<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
Tender Offer Statement
Pursuant to Section 14(d)(1) of the Securities Exchange Act of 1934
THE ENERGY GROUP PLC
(Name of Subject Company)
PACIFICORP ACQUISITIONS
PACIFICORP
(Bidders)
ORDINARY SHARES OF 10P EACH AND
AMERICAN DEPOSITARY SHARES, EACH REPRESENTING 4 ORDINARY SHARES
AND EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
(Title of Class of Securities)
292691 10 2
(CUSIP Number of Class of Securities)
RICHARD T. O'BRIEN
PACIFICORP
PORT OF PORTLAND BUILDING, SUITE 1600
700 NE MULTNOMAH
PORTLAND, OREGON 97232
(503) 731-2000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of Bidder)
COPY TO:
STUART W. CHESTLER
STOEL RIVES LLP
900 SW FIFTH AVENUE, SUITE 2300
PORTLAND, OREGON 97204-1268
(503) 294-9500
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
Transaction Valuation* Amount of Filing Fee*
<S> <C>
$1,409,422,416 $281,884
</TABLE>
- ------------------------
* For the purposes of calculating the filing fee only. The transaction
valuation is based upon the purchase of 27,671,956 American Depositary
Shares of The Energy Group PLC (each representing four Ordinary Shares) and
500,000 Ordinary Shares of 10p each of The Energy Group PLC held by U.S.
residents at L7.65 per Ordinary Share in cash and the multiplication of such
aggregate purchase price by the currency exchange rate of L1 = U.S.$1.6570
(such currency exchange rate being derived from THE WALL STREET JOURNAL
dated February 5, 1998). Such number of American Depositary Shares
represents all American Depositary Shares outstanding as of January 29,
1998, and such number of Ordinary Shares exceeds the estimate by The Energy
Group PLC of the aggregate number of outstanding Ordinary Shares held by
United States residents.
/X/ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
<TABLE>
<S> <C>
Amount Previously Paid:................................. $354,596
Form or Registration No.:............................... Schedule 14D-1
PacifiCorp Acquisition and
Filing Party:........................................... PacifiCorp
Date Filed:............................................. June 30, 1997
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
14D-1
<TABLE>
<C> <S>
1. Name of Reporting Person
PacifiCorp Acquisitions
2. Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
3. SEC Use Only
4. Sources of Funds
AF, BK
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f) / /
6. Citizenship or Place of Organization
England and Wales
7. Aggregate Amount Beneficially Owned by Each Reporting Person
None (0)
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / /
9. Percent of Class Represented by Amount in Row (7)
None (0)
10. Type of Reporting Person
CO
</TABLE>
2
<PAGE>
14D-1
<TABLE>
<C> <S>
1. Name of Reporting Person
PacifiCorp
2. Check the Appropriate Box if a Member of a Group (a) / /
(b) / /
3. SEC Use Only
4. Sources of Funds
BK
5. Check Box if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f) / /
6. Citizenship or Place of Organization
Oregon
7. Aggregate Amount Beneficially Owned by Each Reporting Person
None (0)
8. Check Box if the Aggregate Amount in Row (7) Excludes Certain Shares / /
9. Percent of Class Represented by Amount in Row (7)
None (0)
10. Type of Reporting Person
CO
</TABLE>
3
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY
(a) The name of the subject company is The Energy Group PLC ("The Energy
Group") and the address of its principal executive offices is 117 Piccadilly,
London W1V 9FJ, England.
(b) This Statement relates to the offer (the "Offer") by PacifiCorp
Acquisitions, an unlimited company organized and registered in England and Wales
and an indirect wholly owned subsidiary of PacifiCorp, an Oregon corporation, to
purchase all of the outstanding (a) ordinary shares of 10p each ("Energy Group
Shares") of The Energy Group and (b) American Depositary Shares ("Energy Group
ADSs") of The Energy Group each representing four Energy Group Shares and
evidenced by American Depositary Receipts. The Energy Group Shares and the
Energy Group ADSs are collectively referred to herein as the "Energy Group
Securities". The Offer is subject to the terms and conditions set forth in the
offer to purchase dated February 6, 1998 (the "Offer to Purchase") (a copy of
which is filed as Exhibit (a)(1) hereto) and the related Letter of Transmittal
for the Energy Group ADSs (a copy of which is filed as Exhibit (a)(2) hereto)
and Form of Acceptance, Authority and Election for the Energy Group Shares (a
copy of which is filed as Exhibit (a)(3) hereto). Information concerning the
number of outstanding Energy Group Shares is set forth under the caption
"Sources of Information and Bases of Calculation" in Appendix V to the Offer to
Purchase and is incorporated herein by reference. Information concerning the
consideration being offered therefor and the conversion thereof from pounds
sterling to US dollars is set forth under the captions "The Offer" and
"Settlement--Currency of Consideration" in the Letter from Goldman Sachs
International contained in the Offer to Purchase.
(c) The information set forth under the caption "Stock Exchange quotations,
market price data and principal purchases" in Appendix V to the Offer to
Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND
(a)-(d) and (g) This Statement is filed by PacifiCorp and PacifiCorp
Acquisitions. Information concerning the principal business, the address of the
principal office and place of organization of each of PacifiCorp and PacifiCorp
Acquisitions is set forth under the captions "Information on the PacifiCorp
Group" in the Letter from Goldman Sachs International contained in the Offer to
Purchase and "Registered/Principal Offices" and "Nature of Business of
PacifiCorp Acquisitions and PacifiCorp" in Appendix IV to the Offer to Purchase
and is incorporated herein by reference. Information concerning the name,
business address, present principal occupation or employment and citizenship of
each director and executive officer of PacifiCorp and PacifiCorp Acquisitions as
well as information concerning the material occupations, positions, offices or
employments during the last five years of such persons is set forth under the
caption "Directors and Executive Officers of PacifiCorp Acquisitions and
PacifiCorp" in Appendix IV to the Offer to Purchase and is incorporated herein
by reference.
(e) and (f) During the last five years, neither PacifiCorp nor PacifiCorp
Acquisitions, nor any person listed in Appendix IV to the Offer to Purchase, has
been either (i) convicted in a criminal proceeding (excluding traffic violations
or similar misdemeanors), or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting activities subject to, federal or state securities
laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY
(a) To the best of PacifiCorp's and PacifiCorp Acquisitions' knowledge,
there have been no transactions with The Energy Group required to be set forth
in this Item.
(b) The information set forth under the caption "Background of the Offer" in
Appendix V to the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
(a)-(c) The information set forth under the caption "Financing arrangements"
in Appendix V to the Offer to Purchase is incorporated herein by reference.
4
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER
(a)-(g) The information set forth under the caption "Background to and
reasons for the Offer" in the Letter from the Chairman of The Energy Group
contained in the Offer to Purchase, "Terms and Conditions of the Offer" and
"Directors, management and employees" in the Letter from Goldman Sachs
International contained in the Offer to Purchase and "Background to the Offer",
"Financing arrangements", "Compulsory acquisition", "Certain consequences of the
Offer" and "Legal and regulatory matters" in Appendix V to the Offer to Purchase
is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY
(a) The information set forth under the caption "Shareholdings and dealings"
in Appendix V to the Offer to Purchase is incorporated herein by reference.
(b) Not applicable.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES
The information set forth under the captions "Rule 10b-13 Exemption" on page
2 of the Offer to Purchase, "Recommendation of the Offer" in the Letter from the
Chairman of The Energy Group contained in the Offer to Purchase as well as the
information set forth under the captions "Irrevocable undertakings", "Background
to the Offer", "Shareholdings and dealings", "Stock Exchange quotations, market
price data and principal purchases" and "Legal and regulatory matters--US
antitrust laws" in Appendix V to the Offer to Purchase is incorporated herein by
reference. Except as set forth under those captions, neither PacifiCorp nor
PacifiCorp Acquisitions, nor to the best knowledge of PacifiCorp or PacifiCorp
Acquisitions, any of the persons listed under the caption "Directors and
Executive Officers of PacifiCorp Acquisitions and PacifiCorp" in Appendix IV to
the Offer to Purchase, has any contract, arrangement, understanding or
relationship (whether or not legally enforceable) with any other person with
respect to any Energy Group Securities (including, but not limited to, any
contract, arrangement, understanding or relationship concerning the transfer or
the voting of any such securities, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss, or the giving or
withholding of proxies).
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The information set forth under the caption "Fees and expenses" in Appendix
V to the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS
The information set forth under the caption "Financial statements" in
Appendix IV to the Offer to Purchase is incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION
(a) and (e) Not applicable.
(b) and (c) The information set forth under the caption "Legal and
regulatory matters" in Appendix V to the Offer to Purchase is incorporated
herein by reference. After commencement of the printing of the Offer to
Purchase, the Federal Energy Regulatory Commission issued an order approving the
sale of the FERC jurisdictional assets of Citizens Power as described in the
press release issued by PacifiCorp on February 5, 1998, a copy of which is
attached hereto as Exhibit (a)(12) and incorporated herein by reference.
(d) The information set forth under the caption "Certain consequences of the
Offer--Margin Securities" in Appendix V to the Offer to Purchase is incorporated
herein by reference.
5
<PAGE>
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Form of the Acceptance, Authority and Election, to the
extent not otherwise incorporated herein by reference, is incorporated herein by
reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS
(a) (1) Offer to Purchase dated February 6, 1998.
(2) Form of Letter of Transmittal.
(3) Form of Acceptance, Authority and Election Relating to the Offer.
(4) Form of Notice of Guaranteed Delivery.
(5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees from Goldman, Sachs & Co.
(6) Form of Letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(8) Text of press announcement issued by PacifiCorp and The Energy Group
dated February 3, 1998.
(9) Text of press release of PacifiCorp dated February 3, 1998.
(10) Summary advertisement published in the U.S. dated February 6, 1998.
(11) Newspaper advertisement published in the U.K. dated February 6,
1998.
(12) Text of press release of PacifiCorp dated February 5, 1998.
(b) (1) Credit Agreement dated as of February 3, 1998 among PacifiCorp Group
Holdings Company, PacifiCorp EnergyCo, the financial institutions party thereto
as lenders, Citibank, N.A., as Paying Agent and Issuing Bank, Citicorp USA,
Inc., as Collateral Agent and Citicorp Securities, Inc., Goldman Sachs Credit
Partners L.P. and J.P. Morgan Securities Inc., as Arrangers.
(b) (2) Credit Agreement dated as of February 3, 1998 among PacifiCorp
Powercoal LLC, the financial institutions party thereto as lenders, Citibank,
N.A., as Paying Agent, Swingline Lender and Issuing Bank, Citicorp USA, Inc., as
Collateral Agent and Citicorp Securities, Inc., Goldman Sachs Credit Partners
L.P. and J.P. Morgan Securities Inc., as Arrangers.
(b) (3) Facility Agreement dated 3 February 1998 between PacifiCorp Services
Limited, PacifiCorp Finance (UK) Limited and PacifiCorp Acquisitions as
Guarantors, PacifiCorp Acquisitions as Borrower, Citibank, N.A., Goldman Sachs
International and J.P. Morgan Securities Ltd. as Arrangers, Citibank, N.A.,
Goldman Sachs Credit Partners, L.P. and Morgan Guaranty Trust Company of New
York as Original Banks, Citibank International PLC as Facility Agent, Citibank,
N.A. as Security Agent and Citibank, N.A. as LC Bank.
(b) (4) Debenture dated 3 February 1998 between PacifiCorp Services Limited
and PacifiCorp Finance (UK) Limited and PacifiCorp Acquisitions as Chargors and
Citibank, N.A. as Security Agent.
(c) Form of Irrevocable Undertaking executed by certain directors of The
Energy Group.
(d) Not applicable.
(e) Not applicable.
(f) The Offer to Purchase, the Letter of Transmittal and the Form of
Acceptance, Authority and Election Relating to the Offer are incorporated herein
by reference.
6
<PAGE>
SIGNATURES
After due inquiry and to the best of its knowledge and belief, each of the
undersigned certifies that the information set forth in this Statement is true,
complete and correct.
Date: February 6, 1998
PACIFICORP ACQUISITIONS
By: /s/ W.E. PERESSINI
-----------------------------------------
Name W. E. Peressini
Title DEPUTY CHIEF FINANCE OFFICER
PACIFICORP
By: /s/ W.E. PERESSINI
-----------------------------------------
Name W. E. Peressini
Title VICE PRESIDENT AND TREASURER
7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ---------------------- -------------------------------------------------------------------------------------------------
<C> <S> <C>
(a) (1) Offer to Purchase dated February 6, 1998.
(a) (2) Form of Letter of Transmittal.
(a) (3) Form of Acceptance, Authority and Election Relating to the Offer.
(a) (4) Form of Notice of Guaranteed Delivery.
(a) (5) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees from
Goldman, Sachs & Co.
(a) (6) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a) (7) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a) (8) Text of press announcement issued by PacifiCorp and The Energy Group dated February 3, 1998.
(a) (9) Text of press release of PacifiCorp dated February 3, 1998.
(a) (10) Summary advertisement published in the U.S. dated February 6, 1998.
(a) (11) Newspaper advertisement published in the U.K. dated February 6, 1998.
(a) (12) Text of press release of PacifiCorp dated February 5, 1998.
(b) (1) Credit Agreement dated as of February 3, 1998 among PacifiCorp Group Holdings Company, PacifiCorp
EnergyCo, the financial institutions party thereto as lenders, Citibank, N.A., as Paying Agent
and Issuing Bank, Citicorp USA, Inc., as Collateral Agent and Citicorp Securities, Inc., Goldman
Sachs Credit Partners L.P. and J.P. Morgan Securities Inc., as Arrangers.
(b) (2) Credit Agreement dated as of February 3, 1998 among PacifiCorp Powercoal LLC, the financial
institutions party thereto as lenders, Citibank, N.A., as Paying Agent, Swingline Lender and
Issuing Bank, Citicorp USA, Inc., as Collateral Agent and Citicorp Securities, Inc., Goldman
Sachs Credit Partners L.P. and J.P. Morgan Securities Inc., as Arrangers.
(b) (3) Facility Agreement dated 3 February 1998 between PacifiCorp Services Limited, PacifiCorp Finance
(UK) Limited and PacifiCorp Acquisitions as Guarantors, PacifiCorp Acquisitions as Borrower,
Citibank, N.A., Goldman Sachs International and J.P. Morgan Securities Ltd. as Arrangers,
Citibank, N.A., Goldman Sachs Credit Partners, L.P. and Morgan Guaranty Trust Company of New York
as Original Banks, Citibank International PLC as Facility Agent, Citibank, N.A. as Security Agent
and Citibank, N.A. as LC Bank.
(b) (4) Debenture dated 3 February 1998 between PacifiCorp Services Limited and PacifiCorp Finance (UK)
Limited and PacifiCorp Acquisitions as Chargors and Citibank, N.A. as Security Agent.
(c) Form of Irrevocable Undertaking executed by certain directors of The Energy Group.
(d) Not applicable.
(e) Not applicable.
(f) The Offer to Purchase, the Letter of Transmittal and the Form of Acceptance, Authority and
Election Relating to the Offer are incorporated herein by reference.
</TABLE>
8
<PAGE>
[LOGO]
RENEWED RECOMMENDED CASH OFFER
FOR
THE ENERGY GROUP PLC
<PAGE>
PACIFICORP
RENEWED RECOMMENDED CASH OFFER
FOR
THE ENERGY GROUP PLC
765 PENCE PER ENERGY GROUP SHARE
L30.60 PER ENERGY GROUP ADS
The Offer:
- - represents:
- a premium of approximately 17 per cent. to the Closing Price of 652 pence
of an Energy Group Share on 18 December 1997, the day immediately prior
to the clearance of the Previous Offer by the President of the Board of
Trade, and
- a premium of approximately 36 per cent. to the Closing Price of 561.5
pence of an Energy Group Share on 9 June 1997, the day before the
announcement by The Energy Group that it was involved in talks with
PacifiCorp in relation to the Previous Offer
- - includes a Loan Note Alternative
IF YOU HAVE ANY QUESTIONS ON THE OFFER, PLEASE CALL THE SHAREHOLDER HELPLINES ON
0845 603 9218 (UK) OR 1-800-733-8481 EXT. 475 (US). IF YOU HAVE ANY QUESTIONS
REGARDING THE ACCEPTANCE FORM, PLEASE CALL THE UK RECEIVING AGENT ON 0181 639
2166 OR THE US DEPOSITARY ON 1-800-733-8481 EXT. 475.
<PAGE>
OFFER TO PURCHASE DATED 6 FEBRUARY 1998
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED IMMEDIATELY TO
SEEK YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR,
ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE FINANCIAL
SERVICES ACT 1986.
If you have sold or otherwise transferred all your Energy Group Securities,
please send this document, together with the accompanying documents (but NOT the
Form of Acceptance if it is personalised), as soon as possible, to the purchaser
or transferee, or to the stockbroker, bank or other agent through whom the sale
or transfer was effected for onward transmission to the purchaser or transferee.
HOWEVER, SUCH DOCUMENTS SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
Goldman Sachs International, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for PacifiCorp Acquisitions
and PacifiCorp and for no one else in connection with the Offer and will not be
responsible to anyone other than PacifiCorp Acquisitions and PacifiCorp for
providing the protections afforded to its customers or for giving advice in
relation to the Offer. Goldman Sachs International is acting through Goldman,
Sachs & Co. for the purposes of making the Offer in and into the United States.
