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 MARCH 31, 1999
-- 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 past 90 days.
Yes X No___
Common Stock outstanding at May 11, 1999:
Texas Utilities Company: 280,652,819 shares, without par value.
Texas Utilities Electric Company: 118,714,200 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 Electric Company. Each registrant makes no representation as to
information filed by the other registrant.
<PAGE>
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Texas Utilities Company and Subsidiaries
Condensed Statements of Consolidated Income -
Three and Twelve Months Ended March 31, 1999 and 1998 . . . . 3
Condensed Statements of Consolidated Comprehensive Income -
Three and Twelve Months Ended March 31, 1999 and 1998 . . . . 4
Condensed Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1999 and 1998. . . . . . . . . . 5
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998. . . . . . . . . . . . . 6
Texas Utilities Electric Company and Subsidiaries
Condensed Statements of Consolidated Income -
Three and Twelve Months Ended March 31, 1999 and 1998 . . . . 8
Condensed Statements of Consolidated Comprehensive Income -
Three and Twelve Months Ended March 31, 1999 and 1998 . . . . 8
Condensed Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1999 and 1998. . . . . . . . . . 9
Condensed Consolidated Balance Sheets -
March 31, 1999 and December 31, 1998. . . . . . . . . . . . . 10
Notes to Condensed Consolidated Financial Statements . . . . . . . 12
Independent Accountants' Reports . . . . . . . . . . . . . . . . . 23
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . 25
Item 3. Quantitative and Qualitative Disclosures About Market Risk. . 37
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . 37
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . 38
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
1999 1998 1999 1998
---- ---- ---- ----
Millions of Dollars
<S> <C> <C> <C> <C>
OPERATING REVENUES. . . . . . . . . . . . . . . . . . . . . . . . . . $4,468 $2,500 $16,704 $8,952
OPERATING EXPENSES
Fuel and purchased power. . . . . . . . . . . . . . . . . . . . . . . 1,290 454 4,635 2,175
Gas and electricity purchased for resale. . . . . . . . . . . . . . . 1,388 844 4,659 1,907
Operation and maintenance . . . . . . . . . . . . . . . . . . . . . . 728 428 2,870 1,642
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . 290 185 1,252 693
Taxes other than income . . . . . . . . . . . . . . . . . . . . . . . 159 163 638 585
------ ------ ------- ------
Total operating expenses. . . . . . . . . . . . . . . . . . . . . . 3,855 2,074 14,054 7,002
------ ------ ------- ------
OPERATING INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . 613 426 2,650 1,950
OTHER INCOME (DEDUCTIONS) - NET . . . . . . . . . . . . . . . . . . . . (6) (10) 49 (48)
------ ------ ------- ------
INCOME BEFORE INTEREST, OTHER CHARGES
AND INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . 607 416 2,699 1,902
------ ------ ------- ------
INTEREST INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 8 163 31
INTEREST EXPENSE AND OTHER CHARGES
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353 204 1,449 785
Distributions on Company or subsidiary obligated, mandatorily
redeemable, preferred securities of Company or subsidiary trusts,
each holding solely junior subordinated debentures of the Company
or related subsidiary . . . . . . . . . . . . . . . . . . . . . . . 24 17 81 72
Preferred stock dividends of subsidiaries . . . . . . . . . . . . . . 4 5 15 20
Allowance for borrowed funds used during construction . . . . . . . . (3) (3) (9) (9)
------ ------ ------- ------
Total interest expense and other charges . . . . . . . . . . . . . 378 223 1,536 868
------ ------ ------- ------
INCOME BEFORE INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . 261 201 1,326 1,065
INCOME TAX EXPENSE. . . . . . . . . . . . . . . . . . . . . . . . . . . 79 74 531 393
------ ------ ------- ------
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182 $ 127 $ 795 $ 672
====== ====== ======= ======
Average shares of common stock outstanding (millions) . . . . . . . . . 282 245 274 236
Per share of common stock:
Basic earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . $0.65 $0.52 $2.90 $2.85
Diluted earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . $0.65 $0.51 $2.90 $2.84
Dividends declared. . . . . . . . . . . . . . . . . . . . . . . . . . $0.575 $0.55 $2.25 $2.15
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
3
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<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
1999 1998 1999 1998
---- ---- ---- ----
Millions of Dollars
<S> <C> <C> <C> <C>
NET INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . $ 182 $ 127 $ 795 $ 672
----- ----- ----- -----
OTHER COMPREHENSIVE INCOME (LOSS) - net change during period:
Foreign currency translation adjustments. . . . . . . . . . (90) 27 (156) (93)
Unrealized holding losses on investments. . . . . . . . . . - - (13) -
Minimum pension liability adjustments . . . . . . . . . . . 1 - (5) -
------ ----- ----- -----
Total . . . . . . . . . . . . . . . . . . . . . . . . . . (89) 27 (174) (93)
----- ----- ----- -----
Deferred income tax effects . . . . . . . . . . . . . . . . 5 (3) (20) 26
----- ----- ----- -----
COMPREHENSIVE INCOME. . . . . . . . . . . . . . . . . . . . . $ 98 $ 151 $ 601 $ 605
===== ===== ===== =====
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
4
<PAGE>
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<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited)
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Millions of Dollars
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182 $ 127
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel) . . . . . . . . . . . . . . . . . . 339 224
Deferred income taxes - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 71
Investment tax credits - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (6)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 9
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 284
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 38
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (293) (203)
Interest and taxes accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (166) (29)
Other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 (42)
Over/(under)-recovered fuel revenue - net of deferred taxes . . . . . . . . . . . . . . . . . . . . 40 26
Energy marketing risk management assets and liabilities . . . . . . . . . . . . . . . . . . . . . . (44) (19)
Other - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (65) 7
------ ------
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 358 487
------ ------
CASH FLOWS - FINANCING ACTIVITIES
Issuances of securities -
Long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,920 450
Retirements of securities:
Other long-term debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,633) (93)
Preferred stock of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (114)
Company or subsidiary obligated, mandatorily redeemable, preferred securities of Company or
subsidiary trusts, each holding solely junior subordinated debentures of the Company or related
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (47)
Change in notes payable:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 1,430
Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (251) (5)
Common stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143) (136)
Debt premium, discount, financing and reacquisition expenses. . . . . . . . . . . . . . . . . . . . . (24) (75)
------ ------
Cash provided by financing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,043 1,410
------ ------
CASH FLOWS - INVESTING ACTIVITIES
Acquisitions of businesses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,054) (1,640)
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (286) (153)
Nuclear fuel (excluding allowance for equity funds used during construction). . . . . . . . . . . . . . (19) (15)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82) (88)
------ ------
Cash used in investing activities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,441) (1,896)
------ ------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . (6) 22
------ ------
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46) 23
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 796 44
------ -------
CASH AND CASH EQUIVALENTS - ENDING BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 750 $ 67
====== =======
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
5
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<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
March 31,
1999 December 31,
(Unaudited) 1998
---------- ------------
Millions of Dollars
<S> <C> <C>
PROPERTY, PLANT AND EQUIPMENT
United States (US):
Electric. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $23,196 $23,130
Gas distribution and pipeline . . . . . . . . . . . . . . . . . . . . . . . . 1,249 1,212
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852 844
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,297 25,186
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . 7,575 7,426
------- -------
Net of accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . 17,722 17,760
Construction work in progress . . . . . . . . . . . . . . . . . . . . . . . . 384 346
Nuclear fuel (net of accumulated amortization: 1999 - $572;
1998 - $549). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 202
Held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 24
Less reserve for regulatory disallowances . . . . . . . . . . . . . . . . . . 836 836
------- -------
Net US property, plant and equipment. . . . . . . . . . . . . . . . . . . . 17,493 17,496
UK/Europe - Electric and other (net of accumulated depreciation: 1999 - $206;
1998 - $147) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,301 4,428
Australia - Electric and gas distribution (net of accumulated depreciation:
1999 - $137; 1998 - $121) . . . . . . . . . . . . . . . . . . . . . . . . . 1,516 943
------- -------
Net property, plant and equipment . . . . . . . . . . . . . . . . . . . . . 23,310 22,867
------- -------
INVESTMENTS
Goodwill (net of accumulated amortization: 1999 - $197; 1998 - $154). . . . . . 7,215 6,830
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,534 2,482
------- -------
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,749 9,312
------- -------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 750 796
Accounts receivable (net of allowance for uncollectible accounts:
1999 - $37; 1998 - $50) . . . . . . . . . . . . . . . . . . . . . . . . . . 1,762 1,887
Inventories - at average cost:
Materials and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . 261 267
Fuel stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 276
Gas stored underground. . . . . . . . . . . . . . . . . . . . . . . . . . . 94 133
Energy marketing risk management assets . . . . . . . . . . . . . . . . . . . 569 832
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 88
Other current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 356 308
------- -------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,083 4,587
------- -------
DEFERRED DEBITS
Unamortized regulatory assets . . . . . . . . . . . . . . . . . . . . . . . . 1,761 1,805
Long-term prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 514 527
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480 416
------- -------
Total deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,755 2,748
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,897 $39,514
======= =======
<FN>
See Notes to Condensed Consolidated Financial Statements.
</FN>
</TABLE>
6
<PAGE>
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<TABLE>
<CAPTION>
TEXAS UTILITIES COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
March 31,
1999 December 31,
(Unaudited) 1998
---------- -----------
Millions of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares - 500,000,000
Outstanding shares -1999 and 1998 - 282,332,819. . . . . . . . . . . . . . . . . . . . . . . . $ 6,942 $ 6,940
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,469 1,448
Accumulated other comprehensive income (loss):
Foreign currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . (208) (123)
Unrealized holding losses on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (13)
Minimum pension liability adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) (6)
------- -------
Total common stock equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,185 8,246
Preferred stock of subsidiaries:
Not subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 190 190
Subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21
Company or subsidiary obligated, mandatorily redeemable, preferred securities of
Company or subsidiary trusts, each holding solely junior subordinated debentures of
the Company or related subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,193 1,193
Long-term debt, less amounts due currently . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,486 15,133
------- -------
Total capitalization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,075 24,783
------- -------
CURRENT LIABILITIES
Notes payable:
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,054 2,055
Banks. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 618 896
Long-term debt due currently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,072 1,071
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,447 1,747
Energy marketing risk management liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 532 838
Dividends declared . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 164
Taxes accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420 490
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 310
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 705
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,400 8,276
------- -------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,739 3,718
Unamortized investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 542 548
Other deferred credits and noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . . . 2,141 2,189
------- -------
Total deferred credits and other noncurrent liabilities . . . . . . . . . . . . . . . . . . 6,422 6,455
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $39,897 $39,514
======= =======
<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 Twelve Months Ended
March 31, March 31,
------------------ -------------------
1999 1998 1999 1998
---- ---- ---- ----
Millions of Dollars
<S> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,285 $1,332 $6,441 $6,102
------ ------ ------ ------
OPERATING EXPENSES
Fuel and purchased power . . . . . . . . . . . . . . . . . . . . . . . . . 413 430 2,085 2,043
Operation and maintenance. . . . . . . . . . . . . . . . . . . . . . . . . 315 282 1,313 1,215
Depreciation and amortization. . . . . . . . . . . . . . . . . . . . . . . 147 144 752 573
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 75 460 417
Taxes other than income. . . . . . . . . . . . . . . . . . . . . . . . . . 132 130 535 508
------ ------ ------ ------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . 1,052 1,061 5,145 4,756
------ ------ ------ ------
OPERATING INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233 271 1,296 1,346
------ ------ ------ ------
OTHER INCOME (DEDUCTIONS)
Allowance for equity funds used during construction. . . . . . . . . . . . 1 2 6 7
Other income (deductions) - net. . . . . . . . . . . . . . . . . . . . . . (4) 5 (22) -
Income tax benefit (expense) . . . . . . . . . . . . . . . . . . . . . . . 1 (2) 7 (8)
------ ------ ------ ------
Total other income (deductions). . . . . . . . . . . . . . . . . . . . (2) 5 (9) (1)
------ ------ ------ ------
INCOME BEFORE INTEREST AND OTHER CHARGES . . . . . . . . . . . . . . . . . . 231 276 1,287 1,345
------ ------ ------ ------
INTEREST INCOME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 - 4 4
INTEREST EXPENSE AND OTHER CHARGES
Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 124 464 519
Distributions on TU Electric obligated, mandatorily redeemable,
preferred securities of subsidiary trusts holding solely junior
subordinated debentures of TU Electric. . . . . . . . . . . . . . . . . . 17 17 69 72
Allowance for borrowed funds used during construction. . . . . . . . . . . (3) (2) (9) (8)
------ ------ ------ ------
Total interest expense and other charges . . . . . . . . . . . . . . . 126 139 524 583
------ ------ ------ ------
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 137 767 766
PREFERRED STOCK DIVIDENDS. . . . . . . . . . . . . . . . . . . . . . . . . . 3 3 12 18
------ ------ ------ ------
NET INCOME AVAILABLE FOR
COMMON STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 103 $ 134 $ 755 $ 748
====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
CONDENSED STATEMENTS OF CONSOLIDATED COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------ -------------------
1999 1998 1999 1998
---- ---- ---- ----
Millions of Dollars
<S> <C> <C> <C> <C>
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106 $ 137 $ 767 $ 766
------ ------ ------ ------
OTHER COMPREHENSIVE INCOME (LOSS) - net change during
period in minimum pension liability adjustment. . . . . . . . . . . . . . . - - (1) -
------ ------ ------ ------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - - (1) -
------ ------ ------ ------
COMPREHENSIVE INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106 $ 137 $ 766 $ 766
====== ====== ====== ======
<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)
Three Months Ended
March 31,
------------------
1999 1998
---- ----
Millions of Dollars
<S> <C> <C>
CASH FLOWS - OPERATING ACTIVITIES
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 106 $ 137
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization (including amounts charged to fuel). . . . . . . . . . . . . . . . . . . 186 181
Deferred income taxes - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81 38
Investment tax credits - net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) (5)
Allowance for equity funds used during construction. . . . . . . . . . . . . . . . . . . . . . . . . . (1) (2)
Changes in operating assets and liabilities:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 132
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 2
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 (62)
Interest and taxes accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82) 10
Other working capital. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) (10)
Over/(under) - recovered fuel revenue - net of deferred taxes. . . . . . . . . . . . . . . . . . . . 40 26
Other - net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 32
----- -----
Cash provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 479
----- -----
CASH FLOWS - FINANCING ACTIVITIES
Issuance of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 -
Retirements/repurchases of securities:
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (209) (1)
Preferred stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (14)
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts holding
solely junior subordinated debentures of TU Electric. . . . . . . . . . . . . . . . . . . . . . . . . - (47)
Common stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (148) (143)
Change in notes payable - affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) (123)
Preferred stock dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) (4)
Debt premium, discount, financing and reacquisition expenses . . . . . . . . . . . . . . . . . . . . . . (10) (3)
----- -----
Cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (274) (335)
----- -----
CASH FLOWS - INVESTING ACTIVITIES
Construction expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (135) (108)
Allowance for equity funds used during construction (excluding amount for nuclear fuel). . . . . . . . . - 1
Nuclear fuel (excluding allowance for equity funds used during construction) . . . . . . . . . . . . . . (19) (15)
Other investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) (19)
----- -----
Cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161) (141)
NET CHANGE IN CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 3
CASH AND CASH EQUIVALENTS - BEGINNING BALANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 12
----- -----
CASH AND CASH EQUIVALENTS - ENDING BALANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1 $ 15
===== =====
<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
March 31,
1999 December
(Unaudited) 1998
----------- --------
Millions of Dollars
<S> <C> <C>
ELECTRIC PLANT
In service:
Production. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $15,475 $15,469
Transmission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,623 1,621
Distribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,104 5,046
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 447 447
------- -------
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,649 22,583
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . 6,911 6,789
------- -------
Electric plant in service, less accumulated depreciation. . . . . . . . . . 15,738 15,794
Construction work in progress . . . . . . . . . . . . . . . . . . . . . . . . . 265 226
Nuclear fuel (net of accumulated amortization: 1999 - $572;
1998 - $549) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199 201
Held for future use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 24
------- --------
Electric plant, less accumulated depreciation and amortization . . . . . . 16,226 16,245
Less reserve for regulatory disallowances . . . . . . . . . . . . . . . . . . . 836 836
------- --------
Net electric plant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,390 15,409
------- -------
INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 600 588
------- -------
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 5
Accounts receivable (net of allowance for uncollectible accounts: 1999 - $3;
1998 - $7). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 205
Inventories - at average cost:
Materials and supplies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 176 181
Fuel stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 84
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 73
Prepayments and other current assets. . . . . . . . . . . . . . . . . . . . . . 54 36
------- -------
Total current assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . 450 584
------- -------
DEFERRED DEBITS
Unamortized regulatory assets . . . . . . . . . . . . . . . . . . . . . . . . . 1,707 1,750
Other deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88 74
------- -------
Total deferred debits . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,795 1,824
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,235 $18,405
======= =======
<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
March 31,
1999 December 31,
(Unaudited) 1998
----------- ------------
Millions of Dollars
<S> <C> <C>
CAPITALIZATION
Common stock without par value:
Authorized shares - 180,000,000
Outstanding shares - 1999 - 118,714,200 and 1998 - 123,660,700 . . . . . . . . . . . . . . $ 3,590 $ 3,738
Stock of parent held for long-term incentive plan trust. . . . . . . . . . . . . . . . . . . (11) (9)
Retained earnings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,871 2,767
Accumulated other comprehensive income (loss) -
Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (1)
------- -------
Total common stock equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,449 6,495
Preferred stock:
Not subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 115
Subject to mandatory redemption. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 21
TU Electric obligated, mandatorily redeemable, preferred securities of subsidiary trusts
holding solely junior subordinated debentures of TU Electric . . . . . . . . . . . . . . . 823 823
Long-term debt, less amounts due currently . . . . . . . . . . . . . . . . . . . . . . . . . 5,117 5,208
------- -------
Total capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,525 12,662
------- -------
CURRENT LIABILITIES
Notes payable - affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 163
Long-term debt due currently . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 528 533
Accounts payable:
Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 115
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 157
Customers' deposits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 76
Taxes accrued. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 169
Interest accrued . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 133
Over-recovered fuel revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 52
Other current liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 113
------- -------
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,484 1,511
------- -------
DEFERRED CREDITS AND OTHER NONCURRENT LIABILITIES
Accumulated deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,304 3,307
Unamortized investment tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 530 536
Other deferred credits and noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . 392 389
------- -------
Total deferred credits and other noncurrent liabilities . . . . . . . . . . . . . . . . 4,226 4,232
------- -------
COMMITMENTS AND CONTINGENCIES (Note 7)
------- -------
Total. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $18,235 $18,405
======= =======
<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
TUC
Texas Utilities Company (TUC or the Company), a Texas corporation, is a
holding company whose principal United States (US) operations are conducted
through Texas Utilities Electric Company (TU Electric), ENSERCH Corporation
(ENSERCH), and Texas Energy Industries, Inc. (TEI). Its principal
international operations are conducted through TU International Holdings
Limited (TU International Holdings), which in turn owns TXU Eastern Holdings
Limited (TXU Eastern) and TU Australia Holdings L.P. (TU Australia Holdings).
TXU Eastern's operations in the United Kingdom (UK) and Europe are conducted
through subsidiaries of Eastern Group plc (Eastern Group), primarily Eastern
Electricity plc (Eastern Electricity). TU Australia Holdings' principal
operating subsidiaries include Eastern Energy Limited (Eastern Energy) and
the recently acquired gas operations in Australia which are described below.
Through its subsidiaries, the Company engages in the generation, purchase,
transmission, distribution and sale of electricity; the gathering, processing,
transmission and distribution of natural gas; energy marketing; and
telecommunications, retail energy services, international gas operations,
power development and other businesses primarily in the US, UK and Australia.
In March 1998, the Company made an offer for all the ordinary shares of
The Energy Group PLC (TEG), the former holding company of Eastern Group. The
Company's offer for TEG was declared unconditional on May 19, 1998, which was
determined to be the date the Company acquired TEG. 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.
Immediately prior to being acquired by the Company, TEG completed the
sale of its US and Australian coal businesses 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". To date, 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 £3.3 billion
($5.3 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 known. In particular, there is uncertainty over the
valuation of the electricity distribution system including metering assets
pending finalization of the current distribution price review and the
intention that the metering business market becomes competitive in 2000. In
addition, there is uncertainty over the outcome of certain proceedings
concerning the pension scheme. In April 1999, the gross adjusted
consideration for the Peabody Sale was determined to be $2.1 billion without
any adverse impact on results of operations, financial condition or cash flow.
12
<PAGE>
<PAGE>
The following summary of unaudited condensed consolidated pro forma
results of the Company's operations reflects the operations of the TEG
Businesses Acquired as though the acquisition had occurred at the beginning of
each period presented. Expenses of the acquisition incurred by the Company
and the 22% equity in earnings of TEG have been eliminated. Amounts are in
millions of dollars, except per share amounts.
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended Ended
March 31, 1998 March 31, 1999
----------------------- -----------------------
As Reported Pro forma As Reported Pro forma
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Operating revenues . . . . . . . . . . $2,500 $4,314 $16,704 $17,407
Operating income . . . . . . . . . . . 426 695 2,650 2,708
Net income . . . . . . . . . . . . . . 127 229 795 802
Average shares outstanding (millions). 245 283 274 282
Earnings per share of common stock:
Basic. . . . . . . . . . . . . . . . . $0.52 $0.81 $2.90 $2.84
Diluted. . . . . . . . . . . . . . . . $0.51 $0.80 $2.90 $2.84
</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 date of the TEG Businesses Acquired. These results are
not necessarily indicative of what the actual results would have been for the
periods had the acquisition 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.
On February 24, 1999, TU Australia Holdings acquired from the Government
of Victoria, Australia the gas retail business of Kinetik Energy, which has
approximately 400,000 gas customers, and the gas distribution operations of
Westar, which is of a similar size (Westar/Kinetik Energy). The purchase
price was $1.0 billion which has been principally financed through banks by TU
Australia Holdings. A portion of the financing was provided by a six-month
subordinated credit facility. To date, the process of determining the fair
value of assets acquired and liabilities assumed of Westar/Kinetik Energy 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 A$794 million ($499 million), which is being amortized over 40
years. This amount is subject to revision as additional information about the
fair value of Westar/Kinetik Energy's assets acquired, liabilities assumed and
contingencies existing at the acquisition date becomes known. Consolidated
pro forma income and earnings per share for the periods ended March 31, 1999
and 1998, assuming the acquisition of Westar/Kinetik Energy had occurred at
the beginning of the periods, would not have differed significantly from
reported results.
Since the acquisitions of TEG and Westar/Kinetik Energy were purchase
business combinations, no financial or other information for those companies
is presented for periods prior to their dates of acquisition.
Throughout this document, references to TEG shall mean the consolidated
UK entity acquired in May 1998, and references to Eastern Group or TXU
Eastern shall mean the Company's primary operations in the UK and other parts
of Europe. References to Eastern Energy or TU Australia Holdings shall mean
the Company's primary operations in Australia, including results for
Westar/Kinetik Energy from date of acquisition.
13
<PAGE>
<PAGE>
The following exchange rates have been used to convert foreign currency
denominated amounts into US dollars:
<TABLE>
<CAPTION>
Income Statement
Balance Sheet (Average Rates)
----------------------- -----------------------------------------
Three Months Twelve Months
March 31, December 31, Ended March 31, Ended March 31,
--------- ------------ ------------------ --------------------
1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
UK pounds sterling (pounds) $1.6110 $1.6554 $1.6337 -- $1.6537 --
Australian dollars (A$) $0.6293 $0.6123 $0.6178 $0.6738 $0.6210 $0.7204
</TABLE>
2.SIGNIFICANT ACCOUNTING POLICIES
TUC and TU Electric
Basis of Presentation -- The condensed consolidated financial statements
of TUC and its subsidiaries and TU Electric and its subsidiaries have been
prepared on the same basis as those in their respective 1998 Annual Reports on
Form 10-K (1998 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 operations 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.
All dollar amounts in the condensed financial statements and notes to
condensed financial statements, except per share amounts, are stated in
millions of US dollars unless otherwise indicated.
Consolidation -- The consolidated financial statements include the
accounts of the Company and all of its majority-owned subsidiaries. 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
are 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 resulting from the assumed conversion of the
convertible subordinated debentures of ENSERCH for the period prior to their
conversion in 1998 and the assumed exercise of all outstanding stock options.
14
<PAGE>
<PAGE>
The following table details the after-tax interest expense added to
earnings applicable to common stock and the number of shares added to average
shares outstanding for the purpose of calculating diluted earnings per share.
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31, Ended March 31,
---------------- ---------------
1999 1998 1999 1998
----- ----- ---- -----
<S> <C> <C> <C> <C>
After-tax interest expense. . $ -- $0.9 $ -- $2.5
Shares of common stock
(in thousands). . . . . . 100 2,476 116 1,611
</TABLE>
3. LINES OF CREDIT
TUC and TU Electric
At March 31, 1999, TUC, TU Electric and ENSERCH had $3.5 billion of 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 $2.1 billion outstanding at any one time at
variable interest rates and terminates February 25, 2000. Of this, $800
million can be used for working capital and other general corporate purposes.
Facility B provides for borrowings aggregating up to $1.4 billion
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. The combined borrowings of TUC, TU Electric
and ENSERCH under both facilities, excluding amounts restricted to finance the
acquisition of TEG, are limited to an aggregate of $2.2 billion outstanding at
any one time. TU Electric's and ENSERCH's borrowings under both facilities
are limited to an aggregate of $1.25 billion and $650 million outstanding at
any one time, respectively. The facilities primarily support commercial
paper borrowings. At March 31, 1999, outstanding commercial paper borrowings
supported by both facilities totaled $3.0 billion, including $992 million
classified as long-term debt.
TUC
A separate Eastern Electricity Revolving Credit Facility provides for
short term borrowings for general corporate purposes of up to pounds250
million outstanding at any one time and terminates March 2, 2003. No
borrowings were outstanding at March 31, 1999 under this facility.
In addition, certain non-US subsidiaries have revolving credit agreements
(denominated in both foreign currencies and US dollars) aggregating
approximately $106 million, of which $83 million was outstanding at March 31,
1999. These revolving credit agreements expire at various dates through
2001.
4. CAPITALIZATION
In April 1999, the Company repurchased approximately 1.7 million shares
of its outstanding common stock at a total cost of approximately $64 million.
15
<PAGE>
<PAGE>
TU Electric
Common Stock -- During the three months ended March 31, 1999, TU Electric
purchased and retired a total of 4.9 million shares of its common stock from
TUC at a cost of approximately $148 million.
TUC and TU Electric
Company or Subsidiary Obligated, Mandatorily Redeemable, Preferred
Securities of Company or Subsidiary Trusts, Each Holding Solely Junior
Subordinated Debentures of the Company or Related Subsidiary (Trust
Securities) -- At March 31, 1999 and December 31, 1998, the statutory business
trust subsidiaries had trust securities outstanding, as follows:
<TABLE>
<CAPTION>
Trust Securities Trust Assets (a)
----------------------------------------------- ----------------------
Units(000's) Amount Amount
---------------------- ---------------------- ----------------------
March 31, December 31, March 31, December 31, March 31, December 31,
1999 1998 1999 1998 1999 1998 Maturity
--------- ------------ --------- ------------ --------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
TUC
TXU Capital I (7.25% Series) . . . . . . . . . 9,200 9,200 $ 223 $ 223 $ 237 $ 237 2029
------ ------ ------ ------ ------ ------
TU Electric
TU Electric Capital I (8.25% Series) . . . . . 5,871 5,871 141 141 155 155 2030
TU Electric Capital III (8.00% Series) . . . . 8,000 8,000 194 194 206 206 2035
TU Electric Capital IV (Floating Rate
Trust Securities)(b) . . . . . . . . . . 100 100 96 96 103 103 2037
TU Electric Capital V (8.175% Trust
Securities). . . . . . . . . . . . . . . 400 400 392 392 412 412 2037
------ ------ ------ ------ ------ ------
Total TU Electric. . . . . . . . . . . . 14,371 14,371 823 823 876 876
------ ------ ------ ------ ------ ------
ENSERCH
ENSERCH Capital I (Floating Rate Trust
Securities)(c) . . . . . . . . . . . . . 150 150 147 147 155 155 2028
------ ------ ------ ------ ------ ------
Total 23,721 23,721 $1,193 $1,193 $1,268 $1,268
====== ====== ====== ====== ====== ======
<FN>
(a) Interest rates on the trusts' sole assets, Junior Subordinated Debentures, correspond in
each case to the rate indicated for the corresponding series of Trust Securities.
(b) Floating rate is determined quarterly based on LIBOR. A related interest rate swap,
expiring 2002, effectively fixes the rate at 7.183%.
(c) Floating rate is determined quarterly based on LIBOR. Interest rate swaps effectively fix
the rates through July 1, 2003 at 6.629% on $100 million and at 6.444% on $50 million.
</FN>
</TABLE>
Each parent company owns securities issued by its subsidiary trust
and has effectively issued a full and unconditional guarantee of such trust's
securities.
TU Electric
Long-Term Debt -- In March 1999, the Brazos River Authority issued
$111 million aggregate principal amount of Collateralized Pollution Control
Revenue Refunding Bonds, Series 1999A, due April 1, 2033 (1999A Bonds). The
1999A Bonds bear interest at a rate of 3.70% per annum until the mandatory
tender date of April 1, 2000. Upon mandatory tender, the 1999A Bonds will be
remarketed by a remarketing agent appointed by TU Electric. Proceeds were
used to refund the 8.25% Brazos River Authority Series 1989A Bonds and a
16
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<PAGE>
portion of the Brazos River Authority Taxable Series 1991D Bonds. TU Electric
is obligated to make payments of principal and interest on the 1999A Bonds.
This obligation is secured by TU Electric First Mortgage Bonds.
TUC
United Kingdom -- At March 31, 1999, TXU Eastern and TU Finance (No.
2) Limited, had a joint sterling-denominated line of credit with a group of
banking institutions under a credit facilities agreement (Sterling Credit
Agreement). The Sterling Credit Agreement, as amended in March 1999, provides
for borrowings of up to pounds1.275 billion and has two facilities: a
pounds750 million term facility which will terminate on March 2, 2003 and a
pounds525 million revolving credit facility which has a pounds200 million
364-day tranche (Tranche A) and a pounds325 million tranche which terminates
March 2, 2003 (Tranche B). TXU Eastern and TU Finance (No. 2) Limited
currently are the only permitted borrowers under the amended Sterling Credit
Agreement. As of March 31, 1999, pounds750 million ($1,208 million) of
borrowings were outstanding under the term facility, and approximately
pounds233 million ($375 million) were outstanding under Tranche B. In
addition, letters of credit totaling pounds37 million ($60 million) were
issued under Tranche A, and letters of credit totaling pounds85 million
($137 million) were issued under Tranche B. The amended Sterling Credit
Agreement is unsecured.
Australia -- At March 31, 1999, TU Australia Holdings had a A$1.1
billion Senior Acquisition Facility with a group of banking institutions and
TU Australia Holdings and Eastern Energy had a A$468 million Subordinated
Acquisition Facility with a banking institution to fund the acquisition of the
assets of Westar/Kinetik Energy. The Senior Acquisition Facility is composed
of: a A$275 million term facility due February 24, 2000 (Tranche A); a A$220
million revolving cash advance facility due February 24, 2002 (Tranche B); and
a A$605 million term facility due February 24, 2002 (Tranche C). The
Subordinated Acquisition Facility expires August 24, 1999. As of March 31,
1999, there was A$1.51 billion ($952 million) outstanding under these
facilities.
5. 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, foreign currency exchange rates and
commodity prices. The Company's participation in derivative transactions,
except for the energy marketing activities of Enserch Energy Services, Inc.
(EES), have been designated for hedging purposes and are not held or issued
for trading purposes.
Interest Rate Risk Management --At March 31, 1999, TUC, TU Electric
and ENSERCH had various interest rate swaps in effect, the terms and notional
amounts of which had not significantly changed from December 31, 1998.
At March 31, 1999, Eastern Energy and Westar/Kinetik Energy had
interest rate swaps and forward rate agreements outstanding, denominated in
Australian dollars and/or US dollars, with an aggregate notional amount of
$1,495 million. These agreements establish a mix of fixed and variable
interest rates on outstanding debt and have remaining terms up to 17 years.
At March 31, 1999, TXU Eastern had various interest rate swaps as
required by the Sterling Credit Agreement and to hedge certain of its
borrowings. The Sterling Credit Agreement required that one-half of the
borrowings under those facilities be swapped from a floating to a fixed
interest rate with a maturity of at least two years from
17
<PAGE>
<PAGE>
July 28, 1998. The aggregate notional amount of interest rate swaps entered
into is £848 million ($1,366 million) with an average maturity of six
years and an average fixed rate of 6.7%. Eastern Group had interest rate
swaps outstanding with an aggregate notional amount of $161 million that
convert fixed interest rates to floating rates expiring in 2004 and forward
rate agreements totaling $459 million for a maximum duration of one year to
swap floating rate deposits into fixed rates.
Foreign Currency Risk Management -- At March 31, 1999, TUC, Eastern
Group and Eastern Energy had various foreign currency swaps, options and
exchange contracts in effect, the terms and amounts of which had not
significantly changed from December 31, 1998.
Electricity Price Risk Management -- UK/Europe -- Long-term
contracts for differences (CfDs) are in place to hedge a portion of the
electricity to be purchased by Eastern Group 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. The impact of changes in the market value of these
contracts, which serve as hedges, is deferred until the related transaction is
completed.
Australia -- At March 31, 1999, Eastern Energy's contracts related to
both its forecasted contestable and franchise load cover a notional volume of
approximately 7.2 TWh for the period from April 1999 through 2001. Further
hedge contracts may be required in that period to service forecasted sales.
US 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 March 31, 1999 included financial
instruments that provide for fixed price receipts of 2,693 trillion British
thermal units equivalent (TBtue) and fixed price payments of 2,844 TBtue, with
a maximum term of seven years. Additionally, sales and purchase commitments
totaling 1,208 TBtue, with terms extending up to nine years, are included in
the portfolio as of March 31, 1999.
6. REGULATION AND RATES
TUC And TU Electric
Docket 18490 -- The Public Utility Commission of Texas (PUC) approved
the non-unanimous 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. 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.
In accordance with the provisions of the stipulation, for the three
months ended March 31, 1999 and 1998, TU Electric recorded $47 million and $45
million, respectively, of depreciation expense reclassified from transmission
and distribution to nuclear production assets. For the twelve months ended
March 31, 1999, TU Electric recorded an additional $355 million of
depreciation on its nuclear powered generating station, Comanche Peak,
representing $185 million of depreciation expense reclassified from
transmission and distribution and $170 million of additional depreciation
representing earnings in excess of the stipulated earnings cap. The earnings
18
<PAGE>
<PAGE>
cap calculation on TU Electric's rate of return under the stipulation was not
reached, therefore, no additional depreciation charges were made to nuclear
production assets during the three months ended March 31, 1999.
On March 31, 1999, TU Electric filed with the PUC its first report, as
required in Docket 18490, concerning the earnings cap calculation for 1998.
Interested parties are allowed to challenge the calculation and the
reasonableness of the underlying costs. The Company and TU Electric are
unable to predict whether any such challenge will be filed or the outcome
thereof.
Docket 20666 -- TU Electric filed a petition with the PUC in March 1999
to refund to customers approximately $115 million, including interest, in
over-collected fuel costs for the period June 1997 through February 1999. TU
Electric has requested that the refund be made with June 1999 billings. This
over-collection is primarily due to declining prices for the natural gas
component of TU Electric's fuel cost .
Flexible Rate Initiatives --TU Electric offers optional time-of-use rates
to residential, commercial and industrial customers, under rates approved by
the PUC in April 1999 in areas where the PUC retains sole regulatory
jurisdiction. These time-of-use rate options allow participating customers to
plan and manage their electrical energy usage to shift their loads from the TU
Electric on-peak periods to off-peak periods. Such activity reduces TU
Electric's requirements for capacity resources to meet the peak electrical
load of all of its customers. On January 15, 1999, TU Electric applied for
approval of these rates with municipal regulatory authorities in 173 cities.
As of April 22, 1999, 171 of the municipalities had approved these rates. TU
Electric estimates that any decrease in revenue resulting from the
implementation of these rates will be offset by the reductions in the peak
load and associated costs.
Open Access Transmission -- On April 13, 1999, modifications to the PUC
rules addressing open-access wholesale transmission service became effective.
The modified rules allow utilities to revise their transmission rates annually
to reflect rate base additions and updated billing units. In addition, the
rules now clarify the cost responsibility for entities connecting new
resources to the Electric Reliability Council of Texas (ERCOT) transmission
grid. These revisions to the rules were enacted primarily to enhance
wholesale competition and provide for the timely recovery by utilities of
their transmission investment. It is anticipated that the adoption of these
rules will have a minimal impact on open-access transmission rates.
TUC
Gas Utilities Docket No. 8935 --Lone Star Gas Company (Lone Star Gas), a
division of ENSERCH, filed an application with the Railroad Commission of
Texas on February 25, 1999, to modify the gas cost adjustment provision of the
city gate rate tariff approved in November 1997. The modification will allow
for a more accurate recovery of the gas cost approved for recovery from Lone
Star Gas residential and commercial customers. Currently, cycle billing
causes Lone Star Gas to over or under recover the allowed gas costs. A Final
Order is expected in August 1999. Lone Star Gas is unable to predict the
outcome of these proceedings.
Lone Star Gas has an on-going program to identify distribution systems in
which its current rates are producing inadequate returns on its investment and
to seek rate relief from the municipalities served by those deficient
systems. Lone Star Gas filed and completed twelve such rate cases since July
1998. Approved revenue increases totaled $5.5 million on an annual basis.
Lone Star Gas currently has rate cases pending in five distribution systems in
which it is seeking rate increases totaling $9.1 million on an annual basis.
Lone Star Gas is unable to predict the outcome of these rate cases.
19
<PAGE>
<PAGE>
7. COMMITMENTS AND CONTINGENCIES
TUC and TU Electric
Legal Proceedings -- In February 1997, the official government
representative of pensioners in the UK (Pensions Ombudsman) made final
determinations against The National Grid Company plc (National Grid) and its
group trustees with respect to complaints by two pensioners in National Grid's
section of the ESPS relating to the use of the pension fund surplus resulting
from the March 31, 1992 actuarial valuation of the National Grid section to
meet certain costs arising from the payment of pensions on early retirement
upon reorganization or downsizing. These determinations were set aside by
the High Court on June 10, 1997, and the arrangements made by National Grid
and its group trustees in dealing with the surplus were confirmed. The two
pensioners have now appealed against this decision, and judgment has now been
received although a final order is awaited. The appeal endorsed the Pension
Ombudsman's determination that the corporation was not entitled to
unilaterally deal with any surplus. If a similar action were to be made
against Eastern Group in relation to its use of actuarial surplus in its
section of the ESPS, it would vigorously defend the action, ultimately through
the courts. However, if a determination were finally to be made against it
and upheld in the courts, Eastern Group could have a potential liability to
repay to its section of the ESPS an amount estimated by the Company to be up
to $165 million (exclusive of any applicable interest charges).
In August 1998, the Gracy Fund, L.P. (Gracy Fund) 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 Gracy Fund sought 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 Gracy Fund alleged 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 allegedly caused the plaintiffs and other members of
the class to purchase EEX and ENSERCH stock at artificially inflated prices.
In such connection, the plaintiffs alleged that the defendants violated
various provisions of the Securities Act of 1933 and the Securities and
Exchange Act of 1934 (Exchange Act).
Also in August 1998, Stan C. Thorne (Thorne) filed suit in the United
States District Court for the Southern District of Texas against EEX, ENSERCH,
DeGolyer & MacNaughton, David W. Biegler, Gary J. Junco, Fredrick S. Addy and
B. K. Irani. Thorne sought 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. Thorne alleged that the defendants engaged in a course of conduct
designed to mislead the plaintiff and 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.
Thorne also alleged that the defendants were negligent in making such
misrepresentations and that they constituted common law fraud against the
defendants.
In December 1998, the United States District Court for the Northern
District of Texas issued an Order in Cause No. 3-98-CV-1808-G consolidating
the Gracy Fund and the Thorne suits (the Consolidated Action). On January 22,
1999, the Gracy Fund, et al filed an amended class action complaint in the
Consolidated Action against EEX, ENSERCH, David W. Biegler, Gary J. Junco,
20
<PAGE>
<PAGE>
Thomas Hamilton, J. Philip McCormick, Fredrick S. Addy and B. K. Irani. The
Company and Erle Nye were omitted as defendants pursuant to a tolling
agreement. The individual named defendants in the amended complaint are
current or former officers and/or directors of EEX, and Mr. Biegler has been
an officer and director of ENSERCH. The amended complaint alleges violations
of provisions of the Securities Act of 1933 and the Exchange Act. The state
law claims alleged in the Thorne case have been omitted. The class period
was amended to include those persons acquiring stock of ENSERCH and/or EEX
between August 3, 1995 and August 5, 1997, inclusive. No amount of damages
has been specified in the Consolidated Action. Defendants filed a joint
motion to dismiss on March 8, 1999, and it is expected that under the Private
Securities Litigation Reform Act of 1995 the court will stay discovery pending
a ruling on the motion to dismiss. The Company is continuing to evaluate
these claims and is unable at this time to predict the outcome of this
proceeding, but it intends to vigorously defend this suit.
General -- The Company and TU Electric are each involved in various legal
and administrative proceedings and have other contingencies, 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.
8. SEGMENT INFORMATION
The Company has five reportable operating segments:
(1) US Electric - operations engaged in the generation, purchase,
transmission, distribution and sale of electric energy primarily in the
north central, eastern and western portions of Texas (primarily TU Electric,
Southwestern Electric Service Company, Texas Utilities Fuel Company and Texas
Utilities Mining Company operations);
(2) US Gas - operations engaged in the gathering, processing,
transmission and distribution of natural gas and selling of natural gas
liquids primarily within Texas (primarily Lone Star Gas, Lone Star Pipeline
Company, a division of ENSERCH, and Enserch Processing, Inc.);
(3) US Energy Marketing - operations engaged in purchasing and selling
natural gas and electricity and providing risk management services for the
energy industry throughout the US (EES);
(4) UK/Europe - operations engaged in the generation, purchase,
distribution and sale of electricity; the purchase and sale of natural gas;
and energy portfolio management operations primarily in the UK, with
additional energy interests throughout the rest of Europe (primarily Eastern
Group); and
(5) Australia - operations engaged in the purchase, distribution and sale
of electricity and natural gas and the provision of other energy-related
services primarily in the State of Victoria, Australia (primarily Eastern
Energy and Westar/Kinetik Energy).
21
<PAGE>
<PAGE>
Reportable Segments:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------- -------------------
1999 1998 1999 1998
------ ------ ------- ------
<S> <C> <C> <C> <C>
Trade Revenues -
US Electric . . . . . . . . . . . . . . . . . . . . . . . . $1,296 $1,344 $ 6,493 $ 6,145
US Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 294 333 783 742
US Energy Marketing . . . . . . . . . . . . . . . . . . . . 800 684 3,314 1,543
UK/Europe . . . . . . . . . . . . . . . . . . . . . . . . . 1,916 - 5,517 -
Australia . . . . . . . . . . . . . . . . . . . . . . . . . 120 109 450 478
All Other . . . . . . . . . . . . . . . . . . . . . . . . . 42 30 147 44
------ ------ ------- -------
Consolidated. . . . . . . . . . . . . . . . . . . . . $4,468 $2,500 $16,704 $ 8,952
====== ====== ======= =======
Affiliated Revenues -
US Electric . . . . . . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ -
US Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10 39 28
US Energy Marketing . . . . . . . . . . . . . . . . . . . . - - 1 1
UK/Europe . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
Australia . . . . . . . . . . . . . . . . . . . . . . . . . - - - -
All Other . . . . . . . . . . . . . . . . . . . . . . . . . 79 73 342 73
Eliminations. . . . . . . . . . . . . . . . . . . . . . . . (86) (83) (382) (102)
------ ------ ------- -------
Consolidated. . . . . . . . . . . . . . . . . . . . . $ - $ - $ - $ -
====== ====== ======= =======
Net Income (Loss) -
US Electric . . . . . . . . . . . . . . . . . . . . . . . . $ 103 $ 134 $ 757 $ 751
US Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 18 17 (32) 16
US Energy Marketing . . . . . . . . . . . . . . . . . . . . (7) (1) - (14)
UK/Europe . . . . . . . . . . . . . . . . . . . . . . . . . 111 8 242 8
Australia . . . . . . . . . . . . . . . . . . . . . . . . . 5 10 26 23
All Other . . . . . . . . . . . . . . . . . . . . . . . . . (48) (41) (198) (112)
------ ------ ------- -------
Consolidated. . . . . . . . . . . . . . . . . . . . . $ 182 $ 127 $ 795 $ 672
====== ====== ======= =======
</TABLE>
22
<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 March 31, 1999, and
the related condensed statements of consolidated income and of comprehensive
income for the three-month and twelve-month periods ended March 31, 1999
and 1998, and of consolidated cash flows for the three-month periods ended
March 31, 1999 and 1998. 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 TXU Eastern Holdings Limited (a consolidated
subsidiary), whose total assets constituted 35% of consolidated total assets
at March 31, 1999, and whose total revenues constituted 43%, and 33% of
consolidated total revenues for the three-month and twelve-month periods ended
March 31, 1999, 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,
1998, and the related statements of consolidated income, comprehensive income,
cash flows and common stock equity for the year then ended (not presented
herein); and in our report, based on our audit and the report of other
auditors, dated March 5, 1999, 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,
1998, 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
May 13, 1999
23
<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 March
31, 1999, and the related condensed statements of consolidated income and of
comprehensive income for the three-month and twelve-month periods ended March
31, 1999 and 1998, and of consolidated cash flows for the three-month periods
ended March 31, 1999 and 1998. 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,
1998, and the related statements of consolidated income, comprehensive income,
cash flows and common stock equity for the year then ended (not presented
herein); and in our report dated March 5, 1999, 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, 1998, 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
May 13, 1999
24
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<PAGE>
Item 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
TUC and TU Electric
This report and other presentations made by Texas Utilities Company and
its subsidiaries (the Company or TUC) 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 believe 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
Operations in TUC's and TU Electric's Annual Reports on Form 10-K for the year
1998 (1998 Form 10-K), as well as, general industry trends; power costs and
availability; changes in business strategy, development plans or vendor
relationships; availability of qualified personnel; changes in, or the failure
or inability to comply with, governmental regulations, including, without
limitation, environmental regulations; changes in tax laws; and access to
adequate transmission facilities to meet changing demands, among others, that
could cause the actual results of the Company or TU Electric to differ
materially from those projected in such forward-looking statements.
