal places.
2.5 If the Facility Agent determines that a change in circumstances has
rendered, or will render, the formula inappropriate, the Facility Agent
(after consultation with the Banks) shall notify the Primary Borrower of
the manner in which the Additional Cost will subsequently be calculated.
The manner of calculation so notified by the Facility Agent shall, in the
absence of manifest error, be binding on all the parties.
<PAGE>
Schedule 5
Form of Substitution Certificate
(referred to in clause 16.5)
NB 1. Banks are advised not to employ Substitution Certificates or otherwise
to assign, novate or transfer interests in the Agreement without first
ensuring that the transaction complies with all applicable laws and
regulations, including the Financial Services Act 1986 and regulations
made thereunder.
2. It is expected that Banks will enter into separate arrangements
dealing with the monies to be paid to the Existing Bank by the
Substitute in consideration of the novation (e.g. principal, accrued
interest, fees and any mismatched funding adjustment). Unless the
Effective Date is a rollover date, mismatches of parties' funding may
arise. This Certificate does not deal with these issues, nor does it
deal with any interim risk participation the Existing Bank may grant
to the Substitute pending the Effective Date.
To: [Name of Facility Agent] on its own behalf, as Facility Agent and on behalf
of each other party to the Agreement mentioned below.
Attention:____________________ [DATE]
Substitution Certificate
This Substitution Certificate relates to a (pound)[o] Facilities Agreement (the
"Agreement") dated 2 March 1998 between TU Finance (No. 1) Ltd as the initial
Borrower (1) TU Finance Ltd and Bidco (2), Chase Manhattan plc, Lehman Brothers
International (Europe), Merrill Lynch Capital Corporation as Arrangers (3),
various banks and financial institutions as Underwriters (4) The Chase Manhattan
Bank as Issuing Bank (5) Chase Manhattan International Limited as Facility Agent
(6) and Chase Manhattan International Limited as Security Agent (7). Terms
defined in the Agreement shall have the same meaning in this Substitution
Certificate.
1. [Existing Bank] (the "Existing Bank") (a) confirms the accuracy of the
summary of its participation in the Agreement set out in the schedule
below; and (b) requests [Substitute Bank] (the "Substitute") to accept by
way of novation the portion of such participation specified in the schedule
to this Substitution Certificate by counter-signing and delivering this
Substitution Certificate to the Facility Agent at its address for the
service of notices specified in the Agreement.
2. The Substitute hereby requests the Facility Agent (on behalf of itself, the
other Finance Parties, the Borrowers and all other parties to the
Agreement) to accept this Substitution Certificate as being delivered to
the Facility Agent pursuant to and for the purposes of clause 16.5 of the
Agreement so as to take effect in accordance with the terms of such clause
16.5 on [date of transfer] (the "Effective Date") or on such later date as
may be determined in accordance with the terms of the Agreement.
3. The Facility Agent (on behalf of itself, the other Finance Parties, the
Borrowers and all other parties to the Agreement) confirms the novation
effected by this Substitution Certificate
<PAGE>
pursuant to and for the purposes of clause 16.5 of the Agreement so as to
take effect in accordance with the terms of such clause 16.5.
4. The Substitute confirms:
(a) that it has received a copy of the Agreement and each of the Security
Documents and all other documentation and information required by it
in connection with the transactions contemplated by this Substitution
Certificate;
(b) that it has not relied upon any statement, opinion, forecast or other
representation or warranty made by the Existing Bank or any other
party to induce it to enter into this Substitution Certificate;
(c) that it has made and will continue to make, without reliance on the
Existing Bank or any other Finance Party, and based on such documents
as it considers appropriate, its own appraisal of the creditworthiness
of any Borrower and the Group and its own independent investigation of
the financial condition, prospects and affairs of any Borrower and the
Group in connection with the making and continuation of the Facilities
under the Agreement and the other Finance Documents;
(d) that neither the Existing Bank nor any other Finance Party shall at
any time be deemed to have had or have a duty or responsibility,
either historically, initially or on a continuing basis, to provide
the Substitute with any credit or other information with respect to
any Borrower or any other member of the Group whether coming into its
possession before the making of any Advance or at any time or times
thereafter, other than (in the case of the Facility Agent) as provided
in clause 19.1 of the Agreement;
(e) that it has made and will continue to make its own assessment of the
legality, validity, enforceability and sufficiency of the Agreement,
the Security Documents, any other Finance Document and this
Substitution Certificate and has not relied and will not rely on the
Existing Bank or any other Finance Party or any statements made by any
of them in that respect;
(f) that, accordingly, none of the Existing Bank nor any other Finance
Party makes any representations or warranties in respect of, or shall
have any liability or responsibility to the Substitute in respect of,
any of the foregoing matters or any other matter referred to in clause
20 of the Agreement;
(g) that it is a Qualifying Bank; and
(h) that it has signed an appropriate confidentiality undertaking issued
by the Existing Bank.
5. The Substitute hereby undertakes to the Existing Bank, the Finance Parties,
the Borrowers and each of the other parties to the Agreement that it will
perform in accordance with its terms all those obligations which by the
terms of the Agreement will be assumed by it after counter-signature of
this Substitution Certificate by the Facility Agent.
6. The Substitute irrevocably and unconditionally guarantees to and
indemnifies the Issuing Bank as required under clause 4.7 (Banks' Guarantee
and Indemnity).
<PAGE>
7. Without limiting the above paragraphs, nothing in this Substitution
Certificate obliges the Existing Bank to:
(a) accept any re-transfer from the Substitute of any of the rights,
benefits and/or obligations hereby transferred; or
(b) support any losses incurred by the Substitute by reason of any
non-performance by the Borrowers or any other party to the Agreement
or any of the Security Documents or any document relating thereto of
any of its obligations under the same.
8. This Substitution Certificate and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with English
law.
Note:This Substitution Certificate is not a security, bond, note, debenture,
investment or similar instrument.
AS WITNESS the hands of the authorised signatories of the parties to this
Substitution Certificate on the date appearing below.
<TABLE>
<CAPTION>
The Schedule
THE ACQUISITION FACILITY
<S> <C> <C>
Commitment (pound) Portion Transferred (pound)
[_____] [_____]
Contion (pound) Next Interest Payment Date Portion Transferred (pound)
[_____] [_____] [_____]
THE INTERIM FACILITY
Commitment (pound) Portion Transferred (pound)
[_____] [_____]
Contribution (pound) Next Interest Payment Date Portion Transferred (pound)
[_____] [_____] [_____]
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE REVOLVING CREDIT FACILITY
<S> <C> <C>
Commitment (pound) Portion Transferred ((pound))
[_____] [_____]
Contribution ((pound)) Next Maturity Date(s) Portion Transferred ((pound))
[_____] [_____] [_____]
Transferor's share of Portion of Letters of Credit
Outstanding Letters of Credit Transferred
[_____] [_____]
Administrative Details of Substitute
Lending Office:
Account for payments:
Telephone:
Telefax:
Attention:
[Existing Bank] [Substitute]
By: __________ By: ________
Date: Date:
The Facility Agent
By: __________
Date:
on its own behalf and on behalf of all other parties to the Agreement (other
than the Existing Bank)
</TABLE>
<PAGE>
Schedule 6
Form of Accession Certificate
To: [name of Facility Agent] on its own behalf as Facility Agent and on behalf
of each other party to the Agreement.
Attention: [Date]
Accession Certificate
This Accession Certificate relates to a (pound)o Facilities Agreement (the
"Agreement") dated 2 March 1998 between, among others, the Primary Borrower (1),
Finco 2 and Bidco (2), Chase Manhattan plc, Lehman Brothers International
(Europe), Merrill Lynch Capital Corporation as Arrangers (3), various banks and
financial institutions as Underwriters (4) The Chase Manhattan Bank as Issuing
Bank (5) Chase Manhattan International Limited as Facility Agent (6) and Chase
Manhattan International Limited as Security Agent (7). Terms defined in the
Agreement shall have the same meaning in this Accession Certificate.
1. [_____] (the "Acceding Borrower") hereby requests the Facility Agent (on
behalf of itself and all other parties to the Agreement) to accept this
Accession Certificate as being delivered to the Facility Agent pursuant to
and for the purposes of clause 24.1 of the Agreement so as to take effect
in accordance with the respective terms thereof on the date hereof.
2. The Acceding Borrower is, pursuant to this Accession Certificate, acceding
to the Agreement as a Borrower in respect of the Revolving Credit Facility
(only) and accordingly shall, subject to the terms of this Accession
Certificate and the Agreement, become a Revolving Credit Facility Borrower
under the Agreement.
3. The Facility Agent (on behalf of itself, and all other parties to the
Agreement) confirms the novation effected by this Accession Certificate
pursuant to and for the purposes of clause 24.1 of the Agreement so as to
take effect in accordance with the terms thereof.
4. The Acceding Borrower hereby undertakes to the Facility Agent (on behalf of
itself and the other Finance Parties) that it will perform in accordance
with their terms all those obligations which by the terms of the Agreement
will be assumed by it as a Borrower after acceptance of this Accession
Certificate by the Facility Agent.
5. [This Accession Certificate is intended to take effect as a Deed
notwithstanding that the Facility Agent may execute it under hand only.]
6. This Accession Certificate and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with English
law.
IN WITNESS whereof this Accession Certificate has been entered into as a Deed on
the date above.
Notice Details of Acceding Borrower
Address:
Telephone:
Telefax:
<PAGE>
Attention:
The Acceding Borrower
[Execution particulars - Acceding Borrower to execute as a Deed]
The Facility Agent
By:
_____
on its own behalf and on behalf of
all the other parties to the Facility Agreement.
<PAGE>
Schedule 7
Terms of Borrowers' Indemnity
1. Each Borrower unconditionally and irrevocably undertakes to the Issuing
Bank as follows:
(a) each Borrower will at all times on demand indemnify the Issuing Bank
against all actions, suits, proceedings, claims, demands, liabilities,
damages, costs, expenses, losses and charges whatsoever (except those
arising from the gross negligence or wilful misconduct of the Issuing
Bank) in relation to or arising out of the Issue of any Letter of
Credit and each Borrower will pay to the Facility Agent for the
account of the Issuing Bank in immediately available funds and in the
currency in which the relevant Letter of Credit is denominated the
amount of all payments made (whether directly or by way of set-off,
counterclaim or otherwise howsoever) and all losses, costs or expenses
suffered or incurred from time to time by the Issuing Bank, arising
under any liability which the Issuing Bank has incurred under the
Issue of any Letter of Credit and any of the indemnities relating
thereto;
(b) the liability of each Borrower under this indemnity shall not be
affected by any time being given or by anything being done by the
Issuing Bank unless the same constitutes the gross negligence or
wilful misconduct of the Issuing Bank.
2. Each of the Borrowers specifically releases and indemnifies the Issuing
Bank against the consequences of:
(a) the failure of the Issuing Bank or any other person to receive any
telex or telephone message in a form in which it was despatched; and
(b) any delay that may occur during the course of the transmission of any
such message
save in respect of any failure arising from the gross negligence or wilful
misconduct of the Issuing Bank.
3. (a) The obligations of any Borrower under this Agreement and any
L/C-Related Document to reimburse the Issuing Bank for a drawing under a
Letter of Credit and to repay any drawing under a Letter of Credit which is
converted into Advances, shall be unconditional and irrevocable, and shall
be paid strictly in accordance with the terms of this Agreement and each
such other L/C-Related Document under all circumstances, including the
following:
(i) any lack of validity or enforceability of this Agreement or any
L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or in any
other term of, all or any of the obligations of the relevant
Borrower in respect of any Letter of Credit or any other
amendment or waiver of or any consent to departure from all or
any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defence or other right that
the relevant Borrower may have at any time against any
beneficiary or any transferee of any
<PAGE>
Letter of Credit (or any person for whom any such beneficiary or
any such transferee may be acting), the Issuing Bank or any
other person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C-Related Documents
or any unrelated transaction;
(iv) any draft, demand, certificate or other document presented under
any Letter of Credit proving to be forged, fraudulent, (save
where the Issuing Bank should decline to make payment under the
terms of the Uniform Customs and Practice for Documentary
Credits (1993) (ICC Publication No. 500 (the "UCPDC")) invalid
or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to
make a drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any
payment made by the Issuing Bank under any Letter of Credit to
any person purporting to be a trustee in bankruptcy, debtor-
in-possession, assignee for the benefit of creditors,
liquidator, receiver or other representative of or successor to
any beneficiary or transferee of any Letter of Credit, including
any arising in connection with any voluntary or involuntary
proceeding, process or arrangement under any law, regulation or
procedure relating to insolvency in any jurisdiction including
in relation to winding up, bankruptcy, administration,
administrative receivership, receivership and management,
receivership, judicial custodianship, judicial trusteeship or
the appointment of a judicial conservator or other official or
the reconstruction, rescheduling, readjustment, moratorium or
suspension of payments of any Indebtedness;
(vi) any exchange, release or non-perfection of any collateral, or
any release or amendment or waiver of or consent to departure
from any other guarantee, for all or any of the obligations of
the relevant Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defence available
to, or a discharge of, the relevant Borrower;
(b) The obligations of each of the Borrowers under the Senior Finance
Documents shall not be affected in any way by reason of any time or
other indulgence which may be granted:
(i) to the Issuing Bank by any beneficiary of any Letter of Credit;
or
(ii) by the Issuing Bank to any person from whom it may seek
reimbursement in respect of sums paid out by it under any Letter
of Credit or any other obligation pursuant thereto or pursuant
to this Agreement, as the case may be.
4. The Issuing Bank may, at any time, without affecting any security created
by, pursuant to or in relation to this Agreement or the rights, powers and
remedies conferred upon it by this Agreement, any such security or by law:
<PAGE>
(a) offer or agree to or enter into agreement for the extension or
variation of the Issue of any Letter of Credit (provided it does so in
accordance with written instructions of the Borrower); or
(b) offer or agree to give any time or other indulgence for any sums paid
out by it under any Letter of Credit or any obligation pursuant to any
Letter of Credit.
5. Any rights conferred on the Issuing Bank by this Agreement and by each
document executed in relation to this Agreement shall be in addition to and
not in substitution for or derogation of any other rights which the Issuing
Bank may at any time have to seek from any person reimbursement of or
indemnification against payments made or liabilities incurred under any
Letter of Credit, any obligation pursuant thereto or to this Agreement.
6. Any satisfaction of obligations by any Borrower or any other person to the
Issuing Bank or any discharge given by the Issuing Bank to any Borrower or
any other person in respect of obligations under this Agreement or any
related agreement between the Issuing Bank and any Borrower or any other
person shall be, and be deemed always to have been, void if any act
satisfying any of such obligations or on the faith of which any such
discharge was given or any such agreement was entered into is subsequently
avoided by law (otherwise than as a result of any act or default by the
Issuing Bank).
7. Any Letter of Credit shall be considered to be outstanding until the later
of:
(a) its Expiry Date, or a reasonable time after its Expiry Date to allow
for the presentation of documents through an advising bank; and
(b) if, in the opinion of the Issuing Bank, its liability under the Letter
of Credit does not expire on its stated Expiry Date or there is any
doubt as to its Expiry Date, the date of return of the document
evidencing the Issuing Bank's liability to the relevant beneficiary
under any Letter of Credit.
8. Each Borrower confirms and agrees that:
(a) the Issuing Bank shall make any payment that appears to be duly
requested or demanded in writing by any beneficiary under any Letter
of Credit subject to its compliance (where applicable) with its
obligations as Issuing Bank under the UCPDC regardless of whether or
not the relevant Borrower shall be in any way in breach of any of its
obligations under or by virtue of the transaction in connection with
which the Letter of Credit was Issued and without making any further
reference to the relevant Borrower or any investigation as to the bona
fide nature, validity or genuineness of any such request or demand
(unless, under applicable law, the Issuing Bank is under no obligation
to make such payment), and
(b) the liability of such Borrower hereunder and the right and obligation
of the Issuing Bank to make such payment shall be in no way diminished
or prejudiced if it should appear that, as between the relevant
Borrower and that beneficiary, that beneficiary was not entitled for
whatever reason to demand payment under the Letter of Credit or that
such demand was not valid or genuine (subject as mentioned in
paragraph 8(a) above).
<PAGE>
Schedule 8
Terms of Interbank Guarantee and Indemnity
1. Each Bank agrees to pay to the Facility Agent for the account of the
Issuing Bank on demand made through the Facility Agent under clause 4.7
(Banks' Guarantee and Indemnity) to such account as the Facility Agent may
have specified for the purpose in immediately available funds and in the
currency in which the relevant Letter of Credit is denominated, its
Proportion of:
(a) any and every sum of money which such Borrower shall from time to time
be liable to pay to the Issuing Bank in respect of that Letter of
Credit in full without set-off or counterclaim on the later of the
date that the Issuing Bank has itself to make payment under the Letter
of Credit (as notified by the Facility Agent to such Bank in the
demand) and two Banking Days after receipt by such Bank of such
demand; and
(b) full cash cover for the Outstanding Contingent Liabilities under that
Letter of Credit at any time after the Issuing Bank has become
entitled to demand an indemnity through the Facility Agent in respect
thereof from the relevant Borrower and which shall not have been paid
at the time such demand is made.
2. Where a Bank makes a payment pursuant to paragraph 1 after the date on
which the Issuing Bank makes the relevant payment under the Letter of
Credit in question, such Bank shall pay on demand to the Issuing Bank its
Proportion (as calculated in clause 4.7) of such amount as the Issuing Bank
certifies as necessary to compensate it for funding the amount demanded in
the interim.
3. No assurance, security or payment avoided under any law relating to
bankruptcy, liquidation, insolvency, reconstruction or reorganisation or
any similar laws and no release, settlement, arrangement or discharge which
may have been given or made on the basis of any such assurance, security or
payment shall prejudice or affect the right of the Issuing Bank to recover
from each of the Banks to the full extent of their obligations under clause
4.7.
4. The obligations of each Bank under clause 4.7 shall not be impaired,
affected or revoked by any act, omission, matter, thing or circumstance
whatsoever which but for this provision might operate to release or
exonerate such Bank from all or any part of its obligations under clause
4.7 or reduce, impair or affect such obligations or cause all or any part
of such obligations to be irrecoverable from or unenforceable against any
Obligor or to discharge, reduce, affect or impair any of such obligations,
including without limitation:
(a) any time, waiver or indulgence granted to any person or the
forbearance of the Issuing Bank in enforcing the obligations of any
person under any Finance Document or in respect of any other
guarantee, security, obligation, right or remedy;
(b) the recovery of any judgment against any person or any action to
enforce the same;
(c) the taking of any other security from any person or the failure,
refusal, or neglect to take, perfect or enforce, any rights, remedies
or securities from or against any person or all or any part of the
security constituted by any of the Finance Documents;
<PAGE>
(d) any alteration in the constitution of any Obligor or any defect in or
irregular exercise of the borrowing or other powers of any person or
any legal limitation, disability, incapacity or other circumstance
relating to any person or any legal limitation, disability, incapacity
or other circumstance relating to any person whether arising in
relation to any Finance Document or otherwise howsoever;
(e) subject to clause 22.4 and 22.5 (Unanimous consents), any amendment or
supplement to or variation of any L/C - Related Document or any other
Finance Document;
(f) the insolvency, bankruptcy, liquidation, reconstruction or
reorganisation of, or analogous proceedings relating to any person or
any composition or arrangement made by any of them with the Issuing
Bank, any Bank or any other person or any transfer or extinction of
any liabilities of any Obligor by any law, order regulation, decree,
court order or similar instrument;
(g) any irregularity, unenforceability or invalidity of any obligations of
any person under any security or document (to the intent that such
Bank's obligations under clause 4.7 shall remain in full force as if
there were no such irregularity, unenforceability or invalidity);
(h) the occurrence of an Event of Default;
(i) the existence of any claim, set-off defence or other right which any
Obligor may have against any beneficiary of any Letter of Credit or
any other person; or
(j) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect.
5. The Issuing Bank shall be entitled to enforce the obligations of each Bank
under clause 4.7 without making any demand on or taking any proceedings
against or filing any proof of claim in any insolvency, winding up,
dissolution or liquidation of any person or exhausting any right or remedy
against any person or taking any action to enforce any part of the security
constituted or evidenced by any of the Finance Documents.
6. The obligations of each Bank under clause 4.7 shall be continuing
obligations and shall extend to the ultimate balance of the obligations
referred to therein. If, for any reason, such obligations cease to be
continuing obligations, the Issuing Bank may open a new account with or
continue any existing account with any person and the liability of each
Bank in respect of amounts guaranteed by it pursuant to clause 4.7 at the
date of such cessation shall remain regardless of any payments in or out of
any such account.
7. The Issuing Bank's rights under clause 4.7 shall be in addition to and
shall be in no way prejudiced by any other rights of or security held by
the Issuing Bank in relation to the obligations of any Obligor. The Issuing
Bank's rights under clause 4.7 are in addition to and are not exclusive of
those provided by law.
8. A certificate of the Issuing Bank as to any amount due to it from any Bank
pursuant to clause 4.7 shall be conclusive (in the absence of manifest
error).
<PAGE>
Schedule 9
Projects which may be financed under clause 11.1(g)(iii)
Name of project Total investment required
Norway (pound)175,000,000
Finland (pound)75,000,000
Spain (pound)180,000,000
Sweden (pound)25,000,000
Poland (pound)150,000,000
UK (pound)170,000,000
<PAGE>
PRIMARY BORROWER, FINCO 2 AND BIDCO
Signed for and on behalf of
TU Finance (No. 1) Ltd
(company number 3505836)
[Robert S. Shapard]
__________________________________
Signed for and on behalf of
TU Finance (No. 2) Ltd
(company number 3514100)
[Robert S. Shapard]
__________________________________
Signed for and on behalf of
TU Acquisitions PLC
(company number 3455523)
[Robert S. Shapard]
__________________________________
JOINT LEAD ARRANGERS
Signed for and on behalf of
Chase Manhattan plc
as Arranger
[Cheryl Boucher]
__________________________________
<PAGE>
Signed for and on behalf of
Lehman Brothers International (Europe)
as Arranger
[Julian Entwisle]
__________________________________
Signed for and on behalf of
Merrill Lynch Capital Corporation
as Arranger
[Stephen B. Paras]
__________________________________
ORIGINAL BANKS
Signed for and on behalf of
The Chase Manhattan Bank
as Underwriter
[Jane Ritchie]
__________________________________
Signed for and on behalf of
Lehman Commercial Paper Inc
as Underwriter
[Dennis J Dee]
__________________________________
<PAGE>
Signed for and on behalf of
Merrill Lynch Capital Corporation
as Underwriter
[Stephen B. Paras]
__________________________________
ISSUING BANK
Signed for and on behalf of
The Chase Manhattan Bank
as Issuing Bank
[Jane Ritchie]
__________________________________
FACILITY AGENT
Signed for and on behalf of
Chase Manhattan International Limited
as Facility Agent
[Jane Ritchie]
__________________________________
SECURITY AGENT
Signed for and on behalf of
Chase Manhattan International Limited
as Security Agent
[Jane Ritchie]
__________________________________
DATED 19 May 1998
-----------------
TU FINANCE (NO. 1) LIMITED
and certain of its Subsidiaries
(as Charging Companies)
- and -
CHASE MANHATTAN INTERNATIONAL LIMITED
(as Security Agent)
-----------------------
GUARANTEE AND DEBENTURE
-----------------------
LOVELL WHITE DURRANT
LONDON
A7/DCH/AJAP
<PAGE>
INDEX
1. INTERPRETATION 1
2. COVENANT TO PAY 5
3. CHARGING CLAUSE 6
4. TITLE DOCUMENTS AND VOTING RIGHTS 9
5. COLLECTION OF RECEIVABLES 11
6. NEGATIVE PLEDGE AND OTHER RESTRICTIONS 11
7. FURTHER ASSURANCE 12
8. CONTINUING SECURITY 12
9. GENERAL COVENANTS 13
10. COVENANTS REGARDING SECURITIES 13
11. LEASES, POSSESSION OF LAND AND CONSOLIDATION OF MORTGAGES 14
12. POWERS OF SALE, LEASING AND ACCEPTING SURRENDERS 14
13. OPENING OF NEW ACCOUNTS 15
14. APPOINTMENT AND POWERS OF A RECEIVER 15
15. POWER OF ATTORNEY 18
16. ADJUSTMENT OF ACCOUNT 18
17. OTHER POWERS EXERCISABLE BY THE SECURITY AGENT 19
18. APPLICATION OF MONEY RECEIVED
BY THE SECURITY AGENT OR A RECEIVER 19
19. COSTS AND INTEREST ON OVERDUE AMOUNTS 20
20. SET-OFF 20
21. SECURITY AGENT AS TRUSTEE,
PERPETUITY PERIODS AND NO PARTNERSHIP 21
22. FORBEARANCE AND SEVERABILITY 21
23. VARIATIONS AND CONSENTS 22
24. AUTHORITY OF PRIMARY BORROWER 22
25. SERVICE OF DEMANDS AND NOTICES 22
<PAGE>
26. COUNTERPARTS 23
27. ASSIGNMENT 23
28. SECURITY AGENT 23
29. JOINT AND SEPARATE LIABILITY 23
30. THE GIVING AND ACKNOWLEDGEMENT OF NOTICE OF ASSIGNMENT 23
31. GOVERNING LAW 23
THE FIRST SCHEDULE
Part A
The Charging Companies 24
Part B
The Security Agent 24
THE SECOND SCHEDULE
Terms of Guarantee 25
THE THIRD SCHEDULE
PART I
Form of Notice and Instructions to Receiving Banker 29
PART II
Form of Acknowledgement
and Undertaking by Receiving Banker 31
PART III
Form of control agreement to be executed by among others
the US Depositary for the Offer and Bidco 32
<PAGE>
THIS GUARANTEE AND DEBENTURE made the 19th day of May 1998
BETWEEN:
(1) THE COMPANIES LISTED IN PART A OF THE FIRST SCHEDULE; and
(2) CHASE MANHATTAN INTERNATIONAL LIMITED as agent and trustee on behalf of the
Beneficiaries (as defined below).
WITNESSES as follows:
1. INTERPRETATION
1.1 In this Debenture words or expressions defined in the Facility Agreement
shall, unless otherwise defined below, bear the same meaning in this
Debenture and, in addition, in this Debenture, so far as the context
admits, the following expressions shall have the following meanings:
"Assets" all the present, future or contingent undertaking,
property, assets, rights and revenues of a
Charging Company whatever, and wherever situated
in the world, present and future, and includes
each or any of them;
"Beneficiaries" means collectively the Arrangers, the Facility
Agent, the Issuing Bank, the Security Agent and
the Banks, and (as regards sums owing in respect
of the Hedging Agreements) their respective
Affiliates;
"Bidco" TU Acquisitions PLC (registered number 3455523);
"Business Day" a day on which the banks generally are open for
business in the City of London and in New York
(excluding Saturdays and bank or public holidays);
"Charging Companies" the companies listed in Part A of the First
Schedule and (where the context permits) includes
each or any of them;
"Companies" means the Charging Companies and to the extent
that they become "Borrowers" under the Facility
Agreement, the Target and any Subsidiary from time
to time of the Target;
"Collection Account" has the meaning attributed to it by clause 5.1
(Collection of Receivables);
"this Debenture" this Guarantee and Debenture;
"Derivative Securities" include:
(a) allotments, rights, money or property
arising from the Securities by way of
conversion, exchange, redemption, bonus,
preference, option or otherwise;
<PAGE>
(b) dividends, distributions, interest and
other income from the Securities; and
(c) stock, shares and securities offered in
addition to or substitution for the
Securities;
"Document" any transfer, renunciation, proxy, mandate, legal
or other charge, mortgage, assignment, deed or
other document in relation to the Securities;
"Facility Agreement" means the facilities agreement dated 2 March 1998
made between TU Finance (No. 1) Limited (1), TU
Finance (No. 2) Limited and TU Acquisitions PLC
(2), Chase Manhattan plc, Lehman Brothers
International and Merrill Lynch Capital
Corporation (as Joint Lead Arrangers) (3), The
Chase Manhattan Bank, Lehman Commercial Paper Inc
and Merrill Lynch Capital Corporation (as
Underwriters) (4), The Chase Manhattan Bank (as
Issuing Bank) (5), Chase Manhattan International
Limited (as Facility Agent) (6) and Chase
Manhattan International Limited (as Security
Agent) (7) as amended and restated by an agreement
dated 3 March 1998 and 21 April 1998 and which
expression shall include any further amendments,
supplements, accessions, variations or additions
to such agreement, however fundamental (including,
without limitation, changes to the facilities
provided or increases in their maximum amount);
"Facility Agent" shall have the meaning attributed to it in the
Facility Agreement;
"Floating Charge Assets" insofar only as concerns the floating charge
created by clause 3.1(n) (Charging Clause), Assets
for the time being comprised within such floating
charge;
"Guarantor" any Charging Company insofar only as it covenants
under clause 2.1(b) (Charging Clause) to pay or
discharge money due or owing from or liabilities
of other Companies to the Beneficiaries and
"Guarantors" and "Guarantee" shall be construed
accordingly;
"Hedging Agreements" the interest rate hedging agreements contemplated
by clause 10.2(f) of the Facility Agreement, but
only if and insofar as such agreements are entered
into with a Beneficiary;
"Holding Company" shall have the meaning given to that expression in
Section 736 of the Companies Act 1985 as if
extended to bodies corporate wheresoever
incorporated;
"indebtedness" includes any obligation in any currency, whether
incurred as principal debtor or surety, for the
payment or repayment of money, whether present or
future, actual or contingent;
<PAGE>
"Land" includes freehold and leasehold land and (outside
England and Wales) immovable property and in each
case all buildings and structures upon and all
things affixed to Land (including trade and
tenant's fixtures);
"Offer Rights" means all rights of Bidco pursuant to the Offer
and the terms of any of the Offer Documents (and
its form of acceptance) including the right to
have the Target's Shares transferred to the name
of or held to the order of Bidco (or its nominee)
and all rights of Bidco over any agreement with
the Receiving Banker to the Offer and any brokers
which may purchase Target Shares on Bidco's
behalf;
"Primary Borrower" TU Finance (No. 1) Limited (registered number
3505836);
"Principal" any Company insofar only as it owes money or has
incurred liabilities to a Beneficiary except as a
Guarantor;
"Receivables" in relation to a Charging Company, all sums of
money receivable by such Charging Company now or
in the future consisting of or payable under or
derived from any of its Assets referred to in
clause 3.1(d), (f), (g), (h), (j), (k) and (l)
(Charging Clause);
"Receiver" means any receiver and manager or receivers and
managers appointed under clause 14.1 (Appointment
and Powers of Receiver) and (where the context
requires or permits) includes any substituted
receiver and manager or receivers and managers;
"Regulations" the Uncertificated Securities Regulations 1995;
"Receiving Banker" the UK Receiving Agent, as defined in the Offer
Documents;
"Relevant System" the meaning given to that term by the Regulations
and includes any other system or facility (in the
United Kingdom or elsewhere) providing for the
deposit of, and clearance of transactions in, the
Securities;
"Receiving Banker's an undertaking from the Receiving Banker in the
Undertaking" form or substantially in the form set out in Part
II of the Third Schedule;
"Secured Sums" means all money and liabilities covenanted and/or
guaranteed to be paid or discharged by the
Charging Companies to the Security Agent and the
Beneficiaries under clause 2.1 (Covenant to Pay);
"Securities" means, in relation to any Charging Company, all
stocks, shares, debentures and loan stocks issued
by any company or person and all other investments
(whether or not marketable) now or in the future
owned at law or in equity by such
<PAGE>
Charging Company, including all interests in
investment funds and all Derivative Securities and
including all Securities owned by such Charging
Company in any other Charging Company, all Target
Shares and all rights and entitlements in respect
thereof owned by Bidco and all shares in Bidco
owned by a Charging Company and including all
rights, benefits and sums now or in the future
accruing to any Charging Company as a result of
any Securities being held in a Relevant System
(including such Charging Company's rights against
the operator of, or any participant in, the
Relevant System);
"Security Agent" Chase Manhattan International Limited acting as
security agent and trustee for the Beneficiaries
and includes any successor appointed by the
Beneficiaries pursuant to Clause 17.5 of the
Facility Agreement;
"Subsidiary" shall have the meaning given to that expression in
Section 736 of the Companies Act 1985 as if
extended to bodies corporate wheresoever
incorporated;
"Target" means The Energy Group PLC (company no. 3257256);
"Target Shares" means the issued and to be issued shares in the
capital of the Target (including the Target's
American Depositary Shares and any American
Depositary Receipts representing the Target's
American Depositary Shares) which are the subject
of the Offer;
"United Kingdom" means the United Kingdom of Great Britain and
and "UK" Northern Ireland;
"writing" includes telex, facsimile transmission and any
other mode of representing or reproducing words in
a legible and non-transitory form, except in
relation to any certificate, notice or other
document which is expressly required by this
Debenture to be signed, and "written" has a
corresponding meaning.
1.2 Interpretation: In this Debenture, unless the context otherwise requires:
(a) words denoting the singular number only shall include the plural
number also and vice versa;
(b) words denoting the masculine gender only shall also include the
feminine gender;
(c) words denoting persons only shall include corporations, partnerships
and unincorporated associations;
(d) references to clauses, paragraphs and Schedules are to be construed as
references to clauses, paragraphs and Schedules of this Debenture;
<PAGE>
(e) references to any party shall, where relevant, be deemed to be
references to or to include, as appropriate, their respective
successors or permitted assigns;
(f) references in this Debenture to this Debenture or any other document
include references to this Debenture or such other document as varied,
supplemented, restated and/or replaced in any manner from time to time
and/or any document which varies, supplements, restates and/or
replaces it;
(g) references to "including" shall not be construed restrictively but
shall be construed as meaning "including, without prejudice to the
generality of the foregoing";
(h) references to moneys, obligations and liabilities due, owing or
incurred under the Finance Documents shall include moneys, obligations
and liabilities due, owing or incurred in respect of any extensions or
increases in the amount of the facilities provided for therein or the
obligations and liabilities imposed thereunder;
(i) expressions defined in the Companies Act 1985 shall have the same
meanings in this Debenture, except that the expression "company" shall
include a body corporate established outside Great Britain;
(j) any references to any statute or any section of any statute shall be
deemed to include reference to any statutory modification or
re-enactment of it for the time being in force;
(k) the limitation on liability conferred by Section 6(2) of the Law of
Property (Miscellaneous Provisions) Act 1994 shall not apply to the
covenants for title implied on the part of each Charging Company.
1.3 Headings: Headings in this Debenture are inserted for convenience and shall
not affect its interpretation.
2. COVENANT TO PAY
2.1 Covenant to Pay: Each Charging Company hereby:
(a) covenants that it will on demand in writing made to it by the Security
Agent or the relevant Beneficiary pay or discharge to the Security
Agent all money and liabilities now or in the future due, owing or
incurred to each Beneficiary by such Charging Company under the
Facility Agreement, the Hedging Agreements or this Debenture (at any
time after such money and liabilities have become due for payment or
discharge in accordance with the Facility Agreement, the Hedging
Agreements or this Debenture);
(b) covenants and guarantees that it will on demand in writing made to it
by the Security Agent or the relevant Beneficiary pay or discharge to
the Security Agent all money and liabilities now or in the future due,
owing or incurred to each Beneficiary by each other Company (except as
a Guarantor for the Charging Company giving this covenant) under the
Facility Agreement, the Hedging Agreements or this Debenture (at any
time after such money and liabilities have become due for payment or
discharge in accordance with the Facility Agreement, the Hedging
Agreements or this Debenture);
in either case, whether on or after such demand, whether actually or
contingently, whether solely or jointly with any other person, whether as
principal or surety, including all interest,
<PAGE>
commission, fees, charges, costs and expenses which each Beneficiary may
charge or incur in respect of any Company or its affairs in accordance with
the Facility Agreement, the Hedging Agreements or this Debenture and so
that interest shall be computed and compounded in accordance with the
Facility Agreement (after as well as before any demand or judgment); but
the guarantee in clause 2.1(b) shall not extend to the repayment of amounts
outstanding under the stand-alone revolving credit facility contemplated by
clause 24.5 of the Facility Agreement.
2.2 Terms of Guarantee: The guarantee contained in clause 2.1(b) (Covenant to
Pay) is given subject to, and with the benefit of, the provisions set out
in the Second Schedule.
2.3 Guarantee Binding: Each Charging Company agrees to be bound by the
guarantee contained in clause 2.1(b) (Covenant to Pay), even if any other
Charging Company which was intended to execute this Debenture may not do so
or may not be effectually bound.
2.4 Demand by Security Agent: The making of one demand under this Debenture
will not preclude the Security Agent making any further demands.
2.5 Third Parties: No demand may be made under this Debenture unless the
Facility Agent or the relevant Beneficiaries have become entitled to make a
demand under clause 12.2 of the Facility Agreement, but any third party
dealing with the Security Agent or the Receiver appointed under this
Debenture shall not be concerned to see or enquire as to the validity of
any demand under this Debenture.
3. CHARGING CLAUSE
3.1 Charging Clause: Each Charging Company with full title guarantee hereby
charges to the Security Agent with the payment or discharge of all Secured
Sums:
(a) Registered property: by way of legal mortgage, all freehold and
leasehold Land in England and Wales now vested in such Charging
Company and registered at H M Land Registry;
(b) Unregistered property: by way of legal mortgage, all other freehold
and leasehold Land in England and Wales now vested in such Charging
Company and not registered at H M Land Registry;
(c) Future Land: by way of first fixed charge, all Land in the future
becoming the property of such Charging Company;
(d) Interests in Land: by way of fixed charge, all interests in Land or
the proceeds of sale of Land now or in the future belonging to such
Charging Company which have not already been charged under the
preceding provisions of this clause 3.1 (Charging Clause) and all
licences now or in the future held by such Charging Company to enter
upon, use or exploit Land and the benefit of all options, easements,
agreements for lease and other agreements relating to the acquisition,
use, exploitation or disposal of Land to which such Charging Company
is or may in the future become entitled;
(e) Plant and machinery and fixtures: by way of fixed charge, all plant
and machinery of such Charging Company now or in the future attached
to any Land which, or an interest in which, is charged under the
preceding provisions of this clause 3.1 (Charging Clause) and all
rights and interests of such Charging Company under all
<PAGE>
present and future agreements for the purchase, maintenance or use of
plant and machinery so attached;
(f) Rental and income from Land: by way of fixed charge, all rental and
other income and all debts and claims now or in the future due or
owing to such Charging Company under or in connection with any lease,
agreement or licence relating to Land;
(g) Securities: by way of fixed charge, all Securities belonging to such
Charging Company;
(h) Contracts and policies of insurance and assurance: by way of fixed
charge, all contracts and policies of insurance and assurance now or
in the future held by or otherwise benefiting such Charging Company
and all rights and interests of such Charging Company in every such
contract and policy (including the benefit of all claims arising and
all money payable under such contracts and policies);
(i) Goodwill and uncalled capital: by way of fixed charge, all the
goodwill and uncalled capital for the time being of such Charging
Company;
(j) Intellectual Property Rights: by way of fixed charge, all intellectual
property rights of such Charging Company capable of being validly
charged by fixed charge;
(k) Book and other debts: by way of fixed charge, all book and other debts
now or in the future owing to such Charging Company and all rights and
claims of such Charging Company against third parties, present and
future, capable of being satisfied by the payment of money (except
rights and claims effectively charged under the preceding provisions
of this clause 3.1) (Charging Clause);
(l) Negotiable instruments etc: by way of fixed charge, the benefit of all
negotiable instruments, guarantees, bonds, debentures, legal or
equitable charges and all other security, reservation of proprietary
rights, rights of tracing, unpaid vendor's liens and all other rights
and remedies now or in the future available to such Charging Company
as security for any Receivable or for the performance by any third
party of any obligation now or in the future owed to such Charging
Company;
(m) Loan Note Collateral Account and Collection Account balances: by way
of fixed charge, all money at any time standing to the credit of the
Loan Note Collateral Account or any Collection Account relating to
such Charging Company, including the proceeds of all its Receivables,
which proceeds shall, for the avoidance of doubt, on payment into such
Collection Account cease to be subject to the charges contained in the
preceding provisions of this clause 3.1 (Charging Clause) but shall be
subject to the fixed charge contained in this paragraph (m);
(n) Floating Charge Assets: by way of floating charge:
(i) all Assets now or in the future owned by such Charging Company
except to the extent that such Assets are for the time being
effectively charged by any fixed charge contained in the
preceding provisions of this clause 3.1 (Charging Clause) or
effectively assigned by clause 3.2 (Assignment of Rights),
including any Assets comprised within a charge which is
reconverted under clause 3.7 (Decrystallisation of Floating
Charge); and
<PAGE>
(ii) without exception all Assets insofar as they are for the time
being situated in Scotland;
but in each case so that such Charging Company shall not create any
mortgage or any fixed or floating charge or other security over any
Floating Charge Asset (whether having priority over, or ranking pari passu
with or subject to, this floating charge) or take any other step referred
to in clause 6.1 (Negative Pledge and other Restrictions) with respect to
any Floating Charge Asset and such Charging Company shall not, without the
prior written consent of the Security Agent, sell, transfer, part with or
dispose of any Floating Charge Asset except by way of sale in the ordinary
course of its business.
3.2 Assignment of Rights: (a) Bidco hereby assigns and agrees to assign to the
Security Agent as continuing security for the payment, discharge and
performance of the Secured Sums the Offer Rights together with the benefit
of all powers and remedies for enforcing the same, in favour of the
Security Agent; (b) each Charging Company hereby assigns and agrees to
assign to the Security Agent as continuing security for the payment,
discharge and performance of the Secured Sums all indebtedness due to such
Charging Company from any other Charging Company including all such
indebtedness arising or in any way connected with the Offer or the
financing of the Offer.
3.3 Notice Relating to the Assignment and the Charge over Target Shares: Bidco
shall:
(a) execute the notice of the assignment and the charge over the Offer
Rights constituted by this deed in the form set out in Part I of the
Third Schedule on the date hereof and:
(i) forthwith deliver the same to the Receiving Banker; and
(ii) procure the execution and delivery to the Security Agent by the
Receiving Banker of the acknowledgement and undertaking
substantially in the form set out in Part II of the Third
Schedule; and
(b) execute the contol agreement substantially in the form set out in Part
III of the Third Schedule on the date hereof and:
(i) forthwith deliver the same to the US Depositary for the Offer,
Bank of New York; and
(ii) procure the execution and delivery to the Security Agent by such
US Depositary of such control agreement.
3.4 Crystallisation of Floating Charge: The floating charge created by any
Charging Company in clause 3.1(n) (Charging Clause) may be crystallised
into a fixed charge by notice in writing given at any time on or after the
Enforcement Date by the Security Agent to such Charging Company. Such
crystallisation shall take effect over such Floating Charge Assets or class
or classes of Floating Charge Assets as shall be specified in the notice.
If no Floating Charge Assets are so specified, it shall take effect over
all Floating Charge Assets of the relevant Charging Company.
3.5 Automatic Crystallisation: If any Charging Company, without the Security
Agent's prior written consent, resolves to take or takes any step to charge
(whether by way of fixed or floating charge) or otherwise encumber any of
its Floating Charge Assets or to create a trust
<PAGE>
over any such Floating Charge Asset or to dispose of any such Floating
Charge Asset except by way of sale or other disposition in the ordinary
course of such Charging Company's business, or if any person resolves to
take or takes any step to levy any distress, execution, sequestration or
other process against any Floating Charge Asset, then the floating charge
created by clause 3.1(n) (Charging Clause) shall be automatically
crystallised (without the necessity of notice) into a fixed charge over
such Floating Charge Asset instantly on the occurrence of such event.