Lazard and Morgan Stanley & Co. Limited, which are regulated in the United
Kingdom by The Securities and Futures Authority Limited, are acting for The
Energy Group and for no one else in connection with the Offer and will not be
responsible to anyone other than The Energy Group for providing the protections
afforded to their customers or for giving advice in relation to the Offer.
- --------------------------------------------------------------------------------
[LOGO]
RECOMMENDED CASH OFFER
by
GOLDMAN SACHS INTERNATIONAL
ON BEHALF OF
PACIFICORP ACQUISITIONS
A WHOLLY-OWNED SUBSIDIARY OF PACIFICORP
for
THE ENERGY GROUP PLC
- ---------------------------------------------------------
A letter of recommendation from the Chairman of The Energy Group is set out on
pages 5 to 6 of this document.
The Initial Offer Period will expire at 10.00 p.m. (London time), 5.00 p.m. (New
York City time) on 9 March 1998, unless extended. At the conclusion of the
Initial Offer Period, including any extension thereof, if all the Conditions of
the Offer have been satisfied, fulfilled or, where permitted, waived, the Offer
will be extended for a Subsequent Offer Period of at least 14 calendar days.
Holders of Energy Group Securities will have withdrawal rights during the
Initial Offer Period, including any extension thereof, but not during the
Subsequent Offer Period.
COMPLETED ACCEPTANCE FORMS SHOULD BE RETURNED AS SOON AS POSSIBLE, BUT, IN ANY
EVENT, SO AS TO BE RECEIVED BY NO LATER THAN 10.00 P.M. (LONDON TIME), 5.00 P.M.
(NEW YORK CITY TIME) ON 9 MARCH 1998. THE PROCEDURE FOR ACCEPTANCE OF THE OFFER
IS SET OUT ON PAGES 14 TO 16 OF THIS DOCUMENT AND IN THE ACCOMPANYING ACCEPTANCE
FORM.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, neither this document nor Acceptance Forms are
to be mailed or otherwise distributed or sent in or into Canada, Australia or
Japan.
The Loan Notes to be issued pursuant to the Offer have not been, and will not
be, registered under the United States Securities Act of 1933, as amended, or
under any relevant securities laws of any state or district of the United
States, will not be the subject of a prospectus under the securities laws of any
province of Canada and will not be registered under any relevant securities laws
of any other country. The Loan Notes are not being offered, sold or delivered,
directly or indirectly, in or into the United States, Canada, Australia or
Japan.
<PAGE>
APPLICABLE DISCLOSURE REQUIREMENTS
The Offer is made for securities of a UK company and, while the Offer is
subject to UK and US disclosure requirements, US investors should be aware that
this document has been prepared in accordance with UK format and style, which
differs from US format and style. In particular, the Appendices to this document
contain information concerning the Offer responsive to US disclosure
requirements that may be material and has not been summarised elsewhere. In
addition, the summary financial statements of The Energy Group herein have been
prepared in accordance with UK GAAP, and thus may not be comparable to financial
statements of US companies.
REDUCTION OF THE ACCEPTANCE CONDITION
The Offer is conditional, amongst other things, on valid acceptances being
received (and not, where permitted, withdrawn) by the Initial Closing Date in
respect of not less than 90 per cent. in nominal value of Energy Group
Securities to which the Offer relates, or such lesser percentage as PacifiCorp
Acquisitions may decide, provided that such Condition (the "Acceptance
Condition") shall not be satisfied unless PacifiCorp Acquisitions and its
wholly-owned subsidiaries shall have acquired or agreed to acquire, whether
pursuant to the Offer or otherwise, Energy Group Securities carrying in the
aggregate more than 50 per cent. of the voting rights then exercisable at
general meetings of The Energy Group. PacifiCorp Acquisitions expects that it
will reduce the percentage of Energy Group Securities required to satisfy the
Acceptance Condition at some time prior to all the Conditions being satisfied,
fulfilled or, where permitted, waived. At least five Business Days prior to any
such reduction, PacifiCorp Acquisitions will announce that it has reserved the
right so to reduce the Acceptance Condition. PacifiCorp Acquisitions will not
make such an announcement unless it believes there is a significant possibility
that sufficient Energy Group Securities will be tendered to permit the
Acceptance Condition to be satisfied at such reduced level. Holders of Energy
Group Securities who are not willing to accept the Offer if the Acceptance
Condition is reduced to the minimum permitted level should either not accept the
Offer until the Subsequent Offer Period or be prepared to withdraw their
acceptances promptly following an announcement by PacifiCorp Acquisitions of its
reservation of the right to reduce the Acceptance Condition.
RULE 10B-13 EXEMPTION
In accordance with normal UK practice, PacifiCorp Acquisitions or its
nominees or brokers (acting as agents for PacifiCorp Acquisitions) or another
subsidiary of PacifiCorp may make certain purchases of Energy Group Securities
outside the United States during the period in which the Offer remains open for
acceptance and affiliates of Goldman Sachs International and Morgan Stanley will
continue to act as market makers and principal traders for Energy Group Shares
on the London Stock Exchange pursuant to relief granted by the SEC staff from
Rule 10b-13 under the Exchange Act. For further details on this relief, see
paragraph 3 of Appendix V ("Stock Exchange quotations, market price data and
principal purchases") below.
OFFER IN THE UNITED STATES
The Offer is being made in the United States by Goldman Sachs International
acting through Goldman, Sachs & Co. References in this document to the Offer
being made by Goldman Sachs International should be read accordingly.
CONVERSION OF CASH CONSIDERATION INTO US DOLLARS
Holders of Energy Group Shares may receive US dollars instead of pounds
sterling on the basis described in paragraph 15(f) of the letter from Goldman
Sachs International included in this document. Holders of Energy Group ADSs
evidenced by Energy Group ADRs, unless they elect to receive pounds
2
<PAGE>
sterling, will receive US dollars on the basis described in the same paragraph.
The attention of all holders of Energy Group Securities is drawn to the
description in that paragraph of the mechanism for converting pounds sterling
into US dollars and of the exchange rate risks attached thereto.
FINANCIAL INFORMATION
The extracts from the consolidated financial statements of, and other
information relating to, PacifiCorp appearing in this document are presented in
US dollars and have been prepared in accordance with US GAAP. US GAAP differs in
certain respects from UK GAAP.
RULE 8 NOTICES
Any person who, alone or acting together with any other person(s) pursuant
to any agreement or any understanding (whether formal or informal) to acquire or
control securities of The Energy Group, owns or controls, or becomes the owner
or controller, directly or indirectly, of one per cent. or more of any class of
securities of The Energy Group is generally required under the provisions of
Rule 8 of the City Code to notify the London Stock Exchange and the Panel of
every dealing in such securities during the Initial Offer Period. Dealings by
The Energy Group or its "associates" (within the meaning of the City Code) in
any class of securities of The Energy Group during the Initial Offer Period must
also be so disclosed. Please consult your financial adviser immediately if you
believe this Rule may be applicable to you.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Letter from the Chairman of The Energy Group.............................................................. 5
Letter from Goldman Sachs International................................................................... 7
Appendix I: Conditions and Further Terms of the Offer..................................................... I-1
Part A: Conditions of the Offer....................................................................... I-1
Part B: Further Terms of the Offer.................................................................... I-7
1. Acceptance Period................................................................................. I-7
2. Announcements..................................................................................... I-8
3. Rights of withdrawal.............................................................................. I-9
4. The Loan Note Alternative......................................................................... I-10
5. Effect of elections............................................................................... I-11
6. Revisions of the Offer and/or the Loan Note Alternative........................................... I-11
7. General........................................................................................... I-12
8. Overseas shareholders............................................................................. I-13
9. Procedures for tendering Energy Group ADSs........................................................ I-15
10. Procedures for tendering Energy Group Shares...................................................... I-18
11. Forms of Acceptance............................................................................... I-21
12. Certain provisions concerning acceptances......................................................... I-25
13. Substitute Acceptance Forms....................................................................... I-26
14. Settlement........................................................................................ I-26
15. Currency of consideration......................................................................... I-26
Appendix II: Summary of the Terms of the Loan Notes....................................................... II-1
Appendix III: Financial and Other Information on the TEG Group............................................ III-1
Appendix IV: Financial and Other Information on PacifiCorp Acquisitions and PacifiCorp.................... IV-1
Appendix V: Additional Information........................................................................ V-1
1. Responsibility.................................................................................... V-1
2. Directors......................................................................................... V-1
3. Stock Exchange quotations, market price data and principal purchases.............................. V-1
4. Shareholdings and dealings........................................................................ V-3
5. Irrevocable undertakings.......................................................................... V-8
6. Service agreements of the directors of The Energy Group and related matters....................... V-8
7. Other information................................................................................. V-11
8. Material contracts................................................................................ V-12
9. Background to the Offer........................................................................... V-14
10. Financing arrangements............................................................................ V-16
11. Compulsory acquisition............................................................................ V-20
12. Certain consequences of the Offer................................................................. V-21
13. Legal and regulatory matters...................................................................... V-22
14. United Kingdom taxation........................................................................... V-25
15. United States federal income taxation............................................................. V-27
16. Fees and expenses................................................................................. V-28
17. Sources of information and bases of calculation................................................... V-29
18. Documents available for inspection................................................................ V-30
Appendix VI: Definitions.................................................................................. VI-1
</TABLE>
4
<PAGE>
LETTER FROM THE CHAIRMAN OF THE ENERGY GROUP
[LOGO]
6 February 1998
TO HOLDERS OF ENERGY GROUP SECURITIES AND, FOR INFORMATION ONLY, TO PARTICIPANTS
IN THE ENERGY GROUP SHARE SCHEMES
Dear Shareholder or ADS holder
RECOMMENDED CASH OFFER ON BEHALF OF PACIFICORP ACQUISITIONS FOR THE ENERGY
GROUP
On 13 June 1997, your board and the board of PacifiCorp announced the terms
of a recommended cash offer for The Energy Group. That offer lapsed when it was
referred to the Monopolies and Mergers Commission on 1 August 1997. The
acquisition of The Energy Group by PacifiCorp was subsequently cleared by the
President of the Board of Trade on 19 December 1997.
On 3 February 1998 your board and the board of PacifiCorp announced the
terms of a new recommended cash offer for The Energy Group to be made on behalf
of PacifiCorp Acquisitions, a wholly-owned subsidiary of PacifiCorp. This letter
sets out the background to the new Offer and the reasons why your board is
recommending all holders of Energy Group Securities to accept it. The formal
Offer, which is subject to the conditions set out in Part A of Appendix I to
this document, is contained in the letter from Goldman Sachs International on
pages 7 to 19 of this document.
1 TERMS OF THE OFFER
The Offer values the equity of The Energy Group at approximately L4,055
million (assuming the exercise in full of all outstanding options and the
vesting of all outstanding awards under the Energy Group Share Schemes). The
Offer represents a premium of approximately 17 per cent. to the Closing Price of
652 pence per Energy Group Share on 18 December 1997, the day immediately prior
to the clearance of the Previous Offer by the President of the Board of Trade,
and a premium of approximately 36 per cent. to the Closing Price of 561.5 pence
of an Energy Group Share on 9 June 1997, the day before the announcement by The
Energy Group that it was involved in talks with PacifiCorp in relation to the
Previous Offer.
The Offer is being made on the following basis:
<TABLE>
<S> <C>
FOR EACH ENERGY GROUP SHARE 765 PENCE; AND
FOR EACH ENERGY GROUP ADS L30.60
</TABLE>
As an alternative to some or all of the cash consideration receivable under
the Offer, holders of Energy Group Shares who accept the Offer (apart from US
citizens or residents and certain other overseas persons) may elect to receive
Loan Notes instead of cash on the following basis:
<TABLE>
<S> <C>
FOR EVERY L1 OF CASH CONSIDERATION L1 NOMINAL OF LOAN NOTES
</TABLE>
A summary of the tax effects for holders of Energy Group Shares resident for
tax purposes in the UK who accept the Offer is set out in paragraph 14 of
Appendix V ("United Kingdom taxation") below. A summary of the tax effects for
holders of Energy Group Securities who are citizens or residents of the US,
5
<PAGE>
US domestic corporations or otherwise taxed as United States residents is set
out in paragraph 15 of Appendix V ("United States federal income taxation")
below.
2 BACKGROUND TO AND REASONS FOR THE OFFER
As we stated at the time of the Previous Offer, the combination of The
Energy Group and PacifiCorp will create a group with the scale and scope of
operations to compete more effectively in international energy markets. The
combined entity will also benefit from the skills that we have acquired from
operating in the deregulated energy environment in the UK. Your board continues
to believe that the combination will allow The Energy Group's strategy to be
pursued within a larger group which will benefit both customers and employees of
The Energy Group.
As previously announced, your board has received approaches from each of
Nomura International plc and Texas Utilities Co. expressing an interest in
acquiring The Energy Group. Both parties have had access to management and have
been provided with certain information about the TEG Group. No offer has been
received from either party and it is uncertain whether any such offer will be
received.
In considering the renewed Offer from PacifiCorp Acquisitions, your board
compared the benefits to shareholders of realising an immediate premium on their
investment (having regard to the level at which Energy Group Securities would be
likely to trade in the absence of bid speculation) with the benefits to them of
remaining as shareholders in The Energy Group as an independent company.
Following such consideration and taking into account discussions with other
potential offerors and the advice of its financial advisers as described below,
your board unanimously agreed to recommend the Offer.
3 DIRECTORS, MANAGEMENT AND EMPLOYEES
PacifiCorp Acquisitions has given assurances to the board of The Energy
Group that the existing employment rights, including pension rights, of all
directors, management and employees of the TEG Group, will be fully safeguarded.
Your attention is also drawn to paragraph 9 of the accompanying letter from
Goldman Sachs International.
4 ACTION TO BE TAKEN TO ACCEPT THE OFFER
The procedure for acceptance of the Offer is set out on pages 14 to 16 of
this document and in the Acceptance Form. The Initial Closing Date will be 10.00
p.m. (London time), 5.00 p.m. (New York City time), on 9 March 1998, unless
extended.
5 HELPLINES FOR THE OFFER
If you have any questions on the Offer, please call the shareholder
helplines on 0845 603 9218 (UK) or 1-800-733-8481 ext. 475 (US). If you have any
questions regarding the Acceptance Form, please call the UK Receiving Agent on
0181 639 2166 or the US Depositary on 1-800-733-8481 ext. 475.
6 RECOMMENDATION OF THE OFFER
The board of The Energy Group, which has been so advised by Lazard and
Morgan Stanley, its financial advisers, considers the terms of the Offer to be
fair and reasonable. In providing advice to the board of The Energy Group,
Lazard and Morgan Stanley have taken account of the board's commercial
assessment. Accordingly, the directors of The Energy Group unanimously recommend
all holders of Energy Group Shares and Energy Group ADSs to accept the Offer, as
they have irrevocably undertaken to do in respect of their personal holdings of
96,000 Energy Group Shares and 1,550 Energy Group ADSs.
Yours faithfully
DEREK C. BONHAM
Chairman
Registered in England and Wales No. 3257256. Registered Office: 117 Piccadilly,
London W1V 9FJ
6
<PAGE>
- --------------------------------------------------------------------------------
Goldman Sachs International, Peterborough Court, 133 Fleet Street,
London EC4A 2BB, England Tel: 0171-774 1000,
Telex: 94015777, Cable: GOLDSACHS LONDON
[LOGO]
- --------------------------------------------------------------------------------
6 February 1998
TO HOLDERS OF ENERGY GROUP SECURITIES AND, FOR INFORMATION ONLY, TO PARTICIPANTS
IN THE ENERGY GROUP SHARE SCHEMES
Dear Sir/Madam
RECOMMENDED CASH OFFER BY GOLDMAN SACHS INTERNATIONAL
ON BEHALF OF PACIFICORP ACQUISITIONS FOR THE ENERGY GROUP
1 INTRODUCTION
On 13 June 1997, the boards of PacifiCorp and The Energy Group announced the
terms of a recommended cash offer to be made by Goldman Sachs International on
behalf of PacifiCorp Acquisitions for all issued and to be issued Energy Group
Securities. The Previous Offer was referred to the Monopolies and Mergers
Commission on 1 August 1997. The acquisition of The Energy Group by PacifiCorp
was subsequently cleared by the President of the Board of Trade on 19 December
1997.
On 3 February 1998 the boards of PacifiCorp and The Energy Group announced
the terms of the Offer. This letter contains the formal Offer. Your attention is
drawn to the letter from the Chairman of The Energy Group, which contains the
recommendation of the directors of The Energy Group, set out on pages 5 to 6 of
this document.
The Offer and this document are subject to the applicable requirements of
both the UK City Code and US federal securities laws.
2 THE OFFER
On behalf of PacifiCorp Acquisitions, we hereby offer to purchase, upon the
terms and subject to the Conditions set out in this document and in the relevant
Acceptance Form, all outstanding Energy Group Securities, for 765 pence in cash
per Energy Group Share and L30.60 in cash per Energy Group ADS, together with
the benefit of the Loan Note Alternative referred to in paragraph 4 below and
the right to elect to receive the consideration in US dollars set out in
paragraph 15 below.