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 report have been affected by the Company's
acquisitions (accounted for as purchase business combinations) of
Westar/Kinetik Energy in Australia (as described below) in February 1999, The
Energy Group PLC (TEG) in May 1998, Lufkin-Conroe Communications Co. (LCC) in
November 1997 and ENSERCH Corporation (ENSERCH) in August 1997. Results of
operations of these companies have been included only from their dates of
acquisition. The Company's principal international operations are conducted
through TU International Holdings Limited (TU International Holdings), which
in turn owns TXU Eastern Holdings Limited (TXU Eastern) and TU Australia
Holdings L.P. (TU Australia Holdings). TXU Eastern's operations in the
United Kingdom (UK) and Europe are conducted through subsidiaries of
Eastern Group plc (Eastern Group), primarily Eastern Electricity plc (Eastern
Electricity). TU Australia Holdings' principal operating subsidiaries include
Eastern Energy Limited (Eastern Energy) and the recently acquired gas
operations in Australia described below.
On February 24, 1999, TU Australia Holdings acquired from the Government
of Victoria, Australia the gas retail business of Kinetik Energy, which has
approximately 400,000 gas customers, and the gas distribution operations of
Westar, which is of a similar size (Westar/Kinetik Energy). The purchase
price was $1.0 billion which has been principally financed through banks by TU
Australia Holdings. A portion of the financing was provided by a six-month
subordinated credit facility. To date, the process of determining the fair
value of assets acquired and liabilities assumed of Westar/Kinetik Energy 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 A$794 million ($499 million), which is being amortized over 40
years. This amount is subject to revision as additional information about the
fair value of Westar/Kinetik Energy's assets acquired, liabilities assumed and
contingencies existing at the acquisition date becomes known. Consolidated
pro forma income and earnings per share for the periods ended March 31, 1999
and 1998, assuming the acquisition of Westar/Kinetik Energy had occurred at
the beginning of the periods, would not have differed significantly from
reported results.
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The Company will pursue 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
Operations in TUC's and TU Electric's 1998 Form 10-K. Results for the
three-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.
Cash flows provided from operating activities for the Company before
changes in operating assets and liabilities for the three months ended March
31, 1999 were $607 million compared with $425 million for the comparable
period in 1998 ($366 million versus $349 million for TU Electric). The
inclusion of the winter heating results for Eastern Group more than offset a
reduction in net income for TU Electric. Changes in operating assets and
liabilities for the Company for the three months ended March 31, 1999 used
$248 million, but provided $62 million in the comparable three-month period of
1998. The year-to-year comparison reflects working capital requirements for
the Eastern Group operations and higher requirements associated with interest.
Additionally, the first quarter last year included a federal income tax refund
with no like amount in the 1999 first quarter. Changes in operating assets
and liabilities for TU Electric provided $65 million for the first quarter
of 1999 compared with $130 million for the 1998 first quarter.
Cash flows used for investing activities for the three months ended March
31, 1999 were $1.4 billion compared with $1.9 billion for the same period of
1998 ($161 million versus $141 million for TU Electric). The February 1999
acquisition of Westar/Kinetik Energy in Australia used approximately $1.0
billion while the purchase of the initial 22% equity interest in TEG in the
first quarter of 1998 required $1.6 billion. Construction expenditures used
$286 million for the current three-month period compared with $153 million for
the comparable three-month period in 1998 ($135 million versus $108 million
for TU Electric), primarily resulting from the inclusion of expenditures for
Eastern Group.
External funds of a permanent or long-term nature are obtained through
the issuance of common stock, preferred stock, trust securities and long-term
debt by the Company and subsidiaries. The capitalization ratios of the
Company at March 31, 1999 consisted of approximately 63% long-term debt, 5%
Company or subsidiary obligated, mandatorily redeemable, preferred securities
of Company or subsidiary trusts, each holding solely junior subordinated
debentures of the Company or related subsidiary (trust securities), 1%
preferred stock and 31% common stock equity. Restricted cash of $1.2
billion pledged against Eastern Group lease obligations is included in other
investments. Applying the cash pledged against related lease obligations, the
capitalization ratios consisted of 61% long term debt, 5% trust securities, 1%
preferred stock and 33% common stock equity. The capitalization ratios of TU
Electric at March 31, 1999 consisted of approximately 41% long-term debt, 7%
trust securities, 1% preferred stock and 51% common stock equity.
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During the three-month period ended March 31, 1999, the Company
(including TU Electric) issued, redeemed, reacquired or made scheduled
principal payments on long-term debt for cash, as follows (in millions of
dollars):
<TABLE>
<CAPTION>
Issuances Retirements
--------- -----------
<S> <C> <C>
TU Electric:
Brazos River Authority Pollution Control Bonds $ 111 $ 111
First Mortgage Bonds -- 98
------ ------
Total TU Electric 111 209
------ ------
TXU Eastern:
Acquisition and Interim Facilities -- 1,225
Term Facility 1,225 --
Revolving Credit Facility (Tranche B) 380 --
Other 169 195
TU Australia Holdings:
Acquisition Facilities 926 --
Other 109 --
All Other Subsidiaries -- 4
------ ------
Total $2,920 $1,633
====== ======
</TABLE>
See Note 4 to Condensed Consolidated Financial Statements for additional
information on new issuances of long term debt.
On May 13, 1999, a financing subsidiary of TXU Eastern issued $1.5
billion of senior notes in three series: $350 million of 6.15% senior notes
due 2002, $650 million of 6.45% senior notes due 2005 and $500 million of
6.75% senior notes due 2009. Net proceeds of approximately $1.49 billion are
to be used to reduce indebtedness incurred in connection with the acquisition
of TEG, to repay short-term debt and for general corporate purposes.
In addition, TXU Eastern entered into interest rate swaps with a group of
banks to convert the fixed interest rate on $1.5 billion notional amount of
the new senior notes to a LIBOR-based floating rate and entered into foreign
currency swaps to deliver US dollars for sterling to match amounts due at the
maturity and interest payment dates for the new senior notes.
At March 31, 1999, TUC, TU Electric and ENSERCH had $3.5 billion of 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 $2.1 billion outstanding at any one time at
variable interest rates and terminates February 25, 2000. Of this, $800
million can be used for working capital and other general corporate purposes.
Facility B provides for borrowings aggregating up to $1.4 billion
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. The combined borrowings of TUC, TU Electric
and ENSERCH under both facilities, excluding amounts restricted to finance the
acquisition of TEG, are limited to an aggregate of $2.2 billion outstanding at
any one time. TU Electric's and ENSERCH's borrowings under both facilities
are limited to an aggregate of $1.25 billion and $650 million outstanding at
any one time, respectively. The facilities primarily support commercial paper
borrowings.
At March 31, 1999, outstanding commercial paper borrowings supported by
both facilities totaled $3.0 billion, including $992 million classified as
long-term debt.
In addition, a separate Eastern Electricity Revolving Credit Facility
provides for short term borrowings for general corporate purposes of up to
£250 million ($403 million) outstanding at any one time and terminates
March 2, 2003. No borrowings were outstanding at March 31, 1999 under this
facility.
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At March 31, 1999, TXU Eastern and TU Finance (No. 2) Limited, had a
joint sterling-denominated line of credit with a group of banking institutions
under a credit facilities agreement (Sterling Credit Agreement). The Sterling
Credit Agreement, as amended in March 1999, provides for borrowings of up to
pounds1.275 billion and has two facilities: a pounds750 million term
facility which will terminate on March 2, 2003 and a pounds525 million
revolving credit facility which has a pounds200 million 364-day tranche
(Tranche A) and a pounds325 million tranche which terminates March 2, 2003
(Tranche B). TXU Eastern and TU Finance (No. 2) Limited currently are the
only permitted borrowers under the amended Sterling Credit Agreement. As of
March 31, 1999, pounds750 million ($1,208 million) of borrowings were
outstanding under the term facility, and approximately pounds233 million
($375 million) were outstanding under Tranche B. In addition, letters of
credit totaling pounds37 million ($60 million) were issued under Tranche
A, and letters of credit totaling pounds85 million ($137 million) were
issued under Tranche B. The amended Sterling Credit Agreement is unsecured.
At March 31, 1999, TU Australia Holdings had a A$1.1 billion Senior
Acquisition Facility with a group of banking institutions and TU Australia
Holdings and Eastern Energy had a A$468 million Subordinated Acquisition
Facility with a banking institution to fund the acquisition of the assets of
Westar/Kinetik Energy. The Senior Acquisition Facility is composed of: a
A$275 million term facility due February 24, 2000 (Tranche A); a A$220 million
revolving cash advance facility due February 24, 2002 (Tranche B); and a A$605
million term facility due February 24, 2002 (Tranche C). The Subordinated
Acquisition Facility expires August 24, 1999. As of March 31, 1999, there was
A$1.51 billion ($953 million) outstanding under these facilities.
In addition, certain non-US subsidiaries have revolving credit agreements
(denominated in both foreign currencies and US dollars) aggregating
approximately $106 million, of which $83 million was outstanding at March 31,
1999. These revolving credit agreements expire at various dates through
2001.
During the three months ended March 31, 1999, TU Electric purchased and
retired a total of 4.9 million shares of its common stock from TUC at a cost
of approximately $148 million.
In April 1999, the Company repurchased approximately 1.7 million shares
of its outstanding common stock at a total cost of approximately $64 million.
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 $499 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 issue up to $170 million of debt securities and, 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 similarly registered with the SEC.
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, options 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),
which uses the mark-to-market method of accounting, the Company's and TU
Electric's participations in derivative transactions are designated for
hedging purposes and are not held or issued for trading purposes.
No material substantive changes in the exposure to, or management of,
interest rate, foreign currency and electricity or gas price risk have
occurred subsequent to December 31, 1998 for the Company's US operations. For
information regarding certain changes in non-US derivative instruments, see
Note 5 to Condensed Consolidated Financial Statements.
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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 March 31, 1999 included derivative financial instruments that
provide for fixed price receipts of 2,693 trillion British thermal units
equivalent (TBtue) and fixed price payments of 2,844 TBtue, with a maximum
term of seven years. Additionally, sales and purchase commitments totaling
1,208 TBtue, with terms extending up to nine years, are included in the
portfolio as of March 31, 1999.
Regulation, Rates and Competition
TUC and TU Electric
Under the current regulatory environment, certain US subsidiaries of the
Company are subject to the provisions of Statement of Financial Accounting
Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation". This statement applies to utilities that have cost-based rates
established by a regulator and charged to and collected from customers. In
accordance with this statement, these companies may defer the recognition of
certain costs (regulatory assets) and certain obligations (regulatory
liabilities) that, as a result of the ratemaking process, have probable
corresponding increases or decreases in future revenues. Future significant
changes in regulation or competition could affect these companies' ability to
meet the criteria for continued application of SFAS 71 and may affect these
companies' ability to recover such regulatory assets from, or refund such
regulatory liabilities to, customers. These regulatory assets and liabilities
are being amortized over various periods (5 to 40 years). The amortization is
currently, or is expected to be, included in rates. In the event all or a
portion of these companies' operations fail to meet the criteria for
application of SFAS 71, these companies would be required to write-off all or
a portion of their regulatory assets and liabilities. Should significant
changes in regulation or competition occur, the affected subsidiaries would be
required to assess the recoverability of plant and regulatory assets.
While the Company and the US Electric segment companies anticipate
legislation being enacted during the 1999 session of the Texas legislature to
authorize retail competition, they cannot predict the ultimate outcome of the
ongoing efforts that are taking place to restructure the electric utility
industry or whether such outcome will have a material effect on their
financial position, results of operations or cash flows.
TU Electric and certain other regulated subsidiaries of the Company have
several rate requests or refunds pending or on appeal. (See Note 6 to
Condensed Consolidated Financial Statements for a discussion of the impact of
these various issues.) With regard to Eastern Group, the regulation of
distribution and supply charges is currently subject to review by the Office
of Electricity Regulation covering England, Wales and Scotland (OFFER), with
the outcome of the review scheduled to be completed by April 1, 2000. The
Company cannot predict the ultimate outcome of OFFER's review or whether
such outcome will have a material effect on its financial position, results of
operations or cash flows.
RESULTS OF OPERATIONS
TU Electric
Net income for TU Electric for the three months ended March 31, 1999 was
lower than the same period of 1998, but for the twelve-month period in 1999
was slightly higher compared to the same period in 1998. Mild winter
temperatures in the first quarter of 1999 and an additional decline in rates
effective January 1, 1999 due to the 1998 rate settlement agreement resulted
in lower quarterly revenues. In addition, there was an increase in operation
and maintenance (O&M) expenses for the first quarter of 1999, a portion of
which was due to the timing of scheduled maintenance. Results for the twelve
months ended March 31, 1999 reflect continued strong retail electric sales
growth, increased electric sales resulting from hotter-than-normal summer
weather and continued capital cost reductions.
29
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The rate settlement agreement, which became effective in January 1998,
reduced customer rates, increased depreciation expense of nuclear production
assets as a result of earnings in excess of a stipulated earnings cap and
reclassified depreciation from transmission and distribution to nuclear
production assets in 1998. Increased nuclear depreciation had a minimal
effect on the first quarter results of this year and last year, but reduced
net income by $143 million in the 1999 twelve-month period compared with a $4
million reduction in the year-earlier period.
Results for the 1998 twelve months were affected by the recognition of an
$81 million fuel disallowance (including interest) and a $10 million charge
related to the sale of sulfur dioxide allowances, which reduced net income by
$55 million. Excluding these items, net income for the twelve months ended
March 31, 1998 was $821 million.
There was a decrease in energy sales and base rate revenues for the first
quarter of 1999 compared with the 1998 period, primarily due to milder winter
weather conditions. Electric energy sales in gigawatt hours for the three
months of 1999 were 2.5% lower than the same period of 1998. For the twelve
months ended March 31, 1999, energy sales and base rate revenues increased
from the comparable 1998 period, a result of strong sales growth and the
effect of hotter-than-normal weather in the summer of 1998. Electric energy
sales for the twelve-month period of 1999 were up 5% from the 1998
twelve-month period.
Fuel revenues decreased for the first quarter of 1999 compared with the
1998 period due to decreased energy sales. For the twelve-month period, fuel
revenues increased primarily due to higher volumes of energy sales offset by
lower gas prices.
Fuel and purchased power expenses for both the three-month and
twelve-month period ended March 31, 1999 reflect lower natural gas prices from
the comparable 1998 periods. The increase in fuel and purchased power for the
twelve-month period for 1999 reflects the increase in gas consumed and
purchased power to meet demand during the hotter-than-normal summer.
O&M expenses for the three- and twelve-month periods ending March 31, 1999
increased 12% and 8%, respectively, in comparison to the same periods for
1998. The increase for the three-month period is primarily due to the
timing of expenditures associated with routine maintenance
work at several generating plants. Reduced generation requirements resulting
from the mild winter weather allowed TU Electric to perform this
planned routine maintenance earlier than normal. Third-party
transmission expenses for the first quarter of 1999 were also higher than the
first quarter last year due to a favorable contract adjustment in the 1998
period. The increase in O&M expenses for the 1999 twelve-month period is
primarily a result of the hotter-than-normal summer of 1998.
Depreciation and amortization expense for the twelve months ended
March 31, 1999 was 31% higher than the same period in 1998. TU Electric's
rate settlement agreement resulted in an increase of $355 million in
depreciation on its Comanche Peak nuclear powered generating station for the
twelve-months ended March 31, 1999. Of the $355 million, $185 million is the
result of the transfer of transmission and distribution depreciation, and $170
million is the result of TU Electric's earnings in excess of its earnings cap.
The 1999 first quarter effective income tax rate for TU Electric was
lower than the same period for 1998 primarily due to a favorable adjustment to
prior years' tax accruals. The effective tax rate for the twelve months ended
March 31, 1999 was slightly higher than the 1998 period principally due to the
impact of amortization of prior period flow-through amounts resulting from the
acceleration of depreciation on nuclear production assets in conjunction with
the rate settlement, partially offset by the favorable adjustment to prior
year's tax accruals.
Net decreases in interest expense for the three- and twelve-months ended
March 31, 1999, compared to similar periods in 1998, are primarily due to the
reacquisition of long-term debt in 1998.
30
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TUC
Earnings for the first quarter of 1999 were $182 million ($.65 per share,
basic and diluted) compared with $127 million ($.52 per share basic, $.51 per
share diluted) for the first quarter of 1998, or a 43% earnings improvement.
Earnings for the twelve months ended March 31, 1999 were $795 million ($2.90
per share, basic and diluted) compared with $672 million ($2.85 per share
basic, $2.84 per share diluted) for the prior twelve-month period, or an 18%
increase in earnings. 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 of Eastern Group since the date of acquisition
of TEG (including certain one-time acquisition transaction-related costs which
totaled $31 million after-tax in the 1999 twelve-month period) also impacted
the Company's net income. Earnings per share comparisons for the quarter and
twelve months ended March 31, 1999 were affected by the issuance of additional
shares of common stock for the acquisition.
The 1999 first-quarter results reflect record operating revenues of $4.5
billion, a 79% increase over the same period in 1998. Substantially all of the
increase is due to the addition of the winter heating season results of
Eastern Group in the UK. Partially offsetting were lower results from the
Company's US Electric operations due to extremely mild winter temperatures in
Texas during the first quarter that reduced revenues. In addition, O&M
expenses for the US Electric segment were higher than the prior year primarily
due to the timing of scheduled maintenance activities.
The 1999 twelve-month period reflects record revenues of almost $17
billion, approximately 87% higher than the same period a year ago. Results
for the twelve months ended March 31, 1999 reflect continued strong US retail
electric sales growth, weather-driven US Electric sales experienced during the
hotter-than-normal summer of 1998 and continued capital reductions in US
Electric operations. The higher results also reflect the addition of the
Eastern Group, and significant improvement in the Company's US Energy
Marketing operations. These improvements were partially offset by TU
Electric's 1998 rate settlement that reduced revenues and increased
depreciation, and by mild winter weather in the fourth quarter of 1998 and the
first quarter of 1999.
Earnings for the twelve months ended March 31, 1999 include a
non-recurring gain from Eastern Group's renegotiation of a long-term gas
contract and non-recurring costs related to the acquisition of TEG, while
earnings for the prior twelve-month period ended March 31, 1998 were reduced
by the fuel disallowance (including interest) and the charge related to the
sale of sulfur dioxide allowances for TU Electric, as described above.
Excluding these non-recurring items, earnings for the twelve months ended
March 31, 1999 were $2.87 per share (basic and diluted) compared with $3.09
per share ($3.08 per share diluted) for the prior twelve-month period.
For a brief description of reportable business segments and certain
financial data by segment, see Note 8 to Condensed Consolidated Financial
Statements.
US Electric -- Net income for the US Electric segment for the first three
months of 1999 decreased 23% from the same period of 1998, reflecting a 4%
reduction in operating revenues as a result of mild winter weather conditions
and increased O&M expenses primarily due to the timing of planned routine
maintenance work.
US Gas -- Net income for the US Gas segment for the first quarter of 1999
was $18 million versus $17 million in the first quarter last year. A 12%
reduction in operating revenues, which reflects the mild winter weather in the
first quarter this year, was offset by lower gas purchase costs and lower
revenue-related taxes.
US Energy Marketing -- This segment had a net loss for the three months
ended March 31, 1999 of $7 million compared with a $1 million net loss in the
first quarter last year. Operating revenues for the 1999 first quarter were
up 17% from the year-earlier period; however, margins were down significantly
due to a market that was capped by mild winter weather. Operating expenses
for the first quarter this year were also higher than in the prior first
quarter due to increased infrastructure costs as a result of business growth.
31
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UK/Europe -- The UK/Europe segment contributed $111 million of net income
to first quarter 1999 results versus $8 million equity in the net income of
TEG in the first quarter last year. Operating revenues for these operations
were $1.9 billion for the first quarter of 1999.
Australia -- Net income for the three months ended March 31, 1999 was $5
million compared with $10 million for the year-ago first quarter. Results for
this segment include Westar/Kinetik Energy from the date of acquisition of
February 24, 1999. A 10% improvement in operating revenues was more than
offset by higher operating expenses and increased interest costs, principally
related to the acquisition of Westar/Kinetik Energy. Reported results for
1999 were impacted by lower average foreign currency exchange rates compared
to the 1998 period.
Year-to-year comparisons of consolidated interest expense and
distributions on trust securities and preferred stock of subsidiaries have
been affected by the Company's capital restructuring and debt reduction
programs, and by the debt assumed and incurred in connection with the
acquisitions of TEG and Westar/Kinetik Energy.
The lower effective income tax rate for the first quarter of 1999
compared with the 1998 first quarter was primarily due to favorable
adjustments to prior years' tax accruals and the effects of Eastern Group
results in the 1999 period which are taxed at a lower rate than US
operations. The effective tax rate for the twelve months ended March 31, 1999
was higher than in the same period of 1998 due to the impact of amortization
of prior period flow-through amounts resulting from the acceleration of
depreciation on nuclear production assets in conjunction with the rate
settlement, partially offset by the favorable adjustments to prior year's tax
accruals and the effects of Eastern Group since acquisition.
CHANGE IN ACCOUNTING STANDARDS
SFAS 133, "Accounting for Derivative Instruments and Hedging Activities",
is effective for fiscal years beginning after June 15, 1999. Many existing
contracts relating to electric and gas purchases and sales may be classified
as derivatives under the definition of derivatives in the new standard. 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 be recorded in earnings
or common stock equity as part of comprehensive income depending 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
TUC and TU Electric
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 US efforts to address Year 2000 (Y2K) issues in
1996 by focusing on information technology mainframe-based application systems
(IT Corporate Applications). In early 1997, an infrastructure project to
address the Company's information technology related hardware, 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).
32
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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 essentially complete. This process includes the solicitation of vendor
feedback, comparing information with other energy companies, and in many cases
internal verification by testing. The remediation and testing work on IT
Corporate Applications currently stands at approximately eighty percent
complete. The IT Infrastructure project is currently eighty-five percent
complete. Remediation work on embedded systems is scheduled to be completed
by September 1999. A number of tests on production equipment with embedded
systems have been performed. The Company will continue to test this equipment
throughout the first half of 1999.
Readiness
The IT Corporate Applications remediation and testing activities are
approximately eighty percent complete. Certification for the Y2K compliance on
mission critical core business applications was completed as scheduled by the
end of the first quarter, with certification of remaining applications
scheduled for the third quarter of 1999.
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 have been
performed. Eighty-five percent of the IT Infrastructure is Y2K ready.
Mainframe computers and support equipment within the data center have
received all necessary upgrades. Other remediation schedules were adjusted
during the quarter to improve the cost effectiveness of the work. Remediation
of equipment within major work locations will be completed by May 31, 1999.
Non critical equipment in remote sites will be remediated throughout the
second and third quarters. Certain software vendors will not have Y2K ready
versions of their product available until the second quarter of 1999. These
software upgrades will be tested and implemented during the second quarter.
The Company's 900 megahertz radio system is being upgraded and is scheduled to
be completed in July 1999.
Non-IT Equipment and Applications involve the hardware and software
products that reside in individual business units. These items 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 individual business units. Assessments are substantially
complete. Forty of fifty-three fossil steam generating units are Y2K ready.
Validation testing is scheduled throughout the second quarter of 1999 on the
remaining thirteen fossil generating units. Some remediation needs have been
identified in various business units as a result of Y2K testing. In most
cases, these concern software upgrades that are necessary to ensure that
information produced by these systems can be efficiently used in the Company's
business processes. The upgrades are not required for equipment functionality.
These remediation activities are planned for completion by the end of the
second quarter of 1999.
The Company has implemented a specific Y2K program at its Comanche Peak
nuclear powered generating station. Inventories were completed by mid-1998 and
detailed assessments were made by December 1998. Remediation projects on
Units 2 and 1 are scheduled for completion by the end of May and September of
1999, respectively.
The Company is analyzing the potential impact of Y2K compliance efforts
of third parties. Over 2000 suppliers and service providers have been
contacted to determine the status of their Y2K efforts. Approximately
seventy percent of these vendors have responded. Their responses are being
prioritized, and the programs and status of the most significant among them
are being analyzed in detail. This initial analysis is complete. The more
significant interdependencies relate to telecommunications and gas suppliers.
On site audits of a number of significant third parties are being conducted
during the first half of 1999.
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Costs
The costs associated with the Company's Y2K efforts 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 million; IT
Infrastructure - $7 million; and Non IT-Equipment and Applications - $15
million. These costs are being expensed as incurred over the period 1996 to
2000; and a total of approximately $17 million had been expended through
December 31, 1998 (latest available information). There can be no assurance
that these estimated costs will not change 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 energy management system for the Company's transmission
grid is being replaced. The Company's principal financial and accounting
system has been 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 are being replaced by systems with dramatically increased
functionality. The cost of this effort is estimated to be $4 million, which
is being expended through 1999. As of December 31, 1998 (latest available
information), estimated costs expended were approximately $2.2 million.
Remediation of IT applications is scheduled to be completed in June 1999.
Testing is underway for both IT applications and embedded systems, with the
majority of these testing activities scheduled for completion in June 1999.
LCC filed a draft description of its Y2K Contingency Plan with the Public
Utilities Commission of Texas (PUC) on December 31, 1998. The plan is
scheduled to be completed by June 1999.
Risk Issues
With respect to internal risks, the Company's current assessment of the
most reasonably likely worst case scenario is that impacts on either service
or financial performance will not be materially adverse. The Company
believes, based on the results of testing that has already occurred on a large
portion of its production equipment with embedded systems, 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) is continuing to
evaluate the status of the electric infrastructure throughout North America.
The Company is a participant in this process. The second NERC status report,
issued on January 11, 1999, indicates that the transition through critical Y2K
dates is expected to have minimal impact on electrical systems in North
America and that, with continued work and coordinated contingency planning,
operating risks can be effectively mitigated. Results from the Company's
testing program compare favorably with the results on which the NERC
conclusions have been based. NERC will perform scenario analyses of potential
risks to the electric infrastructure. Joint industry testing between the
electric industry and the telecommunications industry is also being planned.
Until this work is complete, the Company cannot assess a worst case scenario
relating to external interdependencies.
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 continue to 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 or the
effect on the Company if those parties are not Y2K compliant.
34
<PAGE>
<PAGE>
Contingency Plans
The Company has in place detailed emergency response and disaster
recovery plans designed to ensure high reliability of service to customers.
These plans are utilized routinely for abnormal service conditions. These
plans have been reviewed to identify required actions specific to the Y2K
issue. Draft contingency plans have been developed and were filed with the PUC
on December 31, 1998. These Y2K contingency plans address both Company
activities and actions necessary to mitigate the impact of third party
disruptions. These contingency plans have been coordinated with those of the
Electric Reliability Council of Texas (ERCOT) and NERC. Final contingency
plans are scheduled to be completed by June 1999.
International Operations - Y2K Programs
Australia
Overview
TU Australia Pty. Ltd., an interim holding company for the Company's
Australian operations (TU Australia) initiated a Y2K Program in the third
quarter of 1997 with the compilation of a Y2K inventory of supported IT
assets and systems. An IT Project Manager was appointed and a consultant
engaged to develop a Y2K remediation plan for items in the inventory
assessed as having Y2K risk. A consulting firm was engaged in early 1998
to provide a methodology for addressing the Y2K risks of all other assets
and systems. The consulting firm was subsequently retained to establish a
Y2K Program Office and complete a non-IT inventory. A Y2K structure was also
established in 1998 and a full time Program Director appointed to bring all
activities together into a single TU Australia Y2K Program. The
inventory contains over eight hundred different asset types divided
approximately equally between IT and non-IT items. The Program consists of
sixty-nine separate projects with individual project plans and project
managers.
Readiness
Fifty-one of the sixty-nine Y2K projects have been completed. Two projects
track the progress of Y2K preparedness associated with telecommunications and
electricity wholesale trading partners. The remaining projects are due for
completion by July 1999 and are associated with the implementation of new
applications for customer information and system control and data acquisition.
Costs
As a result of lower than anticipated requirements, the estimated costs
associated with the TU Australia Y2K Program were reduced to $2.3
million. Some additional costs included in capital budgets for new IT systems
are not reflected in these Y2K costs. Approximately 50% of the Y2K costs were
incurred during 1998 with the majority of the remaining costs to be incurred
in the first half of 1999. There can be no assurance that these estimates will
not change as a result of the discovery of unexpected additional remediation
work identified during Y2K testing.
Risk Issues
With respect to internal risks, TU Australia's current assessment
of the most reasonably likely worst case scenario is that impacts on either
service or financial performance will not be materially adverse. TU Australia
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.
35
<PAGE>
<PAGE>
Audits of the Y2K Program were conducted by PricewaterhouseCoopers in
1997 and 1998. The State Government Office of the Regulator General has
engaged an international consulting firm to externally audit the Y2K
preparations of all Victorian Electricity Supply Industry Companies in 1999.
Contingency Plans
Y2K contingency planning is being developed on three levels; asset level,
project level and program level. In addition, Y2K contingency planning
associated with assets that are assessed as having the capacity to interrupt
electricity supply will be developed jointly with the rest of the Victorian
Electricity Supply Industry. Y2K contingency plans at the asset level have
been completed and several project level plans have also been prepared. The
completion of the remainder of contingency plans represents the majority of
Y2K activities planned in 1999. Y2K contingency plans will be incorporated
into existing disaster plans and business continuity plans where appropriate.
UK/Europe
Overview
In the UK, the Eastern Group established a program of projects in August
1996 designed to ensure that all its systems are Y2K compliant. In testing
for conformity, Eastern Group uses the revised version of the British
Standards Institute's definition of Y2K conformity. Each project has six
phases: inventory, risk assessment, analysis, remediation, testing and
contingency planning.
Readiness
The inventory, risk assessment and analysis of the mainframe systems were
completed in June 1997. All COBOL code was fixed by November 1998. The
mainframe remediation work was completed in March 1999, and the testing work
is scheduled for completion by July 1999.
Inventories of all other IT systems and of embedded systems (controls,
monitoring, and protection systems, including electricity meters and customer
premises and systems used in Eastern Group's offices) were completed in
February 1998. Risk assessments were completed in August 1998. Many of the
older IT systems have already been replaced by systems which are Y2K
compliant. Remediation and testing of these systems is underway and is
scheduled for completion by August 1999. Since October 1996, requirements
have been included in the standard purchasing terms and conditions requiring
Y2K readiness for new systems. Acceptance tests for any significant new or
upgraded system include testing for Y2K readiness.
The IT infrastructure is currently based on a mixture of hardware and
operating systems connected by local and wide area networks. The system was
remediated in March 1999 and will be tested and verified compliant by the end
of May 1999. The infrastructure PABX systems were upgraded to be compliant in
February 1999.
Remediation products for three of the eight power station turbine control
systems were not available from all suppliers in time for the planned summer
shutdowns of 1998. Completion of this work has, therefore, been delayed until
August 1999. All the electricity distribution systems have been checked, and
testing was completed in February 1999.
Cost
The costs of addressing the Y2K issue are estimated to be approximately
$33 million. These costs include all Y2K related activities. They do not
include the cost of achieving Y2K compliance for new IT systems installed in
connection with the opening up of the domestic UK electricity retail market to
competition, new systems installed to meet other business needs, or the cost
of developing contingency plans for the energy management business.
36
<PAGE>
<PAGE>
Costs of addressing the Y2K issue are being expensed as incurred.
Amounts expended through December 31, 1998 (latest available information)
totaled $4.6 million. Cost expenditures for 1999 are estimated at $24.4
million and an additional $4 million for 2000.
Risk and Contingency Plans
With respect to internal risks, Eastern Group's current assessment of the
most reasonably likely worst case scenario is that impacts on either service
or financial performance will not be materially adverse. Eastern Group
believes, based on the results of testing that has already occurred on a large
portion of production equipment with embedded systems, that if any disruption
to service occurs, it will be isolated and of short-term duration.
All of Eastern Group's businesses, other than the energy management
business, have developed Y2K contingency plans. The energy management
business is in the process of developing its contingency plan. The Y2K
process includes a review of all the existing contingency plans and further
development of contingency arrangements to cover the Y2K failure scenarios.
The work is underway and due to be completed by June 1999, to be followed by
further review, testing and refinement and will result in revisions to the
existing contingency plans.
Eastern Group is working with its equipment and service suppliers to
ensure their products and services are Y2K compliant. Reviews were completed
by December 1998. Eastern Group believes that any failure of such suppliers
to be compliant is unlikely to have a material effect on Eastern Group or its
operations. Eastern Group's operations are heavily dependent upon the
reliability of the high voltage transmission system in England and Wales and
on the operations of the wholesale trading market for electricity in England
and Wales. The owners and operators of those systems have taken the position
that they anticipate no material disruptions of service.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The 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
1998 Form 10-K and is therefore not presented herein. Similar information for
recently acquired Westar/Kinetik Energy in Australia is not presently
available without undue cost and effort and is therefore not presented herein.
Item 5. OTHER INFORMATION
2000 Annual Meeting Shareholders' Proposals
Rule 14a-4(c) of the Securities and Exchange Commission's proxy rules
allows the Company to use discretionary voting authority to vote on a matter
coming before an annual meeting of shareholders which is not included in the
Company's proxy statement, if the Company does not have notice of the matter
at least 45 days before the date in 2000 corresponding to the date on which
the Company first mailed its proxy material for the prior year's annual
meeting of shareholders. In addition, discretionary voting authority may
generally also be used if the Company receives timely notice of such matter
(as described in the preceding sentence) and if, in the proxy statement, the
Company describes the nature of such matter and how the Company intends to
exercise its discretion to vote on such matter. Accordingly, for the 2000
Annual Meeting of Shareholders, any such notice must be received by the
Secretary of the Company on or before February 20, 2000.
This requirement is separate and apart from the Securities and Exchange
Commission's requirements that a shareholder must meet in order to have a
shareholder proposal included in the Company's proxy statement and form of
proxy. As described in the Company's proxy statement for its 1999 Annual
Meeting, specific proposals of common shareholders intended to be presented at
the 2000 Annual Meeting must be received by the Secretary of the Company no
later than December 6, 1999 in order to be eligible for inclusion in the
Company's proxy materials relating to that meeting.
37
<PAGE>
<PAGE>
PART II. OTHER INFORMATION
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) - Fifty-ninth Supplemental Indenture dated as of March 1,
1999 to TU Electric's Mortgage and Deed of Trust dated as
of December 1, 1983.
10 Material contracts
10(a) - Facilities Agreement for pounds1,275,000, Credit Facilities,
dated March 24, 1999, among TXU Eastern Holdings Limited,
TU Finance (No. 2) Limited, TU Acquisitions Limited, Chase
Manhattan Bank plc, Lehman Brothers International (Europe),
Merrill Lynch Capital Corporation and the other banks named
therein.
10(b) - Restated Salary Deferral Program of the Texas Utilities
Company System, as amended effective April 1, 1998.
10(c) - Split Dollar Life Insurance Program of the Texas Utilities
Company System, restated as of August 1, 1987.
10(d) - Second Supplemental Retirement Plan for Employee's of the
Texas Utilities Company System, as amended and restated
August 11, 1998.
10(e) - Long Term Incentive Compensation Plan of the Texas
Utilties Company System, dated as of May 23, 1997.
10(f) - Employment Agreement between TUC and David W. Biegler.
10(g) - Description of Compensatory Arrangement with Michael J.
McNally.
10(h) - Description of Compensatory Arrangement with H. Jarrell
Gibbs.