3.6 Floating Charge Assets acquired after Crystallisation: Except as otherwise
stated in any notice given under clause 3.4 (Crystallisation of Floating
Charge) or unless such notice relates to all Floating Charge Assets,
Floating Charge Assets acquired by any Charging Company after
crystallisation has occurred under clause 3.4 (Crystallisation of Floating
Charge) or 3.5 (Automatic Crystallisation) shall continue subject to the
floating charge created by clause 3.1(n) (Charging Clause), so that the
crystallisation shall be effective only as to its Floating Charge Assets in
existence at the date of crystallisation.
3.7 Decrystallisation of Floating Charge: Any charge by a Charging Company
which has crystallised under clause 3.4 (Crystallisation of Floating
Charge) or 3.5 (Automatic Crystallisation) may, by notice in writing given
at any time by the Security Agent to such Charging Company, be reconverted
into a floating charge in relation to the Assets or class or classes of
Assets specified in such notice.
3.8 Priority of Fixed Security: Any mortgage, fixed charge or other fixed
security whenever and however created by a Charging Company and subsisting
in favour of the Security Agent shall (save as the Security Agent may
otherwise declare at or after the time of its creation) have priority over
the floating charge created by clause 3.1(n) (Charging Clause).
3.9 Future Security subject to this Debenture: Any debentures, mortgages or
charges (fixed or floating) created in the future by a Charging Company
(except those in favour of the Security Agent) shall be expressed to be
subject to this Debenture and shall rank in order of priority behind the
charges created by this Debenture.
4. TITLE DOCUMENTS AND VOTING RIGHTS
4.1 Deposit of Title Deeds and Documents: Except as otherwise expressly agreed
in writing by the Security Agent, each Charging Company shall:
(a) deposit with the Security Agent, and the Security Agent shall be
entitled to retain, all deeds and documents of title relating to all
its Assets charged by way of fixed charge under clause 3.1 (Charging
Clause) (including policies of insurance and assurance and
certificates evidencing the entitlement of the Charging Companies to
the Securities);
(b) promptly have registered in the name of the Security Agent or its
nominee on the date of receipt by it and/or, in relation to the Target
Shares, the Receiving Banker, the Target Shares in certificated form,
and in the case of all other Securities certificates and documents of
title relating to such other Securities in certificated form and
undated transfers executed in blank and such other Documents as the
Security Agent may require to perfect title to such other Securities
(duly executed by the registered holder) or for vesting or enabling it
to vest the same in itself, its nominees or any purchaser Provided
that this sub-clause shall be satisfied in relation to the Target
Shares held by
<PAGE>
the Receiving Banker if the Security Agent receives from the Receiving
Banker a duly executed Receiving Banker's Undertaking.
4.2 Charging Companies to retain voting rights and dividends until Debenture
enforceable: Unless and until this Debenture becomes enforceable or the
Security Agent otherwise directs at any time while a Default is continuing:
(a) for so long as the relevant Charging Company remains the registered
owner of the Securities:
(i) all voting and other rights (including the right to receive
dividends) attaching to Securities shall continue to be exercised
by the relevant Charging Company for so long as it remains their
registered owner, Provided that the relevant Charging Company
undertakes not to exercise any voting or other rights in a way
which is likely to prejudice the value of the Securities or
otherwise jeopardise the security constituted by this Debenture;
and
(ii) the relevant Charging Company shall be free to deal with all
dividends and interest paid thereon, subject to the provisions of
the Facilities Agreement;
(b) if Securities are registered in the name of the Security Agent or its
nominee:
(i) all voting and other rights attaching to them shall be exercised
by the Security Agent or its nominee in accordance with
instructions in writing from time to time received from the
relevant Charging Company, Provided that the relevant Charging
Company undertakes not to give any instructions to exercise any
voting or other rights in a way which is in the reasonable
opinion of the Security Agent likely to prejudice the value of
the Securities or otherwise jeopardise the security created by
this Debenture; in the absence of any such instructions, the
nominee shall refrain from exercising any such rights; and
(ii) all dividends, distributions, interest and other moneys paid on
and received by the Security Agent in respect of the Securities
shall be collected by the Agent as agent for the relevant
Charging Company and paid to such Charging Company to such
account as it may from time to time specify.
4.3 Security Agent to have voting rights and dividends after Debenture
enforceable: At any time after this Debenture has become enforceable:
(a) the Security Agent may (in the name of the relevant Charging Company
or otherwise and without any further consent or authority on the part
of such Charging Company) exercise all voting and other rights
attaching to the Securities and any rights attaching to the Securities
to nominate or remove a director as if the Security Agent was the sole
beneficial owner of the Securities;
(b) all Derivative Securities shall, if received by the relevant Charging
Company or its nominee, be held on trust for and forthwith paid or
transferred to the Security Agent; and
(c) each Charging Company shall (and shall procure that its nominees
shall) accept short notice for and attend any meeting of the holders
of any Securities, appoint proxies and
<PAGE>
exercise voting and other rights and powers exercisable by the holders
of the Securities as the Security Agent may direct from time to time.
5. COLLECTION OF RECEIVABLES
5.1 Treatment of Receivables: Each Charging Company shall collect and realise
all Receivables and shall pay into such Charging Company's account with the
Security Agent or such other account of such Charging Company as the
Security Agent may direct (a "Collection Account") all money which it may
receive in respect of them immediately on receipt. Each Charging Company
shall, pending such payment, hold all money so received upon trust for the
Security Agent and shall not, without the prior written consent of the
Security Agent, charge, factor, discount, assign, postpone, subordinate,
release or waive its rights in respect of any Receivable in favour of any
other person or purport to do so. The Collection Account shall be operated
by the Beneficiary with which it is maintained (if not the Security Agent
itself) as trustee for the Security Agent.
5.2 Delivery of Particulars and Receivables: Each Charging Company shall
deliver to the Security Agent such particulars as to the amount and nature
of its Receivables as the Security Agent may from time to time reasonably
require.
6. NEGATIVE PLEDGE AND OTHER RESTRICTIONS
6.1 Negative Pledge and other restrictions: No Charging Company shall, without
the prior written consent of the Security Agent:
(a) create, or agree or attempt to create, or permit to subsist, any
Security Interest except this Debenture;
(b) sell, or otherwise dispose of any Assets to any persons on terms which
will or are intended to result in such Assets being leased or licenced
back or re-acquired by such Charging Company or any other Group
Company;
(c) permit any person other than the Security Agent or its nominee to be
registered as the holder of any Target Shares;
(d) do anything which would prejudice the Security Interest of the
Security Agent over the Securities.
6.2 Application to Land Registrar: Each Charging Company hereby applies to the
Chief Land Registrar for a restriction to be entered on the register of
title of all present registered freehold and leasehold Land in England and
Wales of such Charging Company, and agrees to apply for such a restriction
when requested by the Security Agent in respect of all freehold and
leasehold Land in England and Wales acquired by such Charging Company after
the date of this Debenture, in the following terms:
"Except under an order of the Registrar, no disposition by the proprietor
of the land is to be registered without the consent of the proprietor for
the time being of [the charge hereby created]."
<PAGE>
7. FURTHER ASSURANCE
7.1 Further Assurance: Each Charging Company shall on demand by the Security
Agent in writing execute and deliver to the Security Agent at the cost of
such Charging Company and in such form as the Security Agent may require:
(a) a valid legal mortgage of standard security or other hypothecation any
Land now or in the future belonging to such Charging Company;
(b) a valid fixed charge over any interest, not capable of being charged
by way of legal mortgage, in any Land now or in the future belonging
to such Charging Company;
(c) a legal assignment or other fixed security over all or any of its
intellectual property rights or Receivables;
(d) a legal charge over all or any of its Securities;
(e) any Documents, instruments or directions relating to any Securities in
uncertificated form required to protect or preserve the Security
Agent's title to and security over such Securities;
(f) a chattel mortgage over such chattels, plant, machinery, computers
and/or other equipment of such Charging Company as the Security Agent
may specify;
(g) a fixed charge or other fixed security over any of its Floating Charge
Assets;
(h) where any of its Assets are situated outside England and Wales, such
fixed security under the law of the place where the Asset is situated
as the Security Agent may require;
(i) a notice to the US Depositary (as defined in the Offer Document)
regarding the Security Agent's interest in the American Depositary
Shares which are the subject of the Offer, and an acknowledgement from
the US Depositary of such notice; and
(j) such other documents as the Security Agent may in its discretion think
fit further to secure the payment of the Secured Sums, or to perfect
this Debenture, or to vest title to any Asset in itself or its nominee
or any purchaser.
8. CONTINUING SECURITY
This Debenture shall be a continuing security to the Security Agent and the
Beneficiaries, notwithstanding any intermediate payment or settlement of
account or any other matter whatever, and shall be in addition to and shall
not prejudice or be prejudiced by any right of lien, set-off, combination
or other rights exercisable by the Security Agent and the Beneficiaries as
bankers against the Charging Companies or any security, guarantee,
indemnity and/or negotiable instrument now or in the future held by the
Security Agent or any Beneficiary.
<PAGE>
9. GENERAL COVENANTS
9.1 Acquisition of Land or Intellectual Property Rights: Each Charging Company
shall at all times immediately notify the Security Agent in writing of its
acquisition of any interest or right in or to any Land or any intellectual
property rights;
9.2 Negative Covenant regarding Receivables: No Charging Company shall,
without the prior written consent of the Security Agent, seek to
compromise, compound, discharge, postpone, release, set-off, settle or
subordinate any of its Receivables or waive its rights of action in
connection with them, or do or omit to do anything which may delay or
prejudice their full recovery.
9.3 Negative Covenant regarding Loan Note Collateral Account: No Charging
Company shall utilise, or draw down, or otherwise deal with or seek to
utilise, draw down, or otherwise deal with the Loan Note Collateral
Account except as permitted by and in accordance with Clause 4.1(f) of the
Facility Agreement.
10. COVENANTS REGARDING SECURITIES
Each Charging Company covenants with the Security Agent that it shall:
10.1 Restriction on consolidation, subdivision etc: save with the prior
written consent of the Security Agent, not cause or permit any of
the Securities to be consolidated, sub-divided or converted and
shall take such action as the Security Agent may direct in respect
of any proposed compromise, arrangement, capital organisation,
conversion, exchange, repayment or takeover offer affecting any of
its Securities or any proposal to vary or abrogate any rights
attaching to any of the Securities;
10.2 Pay calls promptly: promptly pay direct to the company in which it
holds Securities any calls on any Securities which are not fully
paid, and if it defaults the Security Agent may (but need not) do so
on behalf of the relevant Charging Company (and any amount so
expended shall be a cost receivable under clause 19.1);
10.3 Forward notices etc: forward to the Security Agent any notices,
reports, accounts, circulars and other documents relating to the
Securities as soon as they are received;
10.4 Execute documents etc required to convert to uncertificated form:
(at its expense) execute and deliver to the Security Agent or as it
directs such documents, transfers and powers of attorney, give such
instructions and perform such other acts as the Security Agent may
reasonably require at any time to convert any Securities in
certificated form into uncertificated form;
10.5 Covenant regarding ADR's: ensure that as regards all ADR holders who
accept the Offer, the American Depositary Shares which such ADR's
represent are immediately exchanged for certificated Ordinary Shares
in the Target registered in the name of the Security Agent and that
such ADR's are then cancelled.
11. LEASES, POSSESSION OF LAND AND CONSOLIDATION OF MORTGAGES
11.1 No Leasing, etc: No Charging Company shall, without the prior written
consent of the Security Agent, exercise any power of leasing, or accepting
surrenders of leases of, any Land,
<PAGE>
nor (save where obliged to do so by law) extend, renew or vary any lease
or tenancy agreement or give any licence to assign or underlet.
11.2 No Parting with Possession No Charging Company shall part with possession
(except on the determination of any lease, tenancy or licence granted to
such Charging Company) of any Land or share the occupation of it with any
other person, or agree to do so, without the prior written consent of the
Security Agent.
11.3 Section 93 LPA 1925: Section 93 of the Law of Property Act 1925, dealing
with the consolidation of mortgages, shall not apply to this Debenture.
12. POWERS OF SALE, LEASING AND ACCEPTING SURRENDERS
12.1 Debenture to become Enforceable: This Debenture shall be immediately
enforceable if the Enforcement Date shall occur.
12.2 Statutory Power of Sale: Section 103 of the Law of Property Act 1925 shall
not apply to this Debenture, but the statutory power of sale shall (as
between the Security Agent and a purchaser from the Security Agent) arise
on, and be exercisable at any time after, the execution of this Debenture.
However, the Security Agent shall not exercise such power of sale until
the Enforcement Date has occurred, or a Receiver has been appointed, but
this provision shall not affect a purchaser or require him to ask whether
a demand or appointment has been made.
12.3 Powers of Security Agent to Grant Leases: The statutory powers of sale,
leasing and accepting surrenders exercisable by the Security Agent by
virtue of this Debenture are extended so as to authorise the Security
Agent (whether in its own name or that of the Charging Company concerned)
to grant a lease or leases of any Land vested in a Charging Company or in
which it has an interest, with such rights relating to other such Land,
and containing such covenants on the part of such Charging Company, and
generally on such terms and conditions, as the Security Agent shall think
fit.
12.4 Power to Sever Fixtures: The statutory power of sale exercisable by the
Security Agent is extended so as to authorise the Security Agent to sever
any fixtures from Land and sell them separately.
12.5 Third Parties not to be concerned with Validity of Demand: No person
dealing with the Security Agent or any Receiver, its agents or brokers,
shall be concerned to enquire whether this Debenture has become
enforceable, or whether any power exercised or purported to be exercised
has become exercisable, or whether any Secured Sums remain due upon this
Debenture, or as to the necessity or expediency of any stipulations and
conditions subject to which the sale of any Assets shall be made, or
otherwise as to the propriety or regularity of the sale of any Asset, or
to see to the application of any money paid to the Security Agent or such
Receiver, or its agents or brokers, and each such dealing shall be deemed
to be within the powers hereby conferred and to be valid and effectual
accordingly.
12.6 Exclusion of liability: The Security Agent shall not be liable (save in
the event of its gross negligence or wilful misconduct) for:
(a) any loss arising out of such sale or other disposal of any of the
Securities or the exercise of or failure to exercise any of the
Security Agent's powers of sale over any Securities under this
Debenture, however caused and whether or not a better price could or
might
<PAGE>
have been obtained by deferring or advancing the date of such sale
or other disposal and the Security Agent shall not be liable to
account as mortgagee in possession for any of the Securities; or
(b) any neglect or default to pay any call or instalment or to accept
any offer or to notify the relevant Charging Company of any matter
or for any other loss of any nature whatsoever in connection with
any of the Securities.
13. OPENING OF NEW ACCOUNTS
13.1 Ruling off Accounts: On receiving notice that any Charging Company has
encumbered or disposed of any of its Assets, the Security Agent and/or any
Beneficiary may rule off such Charging Company's account or accounts and
open a new account or accounts with such Charging Company.
13.2 Credits not to reduce Indebtedness: If the Security Agent or any
Beneficiary does not open a new account or accounts immediately on receipt
of such notice, it shall nevertheless be treated as if it had done so at
the time when it received such notice and as from that time all payments
made by such Charging Company to the Security Agent or such Beneficiary
shall be treated as having been credited to such new account or accounts
and shall not operate to reduce the amount owing from such Charging
Company to the Security Agent or such Beneficiary at the time when it
received such notice.
14. APPOINTMENT AND POWERS OF A RECEIVER
14.1 Appointment of Receiver: At any time:
(a) on or after the Enforcement Date; or
(b) if so requested by the Primary Borrower and/or any Charging Company
in respect of its own Assets;
the Security Agent may appoint by writing any person or persons to be a
receiver and manager or receivers and managers of all or any part of the
Assets of the Primary Borrower and/or such Charging Company (as the case
may be).
14.2 Power of Receivers Joint and Several: Where more than one Receiver is
appointed, they shall have power to act separately unless the Security
Agent shall in the appointment specify to the contrary.
14.3 Security Agent to Determine Remuneration of Receiver: The Security Agent
may from time to time determine the remuneration of the Receiver.
14.4 Removal of Receiver: The Security Agent may (subject to Section 45 of the
Insolvency Act 1986) remove the Receiver from all or any of the Assets of
which he is the Receiver.
14.5 Further Appointment: Such an appointment shall not preclude (i) the
Security Agent from making any subsequent appointment of a Receiver over
all or any Assets over which a Receiver has not previously been appointed
or has ceased to act, or (ii) a Receiver, while continuing to act,
consenting to the appointment of an additional Receiver to act with him.
<PAGE>
14.6 Receiver to Act as Agent: The Receiver shall be the agent of the Charging
Company concerned (which shall be solely liable for his acts, defaults and
remuneration) unless and until such Charging Company goes into
liquidation, after which he shall act as principal and shall not become
the agent of the Security Agent or the Beneficiaries.
14.7 Powers of Receiver: The Receiver shall have and be entitled to exercise in
relation to the Charging Company concerned all the powers set out in
Schedules 1 and 2 to the Insolvency Act 1986 and in particular, by way of
addition and without limiting such powers (and without prejudice to the
powers of the Security Agent and the Beneficiaries), the Receiver shall
have power:
(a) to take possession of, collect and get in all or any part of the
Assets of the relevant Charging Company and to take and defend any
proceedings (including proceedings for its winding up or proceedings
by way of arbitration) in its name or otherwise as he shall think
fit;
(b) to carry on or concur in carrying on the business of the relevant
Charging Company and raise money from any Beneficiary or others
without security or on the security of all or any of its Assets;
(c) to sell or concur in selling (where necessary with the leave of the
Court), lease or concur in leasing, licence or concur in licensing,
grant options over and, without the need to observe any of the
provisions of Sections 99 and 100 of the Law of Property Act 1925,
let or concur in letting and to terminate or to accept surrenders of
leases, licences or tenancies of all or any of the Assets of the
relevant Charging Company in such manner and generally on such terms
and conditions as he shall think fit in his absolute and unfettered
discretion and any such sale or disposition may be for cash,
debentures, securities or other valuable consideration (in each case
payable in a lump sum or by instalments) and to carry any such
transactions into effect in the name of and on behalf of such
Charging Company;
(d) to promote the formation of a Subsidiary or Subsidiaries of the
relevant Charging Company with a view to such Subsidiary or
Subsidiaries purchasing, leasing, licensing or otherwise acquiring
interests in all or any of the Assets of such Charging Company;
(e) to arrange for such Subsidiary or Subsidiaries to trade or cease to
trade as the Receiver may think fit from time to time;
(f) to sever any fixtures from the Land of which they form part;
(g) to exercise all voting and other rights attaching to Securities
owned by the relevant Charging Company;
(h) to arrange for the purchase, lease, licence or acquisition of all or
any Assets of the relevant Charging Company by any such Subsidiary
on a basis whereby the consideration may be for cash, shares,
debentures, loan stock, convertible loan stock or other securities,
shares of profits or sums calculated by reference to profits or
turnover or royalties or licence fees or otherwise, whether or not
secured on the assets of such Subsidiary and whether or not such
consideration is payable or receivable in a lump sum or by
instalments over such period as the Receiver may think fit;
<PAGE>
(i) to make any arrangement or compromise with the Security Agent or any
Beneficiary as he shall think fit;
(j) to make and effect all repairs, renewals and improvements to the
Assets of the relevant Charging Company and to effect, renew or
increase insurances on such terms and against such risks as he shall
think fit;
(k) to appoint managers, officers and agents for the above purposes at
such salaries as the Receiver may determine;
(l) to call up all or any portion of the uncalled capital of the
relevant Charging Company;
(m) to redeem any prior Security Interest and to settle and pass the
accounts of the encumbrancer and any accounts so settled and passed
shall (subject to any manifest error) be conclusive and binding on
the relevant Charging Company and the money so paid shall be deemed
an expense properly incurred by the Receiver;
(n) to pay the proper administrative charges of the Security Agent
and/or the Beneficiaries in respect of time spent by their agents
and employees in dealing with matters raised by the Receiver or
relating to the receivership of the relevant Charging Company;
(o) to commence and/or complete any building operations upon any
freehold or leasehold Land of the relevant Charging Company and to
apply for and obtain any planning permissions, building regulation
consents or licences in each case as he may in his absolute
discretion think fit;
(p) to vary the terms of the leases of any such freehold and leasehold
Land;
(q) to take all steps necessary to effect all registrations, renewals,
applications and notifications as the Receiver will in his
discretion think prudent to maintain in force or protect any of the
relevant Charging Company's Intellectual Property Rights;
(r) to do all such other acts and things as may be considered by the
Receiver to be incidental or conducive to any of the above matters
or powers or otherwise incidental or conducive to the preservation,
improvement or realisation of the relevant Assets.
14.8 No Obligation to Account as Mortgagee in Possession: Neither the Security
Agent nor any Beneficiary nor the Receiver shall be liable to account as
mortgagee in possession or otherwise for any money not actually received
by it or him respectively.
14.9 Third Parties: A person dealing with the Receiver in good faith and for
full value shall not be concerned to enquire whether the Receiver is
validly appointed or acting within his powers. Neither the Security Agent
nor any Beneficiary nor the Receiver shall be liable to account as
mortgagee in possession or otherwise for any money not actually received
by it or him respectively, whether by way of payment, set-off,
counterclaim or otherwise.
14.10 Section 109, Law of Property Act 1925: Section 109 of the Law of Property
Act 1925 shall not apply to this Debenture.
<PAGE>
15. POWER OF ATTORNEY
15.1 Power of Attorney: Each Charging Company by way of security hereby
irrevocably appoints the Security Agent (whether or not a Receiver has
been appointed) and any Receiver separately the attorney of such Charging
Company (with full power to appoint substitutes and to delegate) for such
Charging Company, in its name and on its behalf, and as its act and deed
or otherwise, at any time to execute and deliver and otherwise perfect any
agreement, assurance, deed, instrument or Document, perform any act or
give any instructions in relation to Securities under the rules and
practices of a Relevant System or otherwise, which may be required of such
Charging Company under and in accordance with the terms of this Debenture
and which such Charging Company has failed to do within 14 days of being
notified by the Security Agent that it is required, or (on or after the
Enforcement Date) as may be deemed by such attorney necessary or desirable
for any purpose of this Debenture or to enhance or perfect the security
intended to be constituted by it or to convey or transfer legal ownership
of any Assets.
15.2 Ratification: Without prejudice to the generality of the provisions
contained in clause 15.1 (Power of Attorney), each Charging Company hereby
covenants with the Security Agent and separately with any Receiver that if
required so to do such company will ratify and confirm:
(a) all transactions entered into by it or (as the case may be) them at
its or (as the case may be) their instance in the proper exercise of
its or (as the case may be) their powers in accordance with this
Debenture; and
(b) all transactions entered into by it or (as the case may be) them in
signing, sealing, delivering and otherwise perfecting any
assignment, mortgage, charge, security, deed, assurance, document or
act as aforesaid;
and each Charging Company irrevocably acknowledges and agrees that such
power of attorney is (inter alia) given to the Security Agent, or as the
case may be, the Receiver or both, to secure the performance of these
obligations owed to him or them by the Charging Companies.
16. ADJUSTMENT OF ACCOUNT
If the state of account between the Security Agent or any Beneficiary and
a Company by reference to which any Secured Sums are calculated for the
purposes of this Debenture requires adjustment at any time because of any
claim made against the Security Agent or such Beneficiary by an
officeholder (within the meaning of Section 234 of the Insolvency Act
1986) then, notwithstanding any other provision of this Debenture:
(a) such Company's liability to the Security Agent or such Beneficiary
will be correspondingly adjusted; and
(b) the Security Agent or such Beneficiary may treat any release or
settlement made by it with such Company or any Charging Company
before any such adjustment is required as being of no effect; and
(c) the Security Agent or such Beneficiary may recover from such Company
or any Charging Company such sum as will place the Security Agent or
such Beneficiary in the same position as if such release or
settlement had not been made.
<PAGE>
If any claim is made against the Security Agent or any Beneficiary under
any insolvency law, the Security Agent or such Beneficiary may agree the
claim or settle it on any terms it chooses without asking for the relevant
Company's or any Charging Company's agreement. If the Security Agent or
such Beneficiary does agree or settle the claim, the Primary Borrower will
be liable under this Debenture as if a court order had been made
containing the terms which the Security Agent or Beneficiary have agreed.
The Primary Borrower will be responsible for all costs and expenses which
the Security Agent or such Beneficiary properly incurs in defending such a
claim.
17. OTHER POWERS EXERCISABLE BY THE SECURITY AGENT
17.1 Security Agent may Exercise Receiver's Powers: All powers of the Receiver
conferred by this Debenture may be exercised by the Security Agent
following demand by the Security Agent whether as attorney of the Charging
Companies or otherwise and whether or not the Receiver shall have been
appointed and so that clause 14.7(m) (Powers of Receiver) shall be read
and construed as if the words "be charged on the Assets of the relevant
Charging Company" were substituted for the words "be deemed an expense
properly incurred by the Receiver."
17.2 Security Agent Empowered to receive Book Debts: The Security Agent or any
manager or officer of the Security Agent is hereby irrevocably empowered
to receive all book debts and other debts and claims which may be assigned
to the Security Agent pursuant to clause 7 and on payment to give an
effectual discharge for them and on non-payment to take and institute (if
the Security Agent in its sole discretion so decides) all steps and
proceedings either in the name of the relevant assignor or in the name of
the Security Agent for their recovery and also to agree accounts and to
make allowances and to give time to any surety. The relevant assignor
hereby undertakes to ratify and confirm whatever the Security Agent or any
manager or officer of the Security Agent shall do or purport to do under
this clause 17.
17.3 Security Agent not obliged to take action relating to Book Debts: The
Security Agent shall have no liability or responsibility to any Charging
Company arising out of the exercise or non-exercise of the rights
conferred on it by this clause 17, except for gross negligence and wilful
default. The Security Agent shall not be obliged to make any enquiry as to
the sufficiency of any sums received by it in respect of any book debts or
other debt or claim so assigned to it or to make any claim or take any
other action to collect in or enforce them.
18. APPLICATION OF MONEY RECEIVED
BY THE SECURITY AGENT OR A RECEIVER
18.1 Application of Recoveries: Any money received under the powers conferred
by this Debenture shall, subject to the discharge of any prior-ranking
claims, be paid or applied in the order of priority set out in clause 8.9
of the Facility Agreement.
18.2 Suspense Accounts: The Security Agent may, in its absolute discretion on
or at any time or times after demand and pending the payment to the
Security Agent of the whole of the Secured Sums, place and keep to the
credit of a separate or suspense account any money received, recovered or
realised by the Security Agent by virtue of this Security for so long and
in such manner as the Security Agent may determine without any
intermediate obligation to apply it in or towards the discharge of any
Secured Sum.
<PAGE>
19. COSTS AND INTEREST ON OVERDUE AMOUNTS
19.1 Costs and Charges: All costs, charges and liabilities (including all
professional fees and disbursements and Value Added Tax and/or any similar
tax) and all other sums paid or incurred by the Security Agent, the
Beneficiaries and/or any Receiver under this Debenture, shall be
recoverable (on a full indemnity basis) as a debt payable on demand from
such of the Charging Companies as the Security Agent may select, may be
debited without notice to any account of such Charging Companies, shall
bear interest accordingly and shall be charged on the Assets of such
Charging Companies. Without prejudice to the generality of the foregoing,
the costs recoverable by the Security Agent, the Beneficiaries and/or any
Receiver under this Debenture shall include (i) all costs incurred by the
Security Agent and the Beneficiaries in preparing and administering this
Debenture or perfecting the security created by it, (ii) all costs
(whether or not allowable on a taxation by the Court) of all proceedings
for the enforcement of this Debenture or for the recovery or attempted
recovery of the Secured Sums, (iii) all money expended and all costs
arising out of the exercise of any power, right or discretion conferred by
this Debenture, (iv) all costs and losses arising from any default by any
Charging Company in the payment when due of any Secured Sums or the
performance of its obligations under this Debenture and (v) all
administrative charges of the Security Agent and the Beneficiaries based
on time spent by its employees and agents in connection with the affairs
of the Companies.
19.2 Overdue Amounts: Any overdue amounts secured by this Debenture shall carry
interest at the rate and in accordance with the terms contained in clause
5.4 of the Facility Agreement in relation to overdue sums or at such other
rate agreed between the relevant Company and the Security Agent or the
relevant Beneficiary from time to time.
19.3 Currency Indemnity: Moneys received or held by the Security Agent or any
Beneficiary pursuant to this Debenture may from time to time after demand
has been made be converted into such currency as the Security Agent or any
Beneficiary considers necessary or desirable to discharge the Secured Sums
in that currency at the Security Agent or that Beneficiary's then
prevailing spot rate of exchange (as conclusively determined by the
Security Agent or that Beneficiary acting in good faith) for purchasing
the currency to be acquired with the existing currency.
20. SET-OFF
(a) Each Beneficiary may, on or after the Enforcement Date, retain any
money standing to the credit of any Charging Company with such
Beneficiary in any currency upon any account or otherwise (in any
country and whether or not in such Charging Company's name) as cover
for any Secured Sums and/or at any time or times without notice to
such Charging Company combine or consolidate all or any of such
money with all or such part of the Secured Sums as such Beneficiary
may select (whether presently payable or not) and such Beneficiary
may purchase with any such money any other currency required to
effect such combination.
(b) Each Charging Company irrevocably authorises the Security Agent and
each Beneficiary on or after the Enforcement Date in its name and at
its expense to perform such acts and sign such documents as may be
required to give effect to any set-off or transfer pursuant to
clause 20(a), including the purchase with the money standing to the
credit of any such account of such other currencies as may be
necessary to effect such set-off or transfer.
<PAGE>
(c) The foregoing provisions of this clause shall be in addition to and
without prejudice to such rights of set-off, combination,
consolidation, lien and other rights whatsoever conferred on the
Security Agent and the Beneficiaries by law.
(d) If the Security Agent or a Beneficiary exercises its rights under
this clause 20, it shall as soon as practicable notify the Primary
Borrower.
21. SECURITY AGENT AS TRUSTEE,
PERPETUITY PERIODS AND NO PARTNERSHIP
21.1 Security Agent: The Security Agent hereby declares itself to be a trustee
of this Debenture (and any other security in its favour created pursuant
to this Debenture) for the Beneficiaries. The retirement of the Security
Agent from being trustee and the appointment of any new trustee shall be
effected in the manner provided in the Facility Agreement.
21.2 Perpetuity Period: The perpetuity period applicable to the trust hereby
constituted shall be 80 years.
21.3 No Partnership: Nothing in this Security shall constitute or be deemed to
constitute a partnership between the Beneficiaries.
22. FORBEARANCE AND SEVERABILITY
22.1 No Waivers: All rights, powers and privileges under this Debenture shall
continue in full force and effect, regardless of the Security Agent or any
Beneficiary exercising, delaying in exercising or omitting to exercise any
of them.
22.2 Invalidity and Severability:
(a) None of the covenants and guarantees given and none of the charges
created by the Charging Companies under this Debenture shall be
avoided or invalidated by reason only of one or more of such
covenants, guarantees or charges being invalid or unenforceable.
(b) Any provision of this Debenture which for any reason is or becomes
illegal, invalid or unenforceable shall be ineffective only to the
extent of such illegality, invalidity and unenforceability, without
invalidating the remaining provisions of this Debenture.
23. VARIATIONS AND CONSENTS
23.1 Variations to be in writing signed by all parties: No variation of this
Debenture shall be considered valid and as constituting part of this
Debenture, unless such variation shall have been made in writing and
signed by the Security Agent (on behalf of the Beneficiaries) and the
Primary Borrower (on behalf of the Charging Companies).
23.2 Variation: The expression 'variation' shall include any variation,
supplement, extension, deletion or replacement however effected.
<PAGE>
23.3 Conditional Consents: Save as otherwise expressly specified in this
Debenture, any consent of the Security Agent may be given absolutely or on
any terms and subject to any conditions as Security Agent may determine in
its entire discretion.
24. AUTHORITY OF PRIMARY BORROWER
Each Charging Company (except the Primary Borrower) hereby irrevocably
authorises the Primary Borrower to act on its behalf in administering the
terms of this Debenture and in signing on its behalf any document varying,
supplementing, restating and/or replacing the terms and conditions
contained in this Debenture or any document ancillary to it.
25. SERVICE OF DEMANDS AND NOTICES
25.1 Addresses:
(a) A demand for payment or any other demand or notice under this
Debenture may be made or given by any manager or officer of the
Security Agent in writing addressed to the Charging Company
concerned and served on it at the address of such Charging Company
stated above or its existing or last known place of business (or, if
more than one, any one of such places), or by facsimile transmission
to the facsimile number last known to the Security Agent or by any
other form of electronic communication which may be available.
(b) Any communication to be given to any Beneficiary under this
Debenture must be given to the Security Agent in writing served on
it at the address for service of the Security Agent given in Part B
of the First Schedule or the address last notified to the Primary
Borrower by the Security Agent in writing.
25.2 Deemed Service: A notice or demand shall be deemed to be duly served on a
Charging Company:
(a) if delivered by hand, when left at such an address;
(b) if sent by post, at noon on the next day following the day of
posting and shall be effective even if it is misdelivered or
returned undelivered;
(c) if given or made by facsimile or other electronic communication, at
the time of transmission;
Provided that, where delivery or transmission occurs after 6.00 p.m. on a
Business Day or on a day which is not a Business Day, service shall be
deemed to occur at 9.00 a.m. on the next Business Day.
26. COUNTERPARTS
This Debenture may be executed by any of the Charging Companies in any
number of copies, all of which taken together shall constitute a single
Debenture.
<PAGE>
27. ASSIGNMENT
Each Beneficiary may assign or transfer all or any of their respective
rights hereunder or hold their rights hereunder on trust for their
successors or assigns or transferees subject always to the provisions of
clause 16 of the Facility Agreement.
28. SECURITY AGENT
The provisions of clauses 17 - 21 of the Facility Agreement shall apply to
the Security Agent's rights, obligations and duties under this Debenture
as if set out in this Debenture in full.
29. JOINT AND SEPARATE LIABILITY
Unless the context otherwise requires, all covenants, agreements,
representations and warranties on the part of the Charging Companies
contained in this Debenture are given by them jointly and separately and
shall be construed accordingly.
30. THE GIVING AND ACKNOWLEDGEMENT OF NOTICE OF ASSIGNMENT
For the purposes of Section 136 of the Law of Property Act 1925 and
generally the Security Agent hereby gives, and each Charging Company which
is or will become a debtor of any other Charging Company hereby
acknowledges, receipt of notice of the assignment by way of security and
charge to the Security Agent under this Debenture of all such present
and/or future indebtedness.
31. GOVERNING LAW
31.1 This Debenture shall be governed by and construed in accordance with
English law.
31.2 Each Charging Company hereby submits, for the exclusive benefit of the
Security Agent and the Beneficiaries, to the jurisdiction of the English
Courts, but without prejudice to the right of the Security Agent and/or
the Beneficiaries to commence proceedings against such Charging Company in
any other jurisdiction.
THIS GUARANTEE AND DEBENTURE has been executed by each Charging Company as a
Deed and signed by the Security Agent and it shall take effect on the day and
year first above written.
<PAGE>
THE FIRST SCHEDULE
Part A
The Charging Companies
Address and fax or
Name of Company Registered Number Telex Number
TU Finance (No. 1) Limited 3505836 Norton Rose,
(as Primary Borrower) Kempson House,
Camomile Street,
London EC3A 7AN
Fax: 44 171 283 6500
Attention: Andrew Bamber/
Marcus Dougherty
TU Finance (No. 2) Limited 3514100 Norton Rose,
Kempson House,
Camomile Street,
London EC3A 7AN
Fax: 44 171 283 6500
Attention: Andrew Bamber/
Marcus Dougherty
TU Acquisitions PLC 3455523 Norton Rose,
Kempson House,
Camomile Street,
London EC3A 7AN
Fax: 44 171 283 6500
Attention: Andrew Bamber/
Marcus Dougherty
Part B
The Security Agent
Address for Service
Name of Company Registered Number and Fax or Telex Number
Chase Manhattan International 938937 Trinity Tower
Limited 9 Thomas More Street
London E1 9YT
Fax: + 44 171 777 2360
Attention: Stephen Clarke
<PAGE>
THE SECOND SCHEDULE
Terms of Guarantee
1. Continuing Security: This Guarantee is a continuing security to the
Security Agent and each Beneficiary and will continue in full force until
no sum remains payable under the Finance Documents and the Beneficiaries
have irrevocably received or recovered all sums payable under the Finance
Documents irrespective of whatever dealings may occur on any account
between the Security Agent or such Beneficiary and the Principal.
2. Opening of New Accounts: If this Guarantee ceases for any reason to be
binding on the Guarantor as a continuing security in relation to the
Principal, then each Beneficiary may break such accounts of the Guarantor
and the Principal with such Beneficiary as such Beneficiary deems
appropriate and open new accounts for the account holders affected.
If that is done, no money credited to such new account at that time or
later will have the effect of reducing the amount due to such Beneficiary
on the original account. If that is not done, such Beneficiary will still
be treated as if it had broken all such accounts at the time when such
notice expired or this Guarantee ceased to be a continuing security and as
if all payments made to such Beneficiary then or later had been credited
to a new account with the same result.
Such Beneficiary may also refuse payment (without notice to the Guarantor)
of any cheque or order which, if paid or honoured, would reduce or further
reduce the Guarantor's credit balances below the amount of its liability
to such Beneficiary under this Guarantee at such time.
3. Payments: All payments falling to be made by a Guarantor under this
Guarantee will be made to the Security Agent or the relevant Beneficiary
without any set-off or counterclaim and free from any deduction or
withholding for or on account of any taxes or other charges in the nature
of taxes imposed by any competent authority. If any such deduction or
withholding is required by law, the Guarantor will pay to the relevant
Beneficiary any additional amount necessary to ensure that such Security
Agent receives and retains the full amount of the relevant payment as if
such deduction or withholding had not been made.
4. Suspense Account: The Security Agent and/or any Beneficiary may at any
time (without prejudice to its other rights) place and keep for such time
as the Security Agent or such Beneficiary may think prudent any money
received, recovered or realised under or by virtue of this Guarantee on a
separate or suspense account to the credit of either the Security Agent or
such Beneficiary or the Guarantor (as the Security Agent or such
Beneficiary thinks fit), without any intermediate obligation on its part
to apply such money or any part of it in or towards discharge of the
Secured Sums.
5. Additional to Other Security: This Guarantee is to be in addition to and
is not to prejudice or be prejudiced by any other guarantee or security
(including any other guarantee signed by the Guarantor) which the Security
Agent or any Beneficiary may hold from or on account of the Principal
either now or in the future. This Guarantee may be enforced at any time on
or after the Enforcement Date without the Security Agent or any
Beneficiary first making demand on the Principal or taking any steps or
proceedings against the Principal or having recourse to any such other
guarantee or security.
6. Restriction on each Guarantor: The Guarantor shall have no right to:
<PAGE>
(i) make any claim (whether by way of proof in liquidation or otherwise)
against the Principal or any property of the Principal; or
(ii) participate in any security held or money received by the Security
Agent or any Beneficiary on account of the Secured Sums; or
(iii) stand in the place of the Security Agent or any Beneficiary in
respect of any such security or money;
until in each case all Secured Sums have been repaid to the Security Agent
and/or the Beneficiaries in full.
However, if so directed by the Security Agent but not otherwise, the
Guarantor shall prove in the Principal's liquidation for the whole or any
part of the money due or owing to the Guarantor from the Principal in any
manner whatever and the benefit of such proof and of all money received by
the Guarantor in respect of it shall be held on trust for the Security
Agent and applied in reduction of the Secured Sums.
7. Right to act without affecting the Guarantee: The Security Agent or any
Beneficiary may at any time (without affecting its rights against the
Guarantor under this Guarantee) grant, extend, increase, renew, vary,
determine or refuse any credit or facility to the Principal, or take,
hold, exchange, vary, release, abstain from perfecting or enforcing any
guarantee or security for the Secured Sums, or compromise with or extend
time or grant waivers, releases or any indulgence to the Principal or any
co-surety, or make any arrangement, concession or settlement with any of
them or do or omit or neglect to do anything whatever which, but for this
provision, might exonerate or discharge the Guarantor's obligations under
this Guarantee (except for a specific written release given by the
Security Agent of such obligations).
8. Receipt of Payments: After this Guarantee becomes enforceable, no payment
received by the Security Agent or any Beneficiary from any source (except
the Principal) in respect of the Secured Sums will be treated (regardless
of the manner in which the Security Agent or such Beneficiary may deal
with it in its books or otherwise) as reducing the Guarantor's liability
to the Security Agent or such Beneficiary under this Guarantee, so that
until the Security Agent or such Beneficiary has received payment in full
of all Secured Sums, it will be deemed, as between the Security Agent or
such Beneficiary and the Guarantor and except for any payment by the
Principal, to remain wholly unsatisfied.
9. Adjustments: If the state of account between the Security Agent or any
Beneficiary and the Principal (by reference to which any Secured Sums are
calculated for the purposes of this Guarantee) requires adjustment at any
time because of any claim made against the Security Agent or such
Beneficiary by an office-holder (within the meaning of Section 234 of the
Insolvency Act 1986), then, notwithstanding any other provision of this
Guarantee:
(a) the Guarantor's liability to the Security Agent or such Beneficiary
will be correspondingly adjusted, and
(b) the Security Agent or such Beneficiary may treat any release or
settlement made by it with the Guarantor before any such adjustment
is required as being of no effect, and
<PAGE>
(c) the Security Agent or such Beneficiary may recover from the
Guarantor such sum as will place the Security Agent or such
Beneficiary in the same position as if such release or settlement
had not been made.
If any claim is made against the Security Agent or any Beneficiary under
any insolvency law, the Security Agent or such Beneficiary may agree the
claim or settle it on any terms it chooses without the necessity of asking
for the Guarantor's agreement. If the Security Agent or such Beneficiary
does agree or settle the claim, the Guarantor will be liable under this
Guarantee as if a court order had been made containing the terms which the
Security Agent or such Beneficiary have agreed. The Guarantor will be
responsible for all costs and expenses which the Security Agent or such
Beneficiary properly incurs in defending such a claim.
10. Retention: The Security Agent may keep the security held by it for the
Guarantor's liability under this Guarantee in order to protect the
Security Agent and the Beneficiaries against any possible claim under
insolvency law for such period after all Secured Sums have been satisfied
as the Security Agent reasonably considers to be necessary to avoid any
risk under applicable insolvency law. If a claim is made against the
Security Agent or any Beneficiary within that period, the Security Agent
may keep the security until that claim has finally been dealt with.
11. Guaranteed Liabilities Continue to be Payable: The winding-up or
dissolution of the Principal will not affect the Guarantor's liability
under this Guarantee and any sum payable to the Security Agent or any
Beneficiary at the date of the commencement of such winding-up or
immediately prior to such dissolution (as the case may be) will be treated
as continuing payable until actually paid in full.