7
<PAGE>
The Offer values the equity of The Energy Group at approximately L4,055
million (assuming the exercise in full of all outstanding options and the
vesting of all outstanding awards under the Energy Group Share Schemes) and
represents a premium of approximately 17 per cent. to the Closing Price of 652
pence per Energy Group Share on 18 December 1997, the day immediately prior to
the clearance of the Previous Offer by the President of the Board of Trade and a
premium of approximately 36 per cent. to the Closing Price of 561.5 pence of an
Energy Group Share on 9 June 1997, the day before the announcement by The Energy
Group that it was involved in talks with PacifiCorp in relation to the Previous
Offer.
Energy Group Securities will be acquired under the Offer fully paid and free
from all liens, charges, equities, encumbrances and other interests and together
with all rights now and hereafter attaching thereto, including, without
limitation, the right to receive and retain all dividends, interest and other
distributions (if any) declared, made or paid on or after 3 February 1998, the
date on which the Offer was announced.
TO ACCEPT THE OFFER YOU SHOULD RETURN THE RELEVANT ACCEPTANCE FORM AS SOON
AS POSSIBLE AND, IN ANY EVENT, SO AS TO BE RECEIVED BY THE UK RECEIVING AGENT OR
THE US DEPOSITARY NO LATER THAN 10.00 P.M. (LONDON TIME), 5.00 P.M. (NEW YORK
CITY TIME) ON 9 MARCH 1998. THE PROCEDURE FOR ACCEPTANCE OF THE OFFER IS SET OUT
IN PARAGRAPH 13 ("PROCEDURE FOR ACCEPTANCE OF THE OFFER") BELOW, IN PARAGRAPHS
9, 10 AND 11 OF PART B OF APPENDIX I BELOW AND IN THE ACCOMPANYING ACCEPTANCE
FORM.
3 TERMS AND CONDITIONS OF THE OFFER
The Offer is subject to the further terms and Conditions set out in Appendix
I below. The following summary of certain of the terms and Conditions of the
Offer is subject to and qualified in its entirety by reference to Appendix I
below.
The Offer is conditional on, amongst other things, valid acceptances being
received (and not, where permitted, withdrawn) by the Initial Closing Date in
respect of not less than 90 per cent. in nominal value of Energy Group
Securities to which the Offer relates (the "90 per cent. threshold"), or such
lesser percentage as PacifiCorp Acquisitions may decide, provided that the
Acceptance Condition shall not be satisfied unless PacifiCorp Acquisitions and
its wholly-owned subsidiaries shall have acquired or agreed to acquire (in
accordance with the requirements of Notes 4 to 6 of Rule 10 of the City Code, to
which reference is made in paragraph 12(b) of Part B of Appendix I below),
whether pursuant to the Offer or otherwise, Energy Group Securities carrying in
the aggregate more than 50 per cent. of the voting rights then exercisable at
general meetings of The Energy Group. If the 90 per cent. threshold is satisfied
before the Initial Closing Date, the Acceptance Condition (subject to any
permitted reduction in the acceptance threshold) must continue to be satisfied
on the Initial Closing Date, by reference to the facts then subsisting.
PacifiCorp Acquisitions expects that it will reduce the percentage of Energy
Group Securities required to satisfy the Acceptance Condition at some time prior
to all the Conditions being satisfied, fulfilled or, where permitted, waived. At
least five Business Days prior to any reduction in the percentage of Energy
Group Securities required to satisfy the Acceptance Condition, PacifiCorp
Acquisitions will announce that it has reserved the right so to reduce the
Acceptance Condition. PacifiCorp Acquisitions will not make such an announcement
unless it believes there is a significant possibility that sufficient Energy
Group Securities will be tendered to permit the Acceptance Condition to be
satisfied at such reduced level. Holders of Energy Group Securities who are not
willing to accept the Offer if the Acceptance Condition is reduced to the
minimum permitted level should either not accept the Offer until the Subsequent
Offer Period or be prepared to withdraw their acceptances promptly following an
announcement by PacifiCorp Acquisitions of its reservation of the right to
reduce the Acceptance Condition.
8
<PAGE>
The Initial Offer Period will expire at 10.00 p.m. (London time), 5.00 p.m.
(New York City time), on 9 March 1998, unless extended. At the conclusion of the
Initial Offer Period, including any extension thereof, if all Conditions have
been satisfied, fulfilled or, where permitted, waived, the Offer will be
extended for a Subsequent Offer Period of at least 14 calendar days. Holders of
Energy Group Securities will have the right to withdraw their acceptances of the
Offer during the Initial Offer Period, but not during the Subsequent Offer
Period, except in certain limited circumstances. PacifiCorp Acquisitions
reserves the right (but will not be obliged) at any time to extend the Initial
Offer Period, provided that PacifiCorp Acquisitions may not extend the Initial
Offer Period beyond 7 April 1998 without the consent of the Panel. PacifiCorp
Acquisitions reserves the right, if appropriate, to seek the Panel's approval to
extend the final date for expiry of the Initial Offer Period to 28 April 1998,
or such later date as the Panel may agree. PacifiCorp Acquisitions may terminate
any extension of the Initial Offer Period (other than an extension required by
the City Code or the Exchange Act) prior to its scheduled expiry if all
Conditions have been satisfied, fulfilled or, where permitted, waived. In that
case, the Initial Offer Period and, consequently, withdrawal rights, except in
certain limited circumstances, will terminate immediately.
If all of the Conditions are satisfied, fulfilled or, where permitted,
waived within the time permitted, payment for tendered Energy Group Securities
will be made as provided in paragraph 15 ("Settlement") below.
If all Conditions are satisfied, fulfilled or, where permitted, waived and
PacifiCorp Acquisitions acquires or contracts to acquire, pursuant to the Offer
or otherwise, at least 90 per cent. in nominal value of Energy Group Securities
to which the Offer relates, it will be entitled to and intends to acquire the
remaining Energy Group Securities on the same terms as the Offer pursuant to and
subject to sections 428 to 430F (inclusive) of the Companies Act. See paragraph
11 of Appendix V ("Compulsory acquisition") below.
If all Conditions are satisfied, fulfilled or, where permitted, waived and
PacifiCorp acquires or contracts to acquire, pursuant to the Offer or otherwise,
Energy Group Securities giving it more than 75 per cent. of voting rights at
general meetings of The Energy Group, but PacifiCorp Acquisitions is not in a
position to effect the compulsory acquisition of all outstanding Energy Group
Securities in accordance with the sections of the Companies Act referred to
above, PacifiCorp Acquisitions intends to seek to procure an application by The
Energy Group to the London Stock Exchange for Energy Group Shares to be delisted
and an application by The Energy Group to the New York Stock Exchange for Energy
Group ADSs to be delisted. PacifiCorp Acquisitions further intends that, subject
to the London Stock Exchange delisting taking place, it will seek to procure the
transfer of Peabody's US coal operations (except Lee Ranch Coal Company) to
PacifiCorp Acquisitions' fellow subsidiary, Powercoal, and to procure the giving
of financial assistance by members of the TEG Group to PacifiCorp Acquisitions
and other members of the PacifiCorp Group, subject to compliance, where
necessary, with the "whitewash" procedures set out in sections 155 to 158 of the
Companies Act. For further details, see paragraph 10 of Appendix V ("Financing
arrangements") below.
4 THE LOAN NOTE ALTERNATIVE
A Loan Note Alternative is available to holders of Energy Group Shares
(other than persons who are citizens or residents of the United States and
certain other overseas shareholders) who validly accept the Offer, on the basis
of L1 nominal of Loan Notes for every L1 of cash that they would otherwise
receive under the Offer, subject to aggregate valid elections being received on
or before the date on which all the Conditions are satisfied, fulfilled or
waived, as applicable, for in excess of L1 million nominal value of Loan Notes.
If insufficient elections are received, holders of Energy Group Shares who
validly accept the Offer and elect for the Loan Note Alternative will instead
receive cash in accordance with the terms of the Offer. Subject as aforesaid,
the Loan Note Alternative will remain open as long as the Offer is open for
acceptance. Where an Energy Group shareholder elects or is deemed to have
elected for the Loan Note Alternative in respect of all the Energy Group Shares
for which he has accepted the Offer, fractional
9
<PAGE>
entitlements to Loan Notes will be disregarded and not paid. The Loan Notes will
bear interest at a rate per annum which is 0.5 per cent below LIBOR.
Goldman Sachs International has advised that, based on market conditions on
2 February 1998 (the latest practicable date prior to the publication of this
document), in its opinion, if the Loan Notes had then been in issue, the value
of each L1 nominal of Loan Notes would have been approximately 98 pence.
In considering the Loan Note Alternative, holders of Energy Group Shares
should note that the obligations of PacifiCorp Acquisitions are not guaranteed
or secured.
A summary of the terms of the Loan Notes is set out in Appendix II below.
5 REGULATION
The Offer is subject to certain regulatory consents and confirmations being
obtained.
Prior to the referral of the Previous Offer to the Monopolies and Mergers
Commission, PacifiCorp agreed to give certain assurances in respect of Eastern
Electricity plc to the DGES and the Monopolies and Mergers Commission, in
clearing the Previous Offer, assumed that these would still apply if PacifiCorp
renewed the Previous Offer. PacifiCorp has confirmed that these assurances will
be formally given by PacifiCorp to OFFER to take effect from completion of the
Acquisition.
The Offer is subject to the US HSR Act. In the course of complying with such
Act in connection with the Previous Offer, the US Federal Trade Commission (the
"FTC") requested additional information from PacifiCorp. Following receipt of
such information, the FTC staff requested that PacifiCorp and The Energy Group
take certain actions. PacifiCorp and The Energy Group have agreed with the FTC
staff on the form of a consent order by the FTC that would, among other things,
require divestiture of a subsidiary of the Energy Group that owns two mines in
Arizona. The consent order is awaiting acceptance by the FTC. If the consent
order is accepted by the FTC, it will be subjected to a 60-day public comment
period after which the consent order will be served upon the parties unless the
FTC determines otherwise. The consent order will become final upon service. The
US HSR Act waiting period will expire upon the earlier of the acceptance of the
consent order for public comment by the FTC and 11.59 pm on 19 February 1998.
PacifiCorp has agreed that it will not invoke either Condition (d) or (e) even
if the FTC amends the terms of the form of the consent order agreed with the FTC
staff.
Further details of regulatory issues applicable to the Offer are set out in
paragraph 13 of Appendix V ("Legal and regulatory matters") below.
6 INFORMATION ON THE PACIFICORP GROUP
PacifiCorp, one of the lowest-cost electricity producers in the United
States, is a multinational energy company based in Portland, Oregon. PacifiCorp
serves approximately 1.4 million retail customers in Oregon, Washington,
California, Montana, Idaho, Utah and Wyoming. PacifiCorp is the largest
investor-owned bulk power marketer in the western United States and is an active
electricity and gas marketer in the eastern United States.
PacifiCorp operates one of the largest open-access transmission systems in
the United States with over 150 access points across 15,000 circuit miles and,
together with its affiliates, has generating capacity of over 10,000 megawatts.
It is the twelfth largest coal producer in the United States, producing 22.6
million tonnes in 1996. In 1996, the average electricity production costs at its
coal-fired plants were 25 per cent. lower than the US national average.
PacifiCorp also has substantial operations in Australia through Powercor,
the largest electricity distribution business in Victoria and its 19.9 per cent.
partnership interest in the Hazelwood power generating station and associated
mine.
10
<PAGE>
PacifiCorp is listed on the New York and Pacific Stock Exchanges under the
symbol "PPW". For the year ended 31 December 1997, PacifiCorp reported earnings
on common stock of $451 million, or $1.52 per share, excluding asset sale gains
and a series of special charges and other adjustments recorded in 1997. As at
the close of trading on the New York Stock Exchange on 30 January 1998,
PacifiCorp had a market capitalization of approximately $6.9 billion.
PacifiCorp Acquisitions, a wholly-owned subsidiary of PacifiCorp, is an
unlimited company registered in England and Wales incorporated on 9 June 1997
for the purpose of making the Previous Offer.
Further information on the PacifiCorp Group is set out in Appendix IV below.
7 INFORMATION ON THE ENERGY GROUP
The Energy Group is a diversified international energy group which includes
Peabody, the world's largest private producer of coal, and Eastern, one of the
leading integrated electricity and gas groups in the United Kingdom.
Peabody, the largest producer of coal in the United States, operates 25
underground and surface mines in the United States and three surface mines in
Australia:
- As at 31 March 1997, Peabody owned or controlled 9.5 billion tons of
proven and probable coal reserves;
- In the six months ended 31 March 1997, Peabody sold 81.4 million tons of
coal worldwide and had an estimated 14.4 per cent. of the US market; and
- Peabody Australia, one of the 10 largest coal producers in Australia, has
interests in four surface mines in New South Wales, three of which are
currently in operation. Peabody's equity share of the coal sales of these
mines amounted to 3.5 million tons in the six months ended 31 March 1997
and its equity share of the proven and probable reserves associated with
these mines as at 31 March 1997 amounted to 466 million tons.
Through Eastern, The Energy Group is one of the leading integrated
electricity and gas groups in the United Kingdom and is involved in a wide range
of operations:
- Eastern Generation, the fourth largest generator of electricity in Great
Britain, currently owns, operates or has an interest in eight power
stations, representing approximately 10 per cent. of the United Kingdom's
total registered generating capacity as at 31 March 1997.
- Eastern Power & Energy Trading manages for the TEG Group the price and
volume risks associated with the generation, wholesaling and sale to end
users of electricity. These exposures are managed by trading its contract
portfolio and by bidding Eastern's generation output into the Electricity
Pool. It also has small equity interests in three natural gas-producing
fields in the North Sea.
- Eastern Natural Gas is one of the largest suppliers of natural gas in the
United Kingdom after Centrica plc.
- Eastern Electricity is the largest supplier and distributor of electricity
in England and Wales, with over three million customers and an authorised
area covering approximately 20,300 sq. km. in the east of England and
parts of north London.
The TEG Group also includes Citizens Power, one of the leading US power
marketing firms, which was acquired by The Energy Group in May 1997. Its
headquarters are in Boston and it has field offices in Milwaukee, Denver and
Toronto. Certain proposals relating to Citizens Power, to take effect upon
completion of the Offer, are described in paragraph 13(d) of Appendix V below.
11
<PAGE>
The Energy Group's results for the nine months ended 31 December 1997 were
announced on 3 February 1998 and are set out in Appendix III to this document,
together with further financial information on The Energy Group. On a pro forma
basis for the year ended 31 March 1997, The Energy Group reported consolidated
turnover of L4,460 million and consolidated net income of L286 million.
8 FINANCING
PacifiCorp Acquisitions has arranged appropriate financing in connection
with the Offer. Other wholly-owned subsidiaries of PacifiCorp Group Holdings
Company have arranged their own funding to assist in PacifiCorp Acquisitions'
financing of the Offer. Details of the financing arrangements for the Offer are
set out in paragraph 10 of Appendix V ("Financing arrangements") below.
9 EMPLOYEE MATTERS AND SHARE SCHEMES
(a) Directors, management and employees
PacifiCorp Acquisitions has given assurances to the board of The Energy
Group that the existing employment rights, including pension rights, of all
directors, management and employees of the TEG Group, will be fully safeguarded.
PacifiCorp looks forward to working with employees of the TEG Group.
PacifiCorp has stated that, subject to the Offer becoming or being declared
unconditional in all respects, it intends to invite Mr Derek Bonham and Mr John
Devaney to join the board of directors of PacifiCorp. Mr Frederick Buckman will
remain as a director and President and Chief Executive Officer of the Combined
Group.
In addition, PacifiCorp intends, subject to approval of the PacifiCorp board
of directors, to invite Mr Bonham, Mr Devaney, Mr Eric Anstee and Mr Irl
Engelhardt to join PacifiCorp senior executives, Mr Buckman, Mr Verl Topham, Mr
Dennis Steinberg and Mr Richard O'Brien to form part of a management committee
to co-ordinate the activities of the Combined Group and, except in the case of
Mr Bonham, to take up certain executive positions within the Combined Group.
Although these intentions have been discussed in general terms, no specific
terms or conditions have yet been agreed. None of Messrs Bonham, Devaney, Anstee
or Engelhardt will enter into any further discussions with PacifiCorp (or any
person acting in concert with it) concerning their personal positions unless and
until, at the earliest, the Offer becomes or is declared unconditional in all
respects.
(b) The Energy Group Share Schemes
The Offer will extend to any fully paid Energy Group Shares which are
unconditionally allotted or issued while the Offer is open for acceptance,
including those unconditionally allotted or issued pursuant to the exercise of
options or vesting of awards under the Energy Group Share Schemes.
Appropriate proposals will be made to participants in the Energy Group Share
Schemes in due course. In relation to the Energy Group Sharesave Scheme, it is
anticipated that, as an additional alternative to the rights provided under the
rules of that scheme, participants will be offered an opportunity to surrender
their existing options in consideration for a cash sum, calculated by reference
to the difference between 765 pence and the exercise price of their options
multiplied by the number of Energy Group Shares that they could have acquired
with their total savings contributions (together with any interest payable
thereon) under the Energy Group Sharesave Scheme up to the date the Offer
becomes or is declared unconditional in all respects, plus a further six months'
savings contributions.