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
38
<PAGE>
<PAGE>
(b) Reports on Form 8-K filed since December 31, 1998:
Date of Report Item Reported
---------------- --------------
TUC
---
January 19, 1999 Item 7. Financial Statements and Exhibits
February 26, 1999 Item 5. Other Events
TU Electric
-----------
March 17, 1999 Item 5. Other Events
39
<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/ Jerry W. Pinkerton
-------------------------------
Jerry W. Pinkerton
Controller and Principal
Accounting Officer
Date: May 13, 1999
- -----------------------------------------------------------------------------
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/ Jerry W. Pinkerton
-----------------------------
Jerry W. Pinkerton
Controller and Principal
Accounting Officer
Date: May 13, 1999
40
<PAGE>
Exhibit 4(a)
TEXAS UTILITIES ELECTRIC COMPANY
TO
THE BANK OF NEW YORK,
(formerly Irving Trust Company)
Trustee under the Texas Utilities
Electric Company Mortgage and
Deed of Trust, dated as of
December 1, 1983
------------------
Fifty-ninth Supplemental Indenture
Providing among other things for
First Mortgage Bonds,
Pollution Control Series AK
------------------
Dated as of March 1, 1999
This Instrument Grants a Security Interest by a Utility
This Instrument Contains After-Acquired Property Provisions
<PAGE>
<PAGE>
This Instrument Grants a Security Interest by a Utility
This Instrument Contains After-Acquired Property Provisions
FIFTY-NINTH SUPPLEMENTAL INDENTURE
---------------------------------
INDENTURE, dated as of March 1, 1999, between TEXAS UTILITIES ELECTRIC
COMPANY, a corporation of the State of Texas, whose address is Energy Plaza,
1601 Bryan Street, Dallas, Texas 75201 (hereinafter sometimes called the
Company), and THE BANK OF NEW YORK (formerly Irving Trust Company), a
corporation of the State of New York, whose address is 101 Barclay Street, New
York, New York 10286 (hereinafter sometimes called the Trustee), Trustee under
the Mortgage and Deed of Trust, dated as of December 1, 1983 (hereinafter called
the Original Indenture, the Original Indenture and any and all indentures and
instruments supplemental thereto being hereinafter sometimes collectively called
the Mortgage), which Original Indenture was executed and delivered by the
Company to secure the payment of bonds issued or to be issued under and in
accordance with the provisions of the Mortgage, reference to which Mortgage is
made, this Indenture (hereinafter called the Fifty-ninth Supplemental Indenture)
being supplemental thereto;
WHEREAS, said Original Indenture was recorded or filed as required in the
State of Texas; and
WHEREAS, the Company executed and delivered to the Trustee the following
supplemental indentures:
Designation Dated as of
----------- -----------
First Supplemental Indenture.............................. April 1, 1984
Second Supplemental Indenture............................. September 1, 1984
Third Supplemental Indenture.............................. April 1, 1985
Fourth Supplemental Indenture............................. August 1, 1985
Fifth Supplemental Indenture.............................. September 1, 1985
Sixth Supplemental Indenture.............................. December 1, 1985
Seventh Supplemental Indenture............................ March 1, 1986
Eighth Supplemental Indenture............................. May 1, 1986
Ninth Supplemental Indenture.............................. October 1, 1986
Tenth Supplemental Indenture.............................. December 1, 1986
Eleventh Supplemental Indenture........................... December 1, 1986
Twelfth Supplemental Indenture............................ February 1, 1987
Thirteenth Supplemental Indenture......................... March 1, 1987
Fourteenth Supplemental Indenture......................... April 1, 1987
Fifteenth Supplemental Indenture.......................... July 1, 1987
Sixteenth Supplemental Indenture.......................... September 1, 1987
Seventeenth Supplemental Indenture........................ October 1, 1987
Eighteenth Supplemental Indenture......................... March 1, 1988
Nineteenth Supplemental Indenture......................... May 1, 1988
2
<PAGE>
<PAGE>
Designation Dated as of
----------- -----------
Twentieth Supplemental Indenture.......................... September 1, 1988
Twenty-first Supplemental Indenture....................... November 1, 1988
Twenty-second Supplemental Indenture...................... January 1, 1989
Twenty-third Supplemental Indenture....................... August 1, 1989
Twenty-fourth Supplemental Indenture...................... November 1, 1989
Twenty-fifth Supplemental Indenture....................... December 1, 1989
Twenty-sixth Supplemental Indenture....................... February 1, 1990
Twenty-seventh Supplemental Indenture..................... September 1, 1990
Twenty-eighth Supplemental Indenture...................... October 1, 1990
Twenty-ninth Supplemental Indenture....................... October 1, 1990
Thirtieth Supplemental Indenture.......................... March 1, 1991
Thirty-first Supplemental Indenture....................... May 1, 1991
Thirty-second Supplemental Indenture...................... July 1, 1991
Thirty-third Supplemental Indenture....................... February 1, 1992
Thirty-fourth Supplemental Indenture...................... April 1, 1992
Thirty-fifth Supplemental Indenture....................... April 1, 1992
Thirty-sixth Supplemental Indenture....................... June 1, 1992
Thirty-seventh Supplemental Indenture..................... June 1, 1992
Thirty-eighth Supplemental Indenture...................... August 1, 1992
Thirty-ninth Supplemental Indenture....................... October 1, 1992
Fortieth Supplemental Indenture........................... November 1, 1992
Forty-first Supplemental Indenture........................ December 1, 1992
Forty-second Supplemental Indenture....................... March 1, 1993
Forty-third Supplemental Indenture........................ April 1, 1993
Forty-fourth Supplemental Indenture....................... April 1, 1993
Forty-fifth Supplemental Indenture........................ May 1, 1993
Forty-sixth Supplemental Indenture........................ July 1, 1993
Forty-seventh Supplemental Indenture...................... October 1, 1993
Forty-eighth Supplemental Indenture....................... November 1, 1993
Forty-ninth Supplemental Indenture........................ May 1, 1994
Fiftieth Supplemental Indenture........................... May 1, 1994
Fifty-first Supplemental Indenture........................ August 1, 1994
Fifty-second Supplemental Indenture....................... April 1, 1995
Fifty-third Supplemental Indenture........................ June 1, 1995
Fifty-fourth Supplemental Indenture....................... October 1, 1995
Fifty-fifth Supplemental Indenture........................ March 1, 1996
Fifty-sixth Supplemental Indenture........................ September 1, 1996
Fifty-seventh Supplemental Indenture...................... February 1, 1997
Fifty-eighth Supplemental Indenture....................... July 1, 1997
which supplemental indentures were or are to be recorded or filed as required in
the State of Texas; and
WHEREAS, by the Original Indenture, the Company covenanted that it would
execute and deliver such supplemental indenture or indentures and such further
instruments and do such further acts as may be necessary or proper to carry out
more effectually the purposes of the Mortgage and to make subject to the Lien of
the Mortgage any property thereafter acquired and intended to be subject to the
Lien thereof; and
3
<PAGE>
<PAGE>
WHEREAS, in addition to the property described in the Original Indenture,
the Company has acquired certain other property, rights and interests in
property; and
WHEREAS, the Company has heretofore issued as of February 28, 1999, in
accordance with the provisions of the Original Indenture, as heretofore
supplemented, the following series of First Mortgage and Collateral Trust Bonds
and First Mortgage Bonds:
<TABLE>
<CAPTION>
Principal Principal
Amount Amount
Series Issued Outstanding
<S> <C> <C>
12% Series due March 1, 1985........................... $ 1,000,000 $ None
13 5/8% Series due April 1, 2014....................... 100,000,000 None
13 1/2% Series due September 1, 2014................... 150,000,000 None
12 7/8% Series due April 1, 2015....................... 150,000,000 None
12% Series due August 1, 2015.......................... 100,000,000 None
12% Series due September 1, 2015....................... 75,000,000 None
11 1/8% Series due December 1, 2015.................... 150,000,000 None
9 3/8% Series due March 1, 2016........................ 200,000,000 None
9 3/4% Series due May 1, 2016.......................... 200,000,000 None
Pollution Control Series C............................. 70,000,000 None
Pollution Control Series D............................. 200,000,000 None
9 1/2% Series due December 1, 2016..................... 300,000,000 None
9 1/4% Series due February 1, 2017..................... 250,000,000 None
Pollution Control Series E............................. 100,000,000 None
10 1/2% Series due April 1, 2017....................... 250,000,000 None
9 1/2% Series due July 1, 1997......................... 150,000,000 None
10 1/2% Series due July 1, 2017........................ 150,000,000 None
Pollution Control Series F ............................ 55,000,000 None
Pollution Control Series G ............................ 12,000,000 None
Pollution Control Series H ............................ 112,000,000 None
Pollution Control Series I ............................ 100,000,000 None
10 3/8% Series due May 1, 1998......................... 150,000,000 None
11 3/8% Series due May 1, 2018......................... 150,000,000 None
Secured Medium-Term Notes, Series A.................... 300,000,000 None
10.44% Series due November 1, 2008..................... 150,000,000 3,000,000
Pollution Control Series J ............................ 100,000,000 100,000,000
9 1/2% Series due August 1, 1999....................... 200,000,000 200,000,000
10% Series due August 1, 2019.......................... 100,000,000 None
9 7/8% Series due November 1, 2019..................... 150,000,000 None
Secured Medium-Term Notes, Series B.................... 150,000,000 114,200,000
Pollution Control Series K ............................ 50,000,000 50,000,000
Pollution Control Series L ............................ 40,000,000 40,000,000
10 5/8% Series due September 1, 2020................... 250,000,000 None
Secured Medium-Term Notes, Series C.................... 150,000,000 None
8 1/4% Pollution Control Series due October 1, 2020.... 11,000,000 11,000,000
7 7/8% Pollution Control Series due March 1, 2021...... 100,000,000 100,000,000
9 3/4% Series due May 1, 2021.......................... 300,000,000 133,047,000
Pollution Control Series M due June 1, 2021 ........... 86,250,000 None
Pollution Control Series N due June 1, 2021 ........... 57,500,000 None
Pollution Control Series O due June 1, 2021 ........... 57,500,000 None
4
<PAGE>
<PAGE>
Pollution Control Series P due June 1, 2021 ........... $115,000,000 $ 18,325,250
8 1/8% Series due February 1, 2002..................... 150,000,000 150,000,000
8 7/8% Series due February 1, 2022..................... 175,000,000 117,200,000
8 1/4% Series due April 1, 2004........................ 100,000,000 100,000,000
9% Series due April 1, 2022............................ 100,000,000 None
6 3/4% Pollution Control Series due April 1, 2022...... 50,000,000 50,000,000
7 1/8% Series due June 1, 1997......................... 150,000,000 None
8% Series due June 1, 2002............................. 147,000,000 147,000,000
6 5/8% Pollution Control Series due June 1, 2022....... 33,000,000 33,000,000
6 3/8% Series due August 1, 1997....................... 175,000,000 None
7 3/8% Series due August 1, 2001....................... 150,000,000 150,000,000
8 1/2% Series due August 1, 2024....................... 175,000,000 127,000,000
6.70% Pollution Control Series due October 1, 2022..... 16,935,000 16,935,000
6.55% Pollution Control Series due October 1, 2022..... 40,000,000 40,000,000
7 3/8% Series due November 1, 1999..................... 100,000,000 100,000,000
8 3/4% Series due November 1, 2023..................... 200,000,000 121,950,000
6 1/2% Pollution Control Series due December 1, 2027... 46,660,000 46,660,000
6 3/4% Series due March 1, 2003........................ 200,000,000 200,000,000
7 7/8% Series due March 1, 2023........................ 300,000,000 168,100,000
6.05% Pollution Control Series due April 1, 2025....... 90,000,000 90,000,000
6.10% Pollution Control Series due April 1, 2028....... 50,000,000 50,000,000
5 7/8% Series due April 1, 1998........................ 175,000,000 None
6 3/4% Series due April 1, 2003........................ 100,000,000 100,000,000
7 7/8% Series due April 1, 2024........................ 225,000,000 150,183,000
Pollution Control Series due June 1, 2023.............. 115,000,000 115,000,000
5 3/4% Series due July 1, 1998......................... 150,000,000 None
6 3/4% Series due July 1, 2005......................... 100,000,000 90,000,000
7 5/8% Series due July 1, 2025......................... 250,000,000 210,000,000
5 1/2% Series due October 1, 1998...................... 125,000,000 None
6 1/4% Series due October 1, 2004...................... 125,000,000 115,000,000
7 3/8% Series due October 1, 2025...................... 300,000,000 193,000,000
5 1/2% Pollution Control Series due May 1, 2022........ 50,000,000 50,000,000
5.55% Pollution Control Series due May 1, 2022......... 75,000,000 75,000,000
5.85% Pollution Control Series due May 1, 2022......... 33,465,000 33,465,000
Floating Rate Series due May 1, 1999................... 300,000,000 None
Pollution Control Series Q due May 1, 2029............. 45,045,500 45,045,500
Pollution Control Series R due May 1, 2029............. 45,045,500 45,045,500
0% Series due 1994..................................... 1,013,831,000 None
Pollution Control Series S due April 1, 2030........... 58,270,500 58,270,500
Pollution Control Series T due April 1, 2030........... 18,400,000 18,400,000
Pollution Control Series U............................. 136,108,250 136,108,250
Pollution Control Series V............................. 136,108,250 136,108,250
Pollution Control Series W............................. 13,857,500 13,857,500
Pollution Control Series X............................. 21,246,250 21,246,250
Secured Medium-Term Notes, Series D.................... 201,150,000 201,150,000
Pollution Control Series Y............................. 28,819,000 28,819,000
Pollution Control Series Z............................. 66,642,500 66,642,500
Pollution Control Series AA............................ 28,750,000 28,750,000
Pollution Control Series AB............................ 28,750,000 28,750,000
Pollution Control Series AC............................ 70,397,250 70,397,250
Pollution Control Series AD............................ 57,500,000 57,500,000
5
<PAGE>
<PAGE>
Pollution Control Series AE............................ 57,500,000 57,500,000
Pollution Control Series AF............................ 36,000,750 36,000,750
Pollution Control Series AG............................ 28,801,750 28,801,750
Pollution Control Series AH............................ 33,079,750 33,079,250
Pollution Control Series AI .......................... 59,253,750 59,253,750
Pollution Control Series AJ ........................... 13,800,000 13,800,000
</TABLE>
which bonds are also hereinafter sometimes called bonds of the First through
Ninety-seventh Series, respectively; and
WHEREAS, Section 2.01 of the Original Indenture provides that the form of
each series of bonds (other than the First Series) issued thereunder and of the
coupons to be attached to coupon bonds of such series shall be established by
Resolution of the Board of Directors of the Company, and that the form of such
series, as established by said Board of Directors, shall specify the descriptive
title of the bonds and various other terms thereof, and may also have such
omissions or modifications or contain such provisions not prohibited by the
provisions of the Mortgage as the Board of Directors may, in its discretion,
cause to be inserted therein expressing or referring to the terms and conditions
upon which such bonds are to be issued and/or secured under the Mortgage; and
WHEREAS, Section 22.04 of the Original Indenture provides, among other
things, that any power, privilege or right expressly or impliedly reserved to or
in any way conferred upon the Company by any provision of the Mortgage, whether
such power, privilege or right is in any way restricted or is unrestricted, may
be in whole or in part waived or surrendered or subjected to any restriction if
at the time unrestricted, or to additional restriction if already restricted,
and the Company may enter into any further covenants, limitations, restrictions
or provisions for the benefit of any one or more series of bonds issued
thereunder, or the Company may cure any ambiguity contained therein, or in any
supplemental indenture, or may establish the terms and provisions of any series
of bonds other than the First Series, by an instrument in writing executed and
acknowledged by the Company in such manner as would be necessary to entitle a
conveyance of real estate to be recorded in all of the states in which any
property at the time subject to the Lien of the Mortgage shall be situated; and
WHEREAS, the Company now desires to create a new series of bonds and to add
to its covenants and agreements contained in the Mortgage certain other
covenants and agreements to be observed by it and to alter and amend in certain
respects the covenants and provisions contained in the Mortgage; and
WHEREAS, the execution and delivery by the Company of this Fifty-ninth
Supplemental Indenture, and the terms of the bonds of the Ninety-eighth Series,
hereinafter referred to, have been duly authorized by the Board of Directors of
the Company by appropriate resolutions of said Board of Directors;
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NOW, THEREFORE, THIS INDENTURE WITNESSETH: That the Company, in
consideration of the premises and of Ten Dollars to it duly paid by the Trustee
at or before the ensealing and delivery of these presents, the receipt whereof
is hereby acknowledged, and in order to secure the payment of both the principal
of and interest and premium, if any, on the bonds from time to time issued under
the Mortgage, according to their tenor and effect and the performance of all the
provisions of the Mortgage (including any instruments supplemental thereto and
any modification made as in the Mortgage provided) and of said bonds, hath
granted, bargained, sold, released, conveyed, assigned, transferred, mortgaged,
hypothecated, affected, pledged, set over and confirmed and granted a security
interest in and by these presents doth grant, bargain, sell, release, convey,
assign, transfer, mortgage, hypothecate, affect, pledge, set over and confirm
and grant a security interest in (subject, however, to Excepted Encumbrances as
defined in Section 1.06 of the Original Indenture) unto The Bank of New York,
Trustee under the Mortgage, and to its successor or successors in said trust,
and to said Trustee and its successors and assigns forever, all properties of
the Company, real, personal and mixed, of the kind or nature specifically
mentioned in the Original Indenture, as heretofore supplemented, or of any other
kind or nature acquired by the Company on or after the date of the execution and
delivery of the Original Indenture (except any herein or in the Original
Indenture expressly excepted), now owned or, subject to the provisions of
Section 18.03 of the Original Indenture, hereafter acquired by the Company (by
purchase, consolidation, merger, donation, construction, erection or in any
other way) and wheresoever situated, including (without in anywise limiting or
impairing by the enumeration of the same, the scope and intent of the foregoing
or of any general description contained in this Fifty-ninth Supplemental
Indenture) all real estate, lands, easements, servitudes, licenses, permits,
franchises, privileges, rights of way and other rights in or relating to real
estate or the occupancy of the same; all power sites, flowage rights, water
rights, water locations, water appropriations, ditches, flumes, reservoirs,
reservoir sites, canals, raceways, waterways, dams, dam sites, aqueducts, and
all other rights or means for appropriating, conveying, storing and supplying
water; all rights of way and roads; all plants for the generation of electricity
by steam, water and/or other power; all power houses, gas plants, street
lighting systems, standards and other equipment incidental thereto; all
telephone, radio and television systems, air-conditioning systems and equipment
incidental thereto, water wheels, water works, water systems, steam heat and hot
water plants, substations, lines, service and supply systems, bridges, culverts,
tracks, ice or refrigeration plants and equipment, offices, buildings and other
structures and the equipment thereof; all machinery, engines, boilers, dynamos,
turbines, electric, gas and other machines, prime movers, regulators, meters,
transformers, generators (including, but not limited to, engine driven
generators and turbo-generator units), motors, electrical, gas and mechanical
appliances, conduits, cables, water, steam heat, gas or other pipes, gas mains
and pipes, service pipes, fittings, valves and connections, pole and
transmission lines, towers, overhead conductors and devices, underground
conduits, underground conductors and devices, wires, cables, tools, implements,
apparatus, storage battery equipment, and all other fixtures and personalty; all
municipal and other franchises, consents or permits; all lines for the
transmission and distribution of electric current, gas, steam heat or water for
any purpose including towers, poles, wires, cables, pipes, conduits, ducts and
all apparatus for use in connection therewith and (except as herein or in the
Original Indenture expressly excepted) all the right, title and interest of the
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Company in and to all other property of any kind or nature appertaining to
and/or used and/or occupied and/or enjoyed in connection with any property
hereinbefore or in the Original Indenture described.
TOGETHER WITH all and singular the tenements, hereditaments, prescriptions,
servitudes and appurtenances belonging or in anywise appertaining to the
aforesaid property or any part thereof, with the reversion and reversions,
remainder and remainders and (subject to the provisions of Section 13.01 of the
Original Indenture) the tolls, rents, revenues, issues, earnings, income,
product and profits thereof, and all the estate, right, title and interest and
claim whatsoever, at law as well as in equity, which the Company now has or may
hereafter acquire in and to the aforesaid property and franchises and every part
and parcel thereof.
IT IS HEREBY AGREED by the Company that, subject to the provisions of
Section 18.03 of the Original Indenture, all the property, rights and franchises
acquired by the Company (by purchase, consolidation, merger, donation,
construction, erection or in any other way) after the date hereof, except any
herein or in the Original Indenture expressly excepted, shall be and are as
fully granted and conveyed hereby and as fully embraced within the Lien of the
Original Indenture and the Lien hereof as if such property, rights and
franchises were now owned by the Company and were specifically described herein
and conveyed hereby.
PROVIDED that the following are not and are not intended to be now or
hereafter granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, hypothecated, affected, pledged, set over or confirmed hereunder, nor
is a security interest therein hereby or by the Original Indenture, as
heretofore supplemented, granted or intended to be granted, and the same are
hereby expressly excepted from the Lien and operation of the Original Indenture,
as heretofore supplemented, and from the Lien and operation of this Fifty-ninth
Supplemental Indenture, viz.: (1) cash, shares of stock, bonds, notes and other
obligations and other securities not hereinbefore or hereafter specifically
pledged, paid, deposited, delivered or held under the Mortgage or covenanted so
to be; (2) merchandise, equipment, apparatus, materials or supplies held for the
purpose of sale or other disposition in the usual course of business or for the
purpose of repairing or replacing (in whole or in part) any rolling stock,
buses, motor coaches, automobiles or other vehicles or aircraft or boats, ships,
or other vessels and any fuel, oil and similar materials and supplies consumable
in the operation of any of the properties of the Company; rolling stock, buses,
motor coaches, automobiles and other vehicles and all aircraft; boats, ships and
other vessels; all timber, minerals, mineral rights and royalties; (3) bills,
notes and other instruments and accounts receivable, judgments, demands, general
intangibles and choses in action, and all contracts, leases and operating
agreements not specifically pledged hereunder or under the Mortgage or
covenanted so to be; (4) the last day of the term of any lease or leasehold
which may hereafter become subject to the Lien of the Mortgage; (5) electric
energy, gas, water, steam, ice, and other materials or products generated,
manufactured, produced, or purchased by the Company for sale, distribution or
use in the ordinary course of its business; (6) any natural gas wells or natural
gas leases or natural gas transportation lines or other works or property used
8
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primarily and principally in the production of natural gas or its
transportation, primarily for the purpose of sale to natural gas customers or to
a natural gas distribution or pipeline company, up to the point of connection
with any distribution system; and (7) the Company's franchise to be a
corporation; provided, however, that the property and rights expressly
excepted from the Lien and operation of the Original Indenture and
this Fifty-ninth Supplemental Indenture in the above subdivisions (2)
and (3) shall (to the extent permitted by law) cease to be so excepted in
the event and as of the date that the Trustee or a receiver or trustee
shall enter upon and take possession of the Mortgaged and Pledged Property
in the manner provided in Article XV of the Original Indenture by reason
of the occurrence of a Default.
TO HAVE AND TO HOLD all such properties, real, personal and mixed, granted,
bargained, sold, released, conveyed, assigned, transferred, mortgaged,
hypothecated, affected, pledged, set over or confirmed or in which a security
interest has been granted by the Company as aforesaid, or intended so to be
(subject, however, to Excepted Encumbrances as defined in Section 1.06 of the
Original Indenture), unto The Bank of New York, Trustee, and its successors and
assigns forever.
IN TRUST NEVERTHELESS, for the same purposes and upon the same terms,
trusts and conditions and subject to and with the same provisos and covenants as
are set forth in the Original Indenture, as heretofore supplemented, this
Fifty-ninth Supplemental Indenture being supplemental to the Original Indenture.
AND IT IS HEREBY COVENANTED by the Company that all the terms, conditions,
provisos, covenants and provisions contained in the Original Indenture, as
heretofore supplemented, shall affect and apply to the property hereinbefore
described and conveyed and to the estate, rights, obligations and duties of the
Company and the Trustee and the beneficiaries of the trust with respect to said
property, and to the Trustee and its successors as Trustee of said property, in
the same manner and with the same effect as if said property had been owned by
the Company at the time of the execution of the Original Indenture, and had been
specifically and at length described in and conveyed to said Trustee by the
Original Indenture as a part of the property therein stated to be conveyed.
The Company further covenants and agrees to and with the Trustee and its
successors in said trust under the Mortgage, as follows:
ARTICLE I
Ninety-eighth Series of Bonds
SECTION 1. There shall be a series of bonds designated "Pollution Control
Series AK" (herein sometimes referred to as the "Ninety-eighth Series"), each of
which shall also bear the descriptive title "First Mortgage Bond", and the form
thereof, which shall be established in accordance with a Resolution of the Board
of Directors of the Company, shall contain suitable provisions with respect to
the matters hereinafter in this Section specified. Bonds of the Ninety-eighth
Series may be issued in one or more tranches and may be issued with up to one
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month's accrued interest. Bonds of the Ninety-eighth Series shall be issued as
fully registered bonds in denominations of One Dollar and, at the option of the
Company, in any multiple or multiples thereof (the exercise of such option to be
evidenced by the execution and delivery thereof); Bonds of the Ninety-eighth
Series shall mature on such date not later than the maturity date of the Series
1999A Brazos Revenue Bonds, referred to below, shall bear interest at such rate
or rates, payable on such date or dates, and have such other terms and
provisions not inconsistent with the Original Indenture as the proper officer or
officers of the Company may determine in accordance with one or more Resolutions
filed with the Trustee referring to this Fifty-ninth Supplemental Indenture
(such determinations shall be evidenced by or in accordance with one or more
written orders filed with the Trustee for the authentication and delivery of
bonds of the Ninety-eighth Series and shall constitute determinations of the
Board of Directors with respect to such bonds for purposes of the Mortgage), the
principal of each said bond to be payable at the office or agency of the Company
in the Borough of Manhattan, The City of New York, New York, or at the office or
agency of the Company in the City of Dallas, Texas, as the holder of any said
bond may elect, in such coin or currency of the United States of America as at
the time of payment is legal tender for public and private debts. Bonds of the
Ninety-eighth Series shall be dated as in Section 2.03 of the Original Indenture
provided.
(I) The bonds of the Ninety-eighth Series shall be initially issued in an
aggregate principal amount not to exceed $123,036,585 to, and registered in the
name of, the trustee under the Trust Indenture, dated as of March 1, 1999
(hereinafter sometimes called the "1999A Brazos Bond Indenture"), of the Brazos
River Authority (hereinafter sometimes called the "Brazos Authority"), under
which its Collateralized Pollution Control Revenue Refunding Bonds (Texas
Utilities Electric Company Project), Series 1999A (hereinafter sometimes called
the "Series 1999A Brazos Revenue Bonds") are to be issued, in order to provide
the benefit of a lien to secure the obligation of the Company to make the
Installment Payments and Purchase Price payments pursuant to, and as such terms
are defined in, the Installment Payment and Bond Amortization Agreement, dated
as of March 1, 1999 (hereinafter sometimes called the "1999A Brazos Agreement"),
between the Brazos Authority and the Company. The maximum amount of bonds of the
Ninety-eighth Series that may be issued is unlimited but the aggregate principal
amount of bonds of the Ninety-eighth Series at any one time Outstanding shall
not exceed $127,126,750. The maximum stated interest rate for any bonds of the
Ninety-eighth Series shall not exceed 15% per annum.
The Company shall receive a credit against its obligation to make any
payment of the principal of and interest, if any, on any tranche of the bonds of
the Ninety-eighth Series, whether at maturity, upon redemption or otherwise, in
an amount equal to (x) the sum of (a) the amount, if any, on deposit in the Debt
Service Fund maintained under the 1999A Brazos Bond Indenture which reduces the
corresponding Installment Payment and (b) the amount, if any, paid by the
Company pursuant to Section 5.04 of the 1999A Brazos Agreement in respect of the
corresponding Installment Payment multiplied by (y) the ratio of the principal
amount of Outstanding bonds of the Ninety-eighth Series to the principal amount
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of outstanding Series 1999A Brazos Revenue Bonds, in each case immediately prior
thereto.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of, and interest, if any, on any tranche of the bonds of the
Ninety-eighth Series as the same shall become due and payable shall have been
fully satisfied and discharged unless and until it shall have received a written
notice from the trustee under the 1999A Brazos Bond Indenture, signed by the
President, a Vice President or a Trust Officer of such trustee, stating that the
corresponding Installment Payment or Purchase Price payment has become due and
payable and has not been fully paid and specifying the amount of funds required
to make such payment.
(II) In the event that any Series 1999A Brazos Revenue Bonds outstanding
under the 1999A Brazos Bond Indenture shall become immediately due and payable
pursuant to Section 6.02 of the 1999A Brazos Bond Indenture, all bonds of the
Ninety-eighth Series, then Outstanding, shall be redeemed by the Company, on the
date such Series 1999A Brazos Revenue Bonds shall have become immediately due
and payable, at the principal amount thereof.
The Trustee may conclusively presume that no redemption of bonds of the
Ninety-eighth Series is required pursuant to the first paragraph of this
subsection (II) unless and until it shall have received a written notice from
the trustee under the 1999A Brazos Bond Indenture, signed by the President, a
Vice President or a Trust Officer of such trustee, stating that Series 1999A
Brazos Revenue Bonds have become immediately due and payable pursuant to Section
6.02 of the 1999A Brazos Bond Indenture, and specifying the principal amount
thereof. Said notice shall also contain a waiver of notice of such redemption by
the trustee under the 1999A Brazos Bond Indenture, as the holder of all bonds of
the Ninety-eighth Series then Outstanding.
(III) The Company hereby waives its right to have any notice of redemption
pursuant to subsection (II) of this Section 1 state that such notice is subject
to the receipt of the redemption moneys by the Trustee on or before the date
fixed for redemption. Notwithstanding the provisions of Section 12.02 of the
Mortgage, any such notice under such subsection shall not be conditional.
(IV) At the option of the registered owner, any bonds of the Ninety-eighth
Series, upon surrender thereof for cancellation at the office or agency of the
Company in the Borough of Manhattan, The City of New York, New York, shall be
exchangeable for a like aggregate principal amount of bonds of the same series
of other authorized denominations.
Bonds of the Ninety-eighth Series shall not be transferable except to any
successor trustee under the 1999A Brazos Bond Indenture, any such transfer to be
made at the office or agency of the Company in the Borough of Manhattan, The
City of New York, New York.
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The Company hereby waives any right to make a charge for any exchange or
transfer of bonds of the Ninety-eighth Series.
ARTICLE II
Miscellaneous Provisions
SECTION 2. Subject to the amendments provided for in this Fifty-ninth
Supplemental Indenture, the terms defined in the Original Indenture, as
heretofore supplemented, shall for all purposes of this Fifty-ninth Supplemental
Indenture have the meanings specified in the Original Indenture, as heretofore
supplemented.
SECTION 3. The Trustee hereby accepts the trusts herein declared, provided,
created or supplemented and agrees to perform the same upon the terms and
conditions herein and in the Original Indenture, as heretofore supplemented, set
forth and upon the following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fifty-ninth Supplemental
Indenture or for or in respect of the recitals contained herein, all of which
recitals are made by the Company solely. In general, each and every term and
condition contained in Article XIX of the Original Indenture shall apply to and
form part of this Fifty-ninth Supplemental Indenture with the same force and
effect as if the same were herein set forth in full with such omissions,
variations and insertions, if any, as may be appropriate to make the same
conform to the provisions of this Fifty-ninth Supplemental Indenture.
SECTION 4. Whenever in this Fifty-ninth Supplemental Indenture either of
the parties hereto is named or referred to, this shall, subject to the
provisions of Articles XVIII and XIX of the Original Indenture, be deemed to
include the successors and assigns of such party, and all the covenants and
agreements in this Fifty-ninth Supplemental Indenture contained, by or on behalf
of the Company, or by or on behalf of the Trustee, shall, subject as aforesaid,
bind and inure to the respective benefits of the respective successors and
assigns of such parties, whether so expressed or not.
SECTION 5. Nothing in this Fifty-ninth Supplemental Indenture expressed or
implied, is intended, or shall be construed to confer upon, or to give to, any
person, firm or corporation, other than the parties hereto and the holders of
the bonds and coupons Outstanding under the Mortgage, any right, remedy or claim
under or by reason of this Fifty-ninth Supplemental Indenture or any covenant,
condition, stipulation, promise or agreement hereof, and all the covenants,
conditions, stipulations, promises and agreements in this Fifty-ninth
Supplemental Indenture contained, by or on behalf of the Company, shall be for
the sole and exclusive benefit of the parties hereto, and of the holders of the
bonds and coupons Outstanding under the Mortgage.
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SECTION 6. This Fifty-ninth Supplemental Indenture shall be executed in
several counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, TEXAS UTILITIES ELECTRIC COMPANY has caused its
corporate name to be hereunto affixed, and this instrument to be signed and
sealed by its Chairman of the Board and Chief Executive, President or one of its
Vice Presidents, and its corporate seal to be attested by its Secretary or one
of its Assistant Secretaries for and in its behalf, and THE BANK OF NEW YORK has
caused its corporate name to be hereunto affixed, and this instrument to be
signed and sealed by one of its Vice Presidents or Assistant Vice Presidents and
its corporate seal to be attested by one of its Assistant Vice Presidents,
Assistant Secretaries or Assistant Treasurers, all as of the day and year first
above written.
TEXAS UTILITIES ELECTRIC COMPANY
By /s/ John H. Carlson
-------------------------------
JOHN H. CARLSON
Vice President
Attest:
/s/ John F. Stephens, Jr.
- ----------------------------------
JOHN F. STEPHENS, JR.
Assistant Secretary
Executed, sealed and delivered by
TEXAS UTILITIES ELECTRIC COMPANY in the presence of:
/s/ Justin B. Rhodes
- ----------------------------------
/s/ Craig Taylor
- ----------------------------------
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THE BANK OF NEW YORK,
Trustee
By /s/ W.N. Gitlin
-----------------------------
W. N. GITLIN
Vice President
Attest:
/s/ Remo J. Reale
- ----------------------------------
REMO J. REALE
Assistant Vice President
Executed, sealed and delivered by
THE BANK OF NEW YORK
in the presence of:
/s/ Mary LaGumina
- ----------------------------------
/s/ Thomas B. Zakrzewski
- ----------------------------------
<PAGE>
15
STATE OF TEXAS ...............)
) SS.:
COUNTY OF DALLAS..............)
Before me, a Notary Public in and for said State, on this day personally
appeared JOHN H. CARLSON, known to me to be the person whose name is subscribed
to the foregoing instrument and known to me to be a Vice President of TEXAS
UTILITIES ELECTRIC COMPANY, a Texas corporation, and acknowledged to me that
said person executed said instrument for the purposes and consideration therein
expressed, and as the act of said corporation.
Given under my hand and seal of office this 22nd day of March, 1999.
/s/ Julia Laxson
----------------------------------
JULIA LAXSON
Notary Public, State of Texas
My Commission Expires February 26, 2001
16
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STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
Before me, a Notary Public in and for said State, on this day personally
appeared W.N. GITLIN, known to me to be the person whose name is subscribed to
the foregoing instrument and known to me to be a Vice President of THE BANK OF
NEW YORK, a New York corporation, and acknowledged to me that said person
executed said instrument for the purposes and consideration therein expressed,
and as the act of said corporation.
Given under my hand and seal of office this 30th day of March, 1999.
/s/ William J. Cassels
--------------------------------
WILLIAM J. CASSELS
Notary Public, State of New York
No. 01CA5027729
Qualified in Bronx County
Certificate filed in New York County
Commission Expires May 16, 2000
Exhibit 10(a)
CONFORMED COPY
DATED 24 March 1999
FACILITIES AGREEMENT
for
(pound)1,275,000,000 Credit Facilities
TXU Eastern Holdings Limited (1)
as Primary Borrower
TU Finance (No. 2) Limited (2)
TU Acquisitions Limited
Chase Manhattan plc (3)
Lehman Brothers International (Europe)
Merrill Lynch Capital Corporation
as Joint Lead Arrangers
The financial institutions listed in Schedule 1 (4)
as Banks
The Chase Manhattan Bank (5)
as Issuing Bank
Chase Manhattan International Limited (6)
as Facility Agent
Lovell White Durrant
London
<PAGE>
Contents
1. PURPOSE AND DEFINITIONS...................................................1
2. THE COMMITMENTS..........................................................29
3. THE CONDITIONS...........................................................30
4. ADVANCES AND LETTERS OF CREDIT...........................................31
5. INTEREST AND INTEREST PERIODS............................................38
6. REPAYMENT, PREPAYMENT, CANCELLATION AND REDUCTIONS.......................41
7. FEES AND EXPENSES........................................................44
8. PAYMENTS AND TAXES; ACCOUNTS AND CALCULATIONS............................46
9. REPRESENTATIONS AND WARRANTIES...........................................54
10. INFORMATION UNDERTAKINGS.................................................58
11. GENERAL UNDERTAKINGS.....................................................60
12. EVENTS OF DEFAULT........................................................70
13. INDEMNITIES..............................................................75
14. UNLAWFULNESS, INCREASED COSTS, ALTERNATIVE INTEREST RATES................77
15. SET-OFF AND PRO-RATA PAYMENTS............................................80
16. ASSIGNMENT, SUBSTITUTION AND LENDING OFFICES.............................82
17. FACILITY AGENT...........................................................85
18. POWERS ..................................................................87
19. DUTIES ..................................................................90
20. EXONERATION..............................................................91
21. GUARANTEE................................................................95
22. DETERMINATION OF MATTERS.................................................95
23. BASIS OF DECISIONS.......................................................97
24. MATTERS CONCERNING THE BORROWERS.........................................99
25. NOTICES AND OTHER MATTERS...............................................101
26. GOVERNING LAW AND JURISDICTION..........................................104
<PAGE>
- ii -
Schedule 1
The Banks and their Commitments.............................................105
Schedule 2
Forms of Drawdown Notice....................................................107
Schedule 3
Conditions Precedent........................................................110
Schedule 4
Calculation of Mandatory Cost Rate..........................................112
Schedule 5
Form of Substitution Certificate............................................114
Schedule 6
Form of Accession Certificate...............................................118
Schedule 7
Terms of Borrowers' Indemnity...............................................120
Schedule 8
Terms of Interbank Guarantee and Indemnity..................................123
Schedule 9
Terms of Guarantee..........................................................126
EXECUTION PAGES.............................................................130
<PAGE>
THIS AGREEMENT is made as of the 24th day of March 1999
BETWEEN:
(1) TXU Eastern Holdings Limited (a company registered in England and Wales
with company number 3505836) (the "Primary Borrower");
(2) TU Finance (No. 2) Limited a company registered in England and Wales with
company number 3514100 ("Finco 2") and TU Acquisitions Limited, 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;
(4) The financial institutions listed in Schedule 1 as the initial Banks;
(5) The Chase Manhattan Bank as the initial Issuing Bank; and
(6) 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:
(a) Term Facility
to the Primary Borrower, a term facility in Sterling of up to
(pound)750,000,000 which shall be available for the financing or
refinancing of the Acquisition;
(b) Revolving Credit Facility Tranche A
to the Primary Borrower and (subject to accession to this
Agreement under clause 24 (Matters Concerning the Borrowers)) the
Additional Borrowers, a 364 day (subject to extension in
accordance with clause 6.2 (Repayment of Revolving Advances))
multicurrency revolving credit facility of up to a Sterling Amount
of (pound)200,000,000 to be used for the Group's general corporate
purposes.
(c) Revolving Credit Facility Tranche B
to the Primary Borrower and (subject to accession to this
Agreement under clause 24 (Matters Concerning the Borrowers)) the
Additional Borrowers, a four year multicurrency revolving credit
facility of up to a Sterling Amount of (pound)325,000,000 to be
used for the Group's general corporate purposes.
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- 2 -
For the avoidance of doubt, no Revolving Advance may be used to finance
or refinance the Acquisition save as envisaged by clause 4.3
(Utilisations generally).
No amounts borrowed under any of the Facilities may be used, directly or
indirectly, to repay or refinance the minimum equity contribution of
(pound)1,678,082,000 required to be made under the terms of the Original
Facilities Agreement.
This Agreement is being entered into for the purpose, in effect, of
amending and restating the Original Facilities Agreement.
1.2 Definitions
In this Agreement, unless the context otherwise requires:
"Accession Certificate" means an accession certificate (by way of deed)
substantially in the form of schedule 6 (Form of Accession Certificate)
and entered into or to be entered into by an acceding Obligor and the
Facility Agent;
"Acquisition" means the acquisition by Bidco of the Target Shares;
"Act" means the Companies Act 1985;
"acting in concert" has the meaning given to that term in the City Code
on Takeovers and Mergers;
"Additional Borrower" means (a) Finco 2 and (b) any Permitted Borrower
which accedes to this Agreement as an Additional Borrower pursuant to
clause 24 (Matters Concerning the Borrowers) for so long as it remains a
Permitted Borrower;
"Additional Guarantor" means any member of the Group which accedes to
this Agreement as a Guarantor pursuant to clause 24 (Matters Concerning
the Borrowers) for so long as it remains a Guarantor;
"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 excluding any
Qualifying Preference Shares issued by Finco 2;
(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:
(i) by deducting the amounts standing to the debit of the
consolidated reserves of the Group;
(ii) by deducting any amounts attributable to interests of
non-Group members in Subsidiaries of Finco 2;
(iii) by deducting any reserves set aside for deferred taxation;
<PAGE>
- 3 -
(iv) 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);
(v) 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 or the shares of any Group Company over which
security has been given as contemplated in paragraph
(c)(ii) of the definition of Project Finance Borrowing is
represented by `investment in subsidiaries' (or other
investments) in the books of their relevant holding
companies, deducting the amount of such investment;
(vi) by deducting the amount of any outstanding loan from a
member of the Group or (other than an Equity-Financed Loan)
the Primary Borrower to, or for the benefit of, any Project
Finance Subsidiary or any Relevant Person or expended on,
or in support of, any Project in respect of which Project
Finance Borrowings have been incurred and the book value of
any assets over which security has been given as
contemplated in paragraph (c)(ii) of the definition of
Project Finance Borrowing (to the extent, in either case,
not deducted under paragraph (v) above (without double
counting));
(vii) 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 or in the context of paragraph (d) of the
definition of Permitted Security Interest or in the context of clauses
11.1 (Financial ratios) or 11.17 (Project Finance Subsidiaries), each
such amount shall be determined by reference to the most recent financial
statements and compliance certificates delivered hereunder as adjusted
pursuant to the provisions of clause 11.2 (Change of Accounting policies)
and the terms of this definition or any relevant clause of this
Agreement;
"Advance" means any Term Advance or Revolving Advance and, as the context
requires, includes the full amount of such Advance when made or the
amount of an Advance which is outstanding at any relevant time;
"Affected Bank" has the meaning given to it in clause 14.4 (Mitigation)
(except that the definition of "Affected Bank" and "Affected Banks" in
clause 4.14 (Unavailability of Optional Currency) shall have that meaning
in that clause only);
"Affiliate" means, in relation to any person, any Subsidiary of that
person, any holding company of that person and any other Subsidiary of
that holding company;
"Applicable Fees Rate" means at any time in respect of:
<PAGE>
- 4 -
(a) the Revolving Credit Facility Tranche A, 40% of the Applicable
Margin for Revolving Credit Facility Tranche A;
(b) the Revolving Credit Facility Tranche B, 50% of the Applicable
Margin for Revolving Credit Facility Tranche B;
"Applicable Margin" means, at any time, 0.875% per annum or if at the
date hereof or subsequently the most recent determination of the Leverage
Ratio under clause 11.1 (Financial Ratios) 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% 0.75%
60% 55% 0.625%
55% -- 0.5%
(a) any reduction or increase 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 10.3(a)
(Annual audited financial statements) and 10.3 (b) (Unaudited
management accounts), together with the financial covenant
compliance certificate by the Primary Borrower referred to in
clause 10.3(c) (Compliance with financial undertakings), 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
0.875%;
"Appropriate Accounting Principles" means:
(a) the accounting principles, policies, standards, practices and
bases (being generally accepted in the United Kingdom), as adopted
in the Original Group Accounts; or
(b) where any change has occurred and (if required) has been agreed
under clause 11.2 (Change of Accounting policies), such accounting
principles, standards, practices and bases as have so occurred and
(if required) have been so agreed;
"Arrangers" means Chase Manhattan plc, Lehman Brothers International
(Europe) and Merrill Lynch Capital Corporation;
"Auditors" means PricewaterhouseCoopers or such other internationally
recognised firm of chartered accountants as may be auditors to the Group
for the time being;
"Available Amount" means, at any time and in respect of any Facility or
Tranche, the aggregate of the Available Commitments of all the Banks in
respect of such Facility or Tranche at such time;
<PAGE>
- 5 -
"Available Commitment" means, in relation to a Bank and save as otherwise
provided in this Agreement:
(a) in respect of the Revolving Credit Facility Tranche A at any time,
its Commitment in respect of such Tranche at such time less:
(i) its Contribution to the Sterling Amount of all outstanding
Revolving Credit Facility Tranche A 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 under Revolving Credit Facility
Tranche A; and
(iii) its proportion of the Sterling Amount of any amount paid
out by the Issuing Bank under a Letter of Credit issued
under Revolving Credit Facility Tranche A and not yet
reimbursed;
(b) in respect of the Revolving Credit Facility Tranche B at any time,
its Commitment in respect of such Tranche at such time less:
(i) its Contribution to the Sterling Amount of all outstanding
Revolving Credit Facility Tranche B 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 under Revolving Credit Facility
Tranche B; and
(iii) its proportion of the Sterling Amount of any amount paid
out by the Issuing Bank under a Letter of Credit issued
under Revolving Credit Facility Tranche B and not yet
reimbursed;
"Available Commitment Termination Date" means save as otherwise provided
herein:
(a) in relation to the Revolving Credit Facility Tranche A, eleven
months after the date of this Agreement;
(b) in relation to the Revolving Credit Facility Tranche B, one month
before the Final Repayment Date;
(c) in relation to the Term Facility, thirty days after the date of
this Agreement (subject to clause 3.4 (Repayment and Cancellation
of Original Facilities Agreement));
"Banking Day" means a day (other than a Saturday or a Sunday) on which
banks are open for general business in London and New York City, and:
(a) in relation to a transaction involving an Optional Currency (other
than Euros, Euro Units or national currency units), the principal
financial centre of the country of that Optional Currency; and
(b) in relation to a transaction involving Euros, Euro Units or
national currency units, in Frankfurt am Main, Germany (or such
other principal financial centre(s) of any Participating Member
State(s) as the Facility Agent may from time to time reasonably
<PAGE>
- 6 -
nominate for this purpose) and, being a day on which payments in
Euros are settled in the Trans-European Automated Real-time Gross
settlement Express Transfer (TARGET) system;
"Banks" means the original banks listed in schedule 1 (The Banks and
their Commitments) and includes their successors in title, assignees and
Substitutes;
"Bidco" means TU Acquisitions Limited (company no 3455523);
"Bidco/Primary Borrower Guarantee" means the guarantee given by Bidco in
favour of the Primary Borrower of all Finco 2's payment obligations to
the Primary Borrower under the intra Group loans made by the Primary
Borrower to Finco 2, both those existing at the date of this Agreement,
and those subsequently required to be made by or pursuant to this
Agreement;
"Borrowed Money" means any present or future Indebtedness (whether by way
of principal or premium) for or in respect of:
(a) money borrowed or raised;
(b) any recourse arising from the discounting of receivables save for
recourse for disputed or ineligible debts or similar rights of
recourse typical in a securitisation transaction;
(c) liabilities under or in respect of any acceptance or acceptance
credit or documentary credit facility or standby credit facility,
other than (i) any such credit facility relating to the
acquisition cost of assets or services to the extent that the same
involves deferral of payment of any sum for one year or less and
(ii) exposure under any such credit issued to back completion or
performance obligations (including any obligation to lodge cash
margin payments in case of a specified decline in a Group
Company's rating), except to the extent that:
(aa) such obligations are for the payment of Borrowed Monies, or
for the payment of liquidated damages the payment of which
is triggered by an event or circumstance which has (as of
the relevant date on which any calculation is made) already
occurred, and, in the case of a decline in rating, if the
rating agency concerned has reduced the relevant rating,
the amount taken into account will be the amount which has,
or will, become payable by reason of such decline; or
(bb) provision has been made in the accounts of the relevant
Group Company for an amount due under the underlying
obligation, or, were the relevant Group Company to prepare
accounts as of the date on which a compliance certificate
is issued to the Facility Agent under clause 10.3 (Delivery
of financial statements), such a provision should be made
in accordance with Appropriate Accounting Principles;
(d) any notes, bonds, debentures, debenture stock, loan stock or other
debt security offered, issued or distributed whether by way of
public offer, private placing, acquisition consideration or
otherwise and whether issued for cash or in whole or in part for a
consideration other than cash, other than any bond, note,
debenture or other debt security referred to in (f) below;
<PAGE>
- 7 -
(e) any outstanding Qualifying Preference Shares in issue;
(f) any outstanding balance of the acquisition cost of assets or
services to the extent payable on deferred payment terms after the
time of acquisition or possession thereof by the person liable
(but only to the extent that the same:
(i) involves deferral of payment of any sum for more than one
year;
(ii) is not a cost in respect of the expansion, development or
renewal of all or part of the "licensee's distribution
system" (as defined in the PES Licence); and
(iii) exceeds (pound)25,000,000 in respect of any transaction or
series of related transactions)
whether or not any instalments for payment are evidenced by a
bond, note, debenture or other debt security issued by the
obligor;
(g) any Finance Lease;
(h) any guarantee, indemnity or other legally binding assurance
against (or other legally binding arrangement intended to prevent
or limit) loss arising under any Borrowed Money of any person who
is not a Group member;
(i) for the purpose of clause 12.1(d) (Cross-default) only, any
Derivative Transaction (calculated at the mark-to-market value for
close-out);
(j) any liability which has arisen under any transaction by virtue of
which:
(i) a capital sum is received by a person as consideration for
the sale or disposal (whether by outright alienation or the
grant of a lease or other interest or otherwise) of any
assets; and
(ii) a third party making or funding the payment receives a
guarantee, indemnity or other legally binding assurance
from a member of the Group against (or other legally
binding arrangement intended to prevent or limit) loss as a
result of the assets not generating or being realised for a
specific amount or an amount calculated in an agreed
manner;
(k) any amount raised under any other transaction having the
commercial effect of a borrowing and entered into primarily as a
means of raising finance;
(l) such part (if any) of the amounts made available to any person as
a result of any securitisation as, in accordance with the
Appropriate Accounting Principles, is or is to be treated as a
creditor rather than as a deduction from or reduction in debtors
or other assets;
Provided that:
(i) Subordinated Debt shall be excluded;
(ii) indebtedness of a member of the Group to another member of
the Group shall be excluded except that indebtedness of any
member of the Group to the
<PAGE>
- 8 -
Primary Borrower shall (to the extent that any such
indebtedness would have fallen within the definition of
Borrowed Money if owed to a third party) be treated as
Borrowed Money. Where Borrowed Money is incurred by an SPV
and on-lent indirectly to Finco 2 by the Borrowed Money in
question being on-lent by such SPV to the Primary Borrower
and then being on-lent by that person to Finco 2, such
Borrowed Money shall be counted only once in any
calculation of the Leverage Ratio or of any other Financial
Covenant;
(iii) indebtedness of a member of the Group to a Relevant Person
shall (to the extent that any such indebtedness would have
fallen within the definition of Borrowed Money if owed to a
third party) be treated as Borrowed Money;
(iv) any interest, dividends, commissions, fees or other like
financing charges shall be included to the extent that they
have been capitalised and remain payable but have not been
discharged;
(v) in respect of paragraph (d) (where the item concerned is a
bond, note, debenture, debenture stock, loan stock or other
debt security issued at a discount) and in respect of
paragraph (e), only the issue price of any such debt
security or Qualifying Preference Share falling thereunder,
together with any applicable discount required under the
Appropriate Accounting Principles to be recognised in the
relevant person's most recently published financial
statements, shall be included;
(vi) in respect of paragraph (g), only the capitalised value
established in accordance with the Statement of Standard
Accounting Practice 21 (as supplemented, varied or replaced
from time to time) of a Finance Lease as shown in the
relevant person's most recently published financial
statements (or as would be shown in the next following
financial statements, if such Finance Lease was entered
into in a period for which there are not yet statements
available) shall be included;
(vii) Indebtedness for or in respect of Project Finance
Borrowings shall be excluded; and
(viii) adjustments shall be made to the exchange rate at which
such Borrowings are converted into Sterling in order to
take account of the effect of any relevant currency swap;
(and so that no amount shall be included or excluded more than once);
"Borrowers" means the Primary Borrower and the Additional Borrowers (if
any), and "Borrower" means any one of them;
"Capitalisation" means at any time the aggregate of Adjusted Share
Capital and Reserves and Consolidated Net Borrowings;
"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
<PAGE>
- 9 -
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 on or after
2nd March 1998, 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 and in respect of any Facility
or Tranche at any relevant time, the amount set opposite its name in
relation to the relevant Facility or Tranche (as the case may be) in
schedule 1 (The Banks and their Commitments) or, in the case of
Commitments under Tranche A of the Revolving Credit Facility, after the
original Final Repayment Date, the amounts notified by each Bank as the
amount of its Tranche A Commitment which it agrees to make available
under a new 364 day facility (in accordance with clause 6.2) 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 compliance certificate most recently delivered to the
Facility Agent pursuant to clause 10.3(c) (Compliance with Financial
Undertakings) (the "relevant balance sheet"), less the aggregate book
value of:
(a) all Liquid Assets which are in, or are freely transferable to, the
United Kingdom and which are owned by Finco 2 or a wholly-owned
member of the Group or (in the case of the Liquid Assets of a
member of the Group which is a partly-owned member of the Group)
the proportion of the total amount for the time being of Liquid
Assets held by such member which corresponds to the proportion of
the total nominal amount of the issued equity share capital of
such member which is beneficially owned directly or indirectly by
Finco 2 (exclusive of Liquid Assets constituting or representing
obligations of any member or members of the Group); and
(b) in the case of a partly-owned member of the Group, the proportion
of total amounts for the time being outstanding of Borrowed Money
owing by such partly owned member of the Group otherwise than to
another member of the Group which corresponds to the proportion of
the total nominal amount of the issued equity share capital of
such partly owned member of the Group not beneficially owned
directly or indirectly by Finco 2 (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 member
of the Group by any other member of the Group;
"Contribution" means, in relation to a Bank, the principal amount of any
or all (as the context requires) of the Term Advances and/or the
Revolving Advances and its Proportion of the Outstanding Contingent
Liabilities owing to such Bank at any relevant time;
<PAGE>
- 10 -
"Default" means any Event of Default or any event which with the giving
of notice, lapse of time, determination of materiality or fulfilment of
any other applicable condition (or any combination of the foregoing)
would, if unremedied, 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
(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;
"Distribution Business Tangible Net Worth" means, at any time, the net
assets as shown in the most recently published audited balance sheet of
the Distribution Business prepared pursuant to the PES Licence less any
amounts shown in such audited balance sheet in respect of goodwill or
intangible assets of the Distribution Business;
"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 (Forms of Drawdown
Notice);
<PAGE>
- 11 -
"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 (excluding any share
of consolidated profits or losses which is attributable to Project
Finance Subsidiaries or to a business the assets or cash flow of which
constitute security for Project Finance Borrowings as contemplated in
paragraphs (c)(i) and (c)(ii) of the definition of Project Finance
Borrowings) before taking into account:
(a) interest payable and interest receivable;
(b) amounts provided for depreciation and amortisation of goodwill;
(c) exceptional items;
(d) Taxes (other than VAT); and
(e) the deduction of any Acquisition costs;
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, but for this
purpose treating Finco 2 as a wholly-owned Subsidiary of the Primary
Borrower) all as determined by reference to the most recent financial
statements and compliance certificates delivered under clause 10.3
(Delivery of Financial Statements), as adjusted pursuant to clause 11.2
(Change of Accounting policies);
"Electricity Act" means the Electricity Act 1989;
"EMU" means Economic and Monetary Union as contemplated in the Treaty
establishing the European Community;
"EMU Legislation" means legislative measures of the European Council for
the introduction of, changeover to or operation of a single or unified
European currency (whether known as the Euro or otherwise), being in part
the implementation of the third stage of Economic and Monetary Union as
contemplated in the Treaty on European Union;
"Enforcement Date" means the date of the first declaration made by the
Facility Agent pursuant to clause 12.2 (Acceleration);
"Equity-Financed Loan" means the aggregate of any loans by the Primary
Borrower (other than to a member of the Group) to the extent that at any
time they do not exceed an amount equal to the excess (if any) of
dividends received by the Primary Borrower over and above the amount of
dividends paid out or declared by the Primary Borrower;
"Euro" means the single currency of Participating Member States;
"EURIBOR" means, in relation to any Advance or unpaid sum denominated in
Euros, the percentage rate per annum determined by the Facility Agent to
be equal to:
(a) the rate which appears on the page of the Bridge Telerate Screen
which displays for spot value the EURIBOR rate sponsored by the
Banking Federation of the European Union for deposits in Euros
(currently page "248") for the specified period; or
<PAGE>
- 12 -
(b) if such page or such service shall cease to be available or
relevant, such other page or such other service for the purpose of
displaying the EURIBOR rate for Euros as the Facility Agent, after
consultation with the Banks and the Primary Borrower, shall
select;
"Euro Unit" means the currency unit of the Euro;
"Event of Default" means any of the events or circumstances described in
clause 12.1 (Events of Default);
"Excess Equity Funding" means the amount owing by Bidco to the Parent
pursuant to the note issued by Bidco to the Parent in consideration of
the issue of the Parent's shares, which shares constituted a portion of
the consideration for the Target Shares acquired by Bidco in connection
with the Acquisition;
"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 both or either (as the context requires) of the Term
Facility and the Revolving Credit Facility and (as the context requires)
"Facility" means either 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 Agent);
"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 Letters" means the fee letters referred to in clause 7.1
(Arrangement, underwriting, participation and agency fees), 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 2 March 2003 or, in the case of the
Revolving Credit Facility Tranche A only, 364 days from the date of this
Agreement (or as amended in accordance with clause 6.2 if applicable);
"Finance Documents" means this Agreement, any L/C-Related Document, each
Drawdown Notice, each Accession Certificate and the Fee Letters;
"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 and the Banks and (as the context requires) "Finance Party"
means any one of them;
<PAGE>
- 13 -
"Finance Period" means the period from the date of this Agreement until
the date on which the Facility Agent acting reasonably 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 clause 11.1
(Financial ratios);
"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);
"Generation Business Tangible Net Worth" means, at any time, the net
assets as shown in the most recently published audited balance sheet of
the Generation Business prepared pursuant to the PES Licence less any
amounts shown in such audited balance sheet in respect of goodwill or
intangible assets of the Generation Business;
"Generation Licence" means each of those licences granted by the
Secretary of State under section 6(1) of the Electricity Act authorising
the relevant licensee to carry on Generation Business and any activities
ancillary thereto, or any replacement licence or licences granted from
time to time to any member of the Group (or, if more than one, the most
recent such replacement);
"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 or
to whose jurisdiction any of the foregoing is subject or in whose
activities any of the foregoing is a participant;
"Group" means the Primary Borrower and all its Subsidiaries for the time
being (except Project Finance Subsidiaries) save that, where the
reference to the Group is used in respect of the Financial Definitions
used in calculating the Leverage Ratio, Group shall mean the Primary
Borrower's Subsidiaries (except Project Finance Subsidiaries) and shall
not include the Primary Borrower itself, and in either case "member of
the Group" or "Group Company" means any one of them;
"Guarantee" means the guarantee set out in schedule 9 (Terms of
Guarantee) to be given by each Guarantor and "Guarantees" shall be
construed accordingly;
"Guarantors" means (a) the Primary Borrower and each Additional Borrower
for so long as that person is an Additional Borrower, and each Additional
Guarantor, if any, which in each case has not been released from the
Guarantee, and (b) for so long as any part of the Excess Equity Funding
remains outstanding but not thereafter, Bidco, and "Guarantor" means any
one of them;
<PAGE>
- 14 -
"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 Term Advance, each period for
the calculation of interest in respect of such Advance ascertained in
accordance with clause 5.2 (Interest Period for the Term Advances) (or
otherwise in this Agreement);
"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 4.5 (Issue of Letters of Credit);
"Issuing Bank" means The Chase Manhattan Bank or any alternative Bank
which has been notified by the Primary Borrower to 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 which
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) in the case of Euros, EURIBOR; or
(b) in the case of any other currency, the offered rate (if any)
appearing on the relevant page of the Telerate screen, or such
other pages as may replace such page of the Telerate screen, which
displays "BBA LIBOR" for deposits in the relevant currency 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
(c) if the relevant screen is generally inaccessible or if the
relevant rate does not appear on the relevant page or such other
page as may replace such page, 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, in the case of Euros, prime
banks in the European inter-bank market and, in the case of any
other currency, leading banks in the London inter-bank market,
deposits in the relevant currency and for the specified period,
in each case at or about 11.00 am (London time or, in the case of Euros,
Central European Time) on the Quotation Date for such period;
<PAGE>
- 15 -
"Licence Undertaking" means any and each undertaking or assurance by any
one or more of the Parent, the Primary Borrower, Finco 2, Bidco, the
Target or The Energy Group Limited (company number 3613919) 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 any Licensee;
"Licences" means those licences granted by the Secretary of State:
(a) under the Electricity Act to the REC or any other Principal
Subsidiary authorising each relevant licensee to carry on the
Distribution Business, the Supply Business, a Second-Tier Supply
Business or (or part of) the Generation Business and any
activities ancillary thereto;
(b) under section 7 of the Gas Act 1986 to a Principal Subsidiary; or
(c) being a replacement licence or licences, from time to time to REC
or any other Principal Subsidiary (or, if more than one, the most
recent such replacement);
as amended and/or extended from time to time;
"Licensees" means REC and any such other Principal Subsidiary as, at any
time, is the licensee under a Licence and "Licensee" means any one of
them;
"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 (if not the
United Kingdom) 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, with a recognised financial
institution;
(c) certificates of deposit, from a recognised financial institution,
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
remaining maturity of 12 months or less excluding commercial paper
issued by any person other than a state entity or a person with a
credit rating of AAA from Standard & Poor's or equivalent or a
short term credit rating of A1 or equivalent;
(h) any obligation owing to a Group Company in respect of a securities
repurchase agreement by a counterparty which is rated AAA or
equivalent or has a short term credit rating of A1 or equivalent,
or in the absence of such a rating, where such obligation is
backed by a margin deposit substantially sufficient to make up for
any shortfall as between the mark-to-market price of the
underlying securities and the amount owing;
<PAGE>
- 16 -
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 Spot Rate as of
11.00 a.m. on such date for the purchase of such currency with
Sterling;
"Majority Banks" means subject to clause 23.2 (Notice to Majority Banks)
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;
"Mandatory Cost Rate" means, in relation to any period, a percentage
calculated for such period at an annual rate determined in accordance
with schedule 4 (Calculation of Mandatory Cost Rate);
"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 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;
<PAGE>
- 17 -
"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;
"national currency unit" means the currency unit (other than a Euro Unit)
of a Participating Member State.