12. Capacity of Principal: If any question arises as to the capacity of the
Principal in relation to any dealing between the Principal and the
Security Agent or any Beneficiary, or as to the capacity, authority or
power of any officer, employee or agent of the Principal to bind it to any
transaction with the Security Agent or any Beneficiary, or as to whether
any of the Secured Sums are immediately due and payable, that question
shall, as between the Security Agent or such Beneficiary and the
Guarantor, be disregarded and the Guarantor will for the purposes of this
Guarantee be and continue to be liable to the Security Agent or such
Beneficiary in respect of any such dealing, transaction and/or Secured
Sums as if the Guarantor were a principal debtor.
13. Currency Conversion: Any money received by the Security Agent or any
Beneficiary under or by virtue of this Guarantee may be converted by the
Security Agent or such Beneficiary at any time as it thinks fit (and
notwithstanding any previous conversion) into any currency in which any
part of the Secured Sums is due or owing to the Security Agent or such
Beneficiary, in which event the net amount available to the Security Agent
or such Beneficiary in such other currency (after allowing for all costs
of conversion) shall be deemed to be the amount received by the Security
Agent or such Beneficiary under or by virtue of this Guarantee.
14. Admission and Acknowledgement of Indebtedness: Any admission or
acknowledgement in writing by the Principal or on its behalf of the amount
of any Secured Sums or otherwise in relation to this Guarantee, or any
judgment or award obtained by the Security Agent or any Beneficiary
against the Principal, or any proof by the Security Agent or any
Beneficiary in winding up which is admitted, or any statement of account
furnished by the Security Agent or any Beneficiary the correctness of
which is certified by any one of its directors, regional directors or
managers, will be binding and conclusive on the Guarantor (except in the
case of manifest error).
<PAGE>
15. Financial Assistance: Notwithstanding any other provision of this
Guarantee, this Guarantee shall not operate to guarantee any money or
liability if and insofar as such money was borrowed or such liability was
incurred directly or indirectly for the purpose of the acquisition by any
person of shares in the Guarantor or its holding company or the reduction
or discharge of any existing liability incurred for the purpose of such
acquisition and if and for so long as it would not be lawful under Chapter
VI, Part V, of the Companies Act 1985 for such money or liability to be
guaranteed by this Guarantee.
16. Disability or Incapacity of any Principal: As a separate and independent
stipulation and without prejudice to the provisions of clause 2 (Covenant
to Pay), the Guarantor agrees that all sums of money which have become due
hereunder and which may not be recoverable from it on the footing of a
guarantee whether by reason of any legal limitation on or disability or
incapacity of any Company or any other fact or circumstance, and whether
known to any Beneficiary or not, shall as to an equivalent amount thereof
nevertheless be recoverable from the Guarantor as sole or principal debtor
or debtors in respect thereof and shall be paid on demand in writing made
by the Security Trustee.
17. No Termination: Other than with the prior written consent of the Security
Agent, the Guarantor shall not terminate its guarantee contained in this
Debenture whilst any part of the Secured Sums remains outstanding.
<PAGE>
THE THIRD SCHEDULE
PART I
Form of Notice and Instructions to Receiving Banker
To: [The Receiving Banker] [ ] 1998
Dear Sirs,
Offer Document dated [ ] 1998 made relating to an offer for The Energy
Group PLC (the "Agreement"); agreement with the receiving banks to the offer
dated [ ] 1998 (the "Receiving Banker Agreement");
1. We refer to the Agreement and the Receiving Banker Agreement. We attach a
copy of a guarantee and debenture (the "Deed") dated [ ] 1998 made
between, inter alia, Chase Manhattan Bank Limited (the "Security Agent")
and ourselves. Terms defined in the Deed are to have the same meanings in
this letter.
2. We hereby give you notice that the Offer Rights (which include our rights
under both the Agreement and the Receiving Banker Agreement) have been
assigned to the Security Agent by the Deed and all the ordinary shares of
[ ] each in The Energy Group PLC (the "Shares") in respect of which
acceptances are received by you pursuant to the Offer for the purchase by
us of the Shares have been charged to the Security Agent.
3. We irrevocably and unconditionally instruct and authorise you
(notwithstanding any previous directions which we may have given you to
the contrary):
(a) unless otherwise directed by the Security Agent, to furnish or
disclose to the Security Agent in addition to ourselves all notices,
matters or things required under the Agreement to be furnished and
disclosed to ourselves;
(b) to accept from and agree with the Security Agent (and not ourselves)
all claims under, discharges for and waivers, variations,
terminations and cancellations of the Offer Rights without any
reference to or further authority from us;
(c) to register or cause to be registered in the name of the Security
Agent (or as the Security Agent may otherwise direct) all the Shares
in respect of which acceptances are received by you pursuant to the
Offer;
(d) to deliver or cause to be delivered to the Security Agent
certificates for the Shares so registered, together with any other
documents of title relating thereto;
(e) pending such registration and delivery, to treat all Shares in
respect of which acceptances are received by you pursuant to the
Offer as charged to the Security Agent and to keep in safe custody
all acceptances, certificates and/or other documents of title
relating thereto and not to part with possession of the same without
the prior written consent of the Security Agent;
<PAGE>
(f) to provide to the Security Agent such information as it may require
from time to time in connection with the Shares charged to it,
without further authority from us and without further reference to
us.
4. This notice and the instructions and authorisations herein contained are
irrevocable and may not be amended, abrogated or withdrawn without the
Security Agent's express prior written consent. These instructions
supersede and override any previous instructions given by us in relation
to the matters dealt with in this letter.
5. This letter shall be governed by and construed in accordance with the laws
of England.
6. Please confirm your acknowledgement of this Notice by signing the enclosed
form of acknowledgement and undertaking and by returning the same to
Messrs Lovell White Durrant at 65 Holborn Viaduct, London EC1A 2DY (Ref
A1/PM/MJC) and Chase Manhattan International Limited at Trinity Tower, 9
Thomas More Street, London E1 9YT marked for the attention of Stephen
Clarke.
Signed by
................................
for and on behalf of
TU Acquisitions PLC
<PAGE>
PART II
Form of Acknowledgement
and Undertaking by Receiving Banker
To: Lovell White Durrant
65 Holborn Viaduct
London EC1A 2DY
Ref: A1/PM/MJC
Chase Manhattan International Limited
Trinity Tower
9 Thomas More Street
London E1 9YT
Attention: Stephen Clarke
Date:
Dear Sirs
The Energy Group PLC
1. We hereby acknowledge receipt of a letter dated [ ] 1998 addressed
to us by TU Acquisitions PLC (a copy of which is annexed) together with a
copy of the Deed referred to in it. Expressions defined in the annexed
letter and the Deed shall have the same meanings in this letter, unless
the context otherwise requires.
2. We confirm our acceptance of the instructions contained in the annexed
letter and we undertake to you to act in accordance with and comply with
those instructions in all respects.
3. We confirm that we have not received notice of any other assignment of the
Offer Document Rights.
4. We acknowledge that all Shares in respect of which acceptances are
received by us pursuant to the Offer shall (subject to the Offer becoming
or being declared unconditional) be treated as charged to you as provided
in the Deed and registered in your name or as you may direct and we
undertake not to do or omit to do anything inconsistent with the terms of
the Deed.
5. The above acknowledgements and undertakings are given in the knowledge
that they are required by you pursuant to the Deed and the Facility
Agreement and in consideration of your making facilities available to the
Borrowers on the terms set out in the Facility Agreement.
Yours faithfully
for and on behalf of
[Receiving Banker]
...........................
Director
<PAGE>
PART III
Form of control agreement to be executed by among others
the US Depositary for the Offer and Bidco
<PAGE>
EXECUTED and DELIVERED as a )
Deed by TU FINANCE (NO. 1) LIMITED )
(pursuant to a resolution of its Board )
of Directors) acting by: )
[L Anderson] Attorney in fact
[R Shapard] Attorney in fact
EXECUTED and DELIVERED as a )
Deed by TU FINANCE (NO. 2) LIMITED )
(pursuant to a resolution of its Board )
of Directors) acting by: )
[L Anderson] Attorney in fact
[R Shapard] Attorney in fact
EXECUTED and DELIVERED as a )
Deed by TU ACQUISITIONS PLC )
(pursuant to a resolution of its Board )
of Directors) acting by: )
[L Anderson] Attorney in fact
[R Shapard] Attorney in fact
SIGNED by [J Ritchie] )
for and on behalf of )
CHASE MANHATTAN INTERNATIONAL LIMITED )
DATED 19 May 1998
-----------------
TU FINANCE (NO. 2) HOLDINGS, INC.
(as Chargor)
- and -
CHASE MANHATTAN INTERNATIONAL LIMITED
(as Security Agent)
- --------------------------------------------------------------------------------
SHARE CHARGE
relating to ordinary shares in TU Finance (No. 2) Limited
- --------------------------------------------------------------------------------
LOVELL WHITE DURRANT
LONDON
A1/PRM/NPF
<PAGE>
CONTENTS
Clause Page No
1. INTERPRETATION........................................................1
2. CHARGING CLAUSE.......................................................3
3. POWER OF ATTORNEY.....................................................4
4. VOTING RIGHTS AND DIVIDENDS...........................................4
5. CONTINUING SECURITY...................................................5
6. WARRANTIES............................................................5
7. COVENANTS.............................................................6
8. POWERS OF THE SECURITY AGENT..........................................6
9. APPLICATION OF MONEY RECEIVED BY THE
SECURITY AGENT OR A RECEIVER..........................................7
10. LIMITATION OF SECURITY AGENT'S LIABILITY..............................7
11. FURTHER ASSURANCE.....................................................7
12. CONSOLIDATION OF MORTGAGES............................................7
13. ADDITIONAL OR FUTURE SECURITY.........................................8
14. OPENING OF NEW ACCOUNTS...............................................8
15. FORBEARANCE AND SEVERABILITY..........................................8
16. VARIATIONS AND CONSENTS...............................................8
17. COSTS AND INTEREST ON OVERDUE AMOUNTS.................................9
18. STAMP DUTY............................................................9
19. CURRENCY INDEMNITY....................................................9
20. COUNTERPARTS..........................................................9
21. ASSIGNMENT............................................................9
22. SECURITY AGENT.......................................................10
23. SERVICE OF DEMANDS AND NOTICES.......................................10
24. APPOINTMENT AND POWERS OF A RECEIVER.................................10
25. OTHER POWERS EXERCISABLE BY THE SECURITY AGENT.......................11
<PAGE>
26. SECURITY AGENT AS TRUSTEE,
PERPETUITY PERIODS AND NO PARTNERSHIP................................11
27. THIRD PARTY SECURITY PROVISIONS......................................11
28. GOVERNING LAW AND JURISDICTION.......................................12
<PAGE>
THIS CHARGE made the 19th day of May 1998
BETWEEN:
(1) TU FINANCE (NO. 2) HOLDINGS, INC. a corporation registered in the State of
Delaware, United States of America, whose address is 1601 Bryan Street,
Dallas, Texas (the "Chargor"); and
(2) CHASE MANHATTAN INTERNATIONAL LIMITED as agent and trustee on behalf of the
Beneficiaries (as defined below), whose address is 125 London Wall, London
EC2Y 5AJ.
WITNESSES as follows:
1. INTERPRETATION
1.1 In this Charge terms defined in the Facility Agreement and not redefined in
this Charge have the meaning set out in that document and, in addition,
unless the context otherwise requires, the following words have the
following meanings:
"Beneficiaries" collectively the Arrangers, the Facility Agent, the
Issuing Bank, the Security Agent and the Banks;
"Business Day" a day on which banks generally are open for business
in the City of London and in New York (excluding
Saturdays and bank or public holidays);
"Company" TU Finance (No. 2) Limited, a company registered in
England with Number 3514100;
"Derivative Assets" include:
(a) allotments, rights, money or property arising
from the Shares by way of conversion, exchange,
redemption, bonus, preference, option or
otherwise;
(b) dividends, distributions, interest and other
income from the Shares; and
(c) stock, shares and securities offered in
addition to or substitution for the Shares;
"Document" includes any transfer, renunciation, proxy, mandate,
legal or other charge, mortgage, assignment, deed or
other document;
"Encumbrance" includes any mortgage, pledge, lien, hypothecation,
charge, assignment or deposit by way of security or
any other agreement or arrangement giving or having
the effect of giving security or preferential
treatment to a creditor;
<PAGE>
"Expenses" interest, costs and expenses which the Chargor is
liable to reimburse to the Security Agent under
clause 17 (Costs and Interest on Overdue Amounts)
and any liability of the Chargor under clauses 18
(Stamp Duty) or 19 (Currency Indemnity);
"Facility Agreement" the facility agreement dated 2 March 1998 made
between TU Finance (No. 1) Limited (1), TU Finance
(No. 2) Limited and TU Acquisitions PLC (2), Chase
Manhattan plc, Lehman Brothers International and
Merrill Lynch Capital Corporation (as Joint Lead
Arrangers) (3), The Chase Manhattan Bank, Lehman
Commercial Paper Inc and Merrill Lynch Capital
Corporation (as Underwriters) (4), The Chase
Manhattan Bank (as Issuing Bank) (5), Chase
Manhattan International Limited (as Facility Agent)
(6) and Chase Manhattan International Limited (as
Security Agent) (7) as amended and restated by an
agreement dated 3 March 1998 and 21 April 1998 and
which expression shall include any further
amendments, supplements, accessions, variations or
additions to such agreement, however fundamental
(including, without limitation, changes to the
facilities provided or increases in their maximum
amount);
"Principal" each of the companies specified or referred to in
the Schedule to this Charge;
"Original Shares" all of the shares in the issued share capital of the
Company owned by the Chargor;
"Receiver" means any receiver and manager or receivers and
managers appointed under clause 24 (Appointment and
Powers of Receiver) and (where the context requires
or permits) includes any substituted receiver and
manager or receivers and managers;
"Regulations" the Uncertificated Securities Regulations 1995;
"Relevant System" the meaning given to that term by the
Regulations and includes any other system or
facility (in the United Kingdom or elsewhere)
providing for the deposit of, and clearance of
transactions in, the Security Assets;
"Secured Sums" all money and liabilities now or in the future due,
owing or incurred to each Beneficiary by any
Principal under the Facility Agreement but excluding
any money and liabilities due under any stand-alone
revolving credit facility as contemplated by clause
24.5 of the Facility Agreement together with the
Expenses;
"Security Agent" Chase Manhattan International Limited acting as
security agent and trustee for the Beneficiaries and
includes any successor appointed by the
Beneficiaries
<PAGE>
pursuant to Clause 17.5 (Successor Facility Agent or
Security Agent) of the Facility Agreement;
"Security Assets" the Shares and Derivative Assets and includes all
rights, benefits and sums now or in the future
accruing to the Chargor as a result of any Security
Asset being held in a Relevant System (including the
Chargor's rights against the operator of, or any
participant in, the Relevant System); and
"Shares" the Original Shares and all other shares in the
Company owned by the Chargor while any Secured Sums
are outstanding.
1.2 Interpretation: In this Charge, unless the context otherwise requires
(a) words denoting the singular number only shall include the plural
number also and vice versa;
(b) words denoting the masculine gender only shall also include the
feminine gender;
(c) words denoting persons only shall include corporations, partnerships
and unincorporated associations;
(d) references to clauses, paragraphs and Schedules are to be construed as
references to clauses, paragraphs and Schedules of this Charge;
(e) references to any party shall, where relevant, be deemed to be
references to or to include, as appropriate, their respective
successors or permitted assigns;
(f) references in this Charge to this Charge or any other document include
references to this Charge or such other document as varied,
supplemented, restated and/or replaced in any manner from time to time
and/or any document which varies, supplements, restates and/or
replaces it;
(g) references to "including" shall not be construed restrictively but
shall be construed as meaning "including, without prejudice to the
generality of the foregoing";
(h) references to moneys, obligations and liabilities due, owing or
incurred under the Finance Documents shall include moneys, obligations
and liabilities due, owing or incurred in respect of any extensions or
increases in the amount of the facilities provided for therein or the
obligations and liabilities imposed thereunder;
(i) expressions defined in the Companies Act 1985 shall have the same
meanings in this Charge, except that the expression "company" shall
include a body corporate established outside Great Britain;
(j) any references to any statute or any section of any statute shall be
deemed to include reference to any statutory modification or
re-enactment of it for the time being in force;
(k) the limitation on liability conferred by Section 6(2) of the Law of
Property (Miscellaneous Provisions) Act 1994 shall not apply to the
covenants for title implied on the part of the Chargor.
<PAGE>
1.3 Headings: headings in this Charge are inserted for convenience and shall
not affect its interpretation;
2. CHARGING CLAUSE
2.1 Security Assets: The Chargor as owner, with full title guarantee, hereby
charges the Security Assets to the Security Agent by way of first fixed
charge as continuing security for the payment and discharge of the Secured
Sums.
2.2 Disapplication of s.6(2) of the Law of Property (Miscellaneous Provisions)
Act 1994: The Chargor shall be liable to the Security Agent under its full
title guarantee covenants for anything which at the time of this Charge (or
any later substitution or deposit) is within the actual knowledge, or is a
necessary consequence of facts then within the actual knowledge of the
Security Agent, and so Section 6 (2) of the Law of Property (Miscellaneous
Provisions) Act 1994 shall not apply to this Charge.
2.3 Obligation to deposit certificates: The Chargor shall promptly deposit with
the Security Agent on the date hereof or on later receipt all certificates
and documents of title relating to Security Assets in certificated form and
undated transfers executed in blank and such other documents as the
Security Agent may require to perfect title to the Security Assets (duly
executed by the registered holder) or for vesting or enabling it to vest
the same in itself, its nominees or any purchaser. The Security Agent may
at any time, without notice to the Chargor, complete such transfers and
present them for registration.
3. POWER OF ATTORNEY
3.1 Power of Attorney: The Chargor by way of security hereby irrevocably
appoints the Security Agent (whether or not a Receiver has been appointed)
and any Receiver separately the attorney of the Chargor (with full power to
appoint substitutes and to delegate), in its name and on its behalf, and as
its act and deed or otherwise, at any time to execute, deliver and perfect
any Document, perform any act, or give any instructions under the rules and
practices of a Relevant System or otherwise which may be required of the
Chargor under this Charge and which the Chargor has failed to do within 7
days of being notified by the Security Agent that it is required, or (on or
after the Enforcement Date) as may be deemed by such attorney necessary or
desirable for any purpose of this Charge or to enhance or perfect the
security intended to be constituted by it or to transfer legal ownership of
any Security Assets.
3.2 Ratification: Without prejudice to the generality of the provisions
contained in clause 3.1 (Power of Attorney), the Chargor hereby covenants
with the Security Agent and separately with any Receiver that if required
so to do the Chargor will ratify and confirm:
(a) all transactions entered into by it or (as the case may be) them at
its or (as the case may be) their instance in the proper exercise of
its or (as the case may be) their powers in accordance with this
Charge; and
(b) all transactions entered into by it or (as the case may be) them in
signing, sealing, delivering and otherwise perfecting any Document as
aforesaid;
and the Chargor irrevocably acknowledges and agrees that such power of
attorney is (inter alia) given to the Security Agent, or as the case
may be, the Receiver or both, to secure the performance of these
obligations owed to him or them by the Chargor.
<PAGE>
4. VOTING RIGHTS AND DIVIDENDS
4.1 Chargor to retain voting rights and dividends until Charge enforceable:
Unless and until this Charge becomes enforceable or the Security Agent
otherwise directs at any time while a Default is continuing:
(a) for so long as the Chargor remains the registered owner of all the
Security Assets:
(i) all voting and other rights (including the right to receive
dividends) attaching to any Security Assets shall continue to be
exercised by the Chargor for so long as it remains their
registered owner and subject to clause 7.3(Covenants), Provided
that the Chargor undertakes not to exercise any voting or other
rights in a way which is likely to prejudice the value of the
Security Assets or otherwise jeopardise the security constituted
by this Charge; and
(ii) the Chargor shall be free to deal with all the dividends and
interest paid thereon, subject to the provisions of the
Facilities Agreement:
(b) if Security Assets are registered in the name of the Security Agent or
the Security Agent's nominee:
(i) all voting and other rights attaching to them shall be exercised
by the nominee in accordance with instructions in writing from
time to time received from the relevant Chargor, Provided that
the relevant Chargor undertakes not to give any instructions to
exercise any voting or other rights in a way which is likely to
prejudice the value of the Security Assets or otherwise
jeopardise the security created by this Charge; in the absence of
any such instructions, the nominee shall refrain from exercising
any such rights; and
(ii) all dividends, distributions, interest and other moneys paid on
and received by the Security Agent in respect of the Security
Assets shall be collected by the Seucrity Agent as agent for the
Chargor and paid to the Chargor to such account as it may from
time to time specify.
4.2 Security Agent to have voting rights and dividends after Charge
enforceable: At any time after this Charge has become enforceable:
(a) the Security Agent may (in the name of the Chargor or otherwise and
without any further consent or authority on the part of the Chargor)
exercise all voting and other rights attaching to the Security Assets
and any rights attaching to the Security Assets to nominate or remove
a director as if the Security Agent was the sole beneficial owner of
the Security Assets;
(b) all Derivative Assets shall, if received by the Chargor or its
nominee, be held on trust for and forthwith paid or transferred to the
Security Agent; and
(c) the Chargor shall (and shall procure that its nominees shall) accept
short notice for and attend any meeting of the holders of any Security
Assets, appoint proxies and exercise voting and other rights and
powers exercisable by the holders of the Security Assets as the
Security Agent may direct from time to time.
<PAGE>
5. CONTINUING SECURITY
This Charge shall be a continuing security to the Security Agent and the
Beneficiaries, notwithstanding any intermediate payment or settlement of
account or any other matter whatever, and shall be in addition to and shall
not prejudice or be prejudiced by any right of lien, set-off, combination
or other rights exercisable by the Security Agent and the Beneficiaries as
bankers against the Chargor or any security, guarantee, indemnity and/or
negotiable instrument now or in the future held by the Security Agent or
any Beneficiary.
6. WARRANTIES
The Chargor represents and warrants to the Security Agent that:
6.1 the Original Shares are and any Shares deposited or substituted
hereafter will be fully called up and fully paid-up;
6.2 (subject to this Charge) the Original Shares are legally and
beneficially owned by the Chargor and any shares deposited or
substituted hereafter shall be beneficially owned by it upon deposit
or substitution and in each case free from any option, equity, trust
or Encumbrance; and
6.3 this Charge has been properly executed by it and it has taken all
necessary action to authorise the execution and delivery of this
Charge which is valid and binding upon it and enforceable in
accordance with its terms.
7. COVENANTS
The Chargor covenants with the Security Agent that it shall:
7.1 not sell, transfer, alienate or deal with the Security Assets or any
interest in any of the Security Assets or attempt or agree to do so;
7.2 not (except for this Charge) create or agree to create or permit to
arise or subsist any Encumbrance on any of the Security Assets;
7.3 not cause or permit any of the Security Assets to be consolidated,
sub-divided or converted and shall take such action as the Security
Agent may direct in respect of any proposed compromise, arrangement,
capital organisation, conversion, exchange, repayment or takeover
offer affecting any of the Security Assets or any proposal to vary or
abrogate any rights attaching to any Security Assets;
7.4 promptly pay direct to the Company any calls on any Security Assets
which (despite clause 7.1) are not fully paid and if it defaults the
Security Agent may (but need not) do so on behalf of the Chargor (and
any amount so expended shall be an Expense);
7.5 forward to the Security Agent any notices, reports, accounts,
circulars and other documents relating to the Security Assets promptly
after they are received;
7.6 (a) (at its expense) execute and deliver to the Security Agent or as
it directs such documents, transfers and powers of attorney,
give such instructions and perform such other acts as the
Security Agent may reasonably require at any time to convert any
Security Assets in certificated form into uncertificated form;
<PAGE>
(b) give the Security Agent at least 14 days' prior written notice of
its intention to convert certificated Security Assets to
uncertificated; and
(c) not give an instruction for uncertificated Security Assets to be
recertificated without the Security Agent's prior written consent
(and shall ensure that on recertification the new certificate is
delivered to the Security Agent promptly after its issue).
8. POWERS OF THE SECURITY AGENT
8.1 When Charge enforceable: This Charge shall be immediately enforceable if
the Enforcement Date shall occur, or if the Chargor fails to comply with
any of its obligations under this Charge and in respect of any such failure
which, in the reasonable opinion of the Security Agent, is capable of
remedy, such action as shall remedy the same to the reasonable satisfaction
of the Security Agent shall not have been taken within 21 days of the
Chargor becoming aware of such default.
8.2 Statutory Power of Sale: Section 103 of the Law of Property Act 1925 shall
not apply to this Charge, but the statutory power of sale shall (as between
the Security Agent and a purchaser from the Security Agent) arise on, and
be exercisable at any time after, the execution of this Charge. However,
the Security Agent shall not exercise such power of sale until a demand has
been made by the Facility Agent or the relevant Beneficiaries under clause
12.2 of the Facility Agreement or a Receiver has been appointed, but this
provision shall not affect a purchaser or require him to ask whether a
demand or appointment has been made.
8.3 Third Parties not to be concerned with Validity of Demand: No person
dealing with the Security Agent or any Receiver, its agents or brokers,
shall be concerned to enquire whether this Charge has become enforceable,
or whether any power exercised or purported to be exercised has become
exercisable, or whether any Secured Sums remain due, or as to the necessity
or expediency of any stipulations and conditions subject to which the sale
of any Security Assets shall be made, or otherwise as to the propriety or
regularity of the sale of any Security Asset, or to see to the application
of any money paid to the Security Agent or such Receiver, or its agents or
brokers, and each such dealing shall be deemed to be within the powers
hereby conferred and to be valid and effectual accordingly.
9. APPLICATION OF MONEY RECEIVED BY THE SECURITY AGENT OR A RECEIVER
9.1 Application of Recoveries: Any money received under the powers conferred by
this Charge shall, subject to the discharge of any prior-ranking claims, be
paid or applied in the order of priority set out in clause 8.9 of the
Facility Agreement.
9.2 Suspense Accounts: The Security Agent may, in its absolute discretion on or
at any time or times after demand and pending the payment to the Security
Agent of the whole of the Secured Sums, place and keep to the credit of a
separate or suspense account any money received, recovered or realised by
the Security Agent by virtue of this Security for so long and in such
manner as the Security Agent may determine without any intermediate
obligation to apply it in or towards the discharge of any Secured Sums.
10. LIMITATION OF SECURITY AGENT'S LIABILITY
The Security Agent shall not be liable (save in the event of its gross
negligence or wilful misconduct) for:
<PAGE>
(a) any loss arising out of such sale or other disposal of any of the
Security Assets or the exercise of or failure to exercise any of the
Security Agent's powers under this Charge, however caused and whether
or not a better price could or might have been obtained by deferring
or advancing the date of such sale or other disposal and the Security
Agent shall not be liable to account as mortgagee in possession for
any of the Security Assets; or
(b) any neglect or default to pay any call or instalment or to accept any
offer or to notify the Chargor of any matter or for any other loss of
any nature whatsoever in connection with any of the Security Assets.
11. FURTHER ASSURANCE
The Chargor shall at any time and from time to time if required by the
Security Agent promptly sign, seal, deliver and complete all Documents,
give such instructions or directions as the Security Agent may require
relating to any Security Assets in uncertificated form to protect or
preserve its security and do all acts and things which the Security Agent
may require for perfecting or improving its title to and security over any
Security Assets or vesting or enabling it to vest any Security Assets in
itself or its nominee or in any purchaser or to facilitate the sale or
other disposal of any of the Security Assets or the exercise of any of the
rights or powers attaching to any Security Assets or hereby conferred on
the Security Agent, such Documents to be prepared by or on behalf of the
Security Agent at the cost of the Chargor and to be in such form as the
Security Agent may require.
12. CONSOLIDATION OF MORTGAGES
Section 93 of the Law of Property Act 1925 (restriction on consolidation of
mortgages) shall not apply to this Charge.
13. ADDITIONAL OR FUTURE SECURITY
This Charge is in addition to and shall not affect (or be affected by) any
guarantees, indemnities or Encumbrances whatsoever which the Security Agent
may hold now or hereafter for any part of the Secured Sums and may be
enforced without first having recourse to any such guarantee, indemnity or
Encumbrance.
14. OPENING OF NEW ACCOUNTS
14.1 Ruling off Accounts: On receiving notice that the Chargor has encumbered or
disposed of any Security Assets, the Security Agent and/or any Beneficiary
may rule off the Chargor's account or accounts and open a new account or
accounts with the Chargor.
14.2 Credits not to reduce Indebtedness: If the Security Agent or any
Beneficiary does not open a new account or accounts immediately on receipt
of such notice, it shall nevertheless be treated as if it had done so at
the time when it received such notice and as from that time all payments
made by the Chargor to the Security Agent or such Beneficiary shall be
treated as having been credited to such new account or accounts and shall
not operate to reduce the amount owing from the Chargor to the Security
Agent or such Beneficiary at the time when it received such notice.
<PAGE>
15. FORBEARANCE AND SEVERABILITY
15.1 No Waivers: All rights, powers and privileges under this Charge shall
continue in full force and effect, regardless of the Security Agent or any
Beneficiary exercising, delaying in exercising or omitting to exercise any
of them.
15.2 Invalidity and Severability:
(a) Neither the charge created nor any of the covenants given under this
Charge shall be avoided or invalidated by reason only of one or more
of such charge or covenants being invalid or unenforceable.
(b) Any provision of this Charge which for any reason is or becomes
illegal, invalid or unenforceable shall be ineffective only to the
extent of such illegality, invalidity and unenforceability, without
invalidating the remaining provisions of this Charge.
16. VARIATIONS AND CONSENTS
16.1 Variations to be in writing signed by all parties: No variation of this
Charge shall be considered valid and as constituting part of this Charge,
unless such variation shall have been made in writing and signed by the
Security Agent (on behalf of the Beneficiaries) and the Chargor.
16.2 Variation: The expression 'variation' shall include any variation,
supplement, extension, deletion or replacement however effected.
16.3 Conditional Consents: Save as otherwise expressly specified in this Charge,
any consent of the Security Agent may be given absolutely or on any terms
and subject to any conditions as Security Agent may determine in its entire
discretion.
17. COSTS AND INTEREST ON OVERDUE AMOUNTS
17.1 Costs and Charges: All costs, charges and liabilities (including all
professional fees and disbursements and Value Added Tax and/or any similar
tax) and all other sums paid or incurred by the Security Agent, the
Beneficiaries and/or any Receiver under this Charge, shall be recoverable
(on a full indemnity basis) as a debt payable on demand from the Chargor
may be debited without notice to any account of the Chargor, shall bear
interest accordingly and shall be charged on the Security Assets of the
Chargor. Without prejudice to the generality of the foregoing, the costs
recoverable by the Security Agent, the Beneficiaries and/or any Receiver
under this Charge shall include (i) all costs incurred by the Security
Agent and the Beneficiaries in preparing and administering this Charge or
perfecting the security created by it, (ii) all costs (whether or not
allowable on a taxation by the Court) of all proceedings for the
enforcement of this Charge or for the recovery or attempted recovery of the
Secured Sums, (iii) all money expended and all costs arising out of the
exercise of any power, right or discretion conferred by this Charge, and
(iv) all costs and losses arising from any default by the Chargor in the
performance of its obligations under this Charge.
17.2 Overdue Amounts: Any overdue amounts secured by this Charge shall carry
interest at the rate and in accordance with the terms contained in clause
5.4 of the Facility Agreement in relation to overdue sums or at such other
rate agreed between the Chargor and the Security Agent or the relevant
Beneficiary from time to time.
18. STAMP DUTY
The Chargor shall pay all present and future stamp, registration and
similar taxes or charges which may be payable or determined to be payable
in any jurisdiction in connection with the
<PAGE>
execution, delivery, performance or enforcement of this Charge or any
judgment given in connection with this Charge and shall indemnify the
Security Agent against any and all liabilities including penalties with
respect to or resulting from its delay or omission to pay any such stamp,
registration and similar taxes or charges.
19. CURRENCY INDEMNITY
Moneys received or held by the Security Agent or any Beneficiary pursuant
to this Charge may from time to time after demand has been made be
converted into such currency as the Security Agent or any Beneficiary
considers necessary or desirable to discharge the Secured Sums in that
currency at the Security Agent or that Beneficiary's then prevailing spot
rate of exchange (as conclusively determined by the Security Agent or that
Beneficiary acting in good faith) for purchasing the currency to be
acquired with the existing currency.
20. COUNTERPARTS
This Charge may be executed in any number of counterparts, each of which,
when executed and delivered, shall be an original, but all of which when
taken together shall constitute a single instrument.
21. ASSIGNMENT
Each Beneficiary may assign or transfer all or any of their respective
rights hereunder or hold their rights hereunder on trust for their
successors or assigns or transferees subject always to the provisions of
clause 16 of the Facility Agreement.
22. SECURITY AGENT
The provisions of clauses 17 - 21 of the Facility Agreement shall apply to
the Security Agent's rights, obligations and duties under this Charge as if
set out in this Charge in full.
23. SERVICE OF DEMANDS AND NOTICES
23.1 Addresses:
(a) A demand for payment or any other demand or notice under this Charge
may be made or given by any manager or officer of the Security Agent
in writing addressed to the Chargor and served on it at the address of
the Chargor stated above or its existing or last known place of
business (or, if more than one, any one of such places), or by
facsimile transmission to the facsimile number last known to the
Security Agent or by any other form of electronic communication which
may be available.
(b) Any communication to be given to any Beneficiary under this Charge
must be given to the Security Agent in writing served on it at the
address for service of the Security Agent stated above or the address
last notified to the Chargor by the Security Agent in writing.
23.2 Deemed Service: A notice or demand shall be deemed to be duly served on the
Chargor:
(a) if delivered by hand, when left at its address;
(b) if sent by post, at noon on the next day following the day of posting
and shall be effective even if it is misdelivered or returned
undelivered;
<PAGE>
(c) if given or made by facsimile or other electronic communication, at
the time of transmission;
Provided that, where delivery or transmission occurs after 6.00 p.m. on a
Business Day or on a day which is not a Business Day, service shall be
deemed to occur at 9.00 a.m. on the next Business Day.
24. APPOINTMENT AND POWERS OF A RECEIVER
24.1 Appointment of Receiver: At any time:
(a) on or after the Enforcement Date; or
(b) if so requested by the Chargor;
the Security Agent may appoint by writing any person or persons to be a
receiver and manager or receivers and managers of all or any part of the
Security Assets of the Chargor.
24.2 Power of Receivers Joint and Several: Where more than one Receiver is
appointed, they shall have power to act separately unless the Security
Agent shall in the appointment specify to the contrary.
24.3 Security Agent to Determine Remuneration of Receiver: The Security Agent
may from time to time determine the remuneration of the Receiver.
24.4 Removal of Receiver: The Security Agent may (subject to Section 45 of the
Insolvency Act 1986) remove the Receiver from all or any of the assets of
which he is the Receiver.
24.5 Further Appointment: Such an appointment shall not preclude (i) the
Security Agent from making any subsequent appointment of a Receiver over
all or any of the Security Assets over which a Receiver has not previously
been appointed or has ceased to act, or (ii) a Receiver, while continuing
to act, consenting to the appointment of an additional Receiver to act with
him.
24.6 Receiver to Act as Agent: The Receiver shall be the agent of the Chargor
(which shall be solely liable for his acts, defaults and remuneration)
unless and until the Chargor goes into liquidation, after which he shall
act as principal and shall not become the agent of the Security Agent or
the Beneficiaries.
24.7 Powers of Receiver: The Receiver shall have the power to sell or concur in
selling (when necessary with the leave of the court) all or any of the
Security Assets and in addition shall be entitled to exercise in relation
to the Chargor concerned all the powers set out in Schedules 1 and 2 to the
Insolvency Act 1986.
24.8 Third Parties: A person dealing with the Receiver in good faith and for
full value shall not be concerned to enquire whether the Receiver is
validly appointed or acting within his powers. Neither the Security Agent
nor any Beneficiary nor the Receiver shall be liable to account as
mortgagee in possession or otherwise for any money not actually received by
it or him respectively, whether by way of payment, set-off, counterclaim or
otherwise.
25. OTHER POWERS EXERCISABLE BY THE SECURITY AGENT
25.1 Security Agent may Exercise Receivers Powers: All powers of the Receiver
conferred by this Charge may be exercised by the Security Agent following
demand by the Security Agent
<PAGE>
whether as attorney of the Chargor or otherwise and whether or not the
Receiver shall have been appointed.
26. SECURITY AGENT AS TRUSTEE, PERPETUITY PERIODS AND NO PARTNERSHIP
26.1 Security Agent: The Security Agent hereby declares itself to be a trustee
of this Charge (and any other security in its favour created pursuant to
this Charge) for the Beneficiaries. The retirement of the Security Agent
from being trustee and the appointment of any new trustee shall be effected
in the manner provided in the Facility Agreement.
26.2 Perpetuity Period: The perpetuity period applicable to the trust hereby
constituted shall be 80 years.
26.3 No Partnership: Nothing in this Charge shall constitute or be deemed to
constitute a partnership between the Beneficiaries.
27. THIRD PARTY SECURITY PROVISIONS
27.1 Restriction on the Chargor: The Chargor shall have no right to:
(i) make any claim (whether by way of proof in liquidation or otherwise)
against any Principal or any co-surety or any property of any
Principal or any co-surety; or
(ii) participate in any security held or money received by the Security
Agent or any Beneficiary on account of the Secured Sums; or
(iii)stand in the place of the Security Agent or any Beneficiary in
respect of any such security or money;
until in each case all Secured Sums have been repaid to the Security Agent
and/or the Beneficiaries in full.
27.2 Right to act without affecting the Charge: The Security Agent or any
Beneficiary may at any time (without affecting its rights against the
Chargor under this Charge) grant, extend, increase, renew, vary, determine
or refuse any credit or facility to any Principal, or take, hold, exchange,
vary, release, abstain from perfecting or enforcing any guarantee or
security for the Secured Sums, or compromise with or extend time or grant
waivers, releases or any indulgence to any Principal or any co-surety, or
make any arrangement, concession or settlement with any of them or do or
omit or neglect to do anything whatever which, but for this provision,
might exonerate or discharge the Principals' obligations under the Finance
Documents (except for a specific written release given by the Security
Agent of such obligations).
27.3 Retention: The Security Agent may keep the security held by it under this
Charge in order to protect the Security Agent and the Beneficiaries against
any possible claim under insolvency law for such period after all Secured
Sums have been satisfied as the Security Agent reasonably considers to be
necessary to avoid any risk under applicable insolvency law. If a claim is
made against the Security Agent or any Beneficiary within that period, the
Security Agent may keep the security until that claim has finally been
dealt with.
27.4 Continuing Liability of Chargor: The winding-up or dissolution of any
Borrower will not affect the security held by the Security Agent under this
Charge and any sum payable to the Security Agent or any Beneficiary by the
Chargor at the date of the commencement of such winding-up or immediately
prior to such dissolution (as the case may be) will be treated as
continuing payable until actually paid in full.
<PAGE>
27.5 Disability or Incapacity of any Borrower: As a separate and independent
stipulation the Chargor agrees that if any Secured Sums shall not be
recoverable from any Borrower by reason of any legal limitation on or
disability or incapacity of any Borrower or any other fact or circumstance,
and whether known to any Beneficiary or not, shall nevertheless be
recoverable from the Security Assets as if the Chargor had been the sole or
principal debtor or debtors in respect thereof and shall be paid on demand
in writing made by the Security Trustee.
28. GOVERNING LAW AND JURISDICTION
28.1 Governing Law: This Charge shall be governed by and construed in accordance
with English law.
28.2 Jurisdiction: For the benefit of the Security Agent, the Chargor
irrevocably agrees that, subject to clause 28.5, the courts of England are
to have non-exclusive jurisdiction to settle any disputes which may arise
out of or in connection with this Charge and that accordingly any
proceedings (referred to in this clause as "Proceedings") arising out of or
in connection with this Charge may be brought in such courts.
28.3 Process Agent: The Chargor hereby designates, appoints and empowers Messrs
Norton Rose of Kempson House, Camomile Street, London EC3A 7AN (Attention:
Andrew Bamber/Marcus Dougherty) (or such other address in England or Wales
as the Chargor may notify to the Security Agent) to accept service of
process in such jurisdiction in any Proceedings and agrees that failure by
such agent to give notice of such service of process to the Chargor shall
not impair or affect the validity of such service or any judgment based on
it.
28.4 Waiver of objection: The Chargor irrevocably waives any objection which it
may have now or hereafter to the laying of the venue of any Proceedings in
the courts of England and any claim that any such Proceedings have been
brought in an inconvenient forum and further irrevocably agrees that a
judgment in any such Proceedings brought in such courts shall be conclusive
and binding upon it and may be enforced in any other jurisdiction.
28.5 Security Agent may take Proceedings in other jurisdictions: Nothing in this
clause 28 shall limit the right of the Security Agent to take action
against the Chargor in any court of competent jurisdiction nor shall the
taking of Proceedings by the Security Agent against the Chargor in one or
more jurisdictions preclude the taking of Proceedings in any other
jurisdiction whether concurrently or not.
28.6 Consent to service outside jurisdiction: The Chargor further consents to
the service of process out of the courts of England in any such Proceedings
by the mailing to it of copies by registered or certified airmail, postage
prepaid.
Executed by the Chargor as a Deed and by the Security Agent under hand the day
and year first above written.
<PAGE>
SCHEDULE
Principals
TU Finance (No.1) Limited (company number 3505836)
TU Finance (No.2) Limited (company number 3514100)
TU Acquisitions PLC (company number 3455523)
Target or any Subsidiary of the Target which, and to the extent that it, borrows
under the Facility Agreement
<PAGE>
EXECUTED and DELIVERED as a )
Deed by TU FINANCE (NO. 2) )
HOLDINGS (DELAWARE) INC. )
(pursuant to a resolution of its Board )
of Directors) acting by its duly )
authorised officer:- )
Name Robert S. Shapard [R Shapard]
Title Treasurer and Assistant Secretary
SIGNED by ) [J Ritchie]
for and on behalf of )
CHASE MANHATTAN INTERNATIONAL LIMITED )
<PAGE>
CONFORMED COPY
FACILITY AGREEMENT
for
(pound)250,000,000 Revolving Credit Facility
Eastern Electricity plc (1)
Chase Manhattan plc (2)
Lehman Brothers International (Europe)
Merrill Lynch Capital Corporation
as Joint Lead Arrangers
The Chase Manhattan Bank (3)
Lehman Commercial Paper Inc.