10 UK TAXATION
PacifiCorp Acquisitions has been advised that, under UK legislation and
Inland Revenue practice current at the date of this document, the taxation
treatment of acceptance of the Offer and the Loan Note
12
<PAGE>
Alternative for holders of Energy Group Shares who are the beneficial owners of
their Energy Group Shares, hold their Energy Group Shares as an investment
(otherwise than under a personal equity plan), and are resident or ordinarily
resident in the UK for tax purposes will, in summary, be as follows:
(A) TAXATION OF CHARGEABLE GAINS
Liability to UK taxation on chargeable gains ("CGT") will depend on the
particular circumstances of holders of Energy Group Shares and on the form of
consideration received.
CASH
To the extent that a holder of Energy Group Shares receives cash under the
Offer, this will constitute a disposal, or part disposal, of his Energy Group
Shares for CGT purposes. Such a disposal, or part disposal, may, depending on
that shareholder's individual circumstances, give rise to a liability to CGT.
LOAN NOTES
A holder of Energy Group Shares who, together with persons connected with
him, holds not more than five per cent. of the issued share capital of The
Energy Group, will not be treated as making a disposal to the extent that he
elects for and receives Loan Notes by way of consideration. In the case of a
holder of Energy Group Shares who, together with persons connected with him,
holds more than five per cent. of the issued share capital of The Energy Group,
this treatment is subject to the Inland Revenue granting clearance under section
138 of the Taxation of Chargeable Gains Act 1992. Although such clearance has
been applied for, the Inland Revenue has not yet formally replied. In the case
of shareholders within the charge to UK corporation tax, indexation relief will
not accrue on the Loan Notes.
A subsequent disposal of Loan Notes (including their redemption or
repayment) may give rise to a chargeable event for CGT purposes.
(B) TAXATION OF INTEREST
Payments of interest on the Loan Notes will be made subject to the deduction
of UK income tax at the lower rate (currently 20 per cent.). Payments of
interest may also be subject to US federal income tax in certain circumstances.
FURTHER INFORMATION ON UK TAX LAW AND PRACTICE CURRENT AT THE DATE OF THIS
DOCUMENT IS CONTAINED IN PARAGRAPH 14 OF APPENDIX V ("UNITED KINGDOM TAXATION")
BELOW. FURTHER INFORMATION ON US FEDERAL INCOME TAX CURRENT AT THE DATE OF THIS
DOCUMENT IS CONTAINED IN PARAGRAPH 15 OF APPENDIX V ("UNITED STATES FEDERAL
INCOME TAXATION") BELOW.
ANY HOLDER OF ENERGY GROUP SECURITIES WHO IS IN ANY DOUBT ABOUT HIS OWN TAX
POSITION OR WHO IS SUBJECT TO TAXATION IN ANY JURISDICTION OTHER THAN THE UK OR
THE US IS STRONGLY RECOMMENDED TO CONSULT HIS INDEPENDENT PROFESSIONAL ADVISER
IMMEDIATELY.
13
<PAGE>
11 US TAXATION
The paragraph below addresses certain current US federal income tax
consequences applicable to holders of Energy Group Securities who are citizens
or residents of the US, US domestic corporations or otherwise taxed as United
States residents. It does not apply to tax issues arising from a holder's
particular circumstances, such as participation in the Energy Group Share
Schemes or being a dealer in securities. Non-US residents who are eligible to
elect for the Loan Note Alternative should refer to paragraph 15 of Appendix V
("United States federal income taxation") below.
The receipt of cash pursuant to the Offer will be a taxable transaction for
US income tax purposes and may also be a taxable transaction under applicable
state, local, foreign and other tax laws.
In general, a holder of Energy Group Securities who sells such securities
pursuant to the Offer will, for US federal income tax purposes, recognise gain
or loss equal to the difference between such holder's adjusted tax basis in the
Energy Group Securities sold and the amount received in exchange therefor. Such
gain or loss generally will be capital gain or loss. An accrual basis holder of
Energy Group Securities who sells such securities pursuant to the Offer may have
a foreign currency exchange gain or loss for US federal income tax purposes on
account of currency fluctuations between the sale date and the settlement date,
in addition to the gain or loss recognised by the holder on the disposition of
Energy Group Securities pursuant to the Offer.
FURTHER INFORMATION ON THE APPLICATION OF CURRENT US TAX LAWS IS CONTAINED
IN PARAGRAPH 15 OF APPENDIX V ("UNITED STATES FEDERAL INCOME TAXATION") BELOW.
ANY HOLDER OF ENERGY GROUP SECURITIES WHO IS IN ANY DOUBT ABOUT HIS OWN TAX
POSITION OR WHO IS SUBJECT TO TAXATION IN ANY JURISDICTION OTHER THAN THE UK OR
THE US (OR IN BOTH THE UK AND THE US) IS STRONGLY RECOMMENDED TO CONSULT HIS
INDEPENDENT PROFESSIONAL ADVISER IMMEDIATELY.
12 OVERSEAS SHAREHOLDERS
The attention of holders of Energy Group Securities who are citizens or
residents of jurisdictions outside the UK or the US is drawn to paragraph 8 of
Part B of Appendix I ("Overseas shareholders") below and to the relevant
provisions of the Acceptance Form.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan. Persons who are citizens or residents of such jurisdictions
may not accept the Offer. Any purported acceptance of the Offer by acceptors who
are unable to give the warranty set out in paragraph 11(I) of Part B of Appendix
I to this document will be disregarded.
The Loan Notes to be issued pursuant to the Loan Note Alternative have not
been, and will not be, registered under the Securities Act or under any relevant
securities laws of any state or district of the United States and will not be
the subject of a prospectus under the securities laws of any province of Canada.
In addition, no steps have been taken, or will be taken, to enable the Loan
Notes to be offered in Japan in compliance with applicable securities laws of
Japan and no prospectus in relation to the Loan Notes has been, or will be,
lodged with or registered by the Australian Securities Commission, nor will the
Loan Notes be registered under any relevant securities laws of any other
country. The Loan Notes are not being offered, sold or delivered, directly or
indirectly, in or into the United States, Canada, Australia or Japan.
13 PROCEDURE FOR ACCEPTANCE OF THE OFFER
(A) HOLDERS OF ENERGY GROUP SHARES
The attention of holders of Energy Group Shares is drawn to paragraph 10 of
Part B of Appendix I ("Procedures for tendering Energy Group Shares") below and
to the relevant provisions of the Form of Acceptance.
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You should note that, if you hold Energy Group Shares in both certificated
and uncertificated form (that is, in CREST), you should complete a separate Form
of Acceptance for each holding. If you hold Energy Group Shares in
uncertificated form, but under different member account IDs, you should complete
a separate Form of Acceptance in respect of each member account ID. Similarly,
if you hold Energy Group Shares in certificated form, but under different
designations, you should complete a separate Form of Acceptance in respect of
each designation.
(I) TO ACCEPT THE OFFER
To accept the Offer, you should compete Box 1 and (if your Energy Group
Shares are in CREST) Box 5, and sign Box 6 of the Form of Acceptance in
accordance with the instructions printed on it. All holders of Energy Group
Shares who are individuals should sign the Form of Acceptance in the
presence of a witness, who should also sign Box 6 in accordance with the
instructions printed on it.
(II) TO ELECT FOR THE LOAN NOTE ALTERNATIVE
To elect for the Loan Note Alternative in respect of some or all of the
Energy Group Shares for which you are accepting the Offer, you should
complete Box 2 in addition to taking the actions described in paragraph (i)
above. The attention of those holders of Energy Group Shares considering
accepting the Loan Note Alternative is drawn to paragraph 4 ("The Loan Note
Alternative") and paragraph 12 ("Overseas shareholders") of this letter, to
paragraphs 4 and 5 of Part B of Appendix I below and to paragraph 15(b) of
Appendix V below ("United States tax treatment of Loan Notes").
(III) RETURN OF FORM OF ACCEPTANCE
TO ACCEPT THE OFFER, THE FORM OF ACCEPTANCE MUST BE COMPLETED AND
RETURNED, WHETHER OR NOT YOUR ENERGY GROUP SHARES ARE IN CREST. THE
COMPLETED, SIGNED AND (IF YOU ARE AN INDIVIDUAL) WITNESSED FORM OF
ACCEPTANCE, TOGETHER WITH, IF YOUR ENERGY GROUP SHARES ARE NOT IN CREST, THE
SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENT(S) OF TITLE FOR YOUR ENERGY GROUP
SHARES, SHOULD BE RETURNED BY POST TO NEW ISSUES DEPARTMENT, IRG PLC, PO BOX
166, BOURNE HOUSE, 34 BECKENHAM ROAD, BECKENHAM, KENT BR3 4TH, BY HAND,
DURING NORMAL BUSINESS HOURS ONLY, TO IRG PLC, 23 IRONMONGER LANE, LONDON
EC2 OR BY POST OR BY HAND TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY, C/O
SHAREHOLDER COMMUNICATIONS CORPORATION, 17 STATE STREET, 24TH FLOOR, NEW
YORK, NY 10004, MARKED FOR THE ATTENTION OF "TENDERS AND EXCHANGES", AS SOON
AS POSSIBLE BUT, IN ANY EVENT, SO AS TO BE RECEIVED NO LATER THAN 10.00 P.M.
(LONDON TIME), 5.00 P.M. (NEW YORK CITY TIME) ON 9 MARCH 1998. A reply-paid
envelope is enclosed for your convenience and may be used by holders of
Energy Group Shares for returning Forms of Acceptance within the UK and the
US only. The instructions printed on the Form of Acceptance shall be deemed
to form part of the terms of the Offer.
Any Form of Acceptance received in an envelope postmarked in Canada,
Australia or Japan or otherwise appearing to PacifiCorp Acquisitions or its
agents to have been sent from Canada, Australia or Japan may be rejected as
an invalid acceptance of the Offer. For further information for overseas
shareholders, see paragraph 12 ("Overseas shareholders") above and paragraph
8 of Part B of Appendix I ("Overseas shareholders") below.
(IV) ENERGY GROUP SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
If your Energy Group Shares are in uncertificated form (that is, if you
do not have a paper share certificate because your shares are held in
CREST), you should read carefully paragraphs 10(d)-(I) of Part B of Appendix
I, which set out the acceptance procedures for holders of Energy Group
Shares in uncertificated form.
If you are a CREST sponsored member, you should refer to your CREST
sponsor before taking any action.
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(V) SHARE CERTIFICATES NOT READILY AVAILABLE OR LOST
If your Energy Group Shares are in certificated form, but your share
certificate(s) and/or other document(s) of title is/are not readily
available or is/are lost, the Form of Acceptance should nevertheless be
completed, signed and returned as stated in paragraph (iii) above so as to
arrive no later than 10.00 p.m. (London time), 5.00 p.m. (New York City
time) on 9 March 1998, together with any share certificate(s) and/or other
document(s) of title that you have available, accompanied by a letter
stating that the balance will follow. You should then arrange for the
relevant share certificate(s) and/or other document(s) of title to be
forwarded as soon as possible thereafter. No acknowledgment of receipt of
documents will be given. In the case of loss, you should write as soon as
possible to Lloyds Bank Registrars, The Causeway, Goring-by-Sea, Worthing,
West Sussex BN99 6DA for a letter of indemnity for lost share certificate(s)
and/or other document(s) of title which, when completed in accordance with
the instructions given, should be returned to New Issues Department, IRG
plc, PO Box 166, Bourne House, 34 Beckenham Road, Beckenham, Kent BR3 4TH.
(VI) DEPOSITS OF ENERGY GROUP SHARES INTO, AND WITHDRAWALS OF ENERGY GROUP
SHARES FROM, CREST
Normal CREST procedures (including timings) apply in relation to any
Energy Group Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Offer (whether any such conversion arises as a result of a
transfer of Energy Group Shares or otherwise). Holders of Energy Group
Shares who are proposing so to convert any such shares are recommended to
ensure that the conversion procedures are implemented in sufficient time to
enable the person holding or acquiring the shares as a result of the
conversion to take all necessary steps in connection with an acceptance of
the Offer (in particular, as regards delivery of share certificate(s) and/or
other document(s) of title or transfers to an escrow balance as described
above) prior to 10.00 p.m. (London time), 5.00 p.m. (New York City time) on
9 March 1998.
(B) HOLDERS OF ENERGY GROUP ADSS
The attention of holders of Energy Group ADSs is drawn to paragraph 9 of
Part B of Appendix I ("Procedures for tendering Energy Group ADSs") below and to
the relevant provisions of the Letter of Transmittal.
To accept the Offer, holders of Energy Group ADSs must complete the Letter
of Transmittal in accordance with the instructions printed on it. The completed
Letter of Transmittal should be sent in the accompanying reply-paid envelope or
delivered by hand together with the required signature guarantees and any other
required documents to the US Depositary at one of its addresses set forth on the
back cover of this document and the Energy Group ADRs must be either received by
the US Depositary at one of such addresses or delivered in accordance with
paragraph 9 of Part B of Appendix I referred to above.
(C) VALIDITY OF ACCEPTANCE
Subject to the City Code, PacifiCorp Acquisitions reserves the right to
treat as valid in whole or in part any acceptance of the Offer which is not
entirely in order or which is not accompanied (as applicable) by the relevant
transfer to escrow or the relevant share certificate(s) and/or other document(s)
of title or which is received by it in a form or at a place or places other than
set out in this document or the Acceptance Form. In that event, no payment of
cash or issue of Loan Notes under the Offer will be made until after (as
applicable) the relevant transfer to escrow has settled or the relevant share
certificate(s) and/or other document(s) of title or indemnities satisfactory to
PacifiCorp Acquisitions have been received.
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(D) GENERAL
No acknowledgment of receipt of Acceptance Forms, share certificates, Energy
Group ADRs or other documents of title will be given.
IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURES FOR ACCEPTANCE, PLEASE CONTACT
THE UK RECEIVING AGENT, NEW ISSUES DEPARTMENT, IRG PLC BY TELEPHONE ON 0181 639
2166 OR AT PO BOX 166, BOURNE HOUSE, 34 BECKENHAM ROAD, BECKENHAM, KENT BR3 4TH
OR THE US DEPOSITARY, CONTINENTAL STOCK TRANSFER & TRUST COMPANY, ON 1-800 733
8481 EXT. 475 OR C/O SHAREHOLDER COMMUNICATIONS CORPORATION, 17 STATE STREET,
24TH FLOOR, NEW YORK, NY 10004, ATTN. TENDERS & EXCHANGES. YOU ARE REMINDED
THAT, IF YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD CONTACT YOUR CREST SPONSOR
BEFORE TAKING ANY ACTION.
14 RIGHTS OF WITHDRAWAL
With certain exceptions pursuant to an SEC exemptive order, the Offer is
subject to the US tender offer rules applicable to securities registered under
the Exchange Act, as well as to the City Code. This has necessitated a number of
changes from the procedures which normally apply to offers for UK companies,
including those applicable to the rights of holders of Energy Group Securities
to withdraw their acceptance of an offer.
Under the Offer, holders of Energy Group Securities will be able to withdraw
their acceptances at any time prior to the Initial Closing Date and in certain
other circumstances. The Offer will not be deemed to have been validly accepted
in respect of any Energy Group Securities which have been withdrawn.
However, the Offer may be accepted again in respect of the withdrawn Energy
Group Securities by following one of the procedures described in paragraph 13 of
this letter ("Procedure for acceptance of the Offer") above at any time prior to
the expiry or lapse of the Offer.
Further details of these rights of withdrawal and the procedure for
effecting withdrawals are set out in paragraph 3 of Part B of Appendix I
("Rights of withdrawal") below.
15 SETTLEMENT
(A) DATE OF PAYMENT
The settlement procedure with respect to the Offer will be consistent with
UK practice, which differs from the US tender offer rules in certain material
respects, particularly with regard to the date of payment.
Subject to the satisfaction, fulfilment or, where permitted, waiver of all
of the Conditions, settlement to accepting holders of Energy Group Shares and
accepting holders of Energy Group ADSs or other designated agents will be
effected:
(i) in the case of acceptances received complete in all respects by the
Initial Closing Date within 14 calendar days of such date; or
(ii) in the case of acceptances received complete in all respects after such
date, but while the Offer remains open for acceptance, within 14 calendar
days of such receipt.
(B) ENERGY GROUP SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
Where an acceptance relates to Energy Group Shares in uncertificated form,
(i) the cash consideration to which accepting holders of Energy Group Shares are
entitled will be paid by means of CREST by PacifiCorp Acquisitions procuring the
creation of an assured payment obligation in favour of the accepting
shareholders' payment bank in respect of the cash consideration due, in
accordance with the CREST assured payment arrangement; and (ii) definitive
certificates for any Loan Notes to which the
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accepting holder of Energy Group Shares is entitled will be despatched by post
(or by such other method as may be approved by the Panel).
PacifiCorp Acquisitions reserves the right to settle all or any part of the
cash consideration referred to above, for all or any accepting shareholder(s),
in the manner referred to in paragraph (c) below, if, for any reason, it wishes
to do so.
(C) ENERGY GROUP SHARES IN CERTIFICATED FORM AND ENERGY GROUP ADSS
Where an acceptance relates to Energy Group Shares in certificated form or
Energy Group ADSs evidenced by Energy Group ADRs, cheques for cash due and,
where applicable, definitive certificates for any Loan Notes will be despatched
by post (or by such other method as may be approved by the Panel).