"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 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)
charged and amortised under FRS4, including the interest equivalent
element of Finance Leases adjusted by:
(a) excluding interest, fees or commission or the interest equivalent
element of Finance Leases accrued by or to members of the Group
from or to other members of the Group;
(b) deducting credit interest accrued during such period which would
be shown as interest receivable in the relevant accounts delivered
under clause 10.3 (Delivery of Financial Statements), as adjusted
pursuant to clause 11.2 (Change of Accounting Policies);
(c) excluding any nominal imputed interest charge that arises only as
a result of an accounting procedure;
(d) adding amounts payable, and deducting amounts receivable, under
interest rate hedging transactions entered into by the Group from
time to time; and
(e) deducting the amount of income accrued to any member of the Group
in respect of the actual or prospective repurchase by the
counterparty of securities under any such securities repurchase
agreement as is referred to in paragraph (h) of the definition of
Liquid Assets established by reference to the increase in price as
between the original sale and the repurchase;
"Obligor" means any Borrower and any Guarantor;
"Optional Currency" means any currency (other than Sterling) which is
freely transferable and freely convertible into Sterling;
"Original Facilities Agreement" means the agreement dated 2nd March 1998
(as subsequently re-stated) made between the Joint Lead Arrangers, the
Facility Agent, the Issuing Bank, the Primary Borrower and others
providing for facilities of (pound)3,625,000,000 for the purposes of the
Acquisition;
"Original Group Accounts" means the audited consolidated accounts of the
Target for the year ended 31st March 1998;
<PAGE>
- 18 -
"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;
"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);
"Participating Member State" means each state so described in any EMU
legislation;
"Peabody Companies" means Peabody Holding Company, Inc., a company duly
incorporated in the state of New York, Darex Capital Inc, a Panamanian
company, Peabody (Australia) Limited, incorporated in England and Wales,
and Citizens Power LLC, and Goldfields Mining Corporation, each
incorporated in the State of Delaware;
"Permitted Borrower" means any Subsidiary or holding company of Eastern
Group plc which is a wholly-owned subsidiary of Finco 2 and incorporated
in England and Wales, except the REC;
"Permitted Security Interest" means any of the following, namely a
Security Interest:
(a) subsisting at the date of this Agreement and notified in writing
to the Facility Agent on or prior to that date or securing the
amounts outstanding under the Original Facilities Agreement, or
arising whether before, on or after the date of this Agreement by
operation of law in the ordinary course of business;
(b) over goods and/or documents of title thereto arising in the
ordinary course of letter of credit transactions;
(c) arising by way of retention of title to goods by the supplier of
those goods arising in the ordinary course of business;
(d) created after the date hereof provided that the Indebtedness
secured thereby, when aggregated with any other Indebtedness
secured by any subsisting Security Interest permitted by (and only
by) this paragraph (d) whether or not such Indebtedness is in
respect of any member of the Group, does not at any time exceed an
amount equal to 15 per cent. of Adjusted Share Capital and
Reserves;
<PAGE>
- 19 -
(e) created after the date hereof securing Borrowed Money which is
refinanced by a Project Finance Borrowing within 6 months of the
date of such Security Interest's creation, provided that:
(i) at any one time Borrowed Money permitted to be secured
under this clause (e) shall not exceed (pound)200,000,000,
or its equivalent in another currency; and
(ii) the Primary Borrower shall have notified the Facility Agent
on or before the creation of such Security Interest that
the related Borrowed Money is intended to be temporary
bridging finance pending refinancing by a Project Finance
Borrowing;
(f) existing on or created after the date hereof (i) to secure a
Project Finance Borrowing and/or (ii) over an asset and/or the
shares of a Project Finance Subsidiary;
(g) over or affecting any asset acquired by a member of the Group
after the date hereof and subject to which such asset is acquired,
provided that:
(i) such Security Interest was not created at the request of
any member of the Group in contemplation of the acquisition
of such asset by a member of the Group; and
(ii) the amount thereby secured (or the amount of the facility,
drawings under which are or would be thereby secured) has
not been increased at the request of any member of the
Group in contemplation of, or since the date of, the
acquisition of such asset by a member of the Group; or
(h) over or affecting any assets of any company which becomes a member
of the Group after the date hereof, where such Security Interest
is created prior to the date on which such company becomes a
member of the Group provided that:
(i) such Security Interest was not created at the request of
any member of the Group in contemplation of such company
becoming a member of the Group; and
(ii) the amount thereby secured (or the amount of the facility,
drawings under which are or would be thereby secured) has
not been increased at the request of any member of the
Group in contemplation of, or since the date of, such
company becoming a member of the Group; or
(i) created after the date hereof with the prior written consent of
the Facility Agent (acting in accordance with the instructions of
the Majority Banks) provided that the amount thereby secured (or
the amount of the facility, drawings under which are or would be
thereby secured) has not been increased beyond the amount so
consented to; or
(j) any order of a court affecting any asset or assets of a member of
the Group to the extent that such order is discharged within 28
days after it is made and the consequences thereof would not
constitute an Event of Default; or
<PAGE>
- 20 -
(k) created or arising to secure any Indebtedness incurred and applied
in or towards the refinancing of any Indebtedness secured by a
Permitted Security Interest as permitted by paragraphs (a), (g),
(h), (i) or (m) of this definition but only to the extent that:
(i) the amount of the Indebtedness secured by such Security
Interest (or, if higher, the amount of the facility,
drawings under which are or would be thereby secured) does
not exceed the amount secured by such Permitted Security
Interest at the date of the refinancing; and
(ii) the amount secured by such Permitted Security Interest is
thereby reduced by an amount equal to the amount secured by
such Security Interest; or
(l) consisting of a contractual right (in personam and not in rem)
restricting the payment of:
(i) cash deposits made by way of support of counter-indemnity
obligations of a member of the Group in respect of
guarantees given or analogous contingent liabilities
incurred by the holder of such cash deposits for the
account of a member of the Group; and/or
(ii) credit balances on bank accounts as part of general Group
banking arrangements having as their intention or effect
the netting of exposure of the bank to members of the
Group; or
(m) over any asset acquired by a member of the 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 paragraph
(m) and, to the extent it refinances Indebtedness secured under
this paragraph (m), paragraph (k), shall not exceed
(pound)1,000,000 in aggregate at any time; or
(n) 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;
"PES Licence" means the licence granted to REC by the Secretary of State
under Section 6 of the Electricity Act authorising REC to distribute
and/or supply electricity within an authorised area to the public, or any
additional or replacement licence(s) for the supply and/or distribution
of electricity granted from time to time to any member of the Group (or,
if more than one replacement, the most recent such replacement), each as
amended or modified from time to 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 and any agreement replacing such pooling and settlement
agreement from time to time;
<PAGE>
- 21 -
"Principal Subsidiary" means:
(a) any member of the Group whose unconsolidated net assets or pre-tax
profit at the date of, or for, any period ending 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 or for that period, and,
during any financial year, such other members of the Group as may
be named in the notification provided to the Agent by the Primary
Borrower pursuant to clause 10.3(b)(i) (Unaudited management
accounts), 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; 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;
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 provided that it shall not continue by
operation of this paragraph (b) to be a Principal Subsidiary after
the delivery to the Facility Agent of the accounts referred to in
(a) above covering the period in which the transfer occurred, if:
(i) the transferor was and continues to be a Principal
Subsidiary by virtue of paragraph (a) above or was a
Principal Subsidiary only by virtue of paragraph (c) below;
and
(ii) where the transferor was a Licensee, it continues to be a
Licensee;
(c) any member of the Group which is a holding company, directly or
indirectly, of a Principal Subsidiary;
"Project" means any project or investment (these terms being treated as
including a series of related projects or investments and any
modifications thereto or developments or expansions of such projects or
investments);
"Project Finance Borrowings" means, at any date, any Indebtedness to
finance or refinance, or in respect of the financing or refinancing of, a
Project:
(a) which is or has been incurred by a single purpose company (whether
or not a Subsidiary of the Primary Borrower) whose principal
assets and business are, at such date, constituted by such Project
and whose liabilities in respect of such Indebtedness are, at such
date, not directly or indirectly the subject of a guarantee,
indemnity or other form of assurance, undertaking or support
(having substantially similar effect to a guarantee or indemnity)
from any member of the Group except as expressly referred to in
paragraph (c) below (a "Project Finance Subsidiary"); or
<PAGE>
- 22 -
(b) which is or has been incurred by a Subsidiary of the Primary
Borrower in its capacity as a partner in, and whose only material
asset is its interest in, a single purpose partnership where the
partnership's principal assets and business are, at that date,
constituted by such Project and where the liabilities of such
Subsidiary in respect of such Indebtedness are not, at that date,
directly or indirectly the subject of a guarantee, indemnity or
other form of assurance, undertaking or support (having
substantially similar effect to a guarantee or indemnity) from any
member of the Group except as expressly referred to in paragraph
(c) below (also a "Project Finance Subsidiary"); or
(c) in respect of which the person or persons to whom such
Indebtedness is or may be owed by the obligor in respect of such
Indebtedness (whether or not a Subsidiary of the Primary Borrower)
have no recourse whatsoever to any member of the Group (whether or
not the obligor) for the repayment of or payment of any sum
relating to such Indebtedness other than:
(i) recourse to such obligor for amounts limited to the
aggregate cash flow or net cash flow received or receivable
by it (other than historic cash flow or historic net cash
flow) from such Project; and/or
(ii) recourse to such obligor for the purpose only of enabling
amounts to be claimed in respect of such Indebtedness in an
enforcement of any Encumbrance given by such obligor over
the assets comprised in such Project (or, where such
obligor is a single purpose company or a Subsidiary of the
Primary Borrower as described in sub-clause (b), given by
any shareholder or the like in the obligor over its shares
or the like in the capital of the obligor) to secure such
Indebtedness or any recourse referred to in (iii) below,
Provided that (A) the extent of such recourse to such
obligor (or its shareholder or the like) is limited solely
to the amount of any recoveries made on such enforcement,
and (B) such person or persons are not entitled, by virtue
of any right or claim arising out of or in connection with
such Indebtedness, to commence proceedings for the winding
up or dissolution of the obligor (or its shareholder or the
like) or to appoint or procure the appointment of any
administrator, receiver, administrative receiver, trustee
or similar person or official in respect of the obligor (or
its shareholder or the like) or any of its assets (save for
the assets the subject of such Encumbrance); and/or
(iii) recourse to such obligor generally, or directly or
indirectly to a member of the Group, under any form of
assurance, undertaking or support, which recourse is
limited to a claim for damages (other than liquidated
damages and damages required to be calculated in a
specified way) for breach of an obligation (not being a
payment obligation or an obligation to procure payment by
another or an obligation to comply or to procure compliance
by another with any financial ratios or other tests of
financial condition) by the person against whom such
recourse is available.
For the purpose of each of paragraphs (a), (b) and (c) of this
definition:
(aa) an off-take agreement entered into between a Group Company and a
Project Finance Subsidiary, or an obligor in respect of Project
Finance Borrowing described in paragraph (c), which is on arms
length terms shall not of itself be deemed to be a
<PAGE>
- 23 -
guarantee, indemnity or other form of assurance, undertaking or
support or to involve liability or recourse; and
(bb) any right of recourse against a member of the Group as a result of
its shareholding in an unlimited company, partnership or similar
entity will be deemed to be a guarantee, indemnity or other form
of assurance, undertaking or support (having substantially similar
effect to a guarantee or indemnity);
"Project Finance Subsidiary" has the meaning set out in paragraph (a) or
(b) of Project Finance Borrowing and also means any Subsidiary of any
such person;
"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) in each case with respect to the relevant
Tranche of the Revolving Facility;
"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; and
(ii) is or will (on becoming a Bank) be beneficially entitled to
any interest paid and 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 so as, so far
as practicable, to put the Banks in the same position as they
would otherwise have been in; or
(b) a Treaty Lender;
"Qualifying Preference Shares" means on any date preference shares of any
member of the Group expressed (whether by law, agreement or otherwise) to
be redeemable at the option of the issuer, any other person or otherwise
on or before the Final Repayment Date;
"Quarter" means each three-month period ending on the last day in March,
June, September and December in each year;
"Quarter Date" means the final day of each Quarter;
"Quotation Date" means, in relation to an Interest Period, Maturity
Period or other period for which LIBOR is to be determined:
(a) the first day of such period if the Advance is in Sterling;
<PAGE>
- 24 -
(b) the second Banking Day before the first day of such period (or
such other date on which quotations would customarily be provided
by leading banks in the London interbank market for deposits in
the relevant currency for delivery on the first day of such
period), if the Advance is in an Optional Currency;
"REC" means Eastern Electricity plc (company no. 2366906 or any successor
as the Licensee in respect of the Distribution Business);
"Recovering Bank" has the meaning given to that term in clause 15.2
(Pro-rata payments);
"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 ceases to
so act, such other bank or banks as shall be selected by the Facility
Agent in accordance with clause 23.7 (Change of Reference Banks);
"Related Persons" each of the Facility Agent, the Issuing Bank, any
successor Facility Agent or Issuing Bank arising under clause 17
(Facility Agent) and the Arrangers, together with their respective
Affiliates and the officers, directors, employees, agents, trustees and
attorneys-in-fact of such persons and Affiliates;
"Relevant Company" means any of the Obligors, Finco 2, Bidco, The Energy
Group Limited (company no. 3613919) and the Principal Subsidiaries;
"Relevant Person" means the Parent and any Affiliate or Associated
Company of the Parent which is neither the Primary Borrower nor a member
of the Group nor a Project Finance Subsidiary;
"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, and (c) the
time barring of claims under the Limitation Act 1980;
"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 clauses 2.1(b) and (c) (The Facilities);
"Second-Tier Supply Business" has the same meaning as in the PES Licence;
"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 Interest" means any mortgage, pledge, lien, charge, assignment
by way of security, deposit of cash subject to contractual restrictions
on re-drawing, 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;
<PAGE>
- 25 -
"Spot Rate" means, in respect of any sum denominated in any currency
other than Sterling, 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 a particular day;
"SPV" means any company or other entity directly or indirectly
wholly-owned by the Primary Borrower, incorporated or otherwise
established, and used, solely for the purpose of issuing one or more
capital market instruments for the purpose of raising finance on behalf
of the Group and, if applicable, carrying out all functions falling to be
carried out by it under a securitisation or other financing arrangement
for which it was established;
"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 the
relevant 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 4.11 (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;
(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 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;
"Subordinated Debt" means Indebtedness incurred on terms which to the
reasonable satisfaction of the Facility Agent:
(a) prohibit repayment or prepayment of any principal amounts
(including capitalised interest) during the Finance Period;
(b) prohibit the holder of that Indebtedness from exercising any
rights or remedies which it might otherwise have to recover such
Indebtedness during the Finance Period; and
(c) provide that in the event of insolvency, dissolution, liquidation
or other insolvency proceedings such Indebtedness shall be
effectively subordinated in right of payment to all liabilities of
the Obligors under the Finance Documents.
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"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 10.2 (Preparation of Financial Statements), 11.1
(Financial Ratios), 11.2 (Change of Accounting policies), 20.7
(Pre-contractual effect of exoneration) and schedule 6 (Form of
Accession Certificate) 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);
"Substitution Certificate" means a certificate substantially in the terms
of schedule 5 (Form of Substitution Certificate);
"Supply Business" means, in the case of a Licensee under the PES Licence,
its authorised business as a public electricity supplier in the
authorised area as such terms are used in its PES Licence from time to
time;
"Target" means the company formerly known as The Energy Group PLC
(company no. 3257256) and subsequently re-named as Energy Holdings (No.
3) Limited;
"Target Shares" means the issued and to be issued shares in the capital
of the Target;
"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;
"Term Advance" means each borrowing under the Term Facility or (as the
context requires) the principal amount of that borrowing outstanding at
any relevant time;
"Term Facility" means the facility granted by the Banks under clause
2.1(a) (The Facilities);
"Test Period" means:
(a) each twelve-month period ending on the last day of each Quarter;
and
(b) each accounting reference period (as defined in Part VIII of the
Companies Act 1985) of the Primary Borrower or, where it applies
to the Leverage Ratio, Finco 2, ending on 31 December in each
year;
"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;
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"Treaty Lender" means a person which (a) 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 (b)
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;
"Treaty on European Union" means the Treaty of Rome of 25 March 1957, as
amended by the Single European Act 1986 and the Maastricht Treaty (which
was signed at Maastricht on 1 February 1992 and came into force on 1
November 1993), as amended from time to time;
"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;
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(g) references to a "person" includes any individual, firm, company,
corporation, government, state or agency of a state or any
unincorporated body of persons, undertaking (within the meaning of
Section 259(1) of the Act) or other joint venture, organisation or
association (whether or not having separate legal personality) or
any two or more of the foregoing;
(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
at the Spot Rate on the day on which the calculation falls to be
made for spot delivery, as conclusively determined by the Facility
Agent;
(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 on behalf of the Facility Agent and the Arrangers and
on behalf of the Obligors, or if there is no such document, the
form reasonably 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;
(o) "arms length terms" means on terms which are 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;
(p) 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;
(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
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(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;
(r) any provision of this Agreement stated to have effect on, after,
or as from, 1 January 1999 will, to the extent that the provision
relates to any currency of a state which is not a Participating
Member State on 1 January 1999, have effect in relation to that
currency on the date on which it becomes a Participating Member
State;
(s) unless the context requires otherwise, expressions defined in the
Act shall have the same meanings in this Agreement, except that
the expression "company" shall include a body corporate
established outside Great Britain;
(t) "Associated Company" shall have the meaning given to it in the
Appropriate Accounting Principles; and
(u) references to a "wholly-owned" or "partly-owned" member of the
Group or Subsidiary of the Primary Borrower shall be construed:
(i) to refer to Subsidiaries whether directly or indirectly owned
by the Primary Borrower; and (ii) on the assumption that the
Primary Borrower owns 100% of Finco 2; and
(v) for the avoidance of doubt, neither a lease nor a Finance Lease
entered into on arm's length terms shall be regarded as an
agreement or arrangement having the effect of conferring security
or a security interest.
2. THE COMMITMENTS
2.1 The Facilities
The Banks, relying upon each of the representations and warranties in
clause 9 (Representations and Warranties) and upon and subject to the
conditions hereof, agree to make available:
(a) to the Primary Borrower, the Term Facility in the principal sum of
(pound)750,000,000;
(b) to the Primary Borrower and the Additional Borrowers, the
Revolving Credit Facility Tranche A in the principal sum of
(pound)200,000,000; and
(c) to the Primary Borrower and the Additional Borrowers, the
Revolving Credit Facility Tranche B in the principal sum of
(pound)325,000,000.
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
Term Facility or the relevant Tranche of the Revolving Credit Facility,
as the case may be, bears to the Total Commitments in respect of the Term
Facility or such Tranche of the Revolving Credit 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 Term Facility or the relevant
Tranche of the Revolving Credit Facility would thereby be exceeded.
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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.
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 in respect of 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 Utilisation may be made until the Facility Agent, or its duly
authorised representative, shall have received the documents and evidence
specified in Part A of Schedule 3 (Conditions Precedent), in each case in
form and substance satisfactory to the Facility Agent and the Facility
Agent shall, once it is so satisfied, so confirm in writing to the
Primary Borrower.
3.2 General conditions precedent
Subject to clause 3.3 (Waiver of conditions precedent), 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
(Representations and Warranties) are true and correct on and as of
each such date as if each such representation and warranty were
made with respect to the facts and circumstances existing at such
date; and
(b) no Default shall have occurred and be continuing (which has not
been waived) 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
(which has not been waived).
3.3 Waiver of conditions precedent
The conditions specified in this clause 3 (The Conditions) 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
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conditions by the Facility Agent acting on the instructions of the
Majority Banks in respect of any Advance.
3.4 Repayment and cancellation of Original Facilities Agreement
(a) No Utilisation may be made:
(i) until the Finance Period (as defined in the Original
Facilities Agreement) expires, except, subject to the terms
of this Agreement, a Utilisation used solely in refinancing
the whole of the obligations under the Original Facilities
Agreement; and
(ii) unless a notice of cancellation in respect of the whole of
the obligations under the Original Facilities Agreement has
been delivered to the facility agent under such agreement.
(b) If the Finance Period (as defined in the Original Facilities
Agreement) has not expired within thirty days after the date of
this Agreement or such later date as may be agreed with the
Facility Agent (acting on the instructions of Majority Banks), all
Commitments under this Agreement shall be completely cancelled and
no Utilisations made.
4. ADVANCES AND LETTERS OF CREDIT
4.1 Term Facility
(a) Repayment of outstandings under the Original Facilities Agreement
Subject to the terms and conditions of this Agreement, Term
Advances may only be drawn down in order to re-finance term
advances under the Original Facilities Agreement, any interest
rolled up thereon, and any revolving advances drawn under the
Original Facilities Agreement to pay interest on such outstanding
term advances, and only following receipt by the Facility Agent of
an appropriately completed Drawdown Notice in the form set out in
Part A of Schedule 2 (Term Facility) signed on behalf of the
Primary Borrower not later than 11am two Banking Days before the
proposed Drawdown Date. No Term Advance may be made after the
Available Commitment Termination Date.
(b) Book entries
The implementation of clause 4.1 (a) (Repayment of outstandings
under the Original Facilities Agreement) shall where identical
amounts are due to and from the same Banks be by way of book
entries. The Banks shall participate in each Term Advance on the
basis of the notifications made by the Facility Agent to achieve
the above.
4.2 Revolving Credit Facility
(a) Drawdown
Subject to the terms and conditions of this Agreement, Revolving
Advances shall be made to any Borrower following receipt by the
Facility Agent from such Borrower of
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an appropriately completed Drawdown Notice relating to the
Revolving Credit Facility and in the form set out in Part B of
Schedule 2 (Revolving Credit Facility) signed on behalf of that
Borrower not later than 11 a.m. two Banking Days, or, in the case
of non-sterling Advances, 3 p.m. three Banking Days before the
proposed Drawdown Date.
(b) Amount
Each Drawdown Notice delivered to the Facility Agent pursuant to
clause 4.2(a) (Drawdown) 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
of the relevant Tranche of the Revolving Credit Facility;
(ii) the currency of denomination of the Advance (being Sterling
or an Optional Currency);
(iii) 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 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 Amount in
respect of the relevant Tranche of the Revolving Credit
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 of the relevant Tranche
of the Revolving Credit Facility;
(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 15 Revolving Advances outstanding at
any time, and not more than one Revolving Advance may be made
under each Tranche of the Revolving Credit Facility 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 4.11 (Currency
fluctuations).
(e) 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 of the relevant Tranche of the Revolving
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Credit Facility and no Advance may be drawn by any Borrower under
that Tranche thereafter.
(f) Netting
If, on any Maturity Date, a Bank is required to provide another
Revolving Credit Advance to the same Borrower in the same
currency, the Facility Agent shall apply the amount which that
Bank is required to make available in respect of the new Revolving
Credit Advance in or towards the repayment (or, if it is a
different currency, the purchase of the relevant currency required
for the repayment) for the account of the relevant Borrower of the
amount of the Revolving Credit Advance (in its currency of
denomination) which is then due to be repaid to that Bank. Any
difference between the amount which is due to that Bank and the
amount which that Bank is required to make available on that
Maturity Date shall remain payable by the relevant Borrower or
that Bank, as the case may be.
4.3 Utilisations 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 or by Obligors).
(c) For the purpose of calculating the Available Amount, the amount of
any Advance outstanding in an Optional Currency shall be its
Sterling Amount. Where an Advance denominated in an Optional
Currency is to be repaid and a new Advance denominated in the same
Optional Currency is to be drawn down on the same day, the
currency amounts to be repaid and re-drawn may be netted off, and
the Sterling Amount of the new Advance and the Available Amount
which can be drawn on that day will be recalculated accordingly.
(d) The Primary Borrower shall not be entitled to utilise the
Revolving Credit Facility except that:
(i) subject to paragraph 4.3(d)(ii), the Primary Borrower may
draw down Revolving Advances (including Revolving Advances
to finance payment to the holders of loan notes issued
pursuant to the Acquisition if and when such holders
require redemption of those loan notes) if and to the
extent that it shall immediately on-lend the amount thereof
to other members of the Group by means of the Primary
Borrower first lending the relevant amount to Finco 2; and
(ii) the Primary Borrower may draw down Revolving Advances
otherwise than in compliance with clause 4.3(d)(i) above
only up to an aggregate amount outstanding at any time of
(pound)25,000,000; and
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(e) Subject to clause 3 (The Conditions), utilisations of letters of
credit under the Original Facilities Agreement which are still
open and any Letters of Credit opened in renewal or replacement of
such letters of credit shall be deemed to have been drawn under
this Agreement by Finco 2 for all purposes of this Agreement and,
by its execution of this Agreement, Finco 2 agrees (in
consideration of the execution of this Agreement by the Banks)
that it will assume, all liabilities under the Original Facilities
Agreement and/or this Agreement, relating to such letters of
credit and the Finance Parties agree that the Primary Borrower
shall be liable under this Agreement only as a Guarantor in
respect of such drawings. The Banks agree that the Facility Agent
may execute a release in a form satisfactory to the Facility Agent
in favour of the issuing bank and the banks (if they so request)
under the Original Facilities Agreement in relation to the letters
of credit under the Original Facilities Agreement.
4.4 Application of proceeds
None of the Finance Parties shall have any responsibility for the
application of the proceeds of any Advance by any Borrower.
4.5 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 any
Borrower, if the Facility 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 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 of the relevant Tranche of the Revolving Credit
Facility;
(b) the face value of each Letter of Credit is or is equivalent to a
minimum Sterling Amount of (pound)1,000,000;
(c) the Expiry Date falls on or before the earlier of (i) 12 months
from the Issue Date or (ii) the Final Repayment Date of the
relevant Tranche of the Revolving Credit Facility;
(d) the Issuing Bank and (if different) the Facility Agent have agreed
its terms;
(e) the Sterling Amount of the Letter of Credit requested does not
exceed the Available Amount in respect of the relevant Tranche of
the Revolving Credit Facility;
(f) after such Issue, there will be no more than ten Letters of Credit
outstanding;
(g) no order, judgment or decree of any Government 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
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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.
4.6 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) Obligors' Authorisation and Indemnity: each Obligor
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 Borrowers' Indemnity);
(ii) agrees that its authorisation under clause 4.6(b)(i) and
its indemnity referred to in clauses 4.6(b)(iii) and
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 in relation
to or arising out of 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.
(c) Non-contravention of US law: No Obligor will request the Issue of
a Letter of Credit which would contravene any of the laws of the
United States Of America.
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4.7 Banks' Guarantee and Indemnity
Each Bank hereby irrevocably and unconditionally:
(a) subject to clause 4.7(b), guarantees to and indemnifies (in each
case 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), shall be recoverable from it (in its Proportion) as sole
principal debtor even if such sum would not be recoverable from
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 due to 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 Facility 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):
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(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 Mandatory Cost Rate 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 that 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.
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 Facility
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 undertakes to place
the relevant cash deposit in an account with it bearing interest at a
rate and on the standard terms 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
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deposited as cash cover shall be for the account of and paid to such
Obligor but shall not be paid to any Obligor (but shall be compounded)
during the continuance of an Event of Default which shall not have been
waived.
4.14 Unavailability of Optional Currency
If a Borrower requests that an Advance be denominated in an Optional
Currency during its Maturity Period as provided in clause 4.2(b)(ii)
(Amount), and:
(a) no later than 10.00 a.m. on the Quotation Date for such Advance,
any Bank or Banks (in this clause 4.14 only, an "Affected Bank"
or, if more than one, the "Affected Banks") notifies the Facility
Agent (providing detailed reasons and justification therefor) that
it is not able to comply with such request; or
(b) no later than 11.00 a.m. on the Quotation Date for such Advance,
the Facility 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; or
(c) to give effect to such request would cause the Advances under the
relevant Tranche of the Facility to be denominated in more than
four Optional Currencies,
then:
(i) if the circumstances in paragraph (a) 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 Affected
Banks and the Affected Bank or Affected 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
(ii) if the circumstances in (b) and/or (c) apply, such Advance
shall not be made unless the relevant Borrower specified in
the Drawdown Notice in respect of such Advance and the
Banks otherwise agree that such Advance should be
denominated in Sterling and/or in one or more Optional
Currencies in such circumstances, in which case such
Advance shall be made in Sterling and/or (as the case may
be) in such Optional Currency or Currencies in the Sterling
Amount relating to such Advance.
5. INTEREST AND INTEREST PERIODS
5.1 Interest on the Term Advances
The Primary Borrower shall pay interest on each Term 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 Mandatory Cost Rate and (c) LIBOR.
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5.2 Interest Periods for the Term 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 Term 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).
(b) Every Interest Period in respect of each Term Advance shall be of
the duration specified by the Primary Borrower pursuant to clause
5.2(a) but so that:
(i) each Interest Period in respect of each such Advance shall
commence on the date of the expiry of the previous Interest
Period;
(ii) if otherwise there would be more than 10 Term 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 a Term Advance would
otherwise overrun the Final Repayment Date, such Interest
Period shall end on such date;
(iv) 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
subject to this clause 5.2(b).
5.3 Interest under the Revolving Credit Facility
The relevant 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 (a) the
Applicable Margin, (b) the Mandatory Cost Rate and (c) LIBOR.
5.4 Interest on unpaid sums
(a) If any Obligor 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 Obligor shall pay
interest on such sum from the due date up to the date of actual
payment (after as well 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
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
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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 (Alternative Interest
Rates)) be the aggregate (as determined by the Facility Agent) of
(i) one per cent per annum, (ii) the Applicable Margin (iii) the
Mandatory Cost Rate 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 (c) of the
definition of LIBOR for a specified period the Facility Agent
determines at 11.00 a.m. (London time or, in the case of Euros,
Central European 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;
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(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 Mandatory Cost Rate and
if and to the extent that clause 5.4 (Interest on unpaid
sums) applies, a further one per cent.
6. REPAYMENT, PREPAYMENT, CANCELLATION AND REDUCTIONS
6.1 Repayment of the Term Advances
The Primary Borrower shall repay in full all outstanding Term Advances on
the Final Repayment Date.
6.2 Repayment of Revolving Advances
The relevant Borrower shall repay each Revolving Advance in full on its
Maturity Date, without prejudice to the right of that or any other
Borrower, subject to the terms of this Agreement, to continue to make
utilisations up to the Available Amount.
On the Final Repayment Date for each Tranche of the Revolving Credit
Facility, the balance of all outstanding Revolving Advances under such
Tranche shall in any event be repaid in full and may not be reborrowed.
The Primary Borrower shall notify the Facility Agent not less than 60
days prior to the Final Repayment Date of Tranche A of the Revolving
Credit Facility if it wishes to extend the Final Repayment Date of all or
part of that Tranche by a further 364 days. The Facility Agent shall seek
the instructions of all the Banks, which shall use their best endeavours
to respond to such request by not later than 30 days before the Final
Repayment Date. If any of the Banks agree,
(a) Tranche A of the Revolving Credit Facility shall from the original
Final Repayment Date of Tranche A consist of the aggregate
commitments which one or more Banks have agreed to continue,
(b) the Final Repayment Date of Tranche A shall be so extended by a
further 364 days from and including the original Final Repayment
Date and the definitions of "Commitment", and "Final Repayment
Date" shall be construed accordingly, and
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(c) the Primary Borrower shall repay on its original due date any
amount outstanding under Tranche A of the Revolving Credit
Facility to those Banks which have not elected to extend the Final
Repayment Date of Tranche A.
6.3 Optional prepayment of all the Banks
The relevant Borrower may, subject to clause 6.6 (Cancellation of the
Facilities), prepay:
(a) a Term 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 (Miscellaneous Indemnities), any
Banking Day, which amount shall be applied by the Facility Agent
in prepayment to the Banks to whom such Advance is owing on a pro
rata basis;
(b) a Revolving Advance in whole (but not in part) together with any
relevant amounts payable pursuant to clause 13.1 (Miscellaneous
Indemnities).
6.4 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 (Cancellation of the Facilities),
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 (Unlawfulness), 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 6.4(a)
above the relevant Borrower may on payment of the amounts referred
to under clause 6.5 (Prepayments Generally), without prejudice to
clause 14.4 (Mitigation), require the Affected Bank to transfer
pursuant to clause 16.5 (Substitution Certificate) 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 (Unlawfulness), 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.
6.5 Prepayments generally
(a) No prepayment may be made pursuant to clauses 6.3 (Optional
Prepayment of all the Banks) or 6.4 (Affected Banks) 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 (Unlawfulness) such notice as is required under clause
14.1 (Unlawfulness)) 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 Term Facility which is repaid or prepaid may be
reborrowed.
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(c) Prepayments required to be made to an Affected Bank should be
applied first against the Affected Bank's Contribution to
outstanding Term Advances, and then in the following order:
(i) in repayment of that Bank's Contribution to outstanding
Revolving Credit Facility Tranche B Advances and in
permanent reduction of the Revolving Credit Facility
Tranche B;
(ii) to provide cash cover for that Bank's Proportion of the
Outstanding Contingent Liabilities under the Revolving
Credit Facility Tranche B;
(iii) in repayment of that Bank's Contribution to outstanding
Revolving Credit Facility Tranche A Advances and in
permanent reduction of the Revolving Credit Facility
Tranche A;
(iv) to provide cash cover for that Bank's Proportion of the
Outstanding Contingent Liabilities under the Revolving
Credit Facility Tranche A.
(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
(Grossing-up for Taxes) or 14.2 (Increased Costs); and
(iii) all other sums payable by the Borrower to the Banks or the
relevant Bank under this Agreement including, without
limitation, any accrued commitment commission payable under
clause 7.2 (Commitment Fees), any Letter of Credit
commission and fees under clause 7.3 (Letter of Credit
Fees), expenses under clause 7.4 (Expenses) and any amounts
payable under clause 13.1 (Miscellaneous Indemnities).
(e) No Borrower shall prepay all or any part of an Advance outstanding
under this Agreement except at the times and in the manner
expressly provided in this Agreement.
6.6 Cancellation of the Facilities
The Primary Borrower may at any time prior to the Available Commitment
Termination Date in respect of the relevant Tranche of the Revolving
Credit 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 Amount of the
relevant Tranche, in each case which is not the subject of a Drawdown
Notice at such time. Such notice shall specify the Tranche 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 Tranche shall be
reduced accordingly (pro-rata their respective Commitments in respect of
the relevant Tranche).
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6.7 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.
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 fees of an amount agreed between the
Primary Borrower and the Facility Agent 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 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 Tranche of the
Revolving Credit Facility, for the account of each of the Banks (pro-rata
to their respective Commitments for the relevant Tranche), commitment
commission computed in arrears at the Applicable Fees Rate on the daily
amount by which the Total Commitments in respect of the relevant Tranche
exceeds the aggregate of the Contributions in respect of the relevant
Tranche. 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 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.
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(c) The commission and fronting fee payable under clauses 7.3(a) and
7.3(b) respectively 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, that part of the commission paid in advance which is
attributable to 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 Obligor 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 4.8 (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 and the
Facility Agent from time to time within three Banking Days of receipt 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 of the transactions
contemplated in the Finance Documents, 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 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
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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 (Interest on Unpaid Sums)
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 against a duly
executed VAT invoice.
7.6 Stamp and other duties
The Primary Borrower shall pay all proper 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 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 Obligor under this Agreement shall be:
(a) made in full, without any set-off or counterclaim whatsoever and,
subject as provided in clause 8.5 (Grossing-up for Taxes), free
and clear of any deductions or withholdings, 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;
(b) made in respect of:
(i) each repayment or prepayment of, or payment of interest on,
or participation by a Bank in, a Utilisation, in the
currency in which the Utilisation is denominated;
(ii) any payment of costs and expenses, in the currency in which
they were incurred;
(iii) all fees and/or commission payable under clause 7 (Fees and
expenses) shall be paid in Sterling unless the Parent and
the Facility Agent otherwise agree;
(iv) any other amount expressed in any Finance Document to be
payable in a currency, in that currency;
(c) 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
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the account of such Banks' respective Facility Offices in
accordance with their Commitments or Contributions, as the case
may be provided that 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.
8.2 Payments by the Banks or by Obligors
(a) All payments by an Obligor or a Bank under the Finance Documents
shall be made to the Facility Agent to its account at such office
or bank:
(i) in the principal financial centre of the country of the
relevant currency; or
(ii) in the case of Euro Units or national currency units, in
Frankfurt am Main, Germany (or such other principal
financial centre of a Participating Member State as the
Facility Agent may from time to time nominate for this
purpose),
as it may from time to time notify to that Obligor or Bank for
this purpose.