Merrill Lynch Capital Corporation
as Underwriters
The Chase Manhattan Bank (4)
as Issuing Bank
Chase Manhattan International Limited (5)
as Facility Agent
For the Primary Borrower For the Facility Agent
Norton Rose Lovell White Durrant
London London
<PAGE>
CONTENTS
1. PURPOSE AND DEFINITIONS................................................. 1
2. THE COMMITMENTS......................................................... 16
3. THE CONDITIONS.......................................................... 17
4. ADVANCES UNDER THE FACILITY............................................. 17
5. INTEREST AND MATURITY PERIODS........................................... 23
6. REPAYMENT, CANCELLATION AND REDUCTIONS.................................. 25
7. FEES AND EXPENSES....................................................... 27
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS........................... 29
9. REPRESENTATIONS AND WARRANTIES.......................................... 35
10. POSITIVE UNDERTAKINGS................................................... 37
11. NEGATIVE UNDERTAKINGS................................................... 41
12. EVENTS OF DEFAULT....................................................... 45
13. INDEMNITIES............................................................. 49
14. UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES............... 50
15. SET-OFF AND PRO-RATA PAYMENTS........................................... 54
16. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES............................ 55
17. FACILITY AGENT.......................................................... 60
18. POWERS ................................................................. 62
19. DUTIES ................................................................. 65
20. EXONERATION............................................................. 66
21. ENFORCEMENT AND RECOVERIES.............................................. 70
22. DETERMINATION OF MATTERS................................................ 71
23. BASIS OF DECISIONS...................................................... 73
24. MATTERS CONCERNING THE OBLIGORS......................................... 74
<PAGE>
25. NOTICES AND OTHER MATTERS............................................... 76
26. GOVERNING LAW AND JURISDICTION.......................................... 79
Schedule 1
The Banks and their Commitments.............................................. 80
Schedule 2
Forms of Drawdown Notice..................................................... 81
Schedule 3
Conditions Precedent......................................................... 83
Schedule 4
Calculation of Additional Cost............................................... 84
Schedule 5
Form of Substitution Certificate............................................. 86
Schedule 6
Form of Deed of Accession.................................................... 89
Schedule 7
Terms of Borrowers' Indemnity................................................ 91
Schedule 8
Terms of Interbank Guarantee and Indemnity................................... 94
Schedule 9
Terms of Guarantee........................................................... 96
<PAGE>
THIS AGREEMENT is made the 21st day of May 1998
BETWEEN:
(1) Eastern Electricity plc a company registered in England and Wales with
company number 2366906 as the initial Borrower and initial Guarantor (the
"Primary Borrower");
(2) Chase Manhattan plc, Lehman Brothers International (Europe) and Merrill
Lynch Capital Corporation as joint lead arrangers;
(3) The Chase Manhattan Bank, Lehman Commercial Paper Inc. and Merrill Lynch
Capital Corporation as the original Banks (the "Underwriters");
(4) The Chase Manhattan Bank as the initial Issuing Bank;
(5) Chase Manhattan International Limited as the initial Facility Agent.
IT IS AGREED as follows:
1. PURPOSE AND DEFINITIONS
1.1 Purpose
This Agreement sets out the terms and conditions upon and subject to
which the Banks agree, according to their several obligations, to make
available to the Primary Borrower and (subject to accession to this
Agreement under clause 24) the Additional Borrowers, a multi-currency
facility of up to (pound)250,000,000 to be used for such Borrower's
general corporate purposes.
No amounts borrowed under the Facility may be used, directly or
indirectly, to give financial assistance for the acquisition of the
shares of any Borrower or any holding company of any Borrower.
1.2 Definitions
In this Agreement, unless the context otherwise requires:
"Act" means the Companies Act 1985;
"Additional Borrower" means any member of the Group which becomes a
Borrower pursuant to clause 24.1 (Additional Obligors);
"Additional Cost" means, in relation to any period, a percentage
calculated for such period at an annual rate determined in accordance
with schedule 4;
"Additional Guarantor" means any member of the Group which becomes a
Guarantor pursuant to clause 24.1 (Additional Obligors) and/or clause
24.2 (Guarantees from REC Companies);
"Additional Obligor" means any Additional Borrower or Additional
Guarantor;
<PAGE>
"Advance" means each borrowing made or to be made by way of an advance
under the Facility or (as the context requires) the principal amount of
that borrowing outstanding at any relevant time;
"Affected Bank" has the meaning given to it in clause 14.4;
"Affiliate" means, in relation to any person, any Subsidiary or
subsidiary undertaking (as defined in section 258 of the Act) of that
person, any holding company of that person and any other Subsidiary or
subsidiary undertaking of that holding company;
"Applicable Fees Rate" means 0.25 per cent. per annum;
"Applicable Margin" means 0.5 per cent. per annum;
"Appropriate Accounting Principles" means (i) the accounting principles,
policies, standards, practices and bases (being generally accepted in the
United Kingdom), as adopted in the last audited accounts of the Primary
Borrower published prior to 1 February 1998 and varied so that
investments in subsidiaries which are not REC Companies are accounted for
on an equity basis or (ii) where any change has been agreed under clause
10.3(c), such accounting principles, standards, practices and bases as
have been so agreed;
"Arrangers" means Chase Manhattan plc, Lehman Brothers International
(Europe) and Merrill Lynch Capital Corporation;
"Auditors" means Price Waterhouse or such other internationally
recognised firm of chartered accountants as may be auditors to the REC
Group for the time being;
"Available Commitment" means, in relation to a Bank and save as otherwise
provided herein its Commitment at such time less:
(a) its Contribution to all Advances at such time;
(b) its Proportion of the Sterling Amount at that time of the
Outstanding Contingent Liabilities under all Letters of Credit
then outstanding; and
(c) its proportion of the Sterling Amount of any amount paid out by
the Issuing Bank under a Letter of Credit and not yet reimbursed;
"Available Facility Amount" means, at any time, the aggregate of the
Available Commitments of all the Banks in respect of the Facility at such
time;
"Banking Day" means a day (other than Saturday or Sunday) on which banks
are open for business in London and in New York;
"Banks" means the original banks listed in schedule 1 and includes their
successors in title, assignees and Substitutes;
"Borrowed Money" includes any Indebtedness of any REC Company in respect
of (without double counting):
(a) borrowed money; or
<PAGE>
(b) the principal amount outstanding in respect of any debentures
(within the meaning of Section 744 of the Act) of that person
(notwithstanding that the same are or were issued in whole or in
part for a consideration other than cash) which are not
beneficially owned by another REC Company; or
(c) the principal amount raised by that person by acceptances (not
being an acceptance in relation to the purchase or sale of goods
in the ordinary course of trading) or under any acceptance credit
opened by any bank or accepting house on behalf of that person; or
(d) receivables sold or discounted to the extent of any potential or
contingent recourse save for recourse for disputed or ineligible
debts or similar rights of recourse typical in a securitisation
transaction; or
(e) the acquisition cost of any asset to the extent payable after the
time of acquisition or possession by the party liable where the
deferred payment is not normal trade credit, is deferred for a
period of more than 90 days or is arranged primarily as a method
of raising finance or financing the acquisition of that asset from
or through a bank or financial institution, except that, if the
deferred payment is amortising, only the amount which remains to
be paid shall be taken into account; or
(f) the nominal amount of any share capital and the principal amount
of any debentures or other indebtedness of any other person, the
redemption or repayment of which is guaranteed or secured by or is
the subject of an indemnity given by that person; or
(g) any fixed or minimum premium payable on final redemption or
repayment of any debenture, share capital or other borrowed moneys
falling to be taken into account under the other paragraphs of
this definition; or
(h) any net liability under any Derivative Transactions; or
(i) the capital element of any Finance Leases; or
(j) any amount raised under any other transaction having the
commercial effect of a borrowing or entered into primarily as a
means of raising finance;
but does not include items of the type described in (a) to (j)
(inclusive) which are owed to a member of the Wider Group or to another
REC Company;
"Borrowers" means the Primary Borrower and each other member of the Group
which has become an Additional Borrower and "Borrower" means any one of
them;
"Change in Control" shall be deemed to have occurred if:
(a) any person or group of related persons (other than the Parent, any
Subsidiary of the Parent, or any pension, savings or other
employee benefit plan for the benefit of employees of the Parent
and/or any Subsidiary of the Parent) shall have acquired
beneficial ownership of more than 30% of the outstanding Voting
Shares of the Parent (within the meaning of section 13(d) or 14(d)
of the Securities Exchange Act of 1934 of the United States of
America, as amended, and the applicable rules and regulations
thereunder); provided that a Change in Control shall not be deemed
to have occurred
<PAGE>
if such acquisition has been approved, prior to the Parent
Acquisition Date and the date on which any tender offer for Voting
Shares of the Parent was commenced, by a majority of the
Disinterested Directors of the Parent; or
(b) during any period of 12 consecutive months, commencing before or
after the date of this Agreement, individuals who on the first day
of such period were directors of the Parent (together with any
replacement or additional directors who were nominated or elected
by a majority of directors then in office) cease to constitute a
majority of the board of directors of the Parent;
"Commitment" means, in relation to a Bank at any relevant time, the
amount set opposite its name in schedule 1 and/or, in the case of a
Substitute, the amount novated in relation to the Facility as specified
in the relevant Substitution Certificate, as reduced, in each case, by
any relevant term of this Agreement;
"Contribution" means, in relation to a Bank, the principal amount of any
or all (as the context requires) of the Sterling Amount of Advances owing
to such Bank at any relevant time;
"Deed of Accession" means an accession certificate (by way of deed) in
the form or substantially the form of schedule 6 and entered into or to
be entered into by the Facility Agent and an Additional Guarantor as an
acceding Guarantor and, in certain cases, an Additional Borrower as an
acceding Borrower;
"Default" means any Event of Default or any event or circumstance which
in the reasonable opinion of the Majority Banks would reasonably be
expected, upon the giving of a notice by the Facility Agent and/or the
expiry of the relevant period and/or the fulfilment of any other
condition (in each case as specified in clause 12.1), to constitute an
Event of Default;
"Derivatives Transaction" means a contract, agreement or transaction
which is:
(a) a rate swap, basis swap, forward rate transaction, equity (or
equity or other index) swap or option, bond option, interest rate
option, foreign exchange transaction, cap, collar or floor,
currency swap, currency option or any other similar transaction;
and/or
(b) any combination of such transactions,
in each case, whether on-exchange or otherwise;
"Director General" means the person appointed from time to time by the
Secretary of State to hold office as the Director General of Electricity
Supply for the purposes of the Electricity Act;
"Disinterested Director" shall mean any member of the board of directors
of the Parent who:
(a) is not affiliated, directly or indirectly, with, or appointed by,
a person or group of related persons (other than the Parent, any
Subsidiary of the Parent, or any pension, savings or other
employee benefit plan for the benefit of employees of the Parent
and/or any Subsidiary of the Parent) acquiring the beneficial
ownership of more than 30% of the outstanding Voting Shares of the
Parent (within the meaning of section 13(d) or 14(d) of the
Securities Exchange Act of 1934 of the United States of America,
as amended, and the applicable rules and regulations thereunder);
and
<PAGE>
(b) either was a member of the board of directors of the Parent prior
to the Parent Acquisition Date or was recommended for election by
a majority of the Disinterested Directors in office prior to the
Parent Acquisition Date;
"Distribution Business" means the business conducted as at the date of
this Agreement by the Primary Borrower (and as that business may
subsequently be conducted by the REC Group), in or ancillary to the
distribution (whether for a REC Company's own account or that of any
other party) of electricity through any REC Company's distribution system
and includes any business of providing connections to any REC Company's
distribution system;
"double taxation treaty" means any convention or agreement between the
government of the United Kingdom and any other government for the
avoidance of double taxation and the prevention of fiscal evasion with
respect to taxes on income and capital gains;
"Drawdown Date" means the date on which an Advance is, or is to be, made;
"Drawdown Notice" means, in respect of a Facility, a notice substantially
in the terms of the relevant Part of schedule 2;
"Effective Date" means the date on which the requirements of Part A of
Schedule 3 are satisfied in accordance with clause 3;
"Electricity Act" means the Electricity Act 1989;
"Environmental Claim" means any claim, prosecution, demand, action,
official warning, abatement, penalty or other order (conditional or
otherwise) arising as a result of or in connection with any Environmental
Matter against any member or former member of the Group and including any
formal written notification or order requiring compliance with the terms
of any Environmental Licence or Environmental Law;
"Environmental Laws" means all or any laws, statutes, rules, regulations,
treaties, directives, by-laws, statutory codes of practices, circulars,
guidance notes, orders, notices and demands, decisions of the courts or
anything like any of the foregoing of any Government Entity or any other
body whatsoever in any jurisdiction or the European Union relating to
Environmental Matters and includes the Environmental Protection Act 1990
and the Environment Act 1995;
"Environmental Licence" means any permit, licence, authorisation, consent
or other approval required at any time by any Environmental Law;
"Environmental Matters" means:
(a) the generation, deposit, disposal, escape, keeping, treatment,
transportation, transmission, handling, importation, exportation,
processing, collection, sorting, presence or manufacture of any
"waste" (as defined in the Environmental Protection Act 1990 or in
any other Environmental Laws), or any Relevant Substance which
gives rise to a risk of causing harm to man or any other living
organism supported by the environment, or damaging the environment
or public health or, for so long as any member of the Group shall
be engaged in the Generation Business, welfare;
(b) nuisance, noise, health and safety at work or elsewhere; and
<PAGE>
(c) the pollution, conservation or protection of the environment (both
natural and built) or of man or any living organisms supported by
the environment or any other matter whatsoever affecting the
environment or any part of it;
"Euro" means the single currency of participating member states (so
described in any legislative measures of the European Council for the
introduction of, changeover to or operation of a single or unified
European currency);
"Event of Default" means any of the events or circumstances described in
clause 12.1;
"Excluded Business" means any business (other than the Distribution
Business or Supply Business) which the Director General or other
competent authority may determine (by modification to the Licence or
otherwise) should not be operated within the REC Group;
"Expiry Date" means the date stated in a Letter of Credit to be its
expiry date or (if later) the latest date on which demand may be made
under it;
"Facility" means the facility granted by the Banks to the Borrower in
accordance with clause 2.1;
"Facility Agent" means Chase Manhattan International Limited of 125
London Wall, London EC2Y 5AJ or such other person as may be appointed
Facility Agent for the Banks pursuant to clause 17;
"Facility Office" means, in relation to the Facility Agent or any Bank,
the office identified in Schedule 1 (or, in the case of a Substitute, at
the end of the Substitution Certificate to which it is a party as a
Substitute) or such other office as it may from time to time select
provided written notice thereof has been given by the Facility Agent or
such Bank to the Primary Borrower;
"Fee Letter" means the fee letter referred to in clause 7.1, in the
agreed form;
"Fee Payment Date" means each of the dates falling at three monthly
intervals after the date of this Agreement;
"Final Repayment Date" means 2 March 2003;
"Finance Documents" means this Agreement, any Deed of Accession, any
L/C-Related Documents, any Guarantee, each Drawdown Notice and the Fee
Letter;
"Finance Lease" means any lease under which a REC Company is the lessee
which is or should be treated as a finance or capital lease under the
Appropriate Accounting Principles (and includes any hire purchase
contract or other arrangement which is or should be similarly treated);
"Finance Parties" means the Facility Agent, the Issuing Bank, the
Arrangers, the Banks and (as the context requires) "Finance Party" means
any one of them;
"Finance Period" means the period from the date of this Agreement until
the date on which the Facility Agent confirms that neither the Finance
Parties nor any Obligor has any actual or contingent liabilities or
obligations under any of the Finance Documents;
<PAGE>
"Financial Covenants" means the financial undertakings in clauses
10.3(a);
"Financial Definitions" means the definitions of Operating Profit and Net
Interest Expense;
"Generation Business" means the business of the Group (if any) in or
ancillary to the generation of electricity (whether for its own account
or that of any other party);
"Government Entity" means and includes (whether having a distinct legal
personality or not) any supra-national, national or local government
authority, regulatory body, central bank, board, commission, department,
division, organ, instrumentality, court or agency and any association,
organisation or institution of which any of the foregoing is a member of
or whose jurisdiction any of the foregoing is subject or in whose
activities any of the foregoing is a participant and (if the context
requires) which, in relation to Environmental Matters, has regulatory or
administrative authority under Environmental Laws;
"Group" means the Primary Borrower and all its Subsidiaries from time to
time;
"Guarantee" means the guarantee set out in schedule 9 to be given by each
Guarantor and "Guarantees" shall be construed accordingly;
"Guarantors" means the Primary Borrower and each Additional Guarantor,
which in each case has not been released from such Guarantee and
"Guarantor" means any one of them;
"Half-year Periods" means the financial periods of the REC Group ending
on 31 March and 30 September in each year;
"Indebtedness" means any obligation of a person for the payment or
repayment of money, whether as principal or as surety and whether present
or future, actual or contingent;
"Issue" means with respect to any Letter of Credit, to issue or extend
the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "Issued", "Issuing" and "Issuance" have
corresponding meanings;
"Issue Date" means in relation to a Letter of Credit, the date on which
that Letter of Credit was Issued, or, as the context requires, is to be
Issued under clause 4.2 (Issue of Letters of Credit);
"Issuing Bank" means The Chase Manhattan Bank or any alternative Bank
which has been notified to the Primary Borrower by the Facility Agent as
the issuer of any Letter of Credit in accordance with the terms of this
Agreement;
"L/C-Related Documents" means each Letter of Credit, any Drawdown Notice
or other application for a Letter of Credit and any other document
relating to any Letter of Credit;
"Letter of Credit" means a letter of credit or a bank guarantee (as the
case may be) Issued or to be Issued by the Issuing Bank on the terms of
this Agreement;
"LIBOR" means, in relation to any Advance or unpaid sum, the rate per
annum determined by the Facility Agent to be equal to:
(a) the offered rate (if any) appearing on page 3740 or page 3750 of
the Telerate screen, or such other pages as may replace such page
of the Telerate screen, which displays
<PAGE>
British Bankers Association Interest Settlement Rates for deposits
in the currency in which such Advance or unpaid sum is denominated
and for the specified period (where "specified period" means the
Interest Period or Maturity Period of such Advance or, as the case
may be, the period for which LIBOR falls to be determined in
relation to such unpaid sum); or
(b) if the Telerate screen is generally inaccessible or if the
relevant rate does not appear on page 3740 or page 3750 or such
other page as may replace such page of the Telerate screen, the
arithmetic mean (rounded upwards, if not already such a multiple,
to four decimal places) of the rates (as notified to the Facility
Agent) at which each of the Reference Banks was offering to
leading banks in the London inter-bank market deposits in which
such Advance or unpaid sum is denominated and for the specified
period,
in each case at or about 11.00 am on the Quotation Date for such period;
"Licences" means those licences granted by the Secretary of State:
(a) under section 6 of the Electricity Act authorising the Primary
Borrower to carry on the Distribution Business and supply of
electricity and any activities ancillary thereto;
(b) being replacement Licence or Licences granted from time to time to
any REC Company (or, if more than one, the most recent such
replacement), as amended and/or extended from time to time;
"Licence Undertaking" means any and each undertaking or assurance given
to the Director General or the Secretary of State concerning the
management and/or ownership of and/or other matters concerning the REC
Group;
"Majority Banks" means subject to clause 23 at any relevant time Banks:
(a) the aggregate of whose Contributions to the Facility exceeds 662/3
per cent. of the Total Contributions in respect of the Facility;
or
(b) (if no principal amounts are outstanding under this Agreement) the
aggregate of whose Commitments in respect of the Facility exceeds
662/3 per cent. of the Total Commitments in respect of the
Facility but so that if at such time the Total Commitments in
respect of the Facility have been reduced to zero references to a
Bank's Commitment in relation to the Facility shall be construed
as amongst the Finance Parties (and not so as to give any rights
to any other person) as a reference to that Bank's Commitment in
relation to the Facility immediately prior to such reduction to
zero;
"Material Adverse Effect" is a reference to:
(a) something having a material adverse effect on the ability of any
Obligor to perform its payment or Financial Covenant obligations
under any of the Finance Documents; or
(b) something (other than the Reservations) which results in any of
the Finance Documents not being legal, valid and binding on, or
enforceable in accordance with their terms
<PAGE>
against, any Obligor in a manner and to an extent reasonably
considered by the Majority Banks to be materially adverse to the
interests of the Banks;
"Maturity Date" means, in relation to any Advance, the last day of the
period for which that Advance is drawn down;
"Maturity Period" means, in relation to any Advance, the period beginning
on its Drawdown Date and ending on its Maturity Date;
"month" or "months" means a period beginning in one calendar month and
ending in the relevant later calendar month on the day numerically
corresponding to the day of the calendar month in which it started,
provided that (a) if the period started on the last Banking Day in a
calendar month or if there is no such numerically corresponding day, it
shall end on the last Banking Day in such later calendar month and (b) if
such numerically corresponding day is not a Banking Day, the period shall
end on the next following Banking Day in such later calendar month but if
there is no such Banking Day it shall end on the preceding Banking Day
and "monthly" shall be construed accordingly;
"Net Interest Expense" means, in respect of the preceding two Half-year
Periods, the aggregate interest paid or payable less interest received or
receivable by the REC Group during that period of the type which would
appear as "Net Interest" in the audited accounts of the REC Group
applying the Appropriate Accounting Principles applied in preparation of
the audited accounts of the REC Group;
"Obligors" means the Primary Borrower and each Additional Obligor and
"Obligor" means any one of them;
"Operating Profit" means, in respect of the preceding two Half-year
Periods, the pre-tax profit of the REC Group of the type which appears as
"Profit on ordinary activities before taxation" in the accounts of the
REC Group (after adding back any Net Interest Expense during that year)
for that period, all as calculated in accordance with the Appropriate
Accounting Principles applied in preparation of the audited accounts of
the REC Group;
"Optional Currency" means any currency (other than Sterling) which is
freely transferable and freely convertible into Sterling;
"Outstanding Contingent Liabilities" at any time under a Letter of Credit
means the face value of that Letter of Credit at that time in accordance
with its express provisions less:
(a) the aggregate amount of any cash cover (not including any cash
cover lodged by any Bank) held in relation to that Letter of
Credit at that time; and
(b) (save to the extent that this is taken into account in the express
provisions of that Letter of Credit or unless the context
otherwise requires) the aggregate of all payments made by the
Issuing Bank, pursuant to demands made under that Letter of Credit
on or prior to such time, for which it has been reimbursed by the
relevant Borrower;
or such lesser amount as the Facility Agent and the Issuing Bank may
agree in good faith represents the maximum liability of the Issuing Bank
in respect thereof;
<PAGE>
"Parent" means Texas Utilities Company whose principal place of business
is at 1601 Bryan Street, Dallas, Texas, 75201;
"Parent Acquisition Date" shall mean the date as of which a person or
group of related persons first acquires more than 30% of the outstanding
Voting Shares of the Parent (within the meaning of section 13(d) or 14(d)
of the Securities Exchange Act of 1934 of the United States of America,
as amended, and the applicable rules and regulations thereunder);
"Permitted Security Interest" means a Security Interest created by any
REC Company being any of the following, namely:
(a) any lien arising solely by operation of law in the ordinary course
of business and securing amounts not more than 90 days overdue or
which are being contested with due diligence and in good faith,
and other liens agreed to in writing by the Majority Banks;
(b) any Security Interest existing on or over the assets of any REC
Company as at the Effective Date (or which any REC Company is
obliged to create under a contract existing at such date), but
only if:
(i) the maximum principal amount of the indebtedness secured by
the Security Interest is not increased after the Effective
Date; and
(ii) any such Security Interest which is created between 2 March
1998 and the Effective Date is discharged within 180 days
after the Effective Date (unless the Security Interest was
created pursuant to an obligation existing as at 2 March
1998);
(c) any Security Interest existing on or over an asset acquired by any
REC Company after the date of this Agreement, but only if:
(i) the Security Interest was not created in contemplation of
the acquisition; and
(ii) the maximum principal amount of the indebtedness secured by
the Security Interest is not subsequently increased;
(d) any Security Interest over any asset acquired by any REC Company
after the date of this Agreement as security for Indebtedness
incurred to finance or refinance (within 6 months of the
acquisition) all or part of the consideration for the acquisition
of that asset, provided that the Indebtedness secured by Security
Interests under this subclause (d) shall not exceed (pound)250,000
in aggregate at any time;
(e) any Security Interest arising over
(i) accounts with any bank or financial institution as a result
of netting and set-off arrangements existing with such
person to the extent that such arrangements are in support
of net overdraft facilities extended by such person; or
(ii) documents of title to goods and insurances under trade
finance facilities provided to any REC Company as part of
the REC Group's normal day to day banking business;
<PAGE>
(f) any Security Interest over goods purchased in the ordinary course
of business arising by virtue of the supplier's retention of title
clause in its standard conditions of supply to secure only the
purchase price of the goods;
(g) so far as they relate to netting, settlement or pooling
arrangements or as required by the regulatory framework or
arrangements in which the relevant business operates, any Security
Interest arising under the Relevant Arrangements;
(h) any Security Interest arising under the terms of Derivatives
Transactions or as a result of trading of shares or other
securities where such Security Interest arises under the rules of
the relevant exchange or clearing system;
(i) any Security Interest constituted by a Finance Lease if the
capital value of such Finance Lease would be permitted under this
Agreement as Borrowed Money under clause 11.1(b); and
(j) any Security Interests (other than any Security Interest permitted
by sub-paragraphs (a) to (i) above) securing indebtedness not
exceeding in aggregate (pound)10,000,000 or its equivalent in
other currencies at any time;
"Pooling and Settlement Agreement" means the pooling and settlement
agreement dated 30 March 1990 made between REC and the National Grid
Company Plc and others setting out the rules and procedures for the
operation of an electricity trading pool and of a settlement system in
England and Wales;
"Proportion" means, in relation to a Bank, the proportion borne by its
Commitment to the Total Commitments (or, if the Total Commitments are
then zero, by its Commitment to the Total Commitments immediately prior
to their reduction to zero);
"Qualifying Bank" means:
(a) a person which:
(i) is a bank within the meaning of Section 840A of the Income
and Corporation Taxes Act 1988;
(ii) will be beneficially entitled to any interest to be paid to
it (as a Bank) under this Agreement; and
(iii) is within the charge to United Kingdom corporation tax as
respects such interest,
except that, if Section 349 or Section 840A of the Income and
Corporation Taxes Act 1988 is repealed, modified, extended or
re-enacted, the Facility Agent may at any time and from time to
time (after consultation with the Primary Borrower and the Banks)
amend this paragraph (a) in such manner as it may determine acting
reasonably to be appropriate by giving notice of the amended
paragraph (a) to the Primary Borrower and the Banks and, so far as
practicable to put the Banks in the same position as they would
otherwise have been in; or
(b) a Treaty Lender;
<PAGE>
"Quotation Date" means, in relation to an Interest Period, Maturity
Period or other period for which LIBOR is to be determined, the date on
which quotations would customarily be provided by leading banks in the
London Interbank Market for deposits in the currency in relation to which
such rate is to be determined for delivery on the first day of that
Interest Period, Maturity Period or other period;
"REC Companies" means the Primary Borrower initially, together with any
other members of the Group carrying on the whole, or part of, the
Distribution Business or Supply Business and/or holding any assets used
to carry on the whole, or part of, the Distribution Business or Supply
Business and/or licensed under the Act to carry on the whole, or part of,
the Distribution Business or Supply Business, each being a "REC Company";
"REC Group" means the REC Companies from time to time;
"Recovering Bank" has the meaning given to that term in clause 15.2;
"Reference Banks" means The Chase Manhattan Bank and any two other banks
selected by the Facility Agent with the consent of the Primary Borrower
(which is not to be unreasonably withheld), or if any of them cease to so
act, such other bank or banks selected by the Facility Agent in
accordance with clause 23.7;
"Related Persons" each of the Facility Agent, the Issuing Bank, any
successor Facility Agent, or Issuing Bank arising under clause 17, the
Arrangers and the Underwriters, together with their respective Affiliates
and the officers, directors, employees, agents, trustees and
attorneys-in-fact of such persons and Affiliates;
"Relevant Arrangements" means any arrangements under or in connection
with pooling and settlement agreements or agreements of the electricity
distribution and/or supply industry or energy trading business (including
the Pooling and Settlement Agreement) or in connection with any
transactions or arrangements entered into in the ordinary course of its
business in a form usual in any such industry or business;
"Relevant Substance" means any radioactive emissions, radiation, noise,
any natural or artificial substance whatsoever (whether in a solid or
liquid form or in the form of a gas or vapour and whether alone or in
combination with any other substance) and includes, without limitation,
"waste" (as defined in the Environmental Protection Act 1990 or in any
equivalent legislation or regulation in force in any jurisdiction in
which any REC Company owns property or assets or carries on any business
or operations);
"Reservations" means (a) the principle that equitable remedies may be
granted or refused at the discretion of the court, (b) the limitation on
enforcement by laws of general application relating to insolvency,
liquidation, reorganisation, court schemes or administration, (c) the
time barring of claims under the Limitation Act 1980 and (d) the
possibility that an undertaking to assume liability for or to indemnify
against non-payment of UK stamp duty may be void;
"Secretary of State" means the Secretary of State for Trade and Industry
from time to time or such other person as may for the time being be
fulfilling the functions of the Secretary of State under the Electricity
Act;
<PAGE>
"Security Interest" means any mortgage, pledge, lien, charge, assignment,
right of set-off, arrangement for retention of title, hypothecation or
security interest, or any other agreement or arrangement having the
effect of conferring security or a security interest, or any agreement to
sell or otherwise dispose of any asset on terms whereby such asset is
acquired or reacquired by any REC Company;
"Spot Rate" means, in respect of any sum denominated in any currency
other than Sterling at any date, the Facility Agent's spot rate of
exchange for purchase of that sum in that currency in the London foreign
exchange market with Sterling at or about 11.00 am on that date for
delivery of such sum two Banking Days thereafter;
"Sterling" and "(pound)" mean the lawful currency for the time being of
the United Kingdom and in respect of all payments to be made under this
Agreement in Sterling mean immediately available, freely transferable
cleared funds;
"Sterling Amount" means:
(a) in respect of Outstanding Contingent Liabilities, the sum of the
amount in Sterling of the Outstanding Contingent Liabilities under
Letters of Credit denominated in Sterling and the amount of
Sterling required to purchase the currency amount of the
Outstanding Contingent Liabilities under Letters of Credit
denominated in each other currency at the Spot Rate at that time
and so that such Sterling Amount shall be recalculated by the
Facility Agent:
(i) in any event, on every Quarter Date; and
(ii) on each date on which the Majority Banks request the
Facility Agent to do so in accordance with the provisions
of clause 4.10 (Currency Fluctuations);
and any recalculated amount under paragraph (a) and (b) above
shall thereupon and until the next recalculation required by this
Agreement constitute the relevant Sterling Amount for all purposes
of this Agreement;
(b) in respect of each Advance, if such Advance is denominated in
Sterling, the amount of the Advance requested in the Drawdown
Notice relating to the Advance, or, in the case of an amount of an
Advance denominated in an Optional Currency the amount of Sterling
required to purchase such amount calculated at the Spot Rate on
the Quotation Date in each case as reduced by the amount (if any)
of such Advance which has been repaid;
"Subsidiary" means:
(a) a subsidiary within the meaning of section 736 of the Act; and
(b) for the purposes of the definition of "Affiliate" and "Group" and
clauses 10.1(a), 10.3, 20.6 and schedule 6 only, a subsidiary
undertaking within the meaning of section 258 of the Act;
"Substitute" has the meaning given to that term in clause 16.3;
"Substitution Certificate" means a certificate substantially in the terms
of schedule 5;
<PAGE>
"Supply Business" means, in the case of each REC Company, its authorised
business as a public electricity supplier in the authorised area as such
terms are used in its Public Electricity Supply licence from time to
time;
"Syndication Date" means the date as determined by the Arrangers and
notified by them to the Primary Borrower on which syndication of the
Facilities has been fully completed;
"Taxes" includes all present and future taxes, levies, imposts, duties,
fees or charges of whatever nature including without limitation any
interest or penalties payable in connection with any failure or delay in
paying any of the same and "Taxation" shall be construed accordingly;
"Total Commitments" means, at any relevant time, and save as otherwise
provided herein, the total of the Commitments of all the Banks in respect
of the Facility at such time;
"Total Contributions" means, in respect of the Facility, the total of the
Contributions of all the Banks in respect of the Facility at such time;
"Treaty Lender" means a person which is resident (as such term is defined
in the appropriate double taxation treaty) in a country with which the
United Kingdom has a double taxation treaty giving residents of that
country complete exemption from the imposition of any withholding or
deduction for or on account of United Kingdom Taxes on interest (and
which does not carry on business in the United Kingdom through a
permanent establishment with which the Indebtedness under this Agreement
in respect of which the interest is paid is effectively connected);
"Utilisation" means the making of an Advance or the Issue of a Letter of
Credit;
"Voting Shares" means outstanding shares of capital stock of any class of
the Parent entitled to vote in the election of directors, excluding
shares entitled so to vote only upon the happening of some contingency;
and
"Wider Group" means TU Finance (No.1) Limited and all its Subsidiaries
from time to time (other than any REC Company).
1.3 Headings
Clause headings and the table of contents are inserted for convenience of
reference only and shall be ignored in the interpretation of this
Agreement.
1.4 Construction of certain terms
In this Agreement, unless the context otherwise requires:
(a) references to clauses and schedules are to be construed as
references to the clauses of, and schedules to, this Agreement and
references to this Agreement include its schedules;
(b) references to (or to any specified provision of) this Agreement or
any other document shall be construed as references to this
Agreement (including any Substitution Certificate), that provision
or that document as in force for the time being and as from time
to time amended, novated or supplemented in accordance with its
terms, or, as the
<PAGE>
case may be, with the agreement of the relevant parties and (where
such consent is, by the terms of this Agreement or the relevant
document, required to be obtained as a condition to such amendment
being permitted) the prior written consent of the Facility Agent;
(c) references to a "regulation" include any present or future
regulation, rule, directive, requirement, request or guideline
(whether or not having the force of law) of any Government Entity;
(d) references to an "authorisation" mean and include any consent,
authorisation, licence, approval and permit;
(e) words importing the plural shall include the singular and vice
versa;
(f) references to a time of day are to London time;
(g) references to a "person" shall be construed as including
references to an individual, firm, company, corporation,
unincorporated body of persons or any State or any of its
agencies;
(h) references to "assets" include all or part of any business,
undertaking, real property, personal property, shareholdings,
assets, revenues, uncalled capital and any rights (whether actual
or contingent, present or future) to receive, or require delivery
of, any of the foregoing;
(i) references to the "equivalent" of an amount specified in a
particular currency (the "specified currency amount") shall be
construed as a reference to the amount of the other relevant
currency which can be purchased with the specified currency amount
in the London foreign exchange market at or about 11 a.m. on the
day on which the calculation falls to be made for spot delivery,
as conclusively determined by the Facility Agent (with the
relevant exchange rate of any such purchase being the "spot
rate");
(j) references to any enactment shall be deemed to include references
to such enactment as re-enacted, amended or extended;
(k) references to documents being in the "agreed form" mean documents
initialled by both Lovell White Durrant (on behalf of the Facility
Agent and the Arrangers) and Norton Rose (on behalf of the
Obligors), or otherwise in the form required by the Facility
Agent;
(l) references to "VAT" are to be construed as including references to
any similar Tax;
(m) "including" and "in particular" shall not be construed
restrictively but shall mean "including, without prejudice to the
generality of the foregoing" and "in particular, but without
prejudice to the generality of the foregoing" respectively;
(n) references to documents being "certified copies" mean copies
certified as being true, complete and up-to-date copies as of a
date no earlier than the date of this Agreement by an officer of
the Primary Borrower who is at such time duly authorised to
execute or certify such documents on behalf of the Primary
Borrower;
<PAGE>
(o) "arms-length terms" means on terms which are fair and reasonable
to the relevant REC Company and no more or less favourable to the
other party to the relevant transaction than could reasonably be
expected to be obtained in a comparable transaction with a person
unconnected with the REC Group;
(p) references to "holding company" and "wholly-owned subsidiary",
save as otherwise defined, shall bear the same meaning as in
section 736 of the Act, as if extended to bodies corporate
wherever incorporated;
(q) a Letter of Credit being "repaid" or "prepaid" is effected by:
(i) providing the Issuing Bank with cash cover in the currency
in which that Letter of Credit is denominated;
(ii) reducing (in accordance with the terms of this Agreement
and the relevant Letter of Credit) the amount that may be
demanded under that Letter of Credit (or by such amount
automatically reducing in accordance with the terms of the
relevant Letter of Credit); or
(iii) cancelling that Letter of Credit by returning the original
to the Issuing Bank together with written confirmation (in
form and substance satisfactory to the Issuing Bank) from
the beneficiary that the Issuing Bank has no further
liability under that Letter of Credit.
2. THE COMMITMENTS
2.1 The Facilities
The Banks, relying upon each of the representations and warranties in
clause 9 and upon and subject to the conditions hereof, agree to make
available to the Primary Borrower and (subject to accession to this
Agreement under clause 24) the Additional Borrowers, a revolving advance
and letter of credit facility in an aggregate principal amount of
(pound)250,000,000.
The obligations of each Bank under this Agreement shall be to participate
in each Utilisation in the proportion which its Commitment in respect of
the Facility bears to the Total Commitments in respect of the Facility
but so that no Bank shall be under any obligation to participate in a
Utilisation if and to the extent its Commitment in respect of the
Facility would thereby be exceeded.
2.2 Finance Parties' obligations several
The obligations of each Finance Party under this Agreement are several;
the failure of any Finance Party to perform such obligations shall not
relieve any other Finance Party or any Obligor of any of their respective
obligations or liabilities under this Agreement nor shall any Finance
Party be responsible for the obligations of any other Finance Party under
this Agreement.
<PAGE>
2.3 Finance Parties' interests several
Notwithstanding any other term of this Agreement (but without prejudice
to the provisions of this Agreement relating to or requiring action by
the Majority Banks) the interests of the Finance Parties are several and
the amount due to each of the Finance Parties (for its own account) is a
separate and independent debt. Without prejudice to any other provision
of this Agreement (including any requirement for action to be approved or
instigated by, or with the consent or approval of, the Majority Banks)
each of the Finance Parties shall have the right to protect and enforce
its rights to amounts which have become due and payable to it under this
Agreement and it shall not be necessary for any other Finance Party to be
joined as an additional party in any proceedings for this purpose.
3. THE CONDITIONS
3.1 Documents and evidence
No Drawdown Notice may be delivered until the Facility Agent, or its duly
authorised representative, shall have received the documents and evidence
specified in Schedule 3, in each case in form and substance satisfactory
to the Facility Agent which the Facility Agent shall, once it is so
satisfied, confirm in writing to the Primary Borrower.
3.2 General conditions precedent
Each Utilisation is subject to the further conditions that at the date of
each Drawdown Notice and on each Drawdown Date and Issue Date:
(a) the applicable representations and warranties set out in clause 9
are true and correct on and as of each such date as if each were
made with respect to the facts and circumstances existing at such
date; and
(b) no Default shall have occurred and be continuing or would result
from the making of such Utilisation,
but this clause 3.2 shall not prevent the rollover of an existing Advance
(without increasing the amount thereof) or the refinancing of an amount
payable under a maturing Letter of Credit by an Advance in each case for
a Maturity Period of no more than one month at any time when no Event of
Default has occurred and is continuing.
3.3 Waiver of conditions precedent
The conditions specified in this clause 3 are inserted solely for the
benefit of the Banks and may be waived on their behalf in whole or in
part and with or without conditions by the Facility Agent acting on the
instructions of the Majority Banks in respect of any Utilisation.
4. ADVANCES UNDER THE FACILITY
4.1 The Facility
(a) Drawdown
<PAGE>
Subject to the terms and conditions of this Agreement, Advances
shall be made to the relevant Borrower following receipt by the
Facility Agent from the relevant Borrower of an appropriately
completed Drawdown Notice in the form set out in Part A of
Schedule 2 relating to the Facility not later than 11 a.m. one
Banking Day, in the case of a Sterling Advance, and three Banking
Days otherwise, before the proposed Drawdown Date.
(b) Amount
Each Drawdown Notice delivered to the Facility Agent pursuant to
clause 4.2(a) shall be irrevocable and shall specify:
(i) the proposed Drawdown Date, which shall be a Banking Day
falling prior to the Final Repayment Date;
(ii) the currency of denomination of the Advance (being Sterling
or an Optional Currency);
(iii) the amount of the Advance, which shall be of
(pound)10,000,000 or any larger sum which is an integral
multiple of (pound)5,000,000 (or if such Advance is to be
denominated in an Optional Currency, an integral multiple
of 1,000,000 of the largest currency unit of that Optional
Currency but in an amount at least the equivalent of
(pound)5,000,000) or, if less, the Available Facility
Amount in respect of the Facility on the relevant Drawdown
Date;
(iv) the Maturity Period which shall be of 1, 2, 3 or 6 months
(or such other period as the Facility Agent, acting on the
instructions of the Majority Banks, shall agree) ending not
later than the Final Repayment Date;
(v) the account to which the proceeds of the proposed Advance
are to be paid.
(c) Number of Advances
There shall be no more than 20 Advances outstanding at any time,
and not more than one Advance may be made in any period of 5
consecutive Banking Days.
(d) Calculation of Available Commitment
For the purpose of calculating the Available Commitment, the
Outstanding Contingent Liabilities under a Letter of Credit will
initially be its Sterling Amount on the Issue Date, subject to
recalculation by the Facility Agent in accordance with the
definition of "Sterling Amount" and clause 4.10 (Currency
Fluctuations).
(e) Cancellation on the Final Repayment Date
Without prejudice to any other provision of this Agreement, the
Total Commitments under the Facility shall in any event be reduced
to zero on the Final Repayment Date in respect of such Facility
and no Advance may be drawn by the Borrowers under the Facility
thereafter.
(f) Unavailability of Optional Currency
<PAGE>
If a Borrower requests that an Advance be denominated in an
Optional Currency during its Maturity Period as provided in Clause
4.1(b)(ii), and:
(i) no later than 10.00 a.m. on the Quotation Date for such
Advance, any Bank or Banks (an "Affected Bank") notifies
the Facility Agent (providing detailed reasons and
justification therefor) that it is not able to comply with
such request; or
(ii) no later than 11.00 a.m. on the Quotation Date for such
Advance, the Agent notifies the relevant Borrower and the
Banks that by reason of circumstances affecting the London
Interbank Market generally it is not feasible for such
Advance to be made in such Optional Currency or, as the
case may be, denominated in such Optional Currency for the
relevant Maturity Period;
(iii) to give effect to such request would cause the Advances
under the Facility to be denominated in more than four
Optional Currencies,
then:
(aa) if the circumstances in paragraph (i) above only
apply, the relevant Borrower and the Facility Agent
shall agree to adjust the amount of such Advance to
exclude the participation therein of the Affected
Bank or Banks and the Affected Bank or Banks shall
make a separate Advance in Sterling in the amount of
their scheduled participation in such Advance
Provided always that the Maturity Period thereof
ends on the same day as the Maturity Period of such
Advance; and/or
(bb) if the circumstances in (ii) and/or (iii) apply,
such Advance shall not be made unless the relevant
Borrower and the Banks otherwise agree, or the
relevant Borrower specified in the Drawdown Notice
in respect of such Advance that such Revolving
Advance should be denominated in Sterling in such
circumstances in which case such Advance shall be
made in Sterling in the Sterling Amount relating to
such Advance.