(D) LAPSING OF THE OFFER
If the Conditions are not satisfied, fulfilled or, where permitted, waived,
(i) in respect of Energy Group Shares in certificated form and Energy Group
ADSs, the relevant share certificate(s) and/or other documents of title will be
returned by post (or by such other method as may be approved by the Panel)
within 14 days of the Offer lapsing and (ii) in respect of Energy Group Shares
in uncertificated form (that is, in CREST) IRG plc will, immediately after the
lapsing of the Offer (or within such longer period as the Panel may permit, not
exceeding 14 days of the lapsing of the Offer), give TFE instructions to CRESTCo
to transfer all relevant Energy Group Shares held in escrow balances and in
relation to which it is the escrow agent for the purposes of the Offer to the
original available balances of the holders of Energy Group Shares concerned.
(E) GENERAL
All documents and remittances sent by, to, or from holders of Energy Group
Securities or their appointed agents will be sent at their own risk.
All mandates and other instructions in force relating to holdings of Energy
Group Securities will, unless and until revoked, continue in force in relation
to payments of principal and interest under the Loan Notes.
(F) CURRENCY OF CASH CONSIDERATION
Instead of receiving cash consideration in pounds sterling, holders of
Energy Group Shares who so wish may elect to receive US dollars on the following
basis: the cash amount payable in pounds sterling to which such holder would
otherwise be entitled pursuant to the terms of the Offer will be converted,
without charge, from pounds sterling to US dollars at the exchange rate
obtainable by the relevant payment agent (either the UK Receiving Agent or the
US Depositary) on the spot market in London at approximately noon (London time)
on the date the cash consideration is made available by PacifiCorp Acquisitions
to the relevant payment agent for delivery in respect of the relevant Energy
Group Shares. A holder of Energy Group Shares may receive such amount on the
basis set out above only in respect of the whole of his holding of Energy Group
Shares in respect of which he accepts the Offer. Holders of Energy Group
Securities may not elect to receive pounds sterling and US dollars. Unless they
elect to receive pounds sterling, holders of Energy Group ADSs will receive
consideration converted into US dollars as described above, as if such holders
of Energy Group ADSs had elected to receive US dollars. Consideration in US
dollars may be inappropriate for holders of Energy Group Shares other than
persons in the US and holders of Energy Group ADSs.
THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY PACIFICORP
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ACQUISITIONS. HOLDERS OF ENERGY GROUP SECURITIES SHOULD BE AWARE THAT THE US
DOLLAR/POUNDS STERLING EXCHANGE RATE WHICH IS PREVAILING AT THE DATE ON WHICH AN
ELECTION IS MADE OR DEEMED TO BE MADE TO RECEIVE DOLLARS AND ON THE DATES OF
DESPATCH AND RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT PREVAILING ON THE
BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT PAYMENT AGENT BY
PACIFICORP ACQUISITIONS. IN ALL CASES, FLUCTUATIONS IN THE US DOLLAR/POUNDS
STERLING EXCHANGE RATE ARE AT THE RISK OF ACCEPTING HOLDERS OF ENERGY GROUP
SECURITIES WHO ELECT OR ARE TREATED AS HAVING ELECTED TO RECEIVE THEIR
CONSIDERATION IN US DOLLARS. NEITHER PACIFICORP ACQUISITIONS NOR ANY OF ITS
ADVISERS OR AGENTS SHALL HAVE RESPONSIBILITY WITH RESPECT TO THE ACTUAL AMOUNT
OF CASH CONSIDERATION PAYABLE OTHER THAN IN POUNDS STERLING.
16 FURTHER INFORMATION
Your attention is drawn to Appendix I to this document, which contains the
Conditions and further terms and information and forms part of this document and
to the other Appendices to this document which contain important information in
connection with the Offer and form part of this document and to the accompanying
Acceptance Form.
17 ACTION TO BE TAKEN
YOU ARE URGED TO COMPLETE, SIGN AND RETURN THE ENCLOSED FORM OF ACCEPTANCE
OR LETTER OF TRANSMITTAL (AS APPROPRIATE) AS SOON AS POSSIBLE, BUT IN ANY EVENT
SO AS TO ARRIVE BY NO LATER THAN 10.00 P.M. (LONDON TIME), 5.00 P.M. (NEW YORK
CITY TIME) ON 9 MARCH 1998.
Yours faithfully
for Goldman Sachs International
Richard A. Sapp
Managing Director
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APPENDIX I
CONDITIONS AND FURTHER TERMS OF THE OFFER
PART A
CONDITIONS OF THE OFFER
The Offer, which is being made by Goldman Sachs International on behalf of
PacifiCorp Acquisitions, will comply with the rules and regulations of the City
Code and with US federal securities laws (except to the extent that exemptive
relief has been granted by the SEC) and the rules and regulations made
thereunder, is governed by English law and is subject to the jurisdiction of the
courts of England and the following Conditions:
(a)
(i) valid acceptances being received (and not, where permitted, withdrawn)
by not later than 10.00 p.m. (London time), 5.00 p.m. (New York City
time) on 9 March 1998 (or such later time(s) and/ or date(s) as
PacifiCorp Acquisitions may, subject to the rules and regulations of the
City Code, decide) in respect of not less than 90 per cent. in nominal
value of Energy Group Securities to which the Offer relates (the "90 per
cent. threshold"), or such lesser percentage as PacifiCorp Acquisitions
may decide, provided that this Condition shall not be satisfied unless
PacifiCorp Acquisitions and its wholly-owned subsidiaries shall have
acquired or agreed to acquire, whether pursuant to the Offer or
otherwise, Energy Group Securities carrying in aggregate more than 50 per
cent. of the voting rights then exercisable at general meetings of The
Energy Group. For the purposes of this Condition: (i) any Energy Group
Securities which have been unconditionally allotted shall be deemed to
carry the voting rights they will carry upon being entered in the
register of members of The Energy Group; (ii) the expression "Energy
Group Securities to which the Offer relates" shall be construed in
accordance with sections 428 to 430F of the Companies Act; and (iii)
valid acceptances shall be treated as having been received in respect of
any Energy Group Shares which PacifiCorp Acquisitions shall, pursuant to
section 429(8) of the Companies Act, be treated as having acquired or
contracted to acquire by virtue of acceptances of the Offer; and
(ii) if the 90 per cent. threshold shall have been satisfied before the
Offer becomes or is declared unconditional in all respects, Condition
(a)(i) remaining satisfied as at the time when the Offer becomes or is
declared unconditional in all other respects, by reference to the facts
then subsisting;
(b) PacifiCorp Acquisitions being reasonably satisfied that the acquisition of
Energy Group Securities pursuant to the Offer will not subject PacifiCorp
Acquisitions to regulation, or PacifiCorp Acquisitions will be exempt from
regulation, under the US Public Utility Holding Company Act of 1935;
(c) FERC shall have issued an order on terms reasonably acceptable to PacifiCorp
Acquisitions approving the sale of the FERC-jurisdictional assets of
Citizens Power and Peabody Investments, Inc. to a third party;
(d) no relevant authority having intervened in a way which would be likely, or
having failed to institute or implement any action the failure of which
would be likely (to an extent which is, in the case of (i) to (iv) below,
material in the context of the PacifiCorp Acquisitions Group or of the TEG
Group or of the financing of the Offer):
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(i) to require, prevent or delay the divestiture or materially alter the
terms of any proposed divestiture by PacifiCorp Acquisitions or The
Energy Group or any member of the PacifiCorp Acquisitions Group or the
wider TEG Group of all or any portion of their respective businesses,
assets or properties or impose any limitation on the ability of any of
them to conduct any of their respective businesses or to own any of their
respective assets or property or any part thereof;
(ii) to impose any limitation on the ability of any member of the PacifiCorp
Acquisitions Group or the wider TEG Group to acquire, or to hold or to
exercise effectively, directly or indirectly, any rights of ownership in
respect of shares in, or management control over, any member of the wider
TEG Group;
(iii) otherwise adversely to affect the financial or trading position of any
member of the PacifiCorp Acquisitions Group or the wider TEG Group;
(iv) to make the Offer or its implementation or the acquisition or the
proposed acquisition of any Energy Group Shares or Energy Group ADSs or
control of The Energy Group by any member of the PacifiCorp Acquisitions
Group void, illegal and/or unenforceable, or otherwise, directly or
indirectly, to restrain, restrict, prohibit, delay or otherwise interfere
with the implementation thereof, or impose additional conditions or
obligations with respect thereto, or otherwise challenge or hinder any
thereof;
(v) to result in a delay in the ability of any member of the PacifiCorp
Acquisitions Group, or render any such person unable, to acquire some or
all of the Energy Group Shares or Energy Group ADSs or require or prevent
or materially delay divestiture by any such person of any such
securities; or
(vi) to require any member of the PacifiCorp Acquisitions Group or the wider
TEG Group to offer to acquire any shares or other securities (or the
equivalent) in any member of the wider TEG Group owned by any third
party;
and all applicable waiting and other time periods during which any relevant
authority could, in respect of the Offer or the acquisition or proposed
acquisition of any Energy Group Shares or Energy Group ADSs or control of
The Energy Group by PacifiCorp Acquisitions, intervene having expired,
lapsed or terminated;
(e) all necessary filings having been made, all regulatory and statutory
obligations having been complied with, all appropriate waiting periods under
any applicable legislation or regulations of any jurisdiction having
expired, lapsed or terminated in each case in respect of the Offer or the
acquisition of any shares or other securities in, or control of, The Energy
Group by any member of the PacifiCorp Acquisitions Group and all
authorisations and determinations necessary or appropriate in any
jurisdiction for or in respect of the Offer (including, without limitation,
its implementation and financing) or proposed acquisition of any shares or
other securities in, or control of, The Energy Group by any member of the
PacifiCorp Acquisitions Group or in relation to the affairs of any member of
the PacifiCorp Acquisitions Group or the wider TEG Group having been
obtained in terms and in a form reasonably satisfactory to PacifiCorp
Acquisitions from all relevant authorities or (without prejudice to the
generality of the foregoing) from any persons or bodies with whom any member
of the PacifiCorp Acquisitions Group or the wider TEG Group, as the case may
be, has entered into contractual arrangements and such authorisations and
determinations together with all material authorisations and determinations
necessary or appropriate for any member of the PacifiCorp Acquisitions Group
or the wider TEG Group to carry on a business which is material in the
context of the PacifiCorp Acquisitions Group or the TEG Group as a whole or
of the financing of the Offer remaining in full force and effect and all
filings necessary for such purpose having been made and there being no
notice or intimation of any intention to revoke or not to renew any of the
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same and all necessary statutory or regulatory obligations in all relevant
jurisdictions having been complied with;
(f) PacifiCorp Acquisitions not having discovered (other than by virtue of the
same having been disclosed to it prior to 3 February 1998 by any member of
the TEG Group) any provision of any agreement, arrangement, licence or other
instrument to which any member of the wider TEG Group is a party or by or to
which any member of the wider TEG Group or any part of its assets may be
bound, entitled or subject which would be likely, as a result of the Offer,
the proposed acquisition by PacifiCorp Acquisitions of any shares in, or
change in the control or management of, The Energy Group or otherwise, to
result in (to an extent which is material in the context of the PacifiCorp
Acquisitions Group or the wider TEG Group as a whole or of the financing of
the Offer):
(i) any moneys borrowed by or any other indebtedness, actual or contingent,
of any member of the wider TEG Group being or becoming repayable or
capable of being declared repayable immediately or prior to its stated
maturity, or the ability of any such member to borrow moneys or incur any
indebtedness being withdrawn or inhibited;
(ii) any such agreement, arrangement, licence or instrument being terminated
or adversely modified or any obligation or liability arising or any
action being taken or arising thereunder;
(iii) the rights, liabilities, obligations or interests of any member of the
wider TEG Group under any such arrangement, agreement, licence or
instrument or the interests or business of any such member in or with any
other person, firm, company or body (or any arrangements relating to any
such interests or business) being terminated or adversely modified or
affected;
(iv) any assets or interests of any such member being or becoming liable to
be disposed of or charged, or any right arising under which any such
asset or interest is required or is likely to be required to be disposed
of or charged, in each case other than in the ordinary course of
business;
(v) the creation of any mortgage, charge or other security interest over the
whole or any part of the business, property or assets of any member of
the wider TEG Group or any such security interest, whenever arising or
having arisen, becoming enforceable;
(vi) the creation of liabilities for any member of the wider TEG Group other
than in the ordinary course of business; or
(vii) the financial or trading position of any member of the wider TEG Group
being prejudiced or adversely affected;
(g) PacifiCorp Acquisitions not having discovered, save as publicly announced in
accordance with the Listing Rules prior to 3 February 1998 or as otherwise
disclosed to it prior to that date by any member of the TEG Group, that any
member of the wider TEG Group has, since 30 September 1997 to an extent
which is material in the context of the TEG Group as a whole or of the
financing of the Offer:
(i) save to any member of the TEG Group and, save for the issue of Energy
Group Securities on the exercise of options granted under any of the
Energy Group Share Schemes prior to 3 February 1998, issued or agreed to
issue or authorised or proposed the issue of additional shares of any
class, or of securities convertible into, or rights, warrants or options
to subscribe for or acquire, any such shares or convertible securities or
redeemed, purchased or reduced any part of its share capital;
(ii) recommended, declared, paid or made or proposed to recommend, declare,
pay or make any bonus, dividend or other distribution in respect of the
share capital of The Energy Group;
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(iii) merged with any body corporate or acquired or disposed of or
transferred, mortgaged or charged or created any security interest over
any assets or any right, title or interest in any assets (including
shares and trade investments) or authorised or proposed or announced any
intention to propose a merger, demerger, acquisition, disposal, transfer,
mortgage, charge or security interest (in each case, other than in the
ordinary course of business);
(iv) made or authorised or proposed or announced an intention to propose any
change in its share or loan capital save for options granted under any of
the Energy Group Share Schemes prior to 3 February 1998 and for any
Energy Group Securities allotted upon exercise of such options;
(v) issued, authorised or proposed or announced an intention to propose the
issue of any debentures or (save in the ordinary course of business)
incurred or increased any indebtedness or contingent liability;
(vi) otherwise than in the ordinary course of business, entered into any
contract, reconstruction, amalgamation, commitment or other transaction
or arrangement or (save for changes in remuneration notified to
PacifiCorp Acquisitions prior to 3 February 1998) changed the terms of
any contract with any director of The Energy Group;
(vii) save in the ordinary course of business, entered into or varied any
contract, transaction or commitment (whether in respect of capital
expenditure or otherwise) which is of a long-term, onerous or unusual
nature or magnitude or which involves or could involve an obligation of
such a nature or magnitude;
(viii) waived or compromised any claim otherwise than in the ordinary course
of business;
(ix) taken any corporate action or had any order made for its winding-up,
dissolution or reorganisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer of all
or any of its assets or revenues; or
(x) entered into any contract, commitment, agreement or arrangement or
passed any resolution with respect to, or announced an intention to, or
to propose to effect, any of the transactions, matters or events referred
to in this Condition;
(h) since 30 September 1997, save as publicly announced in accordance with the
Listing Rules prior to 3 February 1998 or as otherwise disclosed to
PacifiCorp Acquisitions prior to that date by any member of the TEG Group,
none of the following having occurred to an extent which is material in the
context of the wider TEG Group as a whole or of the financing of the Offer:
(i) adverse change or deterioration in the business, assets, financial or
trading position of any member of the wider TEG Group;
(ii) litigation or arbitration proceedings, prosecution or other legal
proceedings having been instituted or threatened in writing by or against
or remaining outstanding against any member of the wider TEG Group or to
which any member of the wider TEG Group is a party (whether as plaintiff,
defendant or otherwise) and any investigation by any relevant authority
against, or in respect of any member of the wider TEG Group having been
threatened in writing, announced or instituted or remaining outstanding
by, against or in respect of any member of the wider TEG Group; and
(iii) a contingent or other liability of any member of the wider TEG Group
having arisen which would be likely adversely to affect any member of the
wider TEG Group;
(i) PacifiCorp Acquisitions not having discovered:
(i) that any financial, business or other information which has been
publicly disclosed at any time by or on behalf of any member of the wider
TEG Group is materially misleading, contains a
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material misrepresentation of fact or omits to state a fact necessary to
make the information contained therein not misleading and which in any
such case is material in the context of the wider TEG Group taken as a
whole or of the financing of the Offer; or
(ii) that any member of the wider TEG Group was, at the date of the Energy
Group Listing Particulars, or has, outside the ordinary course of
business since that date, become subject to any liability (contingent or
otherwise) which is not disclosed or referred to in the Energy Group
Listing Particulars and which is material in the context of the wider TEG
Group taken as a whole or of the financing of the Offer; and
(j) save as publicly announced in accordance with the Listing Rules prior to 3
February 1998 or as otherwise disclosed to it prior to that date by any
member of the TEG Group, PacifiCorp Acquisitions not having discovered:
(i) that any past or present member of the wider TEG Group has not complied
with all applicable legislation or regulations of any jurisdiction with
regard to the disposal, discharge, spillage, leak or emission of any
waste or hazardous substance or any substance likely to impair the
environment or harm human health, which non-compliance or any other
disposal, discharge, spillage, leak or emission which has occurred would
be likely to give rise to any liability (whether actual or contingent) on
the part of any member of the wider TEG Group and which is material in
the context of the wider TEG Group taken as a whole or of the financing
of the Offer; or
(ii) that there is, or is likely to be, any liability (whether actual or
contingent) to make good, repair, reclaim, remediate, reinstate or clean
up property now or previously owned, occupied or made use of by any past
or present member of the wider TEG Group under any legislation,
regulation, notice, circular or order of any relevant authority relating
to the protection of or enhancement of the environment and which is
material in the context of the wider TEG Group taken as a whole or of the
financing of the Offer.