(b) Payments under the Finance Documents to the Facility Agent shall
be made for value on the due date at such times and in immediately
available, freely transferable cleared funds (or such other funds
as the Facility Agent may specify to the Party concerned as being
customary at the time for the settlement of transactions in the
relevant currency).
(c) Each payment received by the Facility Agent under the Finance
Documents for another Party shall, subject to paragraph (d) below,
be made available by the Facility Agent to that Party by payment
(on the date and in the currency and funds of receipt) to its
account with such office or bank:
(i) in the principal financial centre of the country of the
relevant currency; or
(ii) in the case of Euro Units or national currency units, in
Frankfurt am Main, Germany (or such other principal
financial centre of a Participating Member State as the
Facility Agent may from time to time nominate for this
purpose),
as it may from time to time notify the Facility Agent for
this purpose by prior written notice.
(d) The Facility Agent may apply any amount received by it for an
Obligor in or towards payment (on the date and in the currency and
funds of receipt) of any amount due from an Obligor under this
Agreement or in or towards the purchase of any amount of any
currency to be so applied.
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.
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8.4 Facility Agent may assume receipt
(a) 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.
(b) If it proves to be the case that such payment was not made to the
Facility Agent, then:
(i) 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
(ii) 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
(a) If at any time any 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 (Qualifying Bank), 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.
(b) Each Obligor shall (without prejudice to the foregoing provisions
of this clause 8.5) 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
Obligor to make any such deduction or withholding.
(c) Each 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
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(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 (Grossing-up for Taxes) or 14.2 (Increased
Costs),
then such Obligor shall (as the case may be) not be liable to pay
under clause 8.5 (Grossing-up for Taxes) in respect of any such
payment of interest any amount in excess of the amount (if any) 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 (Grossing-up for Taxes)
or, as the case may be, clause 14.2 (Increased Costs) than would
have been required (if any) if the aforesaid Bank had been or had
not ceased to be a Qualifying Bank.
(b) This clause 8.6 shall not apply, and such Obligor shall be obliged
to comply with its obligations under clause 8.5 (Grossing-up for
Taxes), or as the case may be 14.2 (Increased Costs), if on or
after the date of this Agreement:
(i) 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
(ii) 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.
(c) A person intending to make a claim pursuant to clause 8.5
(Grossing-up for Taxes) 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.
(d) 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.
(e) 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 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 (Grossing-up for Taxes) 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 Lender became a party to this Agreement
as a Treaty Lender or the proviso to clause 8.6(a) applies.
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8.7 Claw-back of Tax benefit
(a) If following any such deduction or withholding as is referred to
in clause 8.5 (Grossing-up for Taxes) 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 Obligor having made
any increased payment in accordance with clause 8.5 (Grossing-up
for Taxes) and subject to there not being any Event of 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 Obligor 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 Obligor as aforesaid.
(b) 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.
(c) 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 Obligor shall, by
virtue of this clause 8.7, be entitled to enquire about any
Finance Party's tax affairs or computations.
(d) 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 an Obligor under this clause shall be
conclusive evidence of the amount payable and will be accepted by
the Obligor 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 Obligor under this Agreement and all payments in
respect thereof made by each Obligor 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 Obligor under this Agreement.
8.9 Partial payments
If:
(a) on any date on which a payment is due to be made by any 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
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(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 such 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
(Indemnity from Banks);
(iii) thirdly, in or towards payment to the Facility Agent, of
any portion of the fees payable under clause 7.1(a)
(Arrangement, underwriting, participation and agency fees)
which remains unpaid;
(iv) fourthly, 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) (Arrangement, underwriting, participation and
agency fees) 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 (Commitment fees) 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 (Grossing-up for Taxes) 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 (Grossing-up for Taxes) 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, default interest under
clause 5.4 (Interest on unpaid sums)). 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.
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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 Obligors.
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 (or, in any case where market practice differs, in accordance
with market practice). 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 Mandatory Cost Rate changes during any
period, interest and commitment fees shall be calculated on the rate
prevailing from day to day.
8.11 Certificates prima facie evidence
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 Finance Documents shall, in the absence of manifest error, be prima
facie evidence of such rate or amount on each Obligor and (in the case of
a certificate of or determination by the Facility Agent) on the Banks.
8.12 Effect of monetary union
The provisions of clauses 8.12 (a) to (h) (inclusive) apply in relation
to any amount payable in the currency of a Participating Member State
provided that, if and to the extent that any provision relates to any
state (or the currency of such state) which was not a Participating
Member State on 1 January 1999, such provision shall come into effect in
relation to such state (and the currency of such state) on and with
effect from the date on which such state becomes a Participating Member
State.
(a) Redenomination and Alternative Currencies. Each obligation under
this Agreement of a party to this Agreement which has been
denominated in the national currency unit of a Participating
Member State shall be redenominated into the Euro Unit in
accordance with EMU legislation, provided that, if and to the
extent that any EMU legislation provides that following 1 January
1999 an amount denominated either in the Euro or in the national
currency unit of a Participating Member State and payable within
that Participating Member State by crediting an account of the
creditor can be paid by the debtor either in the Euro Unit or in
that national currency unit, each party to this Agreement shall be
entitled to pay or repay any such amount either in the Euro Unit
or in such national currency unit.
(b) Advances. Any Advance in the currency of a Participating Member
State shall be made in the Euro Unit.
(c) Payments to the Facility Agent. Clause 8.2 (Payments by the Banks
or Obligors) shall be construed so that, in relation to the
payment of any sum denominated in the Euro or in a national
currency unit, such sum shall be made available to the Facility
Agent by payment in the Euro Unit or, as the case may be, such
national currency
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unit and in immediately available, freely transferable, cleared
funds to the account notified by it under clause 8.2(a)(ii).
(d) Payments by the Facility Agent to the Banks. Any amount payable by
the Facility Agent to the Banks under this Agreement in the
currency of a Participating Member State shall be paid in the Euro
Unit.
(e) Payments by the Facility Agent. The Facility Agent shall not be
liable to the Borrower or any of the Banks in any way whatsoever
for any delay, or the consequences of any delay, in the crediting
to any account of any amount required by this Agreement to be paid
by the Facility Agent if the Facility Agent shall have taken all
relevant steps to achieve, on the date required by this Agreement,
the payment of such amount in immediately available, freely
transferable, cleared funds (in the Euro Unit or, as the case may
be, in a national currency unit) to the account with the Bank in
the principal financial centre in the Participating Member State
which any Borrower or, as the case may be, any Bank shall have
specified for such purpose. In this clause 8.12(e) "all relevant
steps" means all such steps as may be prescribed from time to time
by the regulations or operating procedures of such clearing or
settlement system as the Facility Agent may from time to time
after consultation with the Primary Borrower and the Banks
determine for the purpose of clearing or settling payments of the
Euro.
(f) Basis of Accrual. If, in relation to the currency of any
Participating Member State, the basis of accrual of interest or
commitment commission expressed in this Agreement in respect of
that currency shall be inconsistent with any convention or
practice in the London Interbank Market for the basis of accrual
of interest or commitment commission in respect of the Euro, such
expressed basis shall be replaced by such convention or practice.
(g) Rounding and Other Consequential Changes. Without prejudice and in
addition to any method of conversion or rounding prescribed by any
EMU legislation and without prejudice to the respective
liabilities for indebtedness of any Borrower to the Banks and the
Banks to any Borrower under or pursuant to this Agreement (and
after consultation with the Primary Borrower and the Banks):
(i) each reference in this Agreement to a minimum amount (or an
integral multiple thereof) in a national currency unit to
be paid to or by the Facility Agent shall be replaced by a
reference to such reasonably comparable and convenient
amount (or an integral multiple thereof) in the Euro Unit
as the Facility Agent may from time to time specify; and
(ii) save as expressly provided in this clause 8.12(g), each
provision of this Agreement shall be subject to such
reasonable changes of construction as the Facility Agent
may from time to time specify to be necessary or
appropriate to reflect the changeover to the Euro in
Participating Member States.
(h) Amendments. After consultation with the Primary Borrower and the
Banks and notwithstanding clause 22 (Determination of Matters),
the Facility Agent shall be entitled to make from time to time
such amendments to this Agreement as it may determine in good
faith 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, place of payment or otherwise howsoever).
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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 Obligor and any other party to this Agreement.
8.13 Confirmation of end of Finance Period
The Facility Agent undertakes with the Obligors that the confirmation
referred to in the definition of "Finance Period" shall be given by it to
all the other parties to this Agreement promptly upon the Facility Agent
determining, acting reasonably, 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.
9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and warranties
Each Obligor for itself makes the representation and warranties set out
in this clause 9 to each Finance Party.
9.2 Status
(a) It and each Principal Subsidiary is duly incorporated under the
laws of the jurisdiction of its incorporation and has power and is
able lawfully to own its respective property and assets and carry
on its respective businesses.
(b) It has power and is able lawfully to execute and deliver each
Finance Document and to exercise its respective rights and perform
its respective obligations under this Agreement and the
transactions contemplated hereby and all corporate or other action
required to be taken by it in order to authorise the execution and
delivery by it of each Finance Document and the performance by it
of its respective obligations has been duly taken.
9.3 Legal validity
The Finance Documents to which it is a party constitute its legal, valid
and binding obligations.
9.4 Non-contravention
The execution and delivery by it of the Finance Documents to which it is
a party and the performance by it of its obligations under the Finance
Documents will not:
(a) contravene any provision of any law, statute (including the
Electricity Act), decree, rule, regulation or code of practice to
which it or any of its assets or revenues is subject, or of any
order, judgement, injunction, decree, resolution, determination or
award of any court or any judicial, administrative or Governmental
Entity or organisation having applicability to it or any of its
assets or revenues; or
(b) result in any breach of any of the terms, covenants, conditions or
provisions of, or
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constitute a default under, any indenture, mortgage, deed of
trust, bond, agreement or other instrument or obligation to which
it is a party or by which it or any of its assets or revenues may
be bound or affected; or
(c) violate any provision of its constitutive documents.
9.5 No default
No Default has occurred which is continuing.
9.6 Consents
All consents, approvals, authorisations, exemptions, registrations and
filings and all acts, conditions and things required to be obtained,
done, fulfilled and performed in order to:
(a) enable it to enter into and exercise its rights and perform its
obligations under each Finance Document to which it is party; and
(b) make the Finance Documents legal, valid and binding and admissible
in evidence in England and Wales,
have been obtained and are in full force and effect or have been done,
fulfilled or performed (as the case may be).
9.7 Accounts
The Original Group Accounts, and thereafter, the most recent consolidated
audited financial statements of the Group, were prepared in accordance
with the Appropriate Accounting Principles and consistently applied from
one period to the next (except as shown in those financial statements)
and give a true and fair view of the financial condition of, in the case
of the Original Group Accounts, the Target and its subsidiary
undertakings, and in the case of subsequent accounts, of the Group, as at
the date as of which the same were prepared.
9.8 No Material Adverse Effect
Since 31 March 1998 there has been no change in the business, assets or
condition of itself, or any other member of the Group, having a Material
Adverse Effect.
9.9 Litigation
No action or proceeding of or before any court, administrative tribunal,
government body or regulatory authority (including, without limitation,
the Monopolies and Mergers Commission or the Office of Electricity
Regulation) has been commenced, or (to the best of its knowledge) is
threatened against any member of the Group which, in each case, has a
Material Adverse Effect.
9.10 Indebtedness
Its Indebtedness under the Finance Documents to which it is a party will
rank at least pari passu with all its other unsubordinated and unsecured
Indebtedness with the exception of that which is preferred by operation
of law.
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9.11 No breach
It is not in breach of or default under any agreement to which it is
party or which is binding on it or any of its assets to an extent or in a
manner which has a Material Adverse Effect.
9.12 No encumbrance
No Security Interest exists over all or any of the present or future
revenues or assets of any member of the Group, save for Permitted
Security Interests.
9.13 No obligation to create encumbrance
The execution of the Finance Documents and the exercise of its rights and
performance of its obligations thereunder will not result in the
existence of nor oblige it to create any Security Interest over all or
any of its present and future revenues or assets other than in favour of
the Finance Parties.
9.14 Licences
Each Licensee has been duly licensed to conduct its business as presently
conducted, no notice has been given to revoke any Licence and no
modification of or amendment to any of the terms of any Licence has been
made or proposed by the Secretary of State or any other person having a
right to do so which has a Material Adverse Effect.
9.15 No contravention of licences
No Licensee is in contravention of any term or condition of its
Licence(s) or any requirement of the Electricity Act or any regulations
made thereunder or any other statutory requirement or any final order or
confirmed provisional order made under the Electricity Act or any
undertaking given by it to the Director General or the Secretary of State
in relation to the conduct of its business as a generator or Public
Electricity Supplier, which contravention and/or any consequence thereof
has a Material Adverse Effect.
9.16 Electricity supply
REC or the relevant Licensee has been duly licensed by the Secretary of
State as the Public Electricity Supplier (as defined in the Electricity
Act) to supply electricity to any premises in the area designated in the
PES Licence and is duly licensed to conduct its business as presently
conducted and the PES Licence is in full force and effect and neither the
Director General nor the Secretary of State has given notice to it to
revoke the PES Licence except in circumstances where a replacement
Licence for the distribution and/or supply of electricity is or is to be
granted to any other member of the Group.
9.17 No modification of PES Licence
No modification or amendment of any of the terms of the PES Licence has
been made or proposed by way of consideration with interested parties by
the Director General or the Secretary of State pursuant to Section 11, 14
or 15 of the Electricity Act or in accordance with the conditions set out
in the PES Licence which has a Material Adverse Effect.
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9.18 No variation of authorised area
No variation of the authorised area in respect of which the PES Licence
has been granted has been made pursuant to Section 6(1)(c) of the
Electricity Act which has a Material Adverse Effect.
9.19 Environmental law
There has been no non-compliance by any member of the Group with any
applicable environmental or safety law applicable to it which has a
Material Adverse Effect.
9.20 Wholly-owned Subsidiary
REC, Eastern Group plc and each Guarantor (other than the Primary
Borrower and Finco 2), if any, is a wholly-owned Subsidiary of Finco 2.
9.21 No dispute
There is no dispute subsisting between any Obligor and any other party to
any of the Finance Documents and no material amendments have been made to
any of the Finance Documents without the consent of the Facility Agent.
9.22 Year 2000
Neither:
(a) the year 2000 problem (that is the risk that any computer
equipment (including both hardware or software) or any other
equipment operated by electronic means used by the Group may be
unable to recognise and perform properly date-sensitive functions
involving a date before, on or after 31 December 1999); nor
(b) the cost to the Group of:
(i) any reprogramming or testing required to ensure that any
reference to or use of a date before, on or after 31
December 1999 in the operation of such equipment; or
(ii) the reasonably foreseeable consequences of the year 2000
problem (including, without limitation, reprogramming
errors and the failure of others' systems or equipment);
is reasonably likely to have a Material Adverse Effect.
9.23 Times for making representations and warranties
The representations and warranties set out in this clause 9:
(a) are made by each Obligor on the date of this Agreement; and
(b) are deemed to be repeated by each Obligor on the date of each
Notice of Drawdown, Utilisation and the first day of each Interest
Period with reference to the facts and circumstances then existing
(other than in the case of any representation and warranty
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as to the Group's audited financial statements where such
representation and warranty shall be read and construed as
referring to the Group's then most recent audited financial
statements, including notes to such statements) save that the
following representations shall not be repeated: clauses 9.5 (No
default), 9.8 (No material adverse effect), 9.9 (Litigation), 9.12
(No encumbrance) 9.13 (No obligation to create encumbrance) and
9.21 (No Dispute).
9.24 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.
10. INFORMATION UNDERTAKINGS
10.1 Undertakings
Each of the Obligors (for itself) or as applicable the specified Obligor
gives the undertakings in this clause 10 and clause 11 (General
Undertakings) to each Finance Party (such undertakings to remain in force
throughout the Finance Period).
10.2 Preparation of financial statements
The Primary Borrower will:
(a) Annual audited financial statements: beginning with the financial
year ending 31 December 1998, prepare financial statements (which
shall in any event include a balance sheet, profit and loss
account, statement of total recognised gains and losses, cash flow
statement, and notes to such statements) in respect of:
(i) itself and consolidated financial statements in respect of
the Group; and
(ii) 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
(b) Quarterly financial statements: prepare:
(i) unaudited consolidated financial statements (which shall in
any event include a balance sheet, profit and loss account
and cash flow statement) of the Group; and
(ii) consolidated financial statements (which shall in any event
include a balance sheet, profit and loss account and cash
flow statement) of Finco 2 (together with (aa) a pro forma
consolidation with the Subsidiaries of the Primary Borrower
which are not Finco 2 or its Subsidiaries and (bb) a
notification setting out any changes in the identity of the
Principal Subsidiaries (or, if there are no changes, so
stating),
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in respect of each Quarter in each financial year in accordance
with the Appropriate Accounting Principles (consistently applied)
in a form reasonably agreed with the Facility Agent.
10.3 Delivery of financial statements
The Primary Borrower will deliver, or will procure delivery, to the
Facility Agent sufficient copies for all the Banks of each of the
following documents:
(a) Annual audited financial statements: (i) within fifteen days of
issue thereof to the shareholders of the Primary Borrower and
Finco 2, but in any event not later than 180 days after the end of
the financial year to which they relate, sufficient copies for
distribution to all of the Banks of the audited financial
statements referred to in clause 10.2(a) (Annual audited financial
statements) 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 10.3(c) (Compliance with Financial Undertakings) and (ii),
in respect of the Parent, its annual accounts most recently filed
with the US Securities and Exchange Commission;
(b) Unaudited management accounts: (i) within 60 days after the end of
each Quarter in each financial year, sufficient copies for
distribution to all of the Banks of the consolidated management
accounts for the Group and for Finco 2 (together with a pro forma
consolidation of all the Subsidiaries of the Primary Borrower and
the notification referred to in clause 10.2 (b) (Quarterly
financial statements)) in respect of such Quarter prepared in
accordance with the requirements of clause 10.2(b) (Quarterly
financial statements) together with (in relation to the Quarter
ending December 1998 and thereafter) the certificate referred to
in clause 10.3(c) (Compliance with Financial Undertakings) and,
(ii) in the case of the Parent, its quarterly accounts most
recently filed with the US Securities and Exchange Commission from
time to time;
(c) Compliance with Financial Undertakings: with each set of accounts
delivered by it under clauses 10.3(a) (Annual audited financial
statements) and (b) (Unaudited management accounts) above the
Primary Borrower will deliver to the Facility Agent a certificate
signed by a director of the Primary Borrower:
(i) confirming compliance or otherwise with the financial
undertakings in clause 11.1 (Financial Ratios) as at the
end of the relevant Test Period; and
(ii) setting out in reasonable detail and in a form satisfactory
to the Facility Agent the computations (including for the
purpose of the Leverage Ratio a detailed statement of the
calculation of Adjusted Share Capital and Reserves and
Consolidated Net Borrowings) necessary to demonstrate such
compliance or otherwise.
The Facility Agent may from time to time request a further
director's certificate setting out in reasonable detail the
calculation of the Leverage Ratio (including a detailed statement
of the calculation of Adjusted Share Capital and Reserves and
Consolidated Net Borrowings) if the Facility Agent is requested to
do so by the Majority Banks or if, acting reasonably, the Facility
Agent determines that the amount of Adjusted Share Capital and
Reserves and Consolidated Net Borrowings may have
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changed materially since the date of the last compliance
certificate. The Primary Borrower shall provide such a certificate
within ten Banking Days of any such request.
(d) PES Regulatory Accounts: as soon as practicable after their issue
to the relevant Government Entity or regulator, all accounts and
other financial statements or financial information required under
any law or regulation to be provided to any Government Entity,
industry regulator or similar body or person and which are thereby
placed in the public domain;
(e) Reports and notices to shareholders and creditors: as soon as
practicable after the 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
(f) 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.
10.4 Notice of Default
Each Obligor will inform the Facility Agent promptly upon becoming aware
of the occurrence of any material Default or any actual Event of Default
and, upon receipt of a request to that effect from the Facility Agent,
confirm to the Facility Agent and the Banks that, save as previously
notified to the Facility Agent or as notified in such confirmation, no
Default has occurred which is continuing.
11. GENERAL UNDERTAKINGS
11.1 Financial ratios
(a) The Primary Borrower will procure that, throughout the Finance
Period:
(i) for each Test Period, the ratio of EBITDA to Net Interest
Costs is not less than 2:1;
(ii) at all times the Leverage Ratio is not more than 70%
although the Leverage Ratio shall be tested only by
reference to the compliance certificate provided quarterly
with the un-audited management accounts unless the Facility
Agent shall at any time exercise the right to request a
further certificate in accordance with clause 10.3(c)
(Compliance with Financial Undertakings).
(b) Where a Test Period commenced prior to 19 May 1998 the calculation
of the Financial Definitions shall be amended so that:
(i) 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, by the last day of the
Test Period, has been refinanced in connection with the
Acquisition shall be brought into account; and
(ii) for all purposes the Peabody Companies and the coal
business conducted by
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them will be deemed not to have been part of the Group, nor
shall they be included in the Group's consolidated results.
11.2 Change of Accounting policies
(a) The Primary Borrower and the Facility Agent hereby undertake that,
in the event that:
(i) there is a change in the manner in which the financial
statements in clause 10.2 (Preparation of Financial
Statements) are prepared or in the accounting principles or
standards applied in the preparation of those financial
statements; and
(ii) such change affects the amounts utilised for the purposes
of determining whether or not an Obligor has complied with
the covenants contained in clause 11.1 (Financial Ratios);
they will renegotiate each of the covenants affected by such
change with a view to putting in place covenants that fairly
reflect that change.
(b) In the event that the Primary Borrower and the Facility Agent
(acting in accordance with the instructions of the Majority Banks)
fail to agree on the revised terms of the covenants within 5
Banking Days, the matter may be referred by either party to an
independent firm of chartered accountants agreed by the Primary
Borrower and the Facility Agent (acting in accordance with the
instructions of the Majority Banks) or, in default of agreement
within 10 Banking Days after the expiry of the previous 5 Banking
Day period, to an independent firm of chartered accountants
nominated by the President for the time being of the Institute of
Chartered Accountants in England and Wales, on the application of
the Borrower or the Facility Agent (acting in accordance with the
instructions of the Majority Banks), and in either case at the
expense of the Primary Borrower.
(c) The firm so agreed or nominated shall act as expert and not as an
arbitrator and shall be instructed to provide its decision within
30 days of its appointment and its decision concerning the revised
terms of the covenants will, in the absence of fraud or manifest
error, be final and binding.
(d) If the ratio of EBITDA to Net Interest Costs under clause 11.1(a)
above is less than 2:1 due to the payment or proper accrual of any
exceptional, special or windfall tax or levy, then,
notwithstanding the provisions of clause 12 (Events of Default),
no Event of Default shall occur as a result thereof except:
(i) the Borrower and the Facility Agent (acting in accordance
with the instructions of the Majority Banks) shall consult
for a period not exceeding 30 days with a view to agreeing
a revised basis for calculation of the ratio or a revised
ratio; and
(ii) the failure to agree a basis for such calculation or a
revised ratio by the end of that 30-day period shall
constitute an Event of Default under clause 12.1(b) (Breach
of other obligations) which, for the purposes of that
clause, shall not be capable of remedy.
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11.3 Authorisation
Each Obligor shall obtain and comply with and do all that is necessary to
maintain in full force and effect all consents, authorisations, approvals
and licences required by law or regulation to enable it to enter into and
perform its obligations under the Finance Documents to which it is a
party or to ensure their legality, validity or admissibility in evidence.
11.4 Disposals
No Obligor shall, and the Primary Borrower will procure that no other
member of the Group will, (either in a single transaction or in a series
of transactions, whether related or not) sell, convey, transfer or
otherwise dispose of:
(a) any shares in Finco 2, Bidco, The Energy Group Limited or any
Principal Subsidiary;
(b) any loans to or other claims on any Principal Subsidiary;
(c) the whole or a substantial part of the undertaking or assets of
(i) the Distribution Business or (ii) the Generation Business as a
whole; or
(d) any other significant assets.
The restrictions will not apply:
(i) with respect to paragraph (c) above to (A) the expenditure or
application of cash, or (B) any disposal in the ordinary course of
business (including by way of securitisation) or (C) any disposal
where the net book value of the assets disposed of, when
aggregated with the net book value of any other assets forming
part of the Distribution Business or (as the case may be) the
Generation Business disposed of otherwise than in the ordinary
course of operating the respective businesses in the same
financial year of the Group, does not exceed 10 per cent of the
Distribution Business Tangible Net Worth or 10 per cent of the
Generation Business Tangible Net Worth (as the case may be) at the
end of the previous financial year;
(ii) to a disposal made by any member of the Group to another member of
the Group; or
(iii) with respect to paragraph (d) above, to any disposal on arms
length terms (including by way of securitisation); or
(iv) to any sale, conveyance, transfer or other disposal with respect
to the King's Lynn generating facility which otherwise would
infringe sub-clause (iii) above provided that none of the parties
to any such transaction is a Relevant Person or Project Finance
Subsidiary.
11.5 Negative pledge
No Obligor shall, and the Primary Borrower will procure that none of its
Subsidiaries shall:
(a) create or permit to subsist any Security Interests (other than
Permitted Security Interests) upon the whole or any part of its
present or future revenues or assets; or
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(b) (i) sell, transfer or otherwise dispose of any of its assets on
terms whereby it is or may be leased to or re-acquired by a
member of the Group or any of its Associated Companies; or
(ii) sell, transfer or otherwise dispose of any of its
receivables on recourse terms (save for recourse for
disputed or ineligible debts or similar rights of recourse)
except for the discounting of bills or notes in the
ordinary course of trading,
in circumstances where the transaction is entered into primarily
as a method of raising finance or of financing the acquisition of
an asset, unless the aggregate disposal proceeds of all such
transactions during any Accounting Reference Period is less than
(pound)50,000,000, provided that the restriction in clause
11.5(b)(i) above shall not apply to any sale, transfer or other
disposal and leaseback or re-acquisition with respect to the
King's Lynn generating facility for so long as none of the parties
to any such transaction is a Relevant Person or Project Finance
Subsidiary.
11.6 Pari passu Indebtedness
Each Obligor shall ensure that its Indebtedness under the Finance
Documents to which it is a party will rank at least pari passu with all
its other unsubordinated and unsecured Indebtedness with the exception of
that preferred by operation of law.
11.7 Guarantees and distributions
No Obligor shall, and the Primary Borrower will procure that none of its
Subsidiaries shall:
(a) give any guarantee, indemnity or other legally binding assurance
against loss to any person (other than a member of the Group) in
respect of the obligations of any Relevant Person;
(b) enter into any transaction under which (or do anything as a result
of or by which) cash or other assets are transferred by or from it
to any Relevant Person;
provided that this clause 11.7 shall not prohibit:
(i) provided that no Default is outstanding or would result
from the dividend, distribution or provision, the
declaration, payment or making of any lawful dividends or
other distributions or the provision of loans, deposits or
other credit but excluding guarantees or indemnities
entered into in favour of or in respect of the indebtedness
of any Relevant Person or distributions as a result of any
reduction in share capital; or
(ii) anything done pursuant to a transaction entered into on
terms no more onerous to the relevant member of the Group
than a transaction entered into on an arm's length basis on
normal commercial terms.
11.8 Licensees
(a) In so far as is necessary to prevent a Material Adverse Effect,
each Obligor shall take, and procure that each Licensee takes, all
appropriate steps efficiently to perform and discharge its duties
and functions in accordance with the provisions of the Electricity
Act, the terms and conditions of the relevant Licence, the
provisions of any final order
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or confirmed provisional order made under the Electricity Act and
all undertakings (if any) given by a Licensee 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.
(b) The Primary Borrower shall promptly inform the Facility Agent of
any material undertaking given by any member of the Group to the
Director General and/or the Secretary of State.
(c) The Primary Borrower shall, forthwith upon receipt of the same,
deliver to the Facility Agent in sufficient copies for the Banks,
copies of all notices or orders served on any member of the Group
by the Director General or the Secretary of State in exercise of
the powers conferred on him by the Electricity Act and keep the
Facility Agent informed of any references to the Monopolies and
Mergers Commission or 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.
(d) The Primary Borrower shall procure that the relevant Licensee will
not consent to any revocation of the PES Licence (except where a
public electricity supply licence is granted to a member of the
Group in its place) or to any material modification or amendment
to or restriction in the terms and conditions of the PES Licence
if such revocation, modification, amendment or restriction ought
to have a Material Adverse Effect.
(e) The Primary Borrower shall ensure at all times that the Licensee
under the PES Licence 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 the PES Licence.
11.9 No outstanding loans
The Primary Borrower shall procure that (except for investments
constituting Liquid Assets) no Licensee will have outstanding at any one
time any loans to (other than deposits with, or investments in debt
instruments of, any institution authorised under the Banking Act 1987, or
the Building Societies Act 1986 or any European Authorised Institution as
defined in the Banking Act 1987) or investments in any person other than
a member of the Group in excess of an aggregate of (pound)5 million.
11.10 Environmental and safety laws
Each Obligor shall, and the Primary Borrower shall procure that each
other member of the Group will, comply with any environmental or safety
laws applicable to it where failure to do so has a Material Adverse
Effect.
11.11 Insurance
Each Obligor shall, and the Primary Borrower shall procure that each
member of the Group will have insurance and maintain insurance in respect
of property damage, third party liability and such other risks in respect
of its business and assets is in accordance with good industry practice.
11.12 Generation Business
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The Primary Borrower shall procure that any Licensee from time to time
licensed to carry on the whole or part of the Generation Business will
not consent to any revocation of the relevant Generation Licence (except
where a Generation Licence is granted to a member of the Group in its
place) or to any material modification or amendment to or restriction in
the terms and conditions of such Generation Licence if such revocation,
modification, amendment or restriction might reasonably be expected to
have a Material Adverse Effect.
11.13 Business of REC
Each Obligor shall procure that the REC will not enter into or engage in
any business or activity other than the Supply Business, a Second-Tier
Supply Business or the Distribution Business or the business of a holding
company of the company carrying on any such business, other than any
business or activity the aggregate turnover of which does not in any
financial year exceed 5 per cent. of the aggregate turnover of the Supply
Business, the Second-Tier Supply Businesses and the Distribution Business
(excluding the turnover on transactions which the Supply Business, any of
the Second-Tier Supply Businesses and/or the Distribution Business made
with each other) in the immediately preceding financial year.
11.14 Change in business
No Obligor shall, and the Primary Borrower will procure that no other
member of the Group shall, carry on any business other than those which
are usual for energy companies and electricity companies (including,
without limitation, electricity distribution, supply and generation and
energy trading and business activities related to the gas,
telecommunications and water industries) in Europe or the business of a
holding company of any company carrying on any such business. Provided
that the limitation of business activities contained in this clause 11.14
will not apply to any other business activities 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
consolidated gross revenues of the Group (as calculated in accordance
with the Appropriate Accounting Principles).
11.15 Functions of the Primary Borrower
(a) The Primary Borrower shall not carry on any business other than
being the holding company of the Group (and any Project Finance
Subsidiaries) and anything ancillary to any of the other matters
described in this clause 11.15.
(b) The Primary Borrower shall not own any material assets other than
any Liquid Assets held by it from time to time, its shareholding
in Finco 2 and its direct or indirect interest in all SPVs and
holding companies of SPVs (provided always that each such holding
company's sole purpose is to hold directly or indirectly an
interest in an SPV and, if applicable, act as a conduit as between
the SPV and the Primary Borrower for any sums lent or arising in
connection with the SPV's issue or issues of capital market
instruments), and Indebtedness due to the Primary Borrower.
(c) The Primary Borrower shall not incur any liabilities (whether or
not in connection with Borrowed Money) other than:
(i) as a result of borrowing under this Agreement or
liabilities otherwise incurred in connection with this
Agreement or the Original Facilities Agreement, or as a
result of borrowing (subject, in the case of any proposed
Borrowed Money
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from Finco 2 or Bidco, to clause 11.18 (Indebtedness of
Finco 2 to the Primary Borrower and of Bidco to Finco 2))
from other members of the Group or other persons (provided
that each amount borrowed other than borrowings falling
within clause 4.3 (d) (ii) (Utilisations generally), is
on-lent to Finco 2), or liabilities incurred in connection
with the Acquisition; or
(ii) incurred as a result of the Primary Borrower's existence
and administrative operation in accordance with the terms
of this Agreement, including, without limitation, audit and
legal fees, taxation and other expenses incurred by it in
acting as contemplated by this Agreement; or
(iii) under any guarantee, indemnity or similar instrument in
respect of Borrowed Money incurred by: (aa) a member of the
Group which is, and for so long as such guarantee,
indemnity or similar instrument is outstanding, remains, a
holding company of the REC, or (bb) an SPV; or
(iv) under any guarantee, undertaking, performance bond or
similar instrument or obligation, not being in respect of
Borrowed Money, in respect of the liabilities and/or
obligations of members of the Group; or
(v) under any guarantee given by the Primary Borrower in
replacement of, or in respect of the same obligations as
are guaranteed under, certain guarantees given by Energy
Holdings (No. 3) Limited (formerly The Energy Group PLC) on
or prior to 22 October 1998 in respect of the obligations
of former direct and indirect Subsidiaries of Energy
Holdings (No. 3) Limited.
11.16 Derivative Transactions
No Obligor shall, and the Primary Borrower will procure that no other
member of the Group shall, enter into any Derivatives Transaction other
than:
(a) in connection with the management of foreign currency or interest
rate exposures likely to be incurred in the conduct of the Group's
business or that of any Project Finance Subsidiary, and/or
(b) any contracts where the exposure is principally related to the
future generation, availability, supply, distribution or pricing
of fuel, power or energy, or other energy-related risks.
11.17 Project Finance Subsidiaries
All transactions and arrangements between the Group on the one hand and
Project Finance Subsidiaries (or members of the Group who incur Project
Finance Borrowings falling within paragraph (c) of the definition of
Project Finance Borrowing but only in connection with the Project to
which such Project Finance Borrowing directly relates) on the other shall
be (a) on arm's length terms, and (b) to the extent that they involve
liability of, or recourse to the Group in respect of Indebtedness to
finance or refinance, or in respect of the financing or refinancing of, a
Project, such liability or recourse shall be limited to the degree of
recourse described in paragraph (c) of the definition of "Project Finance
Borrowing" unless the Primary Borrower shall promptly on the incurrence
of such liability or right of recourse notify the Facility Agent that the
relevant Project Finance Borrowing which is the subject of such liability
or right of recourse shall have ceased or shall thereupon cease to be a
Project Finance
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Borrowing, attaching a detailed re-calculation of the Leverage Ratio
showing the effect of such re-designation.
11.18 Indebtedness of Finco 2 to the Primary Borrower and of Bidco to Finco 2
(a) Until the Excess Equity Funding shall have been repaid in full the
Primary Borrower will procure that:
(i) Finco 2 will not repay, forgive or novate nor shall the
Primary Borrower accept the repayment or novation of
amounts outstanding from Finco 2 to the Primary Borrower if
and to the extent that such repayment, novation or
forgiveness of any indebtedness from time to time due from
Finco 2 to the Primary Borrower (after application of the
proceeds of such repayment, forgiveness or novation by the
Primary Borrower) would result (and shall ensure that it
does not subsequently result) in the net amount owing
(including any accrued interest) by Finco 2 to the Primary
Borrower falling short of the aggregate of the Term
Advance, the Revolving Advances and all other Borrowed
Money of the Primary Borrower by more than(pound)25,000,000
(without double counting where Borrowed Money guaranteed by
the Primary Borrower is also lent to it) (including in each
case any accrued interest) unless the Primary Borrower
shall immediately repay an equivalent amount of the Term
Advance and to the extent that no Term Advance is
outstanding, repay an equivalent amount of the Revolving
Credit Facility; and
(ii) Bidco will not repay Finco 2 amounts outstanding from Bidco
to Finco 2 if and to the extent that such repayment (after
application of the proceeds of such repayment by Finco 2
and, in due course, the Primary Borrower) would result (and
shall ensure that it does not subsequently result) in the
net amount owing (including any accrued interest) by Bidco
to Finco 2 when aggregated with Bidco's liability under the
Bidco-Primary Borrower Guarantee falling short of the
aggregate of the Term Advance and the Revolving Advances
and all other Borrowed Money of the Primary Borrower by
more than(pound)25,000,000 (without double counting where
Borrowed Money guaranteed by the Primary Borrower is also
lent to it) (including in each case accrued interest) and,
without double counting, Finco 2 unless the Primary
Borrower shall immediately repay an equivalent amount of
the Term Advance and to the extent that no Term Advance is
outstanding, repay an equivalent amount of the Revolving
Credit Facility; and
(iii) the Bidco-Primary Borrower Guarantee will not be released.
(b) After the Excess Equity Funding has been repaid in full Finco 2
will not repay, forgive or novate nor shall the Primary Borrower
accept the repayment or novation of amounts outstanding from Finco
2 to the Primary Borrower if and to the extent that such repayment
(after application of the proceeds of such repayment by the
Primary Borrower) would result (and shall ensure that it does not
subsequently result) in the net amount owing (including any
accrued interest) by Finco 2 to the Primary Borrower falling short
of the aggregate of the Term Advance and the Revolving Advances
and all other Borrowed Money of the Primary Borrower by more than
(pound)25,000,000 (without double counting where Borrowed Money
guaranteed by the Primary Borrower is also lent to it) (including
in each case any accrued interest) unless the Primary Borrower
shall immediately repay an equivalent amount of the Term Advance
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and to the extent that no Term Advance is outstanding, repay an
equivalent amount of the Revolving Credit Facility.
(c) Once the Term Advance has been repaid in full and no other amount
is due owing or incurred by the Primary Borrower under the
Facilities none of the restrictions in this clause 11.18 shall
apply until and unless the Primary Borrower shall draw any further
Revolving Advance and for so long as any such Revolving Advance is
outstanding.
(d) Any amount which purports to be lent from Finco 2 to the Primary
Borrower shall for the purpose of this clause be deemed to be
applied in repayment of any existing indebtedness due from Finco 2
to the Primary Borrower at the relevant time and the provisions of
this clause shall therefore apply to the lending of any such
amount exactly as if it had been a repayment of debt.
(e) The liability of Bidco under the Bidco-Primary Borrower guarantee,
shall at all times before the Excess Equity Funding has been
repaid in full be expressed to be equal to the amount of all
intercompany loans from the Primary Borrower to Finco 2 provided
always that the total amount claimable shall be the aggregate of:
(i) the difference between the intercompany indebtedness owing
by Finco 2 to the Primary Borrower and the intercompany
indebtedness owing by Bidco to Finco 2; and
(ii) such additional amount as would give the Primary Borrower a
claim on Bidco which will compensate the Primary Borrower
for the dilutive effect of Finco 2 having other creditors;
Bidco shall not lend any amount to the Primary Borrower directly
until the Excess Equity Funding has been repaid.
(f) Any amount lent down by the Primary Borrower to Finco 2 which
represents the on-lending of Borrowed Monies incurred or
guaranteed by the Primary Borrower (the "Connected Borrowing")
shall bear a rate of interest at least equal to that applicable to
the Connected Borrowing from time to time.
(g) The Primary Borrower shall procure that each loan owing from The
Energy Group Limited to Energy Group Overseas B.V. ("EGO B.V."),
which originally came into being as a result of the on-lending
through the Group of the proceeds of the issuance by EGO B.V. of
$500,000,000 aggregate principal amount of unsecured debt
securities ("Yankee Bonds") in October 1997 carries a rate of
interest at least equal to that of the respective series of the
Yankee Bonds and is not discharged, novated or assigned in any way
which would either:
(i) cause the ultimate obligor to be a company which is not a
holding company of the REC; or
(ii) cause the ultimate beneficiary of the series of related
indebtedness to be a person other than the Group Company
which is the obligor under the Yankee Bonds.
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11.19 Ranking of bond issuer
(a) Where the Primary Borrower issues a guarantee of the obligations
of an SPV in respect of a raising of Borrowed Money by that SPV
the amount raised by such SPV shall be on-lent to the Primary
Borrower on terms that the obligations of the Primary Borrower in
respect of repayment of that loan are expressly subordinated to
the claims of all other unsecured and unsubordinated creditors of
the Primary Borrower in the event of the insolvency of the Primary
Borrower or such loan is made on such terms as are, in the opinion
of the Facility Agent (acting reasonably), effective to provide
that the creditors of the SPV under the relevant capital market
instrument will not (after taking account of the possibility of
the SPV making an intra-group claim against the Primary Borrower,
in addition to the claim of the creditors of such SPV under the
Primary Borrower's guarantee) become entitled to a claim against
the Primary Borrower that ranks better than pari passu with the
claims of the Finance Parties under the Finance Documents on a
liquidation of the Primary Borrower.
(b) Where the SPV is an unlimited company (or any other entity whose
immediate owner would have unlimited liability for that entity's
liabilities and obligations), the Primary Borrower shall hold its
interest in the SPV indirectly, by virtue of the Primary Borrower
being the holder of the issued share capital of one or more
private limited companies (or any other entities whose immediate
owner would have limited liability (by reference only to unpaid
share capital or a similar concept) for that entity's liabilities
or obligations) which is the direct or indirect owner of such SPV.
(c) The Primary Borrower shall ensure that no Group Company other than
the Primary Borrower or any holding company of the relevant SPV
shall:
(i) transfer cash or assets to an SPV or holding company of an
SPV; or
(ii) give any guarantee, indemnity or other assurance for the
obligations of an SPV or holding company of an SPV, unless
the Facilities shall simultaneously be equally and rateably
secured by a guarantee from the same Group Company.
(d) The Primary Borrower shall not and shall ensure that no holding
company of the relevant SPV shall:
(i) transfer cash or assets to an SPV or holding company of an
SPV save only to the extent required to service interest,
principal and/or premium payable under capital markets
instruments issued by the SPV or as the Primary Borrower
may be required to pay pursuant to the terms of any loan
between the SPV and the Primary Borrower made pursuant to
clause 11.19(a) or as may be required initially to
capitalise an SPV in accordance with professional advice
received or to meet liabilities of such SPV arising from
its existence and administration operation in accordance
with the terms of this Agreement including audit and legal
fees, taxation and other expenses incurred by it; or
(ii) give any guarantee, indemnity or other assurance for the
Borrowed Money of an SPV or holding company of an SPV,
unless the Facilities shall simultaneously be equally and
rateably secured by a guarantee from the same Group Company
(save for any guarantee given by the Primary Borrower
pursuant to clause 11.19(a)).
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11.20 Restrictions related to Excess Equity Funding
(a) Until such time as the Excess Equity Funding shall have been
repaid in full, no dividends or other distributions shall be paid
by the Primary Borrower to any Relevant Person nor shall loans be
made by members of the Group to any Relevant Person.
(b) Any Borrowed Money which is raised with a view to repaying, or is
used to repay, all or part of the Excess Equity Funding, or which
is raised to refinance an Indebtedness which was incurred for that
purpose or so used, shall rank pari passu with the Facilities, and
shall be raised by the Primary Borrower or by an SPV guaranteed by
the Primary Borrower, and not by any other member of the Group.
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 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 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) (Non-payment)) 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
(c) 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
(d) 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) (by reason of an event of default or default howsoever
described) any Borrowed Money of a member of the Group is
declared or becomes capable
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of being declared 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,
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, if higher, an amount of 2% of Adjusted Share
Capital and Reserves or its equivalent in other currencies, unless
the alleged default 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 resources to pay
that Borrowed Money and its other debts as they fall due; or
(e) 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
(f) 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
(g) Administration:
(i) any meeting of the directors 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 for an administration order in relation to any
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, if
in either case it is being contested by the Relevant
Company in good faith with appropriate proceedings
diligently pursued, is not discharged within 21 days; or
(iii) any Relevant Company passes a resolution to present an
application for an administration order; or
(iv) an administration order is made in relation to any Relevant
Company; or
(h) Compositions etc: any steps are taken, or negotiations commenced,
by any Relevant Company or by its creditors generally with a view
to proposing any kind of
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composition, scheme of arrangement, compromise or arrangement, in
each case involving such company and its creditors generally; or
(i) 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
(j) 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 dismissed or discharged
within 14 days of service thereof; or
(iv) an order for the winding up of any Relevant Company is
made, not (in any case) being a 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
(k) 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
(l) Analogous proceedings: there occurs, in relation to any Relevant
Company, in any country or territory in which it carries on
business or to the jurisdiction of whose courts any part of its
assets is subject, any event which, in the reasonable opinion of
the Majority Banks, appears in that country or territory
corresponds with, or has an effect equivalent to, any of those
mentioned in clauses 12.1(e) (Legal process) to (k) (Dissolution)
(inclusive) or any Relevant Company otherwise becomes subject, in
any such country or territory, to a legal procedure under of any
law relating to insolvency, bankruptcy or liquidation; or
(m) 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
unless another member of the Group carries on such business in its
place; or
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(n) 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 19 May 1999) or 75% (until 19 May
2000) 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 Energy
Group Limited; or
(v) REC or any other Licensee ceases to be a wholly-owned
Subsidiary of the Primary Borrower; or
(vi) there is a Change in Control of the Parent; or
(o) Distribution Business/Generation Business:
(i) the Group ceases, or threatens to cease, to carry on the
Distribution Business or the Generation Business as a
whole;
(ii) all or a majority of the issued shares of any Licensee or
any other Relevant Company or the whole or any material
part of the assets or revenues of (aa) the Distribution
Business or (bb) the Generation Business (taken as a whole)
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 the
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
(p) Licences:
(i) the Secretary of State or any other person with the ability
to do so 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; or
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(q) 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 relevant 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
(r) 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 or
such cesser occurs or such notice is given in the context of a
general disbandment of the Pooling and Settlement Agreement; or
(s) Gas Framework Agreement: the relevant 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;
(t) Finance Documents: any Finance Document is not or ceases to be
legal, valid and binding on or (subject to the Reservations)
enforceable against any Obligor or is alleged by any Borrower or
other Obligor to be ineffective for any reason; or
(u) 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; or
(v) Material Adverse Effect: At any time after the date of this
Agreement there is a change in the financial condition of an
Obligor which has a Material Adverse Effect.