4.2 Issue of Letters of Credit
Subject to the provisions of this Agreement and to the prior delivery of
the notice referred to in clause 4.1(a), the Issuing Bank will Issue a
Letter of Credit specified in a Drawdown Notice at the request of a
Borrower, if the Agent has received the Drawdown Notice for a Letter of
Credit in the form set out in Part B of schedule 2 (Letters of Credit)
signed on behalf of such Borrower not later than 11.00 am five Banking
Days prior to the proposed Issue Date; and
(a) the proposed Issue Date is a Banking Day on or before the Final
Repayment Date;
(b) the face value of each Letter of Credit is a minimum Sterling
Amount of (pound)250,000;
(c) the Expiry Date falls on or before the earlier of 12 months from
the Issue Date and the Final Repayment Date;
(d) the Issuing Bank and (if different) the Facility Agent has agreed
its terms;
<PAGE>
(e) the Sterling Amount of the Letter of Credit requested does not
exceed the Available Facility Amount in respect of the Facility;
(f) after such Issue, there will be no more than twenty Letters of
Credit outstanding;
(g) no order, judgment or decree of any Governmental Entity or
arbitrator shall be outstanding which by its terms purports to
enjoin or restrain the Issuing Bank from Issuing such Letter of
Credit, nor shall any requirement of law applicable to the Issuing
Bank or any request or directive (whether or not having the force
of law) from any Governmental Entity with jurisdiction over the
Issuing Bank prohibit, or request that the Issuing Bank refrain
from, the Issuance of Letters of Credit generally or such Letter
of Credit in particular or shall impose upon the Issuing Bank with
respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuing Bank is not otherwise
compensated hereunder and which is not in effect on the date of
this Agreement), or shall impose upon the Issuing Bank any
unreimbursed loss, cost or expense which was not applicable on the
date of this Agreement and which the Issuing Bank in good faith
deems material to it;
(h) the currency in which the relevant Letter of Credit is to be
denominated is, in the opinion of the Issuing Bank, not likely to
be subject to undue fluctuation against Sterling and is likely to
be freely convertible and available in sufficient amounts to
enable the Issuing Bank to discharge its obligations as they fall
due;
(i) the Issuing Bank has approved (and been approved by) the relevant
beneficiary; and
(j) the total Sterling Amount of all Outstanding Contingent
Liabilities under all Letters of Credit then outstanding would not
exceed (pound)100,000,000.
4.3 Advances generally
(a) A Drawdown Notice (or notice purporting to be such) shall only be
effective if it complies with this Agreement and only upon actual
receipt by the Facility Agent and, once given, shall be
irrevocable.
(b) As soon as practicable after receipt of each Drawdown Notice
complying with this Agreement the Facility Agent shall notify each
Bank of such receipt and of the date on which the proposed Advance
is to be made and of the relevant Interest Period or, as the case
may be, the relevant Maturity Period and each Bank shall on such
Drawdown Date or, the case may be, on the first day of the
relevant Interest Period participate in such Advance by making
available to the Facility Agent its portion of such Advance in
accordance with clause 8.2 (Payments by the Banks).
4.4 Application of proceeds
Without prejudice to the Borrowers' obligations under clause 1.1(a), none
of the Finance Parties shall have any responsibility for the application
of the proceeds of any Utilisation by the relevant Borrower.
<PAGE>
4.5 Letters of Credit
(a) Issuing Bank as principal: the Issuing Bank will act as principal
of each Letter of Credit Issued by it and each Bank will
counter-indemnify the Issuing Bank in respect of the Outstanding
Contingent Liabilities thereunder in the relevant Proportion;
(b) Borrower's Authorisation and Indemnity: the relevant Borrower
unconditionally and irrevocably:
(i) authorises the Issuing Bank to comply with any demand which
appears to be duly made by a third party in respect of a
Letter of Credit without any further reference to the
relevant Borrower on the terms set out in Schedule 7 (Terms
of Borrower's Indemnity);
(ii) agrees that its authorisation under clause 4.5(b)(i) and
its indemnity under clause 4.5(b)(iv) shall remain in full
force and effect and shall not be discharged until such
date as the Facility Agent (acting on the instructions of
the Issuing Bank) shall notify the relevant Borrower that
it is satisfied (acting reasonably) that the Issuing Bank
remains under no liability (actual or contingent) in
respect of any Letter of Credit;
(iii) agrees that each Letter of Credit is Issued subject to and
with the benefit of the provisions of Schedule 7 (Terms of
Borrower's Indemnity); and
(iv) if a Finance Party suffers any liabilities, damages, costs,
expenses, losses and charges whatsoever in relation to or
arising out of any Letter of Credit Issued or clause 4.6
(Banks' Guarantee and Indemnity), the benefit of Schedule 7
(Terms of Borrower's Indemnity) shall extend to such
Finance Party. The relevant Borrower may finance a payment
under such indemnity by drawing down an Advance if it is
then entitled to do so in accordance with the terms of this
Agreement.
4.6 Banks' Guarantee and Indemnity
Each Bank hereby irrevocably and unconditionally:
(a) subject to clause 4.6(b), guarantees to and indemnifies on the
terms set out in Schedule 8 (Terms of Interbank Guarantee and
Indemnity) the Issuing Bank severally in its Proportion and on
demand by the Issuing Bank, the due and punctual performance by
the relevant Borrower of all its obligations in respect of each
Letter of Credit Issued by the Issuing Bank;
(b) if it is not permitted by its constitutional documents or any
applicable law to grant guarantees, agrees that, upon any failure
of the relevant Borrower to make timely payment of any amount due
in respect of a Letter of Credit, such Bank shall take (and upon
the occurrence of an Event of Default specified in clauses 12.1(e)
to (n) (Events of Default) shall be deemed to have taken without
any further action, as of the Issue Date of each outstanding
Letter of Credit), an undivided participating interest from the
Issuing Bank in each Letter of Credit outstanding at such time in
a proportion equal to such Bank's Proportion. Each Bank shall hold
the Issuing Bank harmless and indemnify
<PAGE>
the Issuing Bank for such Bank's proportionate share of any
drawing under any Letter of Credit in which it has taken an
undivided participating interest under this clause 4.7;
(c) as a separate and independent stipulation agrees that any sum of
money intended to be the subject of the guarantee in clause
4.6(a), and subject to clause 4.6(b) and Schedule 8 (Terms of
Interbank Guarantee and Indemnity), shall be recoverable from it
(in its Proportion) as sole principal debtor even if such sum
would not be recoverable from the relevant Borrower by reason of
any legal limitation or disability or incapacity or liquidation of
the relevant Borrower or any other fact or circumstance (whether
known to the Issuing Bank or not) but which would have been
recoverable from such Bank if it were the sole or principal debtor
in respect of such liability in place of the relevant Borrower;
(d) if it ceases to have the Minimum Rating as defined in clause 16.5,
to lodge forthwith with the Issuing Bank cash cover as security
for its indemnity obligations in the same amount as if it had
been, on that date, a Substitute.
4.7 Calculation of Interest if Bank makes a Guarantee or Indemnity Payment
Any payment made or to be made by a Bank pursuant to clause 4.6 (Banks'
Guarantee and Indemnity) and any unreimbursed amount on the part of the
Issuing Bank shall (for the purpose of calculating interest thereon which
is due from the relevant Borrower) be deemed to have been made available
to the relevant Borrower by way of an Advance on the date such payment is
made or is to be made (or reimbursed) and accordingly is subject to the
terms and conditions hereof and, after the earliest date on which an
Advance could have been drawn down to fund such liability, such amount
shall be treated as if it were an overdue sum with an initial term of one
month but (for all other purposes) shall be immediately due and payable
by the relevant Borrower.
4.8 Defaulting Banks
If a Bank (a "Defaulting Bank") fails to make payment on its due date of
any amount (an "overdue amount") due from it for the account of the
Issuing Bank pursuant to clause 4.6 (Banks' Guarantee and Indemnity) then
until the Issuing Bank (or the Agent on its behalf) has received payment
of such overdue amount in full (and without prejudice to any other rights
or remedies of the Issuing Bank in respect of such failure):
(a) the Issuing Bank shall be entitled to receive any remuneration
which such Defaulting Bank would otherwise have been entitled to
receive in respect of the Facility; and
(b) the overdue amount shall bear interest at the rate of one per cent
per annum over LIBOR plus the Additional Cost for the time being
from the due date until the date of payment and any such interest
which accrues shall be compounded monthly.
4.9 Subrogation of Banks making guarantee payments
(a) The relevant Borrower agrees that if any Bank makes any payment
under clause 4.6 (Banks' Guarantee and Indemnity) it will
immediately be subrogated to any rights that the Issuing Bank may
then have against the relevant Borrower in respect of the amount
paid and such subrogation will be subject to the terms set out in
Schedule 7 (Terms of Borrower's Indemnity).
<PAGE>
(b) The relevant Borrower agrees to indemnify the Bank making such a
payment in respect of such payment and all costs and expenses
properly incurred by the Bank in recovering or attempting to
recover any amount pursuant to such rights of subrogation.
4.10 Currency Fluctuations
In addition and without prejudice to the Banks' other rights hereunder,
the Facility Agent shall on every Quarter Date (and at any other time at
which it is requested to do so by the Majority Banks) calculate the
aggregate of the Sterling Amounts of all Outstanding Contingent
Liabilities under all Letters of Credit then outstanding.
4.11 Clawback
If the Facility Agent at any time issues a certificate addressed to the
Primary Borrower that in its opinion the aggregate of the Sterling
Amounts of Outstanding Contingent Liabilities under all Letters of Credit
then outstanding is equal to or exceeds 105% of the aggregate amount of
the Banks' Commitments under the Facility less the amount of all
outstanding Advances at that time, the Agent may give notice to the
Borrowers requiring them within five Banking Days either to:
(a) make arrangements to repay Advances and/or reduce the amount of
the Letters of Credit outstanding so as to bring the Sterling
Amount of all such Outstanding Contingent Liabilities to an amount
equal to or below 100% of that aggregate amount; or
(b) provide the Issuing Bank with cash cover in the currency in which
any Letter of Credit is denominated of such amount as would cause
the requirements of this clause 4.11 to be satisfied.
4.12 Cash Cover
Wherecash cover is provided by any Borrower under clause 4.11 (Clawback)
or otherwise under this Agreement:
(a) the Issuing Bank or other recipient Bank undertakes to place the
relevant cash deposit in an account with it bearing interest at a
rate and on the standard terms (other than as to the security
arrangements) applicable to corporate customers of such Bank
making deposits of an equivalent size and for an equivalent
duration (or on such other terms as such Bank and such Borrower
may agree or are set out in this Agreement);
(b) interest accruing on cash deposited as cash cover shall be for the
account of and paid to such Borrower but shall not be paid to such
Borrower during the continuance of an Event of Default; and
(c) unless the Majority Banks decide otherwise, cash cover may not be
withdrawn by any Borrower until all outstanding liabilities of the
Issuing Bank in respect of all Letters of Credit have been repaid
or prepaid (ignoring for this purpose any cash cover provided to
the Issuing Bank) in full.
<PAGE>
5. INTEREST AND MATURITY PERIODS
5.1 Interest under the Facility
The relevant Borrower shall pay interest on each Advance on its Maturity
Date (or, in the case of an Advance having a Maturity Period of more than
six months, by instalments, every six months from the relevant Drawdown
Date and on the relevant Maturity Date) at the rate per annum determined
by the Facility Agent to be the aggregate of (i) the Applicable Margin,
(ii) the Additional Cost and (iii) LIBOR.
5.2 Interest on unpaid sums
(a) If any Borrower fails to pay any sum (including, without
limitation, any sum payable pursuant to this clause 5.2) on its
due date for payment under this Agreement such Borrower shall pay
interest on such sum from the due date up to the date of actual
payment (as well after as before judgment) at a rate determined by
the Facility Agent pursuant to this clause 5.2.
(b) The period beginning on the due date for payment and ending on the
date of actual payment shall be divided into successive periods of
not more than three months as selected by the Facility Agent
(after consultation with the Banks so far as reasonably
practicable in the circumstances) each of which (other than the
first, which shall commence on such due date) shall commence on
the last day of the preceding such period but so that if the
unpaid sum is an amount of principal which shall have become due
and payable prior to the relevant Maturity Date, then the first
such period selected by the Facility Agent shall end on such
Maturity Date.
(c) The rate of interest applicable to each period referred to in
clause 5.2(b) shall (subject to clause 5.4) be the aggregate (as
determined by the Facility Agent) of (i) one per cent per annum,
(ii) the Applicable Margin (iii) the Additional Cost and (iv)
LIBOR but so that if the unpaid sum is an amount of principal (as
referred to in clause 5.2(b)) interest shall be payable on such
unpaid sum during the first period determined pursuant to clause
5.2(b) at a rate one per cent above the rate applicable thereto
immediately before it fell due.
(d) Interest under this clause 5.2 shall be due and payable on the
last day of each period determined by the Facility Agent pursuant
to this clause 5.2 or, if earlier, on the date on which the sum in
respect of which such interest is accruing shall actually be paid
or on such date or other dates which the Facility Agent may
specify by written notice to the relevant Borrower (but not more
frequently than once a month). Any interest payable under this
clause 5.2 which is not paid when due shall be deemed an unpaid
sum and shall itself bear interest accordingly.
5.3 Notification of Maturity Periods and interest rate
The Facility Agent shall notify the relevant Borrower and the Banks
promptly of the duration of each Maturity Period or other period for the
calculation of interest (or, as the case may be, default interest) and of
each rate of interest determined by it under this clause 5.
<PAGE>
5.4 Alternative interest rates
If:
(a) in attempting to calculate LIBOR under paragraph (b) of the
definition of LIBOR for a specified period the Facility Agent
determines at 11.00 a.m. (London time) on the Quotation Date that
it is unable to obtain quotations for LIBOR from any of the
Reference Banks in respect of the relevant Advance or unpaid sum
for the specified period; or
(b) before its close of business on such day, the Facility Agent has
been notified in writing by a Bank or group of Banks to which 35%
or more of the relevant Advance or unpaid sum is (or, if the
relevant Advance were made, would then be) owed that LIBOR
calculated in accordance with its definition in this Agreement
does not accurately reflect the cost to them of funding their
participation; or
(c) the Facility Agent, acting reasonably, determines that, by reason
of circumstances affecting the London inter-bank market, adequate
and fair means do not or will not exist for determining the rate
of interest applicable to the specified period,
then:
(i) the Facility Agent shall promptly notify in writing the
Primary Borrower and the Banks of such event or
circumstance;
(ii) the Facility Agent (on behalf of and after consultation
with the Banks) shall, within three Banking Days of such
notice, negotiate with the Primary Borrower with a view to
agreeing a substitute basis on which the relevant part of
the Facility may be maintained;
(iii) any substitute basis agreed in writing by the Facility
Agent (on behalf of and with the consent of all the Banks)
and the Primary Borrower within 30 days of such notice
shall take effect in accordance with its terms and interest
shall be calculated as if the substitute basis had come
into effect from the beginning of the relevant specific
period;
(iv) in default of agreement within 30 days, each Bank's
participation in the Advance or unpaid sum (if any) shall
during that specific period bear interest at the annual
rate equal to the cost to that Bank (as certified by it to
the Primary Borrower within ten days of the end of that 30
day period and expressed as a percentage rate per annum) of
funding its participation during that specific period by
whatever means that Bank determines to be most appropriate
plus the Applicable Margin and the Additional Cost and if
clause 5.4 (Interest on unpaid sums) applies, a further one
per cent.
<PAGE>
6. REPAYMENT, CANCELLATION AND REDUCTIONS
6.1 Repayment of Advances
(a) The relevant Borrower shall repay each Advance in full on its
Maturity Date but, subject to the terms of this Agreement, amounts
repaid may be reborrowed.
(b) On the Final Repayment Date the balance of all outstanding
Advances shall in any event be repaid in full (together with all
other amounts outstanding under the Facility) and may not be
reborrowed.
(c) In the event that
(i) there is a Change in Control of the Parent; or
(ii) any REC Company ceases to be a Subsidiary of the Parent or
the Parent reduces its shareholding (whether direct or
indirect) in any REC Company;
then, within thirty days of such event (unless the Majority Banks
decide otherwise) the balance of all outstanding Advances shall be
repaid in full (together with all other amounts outstanding under
the Facility) and may not be reborrowed and each Borrower shall
procure the provision of full cash cover for the Outstanding
Contingent Liabilities under all Letters of Credit then
outstanding in the currency in which those Letters of Credit are
denominated.
6.2 Optional prepayment of all the Banks
The relevant Borrower may prepay Advances other than on their relative
Maturity Date provided that it shall simultaneously pay any relevant
amounts payable pursuant to clause 13.1.
6.3 Affected Banks
(a) The relevant Borrower may and, where required under this Agreement
shall prepay (in whole but not in part only), without premium or
penalty, subject to clause 13.1, the whole of the Contributions to
the Facility of any Affected Bank. Upon any such notice of such
prepayment being given, or as provided for in clause 14.1, the
Commitments of the relevant Bank to the Facility shall be reduced
to zero and the undrawn amount of the Total Commitments in respect
of the Facility shall be reduced accordingly.
(b) Instead of or, in addition to, its rights under clause 6.5(a) the
relevant Borrower may on payment of the fee under clause 16.5,
without prejudice to clause 14.4, require the Affected Bank to
transfer pursuant to clause 16.5 at par all of its Commitments and
Contributions to a Qualifying Bank nominated by the relevant
Borrower provided that the relevant Qualifying Bank agrees (in its
absolute discretion) to accept the transfer to it and, in the case
of clause 14.1, that Bank is lawfully able to do so and the
transfer is to take effect prior to the prepayment date specified
by the Facility Agent thereunder.
6.4 Prepayments generally
(a) No prepayment may be made unless the relevant Borrower shall have
given the Facility Agent 5 Banking Days prior notice (or in the
case of a prepayment pursuant to clause 14.1 such notice as is
required under clause 14.1) specifying the proposed date of the
prepayment and the amount to be prepaid. Every such notice shall
be effective only on actual receipt by the Facility Agent, shall
be irrevocable and shall oblige the relevant Borrower to make the
relevant prepayment on the date specified.
<PAGE>
(b) All prepayments shall be made together with (to the extent these
relate to the amounts prepaid) (i) accrued interest to the date of
prepayment; (ii) any additional amount payable under clauses 8.5
or 14.2; and (iii) all other sums payable by the relevant Borrower
to the relevant Banks under this Agreement including, without
limitation, any accrued commitment commission payable under clause
7.2, any Letter of Credit commission and fees under clause 7.3,
expenses under clause 7.4 and any amounts payable under clause
13.1.
(c) No Borrower shall prepay all or any part of an Advance outstanding
hereunder except at the times and in the manner expressly provided
herein.
6.5 Cancellation of the Facilities
The Primary Borrower may at any time prior to the Final Repayment Date in
respect of the Facility by notice to the Facility Agent (effective only
on actual receipt) cancel with effect from a date not less than 10
Banking Days after the receipt by the Facility Agent of such notice the
whole or any part (if in part, being (pound)10,000,000 or any larger sum
which is an integral multiple of (pound)5,000,000) of the Available
Facility Amount of the Facility, in each case which is not the subject of
a Drawdown Notice at such time. Such notice shall specify the date upon
which such cancellation is to be made and the amount of such
cancellation. Any such notice of cancellation, once given, shall be
irrevocable and upon such cancellation taking effect the Commitments of
the Banks in respect of the Facility shall be reduced pro rata
accordingly.
6.6 Termination
The Commitment of each Bank shall be automatically cancelled and reduced
to zero at the close of business in London on the Final Repayment Date.
7. FEES AND EXPENSES
7.1 Arrangement, underwriting, participation and agency fees
The Primary Borrower shall pay to the Facility Agent or shall procure
that there is paid, whether or not any part of the Commitments is ever
advanced on the date of this Agreement and on each anniversary thereof
until the end of the Finance Period, for the account of the Facility
Agent, an agency fee of an amount agreed between the Primary Borrower and
the Facility Agent in a letter dated on or about the date of this
Agreement.
7.2 Commitment fees
The Primary Borrower shall pay to the Facility Agent, whether or not any
part of the Commitments is ever advanced, from the date of this Agreement
on each Fee Payment Date after the date of this Agreement and on the
Final Repayment Date, for the account of each of the Banks (pro-rata
their respective Commitments for the Facility), commitment commission
computed in arrears at the Applicable Fees Rate on the daily amount by
which the Total Commitments in respect of the Facility exceeds the
aggregate of the Contributions in respect of the Facility. Accrued
commitment commission will also be payable on the amount of any
Commitment when cancelled on the date of its cancellation.
<PAGE>
7.3 Letter of Credit Fees
(a) The relevant Borrower shall (on the dates set out in clause
7.3(c)) pay commission in Sterling to the Facility Agent for the
account of the Banks (in their respective Proportions) on the
Issue of any Letter of Credit requested by the relevant Borrower
in Sterling at a percentage rate per annum equal to the Applicable
Margin on the Sterling Amount of the Outstanding Contingent
Liabilities under such Letter of Credit calculated in each case on
the date of Issue and recalculated on each Quarter Date from the
Issue Date of such Letter of Credit until the earlier of its
Expiry Date or such date as the Issuing Bank and the Banks have
ceased to be under any liability (actual or contingent) in respect
thereof, and on the basis of a 365 day year. If the relevant
Borrower has provided cash cover for any Letter of Credit, the
percentage rate per annum payable on cash covered amounts shall
instead be 0.25%.
(b) The relevant Borrower shall pay a fronting fee to the Facility
Agent for the account of the Issuing Bank on the Issue of any
Letter of Credit at a rate of 0.2% per annum on the Sterling
Amount of the face amount of the relevant Letter of Credit payable
in advance on the date of Issue and on each Quarter Date
thereafter.
(c) The commission and fronting fee payable under clauses 7.3(a) and
7.3(b) in respect of each Letter of Credit shall be paid in
advance on the relevant Issue Date and on each Quarter Date in
each year during the continuance of such Letter of Credit (or if
such day is not a Banking Day, on the preceding Banking Day)
commencing on the first Quarter Date falling on or after the Issue
of the relevant Letter of Credit. If a Letter of Credit is
terminated leaving no Outstanding Contingent Liabilities before a
Quarter Date, any commission paid in advance for the period from
the date of cancellation until the next Quarter Date shall be
repaid to the relevant Borrower which made the advance commission
payment by set-off against any amounts then due from the relevant
Borrower to any Finance Party or, if no such amounts are due, by
payment in cash.
(d) For the avoidance of doubt, the Issuing Bank's Proportion of the
commission at the rate and calculated in the manner specified in
clause 7.3(a) shall be payable to the Issuing Bank in respect of
its residual liability in its capacity as a Bank, notwithstanding
that it does not purport to guarantee itself in its capacity as
Issuing Bank.
(e) The relevant Borrower shall pay interest on the amount demanded
and outstanding under the indemnity given by them in respect of
Letters of Credit in accordance with clause 4.7 (Calculation of
Interest if Bank makes a Guarantee or Indemnity Payment) in
addition to the commission and other fees payable under this
Agreement in respect of the Facility.
7.4 Expenses
The Primary Borrower shall reimburse the Arrangers, the Banks, the
Issuing Bank and the Facility Agent from time to time within three
Banking Days of demand:
(a) all reasonable costs and expenses (including without limitation
legal, printing and out-of-pocket expenses) together with any VAT
thereon incurred by the Facility Agent and the Arrangers in
connection with the negotiation, preparation and execution of the
Finance Documents and the completion and syndication of the
transactions therein contemplated, and the negotiation,
preparation and execution of any amendment or
<PAGE>
extension of, or the granting of any waiver or consent under, any
of the Finance Documents; and
(b) without prejudice to the generality of (c) below, all expenses and
costs (including without limitation the fees and expenses of
lawyers, accountants, surveyors, valuers, environmental
consultants and other professional advisers and out-of-pocket
expenses) incurred by the Facility Agent in connection with the
obtaining of reports and/or advice and/or the undertaking of
investigations by or on behalf of the Facility Agent into or
concerning any Borrower or the REC Group following the occurrence
of a Default and whilst it is continuing (or where the Majority
Banks' reasonable opinion is that a Default may have occurred) and
each Borrower undertakes to give, and to procure that its
Subsidiaries give, all such reasonable assistance (including,
without limitation, access to its and/or their properties and
financial and other records) at all times as the Facility Agent
shall reasonably require for the purpose of enabling such reports
or advice to be prepared or such investigations to be undertaken;
and
(c) after a Default has occurred, all costs and expenses (including
without limitation legal and out-of-pocket expenses) incurred by
any of the Finance Parties in contemplation of, or otherwise in
connection with, the enforcement or attempted enforcement of, or
preservation or attempted preservation of any rights under, any of
the Finance Documents, or otherwise in respect of the recovery, or
attempted recovery, of moneys owing under the same, together with
interest at the rate referred to in clause 5.4 from the date on
which such expenses were incurred to the date of payment (as well
after as before judgment).
7.5 Value Added Tax
All fees, costs and expenses payable pursuant to this clause 7 shall be
paid together with an amount equal to any VAT thereon payable by any of
the Finance Parties in respect of such fees and expenses.
7.6 Stamp and other duties
The Primary Borrower shall pay all stamp, documentary, registration,
notarisation or other duties or Taxes (including any duties or Taxes
payable by, or assessed on, the Finance Parties) imposed on or in
connection with the negotiation, preparation, execution or implementation
of any of the Finance Documents and the syndication of the Facilities and
shall indemnify the Finance Parties against any liability arising by
reason of any delay or omission by the Primary Borrower to pay such
duties or Taxes.
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS
8.1 No set-off or counterclaim; distribution to the Banks
All payments to be made by the relevant Obligor under this Agreement
shall be made in full, without any set-off or counterclaim whatsoever
and, subject as provided in clause 8.5, free and clear of any deductions
or withholdings, in Sterling (except for (a) the repayment or prepayment
of an Advance which shall be payable in the currency in which the Advance
is denominated on the due date, (b) interest which shall be payable in
the currency in which the relevant amount in respect of which it is
payable is denominated, (c) costs, charges or expenses which shall be
<PAGE>
payable in the currency in which they are incurred and (d) provisions in
the Finance Documents providing otherwise) on the due date to the account
of the Facility Agent at such bank as the Facility Agent may from time to
time specify for this purpose. Save where this Agreement provides for a
payment to be made for the account of a particular Finance Party or
Finance Parties, in which case the Facility Agent shall distribute the
relevant payment to the relevant Finance Party or Finance Parties
concerned, payments to be made by the relevant Obligor under this
Agreement shall be for the account of all the Banks and the Facility
Agent shall forthwith distribute such payments in like funds as are
received by the Facility Agent to the Banks rateably for the account of
such Banks' respective Facility Offices in accordance with their
Commitments or Contributions, as the case may be.
8.2 Payments by the Banks
All sums to be advanced by the Banks to the relevant Borrower under this
Agreement shall be remitted in the currency specified in the Drawdown
Notice (subject to clause 4.1(f)) in immediately available funds not
later than such time as the Facility Agent may specify as being customary
for settlement of transactions in the relevant currency on the relevant
Drawdown Date or, as the case may be, the first day of the relevant
Interest Period to the account of the Facility Agent at such bank as the
Facility Agent may have notified to the Banks and shall be paid by the
Facility Agent on such date to the account of the relevant Borrower in
England specified in the relevant Drawdown Notice.
8.3 Non-Banking Days
When any payment under this Agreement would otherwise be due on a day
which is not a Banking Day, the due date for payment shall be postponed
to the next following Banking Day unless such Banking Day falls in the
next calendar month, in which case payment shall be made on the
immediately preceding Banking Day.
8.4 Facility Agent may assume receipt
Where any sum is to be paid under this Agreement to the Facility Agent
for the account of another person, the Facility Agent may assume that the
payment will be made when due and may (but shall not be obliged to) make
such sum available to the person so entitled. If it proves to be the case
that such payment was not made to the Facility Agent, then the person to
whom such sum was so made available shall on request refund such sum to
the Facility Agent together with interest thereon sufficient to
compensate the Facility Agent for the cost of making available such sum
up to (and/or, as the case may be, the cost to the relevant other person
of not receiving such sum until) the date of such repayment and the
person by whom such sum was payable shall indemnify the Facility Agent
(or the relevant other person) for any and all loss or expense which the
Facility Agent (or the relevant other person) may sustain or incur as a
consequence of such sum not having been paid on its due date together
with any interest, expenses and penalties payable or incurred in
connection therewith.
8.5 Grossing-up for Taxes
If at any time the relevant Obligor is required to make any deduction or
withholding in respect of Taxes from any payment due under any Finance
Document for the account of any Finance Party (or if the Facility Agent,
is required to make any such deduction or withholding from a payment to a
Finance Party), the sum due from the relevant Obligor in respect of such
payment shall, subject to clause 8.6, be increased to the extent
necessary to ensure that, after the making
<PAGE>
of such deduction or withholding (and any further deduction and
withholding which may be levied on the additional amounts paid by reason
of this clause), each Finance Party receives on the due date for such
payment (and retains, free from any liability in respect of such
deduction or withholding) a net sum equal to the sum which it would have
received and so retained had no such deduction or withholding been made
or required to be made and (without prejudice to the foregoing provisions
of this clause 8.5) the relevant Obligor shall indemnify each Finance
Party on demand by the Facility Agent against any losses or costs
incurred by it together with any interest, expenses and penalties payable
or incurred in connection therewith by reason of any failure of the
relevant Obligor to make any such deduction or withholding.
The relevant Obligor shall promptly deliver to the Facility Agent any
receipts, certificates or other proof evidencing the amounts (if any)
paid or payable in respect of any such deduction or withholding.
8.6 Qualifying Bank
(a) If:
(i) any Bank is not or ceases to be a Qualifying Bank; and
(ii) as a result any Borrower is required to deduct or withhold
United Kingdom income tax in respect of payments of
interest to be made by such Borrower to that Bank under any
Finance Document or would otherwise have been required to
make an indemnity payment or a greater indemnity payment
under clause 8.5 or 14.2,
then the relevant Borrower shall (as the case may be) not be
liable to pay under clause 8.5 in respect of any such payment of
interest any amount in excess of the amount it would have been
obliged to pay if such Bank were a Qualifying Bank, nor shall it
be liable to make an indemnity payment or a greater indemnity
payment under clause 8.5 or, as the case may be, Clause 14.2 than
would have been required if the aforesaid Bank had been or had not
ceased to be a Qualifying Bank Provided that this Clause 8.6 shall
not apply, and the relevant Borrower shall be obliged to comply
with its obligations under clause 8.5, or as the case may be 14.2,
if on or after the date hereof:
(aa) there shall have been any change in, or in the official
interpretation or application of, any relevant law or the
practice of the United Kingdom Inland Revenue (or, in the
case of a Treaty Lender, any Government Entity in the
country in which it is resident for the purpose of the
relevant double taxation treaty) and as a result thereof
the Bank is not or ceases to be a Qualifying Bank, or
(bb) the Bank referred to in clause 8.6(a) has transferred its
Facility Office in respect of any Facility outside the
United Kingdom or has become a Bank hereunder with a
Facility Office outside the United Kingdom in respect of
any Facility, in each case, with the consent of the Primary
Borrower if and insofar as required under this Agreement.
(b) A person intending to make a claim pursuant to clause 8.5 shall,
promptly after such person becomes aware of the circumstances
giving rise to such claim and the amount of such claim, deliver to
the Primary Borrower through the Facility Agent a certificate
<PAGE>
to that effect specifying the amount of such claim and setting out
in reasonable detail the basis of such claim, provided that
nothing shall require such person to disclose any confidential
information relating to the organisation of its affairs.
(c) If at any time after the date of this Agreement any Bank is aware
that it is not or will cease to be a Qualifying Bank (for whatever
reason), it shall promptly notify the Primary Borrower.
(d) A Treaty Lender will submit such claim to the appropriate
authorities (together with such forms, papers, other documents
and/or evidence as necessary) as may be required for the relevant
Borrower to make payment of interest to such Treaty Lender on its
Advances free of withholding or deduction on account of United
Kingdom Tax. The relevant Borrower will not be liable to pay any
additional amount under clause 8.5 in respect of the withholding
or deduction on account of United Kingdom income tax from any such
interest unless such claim has been submitted to those authorities
promptly after that Treaty Leader became a party to this Agreement
as a Treaty Lender or the proviso to clause 8.6(a) applies.
8.7 Claw-back of Tax benefit
If following any such deduction or withholding as is referred to in
clause 8.5 any Finance Party determines in its sole discretion that it
has received or been granted a credit against or remission for any Taxes
payable by it, such Finance Party shall, subject to the relevant Borrower
having made any increased payment in accordance with clause 8.5 and
subject to there not being any Default which is continuing, and to the
extent that such Finance Party can do so without prejudicing the
retention of the amount of such credit or remission and without prejudice
to the right of such Finance Party to obtain any other relief or
allowance which may be available to it, reimburse the relevant Borrower
with such amount as such Finance Party shall in its absolute discretion
certify to be the proportion of such credit or remission as will leave
such Finance Party (after such reimbursement) in no worse position than
it would have been in had there been no such deduction or withholding
from the payment by the relevant Borrower as aforesaid. Such
reimbursement shall be made forthwith upon such Finance Party certifying
that the amount of such credit or remission has been received by it,
provided that the Finance Party shall be the sole judge of the amount of
any such benefit and of the date on which it was received. Nothing
contained in this Agreement shall interfere with the right of any Finance
Party to arrange its tax affairs in whatever manner it thinks fit nor
oblige any Finance Party to disclose any information regarding its tax
affairs and computations. Without prejudice to the generality of the
foregoing, no Borrower shall, by virtue of this clause 8.7, be entitled
to enquire about any Finance Party's tax affairs or computations. The
Finance Parties are under no obligation to investigate whether any tax
credit is available or to claim any tax credit. Any amount paid by any
Finance Party to any Borrower under this clause shall be conclusive
evidence of the amount payable and will be accepted by such Borrower in
full and final settlement of its claim.
8.8 Bank accounts
Each Bank shall maintain, in accordance with its usual practices, an
account or accounts evidencing the amounts from time to time lent by,
owing to and paid to it under this Agreement. The Facility Agent shall
maintain a control account showing the utilisation of the Facilities and
other sums owing by the Borrowers under this Agreement and all payments
in respect thereof made by any Borrower from time to time. In any legal
action arising out of or in connection with the Finance Documents the
entries made in the accounts maintained pursuant to this
<PAGE>
clause 8.8 shall, in the absence of manifest error, be conclusive as to
the amount from time to time owing by each Borrower under this Agreement.
8.9 Partial payments
If:
(a) on any date on which a payment is due to be made by a Obligor
under this Agreement, the amount received by the Facility Agent
from such Obligor falls short of the total amount of the payment
due to be made by such Obligor on such date; or
(b) on any date on which the Facility Agent receives or recovers any
payment from an Obligor or otherwise receives any amount
representing proceeds of realisations or other recoveries under
any of the Finance Documents, the amount of such payment or other
receipt falls short of the total amount owing to the Finance
Parties under this Agreement on such date,
then (in any such case), without prejudice to any rights or remedies
available to the Finance Parties under any of the Finance Documents, the
Facility Agent shall apply the amount actually received by it in or
towards discharge of the obligations of the relevant Obligor under this
Agreement in the following order, notwithstanding any appropriation made,
or purported to be made, by such Obligor:
(i) first, in or towards payment, on a pro-rata basis, of any
unpaid costs and expenses of the Facility Agent or the
Arrangers under this Agreement;
(ii) secondly, in or towards payment to the Banks, on a pro-rata
basis, of any amount owing to the Banks under clause 20.2;
(iii) thirdly, in or towards payment to the Facility Agent on a
pro-rata basis, of any portion of the fees payable under
clause 7.1(b) which remains unpaid;
(iv) fourthly, in or towards payment to the Banks, on a pro-rata
basis, of any accrued commitment commission payable under
clause 7.2 which shall have become due but remains unpaid;
(v) fifthly, in or towards payment to the Banks, on a pro-rata
basis, of any accrued interest, Letter of Credit commission
and (in the case of the Issuing Bank) Letter of Credit
fronting fees or commission which shall have become due but
remain unpaid, but so that any amount payable by virtue of
clause 8.5 shall be excluded;
(vi) sixthly, in or towards payment to the Banks, on a pro-rata
basis, of any principal which shall have become due but
remains unpaid;
(vii) seventhly, in or towards payment to any such Banks, on a
pro-rata basis, of any amount payable to any Banks by
virtue of clause 8.5 which remains unpaid; and
(viii) eighthly, in or towards payment of any other sum which
shall have become due but remains unpaid (and, if more than
one such sum so remains unpaid, on a pro-rata basis).
<PAGE>
Each reference in clause 8.9(i) to (viii) (inclusive) to a category of
unpaid sums shall include interest thereon payable in accordance with
this Agreement (including, without limitation, default interest under
clause 5.4). Accordingly, clause 8.9(v) shall be construed as referring
to interest on principal and accrued interest thereon which remain unpaid
to the extent due.
The order of application set out in this clause 8.9(v) to 8.9(viii) shall
be varied by the Facility Agent if the Majority Banks so direct, without
any reference to, or consent or approval from, any Obligor.
8.10 Calculations
All interest and other payments of an annual nature under this Agreement
or any of the Finance Documents shall accrue from day to day and be
calculated on the basis of the actual number of days elapsed, and in the
case of Sterling a 365 day year and in the case of other currencies a 360
day year. In calculating the actual number of days elapsed in a period
which is one of a series of consecutive periods with no interval between
them or a period on the last day of which any payment falls to be made in
respect of such period, the first day of such period shall be included
but the last day excluded.
Where the Applicable Margin or Additional Cost changes during any period,
interest and commitment fees shall be calculated on the rate prevailing
from day to day.
8.11 Certificates conclusive
Any certificate of, or determination by, a Finance Party as to any rate
of interest or any other amount payable under this Agreement or any other
Finance Documents shall, in the absence of manifest error, be conclusive
and binding evidence of such rate or amount on the Obligors and (in the
case of a certificate of or determination by the Facility Agent) on the
Banks.
8.12 Effect of monetary union
If the country of any national currency in which any amount is expressed
to be payable under this Agreement participates in economic and monetary
union in accordance with Article 109J of the Treaty on European Union,
then:
(a) any amount expressed to be payable under this Agreement in that
national currency shall (until the end of the transitional period)
be made in that national currency or in Euros as the Facility
Agent may, by not less than two Banking Days' notice to the
Primary Borrower and the Banks to that effect, require;
(b) any amount so required under clause 8.12(a) to be paid in Euros
shall be converted from that national currency at the rate
stipulated pursuant to Article 109L(4) of the Treaty on European
Union and payment of the amount in Euro derived from such
conversion shall discharge the obligation of the relevant party to
pay such national currency amount; and
(c) after consultation with the Primary Borrower and the Banks and
notwithstanding clause 22, the Facility Agent shall be entitled to
make from time to time such amendments to this Agreement as it may
determine to be necessary to take account of monetary union
<PAGE>
and any consequent changes in market practices (whether as to the
settlement or rounding of obligations, the calculation of interest
or otherwise howsoever).
Any amendment so made to this Agreement by the Facility Agent shall be
promptly notified to the other Finance Parties and the Primary Borrower
by the Facility Agent and shall be binding on all the other Finance
Parties and the Primary Borrower and any other party to this Agreement.
9. REPRESENTATIONS AND WARRANTIES
9.1 Repeated representations and warranties
Each Obligor represents and warrants to each Finance Party that:
(a) Due incorporation: it is duly incorporated and validly existing
under the laws of England as a limited liability company and has
power to carry on its businesses as they are now being conducted
and to own its property and other assets;
(b) Corporate Power: it has power to execute, deliver and perform its
obligations under each of the Finance Documents and to borrow the
Commitments; all necessary corporate, shareholder and other action
has been taken to authorise the execution, delivery and
performance of the same and no limitation on the powers of any
Borrower to borrow or Guarantor to guarantee will be exceeded as a
result of any Utilisation under or entry into any of the Finance
Documents;
(c) Binding obligations: (i) each of the Finance Documents when
executed and delivered by it will (subject to the Reservations)
constitute, valid, legally binding and enforceable obligations of
it in accordance with their respective terms and (ii) it is not
necessary, to ensure the legality, validity, enforceability or
admissibility in evidence of any Finance Document that they or any
other instrument be notarised, filed, recorded, registered or
enrolled in any court, public office or elsewhere in the United
Kingdom or elsewhere or that any stamp, registration or similar
tax or charge be paid in the United Kingdom or elsewhere on or in
relation to any Finance Documents;
(d) No conflict with other obligations: the execution and delivery of,
the exercise of its rights and the performance of its obligations
under, and compliance with the provisions of, the Finance
Documents by it will not (i) contravene any existing applicable
law, statute, rule or regulation or any judgment, decree or permit
to which any of them are subject, (ii) conflict with, or result in
any breach of any of the terms of, or constitute a default under
any of the Licences or the Pooling and Settlement Agreement, or
under any other agreement or other instrument to which any of them
are a party or are subject or by which any of their property is
bound to an extent which is reasonably likely in the reasonable
opinion of the Majority Banks to have a Material Adverse Effect,
(iii) contravene or conflict with any provision of its Memorandum
or Articles of Association or (iv) result, other than pursuant to
the provisions of any of the Finance Documents, in the creation or
imposition of, or oblige any Obligor to create, any Security
Interest (save in favour of the Finance Parties) on its assets,
rights or revenues; and
(e) Pari passu: its obligations under this Agreement are its direct,
general and unconditional obligations and rank at least pari passu
with all its other present and
<PAGE>
future unsecured and unsubordinated Indebtedness with the
exception of any obligations which are mandatorily preferred by
law and not by contract.
(f) No Litigation: So far as it is aware, no litigation, alternative
dispute resolution, arbitration or administration proceeding is
taking place, pending or threatened against it or any other member
of the Group which is reasonably likely (in the reasonable opinion
of the Majority Banks) in either case to have a Material Adverse
Effect.
9.2 Continuing representations
Each Obligor represents and warrants to each Finance Party that:
(a) Compliance with Environmental Laws: it:
(i) as at the Effective Date, or in the case of an Additional
Obligor, the date it accedes to this Agreement complies;
and
(ii) has (to the extent that non-compliance would be reasonably
likely to give rise to a material liability as at the
Effective Date or such date) at all times complied,
in all material respects with all Environmental Laws, where
non-compliance, in each case, would be reasonably likely to have a
Material Adverse Effect;
(b) No Environmental Claims:
(i) no Environmental Claim is pending or has been made or
threatened against the Primary Borrower or any other member
of the Group for which any REC Company could be held liable
or any of their respective officers in their capacity as
such; and
(ii) no member of the Group is aware of any circumstances or
situation which would be reasonably likely to result in it
having any liability in relation to Environmental Matters,
which, in either case, would be reasonably likely to have a
Material Adverse Effect;
(c) Electricity Act:
(i) each REC Company (to the extent necessary for it to be able
to carry on such part of the Distribution Business and/or
Supply Business carried on by it) has been duly authorised
by the Secretary of State under Section 6 of the
Electricity Act to distribute and/or supply electricity;
and
(ii) no REC Company is in contravention of:
(A) any term or condition of any Licence; or
(B) any requirement of the Electricity Act or any
regulations made thereunder; or
<PAGE>
(C) any other statutory requirement or any final order
or confirmed provisional order made under the
Electricity Act; or
(D) any undertaking given by it to the Director General
or the Secretary of State in relation to the conduct
of its business as a public electricity supplier;
the contravention or consequence of which is reasonably
likely to have a Material Adverse Effect;
(d) The Licences:
(i) each Licence is in full force and effect and neither the
Director General nor the Secretary of State has given
notice to revoke a Licence;
(ii) no amendment of any of the terms of a Licence has been made
or proposed;
(iii) no other material licence, consent, undertaking or
authorisation necessary for the carrying on by any REC
Company of its business substantially as it is currently
carried on has been terminated or breached or not obtained
or is otherwise not in full force and effect;
which in either case is reasonably likely to have a Material
Adverse Effect.