For the purposes of these Conditions: (a) "relevant authority" means any
government, government department or governmental, quasi-governmental,
supranational, statutory or regulatory body, court, trade agency, professional
association or institution or environmental body in any jurisdiction; (b) a
relevant authority shall be regarded as having "intervened" if it has
instituted, implemented or threatened to take any action, proceedings, suit,
investigation or enquiry or reference, or made, enacted or proposed any statute,
regulation, decision or order and "intervene" shall be construed accordingly;
(c) "authorisations" means authorisations, orders, grants, recognitions,
certifications, confirmations, consents, licences, clearances, permissions and
approvals; (d) the "wider TEG Group" means The Energy Group and its subsidiary
undertakings, associated undertakings and any other undertakings in which The
Energy Group and such undertakings (aggregating their interests) have a
substantial interest; and (e) the "PacifiCorp Acquisitions Group" means
PacifiCorp Group Holdings Company and its subsidiary undertakings, associated
undertakings and any other undertaking in which PacifiCorp Group Holdings
Company and such undertakings (aggregating their interests) have a substantial
interest and, for these purposes, "subsidiary undertaking", "associated
undertaking", "holding company" and "undertaking" have the meanings given by the
Companies Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A
of the Companies Act) and "substantial interest" means a direct or indirect
interest in 20 per cent. or more of the equity capital of an undertaking.
PacifiCorp Acquisitions will not invoke either of Conditions (d) or (e) in
respect of:
(a) the DGES seeking or indicating that it is his intention to seek:
(i) modifications to any of Eastern's licences under the Electricity Act
1989; or
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(ii) undertakings or assurances from any member of the PacifiCorp
Acquisitions Group or the TEG Group,
in either case provided that such modifications, undertakings or assurances
substantially reflect the assurances proposed by the DGES to PacifiCorp
Acquisitions in connection with the referral of the Previous Offer to the
Monopolies and Mergers Commission (as the same are described in the
Monopolies and Mergers Commission Report relating to the Previous Offer
published on 19 December 1997) or are otherwise reasonably satisfactory to
PacifiCorp Acquisitions; or
(b) any action taken or order made by the FTC or the failure to obtain any
approval or order from the FTC.
PacifiCorp Acquisitions reserves the right to waive all or any of the above
Conditions, in whole or in part, except Condition (a). Conditions (b) to (j)
inclusive, if not, where applicable, waived, must be fulfilled or satisfied by
the Initial Closing Date. Subject thereto, if Condition (a)(i) is satisfied
prior to the Initial Closing Date, Conditions (b) to (j) inclusive if not, where
applicable, waived, must be fulfilled or satisfied, (i) if Condition (a)(i) is
satisfied at a level below the 90 per cent. threshold described in Condition
(a)(i), by the date on which Condition (a)(i) is so satisfied, or (ii) if
Condition (a)(i) is satisfied at a level at or above such 90 per cent.
threshold, by the end of the twenty-first day (or such later day as the Panel
may agree) after whichever is the later of the time of satisfaction of Condition
(a)(i) and 9 March 1998, but, subject thereto, PacifiCorp Acquisitions shall be
under no obligation to waive or treat as satisfied any Condition by a date
earlier than the latest date for the satisfaction thereof, notwithstanding that
the other Conditions may at such earlier date have been waived or fulfilled and
that there are at such earlier date no circumstances indicating that any of such
Conditions may not be capable of fulfilment.
If PacifiCorp Acquisitions is required by the Panel to make an offer for
Energy Group Securities under the provisions of Rule 9 of the City Code,
PacifiCorp Acquisitions may make such alterations to the above Conditions,
including Condition (a), as are necessary to comply with the provisions of Rule
9.
The Offer will lapse if the Acquisition is referred to the Monopolies and
Mergers Commission before the Initial Closing Date.
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PART B
FURTHER TERMS OF THE OFFER
The following further terms apply, where the context permits, to the Offer.
1 ACCEPTANCE PERIOD
(a) The Offer will initially be open until 10.00 p.m. (London time), 5.00 p.m.
(New York City time) on 9 March 1998. PacifiCorp Acquisitions expressly
reserves the right (but will not be obliged) at any time or from time to
time to extend the Offer after the Initial Closing Date and, in such event,
will make a public announcement of such extension in the manner described in
paragraph 2 below and give oral or written notice of such extension to the
UK Receiving Agent and the US Depositary. PacifiCorp Acquisitions may
terminate any such extension (other than an extension required by the City
Code or US federal securities laws and the rules and regulations thereunder)
prior to its scheduled expiry if all Conditions have been satisfied or,
where permitted, waived. If all Conditions have not been satisfied or, where
permitted, waived by PacifiCorp Acquisitions by 10.00 p.m. (London time),
5.00 p.m. (New York City time) on the Initial Closing Date, PacifiCorp
Acquisitions currently intends to extend the Offer until such time as all
Conditions have been satisfied or, where permitted, waived. There can be no
assurance, however, that PacifiCorp Acquisitions will, in such
circumstances, extend the Offer and, if no such extension is made, the Offer
will lapse on the Initial Closing Date and no Energy Group Securities will
be purchased pursuant to the Offer.
(b) Although no revision is envisaged, if the Offer is revised, the Initial
Offer Period will be extended, if necessary, for a period of at least 14
calendar days from the date of posting of the revised Offer to holders of
Energy Group Securities. Except with the consent of the Panel, no revision
of the Offer may be made after 24 March 1998.
(c) The Initial Offer Period cannot (except with the consent of the Panel) be
extended beyond midnight (London time), 7.00 p.m. (New York City time) on 7
April 1998 (or any earlier time and/or date beyond which PacifiCorp
Acquisitions has stated that the Offer will not be extended and in respect
of which it has not withdrawn that statement). If all Conditions are not
satisfied or, where permitted, waived at such time (taking account of any
prescribed extension of the Initial Offer Period), the Offer will lapse in
the absence of a competing bid and/or unless the Panel agrees otherwise. If
the Offer lapses for any reason, the Offer shall cease to be capable of
further acceptance and PacifiCorp Acquisitions and holders of Energy Group
Securities shall cease to be bound by prior acceptances. PacifiCorp
Acquisitions reserves the right, if appropriate, to seek the Panel's
approval to extend the final date for expiry of the Initial Offer Period to
28 April 1998, or such later date as the Panel may agree. Except with the
consent of the Panel, PacifiCorp Acquisitions may not, for the purposes of
determining whether the Acceptance Condition has been satisfied, take into
account acceptances or purchases of Energy Group Securities made after 1.00
p.m. (London time), 8.00 a.m. (New York City time) on 7 April 1998 (or any
other time or date beyond which PacifiCorp Acquisitions has stated that the
Offer will not be extended and in respect of which it has not withdrawn that
statement) or such later time and/or date as PacifiCorp Acquisitions, with
the permission of the Panel, may determine.
(d) If all Conditions are satisfied, fulfilled or, where applicable, waived and
the Initial Offer Period expires, the Offer will remain open for acceptance
for the Subsequent Offer Period of not less than 14 calendar days from the
expiry of the Initial Offer Period. If it is stated that the Offer will
remain open until further notice, then not less than 14 calendar days'
notice will be given prior to the closing of the Subsequent Offer Period.
(e) If a competitive situation arises after a no extension and/or a no increase
statement has been made by or on behalf of PacifiCorp Acquisitions in
relation to the Offer, PacifiCorp Acquisitions may, if it has
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specifically reserved the right to do so at the same time as such statement
is made (or otherwise with the consent of the Panel), withdraw such
statement and be free to extend the Offer if it announces such withdrawal
within four Business Days after the announcement of the competing offer and
gives notice to the holders of Energy Group Securities to that effect in
writing or (in the case of holders of Energy Group Securities with
registered addresses outside the United Kingdom or the United States or whom
PacifiCorp Acquisitions knows to be nominees, trustees or custodians holding
Energy Group Securities for such persons) by announcement in the United
Kingdom and in the United States at the earliest opportunity. PacifiCorp
Acquisitions may choose not to be bound by the terms of a no extension
and/or a no increase statement if it would otherwise prevent the posting of
an increased or improved Offer, (i) if it has reserved the right to do so,
and the increased or improved Offer is recommended for acceptance by the
board of directors of Energy Group or (ii) with the consent of the Panel.
(f) For the purposes of determining whether the Acceptance Condition has been
satisfied, PacifiCorp Acquisitions will not be bound (unless otherwise
required by the Panel) to take into account any Energy Group Securities
which have been issued or unconditionally allotted, or which arise as the
result of the exercise of conversion rights, before that determination takes
place, unless written notice containing relevant details of the allotment,
issue or conversion has been received from The Energy Group or its agents
before that time by PacifiCorp Acquisitions or IRG plc or Continental Stock
Transfer & Trust Company on behalf of PacifiCorp Acquisitions at one of the
addresses specified at the end of this document. Notification by telex or
facsimile or other electronic transmission will not be sufficient.
(g) In accordance with an SEC exemptive order received by PacifiCorp
Acquisitions, at least five Business Days prior to any reduction in the
percentage of Energy Group Securities required to satisfy the Acceptance
Condition, PacifiCorp Acquisitions will announce that it has reserved the
right so to reduce the Acceptance Condition. PacifiCorp Acquisitions will
not make such an announcement unless PacifiCorp Acquisitions believes there
is a significant possibility that sufficient Energy Group Securities will be
tendered to permit the Acceptance Condition to be satisfied at such reduced
level. Holders of Energy Group Securities who are not willing to accept the
Offer if the Acceptance Condition is reduced to the minimum permitted level
should either not accept the Offer until the Subsequent Offer Period or be
prepared to withdraw their acceptance promptly following an announcement by
PacifiCorp Acquisitions of its reservation of the right to reduce the
Acceptance Condition.
2 ANNOUNCEMENTS
(a) Without prejudice to paragraph 3 ("Rights of withdrawal") below, by 8.30
a.m. (London time) in the United Kingdom and 8.30 a.m. (New York City time)
in the United States on the Business Day (the "relevant day") next following
the day on which the Offer is due to expire or on which all Conditions
become or are declared to have been satisfied, fulfilled or, where
applicable, waived or on which the Offer is revised or extended (or such
later time and/or date as the Panel may agree), PacifiCorp Acquisitions will
make an appropriate announcement and inform the London Stock Exchange and
the Dow Jones News Service, respectively, of the position regarding the
Offer. Such announcements will (unless otherwise permitted by the Panel)
also state the total number of Energy Group Securities and rights over
Energy Group Securities (as nearly as practicable):
(i) for which acceptances of the Offer have been received (showing the
extent, if any, to which such acceptances have been received from persons
acting or deemed to be in concert with PacifiCorp Acquisitions);
(ii) acquired or agreed to be acquired by or on behalf of PacifiCorp
Acquisitions and any person acting or deemed to be in concert with
PacifiCorp Acquisitions;
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(iii) held prior to the Initial Offer Period by or on behalf of PacifiCorp
Acquisitions and any persons acting or deemed to be in concert with it;
and
(iv) for which acceptances of the Offer have been received from persons
acting in concert with PacifiCorp Acquisitions;
and will specify the percentages of Energy Group Securities represented by
each of these figures.
In computing the numbers of Energy Group Securities represented by
acceptances and/or purchases for the above purposes, only those acceptances
and/or purchases permitted to be counted towards fulfilling the Acceptance
Condition in accordance with paragraph 12 ("Certain provisions concerning
acceptances") below shall be included in the totals.
(b) Any decision to extend the Initial Offer Period may be made at any time up
to, and will be announced not later than, 8.30 a.m. (London time) in the
United Kingdom and 8.30 a.m. (New York City time) in the United States on
the relevant day (or such later time and/or date as the Panel may agree) and
the announcement will state the next expiry date of the Initial Offer
Period.
(c) References to the making of an announcement by or on behalf of PacifiCorp
Acquisitions include the release of an announcement by PacifiCorp
Acquisitions, by public relations consultants retained by PacifiCorp
Acquisitions, or by Goldman Sachs International, to the press and the
delivery by hand or telephone, facsimile or telex transmission or other
electronic transmission of an announcement to the London Stock Exchange and
the Dow Jones News Service, as the case may be. An announcement made
otherwise than to the London Stock Exchange will be notified simultaneously
to the London Stock Exchange.
(d) Without limiting the manner in which PacifiCorp Acquisitions may choose to
make any public announcement and, subject to PacifiCorp Acquisitions'
obligations under applicable law (including Rules 14(d)-4(c) and 14d-6(d)
under the Exchange Act relating to PacifiCorp Acquisitions' obligation to
disseminate promptly public announcements concerning material changes to the
Offer), PacifiCorp Acquisitions will have no obligation to publish,
advertise or otherwise communicate any such public announcement other than
by making a release to the London Stock Exchange and the Dow Jones News
Service.
3 RIGHTS OF WITHDRAWAL
(a) Except as otherwise provided in this paragraph, tenders of Energy Group
Securities and elections are irrevocable. Energy Group Securities tendered
pursuant to the Offer may be withdrawn pursuant to the procedures set out
below at any time during the Initial Offer Period and in certain other
circumstances described below. Energy Group Securities tendered during the
Initial Offer Period and not validly withdrawn prior to the Initial Closing
Date, and Energy Group Securities tendered during the Subsequent Offer
Period, may not be withdrawn. Holders of Energy Group Securities will not
have withdrawal rights during the Subsequent Offer Period, except in certain
limited circumstances described below.
(b) If PacifiCorp Acquisitions, having announced that the Acceptance Condition
has been satisfied, fails by 3.30 p.m. (London time), 10.30 a.m. (New York
City time) on the relevant day (or such later time or date as the Panel may
agree) to comply with any of the relevant requirements relating to the Offer
specified in paragraph 2(a) of this Part B of Appendix I above, an accepting
holder of Energy Group Securities may immediately after that time withdraw
his acceptance of the Offer by written notice given by post or by hand to
New Issues Department, IRG plc, PO Box 166, Bourne House, 34 Beckenham Road,
Beckenham, Kent BR3 4TH receiving such notice on behalf of PacifiCorp
Acquisitions. This right of withdrawal may be terminated not less than eight
days after the relevant day by PacifiCorp Acquisitions confirming, if that
be the case, that the Offer is still unconditional and complying with the
other relevant requirements relating to the Offer specified in paragraph
2(a) of
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this Part B of Appendix I above. If any such confirmation is given, the
first period of 14 days referred to in paragraph 1(b) of this Part B of
Appendix I above will run from the date of that confirmation and compliance.
(c) If a no extension and/or a no increase statement is withdrawn in accordance
with paragraph 1(e) of this Part B of Appendix I above, any acceptance of
the Offer made after the date of that statement may be withdrawn thereafter
in the manner referred to in paragraph 3(b) of this Part B of Appendix I
above, for a period of eight days following the date on which the notice of
the withdrawal of such statement is posted to holders of Energy Group
Securities.
(d) To be effective, a written notice of withdrawal must be received on a timely
basis by the party (either the UK Receiving Agent or the US Depositary) to
whom the Acceptance Form was originally sent and must specify the name of
the person who has tendered the Energy Group Securities, the number of
Energy Group Securities to be withdrawn and (if certificates have been
tendered) the name of the registered holder of the relevant Energy Group
Securities, if different from the name of the person who tendered such
Energy Group Securities.
(e) In respect of Energy Group ADSs, if Energy Group ADRs have been delivered or
otherwise identified to the US Depositary, then, prior to the physical
release of such Energy Group ADRs, the serial numbers shown on such Energy
Group ADRs must be submitted and, unless the Energy Group ADSs evidenced by
such Energy Group ADRs have been tendered by an Eligible Institution or by
means of a Letter of Transmittal, the signatures on the notice of withdrawal
must be guaranteed by an Eligible Institution. If interests in Energy Group
ADSs evidenced by Energy Group ADRs have been delivered pursuant to the
procedures for book-entry transfer set out in paragraph 9 of this Part B of
Appendix I below, any notice of withdrawal must also specify the name and
number of the account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Energy Group ADSs and must otherwise comply with
such Book-Entry Transfer Facility's procedures.
(f) Withdrawals of tendered Energy Group Securities may not be rescinded
(without PacifiCorp Acquisitions' consent) and any Energy Group Securities
properly withdrawn and not properly retendered will thereafter be deemed not
validly tendered for the purposes of the Offer. Withdrawn Energy Group
Securities may be subsequently re-tendered, however, by following one of the
procedures described in either paragraph 9 or paragraph 10 of this Part B of
Appendix I below, as the case may be, at any time whilst the Offer remains
open.
(g) All questions as to the validity (including time of receipt) of any notice
of withdrawal will be determined by PacifiCorp Acquisitions, whose
determination (except as required by the Panel) will be final and binding.
None of PacifiCorp Acquisitions, The Energy Group, Goldman Sachs
International, the US Depositary, the UK Receiving Agent or any other person
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give such
notification.
4 THE LOAN NOTE ALTERNATIVE
(a) The Loan Note Alternative is conditional upon all Conditions becoming or
being declared satisfied, fulfilled or, where permitted, waived.