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 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
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(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
or become obligations payable on demand; 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 Guarantees (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.
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 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 Utilisation 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 obligation
in respect of which it is made except to the extent of the net
proceeds in the
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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 each 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 Obligor 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 Obligor 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 Acquisition 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 ECB reserve requirements
The Primary Borrower shall on demand indemnify each Finance Party against
any cost or loss suffered by it as a result of complying with European
Central Bank reserve requirements to
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the extent such requirements relate to its participation in the
Facilities and are not recoverable by such Bank under clause 14.2
(Increased Costs).
13.5 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 the
Facility Agent and the Majority Banks, 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 7.6 (Stamp and other duties), 8.4 (Facility Agent may assume
receipt), 8.5 (Grossing-up for Taxes), 8.6 (Qualifying Bank), 13
(Indemnities) or 20.2 (Indemnity from Banks) (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 to the Issuing Bank 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 6.5 (Prepayments generally).
(b) When any relevant Borrower makes any prepayment under this clause
14.1 the Issuing Bank shall not release the amount of such
prepayment which is cash cover for any Outstanding Contingent
Liabilities 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.
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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 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 the 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 it is resident or incorporated or 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 (Qualifying
Bank) and 14.3 (Exceptions)):
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(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 and
fair.
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 (Mitigation)
"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 Obligors 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 (Increased costs) 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 Mandatory Cost Rate; or
(b) is (or would be if the Finance Party were or continued to be a
Qualifying Lender) the subject of an additional payment under
clause 8.5 (Grossing-up for Taxes); 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
unless (in each case) 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) (Increased Costs); or
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(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), the Solvency Ratio Directive (89/647/EEC of 18th December 1989)
and the Capital Adequacy Directive (93/6/EEC of 15 March 1993) as the
foregoing have been amended up to the date of this Agreement.
14.4 Mitigation
If, in respect of any Finance Party (an "Affected Bank"), circumstances
arise or exist which would result in:
(a) any Obligor being required to make an increased payment to that
Finance Party pursuant to clause 8.5 (Grossing-up for Taxes);
(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 (Unlawfulness);
(c) any Obligor 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)
(Increased Costs); or
(d) any Obligor 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 Obligor under clause 8 (Payments and Taxes, Accounts
and Calculations) and this clause 14 (Unlawfulness, increased costs,
alternative interest rates) (and subject to the Obligor's rights under
clause 6.5 (Prepayments generally), 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) (Increased Costs) 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
(a) Each Obligor 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 Obligor jointly with others), whether such accounts are
current, deposit, loan or of
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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 Obligor to such Finance Party under the Finance Documents but
are unpaid.
(b) 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.
(c) 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 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 Obligor 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 Obligor and shall distribute the same to the Banks
(other than the Recovering Bank); and
(iii) as between the relevant Obligor and the Recovering Bank,
the excess amount so re-distributed shall be treated as not
having been paid but the obligations of the relevant
Obligor 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
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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 22.3
(Majority Bank matters: enforcement).
(e) The amounts due from each relevant Obligor 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 or appropriating any
cash cover provided by an Obligor under this Agreement provided
that any cash cover not ultimately applied in respect of an amount
due under a Letter of Credit shall be turned over to the Facility
Agent and treated as a Relevant Receipt to which the provisions of
this clause 15.2 will generally apply.
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 (Pro-rata
payments) shall not release any other Recovering Bank from any of its
obligations or liabilities under clause 15.2 (Pro-rata payments).
15.4 No charge
The provisions of this clause 15 (Set-off and pro-rata payments) 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 (Pro-rata payments).
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 Obligors and their respective successors,
transferees and assigns.
16.2 No assignment by the Obligors
The Obligors 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 clauses 16.5 (Substitution Certificate) and 16.12 (Restrictions on
novations) (but not otherwise) 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).
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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 (Substitution), then,
unless and until the assignee has agreed with the other Finance Parties
and the Obligors 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 and the Obligors shall not be obliged
to recognise that assignee as having the rights against each or any of
them which it would have had if it had been such a party thereto.
16.5 Substitution Certificate
Subject to clause 16.6 (Reliance on Substitution Certificate) , if a duly
completed Substitution Certificate duly executed by the Existing Bank and
the Substitute is delivered to and countersigned by the Facility 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")
(except with respect to antecedent breaches) 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 pay to the
Facility Agent for its own account a fee of (pound)750. The
Facility Agent 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 Obligors shall be fully
entitled to rely on any Substitution Certificate delivered to the
Facility Agent in accordance with the foregoing
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provisions of this clause 16 (Assignment, Substitution and Lending
offices) 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
Obligors 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.
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 (Substitution Certificate) without any further consent of,
or consultation with, such party except, in the case of the Primary
Borrower, the consent required pursuant to clause 16.3 (Substitution).
16.8 Accession Deeds
The Obligors shall from time to time at the request of the Facility Agent
promptly do any act or thing or execute such documents as directed by the
Facility Agent in connection with the transfer of rights or benefits
under clause 16.3 (Substitution).
16.9 Construction of certain references
If any Bank novates all or any part of its rights, benefits and
obligations as provided in clause 16.3 (Substitution) 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.
16.10 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 (with the consent of the Primary
Borrower, if such changed lending office is outside the United Kingdom).
If the office through which a Bank is lending is changed pursuant to this
clause 16.10, 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.
16.11 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;
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(e) if required to do so by an order of a court of competent
jurisdiction;
(f) under any law or regulation or to any applicable regulatory
authority (including the Bank of England) in any relevant
jurisdiction; and
(g) where such information shall have already entered the public
domain other than by breach of confidence on the part of the
relevant Finance Party,
and in the case of (a) above, subject to first requiring and receiving a
written confirmation from the recipient of the information addressed to,
inter alios, the Primary Borrower itself and its Affiliates that the
recipient will, and will cause its Affiliates to, 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.
16.12 Restrictions on novations
Any novation by a Bank which is transferring part (but not all) of its
Commitment may only be made if (a) it is made in respect of a Commitment
of (pound)5,000,000 or any larger integral multiple of (pound)5,000,000
and (b) 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.
16.13 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
(Assignment, Substitution and Lending offices); 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.
17. FACILITY AGENT
17.1 Appointment of Facility Agent
Each Finance Party (except the Facility 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 authorises the Facility Agent to
exercise such rights, remedies, powers and discretions as are
specifically delegated to it by the terms of this Agreement and the
Finance Documents, together with all reasonably incidental rights, powers
and discretions. The Obligors shall be entitled to assume that the
Facility Agent represents the Finance Parties (except the Facility
Agent), the Reference Banks or the Majority Banks (as the case may be),
and that all consents and notices given by the Facility Agent on their
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
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or departments and, despite the provisions of clauses 17 (Facility Agent)
to 21 (Guarantee), 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 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 any Related
Person in such other capacity may be treated as confidential by the
Facility Agent. The Obligors 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
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 (Notification of retirement of Facility Agent or
Issuing Bank), then any reputable and experienced bank or other financial
institution with an office in London may, with the consent of the Primary
Borrower (such consent not to be unreasonably withheld), 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 (Facility
Agent):
(a) as regards the other Finance Parties and the Obligors, 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
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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;
(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); and
(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 and the Arrangers 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;
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(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;
(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
The Facility Agent:
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(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 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 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 Facility Agent 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 against all Liabilities
(as defined in clause 20.2 (Indemnity from Banks)) 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;
(f) shall have the power to institute, prosecute and defend any suits
or actions or other proceedings affecting the Facility Agent 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 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;
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(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 (subject to clause 19 (Duties)) 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, 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;
(j) 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 in its individual
capacity as Bank.
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 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 Finance Document of which
the Facility Agent 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);
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(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 (Acceleration)
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 (Partial
payments) 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 and the Arrangers
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;
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(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 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 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 may not be paid out promptly following receipt in the name
or under the control of such Facility Agent
<PAGE>
- 93 -
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 as the
Facility Agent may think fit and the Facility Agent 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) 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 or
the Arrangers to liabilities in any jurisdiction or be otherwise
actionable at the suit of any person;
(l) not be liable for any failure:
(i) 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;
(ii) 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;
(m) have no liability (save as otherwise provided in clauses 17
(Facility Agent) to 23 (Basis of decisions)) 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 or any Arranger from time to time, indemnify the Facility
Agent or, as the case may be, any Arranger, against any and all fees (to
the extent properly chargeable by the Facility Agent or, as the case may
be, such Arranger under any Finance Document but not promptly recovered
from the Obligors), costs, claims and expenses and liabilities including
any VAT thereon (other than those arising from the Facility Agent's or
any such Arranger's gross negligence or wilful misconduct):
(a) to which the Facility Agent becomes subject by reason of it acting
as agent; or
(b) 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 under any of the Finance Documents (collectively the
"Liabilities"). Each Obligor 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
<PAGE>
- 94 -
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, nor any Arranger 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, nor any Arranger 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 or any
Arranger any claim it may have against any of them in respect of the
matters referred to in clause 20.1 (Absence of obligation on initial
Finance Parties).
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 Group, and, accordingly, each Bank confirms to the Facility Agent and
each Arranger 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, any Arranger or any 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
(b) has not relied on and will not rely on the Facility Agent, any
Arranger or any 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 or any Arranger 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.
<PAGE>
- 95 -
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 (Exoneration) 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 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 Arrangers 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. GUARANTEE
Each Guarantor covenants and guarantees on, and in accordance with, the
terms of the Guarantee set out in Schedule 9 (Terms of Guarantee).
22. DETERMINATION OF MATTERS
22.1 Majority Bank matters: amendments and waivers
Except as provided in clause 22.4 (All Bank matters: amendments and
waivers) and 22.5 (New Obligors), with the prior written consent of the
Majority Banks:
(a) the Facility Agent and the Primary Borrower may from time to time
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 and the Banks; and
(b) the Facility Agent may from time to time execute and deliver to
any Obligor 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 (Majority Bank matters: amendments and waivers) 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
<PAGE>
- 96 -
Banks by the Facility Agent and (without prejudice to the generality of
clause 17.3 (Actions of Facility Agent)) shall be binding on all the
Banks.
22.3 Majority Bank matters: enforcement
If the Facility Agent makes a declaration under clause 12.2
(Acceleration) 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 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 (in relation to the tactics
or means of enforcement) independently against any Obligor or any other
member of the Group without the prior consent of the Majority Banks. In
determining any matter under this clause 22.3, no consent by the Majority
Banks shall be effective to approve either (a) the recovery of any
particular Bank's or Banks' debt in priority to any other Bank's debt or
(b) the effective discontinuation of recovery procedures or the final
waiver of any of the claims of the Banks under this Agreement. Such
determinations shall be for the purpose of effectively pursuing the
Banks' rights and claims under this Agreement.
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
Obligor any amendment or modification to the Finance Documents or to vary
or waive breaches of or defaults under or otherwise excuse performance of
any provision of the Finance Documents by any Obligor, if the effect of
such would be to:
(a) postpone the due date or reduce the amount of any payment of
principal, interest, commitment commission or other amount payable
or which may become payable by any Obligor under the Finance
Documents;
(b) except in accordance with clause 8.1(b)(iii) (No set-off or
counterclaim; distribution to the Banks) and 8.12 (Effect of
Monetary Union), change the currency in which any amount is
payable by any Obligor under the Finance Documents;
(c) have the effect of changing the amount of any Facility, any Bank's
Commitment or, except in accordance with clause 8.12 (Effect of
Monetary Union), the principal or face amount or currency of any
Advance;
(d) extend any period during which a Drawdown Notice may be delivered
(subject to clause 3.4 (Repayment and Cancellation of Original
Facilities Agreement));
(e) change any provision of the Finance Documents 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;
(f) change the definition of Majority Banks;
(g) change clause 15.2 (Pro-rata Payments); or
(h) change this clause 22 (Determination of matters) or clause 23
(Basis of Decisions).
<PAGE>
- 97 -
22.5 New Obligors
For the purposes of this clause 22 (Determination of matters) 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.
22.6 Veto of Facility Agent
Regardless of any other provision in this Agreement, the Facility 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 this clause 22
(Determination of matters); or
(b) otherwise amend, modify or waive any of the Facility Agent's or
the Arrangers' rights under any of the Finance Documents or
subject the Facility Agent 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 any of the Finance 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 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 (Late
responses)) the Facility Agent shall treat any Bank which has not so
responded as having
<PAGE>
- 98 -
indicated a desire to be bound by the wishes of 66 2/3 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
(a) 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 "Facility Agent's Notice") of such matter containing a
request for written instructions from such Bank to be received by
the Facility Agent within ten Banking Days of the receipt (or the
deemed receipt pursuant to clause 25.1(b) (Address for Notice)) of
the Facility Agent's Notice. Before the expiry of such deadline,
the Facility Agent will use reasonable endeavours to contact any
Bank which has not responded to the Facility Agent's Notice in
order to obtain a response from such Bank.
(b) If, in respect of a Bank, the Facility Agent:
(i) shall not have received written instructions in respect of
such matter from such Bank; and
(ii) 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
(Late responses)), 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 of the Obligors) by the
determination, approval, consent or instructions of the other
Banks in respect of such matter. This clause 23.3(b) shall not
apply in so far as it would create any obligation on a Bank to
provide an increased Commitment without such Bank having expressed
such increased Commitment in writing.
(c) Clauses 23.1 (Meaning of Majority Banks) and 23.2 (Notice to
Majority Banks) 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 (Notice to Majority Banks) or 23.3 (Meaning of All
Banks), 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.
<PAGE>
- 99 -
23.5 Costs
If any Obligor requests, or if the Facility Agent requires in accordance
with any provision of this Agreement, any amendment, supplement,
modification or waiver under clause 22.1 (Majority Bank matters:
amendments and waivers) or clauses 22.4 (All Bank matters: amendments and
waivers) or 22.5 (New Obligors), then the Obligors 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: amendments and waivers) or clauses 22.4 (All Bank matters:
amendments and waivers) or 22.5 (New Obligors).
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 (Definitions))
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 Obligors
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 or that a member
of the Group is to be designated as an additional Guarantor. Such notice
shall be in writing and signed by the Primary Borrower and the relevant
Permitted Borrower or member of the Group, respectively, and shall take
effect in accordance with its terms on the condition that:
(a) such Permitted Borrower or member of the Group, respectively,
shall have entered into an Accession Certificate with the Facility
Agent which, subject to (b) below, the
<PAGE>
- 100 -
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 or member of the Group, respectively,
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, in the case of the Permitted Borrower,
the delivery to the Facility Agent of the documents and evidence
referred to in Part B of Schedule 3 (Conditions Precedent) in form
and substance satisfactory to the Facility Agent.
Upon satisfaction of such conditions such Permitted Borrower or member of
the Group shall become a party to this Agreement in the capacity also of
an Additional Guarantor and, in the case of such Permitted Borrower,
Additional Borrower, of the Revolving Credit Facility and shall assume
all the obligations and rights of such a Guarantor and, in the case of
such Permitted Borrower, Borrower, under this Agreement.
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 (the "Obligor's Agent") for such Obligor 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 (Address for Notice); 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 Finance
Documents are unconditional and irrevocable (subject to the express
provisions of this Agreement or any Finance Document) and shall not be in
any way affected or discharged by reason of any matter affecting the
Acquisition. Each Obligor acknowledges that any approval or authorisation
given under this Agreement or a Finance Document by a Finance Party in
relation to the Acquisition shall not constitute any representation or
warranty by such (or any) Finance Party as to the adequacy or
effectiveness of such Acquisition, the purchase consideration payable by
Bidco, the commercial advisability of any Obligor or Bidco entering into
the arrangements contemplated thereby or otherwise.
<PAGE>
- 101 -
24.4 Obligations Several
The obligations of each Obligor under this Agreement and the Finance
Documents are several (unless otherwise stated) and the failure of any
Obligor to perform such obligations shall not release any other Obligor
of 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
(c) be sent:
(i) to the Primary Borrower (for itself, Bidco, Finco 2 and any
other Obligors) at:
c/o Norton Rose
Kempson House
Camomile Street
London EC3A 7AN
Telefax: + 44 171 283 6500
Attention: Andrew Bamber
with a copy for information only to:
Eastern Group plc
Wherstead Park
Wherstead
Ipswich
Suffolk
Telefax: +44 1473 555002
Attention: Group Finance Director
and,
Texas Utilities Company
Energy Plaza
1601 Bryan Street
<PAGE>
- 102 -
Dallas
Texas
Telefax: 214 812 2488
Attention: Treasurer
(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 (The Banks and their Commitments) 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
Lehman Brothers International (Europe)
One Broadgate
London EC2M 7HA
Telefax: +44 171 256 4018
Attention: Julian Entwisle
<PAGE>
- 103 -
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 an Obligor 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 an
Obligor 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 Finance
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 Finance 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>
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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
(c) nothing in this clause 26.2 shall limit the right of any Finance
Party to refer any such claim against any Obligor to any other
court of competent jurisdiction outside England, to the
jurisdiction of which any Obligor 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>
- 105 -
Schedule 1
The Banks and their Commitments
<TABLE>
<CAPTION>
=================================================================================================
Bank Commitments
- -------------------------------------------------------------------------------------------------
Term Facility Revolving Credit Revolving Credit
(pound) Facility Facility
Tranche A Tranche B
(pound) (pound)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Chase Manhattan Bank 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Lehman Commercial Paper Inc. 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Merrill Lynch Capital Corporation 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Bank of America NT and SA 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Barclays Bank PLC 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Bayerische Hypo- und Vereinsbank AG, 24,757,891.18 6,602,104.31 10,728,419.51
London Branch
- -------------------------------------------------------------------------------------------------
Bayerische Landesbank Girozentrale, 24,757,891.18 6,602,104.31 10,728,419.51
London Branch
- -------------------------------------------------------------------------------------------------
CIBC Wood Gundy plc 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Citibank, N.A 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Commerzbank Aktiengesellschaft, 24,757,891.18 6,602,104.31 10,728,419.51
London Branch
- -------------------------------------------------------------------------------------------------
Credit Lyonnais 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Credit Suisse First Boston 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Den Danske Bank Aktieselskab 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Deutsche Bank AG London 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
First Union National Bank, London 24,757,891.18 6,602,104.31 10,728,419.51
Branch
- -------------------------------------------------------------------------------------------------
ING Bank N.V., London Branch 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
KBC Bank N.V., London Branch 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
National Australia Bank Limited (ACN 24,757,891.18 6,602,104.31 10,728,419.51
004044937)
- -------------------------------------------------------------------------------------------------
The Royal Bank of Scotland plc 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
Societe Generale, London Branch 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
The Toronto-Dominion Bank 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- 106 -
<TABLE>
<CAPTION>
=================================================================================================
Bank Commitments
- -------------------------------------------------------------------------------------------------
Term Facility Revolving Credit Revolving Credit
(pound) Facility Facility
Tranche A Tranche B
(pound) (pound)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Westdeutsche Landesbank Girozentrale 24,757,891.18 6,602,104.31 10,728,419.51
- -------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V 18,005,738.24 4,801,530.20 7,802,486.57
- -------------------------------------------------------------------------------------------------
The Bank of New York 18,005,738.24 4,801,530.20 7,802,486.57
- -------------------------------------------------------------------------------------------------
The Dai-Ichi Kangyo Bank, Limited 18,005,738.24 4,801,530.20 7,802,486.57
- -------------------------------------------------------------------------------------------------
Mellon Bank N.A 18,005,738.24 4,801,530.20 7,802,486.57
- -------------------------------------------------------------------------------------------------
The Sanwa Bank, Limited 18,005,738.24 4,801,530.20 7,802,466.57
- -------------------------------------------------------------------------------------------------
Abbey National Treasury Services plc 13,504,304.12 3,601,147.76 5,851,865.12
- -------------------------------------------------------------------------------------------------
National Westminster Bank Plc 13,504,304.12 3,601,147.76 5,851,865.12
- -------------------------------------------------------------------------------------------------
UBS AG 13,504,304.12 3,601,147.76 5,851,865.12
- -------------------------------------------------------------------------------------------------
ABC International Bank plc 9,002,869.41 2,400,765.18 3,901,243.41
- -------------------------------------------------------------------------------------------------
Banca Monte dei Paschi di Siena SpA, 9,002,869.41 2,400,765.18 3,901,243.41
London Branch
- -------------------------------------------------------------------------------------------------
The Bank of Nova Scotia 9,002,869.41 2,400,765.18 3,901,243.41
- -------------------------------------------------------------------------------------------------
The Bank of Tokyo-Mitsubishi, Ltd 9,002,869.41 2,400,765.18 3,901,243.41
- -------------------------------------------------------------------------------------------------
Banque Nationale de Paris London 9,002,869.41 2,400,765.18 3,901,243.41
Branch
- -------------------------------------------------------------------------------------------------
Christiania Bank og Kreditkasse ASA 9,002,869.41 2,400,765.18 3,901,243.41
- -------------------------------------------------------------------------------------------------
Banca Nazionale del Lavoro S.p.A., 5,882,352.94 1,568,627.45 2,549,019.61
London Branch
- -------------------------------------------------------------------------------------------------
Caisse Centrale de Caisses d'Epargne et 5,882,352.94 1,568,627.45 2,549,019.61
de Prevoyance (CCCEP)
- -------------------------------------------------------------------------------------------------
AIB International Finance 4,501,434.12 1,200,382.43 1,950,621.45
- -------------------------------------------------------------------------------------------------
Arab Bank plc 4,501,434.12 1,200,382.43 1,950,621.45
- -------------------------------------------------------------------------------------------------
TOTAL 750,000,000.00 200,000,000.00 325,000,000.00
=================================================================================================
</TABLE>
<PAGE>
- 107 -
Schedule 2
Forms of Drawdown Notice
Part A
Term Facility
To: [Name and address of Facility Agent]
[DATE]
Attention: |_|
(pound)1,275,000,000 Facilities Agreement dated 24 March 1999 (as amended)
1. We refer to the above Agreement and hereby give you notice that we wish
to draw down a Term Advance under the Term 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 ............................. |_|] ; and
(d) the proceeds of such Advance to be credited to [name and number of
account] at [name of bank in London]
2. We confirm that each condition specified in clause 3 (The Conditions) 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
[relevant Borrower]
------------------------------
Director
<PAGE>
- 108 -
Part B
Revolving Credit Facility
To: [Name and address of Facility Agent]
[DATE]
Attention: |_|
(pound)1,275,000,000 Facilities Agreement dated 24 March 1999 (as amended)
1. We refer to the above Agreement and hereby give you notice that we wish
to draw a Revolving Credit Advance under Tranche [A/B]:
(a) on |_| 19|_| ;
(b) in the sum of (pound)|_| [or currency |_|];
(c) with a Maturity Period in respect thereof of |_| 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 each condition specified in clause 3 (The Conditions) 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
[Name of Borrower]
------------------------------
Director
<PAGE>
- 109 -
Part C
Letters of Credit
To: [Name and address of Facility Agent]
[DATE]
Attention: |_|
(pound)1,275,000,000 Facilities Agreement dated 24 March 1999 (as amended)
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 under
Revolving Credit Facility Tranche [A/B]:
(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 that has not been waived; and
(b) the applicable representations and warranties contained in clause
9 (Representations and Warranties) 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>
- 110 -
Schedule 3
Conditions Precedent
Part A - Documents and Evidence required as Conditions Precedent
1. Certified copies of the memorandum and articles of association and the
certificate of incorporation and any change of name certificates of each
Obligor, in the agreed form.
2. Certified copies of resolutions of the shareholders of Bidco and the
board of directors of each Obligor in the agreed form approving the
execution and delivery of and the performance of their respective
obligations under the Finance Documents to which they are a party 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.
3. A certificate of a duly authorised signatory of each Obligor setting out
the names and specimen signatures of the persons authorised to sign on
behalf of such Obligor 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.
4. The opinion of Lovell White Durrant, English solicitors for the Facility
Agent.
5. The Fee Letters, duly executed and countersigned, and the fees and
expenses payable under the Fee Letters having been paid.
6. Certified copy of the Bidco/Primary Borrower Guarantee.
Part B - To be delivered by each Permitted Borrower
1. A certified copy of the certificate of incorporation and the memorandum
and articles of association of the Permitted Borrower.
2. A certified copy of the resolutions of the board of directors of the
Permitted Borrower evidencing approval of this Agreement and the Finance
Documents (to which that company is a party) and authorising its
appropriate duly authorised officers to execute and deliver this
Agreement and those Finance Documents and to give all notices and take
all other action required by the relevant company under this Agreement
and those Finance Documents.
3. 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 2 above.
<PAGE>
- 111 -
4. The Accession Certificate duly executed by the Permitted Borrower.
5. A certificate of a director of the Permitted Borrower certifying that the
borrowing and/or guaranteeing of the liabilities guaranteed by it would
not cause any borrowing limit binding on the Permitted Borrower to be
exceeded.
<PAGE>
- 112 -
Schedule 4
Calculation of Mandatory Cost Rate
The Mandatory Cost Rate is an addition to the interest rate on a sum to
compensate the Banks for the cost resulting from the imposition from time to
time under the Bank of England Act 1998 and/or by the Bank of England and/or the
Financial Services Authority (the "FSA") (or other United Kingdom governmental
authorities or agencies) of a requirement to place non-interest-bearing cash
ratio deposits or Special Deposits (whether interest bearing or not) with the
Bank of England and/or pay fees to the FSA calculated by reference to
liabilities used to fund the sum.
The Mandatory Cost Rate will be the rate determined by the Facility Agent to be
the arithmetic mean (rounded upward, if necessary, to four decimal places) of
the rates notified by each Reference Bank to the Facility Agent as the rate
resulting from the application of the formula:
for sterling sums: XL + S(L - D) + F x 0.01
------------------------
100 - (X + S)
for other sums: F x 0.01
--------
300
where on the day of application:
X is the percentage of Eligible Liabilities (in excess of any stated
minimum) by reference to which such Reference Bank is required under the
Bank of England Act 1998 to maintain cash ratio deposits with the Bank of
England;
L is the BBA sterling LIBOR rate quoted at or about 11.00 a.m. (London
time) on Telerate (now at page 3750) on that day;
F is the rate payable by such Reference Bank to the FSA under the Fees
Regulations, expressed in pounds per (pound)1 million of such Reference
Bank's fee base;
S is the level of interest-bearing Special Deposits, expressed as a
percentage of Eligible Liabilities, which such Reference Bank is required
to maintain by the Bank of England (or other United Kingdom governmental
authorities or agencies); and
D is the percentage rate per annum payable by the Bank of England to such
Reference Bank on Special Deposits.
(X, L, S and D are to be expressed in the formula as numbers and not as
percentages. A negative result obtained from subtracting D from L shall be
counted as zero.)
If any Reference Bank fails to notify any such rate to the Facility Agent, the
Mandatory Cost Rate shall be determined on the basis of the rate(s) notified to
the Facility Agent by the remaining Reference Bank(s).
The Mandatory Cost Rate attributable to a sum for any period shall be calculated
at or about 11.00 a.m. (London time) on the first day of such period for the
duration of such period.
<PAGE>
- 113 -
The determination of the Mandatory Cost Rate for any period shall, in the
absence of manifest error, be conclusive and binding on the parties hereto. 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 and the Primary Borrower) shall notify the Primary Borrower of
the manner in which the Mandatory Cost Rate will subsequently be calculated.
For the purposes of this Schedule:
The terms "Eligible Liabilities" and "Special Deposits" have the meanings
given to them under the Bank of England Act 1998 or by the Bank of
England (as appropriate) on the date of application of the formula.
"fee base" has the meaning given to it in the Fees Regulations.
"Fees Regulations" means, as appropriate, either:
(a) the Banking Supervision (Fees) Regulations 1998; or
(b) such regulations as may be in force from time to time relating to
the payment of fees for banking supervision after 31 March 1999.
<PAGE>
- 114 -
Schedule 5
Form of Substitution Certificate
(referred to in clause 16.5 (Substitution Certificate))
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)1,275,000,000 Facilities
Agreement (the "Agreement") dated 24 March 1999 between TXU Eastern Holdings Ltd
as the initial Borrower (1) TU Finance (No.2) Ltd and TU Acquisitions Limited
(2), Chase Manhattan plc, Lehman Brothers International (Europe), Merrill Lynch
Capital Corporation as Arrangers (3), various banks and financial institutions
as Banks (4) The Chase Manhattan Bank as Issuing Bank (5) and Chase Manhattan
International Limited as Facility Agent (6) (as amended). 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 Obligors 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
(Substitution Certificate) of the Agreement so as to take effect in
accordance with the terms of such clause 16.5 (Substitution Certificate)
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
Obligors and all other parties to the Agreement) confirms the novation
effected by this Substitution Certificate pursuant
<PAGE>
- 115 -
to and for the purposes of clause 16.5 (Substitution Certificate) of the
Agreement so as to take effect in accordance with the terms of such
clause 16.5 (Substitution Certificate).
4. The Substitute confirms:
(a) that it has received a copy of the Agreement and each of the
Finance 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 Obligor and the Group and its own
independent investigation of the financial condition, prospects
and affairs of any Obligor 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 Obligor 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 (Specific
duties of the Facility Agent) 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 (Exoneration) 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 Obligors 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).
7. Without limiting the above paragraphs, nothing in this Substitution
Certificate obliges the Existing Bank to:
<PAGE>
- 116 -
(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 Obligors 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
Term Facility
Commitment ((pound)) Portion Transferred ((pound))
[_] [_]
Contribution ((pound)) Portion Transferred ((pound))
[_] [_]
Next Interest Payment Date
[_]
Revolving Credit Facility Tranche A
Commitment ((pound)) Portion Transferred ((pound))
[_] [_]
Contribution ((pound)) Portion Transferred ((pound))
[_] [_]
Next Maturity Date(s)
[_]
Transferor's share of Portion of Letters of Credit
Outstanding Letters of Credit Transferred
[_] [_]
<PAGE>
- 117 -
Revolving Credit Facility Tranche B
Commitment ((pound)) Portion Transferred ((pound))
[_] [_]
Contribution ((pound)) Portion Transferred ((pound))
[_] [_]
Next Maturity Date(s)
[_]
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>
- 118 -
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)1,275,000,000 Facilities
Agreement (the "Agreement") dated 24 March 1999 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 Banks (4) The Chase Manhattan
Bank as Issuing Bank (5) and Chase Manhattan International Limited as Facility
Agent (6) (as amended). Terms defined in the Agreement shall have the same
meaning in this Accession Certificate.
1. [|_|] (the "Acceding [|_|Borrower/Guarantor|_|]") 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
(Additional Obligors) 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 and accordingly shall, subject to the terms of this
Accession Certificate and the Agreement, become an Additional Borrower
and Additional Guarantor under the Agreement.|_|]
[|_|The Acceding Guarantor is, pursuant to this Accession Certificate,
acceding to the Agreement as a Guarantor in respect of the Revolving
Credit Facility and accordingly shall, subject to the terms of this
Accession Certificate and the Agreement, become an Additional Guarantor
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 (Additional Obligors) of
the Agreement so as to take effect in accordance with the terms thereof.
4. The Acceding [|_|Borrower/Guarantor|_|] 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.
<PAGE>
- 119 -
Notice Details of Acceding [|_|Borrower/Guarantor|_|]
Address:
Telephone:
Telefax:
Attention:
The Acceding [|_|Borrower/Guarantor|_|]
[Execution particulars - Acceding [|_|Borrower/Guarantor|_|] 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>
- 120 -
Schedule 7
Terms of Borrowers' Indemnity
1. The relevant Borrower unconditionally and irrevocably undertakes to the
Issuing Bank as follows:
(a) the relevant 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 the relevant 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 the relevant 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. The relevant Borrower 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 (save in the case
of gross negligence or wilful default):
(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
<PAGE>
- 121 -
any 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) (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")) any draft, demand, certificate or 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; 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 the relevant Borrower 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>
- 122 -
(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 the relevant Borrower or any other
person to the Issuing Bank or any discharge given by the Issuing Bank to
that Borrower or any other person in respect of obligations under this
Agreement or any related agreement between the Issuing Bank and that
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. That 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>
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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 (Banks' Guarantee and Indemnity))
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 (Banks' Guarantee and Indemnity).
4. The obligations of each Bank under clause 4.7 (Banks' Guarantee and
Indemnity) shall not be impaired, affected or revoked (except to the
extent arising from the Facility Agent's gross negligence or wilful
default) 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 (Banks'
Guarantee and Indemnity) 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>
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(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 (All Bank matters: amendments and waivers)
and 22.5 (New Obligors), 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 (Banks'
Guarantee and Indemnity) 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 (Banks' Guarantee and Indemnity) 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 (Banks' Guarantee and
Indemnity) 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 (Banks' Guarantee and Indemnity)
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 (Banks' Guarantee and
Indemnity) 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 (Banks' Guarantee and Indemnity) are in addition to and are not
exclusive of those provided by law.
<PAGE>
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8. A certificate of the Issuing Bank as to any amount due to it from any
Bank pursuant to clause 4.7 (Banks' Guarantee and Indemnity) shall be
conclusive (in the absence of manifest error).
<PAGE>
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Schedule 9
Terms of Guarantee
1. Guarantee
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 (other than
the Primary Borrower) (the "Guaranteed Parties") of all its
obligations under the Revolving Credit Facility and the payment
when due of all sums from time to time payable to each Finance
Party by each other Guaranteed Party under or in connection with
the Revolving Credit Facility;
(b) undertakes with each Finance Party that whenever a Borrower (other
than the Primary Borrower) does not pay any amount when due under
or in connection with obligations under the Revolving Credit
Facility, that Guarantor shall forthwith on demand by the Facility
Agent pay that amount as if that Guarantor instead of the relevant
Borrower (other than the Primary 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 pursuant to this Guarantee is or
becomes unenforceable, invalid or illegal.
Provided that this guarantee shall not extend to:
(i) any obligation under or in connection with the Term
Facility;
(ii) interest, commission, fees, charges, costs or expenses
relating to any of the matters excluded from the guarantee
by sub-clause (i) above.
2. Continuing guarantee
This guarantee is a continuing guarantee and will extend (subject to the
proviso in paragraph 1 above) to the ultimate balance of all sums payable
by the Guaranteed Parties or any of them under the Finance Documents
under or in connection with the Revolving Credit Facility, 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
Guaranteed Party or any security for those obligations or
otherwise) 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 (Terms of Guarantee) 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.
<PAGE>
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4. Waiver of defences
The obligations of each Guarantor under this schedule 9 (Terms of
Guarantee) 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 (Terms of
Guarantee) 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 Guaranteed Party or other person;
(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
Guaranteed Party 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 Guaranteed Party or any other person;
(d) any variation (however fundamental and whether or not involving an
increase in liability of any Guaranteed Party) or replacement of a
Finance Document or any other document or security so that
references to that Finance Document in this schedule 9 (Terms of
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 Guaranteed Party or
proposed Guaranteed Party 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 Guaranteed
Party 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 (Terms of Guarantee) 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 (Terms of Guarantee).
<PAGE>
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6. Appropriations
Until all amounts which may be or become payable by the Guaranteed
Parties under or in connection with the Revolving Credit Facility 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 (Terms of Guarantee).
7. Non-competition
Until all amounts which may be or become payable by the Guaranteed
Parties under or in connection with the Revolving Credit Facility 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 (Terms of Guarantee):
(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 (Terms of
Guarantee) 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 Guaranteed Party
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 Guaranteed Party, or exercise
any right of set-off as against any Guaranteed Party (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 (Terms of
Guarantee).
<PAGE>
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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.
9. Financial assistance
Notwithstanding any other provision of this guarantee, this guarantee
shall not operate to guarantee, or create any indemnity in respect of,
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.
<PAGE>
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EXECUTION PAGES
PRIMARY BORROWER, FINCO 2 AND BIDCO
Signed for and on behalf of
TXU Eastern Holdings Limited
(company number 3505836)
[H. JARRELL GIBBS]
- -----------------------------------
Signed for and on behalf of
TU Finance (No. 2) Limited
(company number 3514100)
[H. JARRELL GIBBS]
- -----------------------------------
Signed for and on behalf of
TU Acquisitions Limited
(company number 3455523)
[H. JARRELL GIBBS]
- -----------------------------------
JOINT LEAD ARRANGERS
Signed for and on behalf of
Chase Manhattan plc
as Arranger
[MARIAM TOULAN]
- -----------------------------------
<PAGE>
- 131 -
Signed for and on behalf of
Lehman Brothers International (Europe)
as Arranger
[ROGER BROOKES]
- -----------------------------------
Signed for and on behalf of
Merrill Lynch Capital Corporation
as Arranger
[STEVE PARAS]
- -----------------------------------
ORIGINAL BANKS
Signed for and on behalf of
Abbey National Treasury Services plc
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
ABC International Bank plc
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
ABN AMRO Bank N.V.
[MATTHEW CURRAN]
- -----------------------------------
<PAGE>
- 132 -
Signed for and on behalf of
AIB International Finance
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
Arab Bank plc
[I.R. GREENWOOD] [M. COOPER]
- ----------------------------------- -----------------------------------
Signed for and on behalf of
Banca Monte dei Paschi di Siena SpA, London Branch
[ROBERTO BOCCANERA] [DUNCAN ROUSE]
- ----------------------------------- -----------------------------------
Signed for and on behalf of
Banca Nazionale del Lavoro S.p.A., London Branch
[M. DAVIDSON-GAY] [D. ROSSER]
- ----------------------------------- -----------------------------------
Signed for and on behalf of
Bank of America NT & SA
[JOHN WADE]
- -----------------------------------
<PAGE>
- 133 -
Signed for and on behalf of
The Bank of New York
[GERRY DORKIN]
- -----------------------------------
Signed for and on behalf of
The Bank of Nova Scotia
[MARGOT WADDUP]
- -----------------------------------
Signed for and on behalf of
The Bank of Tokyo-Mitsubishi, Ltd
[DAVID DALLISON]
- -----------------------------------
Signed for and on behalf of
Banque Nationale de Paris London Branch
[RICHARD HITE]
- -----------------------------------
Signed for and on behalf of
Barclays Bank PLC
[MICHAEL JOYNER]
- -----------------------------------
<PAGE>
- 134 -
Signed for and on behalf of
Bayerische Hypo- und Vereinsbank AG, London Branch
[STEPHEN J.B. PEECOCK] [TREVOR J.T. HEAP]
- ----------------------------------- -----------------------------------
Signed for and on behalf of
Bayerische Landesbank Girozentrale, London Branch
[TIMOTHY R. HALL]
- -----------------------------------
Signed for and on behalf of
Caisse Centrale de Caisses d'Epargne et de Prevoyance (CCCEP)
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
The Chase Manhattan Bank
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
Christiania Bank og Kreditkasse ASA
[MARIAM TOULAN]
- -----------------------------------
<PAGE>
- 135 -
Signed for and on behalf of
CIBC Wood Gundy plc
[DAVID R. AUSTIN]
- -----------------------------------
Signed for and on behalf of Citibank, N.A.
[NIELS C. KIRK]
- -----------------------------------
Signed for and on behalf of
Commerzbank Aktiengesellschaft, London Branch
[J. R. BOURNE] [H.L. NUTTALL]
- ----------------------------------- -----------------------------------
Signed for and on behalf of
Credit Lyonnais
[MARGARET STEWART]
- -----------------------------------
Signed for and on behalf of
Credit Suisse First Boston
[N.D. HORNE] [R. SMITH-MORGAN]
- ----------------------------------- -----------------------------------
<PAGE>
- 136 -
Signed for and on behalf of
The Dai-Ichi Kangyo Bank, Limited
[COLIN VITTERY]
- -----------------------------------
Signed for and on behalf of
Den Danske Bank Aktieselskab
[A.J. PETTIGREW]
- -----------------------------------
Signed for and on behalf of
Deutsche Bank AG London
[MICHAEL STARMER-SMITH] [RICHARD SEDLACEK]
- ----------------------------------- -----------------------------------
Signed for and on behalf of
First Union National Bank, London Branch
[TOM QUIGLEY]
- -----------------------------------
Signed for and on behalf of
ING Bank N.V., London Branch
[ANDREW PRECIOUS]
- -----------------------------------
Signed for and on behalf of
KBC Bank N.V., London Branch
[MARIAM TOULAN]
- -----------------------------------
<PAGE>
- 137 -
Signed for and on behalf of
Lehman Commercial Paper Inc.
[ROGER BROOKS]
- -----------------------------------
Signed for and on behalf of
Mellon Bank N.A.
[KEITH BRACKLEY]
- -----------------------------------
Signed for and on behalf of
Merrill Lynch Capital Corporation
[STEVE PARAS]
- -----------------------------------
Signed for and on behalf of
National Australia Bank Limited (ACN 004044937)
[DAVID RAWSON]
- -----------------------------------
Signed for and on behalf of
National Westminster Bank Plc
[STEVE BARLOW]
- -----------------------------------
<PAGE>
- 138 -
Signed for and on behalf of
The Royal Bank of Scotland plc
[LEE MORSE]
- -----------------------------------
Signed for and on behalf of
The Sanwa Bank, Limited
[PETER LUCAS]
- -----------------------------------
Signed for and on behalf of
Societe Generale, London Branch
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
The Toronto-Dominion Bank
[MARIAM TOULAN]
- -----------------------------------
Signed for and on behalf of
UBS AG
[MARIAM TOULAN]
- -----------------------------------
<PAGE>
- 139 -
Signed for and on behalf of
Westdeutsche Landesbank Girozentrale
[GILES TAYLOR]
- -----------------------------------
ISSUING BANK
Signed for and on behalf of
The Chase Manhattan Bank
as Issuing Bank
[MARIAM TOULAN]
- -----------------------------------
FACILITY AGENT
Signed for and on behalf of
Chase Manhattan International Limited
as Facility Agent
[KATHRYN JEPSON]
- -----------------------------------
<PAGE>
<PAGE>
Exhibit 10(b)
SALARY DEFERRAL PROGRAM
of the
TEXAS UTILITIES COMPANY SYSTEM
(As restated effective April 1, 1998)
Section 1. Purpose
1.1 Purpose. The Salary Deferral Program of the Texas Utilities
-------
Company System (the "Plan") is established, effective April 1, 1991, and is
amended and restated as of April 1, 1998, for the purpose of providing a
mechanism for certain key employees of Participating Employers to defer a
portion of their Salary and Bonus, motivating key employees, and recognizing
the contributions of such employees to the Company as the Plan sponsor. The
Plan is designed as an unfunded arrangement maintained "primarily for the
purpose of providing deferred compensation for a select group of management or
highly compensated employees" as determined under the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"). ERISA Section
201(2).
Section 2. Definitions
2.1 Definitions. Whenever used herein, the following terms shall
-----------
have the meanings set forth below:
(a)"Account" means the individual account maintained by the Company for each
Participant for recording Salary and Bonus Deferrals made by, and Matching
Awards made on behalf of, each Participant in the Plan, and earnings on such
Deferrals and Matching Awards.
(b)"Adjustment Date" means the last day of each calendar quarter and such
other dates as the Committee in its discretion may prescribe.
(c)"Beneficiary" means the person or persons named by the Participant as the
recipient(s) of any distribution remaining to be paid to the Participant under
the Plan upon the Participant's death.
(d)"Board of Directors" means the Board of Directors of the Company.
(e)"Bonus" means the cash portion of any future bonus or incentive award paid
by a Participating Employer to a Participant with respect to services to be
performed by a Participant during a Plan Year, or any other future special or
extraordinary cash payment payable by a Participating Employer to a
Participant during a Plan Year.
(f)"Business Unit" means a subsidiary, division or operating unit of the
Company designated by the Chief Executive Officer of the Company which will
focus on its own unique products, services and markets.
(g)"Change in Control" means a change in control of a nature that would be
required to be reported in response to Item 1(a) of the Securities and
Exchange Commission Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), or would have been required to be so reported but for the
fact that such event had been "previously reported" as that term is defined
in Rule 12b-2 of Regulation 12B under the Exchange Act; provided that, without
limitation, such a change in control shall be deemed to have occurred if (i)
any Person is or becomes the beneficial owner (as defined in Rule 13-d3 under
the Exchange Act), directly or indirectly, of securities of the Company
<PAGE>
<PAGE>
representing 20% or more of the combined voting power of the Company's then
outstanding securities ordinarily (apart from rights accruing under special
circumstances) having the right to vote at elections of directors ("Voting
Securities"), or (ii) individuals who constitute the Board of Directors on the
date hereof (the "Incumbent Board") cease for any reason to constitute at
least a majority thereof, provided that any person becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least three-quarters
of the directors comprising the Incumbent Board (either by a specific vote or
by approval of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such nomination) shall
be, for purposes of this clause (ii), considered as though such person were a
member of the Incumbent Board, or (iii) a recapitalization of the Company
occurs which results in either a decrease by 33% or more in the aggregate
percentage ownership of Voting Securities held by Independent Shareholders (on
a primary basis or on a fully diluted basis after giving effect to the
exercise of stock options and warrants) or an increase in the aggregate
percentage ownership of Voting Securities held by non-Independent Shareholders
(on a primary basis or on a fully diluted basis after giving effect to the
exercise of stock options and warrants) to greater than 50%. For purposes of
this definition, the term "Person" shall mean and include any individual,
corporation, partnership, group, association or other "person", as such term
is used in Section 14(d) of the Exchange Act, other than the Company, a
subsidiary of the Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof, and the term "Independent
Shareholder" shall mean any shareholder of the Company except any employee(s)
or director(s) of the Company or any employee benefit plan(s) sponsored or
maintained by the Company or any subsidiary thereof.