9.3 Repetition
The representations and warranties in clauses 9.1 and 9.2 shall be deemed
to be repeated as of each Drawdown Date, the date of each Drawdown Notice
and the date of accession of each Additional Obligor and, as if made with
reference to the facts and circumstances existing on each such date, and
shall, after the first set of financial statements have been delivered
under clauses 10.1(b)(i) and (ii), be deemed to include a representation
that the then latest financial statements delivered to the Banks under
clauses 10.1(b)(i) and (ii) have been prepared in accordance with the
Appropriate Accounting Principles which have been consistently applied
and give a true and fair view of (or in the case of unaudited accounts,
present with reasonable accuracy) the financial position of each REC
Company and the consolidated financial position of the REC Group
respectively as at the date to which such financial statements were made
up and the results of the operations of each REC Company and the results
of the operations of the REC Group respectively for the relevant period,
and in the case of audited accounts are not subject to any qualifications
save of a technical and non-adverse nature.
9.4 Borrowers' acknowledgement
Each Borrower acknowledges that the Finance Parties are relying on the
representations and warranties but not on any other information
contradictory to them or varying them of which the Finance Parties or any
of them or their respective agents or advisers may have actual or
constructive knowledge.
<PAGE>
10. POSITIVE UNDERTAKINGS
10.1 Information Undertakings
Each Borrower undertakes with each of the Finance Parties that,
throughout the Finance Period:
(a) Preparation of financial statements: it will:
(i) Annual audited financial statements: beginning with the
financial year ending 31 March 1998, prepare financial
statements in respect of itself and consolidated financial
statements in respect of the REC Group in accordance with
the Appropriate Accounting Principles (consistently
applied) in respect of each financial year and cause the
same to be reported on by the Auditors; and
(ii) Semi-annual financial statements: prepare unaudited
consolidated financial statements of the REC Group and
financial statements in respect of each REC Company in
respect of each Half-Year Period in each financial year in
accordance with the Appropriate Accounting Principles
(consistently applied);
(b) Delivery of financial statements: it will deliver to the Facility
Agent, for distribution to the Banks, sufficient copies for all
the Banks of each of the following documents:
(i) Annual audited financial statements: at the time of issue
thereof to the shareholders of the Primary Borrower, but in
any event not later than 120 days after the end of the
financial year to which they relate, the audited financial
statements referred to in clause 10.1(a)(i) for each
financial year together, in each case, with the report of
the Auditors thereon, the notes thereto, the directors'
report thereon and the certificate referred to in clause
10.1(b)(iii);
(ii) Unaudited management accounts: within 45 days after the end
of each Half- year Period in each financial year,
consolidated management accounts for the REC Group in
respect of such Half-year Period prepared in accordance
with the requirements of clause 10.1(a)(ii) together with
the certificate referred to in clause 10.1(b)(iii);
(iii) Compliance with Financial Undertakings: with each set of
accounts delivered by it under clauses 10.1(b)(i) and (ii)
above by reference to which the financial covenants are
tested, the Primary Borrower will deliver to the Facility
Agent a certificate signed by a director of the Primary
Borrower:
(aa) confirming compliance with the financial
undertakings in clause 10.3 as at the end of the
relevant Test Period; and
(bb) setting out in reasonable detail and in a form
satisfactory to the Facility Agent the computations
necessary to demonstrate such compliance;
(iv) Regulatory Accounts: at the time of their issue to the
relevant Government Entity or regulator, all accounts and
other financial statements or information required under
any law or regulation to be provided to any Government
Entity, industry regulator or similar body or person;
<PAGE>
(v) Reports and notices to shareholders and creditors: at the
time of issue thereof every report, circular, notice or
like document issued by each REC Company to its
shareholders or creditors generally and every notice
convening a meeting of its shareholders or any class of its
shareholders; and
(vi) Further information: promptly upon request, such further
information concerning the financial position of the REC
Group (or any member of it) as the Facility Agent shall
reasonably require;
(c) Notice of Default: it will promptly upon becoming aware of the
same inform the Facility Agent of any Default;
(d) Notice of litigation: it will, upon becoming aware that the same
is threatened or pending and in any case promptly after the
commencement thereof, give to the Facility Agent notice in writing
of any litigation, alternative dispute resolution, arbitration or
administrative proceedings or any dispute affecting any member of
the Group to the extent that any REC Company could be held liable
or any of its respective assets, rights or revenues affected and
which if determined against it could reasonably be expected to
result in a liability (including costs) of more
than(pound)10,000,000 or otherwise have a Material Adverse Effect;
and
(e) Environmental Claims: promptly upon receipt of formal written
notice of the same inform the Facility Agent of any material
Environmental Claim to the extent that any REC Company would have
responsibility for or be materially affected by it.
10.2 General Undertakings
Each Obligor undertakes with each of the Finance Parties that, throughout
the Finance Period:
(a) Consents etc relating to the Finance Documents: it will obtain or
cause to be obtained, maintain in full force and effect and comply
in all material respects with the conditions and restrictions (if
any) imposed in, or in connection with, every consent,
authorisation, licence or approval of any Government Entity or
consents required by it in connection with the execution,
delivery, validity, enforceability or admissibility in evidence of
the Finance Documents and do, or cause to be done, all other acts
and things, which may from time to time be necessary under
applicable law for the continued due performance of all its
obligations under the Finance Documents;
(b) Pari passu: it will ensure that its obligations, under each of the
Finance Documents shall, at all times be direct, general and
unconditional obligations and rank at least pari passu with all
its other present and future unsecured and unsubordinated
Indebtedness with the exception of any obligations which are
mandatorily preferred by law and not by contract and save for
Indebtedness secured by Permitted Security Interests;
(c) Licences and Environmental Laws:
(i) it will obtain and maintain in full force and effect each
Licence and use all reasonable endeavours to procure that
each other REC Company obtains and maintains in full force
and effect each Licence required by such person for the
carrying on of their respective businesses and, as
appropriate for so long as any REC Company is involved in
the Generation Business, any licence under the
<PAGE>
Electricity Act to carry on Generation Business required by
such person for the carrying on of their respective
businesses; and
(ii) it will obtain and maintain, and use all reasonable
endeavours to procure that each REC Company obtains and
maintains, in full force and effect all other material
Environmental Licences and ensures that its business and
the business of each of its Subsidiaries complies in all
respects with all material Environmental Laws and all other
material Environmental Licences;
(d) Insurance: it will maintain and will use all reasonable endeavours
to procure that each member of the REC Group maintains insurances
on and in relation to its business and assets with reputable
underwriters or insurance companies against such risks and to such
extent as is usual for companies carrying on a business such as
that carried on by such member of the REC Group.
10.3 Financial Condition
(a) Each Obligor shall procure that, at the end of any Half-year
Period (the first such Half-year Period being the one beginning on
1 April 1998), the ratio of Operating Profit to Net Interest
Expense in respect of the preceding two Half-year Periods is not
less than 2.25:1.
(b) Each Obligor undertakes with each of the Finance Parties that it
will not adopt any accounting policy or change the consistency of
application of its accounting principles from the Appropriate
Accounting Principles unless:
(i) the revised policy and practice adopted from time to time
is in accordance with generally accepted accounting
practice in the United Kingdom, and
(ii) prior to any revised policy and practice being adopted such
Obligor has notified the Facility Agent thereof and, if
required by the Facility Agent, will negotiate in good
faith with the Facility Agent in order that the Financial
Covenants may be amended as required by the Facility Agent
in order for it to be able to make the same judgments as to
the financial performance of the REC Group as it is able to
under the present accounting policy.
If such negotiations are not concluded to the satisfaction of the
Facility Agent within a period of 30 days from the commencement of
such negotiations the relevant Obligor agrees that it will procure
that the Auditors provide financial statements reflecting the
Appropriate Accounting Policies, and any reference in this
Agreement to financial statements under this Agreement shall be
construed as a reference to such financial statements as adjusted
to reflect the Appropriate Accounting Policies.
(c) If, at the end of any Half-year Period, the financial covenant
under clause 10.3(a) is breached due to any exceptional, special
or windfall tax or levy applying to the electricity industry as a
whole, then:
(i) the breach of that clause will not constitute an Event of
Default under clause 12.1(b) (Breach of certain
obligations) and the Primary Borrower and the Facility
Agent (on behalf of the Banks) shall enter into
negotiations for a period of not more than 30 days with a
view to agreeing new terms for this Agreement
<PAGE>
to reflect that tax or levy and such terms may include
improved pricing and/or security and if any new terms are
agreed under this paragraph (i), they shall be, with the
prior consent of the Majority Banks, binding upon all the
parties to this Agreement; but
(ii) if no new terms are agreed within 30 days of such breach,
the breach will become an immediate Event of Default under
clause 12.1(b) (Breach of certain obligations) on the 31st
day after the date of such breach.
11. NEGATIVE UNDERTAKINGS
Negative undertakings
Each Obligor undertakes with each of the Finance Parties that throughout
the Finance Period, without the prior written consent of the Facility
Agent acting on the instructions of the Majority Banks:
(a) Negative pledge: it shall not permit, and shall procure that no
other REC Company shall permit, any Security Interest by it or any
other member of the REC Group to subsist, arise or be created or
extended over all or any part of their respective present or
future undertakings, assets, rights or revenues, save for any
Permitted Security Interest;
(b) No other Borrowed Money: it shall not, and shall procure that no
REC Company shall, incur or permit to exist on its behalf any
obligations in respect of Borrowed Money (excluding any
guarantees, indemnities or other forms of assurance against
financial loss in respect of Borrowed Money, which are referred to
in clause 11.1(d) below) to any person except:
(i) the Facility;
(ii) Borrowed Money owed by any REC Company to a member of the
Wider Group;
(iii) Borrowed Money to the extent secured by a Security Interest
permitted by paragraphs (c), (d), (e) and (j) of the
definition of Permitted Security Interest, but only for so
long as such Security Interest remains a Permitted Security
Interest;
(iv) Borrowed Money incurred to repay and discharge the Facility
in full;
(v) Borrowed Money of the Primary Borrower as at the Effective
Date (and refinancings thereof) provided that:
(aa) each refinancing extends the tenor of the refinanced
amount to beyond the Final Repayment Date; and
(bb) all refinancings shall be of a like nature to the
Indebtedness or facility being refinanced or shall
be by way of capital markets instruments which are
of a similar nature to the REC Group's existing
instruments
<PAGE>
having regard to market conditions and the issuer's
credit status, or are structurally or contractually
subordinated to the Facilities in a manner
satisfactory to the Majority Banks (acting
reasonably); and
(cc) any new facilities for Borrowed Money entered into
by the REC Group between 2 March 1998 and the
Effective Date (inclusive) shall be cancelled and
repaid in full within 180 days of the Effective
Date;
(vi) contracts for differences and contracts to hedge commodity
and energy related exposures and positions in the ordinary
course of trading;
(vii) individual letters of credit having a face value of a
Sterling Amount less than (pound)250,000 provided that in
aggregate the face value of such letters of credit at any
one time is no more than a Sterling Amount of
(pound)10,000,000;
(c) Disposals: it shall not and shall procure that no other REC
Company shall, either in a single transaction or in a series of
transactions, whether related or not and whether voluntarily or
involuntarily, sell, factor, discount, transfer, licence, lend,
grant or lease or otherwise dispose of all or any part of the
assets or undertaking of any REC Company other than:
(i) disposals in the ordinary course of trading;
(ii) disposals of obsolete or redundant assets;
(iii) other disposals to third parties, provided that the
consideration for such disposals does not exceed
(pound)5,000,000 in aggregate for the REC Group in any
financial year;
(iv) disposals constituting the creation of Permitted Security
Interests;
(v) securitisations of receivables of the Borrower in
accordance with the Borrower's securitisation programme in
existence at the date of this Agreement (or comparable
programme(s) of REC Companies) Provided that the value of
the billed, unbilled and future flow receivables in the
programme at any one time does not exceed
(pound)300,000,000 in aggregate in all such programmes; or
(vi) disposals of an interest in a Subsidiary of the Primary
Borrower which is not itself in the REC Group on
arms-length terms to a person outside the REC Group in
consideration for payment in freely transferrable funds on
the date of disposal.
(vii) disposals of assets by a REC Company to another REC Company
or to another member of the Group which becomes a REC
Company on or before acquiring the assets disposed of;
(viii) disposals by way of sales and operating leasebacks of
capital assets to other members of the Wider Group limited
to a net book value of (pound)75,000,000 in aggregate;
<PAGE>
(ix) disposals of any interest in an Excluded Business of any
REC Company (including by way of disposal of any interest
in a member of the Group not being a REC Company carrying
on an Excluded Business) or disposals of assets to a member
of the Wider Group where such REC Company is engaged in an
Excluded Business irrespective of what consideration may be
payable provided that such a disposal is not of all or part
of the Distribution Business or Supply Business or any of
the assets primarily used in such Distribution Business or
Supply Business;
(d) Restriction on Guarantees: it shall not and shall procure that no
other REC Company shall give any guarantee (which includes an
indemnity or other form of assurance against financial loss),
except:
(i) where the guarantee is given by a member of the REC Group
in connection with cash management and netting facilities
extended to the REC Group by a bank or financial
institution in the normal course of business; or
(ii) any guarantee, indemnity, letter of credit or similar
assurance against financial loss under any Relevant
Arrangements;
(iii) guarantees of Borrowed Money or other obligations of other
members of the REC Group, for so long as they remain
members of the REC Group where such guarantees are already
in existence as at the Effective Date provided that any
such guarantees of Borrowed Money entered into between 2
March 1998 and the Effective Date (inclusive) shall be
discharged and released within 180 days of the Effective
Date (unless the guarantee was created pursuant to an
obligation existing as at 2 March 1998);
(iv) any guarantee permitted under clause 11.1(b)(vi);
(v) any other guarantees given with the prior written consent
of the Majority Banks;
(e) The Licences: it shall, and shall procure that each other REC
Company shall, (having regard to the Distribution Business and
Supply Business or that part of such businesses carried on by it):
(i) take all appropriate steps efficiently to perform and
discharge the duties and functions of a public electricity
supplier in accordance with the provisions of the
Electricity Act and, in particular, to comply with:
(aa) the terms and conditions of the Licence;
(bb) the provisions of any final order or confirmed
provisional order made under the Electricity Act;
and
(cc) all Licence Undertakings given by it to the Director
General and/or the Secretary of State in respect of
the matters referred to in Section 25(5) of the
Electricity Act;
<PAGE>
(ii) not consent to any amendment to the terms and conditions of
the Licence if that amendment is reasonably likely to have
a Material Adverse Effect;
(iii) not consent to any revocation of the Licence except where a
replacement Licence is to be granted to it in its place;
(iv) promptly inform the Facility Agent of any material Licence
Undertaking given by it or any Affiliate to the Director
General, and/or the Secretary of State and subsequently
comply with its terms;
(v) promptly supply to the Facility Agent:
(aa) certified copies of all notices or orders served on
it by the Director General or the Secretary of State
in exercise of the powers conferred on him by the
Electricity Act;
(bb) details of any references to the Monopolies and
Mergers Commission relating to the business of the
REC Group; and
(cc) details of the exercise or purported exercise by the
Secretary of State or the Director General of the
powers conferred on him by the Fair Trading Act
1973, the Competition Act 1980 and/or Section 12 of
the Electricity Act;
(vi) ensure that all times it has sufficient working capital to
finance the performance and discharge of its duties as a
public electricity supplier in accordance with the
provisions of the Electricity Act and the terms and
conditions of any Licence; and
(vii) not permit any other person (other than a REC Company) to
perform or manage on its behalf any of its functions as a
public electricity supplier, as set out in any Licence and
the Electricity Act;
(f) Dividend payments: the Primary Borrower shall not declare or pay
any dividend or make any other distribution or payment (whether in
cash or in specie), including any interest and/or unpaid
dividends, to its shareholders or their Affiliates for the time
being if and for so long as any Default has occurred and is
continuing;
(g) Contracts and arrangements between the REC Companies and the
Parent: it shall not enter into any material arrangement or
contract with or incur any material liability to the Parent or any
of its Subsidiaries or Affiliates or any member of the Wider Group
other than another REC Company or another member of the Group
which becomes a REC Company on or prior to such arrangement coming
into force or liability being incurred, save for contracts entered
into on an arm's length basis in the ordinary course of trade (and
in any event no REC Company will make any loan to or give any
guarantee in respect of the Parent or any of its Subsidiaries or
Affiliates other than another REC Company);
(h) Amalgamation and merger: it shall not and shall procure that no
other REC Company shall amalgamate or merge with any other company
or person (other than a REC Company);
<PAGE>
(i) Change in business: it shall not and shall procure that no other
REC Company shall carry on any business other than those which are
usual for electricity companies in the United Kingdom including,
without limitation, electricity distribution and supply. Provided
that the limitation of business activities contained in this
clause 11.1(i) will not apply to any other business activities
carried on by the REC Group as long as such other business
activities do not in aggregate account for more than 10% of the
consolidated gross assets or gross revenues of the REC Group; and
(j) Treasury Transactions: it shall not, and shall procure that no
other REC Company shall, enter into any Derivatives Transactions,
save for hedging financial exposures of the REC Group arising in
the ordinary course of business.
12. EVENTS OF DEFAULT
12.1 Events of Default
Each of the events set out below is an Event of Default (whether or not
caused by any reason whatsoever outside the control of any member of the
REC Group (or any other person)) namely if:
(a) Non-payment: any Borrower fails to pay any sum due from it under
any of the Finance Documents on its due date in the manner
stipulated in the relevant Finance Document (or within three
Banking Days of the due date if the delay is caused by technical
difficulties or administrative error in the transfer of funds); or
(b) Breach of certain obligations: any Obligor commits any breach or
omits to observe any of the obligations or undertakings expressed
to be assumed by it under clause 10.3, 11.1(a), 11.1(f), 11.1(i)
or 24.2(b); or
(c) Breach of other obligations: any Obligor commits any breach of or
omits to observe any of the obligations or undertakings expressed
to be assumed by it under any of the Finance Documents (other than
any such obligations referred to in clause 12.1(a) and (b)) and in
respect of any such breach or omission which, in the reasonable
opinion of the Majority Banks, is capable of remedy, such action
as shall remedy the same to the reasonable satisfaction of the
Majority Banks shall not have been taken within 21 days of such
Obligor becoming aware of such default; or
(d) Misrepresentation: any representation, warranty or statement made
or deemed to be made or repeated by or on behalf of any Obligor
in, or in connection with, any of the Finance Documents or in any
notice, accounts, certificate or statement referred to in or
delivered under any of the Finance Documents is or proves to have
been incorrect or misleading and if capable of being remedied, in
the reasonable opinion of the Majority Banks, is not remedied to
the reasonable satisfaction of the Majority Banks 21 days after
the date on which any Obligor becomes aware of such
misrepresentation; or
(e) Cross-default:
(i) any Borrowed Money of any Obligor is not paid when due or
within any originally stated applicable grace period; or
<PAGE>
(ii) any Borrowed Money of any Obligor is declared or becomes
capable of being declared (by reason of an event of default
or default howsoever described) to be or otherwise becomes
due and payable prior to its specified maturity; or
(iii) any Borrowed Money of any Obligor which is repayable on
demand is not repaid on demand being made,
in circumstances where, in all or any of the above paragraphs, the
Borrowed Money amounts in aggregate at any one time to more than
(pound)20,000,000 or its equivalent in other currencies, unless
the Borrowed Money concerned is being disputed in good faith and
any Obligor has shown to the Facility Agent's satisfaction (acting
reasonably) that it has adequate cash reserves to pay that
Borrowed Money and its other outstanding debts; or
(f) Legal process: (without prejudice to any other provision of this
Agreement) any final judgment or order in an amount
exceeding(pound)2,000,000 (or its equivalent in other currencies)
made against any Obligor is not stayed or complied with or paid
within 28 days (or in the case of payments, when due (if later))
or a creditor attaches or takes possession of, or a distress,
execution, sequestration or other process is levied or enforced
upon or sued out against, any part of the undertakings, assets,
rights or revenues of any Obligor with a book value or market
value in excess of(pound)2,000,000 and is not discharged or stayed
within 14 days; or
(g) Insolvency: any Obligor (i) is deemed unable to pay its debts in
accordance with Section 123(1)(a), (b) or (e) or (2) of the
Insolvency Act 1986 unless, in the case of Section 123(1)(a) only,
a statutory notice has been withdrawn, stayed or dismissed within
14 days or (ii) is unable generally to pay its debts as they fall
due; or
(h) Administration: (i) any meeting of any Obligor is convened for the
purpose of considering any resolution to present an application
for an administration order or (ii) the Obligor passes a
resolution to present an application for an administration order
or (iii) an administration order is made in relation to any
Obligor; or
(i) Compositions etc: any steps are taken, or negotiations commenced,
by any Obligor or by any of its creditors with a view to proposing
any kind of composition, scheme of arrangement, compromise or
arrangement, in each case involving any Obligor and any of its
creditors; or
(j) Appointment of receivers and managers: (i) any administrative or
other receiver or any manager is appointed over any Obligor or any
material part of its assets and/or undertaking or (ii) the
directors of any Obligor request any person to appoint such a
receiver or manager or (iii) any other steps are taken to enforce
any Security Interest over all or any material part of the assets
and/or undertakings of any Obligor; or
(k) Winding up: (i) any meeting of any Obligor is convened for the
purpose of considering any resolution for (or to petition for) its
winding up or (ii) any Obligor passes such a resolution; or (iii)
any person presents any petition for the winding up of any Obligor
(not being a petition which such Obligor can demonstrate to the
satisfaction of the Facility Agent is frivolous vexatious or an
abuse of the process of the court) which is not discharged within
14 days or (iv) an order for the winding up of any Obligor is
<PAGE>
made, not (in any case) being a winding-up of a Subsidiary of any
Obligor involving an amalgamation or reorganisation on a solvent
basis which has been approved in advance by the Facility Agent
(acting reasonably); or
(l) Dissolution: any corporate, legal or administrative proceedings
are commenced by any person (including, without limitation, the
Registrar of Companies) with a view to the dissolution of any
Obligor, not being a dissolution involving an amalgamation or
reorganisation on a solvent basis which has been approved in
advance by the Facility Agent (acting reasonably); or
(m) Analogous proceedings: there occurs, in relation to any Obligor,
in any country or territory in which it carries on business or to
the jurisdiction of whose courts any part of their assets is
subject, any event which, in the reasonable opinion of the
Majority Banks, appears in that country or territory to correspond
with, or have an effect equivalent to, any of those mentioned in
clauses 12.1(f) to (l) (inclusive) or any Obligor otherwise
becomes subject, in any such country or territory, to the
operation of any law relating to insolvency, bankruptcy or
liquidation; or
(n) Cessation of business: other than in relation to a disposal
permitted under this Agreement, any REC Company suspends or ceases
or threatens to suspend or cease to carry on its business unless
it is transferred to another REC Company; or
(o) Insolvency of members of REC Group: any of the events (e) to (n)
above happening in respect of another member of the REC Group,
where that could reasonably be expected to have a Material Adverse
Effect;
(p) Distribution Business and Supply Business:
(i) the REC Group ceases, or threatens to cease, to carry on
all or any material part of the Distribution Business or
Supply Business;
(ii) all or a majority of the issued shares of any REC Company
or the whole or any material part of the assets or revenues
of the Distribution Business or Supply Business are seized,
nationalised, expropriated or compulsorily acquired by or
under the authority of a Government Entity;
(iii) any change is made in the statutory or regulatory
requirements applicable to the Distribution Business or
Supply Business or any new statutory or regulatory
requirements are imposed on it which would be reasonably
likely to have a Material Adverse Effect; or
(iv) any REC Company is not or ceases to be a directly
wholly-owned Subsidiary of the Primary Borrower or is not
incorporated in England and Wales or fails to execute a
Deed of Accession in accordance with clause 24;
(q) Licences:
(i) the Secretary of State gives notice in writing of the
revocation of a Licence for any reason or a Licence ceases
to be in full force and effect in any material respect
except where a similar licence or licences are granted to a
REC Company in its place;
<PAGE>
(ii) without prejudice to paragraph (i) above, any legislation
(whether primary or subordinate) with regard to the
creditors of any REC Company or the ability of any REC
Company to raise finance under a Licence or with regard to
public electricity suppliers generally is enacted and that
enactment would be reasonably likely to have a Material
Adverse Effect;
(iii) any amendment is made to the terms and conditions of a
Licence and the amendment would be reasonably likely to
have a Material Adverse Effect;
(iv) the REC Group ceases to hold the Licences required by it to
carry on the Distribution Business and Supply Business.
(r) Electricity Act:
(i) any of the provisions of the Electricity Act (or any
subordinate legislation) detailing the rights, powers,
authorities, obligations and duties of the Secretary of
State or the Director General, or the manner in or time at
which they are to be exercised, are repealed or amended in
a manner which would be reasonably likely (in the opinion
of the Majority Banks) to have a Material Adverse Effect;
or
(ii) any REC Company fails to comply with a final order (within
the meaning of section 25 of the Electricity Act) or with a
provisional order (within the meaning of that section)
which has been confirmed under that section and in either
case which has not been revoked under that section or the
validity of which has not been questioned under section 27
of the Electricity Act, if such failure to comply would be
reasonably likely to have a Material Adverse Effect; or
(s) Pooling and Settlement Agreement: any REC Company which is a party
to the Pooling and Settlement Agreement ceases to be such a party
(except where another REC Company is substituted in its place), or
any notice requiring REC Company to cease to be a party to the
Pooling and Settlement Agreement is given to such company under
the relevant clauses of the Pooling and Settlement Agreement;
(t) Finance Documents: any Finance Document is not or ceases to be
legal, valid and binding on or enforceable against any Obligor or
is alleged by any Obligor to be ineffective for any reason; or
(u) Unlawfulness: it becomes unlawful at any time for any Obligor to
perform all or any of its material obligations under any of the
Finance Documents.
12.2 Acceleration
The Facility Agent may, and, if so requested by the Majority Banks,
shall, without prejudice to any other rights of the Finance Parties at
any time, after the happening of an Event of Default, and so long as the
same is continuing, by notice to the Primary Borrower:
<PAGE>
(i) declare that the obligation of each Bank to make its Commitments
available shall be terminated, whereupon the Total Commitments in
respect of all Facilities shall be reduced to zero forthwith;
and/or
(ii) declare that the Advances and all interest, fees and commitment
commission accrued and all other sums payable under the Finance
Documents have become due and payable or have become due and
payable on demand, whereupon the same shall, immediately or in
accordance with the terms of such notice, become due and payable;
and/or
(iii) demand full cash cover for the Outstanding Contingent Liabilities
under all Letters of Credit then outstanding in the currency in
which those Letters of Credit are denominated.
On or at any time after the making of any such declaration, the Facility
Agent shall be entitled, to the exclusion of the Primary Borrower, to
select the duration of Interest Periods.
13. INDEMNITIES
13.1 Miscellaneous indemnities
The Primary Borrower shall within three Banking Days of demand indemnify
each Finance Party, without prejudice to any of their other rights under
any of the Finance Documents, against any cost, loss, claim, expense
(including loss of Applicable Margin and legal fees) or liability
together with any Tax thereon which such Finance Party shall certify as
sustained or incurred by it as a consequence of:
(a) any default in payment by any Obligor of any sum under any of the
Finance Documents when due,
(b) the occurrence of any other Default,
(c) any Advance outstanding under the Facility or part thereof being
made otherwise than on Maturity Date relative thereto,
(d) any Advance not being made for any reason (excluding, but only to
the extent of the indemnification of a particular Finance Party,
any gross negligence or wilful default by such Finance Party)
after a Drawdown Notice has been given, or
(e) any notice sent by telefax failing to be received,
including, in any such case, but not limited to, any loss or expense
sustained or incurred in maintaining or funding its Contributions or any
part thereof or in liquidating or re-employing deposits from third
parties acquired or contracted for to fund all or any part of its
Contributions or any other amount owing to such Finance Party.
13.2 Currency of account; currency indemnity
(a) No payment by any Obligor under any of the Finance Documents which
is made in a currency other than the currency ("Contractual
Currency") in which such payment is required to be made pursuant
to the relevant Finance Documents shall discharge the
<PAGE>
obligation in respect of which it is made except to the extent of
the net proceeds in the Contractual Currency received by the
Facility Agent upon the sale of the currency so received, after
taking into account any premium and costs of exchange in
connection with such sale.
(b) The Finance Parties shall not be obliged to accept any such
payment in a currency other than the Contractual Currency nor
shall the Finance Parties be liable to any Obligor for any loss or
alleged loss arising from fluctuations in exchange rates between
the date on which such payment is so received by the Facility
Agent and the date on which the Facility Agent effects such sale,
as to which the Facility Agent shall (as against any Obligor) have
an absolute discretion.
(c) If any sum due from any Obligor under any Finance Documents or any
order or judgment given or made in relation hereto is required to
be converted from the Contractual Currency or the currency in
which the same is payable under such order or judgment (the "first
currency") into another currency (the "second currency") for the
purpose of (i) making or filing a claim or proof against any
Obligor, (ii) obtaining an order or judgment in any court or other
tribunal or (iii) enforcing any order or judgment given or made in
relation to any of the Finance Documents, each Borrower shall
indemnify and hold harmless each Finance Party from and against
any loss suffered as a result of any difference between (A) the
rate of exchange used for such purpose to convert the sum in
question from the first currency into the second currency and (B)
the rate or rates of exchange at which each such Finance Party may
in the ordinary course of business purchase the first currency
with the second currency upon receipt of a sum paid to it in
satisfaction, in whole or in part, of any such order, judgment,
claim or proof.
(d) Any amount due from any Borrower under the indemnity contained in
this clause 13.2 shall be due as a separate debt and shall not be
affected by judgment being obtained for any other sums due under
or in respect of any of the Finance Documents and the term "rate
of exchange" includes any premium and costs of exchange payable in
connection with the purchase of the first currency with the second
currency.
13.3 No settlement without consent
The Primary Borrower agrees on its own behalf and on behalf of each other
member of the REC Group that, without the prior written consent of the
Agent and the Majority Banks, no member of the REC Group will settle,
compromise or consent to the entry of any judgment in any pending or
threatened claim, action, suit or proceeding in respect of which
indemnification could be sought under the indemnification provisions of
clauses 4.5(b)(iv), 8.4, 8.5, 8.6, 7.6, 13, 16.14, or 20.2 (whether or
not any indemnitee thereunder (the "Indemnitee") is an actual or
potential party to such claim, action, suit or proceeding), unless such
settlement, compromise or consent does not include any statement as to an
admission of fault, culpability or failure to act by or on behalf of any
Indemnitee and does not involve any payment of money or other value by
any Indemnitee or any injunctive relief or factual findings or
stipulations binding on any Indemnitee.
<PAGE>
14. UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES
14.1 Unlawfulness
(a) If it is or becomes contrary to any law or regulation or contrary
to any request from or requirement of any fiscal monetary or other
authority (with which such Finance Party would normally comply)
for a Finance Party to contribute to any Utilisation or to
maintain its Commitments in respect of a Facility or fund its
Contribution to a Facility, such Finance Party shall promptly
after becoming aware of the same, through the Facility Agent,
notify the Primary Borrower whereupon (a) such Finance Party's
Commitments shall be reduced to zero (and, if it is the Issuing
Bank, it shall have no further obligation to Issue Letters of
Credit if to do so would in the opinion of the Issuing Bank be or
become contrary to any law or regulation or contrary to any
request from or requirement of any fiscal monetary or other
authority (with which such Finance Party would normally comply))
and (b) if the Facility Agent on behalf of the Finance Party so
requires the relevant Borrower shall be obliged to prepay the
Contribution of such Finance Party to such Facility and provide
full cash cover for any Outstanding Contingent Liabilities of the
relevant Finance Party on a future date specified by the Facility
Agent not being earlier than the latest date permitted by the
relevant law or regulation or not contrary to such request or
requirement. Any prepayment pursuant to this clause 14.1 shall be
made together with all amounts referred to in clause 6.6.
(b) When any Borrower makes any prepayment under this clause 14.1 the
Facility Agent shall not release the amount of such prepayment
which is cash cover for any Outstanding Contingent Liabilities of
the relevant Finance Party to such Finance Parties but shall place
such monies on suspense account and such money may be used as
collateral for the actual and the contingent liabilities of that
Finance Party to the Issuing Bank, which liabilities shall remain
in full force and effect notwithstanding such prepayment; and such
Finance Party shall remain liable under all the relevant
provisions of this Agreement to the Issuing Bank to pay in cash
any shortfall between the amount held by the Facility Agent and
its liabilities under this Agreement.
14.2 Increased costs
If the result of any change in, or in the interpretation or application
of, or the introduction of, (after the date of this Agreement):
(a) any law (including, the introduction of the proposed Bank of
England Act following the publication of the Bank of England Bill
1997) or
(b) any regulation, request or requirement (which if not having the
force of law is one of a kind with which the relevant Finance
Party or, as the case may be, its holding company habitually
complies), including those relating to Taxation, capital adequacy,
European monetary union, liquidity, reserve assets, cash ratio
deposits and special deposits or requested or required by any
central bank (including without limitation any European Central
Bank) or other fiscal monetary or other authority,
is to:
(i) subject any Finance Party or its holding company to Taxes
or change the basis of Taxation of any Finance Party with
respect to any payment under this
<PAGE>
Agreement (other than Taxes or Taxation on the overall net
income, profits or gains of such Finance Party imposed in
the jurisdiction in which its principal office or Facility
Office is located); and/or
(ii) increase the cost to, or impose an additional cost on, any
Finance Party or its holding company in entering into or
performing its obligations under the Finance Documents
and/or in making or keeping available all or part of such
Finance Party's Commitments and/or maintaining or funding
all or part of such Finance Party's Contributions (and/or
providing any guarantee or indemnity of any other Finance
Party's obligations); and/or
(iii) reduce the amount payable or the effective return to any
Finance Party under this Agreement; and/or
(iv) reduce any Finance Party's or its holding company's rate of
return on its overall capital by reason of a change in the
manner in which it is required to allocate capital
resources in respect of all or any of the advances or
obligations comprised in a class of advances or obligations
formed by or including such Finance Party's share in
Utilisations made or to be made under this Agreement;
and/or
(v) require any Finance Party or its holding company to make a
payment or forgo a return calculated by reference to or on
any amount received or receivable by such Finance Party
under this Agreement; and/or
(vi) require any Finance Party or its holding company to incur
or sustain a loss (including a loss of future potential
profits) by reason of being obliged to deduct all or part
of such Finance Party's Commitments or Contributions from
its capital for regulatory purposes,
then and in each such case (but subject to clause 8.6 and 14.3):
(aa) such Finance Party shall notify the Primary Borrower
through the Facility Agent in writing of such event
promptly upon its becoming aware of the same; and
(bb) following such notification the Primary Borrower
shall, whether or not such Finance Party's
Contribution to any Facility has been repaid, pay to
the Facility Agent on demand for the account of such
Finance Party the amount which such Finance Party
specifies (in a certificate setting forth the basis
of the computation of such amount but not including
any matters which such Finance Party or its holding
company regards as confidential) is required to
compensate such Finance Party and/or its holding
company in its sole discretion for such liability to
Taxes, increased or additional cost, reduction,
payment, forgone return or loss.
For the purposes of this clause 14.2 each Finance Party may in good faith
allocate or spread costs and/or losses among its assets and liabilities
(or any class thereof) on such basis as it considers appropriate.
<PAGE>
Each Finance Party shall use all reasonable endeavours to notify the
Primary Borrower as soon as reasonably practicable of any such increased
cost, reduction, payment or forgone return which is to result in a demand
under clause 14.2(bb).
For the purposes of this clause 14.2 and clause 14.4 "holding company"
means, in relation to a Finance Party, the company or entity (if any)
within the consolidated supervision of which such Finance Party is
included.
For the purposes of this clause 14.2, each Borrower acknowledges that any
requirement that the Finance Parties treat interest hereunder as anything
other than interest shall be a change in law or the interpretation
thereof.
14.3 Exceptions
Nothing in clause 14.2 shall entitle any Finance Party to receive any
amount in respect of compensation for any such liability to Taxes,
increased or additional cost, reduction, payment, forgone return or loss
to the extent that the same:
(a) is taken into account in calculating the Additional Cost; or
(b) is the subject of an additional payment under clause 8.5; or
(c) arises as a consequence of (or of any law or regulation
implementing) (i) the proposals for international convergence of
capital measurement and capital standards published by the Basle
Committee on Banking Regulations and Supervisory Practices in July
1988 and/or (ii) any applicable directive of the European Union
(in each case) unless it results from any change in, or in the
interpretation or application of, such proposals or any such
applicable directive (or any law or regulation implementing the
same) occurring after the date hereof; or
(d) is attributable to Taxation save where it is recovered under
clause 14.2(i); or
(e) is attributable to the wilful default or gross negligence of a
Finance Party.
For the purposes of clause 14.3(c) the term "applicable directive" means
(exclusively) each of the Own Funds Directive (89/299/EEC of 17th April
1989) and the Solvency Ratio Directive (89/647/EEC of 18th December
1989).
14.4 Mitigation
If, in respect of any Finance Party (an "Affected Bank"), circumstances
arise or exist which would result in:
(a) any Borrower being required to make an increased payment to that
Finance Party pursuant to clause 8.5;
(b) the reduction of that Finance Party's Commitment in respect of any
Facility to zero or any Borrower being required to prepay that
Finance Party's Contribution to any Facility pursuant to clause
14.1;
<PAGE>
(c) any Borrower being required to make a payment to any Finance Party
to compensate such Finance Party or its holding company for a
liability to Taxes, increased or additional cost, reduction,
payment, forgone return or loss pursuant to clause 14.2(bb); or
(d) any Borrower not being entitled to a deduction for UK corporation
tax purposes in respect of interest payable under this Agreement
to that Finance Party;
then, without in any way limiting, reducing or otherwise qualifying the
obligations of any Borrower under clause 8 and this clause 14 (and
subject to such Borrower's rights under clause 6.5), such Finance Party
shall, in consultation with the Facility Agent, endeavour to take such
reasonable steps (and/or, in the case of clause 14.2(bb) and where the
increased or additional cost, reduction, payment, forgone return or loss
is that of its holding company, endeavour to procure that its holding
company takes such reasonable steps) as are open to it (or, as the case
may be, its holding company) to mitigate or remove such circumstances
unless the taking of such steps might (in the opinion of such Finance
Party) be prejudicial to such Finance Party (or, as the case may be, its
holding company) and provided that such Finance Party shall be under no
obligation to take any such action if in the opinion of such Finance
Party to do so might have any adverse effect upon its business,
operations or financial condition.
15. SET-OFF AND PRO-RATA PAYMENTS
15.1 Set-off
Each Borrower hereby agrees that each Finance Party may at any time,
whilst any Default shall be continuing or, with respect to cash cover
referred to in clause 4.12, at any time, notwithstanding any settlement
of account or other matter whatsoever, combine or consolidate all or any
of its then existing accounts wheresoever situate (including accounts in
the name of such Finance Party or of any Borrower jointly with others),
whether such accounts are current, deposit, loan or of any other nature
whatsoever, whether they are subject to notice or not and whether they
are denominated in Sterling or in any other currency, and set-off or
transfer any sum standing to the credit of any one or more such accounts
in or towards satisfaction of any moneys, obligations or liabilities
which are due and payable by any Borrower to such Finance Party under the
Finance Documents but are unpaid. For this purpose each Finance Party is
authorised to purchase with the moneys standing to the credit of such
account such other currencies as may be necessary to effect such
application. No Finance Party shall be obliged to exercise any right
given to it by this clause 15.1. Each Finance Party shall notify the
Facility Agent promptly upon the exercise or purported exercise of any
right of set-off in relation to any Borrower giving full details in
relation thereto and the Facility Agent shall inform the other Finance
Parties.
15.2 Pro-rata payments
(a) If at any time any Bank (the "Recovering Bank") receives or
recovers any amount owing to it by a Borrower under this Agreement
by direct payment, set-off or in any manner other than by payment
through the Facility Agent (not being a payment received from a
Substitute or a sub-participant in such Bank's Contribution to any
Facility or any other payment of an amount due to the Recovering
Bank for its sole account), the Recovering Bank shall, within two
Banking Days of such receipt or recovery (a "Relevant Receipt")
notify the Facility Agent of the amount of the
<PAGE>
Relevant Receipt. If the Relevant Receipt exceeds the amount which
the Recovering Bank would have received if the Relevant Receipt
had been received by the Facility Agent then:
(i) within two Banking Days of demand by the Facility Agent,
the Recovering Bank shall pay to the Facility Agent an
amount equal to the excess;
(ii) the Facility Agent shall treat the excess amount so paid by
the Recovering Bank as if it were a payment made by the
relevant Borrower and shall distribute the same to the
Banks (other than the Recovering Bank); and
(iii) as between the relevant Borrower and the Recovering Bank,
the excess amount so re-distributed shall be treated as not
having been paid but the obligations of the relevant
Borrower to the other Banks shall, to the extent of the
amount so re-distributed to them, be treated as discharged.
(b) If any part of a Relevant Receipt subsequently has to be wholly or
partly refunded by the Recovering Bank (whether to a liquidator or
otherwise) each Bank to which any part of such Relevant Receipt
was so re-distributed shall on request from the Recovering Bank
repay to the Recovering Bank such Bank's pro-rata share of the
amount which has to be refunded by the Recovering Bank.
(c) Each Bank shall on request supply to the Facility Agent such
information as the Facility Agent may from time to time request
for the purpose of this clause 15.2.
(d) Notwithstanding the foregoing provisions of this clause 15.2, no
Recovering Bank shall be obliged to share any Relevant Receipt
which it receives or recovers pursuant to legal proceedings taken
by it to recover any sums owing to it under this Agreement with
any other party which has a legal right to, but does not, either
join in such proceedings or commence and diligently pursue
separate proceedings to enforce its rights in the same or another
court (unless the proceedings instituted by the Recovering Bank
are instituted by it in breach of clause 18.2).
(e) The amounts due from the relevant Borrower to each of the Banks
shall reflect any payments and receipts among the Banks prescribed
by this clause.
(f) Nothing in this clause 15.2 shall prevent the Issuing Bank from
recovering from the relevant Borrower any amounts due under a
Letter of Credit issued by the Issuing Bank.
15.3 No release
For the avoidance of doubt it is hereby declared that failure by any
Recovering Bank to comply with the provisions of clause 15.2 shall not
release any other Recovering Bank from any of its obligations or
liabilities under clause 15.2.
15.4 No charge
The provisions of this clause 15 are not intended to, shall not, and
shall not be construed so as to, constitute a charge by a Bank. In
particular it is not intended to create a charge over all or any part of
a sum received or recovered by any Bank in the circumstances mentioned in
clause 15.2.
<PAGE>
16. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES
16.1 Benefit and burden
This Agreement shall be binding upon, and enure for the benefit of, the
Finance Parties and each Borrower and their respective successors,
transferees and assigns.
16.2 No assignment by the Borrower
No Borrower may assign or otherwise transfer any of its respective rights
or obligations under any of the Finance Documents.
16.3 Substitution
Each Bank (an "Existing Bank") may at any time assign all or any of its
rights and benefits under the Finance Documents or novate in accordance
with clause 16.5 all or any part of its rights, benefits and/or
obligations under the Finance Documents to another Qualifying Bank (a
"Substitute") with the consent of the Issuing Bank, and with the consent
of the Primary Borrower (not to be unreasonably withheld or delayed),
save that such consent of the Primary Borrower will not be required to
assignments or novations which take place prior to the Syndication Date.