(b) No election for the Loan Note Alternative will be valid unless both a valid
acceptance of the Offer and a valid election for the Loan Note Alternative,
duly completed in all respects and accompanied by, if appropriate, all
relevant share certificates and/or other document(s) of title, are duly
received by the time and date on which the Loan Note Alternative closes.
(c) If any acceptance of the Offer which includes an election for the Loan Note
Alternative is not, and is not deemed to be, valid or complete in all
respects at such time, such election shall for all purposes be void and the
holder(s) of Energy Group Shares purporting to make such election shall not,
for
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any purpose, be entitled to receive the Loan Note Alternative, but any such
acceptance which is otherwise valid shall be deemed to be an acceptance of
the Offer (without the Loan Note Alternative) for the number of Energy Group
Shares which are the subject of the acceptance and the holder(s) of Energy
Group Shares will, on the Offer becoming unconditional in all respects, be
entitled to receive the cash consideration due under the Offer.
(d) The Loan Note Alternative will remain open for acceptance for as long as the
Offer remains open for acceptance.
(e) The Loan Note Alternative is not available to any holder of Energy Group
Securities who is a citizen or resident of the United States.
5 EFFECT OF ELECTIONS
(a) The insertion of a number in Box 2 on the Form of Acceptance shall, subject
to the other terms of the Offer, be treated in respect of the relevant
number of Energy Group Shares as an election for the Loan Note Alternative
described in paragraph 4 of this Part B of Appendix I above.
(b) An election will not be valid unless the Form of Acceptance is completed
correctly in all respects and is received in accordance with paragraph 10
("Procedures for tendering Energy Group Shares") below.
(c) To allow PacifiCorp Acquisitions to pay interest on the Loan Notes without
withholding US income tax, beneficial owners of Loan Notes must certify that
they are not US persons for purposes of US federal income tax laws (see
paragraph 15(b) of Appendix V below).
6 REVISIONS OF THE OFFER AND/OR THE LOAN NOTE ALTERNATIVE
(a) Although no revision of the Offer is envisaged, if the Offer (in its
original or any previously revised form(s)) is revised (either in its terms
or Conditions or in the value or form of the consideration offered or
otherwise) and any such revision represents, on the date on which such
revision is announced (on such basis as Goldman Sachs International may
consider appropriate) an improvement (or no diminution) in the value of the
consideration under the Offer as so revised compared with the value of the
consideration previously offered, the benefit of the revised Offer will,
subject as provided in this paragraph 6 below, be made available to holders
of Energy Group Securities who have accepted the Offer in its original or
any previously revised form(s) and not validly withdrawn such acceptance
(hereinafter called a "Previous Acceptor"). The acceptance by or on behalf
of a Previous Acceptor of the Offer in its original or any previously
revised form(s) shall, subject as provided in this paragraph 6 and in
paragraph 9 or paragraph 10 of Part B of this Appendix I below, be deemed to
be an acceptance of the Offer as so revised and shall constitute the
appointment of any director of PacifiCorp Acquisitions or of Goldman Sachs
International as his attorney and/or agent with authority to accept any such
revised Offer on behalf of such Previous Acceptor and to make such elections
as those made by the Previous Acceptor in relation to the Offer in the
Acceptance Form previously executed by him or on his behalf and to execute
on behalf of and in the name of such Previous Acceptor all such further
documents and take such further actions (if any) as may be required to give
effect to such acceptances and/or elections. In making any such acceptance
or making any such election, the attorney and/or agent will take into
account the nature of any previous acceptances and/or elections made by or
on behalf of the Previous Acceptor and such other facts or matters as he may
reasonably consider relevant.
(b) The authorities conferred by paragraph 6(a) of Part B of this Appendix I
above shall not be exercised by any director of PacifiCorp Acquisitions or
of Goldman Sachs International, as the case may be, if, as a result thereof,
the Previous Acceptor would thereby receive less in cash than he would have
received as a result of his acceptance of the Offer (in its original or any
previously revised form(s)) in
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the form in which it was originally accepted by him and the exercise of the
powers of attorney so conferred by paragraph 6(a) of Part B of this Appendix
I above of any such Previous Acceptor shall be ineffective to the extent
that such Previous Acceptor shall lodge, within 14 calendar days of the
posting of the document pursuant to which the improved consideration
referred to in paragraph 6(a) of Part B of this Appendix I above is made
available to holders of Energy Group Securities, an Acceptance Form validly
accepting the Offer in which he validly elects to receive the consideration
receivable by him in some other manner than that set out in his original
acceptance.
(c) PacifiCorp Acquisitions reserves the right (subject to paragraph 6(a) of
this Part B of this Appendix I above) to treat an executed Acceptance Form
relating to the Offer (in its original or any previously revised form(s))
which is received (or dated) after the announcement or issue of the Offer in
any revised form as a valid acceptance and/or election of the revised Offer
and such acceptance shall constitute an authority in the terms of paragraph
6(a) of Part B of this Appendix I above, MUTATIS MUTANDIS, on behalf of the
relevant holder of Energy Group Securities.
7 GENERAL
(a) If the Offer lapses, pursuant to the City Code, neither PacifiCorp
Acquisitions nor any person acting or deemed to be acting in concert with
PacifiCorp Acquisitions for the purpose of the Offer nor any of their
respective affiliates may make an offer (whether inside or outside the
United Kingdom) for Energy Group Securities for a period of one year
following the date of such lapse, except with the permission of the Panel.
(b) Except with the consent of the Panel, settlement of the consideration to
which any holder of Energy Group Securities is entitled under the Offer will
be implemented in full in accordance with the terms of the Offer without
regard to any lien, right of set-off, counterclaim or other analogous right
to which PacifiCorp Acquisitions may otherwise be, or claim to be, entitled
as against such holder of Energy Group Securities. Consideration due to a
holder of Energy Group Securities who validly accepts the Offer will (except
with the consent of the Panel) be despatched not later than 14 calendar days
after the later of the Initial Closing Date and the date of receipt of a
valid and complete acceptance from such holder of Energy Group Securities.
Cash consideration will be settled as described in paragraph 14
("Settlement") below.
(c) Any omission or failure to despatch this document, the Acceptance Form, any
other document relating to the Offer and/or any notice required to be
despatched under the terms of the Offer to, or any failure to receive the
same by, any person to whom the Offer is made or should be made shall not
invalidate the Offer in any way. Subject to the provisions of paragraph 8
("Overseas shareholders") below, the Offer extends to any such persons to
whom this document, the Acceptance Form, and/or any related offering
document may not have been despatched or who may not receive such documents
and such persons may collect copies of those documents from Goldman Sachs
International.
(d) All powers of attorney, appointment of agents and authorities on the terms
conferred by or referred to in this Appendix I or in the Acceptance Form are
given by way of security for the performance of the obligations of the
holder of Energy Group Securities concerned and are irrevocable in
accordance with section 4 of the Powers of Attorney Act 1971, except in the
circumstances where the donor of such power of attorney or authority is
entitled to withdraw his acceptance in accordance with paragraph 3 ("Rights
of withdrawal") above and duly does so.
(e) If all Conditions are satisfied, fulfilled or, where permitted, waived and
PacifiCorp Acquisitions acquires or contracts to acquire, pursuant to the
Offer or otherwise, at least 90 per cent. in value of the Energy Group
Securities to which the Offer relates before the end of the period of four
months beginning with the date of the Offer, it will be entitled to and
intends to acquire the remaining Energy
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Group Shares on the same terms as the Offer pursuant to and subject to
sections 428 to 430F (inclusive) of the Companies Act.
If all Conditions are satisfied, fulfilled or, where permitted, waived and
PacifiCorp Acquisitions acquires or contracts to acquire, pursuant to the
Offer or otherwise, Energy Group Securities giving it more than 75 per cent.
of voting rights at general meetings of The Energy Group, but PacifiCorp
Acquisitions is not in a position to effect the compulsory acquisition of
all outstanding Energy Group Securities in accordance with the relevant
procedures and time limits of the Companies Act referred to above,
PacifiCorp Acquisitions intends to seek to procure the making of an
application by The Energy Group to the London Stock Exchange for Energy
Group Shares to be delisted and the making of an application by The Energy
Group to the New York Stock Exchange for Energy Group ADSs to be delisted.
PacifiCorp Acquisitions further intends that, subject to the London Stock
Exchange delisting taking place, it will seek to procure the transfer of
Peabody's US coal operations (except Lee Ranch Coal Company) to PacifiCorp
Acquisitions' fellow subsidiary, Powercoal, and to procure the giving of
financial assistance by members of the TEG Group to PacifiCorp Acquisitions
and other members of the PacifiCorp Group, subject to compliance, where
necessary, with the "whitewash" procedures set out in sections 155 to 158 of
the Companies Act. For further details, see paragraph 10 of Appendix V
("Financing arrangements") below.
(f) PacifiCorp Acquisitions and Goldman Sachs International reserve the right
to notify any matter, including the making of the Offer, to all or any
holders of Energy Group Securities with a registered address outside the
United Kingdom and the United States, or whom PacifiCorp Acquisitions knows
to be a custodian, trustee or nominee holding Energy Group Securities for
persons in Canada, Australia or Japan, by announcement in the United Kingdom
to the London Stock Exchange and in the United States to the Dow Jones News
Service or in any other appropriate manner, or by paid advertisement in a
newspaper published and circulated in the United Kingdom and the United
States, in which event such notice will be deemed to have been sufficiently
given, notwithstanding any failure by any such holders of Energy Group
Securities to receive or see such notice. All references in this document to
notice in writing by or on behalf of PacifiCorp Acquisitions will be
construed accordingly. No such document will be sent to an address in
Canada, Australia or Japan.
(g) The Offer is being extended by means of an advertisement to be inserted in
the Financial Times (United Kingdom version only) on 6 February 1998 to all
persons to whom this document or an Acceptance Form may not be despatched
(or by whom such documents may not be received) who hold or are entitled to
have allotted or issued to them Energy Group Securities.
(h) The terms, provisions, instructions and authorities contained in the Form of
Acceptance constitute part of the terms of the Offer. Words and expressions
defined in this document have the same meanings when used in the Form of
Acceptance, unless the context otherwise requires.
(i) References to a holder of Energy Group Securities include references to the
person or persons executing any Acceptance Form and in the event of more
than one person executing an Acceptance Form, such references will apply to
them jointly and severally.
8 OVERSEAS SHAREHOLDERS
(a) The making of the Offer in, or to certain persons who are citizens,
residents or nationals of, jurisdictions outside the United Kingdom or
United States (and the availability of Loan Notes to such persons and
citizens or residents of the United States) may be prohibited or affected by
the laws of the relevant overseas jurisdiction. Holders of Energy Group
Securities who are citizens, residents or nationals of jurisdictions outside
the United Kingdom and the United States (and, in the case of Loan Notes,
the United Kingdom only) should inform themselves about and observe any
applicable legal requirements. It is the responsibility of any such holder
of Energy Group Securities wishing to accept the Offer or the Loan Note
Alternative to satisfy himself as to the full observance of the laws of
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the relevant jurisdiction in connection therewith, including the obtaining
of any governmental, exchange control or other consents which may be
required, compliance with other necessary formalities and the payment of any
issue, transfer or other taxes or duties in such jurisdiction. Any such
holder of Energy Group Securities will also be responsible for payment of
any issue, transfer or other taxes or duties or other requisite payments due
in such jurisdiction by whomsoever payable and PacifiCorp Acquisitions and
Goldman Sachs International and any person acting on their behalf shall be
entitled to be fully indemnified and held harmless by such holder of Energy
Group Securities for any issue, transfer or other taxes or duties as
PacifiCorp Acquisitions and Goldman Sachs International or such person may
be required to pay.
(b) In particular, the Offer is not being made, directly or indirectly, in or
into Canada, Australia or Japan, or by use of the mails or any means or
instrumentality (including, without limitation, facsimile transmission,
telex or telephone) of interstate or foreign commerce of, or any facilities
of a national securities exchange of, any of these jurisdictions.
Accordingly, copies of this document, the Acceptance Form and any related
offer documents are not being mailed or otherwise distributed or sent in or
into Canada, Australia or Japan. Persons receiving such documents
(including, without limitation, custodians, nominees and trustees) must not
distribute, send or mail them in, into or from Canada, Australia or Japan or
use any such means, instrumentality or facilities in connection with the
Offer, and doing so may render invalid any related purported acceptance of
the Offer. Persons wishing to accept the Offer must not use the Canadian,
Australian or Japanese mails or any such means, instrumentality or
facilities for any purpose directly or indirectly related to acceptance of
the Offer. Envelopes containing the Acceptance Form must not be postmarked
in Canada, Australia or Japan or otherwise despatched from these
jurisdictions and all acceptors must provide addresses outside Canada,
Australia and Japan for the receipt of the consideration to which they are
entitled under the Offer and which is despatched by post or for the return
of the Acceptance Form and (in relation to Energy Group Shares in
certificated form) any Energy Group Share certificate(s) and/or other
document(s) of title.
(c) The provisions of this paragraph 8 and/or other terms of the Offer relating
to overseas holders of Energy Group Securities may be waived, varied or
modified as regards specific holders of Energy Group Securities or on a
general basis by PacifiCorp Acquisitions in its absolute discretion.
References in this paragraph 8 to holders of Energy Group Securities shall
include references to the person or persons executing an Acceptance Form
and, in the event of more than one person executing an Acceptance Form, the
provisions of this paragraph 8 shall apply to them jointly and severally.
(d) The Loan Notes to be issued pursuant to the Loan Note Alternative have not
been, and will not be, registered under the Securities Act or under any
relevant securities law of any state or district of the United States and
will not be the subject of a prospectus under the securities laws of any
province of Canada. In addition, no steps have been taken, or will be taken,
to enable the Loan Notes to be offered in Japan in compliance with
applicable securities laws of Japan and no prospectus in relation to the
Loan Notes has been, or will be, lodged with or registered by the Australian
Securities Commission, nor will the Loan Notes be registered under any
relevant securities laws of any other country. PacifiCorp Acquisitions will
not authorise the delivery of any document(s) of title in respect of any
Loan Notes falling to be allotted pursuant to the Offer to any address in
the United States, Canada, Australia or Japan or to any person who is, or
whom PacifiCorp Acquisitions has reason to believe is, a citizen or resident
of the United States or a person in Canada, Australia or Japan or who, by
completing Box 8 of the Form of Acceptance or otherwise, does not give the
warranty set out in paragraph 11(l) of this Part B of Appendix I. Any holder
of Energy Group Securities accepting the Offer who is a citizen or resident
of the United States or a person in Canada, Australia or Japan or who does
not give such warranty shall be deemed not to have accepted the Loan Note
Alternative.
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9 PROCEDURES FOR TENDERING ENERGY GROUP ADSS
(a) If you are a holder of Energy Group ADSs evidenced by Energy Group ADRs, you
will have also received a Letter of Transmittal and Notice of Guaranteed
Delivery for use in connection with the Offer. This section should be read
together with the instructions on the Letter of Transmittal. The provisions
of this section shall be deemed to be incorporated in, and form a part of,
the relevant Letter of Transmittal. The instructions printed on the relevant
Letter of Transmittal shall be deemed to form part of the terms of the
Offer.
(b) For a holder of Energy Group ADSs evidenced by Energy Group ADRs to tender
such Energy Group ADSs validly pursuant to the Offer, either:
(i) a properly completed and duly executed Letter of Transmittal, together
with any required signature guarantees and any other required documents,
must be received by the US Depositary at one of its addresses set forth
on the back cover of this document and the Energy Group ADRs evidencing
such Energy Group ADSs must be either received by the US Depositary at
one of such addresses or delivered pursuant to the procedures for
book-entry transfers set out below (and a confirmation of receipt of such
transfer received by the US Depositary); or
(ii) such holder must comply with the "Guaranteed Delivery" (as set forth in
paragraph 9(h) below).
The Offer in respect of Energy Group ADSs evidenced by Energy Group ADRs
shall be validly accepted by delivery of a Letter of Transmittal, the
relevant Energy Group ADRs evidencing Energy Group ADSs and other required
documents to the US Depositary by holders of Energy Group ADSs (without any
further action by the US Depositary), subject to the terms and Conditions
set out in the Letter of Transmittal. The acceptance of the Offer by a
tendering holder of Energy Group ADSs evidenced by Energy Group ADRs
pursuant to the procedures described above, subject to the withdrawal rights
described below, will be deemed to constitute a binding agreement between
such tendering holder of Energy Group ADSs and PacifiCorp Acquisitions upon
the terms and subject to the Conditions of the Offer. IF AN ENERGY GROUP ADR
EVIDENCING AN ENERGY GROUP ADS HAS BEEN TENDERED BY A HOLDER OF ENERGY GROUP
ADSS, THE ENERGY GROUP SHARES REPRESENTED BY SUCH ENERGY GROUP ADSS MAY NOT
BE TENDERED INDEPENDENTLY. A LETTER OF TRANSMITTAL AND OTHER REQUIRED
DOCUMENTS CONTAINED IN AN ENVELOPE POSTMARKED IN CANADA, JAPAN OR AUSTRALIA
OR OTHERWISE APPEARING TO PACIFICORP ACQUISITIONS OR ITS AGENTS TO HAVE BEEN
SENT FROM CANADA, JAPAN OR AUSTRALIA MAY BE REJECTED AS INVALID.