(h)"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
(i)"Committee" means the Salary Deferral Program Administrative Committee,
which shall be comprised, initially, of members who serve on the Employees'
Thrift Plan Committee. Subsequently, members of the Committee shall be
appointed by the Chief Executive of the Company.
(j)"Company" means Texas Utilities Company, its successors and assigns.
(k)"Deferral" means the deferral of Salary and/or Bonus under this Plan as
provided for in Section 4 hereof.
(l)"Deferral Period" means the period of deferral, beginning with the first
day of the applicable Plan Year, which shall be seven years for the Seven Year
Option and which shall be the period ending with Retirement for the Retirement
Option. Notwithstanding the foregoing, the Deferral Period shall end on the
date of death, Disability, or termination of employment and, to the extent
that amounts otherwise eligible for distribution under this Plan combined with
the Participant's other remuneration exceeds the Applicable Employee
Remuneration for such year, and subject to the subsequent Transition
Provision, the Deferral Period for such excess amount shall end with
Retirement or such earlier date as of which such amounts, or any part thereof,
combined with other remuneration does not exceed the Applicable Employee
Remuneration. For purposes of this definition, "Applicable Employee
Remuneration" means applicable employee remuneration as that term is defined
in Section 162(m), or any successor provision, of the Code. Transition
2
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<PAGE>
provision, of the Code. Transition Provision: Notwithstanding any other
provisions contained herein, the Deferral Period for amounts subject to an
Election made for periods prior to April 1, 1995, shall be the Deferral
Deferral Period applicable at the time of the Election.
(m)"Disability" shall have the meaning given to it under the Texas Utilities
System Employee Long-Term Disability Income Plan.
(n)"Early Retirement" means Retirement at age fifty-five or later but prior to
Normal Retirement.
(o)"Eligible Employee" means an employee of a Participating Employer whose
Salary as of January 1, 1991, is $80,000 or more. For each year subsequent to
1991, an Eligible Employee is an Employee whose Salary as of January 1 of such
year is $80,000 or more, as indexed consistent with the Consumer Price Index
for such year.
(p)"Matching Award" means contributions made by the Participating Employers
pursuant to Section 5.1 herein.
(q)"Normal Retirement" means Retirement at age sixty-two or later.
(r)"Participant" means an Eligible Employee who elects to participate in the
Plan and whose Account(s) has not been completely distributed.
(s)"Participating Employer" means the Company and each of its subsidiaries,
affiliates or Business Units which elect to participate and adopt this Plan
and are approved by the Committee for participation in this Plan. The
Participating Employers, as of the date of the restatement of this Plan (i.e.,
April 1, 1998), are listed on Exhibit "A" attached hereto. Participation in
the Plan by additional Participating Employers will commence as of the
beginning of the Plan Year following Committee approval of such participation.
(t)"Plan Administrator" means the person(s) or entities appointed by the
Committee to assist in carrying out the operation of the Plan.
(u)"Plan Year" means the twelve-month period beginning April 1 and ending
March 31.
(v)"Rate" means the earnings rate to be applied to certain Deferrals and
Matching Awards under Section 6.2 and pursuant to Section 9.1 hereof for the
Deferral Period which shall be the greater of: (i) the actual earnings rate,
as determined by the Trustee, for assets held in Trust under the Seven-Year
Option and invested in accordance with the provisions of Section 6.2; and (ii)
the Alternative Rate. The term "Alternative Rate" shall mean the average
earnings rate, as determined by the Trustee, of interest rates payable on
Treasury Notes of the United States Government with a maturity period of ten
years. Income credited under the Alternative Rate shall be determined by
multiplying the Alternative Rate for the Plan Year within the Deferral Period
times the average balance in the Account for such Plan Year, including income
earned for prior periods. Income on all Accounts under the Plan shall be
deemed to have been earned on a consistent basis.
(w)"Retirement" shall have the meaning given it under the Retirement Plan for
Employees of the Texas Utilities Company System.
3
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<PAGE>
(x)"Retirement Option" means the option to defer receipt of certain amounts of
Salary and Bonus until Retirement.
(y)"Salary" means the annualized rate of normal base pay earnings, prior to
any deferrals, of an Employee exclusive of overtime, bonuses or any fringe
benefits.
(z)"Seven Year Option" means the option to defer receipt of certain amounts of
Salary and Bonus for seven years.
(aa)"Trust" means the trust established by Texas Utilities Company to assist
it in meeting its obligations under the Plan.
(bb)"Trustee" means the trustee appointed by the Committee to hold assets of
the Plan.
(cc)"Vesting Period" means the period beginning with the date of the beginning
of the Plan Year of deferral and ending with the end of the seventh Plan Year.
Section 3. Deferral Eligibility and Participation
3.1 Eligibility. An Eligible Employee shall be eligible to
-----------
participate in the Plan as of the beginning of the Plan Year upon compliance
with the provisions of Section 4 herein.
3.2 Participation. All Eligible Employees may elect on an election
-------------
form prescribed by the Committee to make Deferrals of a percentage of Salary
and Bonus, under the Retirement Option, the Seven Year Option, or a
combination thereof, in one percent (1%) increments, up to a maximum of fifty
percent (50%) of Salary and one hundred percent (100%) of Bonus.
Section 4. Election to Defer
4.1 Deferral Election. An Eligible Employee may elect, irrevocably,
-----------------
by written notice to the Plan Administrator on an election form and in the
manner prescribed by the Plan Administrator, to defer a percentage of Salary
and Bonus, up to the maximum Deferral percentages provided for above, during
the Plan Year.
4.2 Salary Deferrals. Salary deferred under the Plan will be ratably
----------------
deducted in each pay period during the Plan Year.
4.3 Bonus Deferrals. Bonus deferred under the Plan will be deferred
---------------
at the time that the Bonus would otherwise have been paid.
Section 5. Matching Awards, Vesting, and Forfeitures.
5.1 Matching Awards. Each Participating Employer shall contribute to
---------------
the Account of each Participant employed by such Participating Employer, as a
Matching Award, an amount equal to one hundred percent (100%) of the
Participant's Salary Deferral up to a maximum Salary Deferral of eight percent
(8%). Such contribution shall be credited at the time of the crediting of the
Salary Deferral amount to be matched.
5.2 Vesting. Subject to the forfeiture provisions of Section 5.3, a
-------
Participant shall at all times be one hundred percent (100%) vested in the
Participant's Salary Deferrals, Bonus Deferrals and all earnings thereon. A
Participant shall be one hundred percent (100%) vested in the Participant's
Matching Awards, and on income earned on such Matching Awards at the end of
the Vesting Period. Notwithstanding any other provision of this Plan, a
4
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<PAGE>
Participant's Account shall become one hundred percent (100%) vested upon the
Participant's Normal Retirement, death, or Disability regardless of the
applicable Vesting Period.
5.3 Forfeitures. The following amounts shall be forfeited from a
-----------
Participant's Account as of the date upon which the forfeiture is created:
(a) Seven Year Option Forfeitures.
-----------------------------
(1) Early Retirement. An amount equal to four percent (4%) of the portion of
----------------
the Participant's Account balance relating to Matching Awards and earnings
thereon, and Salary Deferrals subject to Matching Awards and earnings thereon,
for each full year Retirement occurs prior to Normal Retirement shall be
forfeited.
(2) Termination for other than Death, Disability or Retirement. If termination
----------------------------------------------------------
of service with the Company occurs for reasons other than death, Disability,
or Retirement, Matching Awards and all earnings thereon shall be forfeited.
(b) Retirement Option Forfeitures.
-----------------------------
(1) Early Retirement. An amount equal to four percent (4%) of the
----------------
Participant's Account balance relating to non-vested Matching Awards and
earnings thereon, and Salary Deferrals subject to Matching Awards and earnings
thereon, for each full year Retirement occurs prior to Normal Retirement shall
be forfeited.
(2) Termination for other than Death, Disability or Retirement. If termination
----------------------------------------------------------
of service with the Company occurs for reasons other than death, Disability,
or Retirement, Matching Awards and all earnings thereon for Plan Years which
are nonvested, shall be forfeited.
Section 6. Investments and Earnings
6.1 Investments and Earnings For Deferrals and Matching Awards After
----------------------------------------------------------------
April 1, 1998. With respect to Salary and Bonus Deferrals and Matching Awards
- -------------
made from and after April 1, 1998, the amount credited to a Participant's
Account shall be adjusted as of each Adjustment Date to reflect such gain,
loss and/or expenses incurred based on the experience of the investments
selected by the Participant prior to the date prescribed by the Committee for
the investment of his or her Account and taking into account additional
Deferrals credited to and distributions made from such Account since the last
Adjustment Date. The Committee shall have sole and absolute discretion with
respect to the number and type of investment choices made available for
selection by Participants, the timing and manner of Participant investment
elections and the method by which adjustments are made. The designation of
investment choices by the Committee shall be for the sole purpose of adjusting
Accounts pursuant to this Section and this provision shall not obligate the
Participating Employers to invest or set aside any assets for the payment of
benefits hereunder; provided, however, that a Participating Employer may
invest a portion of its general assets in investments, including investments
which are the same as or similar to the investment choices designated by the
Committee and selected by Participants, but any such investments shall remain
part of the general assets of such Participating Employer and shall not be
deemed or construed to grant a property interest of any kind to any
Participant, designated beneficiary or estate. The Committee shall notify the
Participants of the investment choices available and the procedures for making
and changing investment elections.
6.2 Investments and Earnings For Deferrals and Matching Awards Made
---------------------------------------------------------------
Prior to April 1, 1998. The Trustee shall continue to invest Salary Deferrals
- ----------------------
and Matching Awards made prior to April 1, 1998 under the Seven
5
<PAGE>
<PAGE>
Year Option, together with all earnings on such Salary Deferrals and Matching
Awards, in a fixed income fund of investment grade securities under investment
guidelines established by the Committee. The Trustee shall continue to invest
all other contributions to Participants' Accounts made prior to April 1, 1998
ina manner consistent with investment guidelines established by the Committee.
At the time of distribution of the portion of Accounts attributable to Salary
Deferrals and Matching Awards made prior to April 1, 1998, Participants will
receive their Account balances relating to such pre-April 1, 1998 Salary
Deferrals and Matching Awards, including income determined by applying the
Rate.
Section 7. Participant Accounts
7.1 Separate Accounts. The Plan Administrator shall establish and
-----------------
maintain separate individual Accounts for each Participant for Salary and
Bonus Deferrals, Matching Awards and earnings thereon for each Plan Year.
7.2 Unsecured Interest. No Participant or Beneficiary shall have any
------------------
security interest whatsoever in any assets of the Company or any Participating
Employer. To the extent that any person acquires a right to receive payments
under the Plan, such right shall not be secured or represented by any assets
of the Company or any Participating Employer.
Section 8. Distribution of Accounts
8.1 Value of Participant's Accounts.
-------------------------------
(a) Deferrals and Matching Awards Made On or After April 1, 1998. The value of
------------------------------------------------------------
the portion of a Participant's Account relating to Salary and Bonus Deferrals
and Matching Awards made on or after April 1, 1998, shall be determined based
upon the amount credited to such Account as of the most recent Adjustment Date
plus any Deferrals and Matching Awards credited to such Account since such
Adjustment Date.
(b) Deferrals and Matching Awards Made Prior to April 1, 1998. The value of
---------------------------------------------------------
the portion of a Participant's Account relating to Salary Deferrals and
Matching Awards made prior to April 1, 1998 shall be determined as of the last
day of the applicable Deferral Period, or, if earlier, at termination of
employment.
(c) Reduction of Accounts Upon Distributions and Forfeitures. The amount of
--------------------------------------------------------
each distribution made with respect to an Account and any forfeiture amounts
applied pursuant to Section 5.3 shall be deducted from the balance credited to
such Account at the time of distribution or forfeiture.
8.2 Form and Timing of Distribution. The value of the Participant's
-------------------------------
Accounts at distribution shall be paid in cash, as follows:
(a) Seven-Year Option -in a lump-sum distribution as soon as practicable after
-----------------
the end of the Deferral Period or, if earlier, termination of employment, but
in no event later than sixty days following such date. No interest shall
accrue or be paid for the period from the end of the Deferral Period until
distribution.
6
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<PAGE>
(b) Retirement Option -
-----------------
(i) If Participant Retires - in twenty annual installments beginning in the
----------------------
year after the date of such Retirement. With respect to the portion of the
Participant's Account relating to Salary and Bonus Deferrals and Matching
Awards made on or after April 1, 1998, the Participant shall have a one-time,
irrevocable election prior to the commencement of such installments to have
such installments paid: (1) on a fixed annuity basis using a fixed annuity
rate of return determined by the Committee ("Fixed Annuity"); or (2) on a
variable annuity basis taking into consideration the earnings and losses
credited to the Participant's Account as a result of the investment elections
made by the Participant during the annuity period ("Variable Annuity"); or (3)
a combination of a Fixed Annuity and a Variable Annuity as selected by the
Participant in 1% increments. With respect to the portion of the
Participant's Account relating to Salary Deferrals and Matching Awards made
prior to April 1, 1998, such installments shall be in a fixed amount which
shall amortize the value of such portion of the Participant's Account over
twenty annual installments using the Rate as a projected earnings rate of
return. In the event of the death of a Participant or Beneficiary during the
distribution period, the Plan Administrator may direct that the remainder of
the Account be distributed to the estate of the Participant or Beneficiary in
a lump-sum distribution as soon as practicable after death occurs.
(ii) If Participant Terminates - in a lump-sum distribution as soon as
-------------------------
practicable after termination occurs but in no event later than sixty days
following such date. No interest shall accrue or be paid for the period from
the date of termination until distribution.
Section 9. Certain Elections for Pre-April 1, 1998 Participants
9.1 Election to Continue Under Prior Plan Provisions. Notwithstanding
------------------------------------------------
anything herein to the contrary, Eligible Employees who, as of March 31,
1998, were Participants in this Plan will be given the opportunity,
pursuant to a one-time, irrevocable written election, to have certain Plan
provisions relating to permitted Deferrals, Matching Awards and investments
which were in effect immediately prior to the effective date of the
restatement of this Plan and are described in Exhibit "B" attached hereto and
incorporated herein by reference (the "Prior Plan Provisions") apply with
respect to their future Plan participation. Such election shall be made at
the time and on an election form prescribed by the Committee.
9.2 Election for Investment of Pre-April 1, 1998 Deferrals and
----------------------------------------------------------
Matching Awards. Notwithstanding anything herein to the contrary, Eligible
- ---------------
Employees who, as of March 31, 1998, were Participants in this Plan and who do
not make the election provided for in Section 9.1 to have the Prior Plan
Provisions apply to their future Plan participation, will be given the
opportunity, pursuant to a one-time, irrevocable written election, to have the
investment provisions set forth in Section 6.1 and the valuation provisions
set forth in Section 8.1(a) apply to the entirety of their Account, including
Salary Deferrals and Matching Awards made prior to April 1, 1998. Such
election shall be made at the time and on an election form prescribed by the
Committee. The Account of each Participant who makes such election shall be
valued as of March 31, 1998 using the actual rate of return of such Account
assets in accordance with the investment provisions of Section 6.2. From and
after April 1, 1998, the provisions of Sections 6.2 and 8.1(b) shall not apply
to any portion of their Account. Furthermore, the rate of return calculated
under Section 8.2(b) shall, with respect to the Participant's entire Account,
be the actual rate of return credited to the Participant's Account as of the
Adjustment Date in accordance with Section 6.1.
7
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<PAGE>
Section 10. Nontransferability
10.1 Nontransferability. In no event shall the Company or any
------------------
Participating Employer make any distribution or payment under this Plan to any
assignee or creditor of a Participant or a Beneficiary. Prior to the time of
a distribution or payment hereunder, a Participant or a Beneficiary shall have
no right by way of anticipation or otherwise to assign or otherwise dispose of
any interest under this Plan.
Section 11. Designation of Beneficiaries
11.1 Specified Beneficiary. A Participant shall designate a
---------------------
Beneficiary or Beneficiaries who, upon the Participant's death are to receive
the amounts that otherwise would have been paid to the Participant. All
Beneficiary designations shall be in writing and signed by the Participant,
and shall be effective only if and when delivered to the Plan Administrator
during the lifetime of the Participant. A Participant may, from time to time
during his lifetime, change his Beneficiary or Beneficiaries by a signed,
written instrument delivered to the Plan Administrator. The payment of
amounts shall be in accordance with the last unrevoked written designation of
the Beneficiary that has been signed and so delivered.
11.2 Estate as Beneficiary. If a Participant designates a
---------------------
Beneficiary without providing in the designation that the Beneficiary must be
living at the time of each distribution, the designation shall vest in the
Beneficiary all of the distributions whether payable before or after the
Beneficiary's death, and any distributions remaining upon the Beneficiary's
death shall be made to the Beneficiary's estate. In the event a Participant
shall not designate a Beneficiary or Beneficiaries, or if, for any reason,
such designation shall be ineffective, in whole or in part, as determined
solely in the discretion of the Plan Administrator, the distribution that
otherwise would have been paid to such Participant shall be paid to the
Participant's estate.
Section 12. Rights of Participants
12.1 Employment. All Participants understand they are employees at
----------
will. Therefore, nothing in the Plan shall interfere with or limit in any way
the right of the Company or any Participating Employer to terminate, for any
or no reason, any Participant's employment at any time, nor confer upon a
Participant any right to continue in the employ of the Company or any
Participating Employer.
Section 13. Administration
13.1 Administration. The Committee shall be responsible for the
--------------
administration of the Plan. The Committee is authorized, in its sole
discretion, to interpret the Plan, to prescribe, amend, and rescind rules and
regulations relating to the Plan, provide for conditions and assurances deemed
necessary or advisable to protect the interests of the Company, and to make
all other determinations necessary or advisable for the administration of the
Plan. The determination of the Committee, interpretation or other action made
or taken pursuant to the provisions of the Plan, shall be final and shall be
binding and conclusive for all purposes and upon all persons whomsoever. The
Committee shall appoint a Plan Administrator to assist in carrying out the
operations of the Plan and a Trustee of the Trust to accompany the Plan.
13.2 Annual Reports. The Plan Administrator shall render annually a
--------------
written report to each Participant which shall set forth, at a minimum, the
Participant's Account balances as of the end of the most recent Plan Year.
8
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<PAGE>
Section 14. Amendment or Termination of the Plan
14.1 Amendment or Termination of the Plan. The Board of Directors
------------------------------------
may amend, terminate, or suspend the Plan at any time. Any such amendment,
termination, or suspension of the Plan shall be effective on such date as the
Board of Directors may determine. An amendment or modification of the Plan
may affect Participants at the time thereof as well as future Participants,
but no amendment or modification of the Plan for any reason may diminish any
Participant's Accounts as of the effective date thereof. As soon as
practical, but in no event more than fifteen (15) days following Plan
termination, the Participating Employers shall make irrevocable contributions
to the Trust in an aggregate amount, as determined by the Committee, which
when added to the total value of the assets of the Trust at such time equals
the total amount credited to all Accounts as of the date of Plan termination.
Each Participant shall receive, as soon as practical after Plan termination,
but in any event within thirty (30) days following Plan termination, a lump
sum distribution of his Account based on the value of his Account as of the
date of Plan termination.
Section 15. Corporate Changes
15.1 Dissolution or Liquidation. Notwithstanding any provision
--------------------------
herein to the contrary, upon the dissolution or liquidation of the Company,
the Participants' Accounts shall vest as of the day preceding the date of
dissolution or liquidation and shall not be subject to the forfeiture
provisions of this Plan. The Company shall cause the full amount of each
Participant's Account to be paid in cash in a lump sum to the Participant, or
his Beneficiary, as soon as is practicable, but in no event later than sixty
days following the date of dissolution or liquidation.
15.2 Change in Control. Notwithstanding anything in this Plan to the
-----------------
contrary, in the event of a Change in Control: (i) the Participants' Accounts
shall vest as of the day immediately preceding the date of such Change in
Control and shall not be subject to the forfeiture provisions of this Plan,
and (ii) the Participating Employers shall, as soon as possible, but in any
event within thirty (30) days, following such Change in Control, make
irrevocable contributions to the Trust in an aggregate amount which, when
added to the total value of the assets of the Trust at such time, equals the
total amount credited to all Accounts as of the date of such Change in
Control. Thereafter, the Participating Employers shall make monthly
contributions to the Trust in aggregate amounts sufficient to maintain the
total value of Trust assets at an amount equal to the total amount credited to
all Accounts. Notwithstanding any provision of this Plan to the contrary, no
action taken on or within two years following such Change in Control to amend
or terminate this Plan shall be effective unless written consent thereto is
obtained from a majority of the Participants.
Section 16. Requirements of Law
16.1 Governing Law. The Plan, and all agreements hereunder, shall be
-------------
construed in accordance with and governed by the laws of the State of Texas.
Section 17. Withholding Taxes
17.1 Withholding Taxes. The Company shall have the right to deduct
-----------------
from all cash payments under the Plan or from a Participant's compensation an
amount necessary to satisfy any federal, state, or local withholding tax
requirements.
9
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<PAGE>
Section 18. Investment and Funding
18.1 Trust. The benefits to be derived by Participants in the Plan
-----
will be funded through the Trust, provided, however, that any assets held by
the Trust shall at all times be subject to the claims of judgment creditors of
the Company.
18.2 Funding of Trust. With respect to Deferrals made under the Seven
----------------
Year Option, the Participating Employers shall, promptly after Deferrals are
credited to Participants' Accounts, provide the Trust with resources in
amounts equal to the amounts of such Deferrals. With respect to Deferrals
made under the Retirement Option, the Participating Employers shall fund the
Trust through the purchase of corporate owned life insurance or such other
Trust assets as may be determined by the Committee from time to time.
18.3 Distributions from Trust. If Trust assets allocated to any
------------------------
Participant's Account for a Plan Year are less than the amount required to
affect a distribution to such Participant provided for in this Plan, the
applicable Participating Employer will pay such difference either through the
Trust or directly to the Participant.
18.4 Funding and Distribution Requirements Under Certain Circumstances.
-----------------------------------------------------------------
The provisions of this Section 18 shall be subject to (and, if deemed to be
contradicting, overridden by) the provisions of Section 15 of this Plan.
EXECUTED this day of , 1998.
TEXAS UTILITIES COMPANY
By: /s/ Peter B. Tinkham
-----------------------------------------
Peter B. Tinkham, Secretary
10
<PAGE>
<PAGE>
EHIBIT "A"
PARTICIPATING EMPLOYERS
AS OF APRIL 1, 1998
Texas Utilities Company
Texas Energy Industries Inc.
Texas Utilities Electric Company
Texas Utilities Fuel Company
Texas Utilities Mining Company
Texas Utilities Services Inc.
Texas Utilities Properties Inc.
Basic Resources Inc.
CHACO Energy Company
Southwestern Electric Service Company
ENSERCH Corporation
Enserch Processing, Inc.
Enserch Gas Transmission Company
Lone Star Gas Company of Texas, Inc.
<PAGE>
<PAGE>
EXHIBIT "B"
Prior Plan Provisions
The following provisions shall apply to all future Plan participation of
Participants who make the one-time irrevocable election to continue to be
governed by the Prior Plan Provisions in Section 9.1 of the Plan:
1. Deferral Election. The Participant may elect, irrevocably, by
-----------------
written notice to the Plan Administrator on an election form and in the manner
prescribed by the Plan Administrator, to defer a percentage of Salary, in one
percent (1%) increments not to exceed a maximum of ten percent (10%), during
each Plan Year, in the Retirement Option, the Seven Year Option, or a
combination thereof. Deferrals of Bonus shall not be permitted.
2. Matching Awards. The Company shall contribute to each
---------------
Participant's Account, as a Matching Award, an amount equal to one hundred
percent (100%) of the amount of Salary deferred by the Participant. Such
contribution shall be credited at the time of the crediting of the Salary
Deferral amount to be matched.
3. Investments, Earnings and Valuation.
-----------------------------------
(a) The Trustee shall invest, as soon as administratively feasible, all
contributions received for Accounts held in Trust under the Seven Year Option
of the Plan in a fixed income fund of investment grade securities under
investment guidelines established by the Committee. Interest received on the
investments shall be reinvested in such fund. All other contributions shall
be invested in accordance with investment guidelines established by the
Committee.
(b) At the time of distribution, the Participant will receive his Account
balance including income determined by applying the Rate.
(c)The total of all assets held by the Trustee for Accounts held in Trust will
be deemed held in an unsegregated fund for valuation purposes. Each month the
Trustee shall determine the value of each unit by dividing the current value
of the fund by the total number of units held in all such Accounts. The value
of Accounts held in Trust under the Retirement Option of the Plan shall be
determined in the same manner as amounts deferred under the Seven Year Option
of the Plan.
4. Forfeitures. The following provisions shall apply with respect to
-----------
forfeitures in lieu of the provisions of Section 5.3 of the Plan. The amounts
described below shall be forfeited from an Account as of the date upon which
the forfeiture is created:
<PAGE>
<PAGE>
(a) Seven Year Option Forfeitures.
-----------------------------
(i) Early Retirement. An amount equal to four percent (4%) of the total
----------------
Account balance for each full year Retirement occurs prior to Normal
Retirement shall be forfeited.
(ii) Termination for other than Death, Disability or Retirement. If
----------------------------------------------------------
termination of service with the Company occurs for reasons other than death,
Disability, or Retirement, income on and contributions to the Matching Account
shall be forfeited and income in excess of six percent (6%) per annum credited
to Salary Deferrals shall be forfeited.
(b) Retirement Option Forfeitures.
-----------------------------
(i) Early Retirement. An amount equal to four percent (4%) of the total
----------------
Account balance for all non-vested Plan Years for each full year Retirement
occurs prior to Normal Retirement shall be forfeited.
(ii) Termination for other than Death, Disability or Retirement. If
----------------------------------------------------------
termination of service with the Company occurs for reasons other than death,
Disability, or Retirement, income earned on and contributions to the Matching
Account, for Plan Years which are nonvested, shall be forfeited and income in
excess of six percent (6%) per annum credited to Salary Deferrals shall be
forfeited for all nonvested Plan Years.
5. Value of a Participant's Account. The cash value of a Participant's
--------------------------------
Account shall be determined as of the last day of the applicable
Deferral Period, or, if earlier, at termination of employment.
6. Form and Timing of Distributions. The following provisions shall
--------------------------------
apply with respect to the form and timing of distributions in lieu of Section
8.2 of the Plan. The value of a Participant's Account at distribution shall
be paid in cash as follows:
(a) Seven-Year Option - in a lump-sum distribution as soon as practicable
-----------------
after the end of the Deferral Period or, if earlier, termination of
employment, but in no event later than sixty days following such date. No
interest shall accrue or be paid for the period from the end of the Deferral
Period until distribution.
(b) Retirement Option -
-----------------
(i) If Participant Retires - in twenty annual installments beginning twelve
----------------------
months after the date of such Retirement. Such installments shall be in a
fixed amount which shall amortize the value of the Participant's Account over
twenty annual installments using the Rate as a projected earnings rate of
return. In the event of the death of the Participant or Beneficiary during
the distribution period, the Plan Administrator may direct that the remainder
of the Account be distributed to the estate of the Participant or Beneficiary
in a lump-sum distribution as soon as practicable after death occurs.
<PAGE>
<PAGE>
(ii) If Participant Terminates - in a lump-sum distribution as soon as
-------------------------
practicable after termination occurs but in no event later than sixty days
following such date. No interest shall accrue or be paid for the period from
the date of termination until distribution.
7. Certain Inapplicable Provisions. The provisions of Sections 3.2,
-------------------------------
4.3, 5.1, 5.3, 6.1 and 8.1(a) of the Plan shall not apply and shall be of no
force or effect with respect to any portion of the Participant's Account or
his prior or future Plan participation. All of the remaining provisions of
the Plan shall remain in full force and effect.
<PAGE>
<PAGE>
Salary Deferral Program
of the
Texas Utilities Company System
This document constitutes part of a prospectus covering securities that have
been registered under the Securities Act of 1933.
February 20, 1998
<PAGE>
<PAGE>
Exhibit 10(c)
SPLIT-DOLLAR LIFE INSURANCE PROGRAM
of the
TEXAS UTILITIES COMPANY SYSTEM
Section 1. Purpose
- -------------------
1.1 Purpose. The Split-Dollar Life Insurance Program of the Texas
-------
Utilities Company System (the "Plan") is established effective July 1, 1995,
and is restated effective August 1, 1997, for the purpose of providing
eligible executives of the Texas Utilities Company System with insurance on
the life of each such executive in recognition of the contributions of such
executives to the Company and for the purpose of continuing to maintain a
competitive level of benefits. This Plan is designed as an "unfunded or
insured welfare" plan maintained by the Company "for the purpose of providing
benefits for a select group of management or highly compensated employees"
and, therefore, is designed to be exempt from the reporting and disclosure
requirements of Part 1 of Title I of the Employee Retirement Income Security
Act of 1974 ("ERISA"). Regulation Section 2520.104-24 of the Department of
Labor.
Section 2. Definitions
- -----------------------
2.1 Definitions. Whenever used hereinafter, the following terms
-----------
shall have the meanings set forth below:
(a) "AIP Award" means the award provided under the Annual Incentive Plan ofthe
Texas Utilities Company System.
(b) "Beneficiary" means the person or persons designated by the Participant to
receive the Benefit payable from the Policy upon the death of the Participant.
(c) "Benefit" means the benefits payable under the terms of the Policy of life
insurance issued on the life of the Participant pursuant to the Participation
Agreement.
(d) "Board of Directors" means the Board of Directors of the Company.
(e) "Business Unit" means a subsidiary, division or operating unit of the
Company designated by the Chief Executive Officer of the Company which will
focus on its own unique products, services and markets.
(f) "Collateral Assignment" means the document assigning an interest in the
Policy to the Company, as set forth in Section 4.4 herein, a form of which
document is attached as Exhibit A and incorporated herein.
(g) "Committee" means the Administrative Committee, whose members initially
shall be H. J. Gibbs, H. D. Farell, P. Pittman, J. H. Scott, and P. B.
Tinkham. Subsequently, members of the Committee shall be appointed by the
Board of Directors.
(h) "Company" means Texas Utilities Company, its successors and assigns.
(i) "Compensation" means the annual rate of base salary, calculated without
regard to any deferrals, as of June 1 immediately preceding the Plan Year plus
the average of the AIP Award over the immediately preceding three-year period;
provided, however, no more than the target AIP level
1
<PAGE>
<PAGE>
amounts will be included in such average and, in years prior to the
accumulation of AIP Award data forthe immediately preceding three-year period,
the average shall be determined with data for such shorter period.
(j) "Disability Plan" means the Texas Utilities System Employee Long-Term
Disability Income Plan.
(k)"Early Termination" means termination of employment with the Company or the
ceasing to be an Eligible Employee prior to: (1) reaching age fifty-five and
obtaining fifteen years of Accredited Service (as defined in the Retirement
Plan), or (2) becoming fully vested in the Benefit as set forth in Section 5.2
hereof; or termination for cause, as determined, for purposes of the Plan,
solely in the discretion of the Plan Administrator.
(l) "Eligible Employee" means an individual who is elected as a corporate
officer of a Participating Employer with a title of Vice President or above.
(m) "Insurer" means the insurance company or companies selected by the
Committee to issue Policies pursuant to the Participation Agreements
hereunder.
(n) "Participant" means an Eligible Employee who enters into a Participation
Agreement with the Company and whose Participation Agreement has not
terminated.
(o) "Participating Employer" means the Company and each of its subsidiaries,
affiliates or Business Units which elect to participate and adopt this Plan
and are approved by the Committee for participation in this Plan. The
Participating Employers, as of the date of the restatement of this Plan, are
listed on Exhibit "C" attached hereto. Participation in the Plan by
additional Participating Employers will commence as of the beginning of the
Plan Year following Committee approval of such participation.
(p) "Participation Agreement" or "Agreement" means the agreement between the
Participant and the Company for performance of obligations incident to the
provision of Benefits, a form of which document is attached as Exhibit B and
incorporated herein. The form of the Participation Agreement may be changed
from time to time by the Committee.
(q) "Plan Administrator" means the person(s) or entities appointed to assist
the Committee in carrying out the operations of the Plan.
(r)"Plan Retirement Date" means July 1 immediately following the Participant's
attainment of age sixty-five.
(s)"Plan Year" means the twelve-month period beginning July 1 and ending June
30.
(t)"Policy" means the policy or policies of life insurance issued pursuant to
the Participation Agreements hereunder and shall include any substitutions,
replacements, additional or supplemental policies. In certain interim
situations, as set forth in the Participation Agreements, "Policy" means term
life insurance.
(u)"Retirement Plan" means the Retirement Plan for Employees of the Texas
Utilities Company System.
2
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<PAGE>
Section 3. Eligibility
- -----------------------
Each Eligible Employee who shall not have attained the age of sixty-five
may become a Participant in the Plan effective as of the July 1 immediately
following their becoming an Eligible Employee by executing a Participation
Agreement and filing the Agreement with the Plan Administrator, as evidenced
in the records of the Plan Administrator.
Section 4. Policies
- --------------------
4.1 Issuance. Each Participant, pursuant to the Participation
--------
Agreement, will take the required actions set forth in the Participation
Agreement to cause a Policy to be issued by the Insurer on the life of the
Participant and to be maintained in force at all times to provide the Benefits
set forth herein.
4.2 Ownership. Subject to the Collateral Assignment of the Policy to
---------
the Company, each Participant or such Participant's designee shall be the
owner of the Policy ("Owner") on such Participant's life issued pursuant to
the applicable Participation Agreement and, as such Owner and subject to
Sections 8.2 and 10.2 herein, may exercise all rights of ownership with
respect to such Policy.
4.3 Payment of Premiums. All premiums on the Policies acquired
-------------------
pursuant to Participation Agreements hereunder shall be promptly paid by the
Company when and as they become due in accordance with and subject to the
applicable Participation Agreement.
It is the Company's intention that the Company's financial obligation
with respect to each Policy will be structured to be terminated upon the later
of: (1) the Participant's fifteenth year of full participation in the Plan, as
set forth in Section 5.4 herein; or (2) the Participant's attainment of age
sixty-five, at which time the Policy is expected to have a cash surrender
value sufficient, at least, to maintain the Policy in force at its level at
such time.
4.4 Collateral Assignment of Policy. As security for the
-------------------------------
Participant's obligations under the Participation Agreement, each Participant
shall assign to the Company, by Collateral Assignment, an interest in the cash
value and Benefits of the Policy on such Participant's life. The Collateral
Assignment of any Policy shall be in the form(s) approved, from time to time,
by the Company in its sole discretion.
Section 5. Benefits
- --------------------
5.1 Level. Benefits, subject to the Collateral Assignment and, with
-----
respect to individuals who become Eligible Employees on or after October 15,
1996, to the vesting schedule set forth in Section 5.2 below, shall be payable
from the Policy, which initially shall be issued in a face amount to provide
death Benefits equal to four times Compensation; provided, however, the face
amount of the Policy will not be decreased because of lower Compensation; and,
provided, further, the Company reserves the right to adjust the face amount of
any Policy which cannot be issued by the Insurer under standard cost in the
following manner: to the extent that the premium would exceed one hundred and
fifty percent (150%) of the standard cost ("Premium Amount"), the Committee
may reduce the face amount of coverage to the level such Premium Amount would
purchase or in such other manner as the Committee deems appropriate.
5.2 Vesting. Individuals who become Eligible Employees on or after
-------
October 15, 1996, shall not be immediately fully vested in the Benefit, but
shall vest in the Benefit periodically over time based on the number of years
of their participation in the Plan in accordance with the vesting schedule set
forth below:
3
<PAGE>
<PAGE> Amount of Death
Number of Years Benefit of Policy
Of Participation To Which Participant
In the Plan Is Vested
----------- ---------
Under 2 Full Years None
Completion of 2 Years One times Compensation
Completion of 3 Years Two times Compensation
Completion of 4 Years Three times Compensation
Completion of 5 Years Four times Compensation
5.3 Company's Limited Obligation. The Company shall have no further
----------------------------
obligation to provide Benefits than to pay premiums under Section 4.3 herein
to maintain the Policy at the level set forth in Section 5.1 herein. The
Participant, other Owner, or, in the event of the Participant's death, the
Beneficiary shall look solely to the Insurer and the Policy for payment of
Benefits under the Plan.
5.4 Termination of Agreement. As set forth in the Agreement, the
------------------------
Agreement shall terminate on the earlier of (a) Early Termination, (b) death
of the Participant, (c) the July 1 following the later of (i) obtaining age
sixty-five or (ii) fifteen years of full participation in the Plan, or (d)
termination of the Plan by the Board of Directors. Full participation in the
Plan shall not include the period during which the Policy is a policy of term
life insurance.
5.5 Distribution. If the Agreement terminates because of Early
------------
Termination, the Participant will pay to the Company an amount equal to the
lesser of (a) the total amount of premiums paid with respect to the vested
portion of the Policy; or (b) the cash surrender value of the vested portion
of the Policy. Upon receipt of this amount, the Company will release the
Collateral Assignment with respect to the vested portion of the Policy. If
the Policy is comprised of more than one life insurance policy, the Committee
will determine in its sole discretion how and in which order such life
insurance policies will vest. The Policy or the balance, if any, payable
under the Policy will then be fully distributable according to the terms of
the Policy.
Notwithstanding anything herein seemingly to the contrary, in the event
that the Participant retires under the Retirement Plan, ceases to be an
Eligible Employee upon reaching age fifty-five and fifteen years of Accredited
Service, or becomes eligible for benefits under the Disability Plan, such
Participant will remain a Participant in the Plan until the Participation
Agreement terminates. Retirement under the Retirement Plan, in general, is
retirement upon obtaining age fifty-five and fifteen years of Accredited
Service, if early, or upon obtaining age sixty-five.
If the Agreement terminates because of reasons other than Early
Termination, the Company will receive the total amount of premiums paid with
respect to the Policy from the cash surrender value or, in the event of the
Participant's death, the Company will receive the amount in excess of the
level of the vested Benefits payable from the proceeds of the Policy. The
Participant, if such amount is not paid directly to the Company by the
Insurer, agrees, pursuant to the Participation Agreement, to reimburse the
Company for such amount. Upon receipt of this amount, the Company will
release the Collateral Assignment with respect to the Policy. The Policy or
the balance, if any, payable under the Policy, or, in the event of the
Participant's death, the level of the vested Benefits payable from the
proceeds of the Policy will be fully distributable according to the terms of
the Policy.
5.6 Tax Offset Payments. Upon reaching retirement, to the extent
-------------------
that a Participant may be deemed to realize gross income in any year for
Federal income tax purposes on the economic benefit of the Policy on the
Participant's life, the Company, in the discretion of the Plan Administrator,
may pay to each such Participant such amount as will fully compensate the
Participant for all such taxes attributable to the receipt of such income and
such payment in order to preserve for the Participant on an after-tax basis
the full Benefits intended to be conferred by this Plan.
4
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<PAGE>
5.7 Claims. All claims for Benefits shall be filed with the Insurer.
------
Section 6. Transferability and Spend Thrift Provision
- ------------------------------------------------------
6.1 Nontransferability. Any assignment of the Policy by the
------------------
Participant for estate planning, tax planning or other purposes shall be
subject to the Collateral Assignment; and such Assignment shall so provide.
Any rights to Benefits under the Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
attachment, or garnishment by creditors of the Participant, other Owner or the
Beneficiary.
Section 7. Designation of Beneficiaries
- ----------------------------------------
7.1 Specified Beneficiary. The Owner shall designate a Beneficiary
---------------------
or Beneficiaries who, upon the Participant's death, are to receive, subject to
the Collateral Assignment, the proceeds of the Policy. All Beneficiary
designations shall be in writing and signed by the Owner, and shall be
effective only if and when delivered to the Insurer during the lifetime of the
Participant. The Owner may, from time to time during the Participant's
lifetime, change the Beneficiary or Beneficiaries by a signed, written
instrument delivered to the Insurer. The payment of amounts shall be in
accordance with the last unrevoked written designation of the Beneficiary that
has been signed and so delivered.
5
<PAGE>
<PAGE>
Section 8. Rights of Participants
- ----------------------------------
8.1 Employment. All Participants understand that they are employees
----------
at will. Therefore, nothing in the Plan or Participation Agreement shall
interfere with or limit in any way the right of the Company to terminate, for
any or no reason, any Participant's employment at any time, nor confer upon a
Participant any right to continue in the employ of the Company.
8.2 Loans. Prior to the termination of the Participation Agreement,
-----
the Participant or other Owner shall not have the right to pledge the Policy
as security for a loan or to obtain from the Insurer a loan against the cash
surrender value of the Policy.
Section 9. Administration
--------------
9.1 Administration. The Committee shall be responsible for the
--------------
administration of the Plan. The Committee is authorized to interpret the
Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan, provide for conditions and assurances deemed necessary or advisable to
protect the interests of the Company, and to make all other determinations
necessary or advisable for the administration of the Plan. The determination
of the Committee, interpretation or other action made or taken pursuant to the
provisions of the Plan, shall be final, binding and conclusive for all
purposes and upon all persons whomsoever. The Committee shall appoint a Plan
Administrator to assist in carrying out the operations of the Plan.
Section 10. Rights of Company
- ------------------------------
10.1 Amendment or Termination of the Plan. The Board of Directors
------------------------------------
may amend, terminate, or suspend the Plan at any time. Any such amendment,
termination, or suspension of the Plan shall be effective on such date as the
Board of Directors may determine. An amendment or modification of the Plan
may affect Participants at the time thereof as well as future Participants,
but no amendment or modification of the Plan for any reason may diminish any
Participant's Benefit as of the effective date thereof. Upon Plan
termination, all Participation Agreements shall terminate.
10.2 Loans. The Company shall have the right to obtain from the
-----
Insurer a loan against the cash surrender value of each Policy issued
hereunder.
Section 11. Requirements of Law.
- --------------------------------
11.1 Governing Law. The Plan, and all agreements hereunder, shall be
-------------
construed in accordance with and governed by the laws of the State of Texas.
EXECUTED effective as of the _____ day of _________________, 1997.
TEXAS UTILITIES COMPANY
By: /s/ Peter B. Tinkham
------------------------------
Peter B. Tinkham, Secretary
6
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<PAGE>
EXHIBIT "C"
PARTICIPATING EMPLOYERS
AS OF MAY 8, 1998
Texas Utilities Company
Texas Energy Industries Inc.
Texas Utilities Electric Company
Texas Utilities Fuel Company
Texas Utilities Mining Company
Texas Utilities Services Inc.
Basic Resources Inc.
CHACO Energy Company
Southwestern Electric Service Company
ENSERCH Corporation, including its
operating divisions Lone Star Gas
Company and Lone Star Pipeline Company
Enserch Processing, Inc.
<PAGE>
<PAGE>
Exhibit 10(d)
SECOND
------
SUPPLEMENTAL RETIREMENT PLAN
----------------------------
FOR EMPLOYEES OF THE TEXAS UTILITIES COMPANY SYSTEM
---------------------------------------------------
(As amended and restated effective as of August 11, 1998)
ARTICLE ONE
-----------
Purposes of the Plan
--------------------
1.1 The Second Supplemental Retirement Plan for Employees of the
Texas Utilities Company System ("Plan") is a restatement and amendment of the
Supplemental Retirement Plan for Employees of the Texas Utilities Company
System (the "First Plan") which was initially established, effective January
1, 1983, and was amended and restated effective as of January 1, 1995, and,
for purposes of establishing the Plan, is hereby amended and restated
effective as of August 11, 1998. The principal purpose of the Plan is to
provide benefits, not otherwise provided by the First Plan, for Participants
in excess of the limitations on contributions and benefits imposed by relevant
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), on
qualified defined benefit plans.
1.2 The Plan is established for the benefit of Participants as an
unfunded compensation arrangement; provided, however, Supplemental Retirement
Benefits for Eligible Participants shall be provided, in whole or in part,
under the Trust Agreement for Participants who are eligible to receive
Supplemental Retirement Benefits under the Trust Agreement, and shall be
provided under the Second Trust Agreement for all other Participants and for
Eligible Participants, to the extent such Supplemental Retirement Benefits are
not payable under the Trust Agreement. Any Supplemental Retirement Benefit
not paid under the Trust Agreement or the Second Trust Agreement shall be paid
by the Employer-corporations under the provisions of the Plan.
1.3 The Plan does not give Participants any rights not expressly
granted them in the Plan.
ARTICLE TWO
Definitions
-----------
The following definitions apply to the Plan unless the context clearly
indicates otherwise:
2.1 "Adjusted Retirement Benefit" shall mean the Retirement Income
Allowance which would have been payable under the provisions of Section 7 of
the Retirement Plan without regard to Section 8 of the Retirement Plan and
without excluding from Earnings: (i) amounts awarded under the Annual
Incentive Plan of the Texas Utilities Company System or deferred under
nonqualified executive compensation plans and arrangements adopted from time
to time by Employer-corporations; and (ii) amounts in excess of the dollar
maximum imposed on Earnings, as defined in the Retirement Plan.
2.2 "Board of Directors" shall mean the Board of Directors of Texas
Utilities Company.