16.4 Assignment
If any Bank assigns all or any of its rights and benefits under the
Finance Documents in accordance with clause 16.3, then, unless and until
the assignee has agreed with the other Finance Parties that it shall be
under the same obligations towards each of them as it would have been if
it had been an original party thereto as a Bank, the other Finance
Parties shall not be obliged to recognise that assignee as having the
rights against each of them which it would have had if it had been such a
party thereto.
16.5 Substitution Certificate
(a) Subject to clause 16.5(b), if a duly completed Substitution
Certificate duly executed by the Existing Bank and the Substitute
is delivered five Banking Days before the proposed Effective Date
(unless the Facility Agent otherwise agrees) to and counter-
signed by the Facility Agent (for itself and the other parties to
this Agreement other than the Existing Bank), then on the
Effective Date (as defined in that Substitution Certificate) to
the extent that the Existing Bank's rights, benefits and
obligations under the Finance Documents are expressed in such
Substitution Certificate to be the subject of a novation in favour
of the Substitute effected pursuant to this clause 16.5:
(i) the existing parties to the Finance Documents and the
Existing Bank shall be released from their respective
obligations towards one another under the Finance Documents
("discharged obligations") except for any obligation which
the Existing Bank has to the Issuing Bank under clause 4.7
(Bank's Guarantee and Indemnity) before the date on which
the novation takes place unless otherwise agreed in writing
by the Issuing Bank and their respective rights against one
another under the Finance Documents ("discharged rights")
shall be cancelled;
<PAGE>
(ii) the Substitute party to such Substitution Certificate and
the existing parties to the Finance Documents shall assume
obligations towards each other which differ from the
discharged obligations only insofar as they are owed to or
assumed by such Substitute instead of to or by such
Existing Bank;
(iii) the Substitute party to such Substitution Certificate and
the existing parties to the Finance Documents shall acquire
rights against each other which differ from the discharged
rights only insofar as they are exercisable by or against
such Substitute instead of by or against such Existing
Bank; and
(iv) the Finance Parties shall acquire the same rights and
benefits and assume the same obligations between themselves
as they would have acquired and assumed had such Substitute
been an original party hereto as a Bank with the rights,
benefits and/or obligations acquired or assumed by it as a
result of such transfer;
and, on such Effective Date, the Substitute shall (unless such
novation is part of the syndication process carried out by the
Arrangers) pay to the Facility Agent for its own account a fee of
(pound)750. The Facility Agent shall promptly notify the other
Banks of the receipt by it of any Substitution Certificate and
shall promptly deliver a copy of such Substitution Certificate to
the Primary Borrower.
(b) A Substitution Certificate executed under this clause 16.5 shall
be automatically effective only if and to the extent that the
Substitute shall have a credit rating issued by Standard & Poors
Corporation of at least A (the "Minimum Rating"). If any
Substitute does not have the Minimum Rating as at the time of the
transfer, then the Substitution Certificate shall not take effect
until such time as the Substitute has lodged with the Issuing Bank
such amount of cash by way of cash cover as would represent the
amount required to be paid by that Substitute to the Issuing Bank,
if the Issuing Bank were to call on the Bank's indemnity in
respect of Letters of Credit contained in clause 4.6. Should the
Issuing Bank issue any further Letters of Credit, such Substitute
shall lodge such further cash cover as shall equal the
contribution which it could be required to make to the Banks'
indemnity in respect of such additional Letters of Credit. Cash
cover lodged under this clause 16.5(b) or clause 4.6(d) shall be
placed by the Issuing Bank in a deposit account (subject to such
security arrangements as the Issuing Bank may specify) and
interest (at a rate determined by the Issuing Bank from time to
time) shall be for the account of and paid to such Substitute or
Bank required to lodge such cash cover.
16.6 Reliance on Substitution Certificate
The Facility Agent and the Primary Borrower shall be fully entitled to
rely on any Substitution Certificate delivered to the Facility Agent in
accordance with the foregoing provisions of this clause 16 which is
complete and regular on its face as regards its contents and purportedly
signed on behalf of the relevant Existing Bank(s) and the Substitute(s)
and none of the Facility Agent and the Primary Borrower shall have any
liability or responsibility to any party as a consequence of placing
reliance on and acting in accordance with any such Substitution
Certificate if it proves to be the case that the same was not authentic
or duly authorised.
<PAGE>
16.7 Authorisation of Facility Agent
Each party to this Agreement irrevocably authorises the Facility Agent to
counter-sign each Substitution Certificate on its behalf for the purposes
of clause 16.5 without any further consent of, or consultation with, such
party.
16.8 Deed of Accession
Each Borrower shall from time to time at the request of the Facility
Agent promptly execute any accession deed to any of the Finance Documents
and do any other act or thing or execute such further documents as
directed by the Facility Agent in connection with the transfer of rights
or benefits under clause 16.3.
16.9 Costs and Expenses
Each Borrower will, promptly after demand by the Facility Agent, pay to
the Facility Agent the reasonable costs and expenses incurred by it or
any other Finance Party in connection with the creation of valid security
in respect of any Substitute taking an assignment of rights and/or an
assumption of obligations pursuant to clause 16 in those jurisdictions
requiring further steps to be taken following such assignment or
assumption.
16.10 Construction of certain references
If any Bank novates all or any part of its rights, benefits and
obligations as provided in clause 16.3 all relevant references in this
Agreement to such Bank shall thereafter be construed as a reference to
such Bank and/or its Substitute to the extent of their respective
interests.
16.11 Lending offices
Each Bank shall lend through its office at the address specified in
schedule 1 or, as the case may be, in or pursuant to any relevant
Substitution Certificate or through any other office of such Bank
selected from time to time by such Bank through which such Bank wishes to
lend for the purposes of this Agreement. If the office through which a
Bank is lending is changed pursuant to this clause 16.11, such Bank shall
notify the Facility Agent promptly of such change. No Bank shall exercise
its rights under this clause in any manner which might reasonably be
expected to result in it not being a Qualifying Bank.
16.12 Disclosure of information
Each Borrower agrees that the Finance Parties may at any time disclose
such information relating to itself, its Affiliates and associated
companies as shall come into their possession, whether or not in relation
to the Facility:
(a) to any prospective assignee, Substitute or sub-participant;
(b) to their respective advisers, professional or otherwise;
(c) to any Affiliate of such Finance Party;
(d) to the other Finance Parties;
<PAGE>
(e) if required to do so by an order of a court in any jurisdiction;
(f) under any law or regulation or to any applicable regulatory
authority (including the Bank of England) in any jurisdiction; and
(g) where such information shall have already entered the public
domain,
and in the case of (a) and (b) above, subject to requiring and receiving
a written confirmation from the recipient of the information that it will
treat in confidence any confidential information so disclosed to it and
not use it for any unauthorised purpose and, upon receipt of such
confirmation, such Finance Party shall in no way be liable or responsible
for such information not being kept confidential by such proposed
assignee, Substitute or other person.
16.13 Restrictions on novations
Any novation by an Existing Bank which is transferring part (but not all)
of its Commitment may only be made under this clause 16 if (i) it is made
in respect of a Commitment of (pound)5,000,000 or any larger integral
multiple of (pound)5,000,000 and (ii) as a consequence of such novation
(or as a consequence of that and any other novation between the same or
related parties taking effect at or about the same time) the Commitment
of the Existing Bank would be not less than (pound)5,000,000. If part
(but not all) of a Bank's Contribution is being transferred, the previous
sentence shall be read as if it referred to "Contribution",
"Contributions" and assignment instead of "Commitment" and "Commitments"
and "novation" respectively.
16.14 No obligation
The Existing Bank shall not be obliged by any Finance Document to:
(a) accept a re-transfer from the Substitute of any of the rights
and/or obligations assigned or transferred under this clause 16;
or
(b) indemnify the Substitute for any losses arising by reason of any
Obligor's failure to perform its obligations under any Finance
Documents or otherwise.
16.15 Syndication
It is acknowledged that at the date of this Agreement the Facility is
being made available by the Underwriters with the intention that each
Underwriter may transfer any part of its participation in accordance with
clause 16.5 (Substitution) and, accordingly, references to the Banks
shall, before the first date on which such transfer shall be made of the
Underwriter's rights, benefits and obligations under this Agreement in
accordance with clause 16.5 (Substitution), be construed as a reference
solely to the Underwriters.
16.16 The Borrower's undertakings in connection with syndication
Each Borrower acknowledges that syndication of the Facility in accordance
with this clause 16.16 will take place and undertakes to take reasonable
steps to assist and co-operate with the Arrangers, the Facility Agent and
the Underwriters in syndication by, among other things:
(a) co-operating with site visits by the Banks and persons invited by
the Arrangers to participate (in this clause 16.16 only, together
the "Banks");
<PAGE>
(b) participating at an appropriate senior management level in
presentations to the Banks concerning the Parent, the members of
the REC Group and their activities;
(c) using reasonable endeavours to obtain appropriate authorisations
from the Auditors, other accountants, consultants and professional
advisers to release for the benefit of the Banks any information
addressed to a Borrower and/or the Facility Agent;
(d) refraining from making any statement, announcement or publication
or doing any act or thing which may obstruct syndication in any
way;
(e) providing the Banks with such information relating to the Parent
and members of the REC Group, and their associated companies and
their activities as the Banks reasonably request;
(f) assisting the Facility Agent and the Arrangers in the preparation
and review of any information which such Facility Agent and/or the
Arrangers reasonably require for the purposes of syndication,
including assisting in the preparation of any information
memorandum and the giving of such additional warranties as the
Facility Agent may reasonably request of the contents of the
information and/or the warranties in clause 9, provided that any
such warranties are expressed to be to the best of such Borrower's
knowledge, information and belief and that it may disclose against
such warranties such matters as it deems appropriate;
(g) passing on to the Facility Agent any enquiries received by it from
potential Banks; and
(h) agreeing to amendments to the Finance Documents of an
administrative or technical nature or to correct typographical or
other clerical errors.
17. FACILITY AGENT
17.1 Appointment of Facility Agent
Each Finance Party appoints the Facility Agent to act as its agent in
connection with the Finance Documents to which the Facility Agent is a
party and authorises the Facility Agent to exercise such rights,
remedies, powers and discretions as are specifically delegated to it by
the terms of this Agreement together with all reasonably incidental
rights, powers and discretions. The Borrowers shall be entitled to assume
that the Facility Agent represents the Finance Parties, the Reference
Banks or the Majority Banks (as the case may be), and that all consents
and notices given by the Facility Agent on its behalf are validly given.
17.2 Separate treatment of syndication division
In acting as Facility Agent, the Facility Agent's syndication division
(or such other division as may undertake such task) shall be treated as a
separate entity from any other of its divisions or departments and,
despite the provisions of clauses 17 to 21, if the Facility Agent or any
Related Person acts for or transacts business with any member of a group
comprising the Parent and its Affiliates or associated companies (the
"Parent Group") or any other person which may be a trade competitor of
the Parent Group or the Wider Group or any member of either such group or
may otherwise have commercial interests similar to those of any member of
such groups in
<PAGE>
any capacity in relation to any other matter (including as a Bank under
this Agreement), any information acquired by the Facility Agent or any
Related Person in such other capacity may be treated as confidential by
the Facility Agent. The Borrowers hereby expressly acknowledge that the
Finance Parties and Related Persons may be providing debt financing,
equity capital or other services (including financial advisory services)
to other persons with whom the Parent or the Wider Group may have
conflicting interests in respect of the Facilities or otherwise.
17.3 Actions of Facility Agent
Each action taken or decision made by the Facility Agent under or in
relation to any Finance Document with requisite authority under this
Agreement, including on the basis of the requisite instructions, shall be
binding on all the Finance Parties.
17.4 Notification of retirement of Facility Agent or Issuing Bank
Each of the Facility Agent and/or the Issuing Bank may resign its
appointment under this Agreement at any time without assigning any reason
therefor by giving not less than 30 days' prior written notice to that
effect to each of the other parties to this Agreement Provided that no
such resignation shall be effective until a successor for such Facility
Agent or Issuing Bank (as the case may be) is appointed in accordance
with the succeeding provisions of this clause.
17.5 Successor Facility Agent or Issuing Bank
If the Facility Agent or Issuing Bank gives notice of its resignation
pursuant to clause 17.4, then any reputable and experienced bank or other
financial institution with an office in London may after consultation
with the Borrowers be appointed as a successor to such Facility Agent or
Issuing Bank (as the case may be) by the Majority Banks but, if no such
successor is so appointed, the Facility Agent or Issuing Bank (as the
case may be) may appoint such a successor itself.
17.6 Provisions relating to successor Facility Agent or Issuing Bank
With effect from the date that a successor is appointed and accepts the
office of Facility Agent or, as the case may be, Issuing Bank and
executes such necessary documentation under this clause 17:
(a) as regards the other Finance Parties and the Borrowers, such
successor shall become bound by all the obligations of the
Facility Agent or, as the case may be, the Issuing Bank and become
entitled to all the rights, privileges, powers, authorities and
discretions of the Facility Agent or, as the case may be, the
Issuing Bank under the Finance Documents;
(b) the agency of the retiring Facility Agent or, as the case may be,
the duties of the Issuing Bank shall terminate and the retiring
Facility Agent or, as the case may be, the retiring Issuing Bank
shall be discharged from any further liability or obligation under
the Finance Documents, but without prejudice to any liabilities
which the retiring Facility Agent or, as the case may be, the
retiring Issuing Bank may have incurred (including with respect to
the retiring Issuing Bank any then outstanding Issued Letter of
Credit) before the termination of its agency, trusteeship and/or
duties;
<PAGE>
(c) the costs, charges and expenses of the retiring Facility Agent,
or, as the case may be, the retiring Issuing Bank shall be
discharged if recoverable under the provisions of this Agreement;
(d) the provisions of the Finance Documents shall continue in effect
for the benefit of any retiring Facility Agent, or, as the case
may be, the retiring Issuing Bank in respect of any actions taken
or omitted to be taken by it or any event occurring before the
termination of its agency, trusteeship and/or duties (including
with respect to the retiring Issuing Bank any then outstanding
Issued Letter of Credit);
(e) the retiring Facility Agent or Issuing Bank shall (at the expense
of the Primary Borrower) provide its successor with copies of such
of its records as its successor reasonably requires to carry out
its functions as such.
17.7 Merger of Facility Agent or Issuing Bank
Any corporation into which the Facility Agent or the Issuing Bank may be
merged or converted or any corporation with which the Facility Agent or
the Issuing Bank may be consolidated or any corporation resulting from
any merger, conversion, amalgamation, consolidation or other
reorganisation to which the Facility Agent or the Issuing Bank shall be a
party shall, to the extent permitted by applicable law, be the successor
Facility Agent or, as the case may be, Issuing Bank under this Agreement
and the other Finance Documents (as appropriate) without the execution or
filing of any document or any further act on the part of any of the
parties to this Agreement or, as the case may be, the other Finance
Documents save that notice of merger, conversion, amalgamation,
consolidation or other reorganisation shall forthwith be given to the
Primary Borrower and the Banks.
17.8 Role of Issuing Bank
The Issuing Bank shall act on behalf of the Banks with respect to any
Letters of Credit Issued by it and the documents associated therewith
until such time and except for so long as the Facility Agent may agree at
the request of the Majority Banks to act for such Issuing Bank with
respect thereto.
18. POWERS
18.1 General powers
Each of the Facility Agent, the Issuing Bank, the Arrangers and the
Underwriters may:
(a) assume that the Facility Office of each Bank is that identified
with its signature below (or, in the case of a Substitute, that
identified in the Substitution Certificate under which it became a
party to this Agreement) until it has received from such Bank a
notice designating some other office of such Bank as its Facility
Office, and may act upon any such notice until the same is
superseded by a further such notice;
(b) engage and pay for the advice or services of any lawyers,
accountants or other advisers whose advice or services may seem
necessary, expedient or desirable to it and may rely upon any
advice so obtained;
<PAGE>
(c) rely as to matters of fact which might reasonably be expected to
be within the knowledge of any Borrower upon a certificate or
statement signed by or on behalf of such Borrower;
(d) rely upon any communication or document believed by it to be
genuine and correct and to have been communicated or signed by the
person by whom it purports to be communicated or signed;
(e) refrain from exercising any right, power or discretion vested in
it under any Finance Document unless and until instructed by the
Majority Banks or, where required, all of the Banks as to whether
or not such right, power or discretion is to be exercised and, if
it is to be exercised, as to the manner in which it should be
exercised, and it shall not be liable for acting or refraining
from acting in accordance with or in the absence of such
instructions;
(f) refrain from taking any step to protect or enforce the rights of
any Finance Party under any Finance Document and from beginning
any legal action or proceeding arising out of or in connection
with any Finance Document until it has been indemnified and/or
secured as it may require (whether by way of payment in advance or
otherwise) against all costs, claims, expenses (including legal
fees) and liabilities which it will or may expend or incur in
complying with such instructions;
(g) refrain from doing anything which would or might in its opinion be
contrary to any applicable law or any requirements (whether or not
having the force of law) of any governmental, judicial or
regulatory body or otherwise render it liable to any person, and
do anything which is in its opinion necessary to comply with any
such applicable law or requirement;
(h) do any act or thing in the exercise of any of its powers and
duties under the Finance Documents which may lawfully be done and
which in its absolute discretion it deems advisable for the
protection and benefit of the Finance Parties collectively;
(i) perform any of its duties, obligations and responsibilities under
the Finance Documents by or through its personnel or agents; and
(j) accept deposits from, lend money (secured or unsecured) to and
generally engage in any kind of banking or other business with, be
the owner or holder of any shares or other securities of, and
provide advisory or other services to the Parent and its
Affiliates, and/or the REC Group or any of the Finance Parties,
without any liability to account.
18.2 Specific powers of Facility Agent and Issuing Bank
The Facility Agent and the Issuing Bank:
(a) may assume that:
(i) any representation made by a Obligor in or in connection
with the Finance Documents is true;
(ii) no Default has occurred;
<PAGE>
(iii) no Obligor is in breach of or default under its obligations
under any Finance Document; and
(iv) any right, power, authority or discretion vested in any of
the Finance Documents upon the Majority Banks, all Banks,
or any other person or group of persons has not been
exercised,
unless the Facility Agent has in its capacity as agent for the
relevant Finance Parties received actual notice to the contrary
from any other party to any Finance Document;
(b) shall be at liberty to place any Finance Document and any other
instruments, documents or deeds delivered to it pursuant thereto
or in connection therewith for the time being in its possession in
any safe deposit, safe or receptacle selected by the Facility
Agent, as the case may be, or with any bank, any company whose
business includes undertaking the safe custody of documents or any
firm of lawyers of good repute and may make any such arrangements
as it thinks fit for allowing any of the Obligors access to, or
its solicitors or auditors possession of, such documents when
necessary or convenient and, in the absence of gross negligence or
wilful default on its part, shall not be responsible for any loss
thereby incurred;
(c) may, whenever it thinks fit, delegate by power of attorney or
otherwise to any person or persons all or any of the rights,
trusts, powers, authorities and discretion vested in it by any
Finance Document and such delegation may be made upon such terms
and subject to such conditions and subject to such regulations as
the Facility Agent, as the case may be, may think fit and shall
not be bound to supervise the proceedings or (in the absence of
gross negligence or wilful default on its part) be in any way
responsible for any loss incurred by reason of any misconduct or
default on the part of any such delegate;
(d) notwithstanding anything else herein contained, may refrain from
doing anything which would or might in its opinion be contrary to
any relevant law of any jurisdiction or any relevant directive or
regulation of any agency of any state or which would or might
otherwise render it liable to any persons and may do anything
which is, in its opinion, necessary or desirable to comply with
any such law, directive or regulations;
(e) may indemnify itself and/or every attorney, agent or other person
appointed by it under any Finance Document out of any security
against all liabilities arising in connection with the Facility
and/or in respect of any other matter or thing done or omitted to
be done in any way relating to any Finance Document or by law
and/or acting as Facility Agent or Issuing Bank;
(f) shall have the power to institute, prosecute and defend any suits
or actions or other proceedings affecting the Facility Agent or
Issuing Bank or any security and to compromise any matter or
difference or submit any such matter to arbitration and to
compromise or compound any debts owing to the Facility Agent or
Issuing Bank or any other claims against it or any such terms as
it shall deem sufficient and to make petition upon such terms as
it shall deem desirable;
(g) save as otherwise expressly provided herein, shall have absolute
discretion as to the exercise or non exercise (and as to the
manner and time of any such exercise) of all
<PAGE>
rights, trust, powers, authorities and discretions vested in it by
any of the Finance Documents but shall be entitled to refrain from
exercising any right, power or discretion vested in it as agent or
trustee under any Finance Document unless and until instructed by
the Majority Banks or, where required under this Agreement, all
Banks as to whether or not such right, power or discretion is to
be exercised and, if it is to be exercised, as to the manner in
which it should be exercised; and
(h) shall have absolute discretion as to the exercise or non-exercise
(and as to the manner and time of any such exercise) of all
rights, trust, powers, authorities and discretions in relation to
any matter, or in any context, not expressly provided for by this
Agreement to act or, as the case may be, refrain from acting in
accordance with the instructions of the Majority Banks;
(i) shall have the power to give or enter into any indemnity,
warranty, guarantee, undertaking or covenant or to enter into any
type of agreement as it shall, with the approval of the Majority
Banks (or, where required under this Agreement, all Banks) and
subject to all other provisions of the Finance Documents, think
fit in relation to any security in respect of the Facility;
(j) shall (subject to clause 19) be entitled (in its own name or in
the names of nominees) to invest moneys from time to time which,
in the opinion of the Facility Agent or the Issuing Bank, it would
not be practicable to distribute immediately by placing the same
on deposit in the name or under the control of itself as it may
think fit without being under any duty to diversify the same and
it shall not be responsible for any loss due to interest rate or
exchange rate fluctuations;
(k) with respect to its own Commitments and Contributions (if any),
shall have the same rights and powers under this Agreement and the
other Finance Documents as any other Bank and may exercise the
same as though it were not performing the duties and functions
delegated to it under this Agreement and/or the other Finance
Documents and the term "Banks" shall, unless the context clearly
otherwise indicates, include the Facility Agent and Issuing Bank
in their individual capacities as Banks.
19. DUTIES
19.1 Specific duties of the Facility Agent
The Facility Agent (for the benefit of the other Finance Parties only)
shall:
(a) promptly upon receipt inform each Bank of the contents of any
notice or document or other information received by it on or after
the date of this Agreement in its capacity as Facility Agent under
this Agreement from any Borrower;
(b) promptly notify each Bank of the occurrence of any Default or any
material breach by any Obligor in the due performance of its
obligations under this Agreement or any guarantee or security in
respect of the Facility of which the Facility Agent has received
written notice from any other party to any Finance Document;
<PAGE>
(c) save as otherwise provided herein, act in accordance with any
instructions given to it by the Majority Banks (which instructions
shall be binding on all of the Finance Parties);
(d) if so instructed by the Majority Banks (or, where so required
under this Agreement, all Banks), refrain from exercising any
right, remedy power or discretion vested in it under the Finance
Documents;
(e) except as regards purely administrative acts, consult whenever
reasonably practicable with the Banks before doing or refraining
from doing any act or thing in the exercise of its powers as agent
and/or trustee;
(f) to the extent that it receives or recovers monies following the
service of a notice in accordance with Clause 12.2 pursuant to or
as a result of any breach of any Finance Document to be applied in
discharging any obligation (whether actual or contingent, present
or future) of any Obligor under any Finance Document, apply such
monies (without prejudice to the respective rights of the Facility
Agent pursuant to any Finance Document to credit any monies
received by it to any suspense account) as between the Finance
Parties in accordance with clause 8.9 as if they were a partial
payment; and
(g) shall make each such application and/or distribution as soon as is
practicable after the relevant moneys are received by, or
otherwise become available to, it save that the Facility Agent may
credit any moneys received by it to a suspense account for so long
and in such manner as the Facility Agent may from time to time
determine with a view to preserving the rights of the Finance
Parties or any of them to prove for the whole of their respective
claims against any Obligor or any other person liable.
20. EXONERATION
20.1 Absence of obligation on initial Finance Parties
Despite anything to the contrary expressed or implied in any Finance
Document, each of the Facility Agent, the Issuing Bank, the Arrangers and
the Underwriters shall:
(a) not be bound to enquire as to and will have no liability in
respect of:
(i) whether or not any representation or warranty made by any
Obligor under or in connection with any Finance Document is
true, complete or adequate;
(ii) the occurrence or otherwise of any Default;
(iii) the performance by any Obligor of its obligations under any
Finance Document; or
(iv) any breach or default by any Obligor of or under its
obligations under any Finance Document;
(b) not be bound to account to any Finance Party for any fee or other
sum or the profit element of any sum received by it for its own
account;
<PAGE>
(c) not be bound to disclose to any other person any information
relating to any member of the REC Group if such disclosure would
or might in its opinion constitute a breach of any law or
regulation or duty of confidentiality or be otherwise actionable
at the suit of any person;
(d) not be under any fiduciary or other duty towards any Finance Party
or under any obligations other than those expressly provided for
in any Finance Documents;
(e) not be liable (in the absence of its own gross negligence or
wilful default):
(i) for any failure, omission, or defect in the due execution,
delivery, validity, legality, adequacy, performance,
enforceability, or admissibility in evidence of any Finance
Document or any communication, report or other document
delivered under any Finance Document; or
(ii) in respect of its exercise or failure to exercise any of
its powers and duties under any Finance Document; or
(f) not have any duties, obligations or liabilities other than those
expressly provided for in this Agreement and have no liability or
responsibility (in the absence of its own gross negligence or
wilful default) of any kind to:
(i) any member of the Wider Group arising out of or in relation
to any failure or delay in the performance or breach by any
Finance Party (other than itself) of any of its obligations
under or in connection with any Finance Document; or
(ii) any Finance Party arising out of or in relation to:
(aa) the financial condition of any member of the Wider
Group; or
(bb) any failure or delay in the performance or breach by
any Obligor of any of its obligations under or in
connection with any Finance Document or the
Facility;
(g) not be bound to check or enquire on behalf of any other Finance
Party into or liable for the adequacy, accuracy, execution,
genuineness, enforceability, admissibility in evidence or
completeness of any communication delivered to it under any of the
Finance Documents, any legal or other opinions, reports,
valuations, certificates, appraisals or other documents delivered
or made or required to be delivered or made at any time in
connection with any of the Finance Documents, any security to be
constituted thereby or any other report or other document,
statement or information circulated, delivered or made, whether
orally or otherwise and whether before, on or after the date of
this Agreement;
(h) be entitled to accept without enquiry, requisition or objection
such right and title as any Obligor may have to that part of the
property belonging to it (or any part thereof) which is the
subject matter of any Finance Document and not be bound or
concerned to investigate or make any enquiry into the right or
title of such person to such property (or any part thereof) or,
without prejudice to the foregoing, to require such person to
remedy any defect in such person's right or title as aforesaid;
<PAGE>
(i) be entitled to invest monies which in the opinion of the Facility
Agent may not be paid out promptly following receipt in the name
or under the control of the Facility Agent or Issuing Bank in any
of the investments for the time being authorised by law for the
investment by trustees of trust monies or in any other investments
whether similar to the aforesaid or not which may be requested by
the Majority Banks or by placing the same on deposit in the name
or under the control of the Facility Agent or Issuing Bank as the
Facility Agent may think fit and the Facility Agent or Issuing
Bank may at any time vary or transpose any such investments for or
into any others of a like nature and (in the absence of gross
negligence or wilful default on the part of such Facility Agent or
Issuing Bank) shall not be responsible for any loss thereby
incurred whether due to depreciation in value of such investments
or any other reason whatever;
(j) not be bound to take any steps or perform any obligation or
exercise any right or fulfil any request if to do so might in its
sole opinion breach or conflict with or contradict or be contrary
to any rule, regulation, law, regulatory requirement, court order
or judgment in any jurisdiction or expose the Facility Agent, the
Issuing Bank, the Arrangers or the Underwriters to liabilities in
any jurisdiction or be otherwise actionable at the suit of any
person;
(k) not be liable for any failure:
(i) to require the deposit with it of any deed or document
certifying, representing or constituting the title of any
Obligor to any of the property mortgaged, charged, assigned
or otherwise encumbered by or pursuant to any security;
(ii) to obtain any licence, consent or other authority for the
execution, delivery, validity, legality, adequacy,
performance, enforceability or admissibility in evidence of
any of the Finance Documents; or
(iii) to register or notify any of the foregoing in accordance
with the provisions of any of the documents of title of any
Obligor;
(l) have no liability (save as otherwise provided in clauses 17 to 23)
otherwise in connection with the Facility or their negotiations or
for acting (or as the case may be refraining from acting) in
connection with the instructions of the Majority Banks.
20.2 Indemnity from Banks
Each Bank shall, in its Proportion, on demand by the Facility Agent, the
Issuing Bank or any Arranger from time to time, indemnify the Facility
Agent, the Issuing Bank or the Arranger, against any and all fees (to the
extent properly chargeable by the Facility Agent, the Issuing Bank or the
Arranger under any Finance Document but not promptly recovered from any
Obligor), costs, claims and expenses and liabilities including any VAT
thereon:
(a) to which the Facility Agent or Issuing Bank becomes subject by
reason of it acting as agent or security trustee; or
(ii) incurred by the Facility Agent or any attorney, agent, delegate or
other person appointed by the Facility Agent under any Finance
Document in relation to or arising out of the taking or holding of
any of the security given or created by or pursuant to
<PAGE>
any of the Finance Documents or in the execution or purported or
attempted execution of the rights, trusts, powers, authorities,
discretions and obligations vested in it; or
(iii) which it is otherwise entitled to recover from any Obligor,
in each case under any of the Finance Documents or by law, including
those relating to all actions, proceedings, claims and demands in respect
of any matter or thing done or omitted in any way relating to the Finance
Documents any exercise or non exercise of any right, power or discretion,
and all amounts due to the Facility Agent by way of remuneration for
acting as agent or trustee under any of the Finance Documents
(collectively the "Liabilities"). Each Borrower shall counter-indemnify
the Banks against all payments by them under this clause 20.2. If a Bank
(referred to in this clause 20.2 as a "defaulting Bank") fails to pay its
due contribution under this indemnity, then the Facility Agent may
(without prejudice to its other rights and remedies) deduct the amount
due from the defaulting Bank from any sums which are then or afterwards
in its possession which would otherwise be payable to the defaulting
Bank.
20.3 Disclaimer
Neither the Facility Agent or the Issuing Bank, nor any Arranger or
Underwriter accepts responsibility to any other Finance Party for the
accuracy and/or completeness of any information supplied in connection
with any Finance Document or for the legality, validity, effectiveness,
adequacy or enforceability of any Finance Document and neither the
Facility Agent or the Issuing Bank, nor any Arranger or Underwriter shall
be under any liability to any other Finance Party as a result of taking
or omitting to take any action in relation to any Finance Document
(except in the case of its gross negligence or wilful misconduct).
20.4 No actions against individuals
Each of the Banks agrees that it will not assert or seek to assert
against any director, officer or employee of the Facility Agent, the
Issuing Bank, any Arranger or Underwriter any claim it may have against
any of them in respect of the matters referred to in clause 20.3.
20.5 Credit appraisals
It is agreed by each Bank, by virtue of its execution of this Agreement
or its accession to this Agreement, that it has itself been, and will
continue to be, solely responsible for making its own independent
appraisal of and investigations into the financial condition,
creditworthiness, condition, affairs, status and nature of each member of
the REC Group, and, accordingly, each Bank confirms to each of the
Facility Agent, the Issuing Bank, the Arrangers, the Underwriters and
other Banks that it:
(a) does not enter into this Agreement nor accede to it on the basis
of and has not relied on and will not rely on any statement,
opinion, forecast or other representation (whether negligent or
innocent) or warranty or other provision (in any case whether
oral, written, express or implied) made by, or agreed to, the
Facility Agent, the Issuing Bank, any Arranger, any Underwriter or
any other Bank to induce it to enter into this Agreement or any
other Finance Document except as expressly set out therein and the
remedies available in respect of any such misrepresentation or
untrue statement made to such Bank shall be limited to a claim for
breach of contract under this Agreement; and
<PAGE>
(b) has not relied on and will not rely on the Facility Agent, the
Issuing Bank, any Arranger, any Underwriter or any other Bank:
(i) to check or enquire on its behalf into the adequacy,
accuracy or completeness of any information provided by or
on behalf of any Obligor or any of its Affiliates in
connection with any Finance Document and/or the
transactions contemplated in the Finance Documents (whether
or not such information has been or is after the date of
this Agreement circulated to such Bank by the Facility
Agent, the Issuing Bank, any Arranger or Underwriter or as
the case may be any other Bank); or
(ii) to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or
nature of any Obligor or any of its Affiliates.
Provided that clause 20.5(a) shall not apply to any statement or
representation made fraudulently, or to any provision of this Agreement
which was induced by fraud for which the remedies available shall be all
those available under English law.
20.6 Exoneration of Related Persons
All the provisions of this clause 20 and of any other provision of any
Finance Document protecting (including indemnifying) or limiting the
liability of any Finance Party, or exonerating it from liability or
responsibility, which may enure to the benefit of the such Finance Party
shall also be deemed to be given for the benefit of all Related Persons
to whom they are capable of relating or in respect of whom they are
capable of taking effect.
20.7 Pre-contractual effect of exoneration
For the avoidance of doubt, the guarantee, indemnity, exonerations and
other protections in favour of the Facility Agent, the Issuing Bank, the
Arrangers, the Underwriters and the Related Persons contained in the
Finance Documents shall take effect in respect of all events, action and
omissions occurring before the execution and completion of this Agreement
as well as events, actions and omissions occurring on or after its
execution and completion and to the extent that any liability should be
adjudged to have arisen prior to the date of this Agreement, such
liability is hereby completely released.
21. ENFORCEMENT AND RECOVERIES
21.1 Obligations owed by each Borrower to Finance Parties
Each Borrower agrees that:
(a) all claims in the Finance Documents may be enforced, realised and
distributed by the Facility Agent and, where relevant, the Issuing
Bank in accordance with their respective powers and obligations of
the Finance Parties set out in clauses 18 and 19;
(b) if it receives any sum from any person which, pursuant to the
Finance Documents, should have been paid to the Facility Agent,
such sum shall be held on trust for the Finance Parties and shall
forthwith be paid over to the Facility Agent.
<PAGE>
(c) the obligations and liabilities the subject of any Guarantee shall
only be discharged by virtue of receipt or recovery by the
Facility Agent of monies, or of payments made by the Facility
Agent hereunder, to the extent that the ultimate recipient
actually receives monies from the Facility Agent hereunder.
21.2 Obligations owed by Finance Parties to Facility Agent and Security Agent
The Finance Parties agree between themselves not to take any action
separately to enforce or attempt to enforce any Guarantee or to exercise
any rights, discretions or powers or to grant any consents or releases
under or pursuant to any Guarantee.
22. DETERMINATION OF MATTERS
22.1 Majority Bank matters: amendments and waivers
Except as provided in clauses 22.4 and 22.5, with the prior written
consent of the Majority Banks, the Facility Agent and the Primary
Borrower may from time to time:
(a) enter into written amendments, supplements or modifications to the
Finance Documents (however fundamental) for the purpose of adding
any provisions to the Finance Documents or changing in any manner
the rights and/or obligations of any of the Obligors, the Facility
Agent, the Issuing Bank and the Banks; and
(b) execute and deliver to the Primary Borrower a written instrument
waiving prospectively or retrospectively, on such terms and
conditions as the Facility Agent may specify in such instrument,
any of the requirements of any of the Finance Documents, or giving
any consents or approvals thereunder.
22.2 Documentation of Majority Bank changes
Any action so authorised and effected by the Facility Agent under clause
22.1 shall be documented in such manner as the Facility Agent shall (with
the approval of the Majority Banks) determine, shall be promptly notified
to the Banks by the Facility Agent and (without prejudice to the
generality of clause 17.3) shall be binding on all the Banks.
22.3 Majority bank matters: enforcement
If the Facility Agent makes a declaration under clause 12.2 the Facility
Agent shall, in the names of all the Banks, take such action on behalf of
the Banks and conduct such negotiations with any Obligor and generally
administer the Facility in accordance with the wishes of the Majority
Banks. All the Banks shall be bound by the provisions of this clause 22.3
and no Bank shall be entitled to take action independently against the
Primary Borrower without the prior consent of the Majority Banks.
22.4 All Bank matters: amendments and waivers
Except with the prior written consent of all the Banks, the Facility
Agent shall not have authority on behalf of the Banks to agree with any
Borrower any amendment or modification to this Agreement or to vary or
waive breaches of or defaults under or otherwise excuse
<PAGE>
performance of any provision of this Agreement by any Borrower, if the
effect of such would be to:
(a) reduce the Applicable Margin;
(b) postpone the due date or reduce the amount of any payment of
principal, interest, commitment commission or other amount payable
by any Borrower under this Agreement;
(c) change the currency in which any amount is payable by any Borrower
under this Agreement;
(d) have the effect of changing the amount of any Facility, any Bank's
Commitment or the principal or face amount or currency of any
Advance;
(e) extend any period during which a Drawdown Notice may be delivered;
(f) change any provision of this Agreement which expressly requires
the approval or consent of all the Banks such that the relevant
approval or consent may be given otherwise than with the sanction
of all the Banks;
(g) change the definitions of Borrowed Money, Event of Default,
Majority Banks, Default, Final Repayment Date or Substitution
Certificate;
(h) agree with any Obligor any amendment of, or action in relation to,
any Guarantee which would have the effect of:
(i) extending the due date or reducing the amount of any
payment under any Guarantee; or
(ii) changing the currency in which any amount is payable under
any Guarantee;
(i) change clause 15.2 (Pro-rata Payments); or
(j) change this clause 22 or clause 23.
22.5 Execution of new security
For the purposes of this clause 22 it is expressly agreed and
acknowledged that the execution of a guarantee and/or deed of adherence
by a new REC Company or other Obligor or proposed Obligor or any deed or
instrument pursuant to a further assurance provision in this Agreement or
the other Finance Documents shall not constitute an amendment or
modification to, or variation of, any of the Finance Documents.
22.6 Veto of Facility Agent
Regardless of any other provision in this Agreement, the Facility Agent
and, to the extent affected, the Issuing Bank shall not be obliged to
agree to any such waiver, amendment, supplement or modification if it
would:
(a) amend, modify or waive any provision of clause 22; or
<PAGE>
(b) otherwise amend, modify or waive any of the Facility Agent's, the
Issuing Bank's or the Arrangers' rights under any of the Finance
Documents to any additional obligations under such documents.
22.7 Administrative determinations
The Facility Agent may determine purely administrative matters without
reference to the Banks.
23. BASIS OF DECISIONS
23.1 Meaning of Majority Banks
Where this Agreement provides for any matter to be determined by
reference to the opinion of, or to be subject to the consent or request
of, the Majority Banks or for any action to be taken on the instructions
of the Majority Banks, such opinion, consent, request or instructions
shall (as between the Banks) only be regarded as having been validly
given or issued by the Majority Banks if all the Banks shall have
received prior notice of the matter on which such opinion, consent,
request or instructions are required to be obtained and the relevant
majority of Banks shall have given or issued such opinion, consent,
request or instructions, but so that (as between each Borrower and the
Finance Parties) each Borrower shall be entitled (and bound) to assume
that such notice shall have been duly received by each Bank and that the
relevant majority shall have been obtained to constitute Majority Banks
when notified to this effect by the Facility Agent whether or not this is
the case.
23.2 Notice to Majority Banks
If, within 10 Banking Days of the Facility Agent despatching to each Bank
a notice requesting instructions (or confirmation of instructions) from
the Banks or the agreement of the Banks to any amendment, modification,
waiver, variation or excuse of performance for the purposes of, or in
relation to, any of the Finance Documents, the Facility Agent has not
received a reply specifically giving or confirming or refusing to give or
confirm the relevant instructions or, as the case may be, approving or
refusing to approve the proposed amendment, modification, waiver,
variation or excuse of performance, then (subject to clause 23.4) the
Facility Agent shall treat any Bank which has not so responded as having
indicated a desire to be bound by the wishes of 662/3 per cent. of those
Banks (measured in terms of the relevant Contributions or, if none, the
relevant Commitments of those Banks) which have so responded. Any Bank
which notifies the Facility Agent of a wish or intention to abstain on
any particular issue shall be treated as if it had not responded.
23.3 Meaning of all Banks
Where this Agreement or any other Finance Document, provides for any
matter to be determined by reference to the opinion of, or to be subject
to the consent of or request of all of the Banks or the Banks acting
unanimously or for any action to be taken on the instruction of all the
Banks such opinion, consent, request or instructions shall (as between
the Banks) only be regarded as having been validly given or issued by all
the Banks (or the Banks acting unanimously) if all the Banks shall have
received prior notice (the "Agent's Notice") of such matter containing a
request for written instructions from such Bank to be received by the
<PAGE>
Facility Agent within ten Banking Days of the receipt (or the deemed
receipt pursuant to clause 24.1(b)) of the Agent's Notice. If, in respect
of a Bank, the Facility Agent:
(a) shall not have received written instructions in respect of such
matter from such Bank; and
(b) the Facility Agent shall have received written instructions in
respect of such matter from at least five other Banks,
in each case within such time period (and subject to clause 23.4), such
Bank shall be deemed to have irrevocably renounced and waived its right
to make any such determination, approval, consent or provide instructions
to the Facility Agent in respect of such matter; shall not have any
rights, recourse or remedy against the Facility Agent in respect of such
matter; and shall be bound (as shall each Borrower) by the determination,
approval, consent or instructions of the other Banks in respect of such
matter. Clauses 23.1 and 23.2 shall not apply in relation to those
matters which are to be decided by all the Banks.
23.4 Late responses
In any case where a Bank fails to respond within the time limit set down
under clauses 23.2 or 23.3, such Bank's response, if it responds before
any determination or instruction is acted upon or communicated to any
Borrower, will be taken into account as if it had been received within
the time limit Provided that the Facility Agent has received actual
notice of such response before any such action or communication.
23.5 Costs
If the Primary Borrower requests, or if the Facility Agent requires in
accordance with clause 10.3(c) or any other provision of this Agreement,
any amendment, supplement, modification or waiver under clauses 22.1 or
22.3 (Majority Bank matters) or clauses 22.4 or 22.5 (All Bank matters),
then the Primary Borrower shall, on demand by the Facility Agent,
reimburse the Facility Agent for all costs and expenses (including legal
fees), together with any VAT on them, incurred by the Facility Agent in
the negotiation, preparation and execution of any written instrument
contemplated by clauses 22.1 or 22.3 (Majority Bank matters) or clauses
22.4 or 22.5 (All Bank matters).
23.6 No partnership
This Agreement shall not and shall not be construed so as to constitute a
partnership between the parties to this Agreement or any of them.
23.7 Change of Reference Banks
If:
(a) the whole of the Contributions (if any) of any Reference Bank are
prepaid;
(b) the Commitments (if any) of any Reference Bank are reduced to zero
prior to the end of the Finance Period;
<PAGE>
(c) a Reference Bank novates the whole of its rights and obligations
(if any) as a Bank under this Agreement; or
(d) a Reference Bank ceases to provide quotations to the Facility
Agent upon request for the purposes of determining LIBOR (where
such quotations are required having regard to the definition of
"LIBOR" in clause 1.2)
the Facility Agent may, acting on the instructions of the Majority Banks,
terminate the appointment of such Reference Bank and after consultation
with the Primary Borrower appoint another Bank to replace such Reference
Bank.