2.3 "Change of Control" shall mean a change in control of the Company
of a nature that would be required to be reported in response to Item 1(a) of
the Securities and Exchange Commission Form 8-K, as in effect on the date
hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended ("Exchange Act"), or would have been required to be so
reported but for the fact that such event had been "previously reported" as
that term is defined in Rule 12b-2 of Regulation 12B under the Exchange Act;
provided that, without limitation, such a change in control shall be deemed to
<PAGE>
<PAGE>
such a change in control shall be deemed to have occurred if
(i) any Person is or becomes the beneficial owner (as defined
in Rule 13-d3 under the Exchange Act), directly or indirectly, of securities
of the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities ordinarily (apart from rights accruing
under special circumstances) having the right to vote at elections of
directors ("Voting Securities"), or (ii) individuals who constitute the Board
of Directors on the date hereof (the "Incumbent Board") cease for any reason
to constitute at least a majority thereof, provided that any person becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at least
three-quarters of the directors comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without objection to such
nomination) shall be, for purposes of this clause (ii), considered as though
such person were a member of the Incumbent Board, or (iii) a recapitalization
of the Company occurs which results in either a decrease by 33% or more in the
aggregate percentage ownership of Voting Securities held by Independent
Shareholders (on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock options and warrants) or an increase in the
aggregate percentage ownership of Voting Securities held by non-Independent
Shareholders (on a primary basis or on a fully diluted basis after giving
effect to the exercise of stock options and warrants) to greater than 50%.
For purposes of this definition, the term "Person" shall mean and include any
individual, corporation, partnership, group, association or other "person", as
such term is used in Section 14(d) of the Exchange Act, other than the
Company, a subsidiary of the Company or any employee benefit plan(s) sponsored
or maintained by the Company or any subsidiary thereof, and the term
"Independent Shareholder" shall mean any shareholder of the Company except any
employee(s) or director(s) of the Company or any employee benefit plan(s)
sponsored or maintained by the Company or any subsidiary thereof.
2.4 "Committee" shall mean the Retirement Committee for the
Retirement Plan for Employees of the Texas Utilities Company System.
2.5 "Company" shall mean Texas Utilities Company, its successors and
assigns.
2.6 "Eligible Participant" shall mean a Participant eligible to
receive benefits under the Trust Agreement, as set forth in the Trust
Agreement.
2.7 "Employer-corporation" shall mean the Company or any company,
more than 50% of the voting stock of which is owned directly or indirectly by
the Company, which has been approved for participation in, and which has
adopted, the Plan. "Employer-corporations" shall be used to refer to such
companies jointly or severally.
2.8 "Independent Committee" shall mean the Independent Committee
provided for in the Second Trust Agreement.
2.9 "Participant" shall mean each person who is entitled to receive a
benefit on or after January 1, 1983, under the Retirement Plan and whose
Retirement Benefit is less than his Adjusted Retirement Benefit, but excluding
any Participant who is eligible to receive benefits under the Retirement
Income Restoration Plan of ENSERCH Corporation and Participating Subsidiary
Companies.
2.10 "Plan" shall mean this Second Supplemental Retirement Plan for
Employees of the Texas Utilities Company System as amended from time to time.
2.11 "Plan Administrator" shall mean the person or persons appointed
by the Committee or, following a Change of Control, the Independent Committee,
to assist in carrying out the day-to-day operation and administration of the
Plan, the Trust Agreement and/or the Second Trust Agreement. In the event no
Plan Administrator is appointed, then the Committee or, following a Change of
Control, the Independent Committee shall be the Plan Administrator.
2
<PAGE>
<PAGE>
2.12 "Plan Year" shall be the calendar year.
2.13 "Retirement Benefit" shall be the Retirement Income Allowance
payable to a Participant under the Retirement Plan.
2.14 "Retirement Plan" shall be the Retirement Plan for Employees of
the Texas Utilities Company System, as amended from time to time.
2.15 "Second Trust Agreement" shall mean the trust agreement dated as
of August 11, 1998 which establishes a rabbi trust to provide benefits under
the Plan for Participants to the extent benefits are not covered under the
Trust Agreement.
2.17 "Supplemental Retirement Benefit" or "Benefit" shall be the
monthly benefit equal in amount to the difference between the installment of
the Participant's Adjusted Retirement Benefit and the installment of the
Participant's Retirement Benefit, payable under the same terms applicable to
the payment of the Retirement Benefit.
2.18 "Trust Agreement" shall mean that certain trust agreement dated
as of May 3, 1993, which establishes a secular trust to provide benefits under
the Plan for certain Participants.
2.19 "Trustee" shall mean the entity appointed by the Plan
Administrator to serve as trustee of the Trust.
ARTICLE THREE
Allocation of Costs
-------------------
3.1 The cost of providing the benefits payable under the Plan shall
be allocated to the Employer-corporation which is the employer of the
Participant.
3.2 If a Participant has service with more than one of the
Employer-corporations which is relevant to benefits provided thereunder, the
costs of providing that portion of such benefits payable to such Participant
shall be borne on the basis of the accrued Supplemental Retirement Benefit as
of date of transfer of the employee from such Employer-corporation or shall be
borne by the Employer-corporation in the proportion which the salary paid by
the Employer-corporation bears to the aggregate salaries paid by all joint
employers during such joint employment.
3.3 The Company, as agent for the Employer-corporations, will pay all
Benefits provided hereunder and administer all transactions relating to the
Plan, except Benefits payable under the Trust Agreement and the Second Trust
Agreement shall be paid by the respective Trustee of each such trust in
accordance with the terms of the Trust Agreement or the Second Trust
Agreement, as the case may be.
ARTICLE FOUR
Benefits
--------
4.1 A Participant shall be entitled to receive a Supplemental
Retirement Benefit, pursuant to the provisions of the Plan and/or the First
Plan; provided, however, Benefits payable to Eligible Participants under the
Trust Agreement or the Second Trust Agreement shall be subject to additional
provisions set forth in the Trust Agreement and/or the Second Trust Agreement,
as applicable, which provisions shall be controlling. To the extent that
Benefits are paid out of a trust established related to the Plan or First
Plan, separate accounts shall be maintained for each covered Participant.
3
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<PAGE>
4.2 Any Benefit payable under the Plan shall constitute a general
unsecured obligation of the Company, and shall be subject to the claims of the
Company's creditors.
ARTICLE FIVE
Miscellaneous
-------------
5.1 The Board of Directors shall be vested with full power and
authority to amend the Plan or to terminate the Plan at any time; provided
that no act of amendment or termination shall reduce any Benefit accrued to
the date such act is adopted. Furthermore, if the Plan is terminated,
amended, or frozen or any other action is taken to limit future Benefit
accruals under the Plan, or in the event of a Change of Control, each of the
Employer-corporations shall be obligated to take all action as may be provided
for under the Trust Agreement, the Second Trust Agreement or any other
agreement affecting, in any way, the funding and/or securitization and the
current or future payment of Benefits.
5.2 The Committee shall have the same powers, duties and
responsibilities with respect to the administration of the Plan as provided in
Section 12 of the Retirement Plan. Furthermore, the Committee may appoint a
person or persons as Plan Administrator to assist in carrying out the
day-to-day operation of the Plan, the Trust Agreement and/or the Second Trust
Agreement. The powers, duties and responsibilities of the Committee shall
include specifically, but not by way of limitation, the authority to carry out
the policy of the Company that applicable remuneration for a taxable year
beginning after December 31, 1993, with respect to an Eligible Participant,
shall not exceed the level of deductibility provided for in Section 162(m) of
the Internal Revenue Code or any successor provision. Notwithstanding any
other provision of this Plan, in the event of a Change of Control, the
Independent Committee shall have the powers, duties and responsibilities
provided for in the Second Trust Agreement.
5.3 Any Employer-corporation, as defined herein, may participate
under this Plan upon approval of the Board of Directors and approval of the
board of directors of such Employer-corporation. Any Employer-corporation
may, by action of its board of directors, withdraw from participation in the
Plan upon thirty days prior notice to Texas Utilities Company.
5.4 The Plan shall be construed under the laws of Texas.
Executed as of the 11th day of August, 1998.
TEXAS UTILITIES COMPANY
By: /s/ Peter B. Tinkham
---------------------------------
Peter B. Tinkham, Secretary and
Assistant Treasurer
4
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<PAGE>
Exhibit 10(e)
Long-Term Incentive Compensation Plan
of the
Texas Utilities Company System
This document constitutes part of a prospectus covering securities that have
been registered under the Securities Act of 1933.
June 6, 1997
<PAGE>
<PAGE>
LONG-TERM INCENTIVE COMPENSATION PLAN
OF THE
TEXAS UTILITIES COMPANY SYSTEM
Section 1. Purpose
Texas Utilities Company, a Texas corporation (the "Company"), hereby
establishes the Long-Term Incentive Compensation Plan of the Texas Utilities
Company System (the "Plan") to promote the interests of the Company and its
shareholders through the (i) attraction and retention of executive officers
and other key employees essential to the success of the Company; (ii)
motivation of executive officers and other key employees using
performance-related incentives linked to long-range performance goals and the
interests of Company shareholders; and (iii) enabling of such employees to
share in the long-term growth and success of the Company. The Plan permits
the grant of Incentive Stock Options (intended to qualify under Section 422 of
the Code), Nonqualified Stock Options, Stock Appreciation Rights, Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units, Bonus
Stock, and any other Stock Unit Awards or stock-based forms of awards as the
Committee, in its sole and complete discretion, may determine to be
appropriate in carrying out the intent and purposes of this Plan.
Section 2. Definitions
When used in this Plan, the following terms shall have the meanings set
forth below:
2.1 "Affiliate" shall have the meaning ascribed to such term in Rule 12b-2
under the Exchange Act.
2.2"Agreement" means a written agreement between the Company and a Participant
implementing the grant, and setting forth the particular terms, conditions and
restrictions of each Award. With respect to the grant of an Option, the
Agreement may be referred to herein as an "Option Agreement," and with respect
to any other Award hereunder, the Agreement may be referred to herein as an
"Award Agreement."
2.3 "Award" means a grant under the Plan of Nonqualified Stock Options,
Incentive Stock Options, Stock Appreciation Rights, Restricted Stock,
Restricted Stock Units, Performance Units, Performance Shares, Bonus Stock, or
other Stock Unit Awards.
2.4 "Award Date" or "Grant Date" means the date on which an Award is made by
the Committee under the Plan.
2.5 "Beneficial Owner" shall have the meaning ascribed to such term in Rule
13d-3 under the Exchange Act.
2.6 "Board" or "Board of Directors" means the Board of Directors of the
Company.
2.7 "Bonus Stock" means an Award granted pursuant to Section 10 of the Plan.
2.8 "Cashless Exercise" means the exercise of an Option by the Participant
through the use of a brokerage firm to make payment to the Company of the
exercise price either from the proceeds of a loan to the Participant from the
brokerage firm or from the proceeds of the sale of Stock issued pursuant to
the exercise of the Option, and upon receipt of such payment, the Company
delivers the exercised Shares to the brokerage firm.
2
<PAGE>
<PAGE>
2.9 "Change in Control" shall be deemed to have occurred if the conditions set
forth in any one of the following paragraphs shall have been satisfied:
(a) Any Person, corporation or other entity or group, including any "group" as
defined in Section 13(d)(3) of the Exchange Act, becomes the Beneficial Owner
of Shares of the Company having 20% or more of the total number of votes that
may be cast for the election of directors of the Company; or
(b) As the result of, or in connection with, any tender or exchange offer,
merger or other business combination, sale of assets, sale of securities,
contested election, or any combination of the foregoing (a "Transaction"), the
persons who were directors of the Company immediately before the Transaction
shall cease to constitute a majority of the Board of Directors of the Company
or any successor to the Company or its assets; or
(c) If at any time: (i) the Company shall consolidate or merge with any other
Person and the Company shall not be the continuing or surviving corporation;
(ii) any Person shall consolidate or merge with the Company, and the Company
shall be the continuing or surviving corporation and in connection therewith,
all or part of the outstanding Stock shall be converted into, or exchanged
for, stock or other securities of any other Person or cash or any other
property; (iii) the Company shall be a party to a statutory share exchange
with any other Person after which the Company is a Subsidiary of any other
Person; or (iv) the Company shall sell or otherwise transfer 50% or more of
the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons.
2.10 "Code" means the Internal Revenue Code of 1986 and the rules and
regulations promulgated thereunder, or any successor law, as amended from time
to time.
2.11 "Committee" means the Organization and Compensation Committee of the
Board.
2.12 "Common Stock" or "Stock" means the Common Stock of the Company, without
par value, or such other security or right or instrument into which such
Common Stock may be changed or converted in the future.
2.13 "Company" means Texas Utilities Company, including all Affiliates and
wholly-owned subsidiaries, or any successor thereto.
2.14 "Covered Participant" means a Participant who is a "covered employee" as
defined in Code Section 162(m)(3) and the regulations promulgated thereunder.
2.15 "Designated Beneficiary" means the beneficiary designated by the
Participant, pursuant to procedures established by the Committee, to receive
amounts due to the Participant in the event of the Participant's death. If
the Participant does not make an effective designation, then the Designated
Beneficiary will be deemed to be the Participant's estate.
2.16 "Disability" means (i) the mental or physical disability of the
Participant defined as "Disability" under the terms of the Texas Utilities
System Employee Long-Term Disability Income Plan, as amended from time to time
in accordance with the provisions of such plan; or (ii) a determination by the
Committee, in its sole discretion, of total disability (based on medical
evidence) that precludes the Participant from engaging in any occupation or
employment for wage or profit for at least twelve months and appears to be
permanent. All decisions by the Committee relating to
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a Participant's Disability (including a decision that a Participant is
not disabled), shall be final and binding on all parties.
2.17 "Divestiture" means the sale of, or closing by, the Company of the
business operations in which the Participant is employed.
2.18 "Early Retirement" means Earlier-than-Normal Retirement of a Participant
under, and subject to, the provisions of the Retirement Plan.
2.19"Exchange Act" means the Securities Exchange Act of 1934 and the rules and
regulations promulgated thereunder, or any successor law as amended from time
to time.
2.20 "Executive Officer" means any employee considered by the Company to be an
Executive Officer.
2.21 "Fair Market Value" means, on any given date, the closing price of Stock
as reported on the New York Stock Exchange composite tape on such day or, if
no Shares were traded on the New York Stock Exchange on such day, then on the
next preceding day that Stock was traded on such exchange, all as reported by
The Wall Street Journal or such other source as the Committee may select.
2.22"Full-time Employee" means an individual who is employed by the Company or
a Subsidiary in a customary employer-employee relationship, is on the payroll
of the Company or such Subsidiary, receives compensation directly from the
Company or such Subsidiary, and is designated in the internal payroll or other
records of the Company or a Subsidiary as a regular, full-time employee. This
designation excludes all leased employees (within the meaning of Code Section
414(n)), part-time employees, temporary employees, or contract employees, as
well as all consultants to, the Company.
2.23 "Incentive Stock Option" or "ISO" means an option to purchase Stock,
granted under Section 6 herein, which is designated as an incentive stock
option and is intended to meet the requirements of Code Section 422.
2.24 "Key Employee" means a Full-time Employee who is an officer or other key
employee of the Company or its Subsidiaries as designated or determined by the
Committee.
2.25 "Nonqualified Stock Option" or "NQSO" means an option to purchase Stock,
granted under Article 6 herein, which is not intended to qualify as, or
constitute an Incentive Stock Option.
2.26 "Normal Retirement" means Normal Retirement of a Participant under, and
subject to, the provisions of the Retirement Plan.
2.27 "Option" means an Incentive Stock Option or a Nonqualified Stock Option.
2.28 "Other Stock Unit Award" means awards of Stock or other Awards that are
valued in whole or in part by reference to, or are otherwise based on, the
value of the Company's Common Stock.
2.29"Participant" means a Key Employee who has been granted an Award under the
Plan.
2.30 "Performance Criteria" means the objectives established by the Committee
for a Performance Period, for the purpose of determining when an Award subject
to such objectives has been earned.
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2.31 "Performance Award" means a performance-based Award made under Section 9
herein, which may be in the form of either Performance Shares or Performance
Units.
2.32 "Performance Period" means the time period designated by the Committee
during which performance goals must be met in order for a Participant to
obtain a performance-based Award.
2.33 "Performance Share" means an Award, designated as a Performance Share,
granted to a Participant pursuant to Section 9 herein, the value of which is
determined, in whole or in part, by the value of Company Stock in a manner
deemed appropriate by the Committee and described in the applicable Agreement.
2.34 "Performance Unit" means an Award, designated as a Performance Unit,
granted to a Participant pursuant to Section 9 herein, the value of which is
determined, in whole or in part, by the attainment of pre-established
Performance Criteria as deemed appropriate by the Committee and described in
the Agreement.
2.35 "Period of Restriction" means the period during which the transfer of
Shares of Restricted Stock is restricted, pursuant to Section 8 herein.
2.36 "Person" shall have the meaning ascribed to such term in Section 3(a)(9)
of the Exchange Act and used in Sections 13(d) and 14(d) thereof, including a
"group" as defined in Section 13(d).
2.37 "Plan" means the Long-Term Incentive Compensation Plan of the Texas
Utilities Company System as herein established and as hereafter amended from
time to time.
2.38 "Restricted Stock" means an Award of Stock granted to a Participant
pursuant to Section 8 herein.
2.39"Restricted Stock Unit" means a fixed or variable dollar denominated right
to acquire Stock, which may or may not be subject to restrictions,
contingently awarded under Section 8 of the Plan.
2.40 "Retirement Plan" means the Retirement Plan for Employees of the Texas
Utilities Company System, as it may be amended from time to time.
2.41 "Rule 16b-3" means Rule 16b-3 under Section 16(b) of the Exchange Act as
adopted in Exchange Act Release No. 34-37260 (May 30, 1996), or any successor
rule as amended from time to time.
2.42 "Section 162(m)" means Section 162(m) of the Code, or any successor
section under the Code, as amended from time to time and as interpreted by
final or proposed regulations promulgated thereunder from time to time.
2.43 "Securities Act" means the Securities Act of 1933 and the rules and
regulations promulgated thereunder, or any successor law, as amended from time
to time.
2.44 "Stock" or "Shares" means the Common Stock of the Company.
2.45 "Stock Appreciation Right" means the right to receive an amount equal to
the excess of the Fair Market Value of a share of Stock (as determined on the
date of exercise) over the Exercise Price of a related Option or the Fair
Market Value of the Stock on the Grant Date of the Stock Appreciation Right.
2.46 "Stock Unit Award" means an award of Common Stock or units granted under
Section 11.
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2.47 "Subsidiary" means a corporation in which the Company owns, either
directly or through one or more of its Subsidiaries, at least 50% of the total
combined voting power of all classes of stock.
Section 3. Administration
3.1 The Committee. The Plan shall be administered and interpreted by
-------------
the Committee which shall have full authority, discretion and power necessary
or desirable for such administration and interpretation. The express grant in
this Plan of any specific power to the Committee shall not be construed as
limiting any power or authority of the Committee. In its sole and complete
discretion the Committee may adopt, alter, suspend and repeal any such
administrative rules, regulations, guidelines, and practices governing the
operation of the Plan as it shall from time to time deem advisable. In
addition to any other powers and, subject to the provisions of the Plan, the
Committee shall have the following specific powers: (i) to determine the terms
and conditions upon which Awards may be made and exercised; (ii) to determine
the Participants to which Awards shall be made; (iii) to determine all terms
and provisions of each Agreement, which need not be identical for types of
Awards nor for the same type of Award to different Participants; (iv) to
construe and interpret all terms,conditions and provisions of the Plan and all
Agreements; (v) to establish, amend, or waive rules or regulations for the
Plan's administration; (vi) to accelerate the exercisability of any Award, the
length of a Performance Period or the termination of any Period of
Restriction; and (vii) to make all other determinations and take all other
actions necessary or advisable for the administration or interpretation of the
Plan. The Committee may seek the assistance or advice of any persons it deems
necessary to the proper administration of the Plan.
3.2 Committee Decisions. Unless strictly and expressly prohibited by
-------------------
law, all determinations and decisions made by the Committee pursuant to the
provisions of this Plan shall be final, conclusive, and binding upon all
persons, including Participants, Designated Beneficiaries, the Company, its
shareholders and employees.
3.3 Rule 16b-3 and Section 162(m) Requirements. Notwithstanding any
------------------------------------------
other provision of the Plan, the Committee may impose such conditions on any
Award as it may deem to be advisable or required to satisfy the requirements
of Rule 16b-3 or Section 162(m).
Section 4. Eligibility
The Committee shall have sole and complete discretion in determining
those Key Employees who shall participate in the Plan. The Committee may
request recommendations for individual awards from the Company's Chief
Executive Officer and may delegate to the Chief Executive Officer the
authority to make Awards to Participants who are not Executive Officers of the
Company.
Section 5. Shares Subject to the Plan
5.1 Number of Shares. Subject to adjustment as provided for in
----------------
Section 5.4 below, the maximum aggregate number of Shares that may be issued
pursuant to Awards made under the Plan shall not exceed 2,500,000 Shares,
which may be in any combination of Options, Restricted Stock, Restricted Stock
Units, Performance Shares, Bonus Shares, or Other Stock Unit Award. Shares of
Common Stock may be available from the authorized but unissued Shares, Shares
issued and reacquired by the Company or Shares purchased in the open market
for purposes of the Plan. Except as provided in Sections 5.2 and 5.3 herein,
the issuance of Shares in connection with the exercise of, or as other payment
for, Awards under the Plan shall reduce the number of Shares available for
future Awards under the Plan.
5.2 Lapsed Awards or Forfeited Shares. In the event that: (i) any
---------------------------------
Option or other Award granted under the Plan terminates, expires, or lapses
for any reason without having been exercised in accordance with its terms;
(ii) Shares issued pursuant to the Awards are canceled or forfeited for any
reason; or (iii) Awards are paid in cash, the Shares subject to such Award
shall thereafter be again available for grant of an Award under the Plan.
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5.3 Delivery of Shares as Payment. In the event a Participant pays
-----------------------------
for any Option or other Award granted under the Plan through the delivery of
previously acquired shares of Common Stock, the number of shares of Common
Stock available for Awards under the Plan shall be increased by the number of
shares surrendered by the Participant.
5.4 Capital Adjustments. The number and class of Shares subject to
-------------------
each outstanding Award, the Option Price and the aggregate number, type and
class of Shares for which Awards thereafter may be made shall be subject to
adjustment, if any, as the Committee deems appropriate, based on the
occurrence of a number of specified and non-specified events. Such specified
events are discussed in this Section 5.4, but such discussion is not intended
to provide an exhaustive list of such events which may necessitate
adjustments.
(a) If the outstanding Shares are increased, decreased or exchanged through
merger, consolidation, sale of all or substantially all of the property of the
Company, reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other distribution in respect to such
Shares, for a different number or type of Shares, or if additional Shares or
new or different Shares are distributed with respect to such Shares, an
appropriate and proportionate adjustment shall be made in: (i) the maximum
number of shares of Stock available for the Plan as provided in Section 5.1
herein; (ii) the type of shares or other securities available for the Plan;
(iii) the number of shares of Stock subject to any then outstanding Awards
under the Plan; and (iv) the price (including Exercise Price) for each share
of Stock (or other kind of shares or securities) subject to then outstanding
Awards, but without change in the aggregate purchase price as to which such
Options remain exercisable or Restricted Stock releasable.
(b) In the event other events not specified above in this Section 5.4, such as
any extraordinary cash dividend, split-up, reverse split, spin-off,
combination, exchange of shares, warrants or rights offering to purchase
Common Stock, or other similar corporate event, affect the Common Stock such
that an adjustment is necessary to maintain the benefits or potential benefits
intended to be provided under this Plan, then the Committee in its discretion
may make adjustments to any or all of: (i) the number and type of shares which
thereafter may be optioned and sold or awarded or made subject to Stock
Appreciation Rights under the Plan; (ii) the grant, exercise or conversion
price of any Award made under the Plan thereafter; and (iii) the number and
price (including Exercise Price) of each share of Stock (or other kind of
shares or securities) subject to the then outstanding Awards.
(c) Any adjustment made by the Committee pursuant to the provisions of this
Section 5.4 shall be final, binding and conclusive. A notice of such
adjustment, including identification of the event causing such adjustment, the
calculation method of such adjustment, and the change in price and the number
of shares of Stock, or securities, cash or property purchasable subject to
each Award shall be sent to each Participant. No fractional interests shall
be issued under the Plan based on such adjustments.
Section 6. Stock Options
6.1 Grant of Stock Options. Subject to the terms and provisions of
----------------------
the Plan and applicable law, the Committee, at any time and from time to time,
may grant Options to Key Employees as it shall determine. The Committee shall
have sole and complete discretion in determining the type of Option granted,
the Option Price (as hereinafter defined), the duration of the Option, the
number of Shares to which an Option pertains, any conditions imposed upon the
exercisability or the transferability of the Options, including vesting
conditions, the conditions under which the Option may be terminated, and any
such other provisions as may be warranted to comply with the law or rules of
any securities trading system or stock exchange. Each Option grant shall have
such specified terms
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and conditions detailed in an Option Agreement. The Option Agreement
shall specify whether the Option is intended to be an Incentive Stock
Option or a Nonqualified Stock Option.
6.2 Option Price. The exercise price per share of Stock covered by
------------
an Option ("Option Price") shall be determined on the Grant Date by the
Committee; provided that the Option Price shall not be less than 100% of the
Fair Market Value of the Common Stock on the Grant Date.
6.3 Exercisability. Options granted under the Plan shall be
--------------
exercisable at such times and be subject to such restrictions and conditions
as the Committee shall determine, which will be specified in the Option
Agreement and need not be the same for each Participant. However, no Option
granted under the Plan may be exercisable until the expiration of at least six
months after the Grant Date (except that such limitations shall not apply in
the case of death or Disability of the Participant, or a Change in Control),
nor after the expiration of ten years from the Grant Date.
6.4 Method of Exercise. Options shall be exercised by the delivery
------------------
of a written notice from the Participant to the Company in a form prescribed
by the Committee setting forth the number of Shares with respect to which the
Option is to be exercised, accompanied by full payment or provision for full
payment for the Shares. The Option Price shall be payable to the Company in
full in cash, or its equivalent, or by delivery of Shares of Stock (not
subject to any security interest or pledge) having a Fair Market Value at the
time of exercise equal to the exercise price of the Shares, or by a
combination of the foregoing. In addition, at the request of the Participant,
and subject to applicable laws and regulations, the Company may (but shall not
be required to) cooperate in a Cashless Exercise of the Option. As soon as
practicable, after receipt of written notice and full payment of the Option
Price, the Company shall deliver to the Participant a stock certificate,
issued in the Participant's name, evidencing the number of Shares with respect
to which the Option was exercised.
Section 7. Stock Appreciation Rights
7.1 Grant of Stock Appreciation Rights. Subject to the terms and
----------------------------------
provisions of the Plan and applicable law, the Committee, at any time and from
time to time, may grant freestanding Stock Appreciation Rights, Stock
Appreciation Rights in tandem with an Option, or Stock Appreciation Rights in
addition to an Option. Stock Appreciation Rights granted in tandem with an
Option or in addition to an Option may be granted at the time of the Option or
at a later time. No Stock Appreciation Rights granted under the Plan may be
exercisable until the expiration of at least six months after the Grant Date
(except that such limitations shall not apply in the case of death or
Disability of the Participant, or a Change in Control), nor after the
expiration of ten years from the Grant Date.
7.2 Price. The exercise price of each Stock Appreciation Right shall
-----
be determined at the time of grant by the Committee, subject to the limitation
that the grant price shall not be less than 100% of Fair Market Value of the
Common Stock on the Grant Date.
7.3 Exercise. Stock Appreciation Rights shall be exercised by the
--------
delivery of a written notice from the Participant to the Company in a form
prescribed by the Committee. Upon such exercise, the Participant shall be
entitled to receive an amount equal to the excess of the Fair Market Value of
a Share over the grant price thereof on the date of exercise of the Stock
Appreciation Right multiplied by the number of Shares for which the Stock
Appreciation Right was granted.
7.4 Payment. Payment upon exercise of the Stock Appreciation Right
-------
shall be in the amount of the full exercise price therefor, and shall be made
in the form of cash, cash installments, Shares of Common Stock, or a
combination thereof, as determined in the sole and complete discretion of the
Committee. However, if any payment in the form of Shares results in a
fractional share, such payment for the fractional share shall be made in cash.
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Section 8. Restricted Stock and Restricted Stock Units
8.1 Grant of Restricted Stock. Subject to the terms and provisions
-------------------------
of the Plan and applicable law, the Committee, at any time and from time to
time, may grant shares of Restricted Stock and Restricted Stock Units under
the Plan to such Participants, and in such amounts and for such duration
and/or consideration as it shall determine.
8.2 Restricted Stock Award Agreement. Each Restricted Stock and
--------------------------------
Restricted Stock Unit granted hereunder shall be evidenced by an Award
Agreement that shall specify the Period of Restriction, the conditions which
must be satisfied prior to removal of the restriction, the number of Shares of
Restricted Stock or Restricted Stock Units granted, payment terms for each
such Award (e.g. whether the Award will be paid in shares of Stock, cash or a
combination thereof, and whether payment will be in a lump sum or
installments), and such other provisions as the Committee shall determine.
The Committee may specify, but is not limited to, the following types of
restrictions in the Award Agreement: (i) restrictions on acceleration or
achievement of terms or vesting based on any Performance Criteria, including,
but not limited to, absolute or relative increases in total shareholder
return, revenues, sales, net income, or net worth of the Company, any of its
Subsidiaries, divisions, business units or other areas of the Company; and
(ii) any other restrictions which the Committee may deem advisable, including
requirements established pursuant to the Securities Act, the Exchange Act, the
Code and any securities trading system or stock exchange upon which such
Shares under the Plan are listed.
8.3 Nontransferability. Except as provided in this Section 8, the
------------------
Shares of Restricted Stock or Restricted Stock Units granted under the Plan
may not be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated until the termination of the applicable Period of Restriction or
upon earlier satisfaction of other conditions as specified by the Committee in
its sole discretion and set forth in the applicable Award Agreement. All
rights with respect to the Restricted Stock and Restricted Stock Units granted
to a Participant under the Plan shall be exercisable during his or her
lifetime only by such Participant or his or her guardian or legal
representative.
8.4 Removal of Restrictions. Except as otherwise noted in this
-----------------------
Section 8, Restricted Stock and Restricted Stock Units covered by each Award
made under the Plan shall become freely transferable by the Participant after
the last day of the Period of Restriction and/or upon the satisfaction of
other conditions as determined by the Committee.
8.5 Voting Rights. During the Period of Restriction, Participants in
-------------
whose name Restricted Stock is granted under the Plan may exercise full voting
rights with respect to those shares.
8.6 Dividends and Other Distributions. During the Period of
---------------------------------
Restriction, Participants in whose name Restricted Stock is granted under the
Plan shall be entitled to receive all dividends and other distributions paid
with respect to those Shares. If any such dividends or distributions are paid
in Shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Restricted Stock with respect to
which they were distributed.
Section 9. Performance Awards
9.1 Grant of Performance Awards. Subject to the terms and provisions
---------------------------
of the Plan and applicable law, the Committee, at any time and from time to
time, may issue Performance Awards in the form of either Performance Units or
Performance Shares to Participants subject to the Performance Criteria,
Performance Period and other consideration or restrictions as it shall
determine. The Committee shall have complete discretion in determining the
number and value of Performance Units or Performance Shares granted to each
Participant.
9.2 Value of Performance Awards. The Committee shall determine the
---------------------------
number and value of Performance Units or Performance Shares granted to each
Participant as a Performance Award. The Committee shall set Performance
Criteria in its discretion for each Participant who is granted a Performance
Award. The extent
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to which such Performance Criteria are met will determine
the value of the Performance Unit or Performance Share to the Participant.
Such Performance Criteria may be particular to a Participant, may relate to
the performance of the Company or Subsidiary which employs him or her, may be
based on the division or business unit which employs him or her, may be based
on the performance of the Company and its Subsidiaries generally, or any
combination of the foregoing. The Performance Criteria may be based on
achievement of balance sheet or income statement objectives, or any other
objectives established by the Committee. The Performance Criteria may be
absolute in their terms or measured against, or in relationship to, other
companies comparably, similarly or otherwise situated. The terms and
conditions of each Performance Award will be set forth in an Award Agreement.
9.3 Settlement of Performance Awards. After a Performance Period has
--------------------------------
ended, the holder of a Performance Unit or Performance Share shall be entitled
to receive the value thereof based on the degree to which the Performance
Criteria established by the Committee and set forth in the Award Agreement
have been satisfied.
9.4 Form of Payment. Payment of the amount to which a Participant
---------------
shall be entitled upon the settlement of the Performance Award shall be made
in cash, Stock, or a combination thereof and may be made in a lump sum or
installments all as determined by the Committee and set forth in the related
Award Agreement.
Section 10. Bonus Stock
Subject to the terms and provisions of the Plan and applicable law, the
Committee may, at any time and from time to time, award shares of Bonus Stock
to participants under the Plan without cash consideration. The Committee
shall determine and indicate in the related Award Agreement whether such
shares of Bonus Stock shall be unencumbered of any restrictions (other than
those which the Committee deems necessary or advisable to comply with law) or
shall be subject to restrictions and limitations similar to those referred to
in Section 9. In the event the Committee assigns any restrictions on the
shares of Bonus Stock, then such shares shall be subject to at least the
following restrictions:
(a) No Shares of Bonus Stock may be sold, transferred, pledged, assigned or
otherwise alienated or hypothecated if such Shares are subject to restrictions
which have not lapsed or been satisfied.
(b) If any condition of vesting of the shares of Bonus Stock are not met, all
such Shares subject to such vesting shall be delivered to the Company (in a
manner determined by the Committee) within 60 days of the failure to meet such
conditions without any payment from the Company.
Section 11. Other Stock Based Awards
11.1 Grant of Other Stock Based Awards. Subject to the terms and
---------------------------------
provisions of the Plan and applicable law, the Committee may, at any time and
from time to time, issue to Participants, either alone or in addition to other
Awards made under the Plan, Stock Unit Awards which may be in the form of
Common Stock or other securities. The value of each such Award shall be
based, in whole or in part, on the value of the underlying Common Stock on the
Grant Date. The Committee, in its sole and complete discretion, may determine
that an Award, either in the form of a Stock Unit Award under this Section 11
or as an Award granted pursuant to Sections 6 through 10, may provide to the
Participant (i) dividends or dividend equivalents (payable on a current or
deferred basis) and (ii) cash payments in lieu of or in addition to an Award.
Subject to the provisions of the Plan, the Committee, in its sole and complete
discretion, shall determine the terms, restrictions, conditions, vesting
requirements, and payment rules of the Award. The Award Agreement shall
specify the rules of each Award as determined by the Committee. However, each
Stock Unit Award need not be subject to identical rules.
11.2 Rules. The Committee, in its sole and complete discretion, may
-----
grant a Stock Unit Award subject to the following rules:
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(a) Common Stock or other securities issued pursuant to Stock Unit Awards may
not be sold, transferred, pledged, assigned or otherwise alienated or
hypothecated by a Participant until the expiration of at least six months from
the Grant Date, except that such limitation shall not apply in the case of
death or Disability of the Participant or a Change in Control. To the extent
Stock Unit Awards are deemed to be derivative securities within the meaning of
Rule 16b-3, the rights of a Participant who is subject to Section 16 of the
Exchange Act with respect to such Awards shall not vest or be exercisable
until the expiration of at least six months from the Award Date. All rights
with respect to such Stock Unit Awards granted to a Participant under the Plan
shall be exercisable during his or her lifetime only by such Participant or
his or her guardian or legal representative.
(b) Stock Unit Awards may require the payment of cash consideration by the
Participant in receipt of the Award or provide that the Award, and any Common
Stock or other securities issued in conjunction with the Award, be delivered
without the payment of cash consideration.
(c) The Committee, in its sole and complete discretion, may establish certain
Performance Criteria that may relate in whole or in part to receipt of Stock
Unit Awards.
(d) Stock Unit Awards may be subject to a deferred payment schedule and/or
vesting over a specified period.
(e) The Committee, in its sole and complete discretion, as a result of certain
circumstances, may waive or otherwise remove, in whole or in part, any
restriction or condition imposed on a Stock Unit Award.
Section 12. Special Provisions Applicable to Covered Participants
Awards to Covered Participants shall be governed by the conditions of
this Section 12 in addition to the requirements of Sections 6 through 11
above. Should conditions set forth under this Section 12 conflict with the
requirements of Sections 6 through 11, the conditions of this Section 12 shall
prevail.
(a) All Performance Criteria relating to Covered Participants for a relevant
Performance Period shall be established by the Committee in writing prior to
the beginning of the Performance Period, or by such other later date for the
Performance Period as may be permitted under Section 162(m) of the Code.
Performance Criteria may include alternative and multiple Performance Criteria
and will be based on one or more of the following business criteria: business
or financial goals of the Company, including absolute or relative levels of
total shareholder return, revenues, sales, net income, or net worth of the
Company, any of its Subsidiaries, divisions, business units, or other areas of
the Company.
(b) The Performance Criteria must be objective and must satisfy third party
"objectivity" standards under Code Section 162(m), and the regulations
promulgated thereunder.
(c)The Performance Criteria shall not allow for any discretion by the
Committee as to an increase in any Award, but discretion to lower an Award is
permissible.
(d)The Award and payment of any Award under this Plan to a Covered Participant
with respect to a relevant Performance Period shall be contingent upon the
attainment of the Performance Criteria that are applicable to such Award. The
Committee shall certify in writing prior to payment of any such Award that
such applicable Performance Criteria have been satisfied. Resolutions adopted
by the Committee may be used for this purpose.
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(e) The aggregate maximum Awards that may be paid (in cash or in shares of
Stock or a combination thereof) to any Covered Participant under the Plan
pursuant to Sections 8, 9, 10 and 11 during any calendar year shall be an
amount equivalent to the fair market value of 100,000 shares of Stock, such
fair market value to be determined as of the first day of such calendar year.
(f)The aggregate maximum number of shares of Stock subject to Options and SARs
made to any Covered Participant during any calendar year shall be 100,000.
(g)All Awards to Covered Participants under this Plan shall be further subject
to such other conditions, restrictions, and requirements as the Committee may
determine to be necessary to carry out the purposes of this Section 12.
Section 13. Change In Control
Notwithstanding any other provision of this Plan, in the event of a
Change in Control: (i) all outstanding Options shall immediately become fully
vested and exercisable; (ii) all Periods of Restriction shall be deemed to
have been completed; (iii) all Performance Criteria shall be deemed to have
been satisfied in full; and (iv) all other restrictions of any kind applicable
to all outstanding Awards shall be deemed to have lapsed or been satisfied in
full; provided that none of the effects described in (i) - (iv) above shall
occur if the Change in Control, or the transaction, event or occurrence
causing the Change in Control was duly and effectively approved in advance by
the affirmative vote of a majority of the Company's Board of Directors.
Section 14. General Provisions
14.1 Plan Term. The Plan was adopted by the Board on February 21,
---------
1997, and became effective upon receiving shareholder approval on May 23,
1997.
The Plan shall terminate December 31, 2006; however, all Awards made
prior to, and which are outstanding on such date, shall remain valid in
accordance with their terms and conditions.
14.2 Withholding. The Company shall have the right to deduct or
-----------
withhold, or require a Participant to remit to the Company, any taxes required
by law to be withheld from Awards made under this Plan. In the event an Award
is paid in the form of Common Stock, the Committee may require the Participant
to remit to the Company the amount of any taxes required to be withheld from
such payment in Common Stock, or, in lieu thereof, the Company may withhold
(or the Participant may be provided the opportunity to elect to tender) the
number of shares of Common Stock equal in Fair Market Value to the amount
required to be withheld.
14.3 Awards. Each Award granted under the Plan shall be evidenced in
------
a corresponding Award Agreement provided in writing to the Participant, which
shall specify the terms, conditions and any rules applicable to the Award,
including but not limited to the effect of a Change in Control, or death,
Disability, Divestiture, Early Retirement, Normal Retirement or other
termination of employment of the Participant on the Award.
14.4 Nontransferability. Except with respect to Nonqualified Stock
------------------
Options, no Award granted under the Plan may be sold, transferred, pledged,
assigned or otherwise alienated or hypothecated, except by will or the laws of
descent and distribution. Further, no lien, obligation, or liability of the
Participant may be assigned to any right or interest of any Participant in an
Award under this Plan.
14.5 No Right to Employment. Neither the Plan, nor any Award made,
----------------------
or any other action taken, hereunder shall be construed as giving any
Participant or other person any right of employment or continued employment
with the Company.
12
<PAGE>
<PAGE>
14.6 Rights as Shareholder. Subject to the terms and conditions of
---------------------
each particular Award, no Participant or Designated Beneficiary shall be
deemed a shareholder of the Company nor have any rights as such with respect
to any shares of Common Stock to be provided under the Plan until he or she
has become the holder of such shares.
14.7 Construction of the Plan. The Plan and all Agreements shall be
------------------------
governed, construed, interpreted and administered in accordance with the laws
of the State of Texas. In the event any provision of the Plan or any
Agreement shall be held invalid, illegal or unenforceable, in whole or in
part, for any reason, such determination shall not affect the validity,
legality or enforceability of any remaining provision, portion of provision or
Plan overall, which shall remain in full force and effect as if the Plan had
been absent the invalid, illegal or unenforceable provision or portion
thereof.
14.8 Amendment of Plan. The Committee or the Board of Directors may
-----------------
amend, suspend, or terminate the Plan or any portion thereof at any time,
provided such amendment is made with shareholder approval if and to the extent
such approval is necessary to comply with any legal requirement, including for
these purposes any approval requirement which is a requirement for the
performance-based compensation exception under Code Section 162(m).
14.9 Amendment of Award. In its sole and complete discretion, the
------------------
Committee may at any time amend any Award for the following reasons: (i)
additions and/or changes are made to the Code, any federal or state securities
law, or other law or regulations applicable to the Award; or (ii) any other
event not described in clause (i) occurs and the Participant gives his or her
consent to such amendment.
14.10 Exemption from Computation of Compensation for Other Purposes.
-------------------------------------------------------------
By acceptance of an applicable Award under this Plan, subject to the
conditions of such Award, each Participant shall be considered in agreement
that all shares of Stock sold or awarded and all Options granted under this
Plan shall be considered extraordinary, special incentive compensation and
will not be included as "earnings," "wages," "salary" or "compensation" in any
pension, welfare, life insurance, or other employee benefit arrangement of the
Company.
14.11 Legend. In its sole and complete discretion, the Committee may
------
elect to legend certificates representing Shares sold or awarded under the
Plan, to make appropriate references to the restrictions imposed on such
Shares.
14.12 Certain Participants. All Award Agreements for Participants
--------------------
subject to Section 16(b) of the Exchange Act shall be deemed to include any
such additional terms, conditions, limitations and provisions as Rule 16b-3
requires, unless the Committee in its discretion determines that any such
Award should not be governed by Rule 16b-3. All performance-based Awards to
Covered Participants shall be deemed to include any such additional terms,
conditions, limitations and provisions as are necessary to comply with the
performance-based compensation exemption of Code Section 162(m), unless the
Committee, in its discretion, determines that any such Award is not intended
to qualify for the exemption for performance-based compensation under Code
Section 162(m).
14.13 Unfunded Plan. The Plan is intended to constitute an unfunded
-------------
deferred compensation arrangement for a select group of management or highly
compensated employees.
EXECUTED on this 23rd day of May, 1997.
TEXAS UTILITIES COMPANY
By: /s/ Peter B. Tinkham
------------------------
/s/ Peter B. Tinkham, Secretary and Assistant
Treasurer
13
<PAGE>
Exhibit 10(g)
Agreement with Michael J. McNally
The Company entered into an employment agreement with Mr. McNally in August
1995 pursuant to which, among other things, the Company agreed to pay Mr.
McNally deferred compensation in an aggregate amount of $300,000, payable in
annual installments over a five-year period. The last of such installments is
scheduled to occur in July 2000.
Exhibit 10(h)
Agreement with H. Jarrell Gibbs
Mr. Gibbs entered into an agreement with the Company pursuant to which he
relocated to the United Kingdom and agreed to serve as Vice Chairman of The
Energy Group beginning June 1, 1998. This agreement provides for annual
compensation for Mr Gibbs during his assignment in the United Kingdom of
$500,000, certain expense reimbursement for housing in London, relocation,
transportation and similar expenses. The term of this agreement expires on
May 31, 2000 or upon Mr. Gibbs' relocation to Dallas.
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 March 31, 1999 and 1998, as
indicated in our report dated May 13, 1999; 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 March 31, 1999,
is incorporated by reference in Registration Statements No. 33-55931,
333-27989, and 333-32831, 333-56055, 333-68663 and 333-68663-01 on Form S-3
and Registration Statements No. 333-32833, 333-32835, 333-32837, 333-32839,
333-32841, 333-32843, and 333-45657 and 333-46671 on Form S-8 of Texas
Utilities Company.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 13, 1999
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 March 31, 1999 and
1998, as indicated in our report dated May 13, 1999; 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 March 31, 1999,
is incorporated by reference in Registration Statements No. 33-69554 and
333-42985 on Form S-3, and Registration Statement No. 33-83976, as amended by
Post Effective Amendment No.1 to Form S-3, of Texas Utilities Electric
Company.
We also are aware that the aforementioned report, pursuant to Rule 436(c)
under the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that
Act.
DELOITTE & TOUCHE LLP
Dallas, Texas
May 13, 1999
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