24. MATTERS CONCERNING THE OBLIGORS
24.1 Additional Borrower
The Primary Borrower may with the prior written consent of the Facility
Agent at any time during the term of this Agreement designate another
directly wholly owned, English incorporated Subsidiary of the Primary
Borrower which is or, on or prior to it making a drawdown hereunder, will
become a REC Company as an Additional Borrower under the Facility, by
giving not less than 10 days' written notice to the Facility Agent. No
such accession shall be valid until the Primary Borrower has procured the
delivery to the Facility Agent of a Deed of Accession duly executed by
the proposed Additional Borrower. Any member of the Group wishing to
become an Additional Borrower shall also become an Additional Guarantor.
24.2 Guarantees from REC Companies
The Primary Borrower shall:
(a) notify the Facility Agent as soon as reasonably practicable after
it becomes aware that any member of the Group is to become a REC
Company; and
(b) procure that each such member of the Group becomes an Additional
Guarantor by the time it becomes a REC Company.
24.3 Deed of Accession
Any member of the Group which is to become either an Additional Guarantor
or both an Additional Borrower and an Additional Guarantor shall deliver
to the Facility Agent:
(a) a Deed of Accession (incorporating a Guarantee) executed by it;
(b) the documents specified in clause 3 of the Deed of Accession, in
form and substance satisfactory to the Facility Agent;
(c) such other information relating to that Subsidiary as the Facility
Agent may reasonably require; and
(d) a guarantee executed by the Guarantors (other than the Additional
Borrower) in a form satisfactory to the Facility Agent of the
Additional Borrower's obligations to the Banks
<PAGE>
under the Finance Documents unless the Guarantees already executed
by such Guarantors would (to the satisfaction of the Facility
Agent) guarantee such Additional Borrower's obligations.
Such a member of the Group shall become an Additional Obligor when the
relevant Deed of Accession has been executed by the Facility Agent, such
Subsidiary and the Primary Borrower and the Facility Agent has notified
the Primary Borrower that it has received the other items referred to in
this clause 24.3.
24.4 Primary Borrower as Obligors' Agent
Each Obligor (other than the Primary Borrower), and each Additional
Obligor by its execution of a Deed of Accession, irrevocably appoints the
Primary Borrower as its agent for all purposes of or connected with the
Finance Documents (including, without limitation, the giving of any
Drawdown Notice under the Facility, the execution of future Deeds of
Accession on its behalf and any agreement to the continuance of its
Guarantee on its behalf). Each of the Finance Parties may rely upon any
document, notice, confirmation or agreement (whether given in writing or
orally) signed by or given by, or on behalf of the Primary Borrower as if
it had been signed by or given by each and every other Obligor. The
Primary Borrower may give a good receipt for any sum payable to each and
every other Borrower under this Agreement.
24.5 Obligations unconditional
The obligations of each Obligor under this Agreement and each other
Finance Document are unconditional and irrevocable (subject to the
express provisions of this Agreement) and shall not be in any way
affected or discharged by reason of any matter in connection with the
offer for shares in The Energy Group PLC made by TU Acquisitions PLC.
24.6 Obligations Several
The obligations of each Obligor under this Agreement and the other
Finance Documents are several and the failure of any Obligor to perform
such obligations shall not release any other Obligor from its obligations
under this Agreement.
25. NOTICES AND OTHER MATTERS
25.1 Address for Notice
Every notice, request, demand or other communication under this Agreement
shall:
(a) be in writing delivered personally or by first-class prepaid
letter (airmail if available) or telefax;
(b) be deemed to have been received, subject as otherwise provided in
this Agreement, in the case of a letter, when delivered personally
or 2 days after it has been put into the post and, in the case of
a telefax, when a complete and legible copy is received by the
addressee (unless the time of despatch of any telefax is after
close of business in which case it shall be deemed to have been
received at the opening of business on the next Banking Day); and
<PAGE>
(c) be sent:
(i) to the Primary Borrower at:
Wherstead Park,
Wherstead,
Suffolk 1PQ 2AQ
Telefax: +44 (0)1473 555034
Attention: Mike Andrews
with a copy to:
TU Acquisitions PLC
117 Piccadilly
London W1
Telefax: +44 (0) 1473 555034
Attention: Finance Director
(ii) to the Facility Agent at:
Chase Manhattan International Ltd
Trinity Tower
9 Thomas More Street
London E1 9YT
Telefax: +44 171 777 2360
Attention: Stephen Clarke
(iii) to the Issuing Bank at:
The Chase Manhattan Bank
Trinity Tower
9 Thomas More Street
London E1 9YT
Telefax: +44 171 777 2360
Attention: Stephen Clarke
(iv) to each Bank at its address or telefax number specified in
schedule 1 or in, or pursuant to, any relevant Substitution
Certificate
(v) to the Arrangers:
Chase Manhattan plc
125 London Wall
London EC2Y 5AJ
Telefax: +44 171 777 3840
Attention: Cheryl Boucher/Kristian Orssten
<PAGE>
Lehman Brothers International (Europe)
3 World Financial Center
10th Floor
200 Vesey Street
New York
NY 10285
Telefax: 001 212 528 0819
Attention: Michele Swanson
Merrill Lynch Capital Corporation
c/o Merrill Lynch & Co
World Financial Center
North Tower
250 Vesey Street
New York
NY 10281
Telefax: 001 212 447 9461
Attention: Pete Wersching
or to such other address or telefax number as is notified by the
Primary Borrower, or a Finance Party, as the case may be, to the
other parties to this Agreement.
25.2 Notice to Facility Agent
Every notice, request, demand or other communication under this Agreement
to be given by a Borrower shall be given by the Primary Borrower and by
the Primary Borrower to any other party shall be given to the Facility
Agent for onward transmission as appropriate and to be given to a
Borrower shall (except as otherwise provided in this Agreement) be given
by the Facility Agent to the Primary Borrower.
25.3 No implied waiver, remedies cumulative
No failure or delay on the part of the Finance Parties or any of them to
exercise any power, right or remedy under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise by the Finance
Parties or any of them of any power, right or remedy preclude any other
or further exercise thereof or the exercise of any other power, right or
remedy. The remedies provided in this Agreement are cumulative and are
not exclusive of any remedies provided by law.
25.4 English translations
All certificates, instruments and other documents to be delivered under
or supplied in connection with this Agreement shall be in the English
language or shall be accompanied by a certified English translation upon
which the Finance Parties shall be entitled to rely.
<PAGE>
25.5 Counterparts
This Agreement may be executed in any number of counterparts and by the
different parties on separate counterparts, each of which when so
executed and delivered shall be an original, but all counterparts shall
together constitute one and the same instrument.
25.6 Severance
If any provision of this Agreement is held to be illegal, invalid or
unforceable in whole or in part this Agreement shall continue to be valid
as to its other provisions and the remainder of the affected provision.
26. GOVERNING LAW AND JURISDICTION
26.1 Law
This Agreement shall be governed by English law.
26.2 Submission to jurisdiction
The parties to this Agreement agree for the benefit of the Finance
Parties that:
(a) if any party has any claim against any other arising out of or in
connection with this Agreement, such claim shall (subject to
clause 25.2(c)) be referred to the High Court of Justice in
England, to the jurisdiction of which each of the parties
irrevocably submits;
(b) the jurisdiction of the High Court of Justice in England over any
such claim against any Finance Party shall be a non-exclusive
jurisdiction and no courts outside England shall have jurisdiction
to hear or determine any such claim; and
(c) nothing in this clause 25.2 shall limit the right of any Finance
Party to refer any such claim against any Borrower to any other
court of competent jurisdiction outside England, to the
jurisdiction of which such Borrower hereby irrevocably agrees to
submit, nor shall the taking of proceedings by any Finance Party
before the courts in one or more jurisdictions preclude the taking
of proceedings in any other jurisdiction whether concurrently or
not.
IN WITNESS whereof the parties to this Agreement have caused this Agreement to
be duly executed on the date first above written.
<PAGE>
Schedule 1
The Banks and their Commitments
================================================================================
Bank Commitments
Address and telefax number
- --------------------------------------------------------------------------------
The Chase Manhattan Bank (pound)83,333,333.34
125 London Wall
London
EC2Y 5AJ
Fax: +44 171 777 3840
Attn: Cheryl Boucher
- --------------------------------------------------------------------------------
Lehman Commercial Paper Inc. (pound)83,333,333.33
3 World Financial Center
10th Floor
200 Vesey Street
New York
NY 10285
Fax: +212 528 0819
Tel: +212 526 0330
Attn: Michele Swanson
- --------------------------------------------------------------------------------
Merrill Lynch Capital Corporation (pound)83,333,333.33
4 World Financial Center
c/o Merrill Lynch & Co
North Tower
7th Floor
250 Vesey Street
New York
NY 10281 - 1307
Fax: +212 449 9461
Tel: +212 449 4972
Attn: Pete Wersching
- --------------------------------------------------------------------------------
<PAGE>
Schedule 2
Forms of Drawdown Notice
Part A
Advances
To: [Name and address of Facility Agent]
[DATE]
Attention: o
(pound)250,000,000 Revolving Credit Facility Agreement dated o 1998
1. We refer to the above Agreement and hereby give you notice that Eastern
Electricity plc wishes to draw an Advance:
(a) on o 19 o ;
(b) in the sum of (pound)o;
(c) with a Maturity Period in respect thereof of o months; and
(d) the proceeds of such fund to be credited to [name and number of
account] with [details of bank in London].
2. We confirm that:
(a) no event or circumstance has occurred and is continuing which
constitutes a Default; and
(b) the applicable representations and warranties contained in clause
9 of the above Agreement are true and correct at the date hereof
as if made with respect to the facts and circumstances existing at
such date.
3. Words and expressions defined in the above Agreement shall have the same
meanings where used herein.
For and on behalf of
Eastern Electricity plc
..............................
Duly authorised officer
<PAGE>
Part B
Letters of Credit
To: [Name and address of Facility Agent]
Attention:
- --------------------------------------
[DATE]
(pound)250,000,000 Revolving Credit Facility Agreement dated o 1998
1. We refer to the above Agreement and hereby give you notice that Eastern
Electricity plc requests the Issue of a Letter of Credit as follows:
(a) Drawdown Date: [__________]
(b) Expiry Date: [__________]
(c) Currency: [__________]
(d) Beneficiary: [__________]
(e) Amount: [__________]
(f) Purpose: [__________]
(g) Issue instructions: [__________]
(h) Documents required to be presented: [__________].
2. We confirm that:
(a) no event or circumstance has occurred and is continuing which
constitutes a Default; and
(b) the applicable representations and warranties contained in clause
9 of the above Agreement are true and correct at the date hereof
as if made with respect to the facts and circumstances existing at
such date.
3. Words and expressions defined in the above Agreement shall have the same
meanings where used herein.
For and on behalf of
Eastern Electricity plc
..............................
Duly authorised officer
<PAGE>
Schedule 3
Conditions Precedent
1. Evidence that the offer made by TU Acquisitions PLC for the entire issued
share capital of The Energy Group PLC has become or been declared
unconditional in all respects and that the obligations of the
Underwriters in favour of TU Finance (No.1) Limited under the acquisition
facility agreement dated 2 March 1998 (and amended and restated as of 3
March 1998 and 21 April 1998 and May 1998) have become unconditional.
2. Delivery of a notice of cancellation of the agreement dated 5 August 1996
between The Energy Group PLC, Citibank International plc as agent,
Barclays Bank PLC and Midland Bank plc so that it is no longer available
for drawing.
3. Delivery of the latest stand-alone audited accounts for the Primary
Borrower prepared on the basis of Appropriate Accounting Principles for
the year ending 31 March 1997 or, if available, 31 March 1998.
4. A certified copy of the certificate of incorporation and the memorandum
and articles of association of the Primary Borrower.
5. A certified copy of the resolutions of the board of directors of the
Primary Borrower evidencing approval of this Agreement (to which that
company is a party) and authorising its appropriate duly authorised
officers to execute and deliver this Agreement and to give all notices
and take all other action required by the Primary Borrower under this
Agreement.
6. Specimen signatures, authenticated by the company secretary or a director
of the Primary Borrower, of the persons authorised in the resolutions of
the board of directors referred to in paragraph 3 above.
7. A certificate of a director of the Primary Borrower certifying that the
borrowing of the Total Commitments in respect of the Facility would not
cause any borrowing limit binding on the Primary Borrower to be exceeded.
<PAGE>
Schedule 4
Calculation of Additional Cost
1. The Additional Cost for any period shall (subject to paragraph 2(e)
below) be calculated in accordance with the following formula:
BY + L(Y - X) + S(Y - Z) per cent per annum
------------------------
100 - (B + S)
where on the day of application of the formula:
B is the percentage of the Facility Agent's eligible liabilities
which the Bank of England then requires the Facility Agent to hold
on a non-interest-bearing deposit account in accordance with its
cash ratio requirements;
Y is the rate at which Sterling deposits are offered by the Facility
Agent to leading banks in the London Interbank Market at or about
11 a.m. on that day for the relevant period;
L is the percentage of eligible liabilities which (as a result of
the requirements of the Bank of England) the Facility Agent
maintains as secured money with members of the London Discount
Market Association or in certain marketable or callable securities
approved by the Bank of England;
X is the rate at which secured Sterling investments may be placed by
the Facility Agent with members of the London Discount Market
Association at or about 11 a.m. on that day for the relevant
period or, if greater, the rate at which Sterling bills of
exchange (of a tenor equal to the duration of the relevant period)
eligible for rediscounting at the Bank of England can be
discounted in the London Discount Market at or about 11 a.m. on
that day;
S is the percentage of the Facility Agent's eligible liabilities
which the Bank of England requires the Facility Agent to place as
a special deposit; and
Z is the interest rate expressed as a percentage per annum allowed
by the Bank of England on special deposits.
2. For the purpose of this schedule 4:
(a) "eligible liabilities" and "special deposits" have the meanings
given to them at the time of application of the formula by the
Bank of England; and
(b) "relevant period" in relation to each period for which Additional
Cost falls to be calculated means:
(i) if it is 3 months or less, that period; or
(ii) if it is more than 3 months, 3 months.
<PAGE>
(c) In the application of the formula, B, Y, L, X, S and Z are
included in the formula as figures and not as percentages, e.g. if
B = 0.5 per cent and Y = 15 per cent BY is calculated as 0.5 x 15.
(d) The formula shall be applied on the first day of each relevant
period. Each amount shall be rounded up to the nearest four
decimal places.
(e) If the Facility Agent determines that a change in circumstances
(including the introduction of charges by the FSA in June 1998)
has rendered, or will render, the formula inappropriate, the
Facility Agent (after consultation with the Banks) shall notify
the Primary Borrower of the manner in which the Additional Cost
will subsequently be calculated. The manner of calculation so
notified by the Facility Agent shall, in the absence of manifest
error, be binding on all the parties.
<PAGE>
Schedule 5
Form of Substitution Certificate
(referred to in clause 16.5)
NB 1. Banks are advised not to employ Substitution Certificates or otherwise to
assign, novate or transfer interests in the Agreement without first
ensuring that the transaction complies with all applicable laws and
regulations, including the Financial Services Act 1986 and regulations
made thereunder.
2. It is expected that Banks will enter into separate arrangements dealing
with the monies to be paid to the Existing Bank by the Substitute in
consideration of the novation (e.g. principal, accrued interest, fees and
any mismatched funding adjustment). Unless the Effective Date is a
rollover date, mismatches of parties' funding may arise. This Certificate
does not deal with these issues, nor does it deal with any interim risk
participation the Existing Bank may grant to the Substitute pending the
Effective Date.
To: [Name of Facility Agent] on its own behalf, as Facility Agent and on
behalf of each other party to the Agreement mentioned below.
Attention: o [DATE]
Substitution Certificate
This Substitution Certificate relates to a (pound)250,000,000 Revolving Credit
Facility Agreement (the "Agreement") dated [ ] [March] 1998 between Eastern
Electricity plc as the Primary Borrower (1) Chase Manhattan plc, Lehman Brothers
International (Europe), Merrill Lynch Capital Corporation as Arrangers (2),
various banks and financial institutions as Underwriters (3) The Chase Manhattan
Bank as Issuing Bank (4) Chase Manhattan International Limited as Facility Agent
(5). Terms defined in the Agreement shall have the same meaning in this
Substitution Certificate unless otherwise defined herein.
1. [Existing Bank] (the "Existing Bank") (a) confirms the accuracy of the
summary of its participation in the Agreement set out in the schedule
below; and (b) requests [Substitute Bank] (the "Substitute") to accept by
way of novation the portion of such participation specified in the
schedule to this Substitution Certificate by counter-signing and
delivering this Substitution Certificate to the Facility Agent at its
address for the service of notices specified in the Agreement.
2. The Substitute hereby requests the Facility Agent (on behalf of itself,
the other Finance Parties, the Primary Borrower and all other parties to
the Agreement) to accept this Substitution Certificate as being delivered
to the Facility Agent pursuant to and for the purposes of clause 16.5 of
the Agreement so as to take effect in accordance with the terms of such
clause 16.5 on [date of transfer] (the "Effective Date") or on such later
date as may be determined in accordance with the terms of the Agreement.
3. The Facility Agent (on behalf of itself, the other Finance Parties, the
Primary Borrower and all other parties to the Agreement) confirms the
novation effected by this Substitution Certificate
<PAGE>
pursuant to and for the purposes of clause 16.5 of the Agreement so as to
take effect in accordance with the terms of such clause 16.5.
4. The Substitute confirms:
(a) that it has received a copy of the Agreement and all other
documentation and information required by it in connection with
the transactions contemplated by this Substitution Certificate;
(b) that it has not relied upon any statement, opinion, forecast or
other representation or warranty made by the Existing Bank or any
other party to induce it to enter into this Substitution
Certificate;
(c) that it has made and will continue to make, without reliance on
the Existing Bank or any other Finance Party, and based on such
documents as it considers appropriate, its own appraisal of the
creditworthiness of each Borrower and its Affiliates and its own
independent investigation of the financial condition, prospects
and affairs of each Borrower and its Affiliates in connection with
the making and continuation of the Facility under the Agreement
and the other Finance Documents;
(d) that neither the Existing Bank nor any other Finance Party shall
at any time be deemed to have had or have a duty or
responsibility, either historically, initially or on a continuing
basis, to provide the Substitute with any credit or other
information with respect to any Borrower or any of its Affiliates
whether coming into its possession before any Utilisation or at
any time or times thereafter, other than (in the case of the
Facility Agent) as provided in clause 19.1 of the Agreement;
(e) that it has made and will continue to make its own assessment of
the legality, validity, enforceability and sufficiency of the
Agreement, any other Finance Document and this Substitution
Certificate and has not relied and will not rely on the Existing
Bank or any other Finance Party or any statements made by any of
them in that respect;
(f) that, accordingly, none of the Existing Bank nor any other Finance
Party makes any representations or warranties in respect of, or
shall have any liability or responsibility to the Substitute in
respect of, any of the foregoing matters or any other matter
referred to in clause 20 of the Agreement;
(g) that it is a Qualifying Bank; and
(h) that it has signed an appropriate confidentiality undertaking
issued by the Existing Bank.
5. The Substitute hereby undertakes to the Existing Bank, the Finance
Parties, the Primary Borrower and each of the other parties to the
Agreement that it will perform in accordance with its terms all those
obligations which by the terms of the Agreement will be assumed by it
after counter-signature of this Substitution Certificate by the Facility
Agent.
6. The Substitute irrevocably and unconditionally guarantees to and
indemnifies the Issuing Bank as required under clause 4.6 (Banks'
Guarantee and Indemnity).
7. Without limiting the above paragraphs, nothing in this Substitution
Certificate obliges the Existing Bank to:
<PAGE>
(a) accept any re-transfer from the Substitute of any of the rights,
benefits and/or obligations hereby transferred; or
(b) support any losses incurred by the Substitute by reason of any
non-performance by the Primary Borrower or any other party to the
Agreement or any of the Finance Documents or any document relating
thereto of any of its obligations under the same.
8. This Substitution Certificate and the rights and obligations of the
parties hereunder shall be governed by and construed in accordance with
English law.
Note: This Substitution Certificate is not a security, bond, note, debenture,
investment or similar instrument.
AS WITNESS the hands of the authorised signatories of the parties to this
Substitution Certificate on the date appearing below.
The Schedule
THE FACILITY
Commitment ((pound)) Portion Transferred ((pound))
[____] [____]
Contribution ((pound)) Next Maturity Date(s) Portion Transferred ((pound))
[____] [____] [____]
Transferor's share of Portion of Letters of Credit
outstanding Letters of Credit Transferred
[____] [____]
Administrative Details of Substitute
Lending Office:
Account for payments:
Telephone:
Telefax:
Attention:
[Existing Bank] [Substitute]
By: ........... By: .........
Date: Date:
The Facility Agent
By:.........
Date:
on its own behalf and on behalf of all other parties to the Agreement (other
than the Existing Bank)
<PAGE>
Schedule 6
Form of Deed of Accession
THIS DEED is made on 199
BETWEEN
(1) [ ] (the "Additional Obligor");
(2) Eastern Electricity plc (the "Primary Borrower") on behalf of itself, and
each other Borrower (as defined in the Facilities Agreement referred to
below); and
(3) [Chase Manhattan International Ltd] as agent (the "Facility Agent") (as
defined in the Facilities Agreement referred to below).
WHEREAS
(A) This Deed is supplemental to the facilities agreement dated [ ] May 1998
made between among others Eastern Electricity plc as Primary Borrower and
Chase Manhattan International Ltd as Facility Agent (the "Facilities
Agreement", which expression shall include any amendments to it in force
from time to time).
(B) The parties intend that [ ] shall accede to the Facilities Agreement as
an Additional Guarantor [and Additional Borrower].
NOW THIS DEED WITNESSES:
1. Accession of Additional Obligor
[In consideration of the Banks through the Facility Agent agreeing to the
Additional Borrower becoming an additional Borrower pursuant to clause
24.1 (Additional Obligors) of the Facilities Agreement and] by the
execution of this Deed the Additional Obligor agrees to observe and be
bound by all of the terms and provisions of the Facilities Agreement to
the extent that they apply to the Obligors as if it were an original
party to the Facilities Agreement and, without limitation to the
generality of the foregoing, to become a Guarantor and give the Guarantee
in the form contained in schedule 9 (Terms of Guarantee).
2. Interpretation
This Deed shall be read as one with the Facilities Agreement so that any
reference in it to "this Agreement" and similar expressions shall include
and be deemed to include this Deed.
3. Conditions precedent
The obligations of the Facility Agent and each Bank in this Deed are
subject to the condition that the Facility Agent has received all
appropriate conditions precedent, as notified by the Facility Agent to
the Primary Borrower in form and substance satisfactory to it including
the following:
<PAGE>
(a) a certified copy of the Certificate of Incorporation and
Memorandum and Articles of Association of the Additional Obligor
in the form required by the Facility Agent together with certified
copies of the minutes of the meetings of the members of the
Additional Obligor adopting such changes to the memorandum and
articles of the Additional Obligor as the Facility Agent shall
have required, and a certificate of a director of the Additional
Obligor confirming that such resolutions were duly and properly
passed;
(b) a certificate of a director of the Additional Obligor to the
effect that the requisite resolutions of its board of directors in
a form agreed with the Facility Agent have been duly and properly
passed (1) authorising the execution, delivery and performance on
behalf of the Additional Obligor of this Deed and (2) authorising
a named person or persons specified in the board resolution and
whose specimen signatures appear there to give any notices or
certificates required in connection with it and confirming that
such resolutions are still in effect and have not been varied or
rescinded;
(c) a copy, certified by a director of the Additional Obligor as being
a true copy, of the resolutions of the board of directors of the
Additional Obligor referred to in (b) above;
(d) a certificate of a director of the Additional Obligor confirming
that the aggregate of the Borrowings of the Additional Obligor
(including the Facilities) do not or, as the case may be, would
not if fully drawn, exceed any borrowing limit contained in the
Additional Obligor's constitutional documents or in any trust deed
or other agreement or instrument to which the Additional Obligor
is a party.
4. Notices
The Additional Obligor's address for notices and demands under the
Facilities Agreement is:
Address:
Telephone:
Telefax:
Attention:
6. Governing Law
This Agreement shall be governed by and construed in accordance with
English law.
IN WITNESS whereof this Deed of Accession has been entered into as a Deed on the
date above.
The Additional Guarantor [and Additional Borrower]
[Execution particulars - Additional Obligor to execute as a deed]
The Facility Agent
By:
on its own behalf and on behalf of
all the other parties to the Facility Agreement.
<PAGE>
Schedule 7
Terms of Borrowers' Indemnity
1. Each Borrower unconditionally and irrevocably undertakes to the Issuing
Bank as follows:
(a) each Borrower will at all times on demand indemnify the Issuing
Bank against all actions, suits, proceedings, claims, demands,
liabilities, damages, costs, expenses, losses and charges
whatsoever (except those arising from the gross negligence or
wilful misconduct of the Issuing Bank) in relation to or arising
out of the Issue of any Letter of Credit and each Borrower will
pay to the Facility Agent for the account of the Issuing Bank in
immediately available funds and in the currency in which the
relevant Letter of Credit is denominated the amount of all
payments made (whether directly or by way of set-off, counterclaim
or otherwise howsoever) and all losses, costs or expenses suffered
or incurred from time to time by the Issuing Bank, arising under
any liability which the Issuing Bank has incurred under the Issue
of any Letter of Credit and any of the indemnities relating
thereto;
(b) the liability of each Borrower under this indemnity shall not be
affected by any time being given or by anything being done by the
Issuing Bank unless the same constitutes the gross negligence or
wilful misconduct of the Issuing Bank.
2. Each of the Borrowers specifically releases and indemnifies the Issuing
Bank against the consequences of:
(a) the failure of the Issuing Bank or any other person to receive any
telex or telephone message in a form in which it was despatched;
and
(b) any delay that may occur during the course of the transmission of
any such message save in respect of any failure arising from the
gross negligence or wilful misconduct of the Issuing Bank.
3. (a) The obligations of any Borrower under this Agreement and any
L/C-Related Document to reimburse the Issuing Bank for a drawing
under a Letter of Credit and to repay any drawing under a Letter
of Credit which is converted into Advances, shall be unconditional
and irrevocable, and shall be paid strictly in accordance with the
terms of this Agreement and each such other L/C-Related Document
under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement or
any L/C-Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the
relevant Borrower in respect of any Letter of Credit or any
other amendment or waiver of or any consent to departure
from all or any of the L/C-Related Documents;
(iii) the existence of any claim, set-off, defence or other right
that the relevant Borrower may have at any time against any
beneficiary or any transferee of any
<PAGE>
Letter of Credit (or any person for whom any such
beneficiary or any such transferee may be acting), the
Issuing Bank or any other person, whether in connection
with this Agreement, the transactions contemplated hereby
or by the L/C-Related Documents or any unrelated
transaction;
(iv) any draft, demand, certificate or other document presented
under any Letter of Credit proving to be forged,
fraudulent, (save where the Issuing Bank should decline to
make payment under the terms of the Uniform Customs and
Practice for Documentary Credits (1993) (ICC Publication
No. 500 (the "UCPDC")) invalid or insufficient in any
respect or any statement therein being untrue or inaccurate
in any respect; or any loss or delay in the transmission or
otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Bank under any Letter of Credit
against presentation of a draft or certificate that does
not strictly comply with the terms of any Letter of Credit;
or any payment made by the Issuing Bank under any Letter of
Credit to any person purporting to be a trustee in
bankruptcy, debtor-in-possession, assignee for the benefit
of creditors, liquidator, receiver or other representative
of or successor to any beneficiary or transferee of any
Letter of Credit, including any arising in connection with
any voluntary or involuntary proceeding, process or
arrangement under any law, regulation or procedure relating
to insolvency in any jurisdiction including in relation to
winding up, bankruptcy, administration, administrative
receivership, receivership and management, receivership,
judicial custodianship, judicial trusteeship or the
appointment of a judicial conservator or other official or
the reconstruction, rescheduling, readjustment, moratorium
or suspension of payments of any Indebtedness;
(vi) any exchange, release or non-perfection of any collateral,
or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the
obligations of the relevant Borrower in respect of any
Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defence
available to, or a discharge of, the relevant Borrower;
(b) The obligations of each of the Borrowers under the Finance
Documents shall not be affected in any way by reason of any time
or other indulgence which may be granted:
(i) to the Issuing Bank by any beneficiary of any Letter of
Credit; or
(ii) by the Issuing Bank to any person from whom it may seek
reimbursement in respect of sums paid out by it under any
Letter of Credit or any other obligation pursuant thereto
or pursuant to this Agreement, as the case may be.
4. The Issuing Bank may, at any time, without affecting any security created
by, pursuant to or in relation to this Agreement or the rights, powers
and remedies conferred upon it by this Agreement, any such security or by
law:
<PAGE>
(a) offer or agree to or enter into agreement for the extension or
variation of the Issue of any Letter of Credit (provided it does
so in accordance with written instructions of the relevant
Borrower); or
(b) offer or agree to give any time or other indulgence for any sums
paid out by it under any Letter of Credit or any obligation
pursuant to any Letter of Credit.
5. Any rights conferred on the Issuing Bank by this Agreement and by each
document executed in relation to this Agreement shall be in addition to
and not in substitution for or derogation of any other rights which the
Issuing Bank may at any time have to seek from any person reimbursement
of or indemnification against payments made or liabilities incurred under
any Letter of Credit, any obligation pursuant thereto or to this
Agreement.
6. Any satisfaction of obligations by any Obligor or any other person to the
Issuing Bank or any discharge given by the Issuing Bank to any Obligor or
any other person in respect of obligations under this Agreement or any
related agreement between the Issuing Bank and any Obligor or any other
person shall be, and be deemed always to have been, void if any act
satisfying any of such obligations or on the faith of which any such
discharge was given or any such agreement was entered into is
subsequently avoided by law (otherwise than as a result of any act or
default by the Issuing Bank).
7. Any Letter of Credit shall be considered to be outstanding until the
later of:
(a) its Expiry Date, or a reasonable time after its Expiry Date to
allow for the presentation of documents through an advising bank;
and
(b) if, in the opinion of the Issuing Bank, its liability under the
Letter of Credit does not expire on its stated Expiry Date or
there is any doubt as to its Expiry Date, the date of return of
the document evidencing the Issuing Bank's liability to the
relevant beneficiary under any Letter of Credit.
8. Each Borrower confirms and agrees that:
(a) the Issuing Bank shall make any payment that appears to be duly
requested or demanded in writing by any beneficiary under any
Letter of Credit subject to its compliance (where applicable) with
its obligations as Issuing Bank under the UCPDC regardless of
whether or not the relevant Borrower shall be in any way in breach
of any of its obligations under or by virtue of the transaction in
connection with which the Letter of Credit was Issued and without
making any further reference to the relevant Borrower or any
investigation as to the bona fide nature, validity or genuineness
of any such request or demand (unless, under applicable law, the
Issuing Bank is under no obligation to make such payment), and
(b) the liability of such Borrower hereunder and the right and
obligation of the Issuing Bank to make such payment shall be in no
way diminished or prejudiced if it should appear that, as between
the relevant Borrower and that beneficiary, that beneficiary was
not entitled for whatever reason to demand payment under the
Letter of Credit or that such demand was not valid or genuine
(subject as mentioned in paragraph 8(a) above).
<PAGE>
Schedule 8
Terms of Interbank Guarantee and Indemnity
1. Each Bank agrees to pay to the Facility Agent for the account of the
Issuing Bank on demand made through the Facility Agent under clause 4.7
(Banks' Guarantee and Indemnity) to such account as the Facility Agent
may have specified for the purpose in immediately available funds and in
the currency in which the relevant Letter of Credit is denominated, its
Proportion of:
(a) any and every sum of money which the relevant Borrower shall from
time to time be liable to pay to the Issuing Bank in respect of
that Letter of Credit in full without set-off or counterclaim on
the later of the date that the Issuing Bank has itself to make
payment under the Letter of Credit (as notified by the Facility
Agent to such Bank in the demand) and two Banking Days after
receipt by such Bank of such demand; and
(b) full cash cover for the Outstanding Contingent Liabilities under
that Letter of Credit at any time after the Issuing Bank has
become entitled to demand an indemnity through the Facility Agent
in respect thereof from the relevant Borrower and which shall not
have been paid at the time such demand is made.
2. Where a Bank makes a payment pursuant to paragraph 1 after the date on
which the Issuing Bank makes the relevant payment under the Letter of
Credit in question, such Bank shall pay on demand to the Issuing Bank its
Proportion (as calculated in clause 4.7) of such amount as the Issuing
Bank certifies as necessary to compensate it for funding the amount
demanded in the interim.
3. No assurance, security or payment avoided under any law relating to
bankruptcy, liquidation, insolvency, reconstruction or reorganisation or
any similar laws and no release, settlement, arrangement or discharge
which may have been given or made on the basis of any such assurance,
security or payment shall prejudice or affect the right of the Issuing
Bank to recover from each of the Banks to the full extent of their
obligations under clause 4.7.
4. The obligations of each Bank under clause 4.7 shall not be impaired,
affected or revoked by any act, omission, matter, thing or circumstance
whatsoever which but for this provision might operate to release or
exonerate such Bank from all or any part of its obligations under clause
4.7 or reduce, impair or affect such obligations or cause all or any part
of such obligations to be irrecoverable from or unenforceable against any
Obligor or to discharge, reduce, affect or impair any of such
obligations, including without limitation:
(a) any time, waiver or indulgence granted to any person or the
forbearance of the Issuing Bank in enforcing the obligations of
any person under any Finance Document or in respect of any other
guarantee, security, obligation, right or remedy;
(b) the recovery of any judgment against any person or any action to
enforce the same;
(c) the taking of any other security from any person or the failure,
refusal, or neglect to take, perfect or enforce, any rights,
remedies or securities from or against any person or all or any
part of the security constituted by any of the Finance Documents;
<PAGE>
(d) any alteration in the constitution of any Obligor or any defect in
or irregular exercise of the borrowing or other powers of any
person or any legal limitation, disability, incapacity or other
circumstance relating to any person or any legal limitation,
disability, incapacity or other circumstance relating to any
person whether arising in relation to any Finance Document or
otherwise howsoever;
(e) subject to clause 22.4 and 22.5 (Unanimous consents), any
amendment or supplement to or variation of any L/C - Related
Document or any other Finance Document;
(f) the insolvency, bankruptcy, liquidation, reconstruction or
reorganisation of, or analogous proceedings relating to any person
or any composition or arrangement made by any of them with the
Issuing Bank, any Bank or any other person or any transfer or
extinction of any liabilities of any Obligor by any law, order
regulation, decree, court order or similar instrument;
(g) any irregularity, unenforceability or invalidity of any
obligations of any person under any security or document (to the
intent that such Bank's obligations under clause 4.7 shall remain
in full force as if there were no such irregularity,
unenforceability or invalidity);
(h) the occurrence of an Event of Default;
(i) the existence of any claim, set-off defence or other right which
any Obligor may have against any beneficiary of any Letter of
Credit or any other person; or
(j) any draft, certificate or any other document presented under any
Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue
or inaccurate in any respect.
5. The Issuing Bank shall be entitled to enforce the obligations of each
Bank under clause 4.7 without making any demand on or taking any
proceedings against or filing any proof of claim in any insolvency,
winding up, dissolution or liquidation of any person or exhausting any
right or remedy against any person or taking any action to enforce any
part of the security constituted or evidenced by any of the Finance
Documents.
6. The obligations of each Bank under clause 4.7 shall be continuing
obligations and shall extend to the ultimate balance of the obligations
referred to therein. If, for any reason, such obligations cease to be
continuing obligations, the Issuing Bank may open a new account with or
continue any existing account with any person and the liability of each
Bank in respect of amounts guaranteed by it pursuant to clause 4.7 at the
date of such cessation shall remain regardless of any payments in or out
of any such account.
7. The Issuing Bank's rights under clause 4.7 shall be in addition to and
shall be in no way prejudiced by any other rights of or security held by
the Issuing Bank in relation to the obligations of any Obligor. The
Issuing Bank's rights under clause 4.7 are in addition to and are not
exclusive of those provided by law.
8. A certificate of the Issuing Bank as to any amount due to it from any
Bank pursuant to clause 4.7 shall be conclusive (in the absence of
manifest error).
<PAGE>
Schedule 9
Terms of Guarantee
1. Each Guarantor irrevocably, unconditionally, jointly and severally:
(a) as principal obligor, and not merely as surety, guarantees to each
Finance Party prompt performance by each other Obligor of all its
obligations under the Finance Documents and the payment when due
of all sums from time to time payable to each Finance Party by
each other Obligor;
(b) undertakes with each Finance Party that whenever a Borrower does
not pay any amount when due under or in connection with any
Finance Document, that Guarantor shall forthwith on demand by the
Facility Agent pay that amount as if that Guarantor instead of the
relevant Borrower were expressed to be the principal obligor; and
(c) indemnifies each Finance Party on demand against any loss or
liability suffered by such Finance Party if any obligation
guaranteed by that Guarantor is or becomes unenforceable, invalid
or illegal.
2. Continuing guarantee
This guarantee is a continuing guarantee and will extend to the ultimate
balance of all sums payable by the Obligors or any of them under the
Finance Documents, regardless of any intermediate payment or discharge in
whole or in part.
3. Reinstatement
(a) Where any discharge (whether in respect of the obligations of any
Obligor or any security for those obligations or otherwise) is
made in whole or in part of any arrangement is made on the faith
of any payment, security or other disposition which is avoided or
must be restored on insolvency, liquidation or otherwise without
limitation, the liability of each Guarantor under this schedule 9
shall continue as if the discharge or arrangement had not
occurred.
(b) Each Finance Party may concede or compromise any claim that any
payment, security or other disposition is liable to avoidance or
restoration.
4. Waiver of defences
The obligations of each Guarantor under this schedule 9 will not be
affected by any act, circumstance, omission, matter or thing which, but
for this provision, would reduce, release or prejudice any of its
obligations under this schedule 9 or prejudice or diminish those
obligations in whole or in part, including without limitation (whether or
not known to it or any other party):
(a) any time, indulgence or waiver granted to, or composition with,
any Obligor or other person;
<PAGE>
(b) the taking, variation, compromise, exchange, renewal or release
of, or refusal or neglect to perfect, take up or enforce, any
rights or remedies against, or security over assets of, any
Obligor or other person or any non-presentation or non-observance
of the full value of any security;
(c) any legal limitation, disability, incapacity or lack of powers,
authority or legal personality of or dissolution or change in the
members or status of any Obligor or any other person;
(d) any variation (however fundamental and whether or not involving an
increase in liability of any Obligor) or replacement of a Finance
Document or any other document or security so that references to
that Finance Document in this schedule 9 (Guarantee) shall include
each variation or replacement;
(e) any unenforceability, illegality, invalidity or frustration of any
obligation of any person under any Finance Document or any other
document or security or any failure of any Obligor or proposed
Obligor to become bound by the terms of any Finance Document;
(f) any postponement, discharge, reduction, non-provability or other
similar circumstance affecting any obligation of any Obligor under
a Finance Document resulting from any insolvency, liquidation or
dissolution proceedings or from any law, regulation or order,
so that each such obligation shall, for the purposes of the Guarantor's
obligations under this schedule 9 remain in full force and be construed
as if there were no such act, circumstance, variation, omission, matter
or thing.
5. Immediate recourse
Each Guarantor waives any right it may have of first requiring any
Finance Party (or any trustee or agent on its behalf) to proceed against
or enforce any other rights or security or claim payment from or file any
proof or claim in any insolvency proceedings of any person before
claiming from the Guarantor under this schedule 9.
6. Appropriations
Until all amounts which may be or become payable by the Obligors under or
in connection with the Finance Documents have been irrevocably paid in
full, each Finance Party (or any trustee or agent on its behalf) may:
(a) refrain from applying or enforcing any other monies, security or
rights held or received by that Finance Party (or any trustee or
agent on its behalf) in respect of those amounts, or apply and
enforce the same in such manner and order as it sees fit (whether
against those amounts or otherwise) and no Guarantor shall be
entitled to the benefit of the same; and
(b) hold in an interest bearing suspense account any monies received
from any Guarantor or on account of any Guarantor's liability
under this schedule 9.
<PAGE>
7. Non-competition
Until all amounts which may be or become payable by the Obligors under or
in connection with the Finance Documents have been irrevocably paid in
full, no Guarantor shall, after a claim has been made or by virtue of any
payment or performance by it under this schedule 9:
(a) be subrogated to any rights, security or monies held, received or
receivable by any Finance Party (or any trustee or agent on its
behalf) or be entitled to any right of contribution or indemnity
in respect of any payment made or monies received on account of
that Guarantor's liability under this schedule 9 and, to the
extent that any Guarantor is so subrogated or entitled by law,
that Guarantor (to the fullest extent permitted by law) waives and
agrees not to exercise or claim those rights, security or money or
that right of contribution or indemnity;
(b) claim, rank, prove or vote as a creditor of any Obligor or its
estate in competition with any Finance Party (or any trustee or
agent on its behalf) unless otherwise required by the Facility
Agent or by law (in which case any proceeds of any claim in
respect of any rights, security or monies of any Finance Party to
which such Guarantor was subrogated will be paid by such Guarantor
to the Facility Agent to be applied in accordance with the
provisions of the Finance Documents); or
(c) receive, claim or have the benefit of any payment, distribution or
security from or on account of any Obligor, or exercise any right
of set-off as against any Obligor (and without prejudice to the
foregoing, each Guarantor shall forthwith pay to the Facility
Agent for the benefit of the Finance Parties an amount equal to
any amount so set-off by it).
Each Guarantor shall hold in trust for and forthwith pay or transfer to
the Facility Agent for the Finance Parties any payment or distribution or
benefit of security received by it contrary to this schedule 9.
8. Additional security
This guarantee is in addition to and is not in any way prejudiced by any
other security now or hereafter held by any Finance Party.
<PAGE>
PRIMARY BORROWER
Signed for and on behalf of
Eastern Electricity plc
[Paul Marsh - Group Finance Director]
...................................
GUARANTOR
Signed for and on behalf of
Eastern Electricity plc
[Paul Marsh]
...................................
JOINT LEAD ARRANGERS
Signed for and on behalf of
Chase Manhattan plc
as Arranger
[Jane Ritchie]
...................................
Signed for and on behalf of
Lehman Brothers International (Europe)
as Arranger
[Julian Entwisle]
...................................
Signed for and on behalf of
Merrill Lynch Capital Corporation
as Arranger
[Steve Paras]
...................................
<PAGE>
ORIGINAL BANKS
Signed for and on behalf of
The Chase Manhattan Bank
as Underwriter
[Jane Ritchie]
...................................
Signed for and on behalf of
Lehman Commercial Paper Inc
as Underwriter
[Christopher Ryan]
...................................
Signed for and on behalf of
Merrill Lynch Capital Corporation
as Underwriter
[Steve Paras]
...................................
ISSUING BANK
Signed for and on behalf of
The Chase Manhattan Bank
as Issuing Bank
[Jane Ritchie]
...................................
FACILITY AGENT
Signed for and on behalf of
Chase Manhattan International Limited
as Facility Agent
[Jane Ritchie]
...................................
<PAGE>