(C) BOOK-ENTRY TRANSFER
The US Depositary will establish an account at the Book-Entry Transfer
Facilities with respect to interests in Energy Group ADSs evidenced by
Energy Group ADRs held in book-entry form for the purposes of the Offer
within two Business Days from the date of this document. Any financial
institution that is a participant in any of the Book-Entry Transfer
Facility's systems may make book-entry delivery of interests in Energy Group
ADSs by causing a Book-Entry Transfer Facility to transfer such interests in
Energy Group ADSs into the US Depositary's account at such Book-Entry
Transfer Facility in accordance with that Book-Entry Transfer Facility's
procedure for such transfer. Although delivery of interests in Energy Group
ADSs evidenced by Energy Group ADRs may be effected through book-entry
transfer into the US Depositary's account at a Book-Entry Transfer Facility,
either:
(i) the Letter of Transmittal, properly completed and duly executed,
together with any required signature guarantees; or
(ii) an Agent's Message (as defined below),
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and, in either case, any other required documents must in any case be
transmitted to, and received by, the US Depositary at one of its addresses
set forth on the back cover of this document before Energy Group ADSs
evidenced by Energy Group ADRs will be either counted as a valid acceptance,
or purchased, or such holder must comply with the Guarantee Delivery
Procedures described below. The term "Agent's Message" means a message
transmitted by a Book-Entry Transfer Facility to, and received by, the US
Depositary and forming a part of a Book-Entry Confirmation that states that
such Book-Entry Transfer Facility has received an express acknowledgment
from the participant in such Book-Entry Transfer Facility tendering the
interests in Energy Group ADSs that such participant has received and agrees
to be bound by the terms of the Letter of Transmittal and that PacifiCorp
Acquisitions may enforce such agreement against the participant. Delivery of
documents to a Book-Entry Transfer Facility does not constitute delivery to
the US Depositary.
(D) METHOD OF DELIVERY
The method of delivery of Energy Group ADRs, the Letters of Transmittal and
all other required documents is at the option and risk of the tendering
holder of Energy Group ADSs. Energy Group ADSs will be deemed delivered only
when the Energy Group ADRs representing such Energy Group ADSs are actually
received by the US Depositary (including in the case of a book-entry
transfer, by Book-Entry Confirmation). If delivery is by mail, registered
mail with return receipt requested, properly insured, is recommended. In all
cases, sufficient time should be allowed to ensure timely delivery. No
acknowledgment of receipt of any Letter of Transmittal or other required
documents will be given by, or on behalf of, PacifiCorp Acquisitions.
(E) SIGNATURE GUARANTEES
No signature guarantee is required on the Letter of Transmittal if:
(i) the Letter of Transmittal is signed by the registered holder of the
Energy Group ADSs tendered therewith and such registered holder has not
completed either the Box entitled "Special Payment Instructions" or the
Box entitled "Special Delivery Instructions" in the Letter of
Transmittal; or
(ii) such Energy Group ADSs are tendered for the account of an Eligible
Institution.
In all other cases all signatures on Letters of Transmittal must be
guaranteed by an Eligible Institution. See Instruction 1 on the Letter of
Transmittal.
(F) ENERGY GROUP ADSS AND ADRS
If the Energy Group ADSs are registered in the name of a person other than
the person who signs the Letter of Transmittal, then the tendered Energy
Group ADRs must be endorsed or accompanied by appropriate stock powers,
signed exactly as the name or names of the registered owner or owners appear
on the Energy Group ADRs, with the signatures on the Energy Group ADRs or
stock powers guaranteed as aforesaid. See Instructions 1 and 5 on the Letter
of Transmittal.
(G) PARTIAL ACCEPTANCES
If fewer than all of the Energy Group ADSs evidenced by any Energy Group ADRs
delivered to the US Depositary are to be tendered, the holder thereof should
so indicate in the Letter of Transmittal by filling in the number of Energy
Group ADSs which are to be tendered in the box entitled "Number of ADSs
Tendered". In such case, a new Energy Group ADR for the remainder of the
Energy Group ADSs represented by the former Energy Group ADR will be sent to
the person(s) signing such Letter of Transmittal (or delivered as such
person properly indicates thereon) as promptly as practicable following the
date the tendered Energy Group ADSs are purchased. All Energy Group ADSs
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delivered to the US Depositary will be deemed to have been tendered unless
otherwise indicated. See Instruction 4 to the Letter of Transmittal. In the
case of partial tenders, Energy Group ADSs not tendered will not be reissued
to a person other than the registered holder.
(H) GUARANTEED DELIVERY
(i) If a holder of Energy Group ADSs evidenced by Energy Group ADRs desires
to tender Energy Group ADSs pursuant to the Offer and the Energy Group
ADRs evidencing such Energy Group ADSs are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely
basis, or if time will not permit all required documents to reach the US
Depositary prior to the expiry of the Subsequent Offer Period, such
holder's tender of Energy Group ADSs may be effected if all the following
conditions are met (the "Guaranteed Delivery Procedures"):
(aa) such tender is made by or through an Eligible Institution;
(bb) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by PacifiCorp
Acquisitions is received by the US Depositary, as provided below,
prior to the expiry of the Subsequent Offer Period; and
(cc) the Energy Group ADRs evidencing all tendered Energy Group ADSs
(or, in the case of interests in Energy Group ADSs held in
book-entry form, timely confirmation of the book-entry transfer of
such interests in Energy Group ADSs into the US Depositary's
account at a Book-Entry Transfer Facility as described above),
together with a properly completed and duly executed Letter of
Transmittal with any required signature guarantees and any other
documents required by the Letter of Transmittal, are received by
the US Depositary within three Business Days after the date of
execution of such Notice of Guaranteed Delivery.
(ii) The Notice of Guaranteed Delivery may be delivered by hand or mailed to
the US Depositary and must include a signature guarantee by an Eligible
Institution in the form set out in such Notice of Guaranteed Delivery.
(iii) Receipt of a Notice of Guaranteed Delivery will not be treated as a
valid acceptance for the purpose of satisfying the Acceptance Condition.
To be counted towards satisfaction of this requirement, Energy Group ADRs
evidencing Energy Group ADSs referred to in the Notice of Guaranteed
Delivery must, prior to the Initial Closing Date, be received by the US
Depositary (or, in the case of interests in Energy Group ADSs evidenced
by Energy Group ADRs held in book-entry form, timely confirmation of a
book-entry transfer of such interests in Energy Group ADSs into the US
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedure set out above), together with a duly executed Letter of
Transmittal with any required signature guarantees (or, in the case of a
book-entry transfer, an Agent's Message) and any other required
documents.
(I) OTHER REQUIREMENTS
By executing the Letter of Transmittal as set out above, the tendering holder
of Energy Group ADSs evidenced by Energy Group ADRs will agree that
effective from and after the date all Conditions are satisfied or, where
permitted, waived:
(i) PacifiCorp Acquisitions shall be entitled to direct the exercise of any
votes attaching to any Energy Group Shares represented by Energy Group
ADSs, in respect of which the Offer has been accepted or is deemed to
have been accepted and any other rights and privileges attaching to such
Energy Group Shares, including any right to requisition a general meeting
of Energy Group or of any class of its shareholders; and
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(ii) the execution of the Letter of Transmittal and its delivery to the US
Depositary will constitute:
(aa) an authority to The Energy Group or its agents from the tendering
holder of Energy Group ADSs to send any notice, circular, warrant,
document or other communication, which may be sent to him as a
holder of Energy Group ADSs, to PacifiCorp Acquisitions at its
registered office;
(bb) an authority to PacifiCorp Acquisitions or its agent to sign any
consent to short notice of a general meeting or separate class
meeting on behalf of the tendering holder of Energy Group ADSs
and/or to execute a form of proxy in respect of such Energy Group
ADSs appointing any person nominated by PacifiCorp Acquisitions to
attend general meetings or separate class meetings of The Energy
Group or its members (or any of them) (or any adjournments
thereof) and to exercise the votes attaching to such Energy Group
ADSs on the holders' behalf; and
(cc) the agreement of the tendering holder of Energy Group ADSs not to
exercise any of such rights without the consent of PacifiCorp
Acquisitions and the irrevocable undertaking of the tendering
holder of Energy Group ADSs not to appoint a proxy for or to
attend general meetings or separate class meetings.
(j) If the Offer lapses, all documents tendered will be returned within 14
calendar days thereafter at the risk of the holder of Energy Group
Securities concerned.
(k) If you are a holder of Energy Group ADSs and are in any doubt about the
procedure for acceptance, please telephone the Information Agent toll free
on 1-800-733-8481, ext. 475.
10 PROCEDURES FOR TENDERING ENERGY GROUP SHARES
(a) Holders of Energy Group Shares will have received with this document a Form
of Acceptance. This section should be read together with the Form of
Acceptance. The provisions of this section shall be deemed to be
incorporated in, and to form a part of, the Form of Acceptance. The
instructions printed on the Form of Acceptance shall be deemed to form part
of the terms of the Offer.
If a holder of Energy Group Shares holds Energy Group Shares in both
certificated and uncertificated form, he should complete a separate Form of
Acceptance for each holding. Similarly, such holder should complete a
separate Form of Acceptance for Energy Group Shares held in uncertificated
form, but under different member account IDs, and for Energy Group Shares
held in certificated form, but under different designations.
(b) To accept the Offer, any holder of Energy Group Shares, including any person
in the US who holds Energy Group Shares, wishing to accept the Offer in
respect of all or any portion of such holder's Energy Group Shares, should
complete Box 1 and, if such holder's Energy Group Shares are in CREST, Box
5, and sign Box 6 on the Form of Acceptance in accordance with the
instructions printed on it. All holders of Energy Group Shares who are
individuals should sign the Form of Acceptance in the presence of a witness
who should also sign Box 6 in accordance with the instructions printed on
it. Unless witnessed, an acceptance will not be valid.
(c) An accepting holder of Energy Group Shares should return the completed,
signed and witnessed Form of Acceptance, whether or not such Energy Group
Shares are in CREST, to the UK Receiving Agent or US Depositary. The
completed Form of Acceptance, together, if such holder's Energy Group Shares
are in certificated form, with his share certificate(s) and/or other
document(s) of title, must be lodged with the UK Receiving Agent or the US
Depositary, as soon as possible, but in any event so as to arrive not later
than 10.00 p.m. (London time), 5.00 p.m. (New York City time) on 9 March
1998. If you have any questions as to how to complete the Form of
Acceptance, please contact the UK Receiving Agent on 0181 639 2166 or the US
Depositary on 1-800 733 8481 ext. 475.
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<PAGE>
A person in the US who holds Energy Group Shares may submit the Form of
Acceptance, together with his share certificate(s) and/or other document(s)
of title, to the US Depositary, who will receive such Form(s) of Acceptance
and certificate(s) and/or other document(s) of title on behalf of the UK
Receiving Agent. A Form of Acceptance contained in an envelope postmarked
Canada, Japan or Australia or otherwise appearing to PacifiCorp Acquisitions
or its agents to have been sent from Canada, Japan or Australia may be
rejected as invalid.
(d) If Energy Group Shares are in uncertificated form, the holder should insert
in Box 5 of the Form of Acceptance the participant ID and member account ID
under which such Energy Group Shares are held by him in CREST and otherwise
complete and return the Form of Acceptance as described above. In addition,
such holder should take (or procure to be taken) the action set out below to
transfer the Energy Group Shares in respect of which he wishes to accept the
Offer to an escrow balance, specifying IRG plc (in its capacity as a CREST
participant under the participant ID referred to below) as the escrow agent,
as soon as possible and in any event so that the transfer to escrow settles
not later than 10.00 p.m. (London time), 5.00 p.m. (New York City time) on 9
March 1998.
(e) If the holder of such Energy Group Shares is a CREST sponsored member, he
should refer to his CREST sponsor before taking any action. Such holder's
sponsor will be able to confirm details of his participant ID and the member
account ID under which his Energy Group Shares are held. In addition, only
his CREST sponsor will be able to send the TTE instruction to CRESTCo in
relation to his Energy Group Shares.
(f) The holder of such Energy Group Shares should send (or, if he is a CREST
sponsored member, procure that his CREST sponsor sends) a TTE instruction to
CRESTCo which must be properly authenticated in accordance with CRESTCo's
specifications and which must contain, in addition to the other information
that is required for a TTE instruction to settle in CREST, the following
details:
(i) the number of Energy Group Shares to be transferred to an escrow
balance;
(ii) the member account ID of such holder of Energy Group Shares. This must
be the same member account ID as the member account ID that is inserted
in Box 5 of the Form of Acceptance;
(iii) the participant ID of such holder of Energy Group Shares. This must be
in the same participant ID as the participant ID that is inserted in Box
5 of the Form of Acceptance;
(iv) the participant ID of the escrow agent (the UK Receiving Agent in its
capacity as a CREST Receiving Agent). This is RA10;
(v) the member account ID of the escrow agent. This is ENERGY;
(vi) the Form of Acceptance Reference Number. This is the Form of Acceptance
Reference Number that appears next to Box 5 on page 3 of the Form of
Acceptance. This Reference Number should be inserted in the first eight
characters of the shared note field on the TTE instruction. Such
insertion will enable the UK Receiving Agent to match the transfer to
escrow to your Form of Acceptance. The holder of such shares should keep
a separate record of this Form of Acceptance Reference Number for future
reference;
(vii) the Intended Settlement Date. This should be as soon as possible and
in any event not later than 9 March 1998;
(viii) the Corporate Action ISIN. This is GB0003132478;
(ix) the Corporate Action Number for the Offer. This is allocated by CRESTCo
and can be found by viewing the relevant Corporate Action Details in
CREST; and
(x) input with Standard Delivery instruction of 80.
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(g) After settlement of the TTE instruction, such holder of Energy Group Shares
will not be able to access the Energy Group Shares concerned in CREST for
any transaction or charging purposes. If the Conditions are satisfied,
fulfilled or, where permitted, waived, the escrow agent will transfer the
Energy Group Shares concerned to itself in accordance with paragraph 11(d)
of this Part B of Appendix I below.
(h) Such holder of Energy Group Shares is recommended to refer to the CREST
Manual published by CRESTCo for further information on the CREST procedures
outlined above. For ease of processing, such holder is requested, wherever
possible, to ensure that a Form of Acceptance relates to only one transfer
to escrow.
(i) If no Form of Acceptance Reference Number, or an incorrect Form of
Acceptance Reference Number, is included on the TTE instruction, PacifiCorp
Acquisitions may treat any amount of Energy Group Shares transferred to an
escrow balance in favour of the escrow agent specified above from the
participant ID and member account ID identified in the TTE instruction as
relating to any Form(s) of Acceptance which relate(s) to the same member
account ID and participant ID (up to the amount of Energy Group Shares
inserted or deemed to be inserted on the Form(s) of Acceptance concerned).
(j) Such holder of Energy Group Shares should note that CRESTCo does not make
available special procedures, in CREST, for any particular corporate action.
Normal system timings and limitations will therefore apply in connection
with a TTE instruction and its settlement. Such holder should therefore
ensure that all necessary action is taken by him (or by his CREST sponsor)
to enable a TTE instruction relating to his Energy Group Shares to settle
prior to 10.00 p.m. (London time), 5.00 p.m. (New York City time) on 9 March
1998. In this connection such holder is referred in particular to those
sections of the CREST Manual concerning practical limitations of the CREST
system and timings.
(k) PacifiCorp Acquisitions will make an appropriate announcement if any of the
details contained in this paragraph 10 alter for any reason.
(l) Normal CREST procedures (including timings) apply in relation to any Energy
Group Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Offer (whether any such conversion arises as a result of a
transfer of Energy Group Shares or otherwise). Holders of Energy Group
Shares who are proposing so to convert any Energy Group Shares are
recommended to ensure that the conversion procedures are implemented in
sufficient time to enable the person holding or acquiring the Energy Group
Shares as a result of the conversion to take all necessary steps in
connection with an acceptance of the Offer (in particular, as regards
delivery of share certificate(s) or other documents of title or transfers to
an escrow balance as described above) prior to 10.00 p.m. (London time),
5.00 p.m. (New York City time) on 9 March 1998.
(m) If the share certificate(s) and/or other document(s) of title is/are not
readily available or is/are lost, the Form of Acceptance should nevertheless
be completed, signed and returned as stated above to the UK Receiving Agent
or the US Depositary so as to be received as soon as possible, but in any
event no later than 10.00 p.m. (London time), 5.00 p.m. (New York City time)
on 9 March 1998 together with any share certificate(s) and/or other
document(s) of title that is/are available, accompanied by a letter stating
that the balance will follow or that one or more share certificate(s) and/or
other document(s) of title have been lost and the certificate(s) and/or
other document(s) of title should be forwarded as soon as possible
thereafter. If the share certificate(s) and/or other document(s) of title
are lost, the accepting holder should request the registrar of The Energy
Group (Lloyds Bank Registrars, The Causeway, Goring-by-Sea, Worthing, West
Sussex BN99 6DA) to send him a letter of indemnity for completion in
accordance with the instructions given. When completed,
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the letter of indemnity must be lodged with the UK Receiving Agent or the US
Depositary, in accordance with instructions given, in support of the Form of
Acceptance.
(n) Subject to the City Code, PacifiCorp Acquisitions reserves the right to
treat as valid in whole or in part any acceptance of the Offer which is not
entirely in order or in the correct form or which is not accompanied by (as
applicable) the relevant transfer to escrow or the relevant share
certificate(s) and/or other document(s) of title or which is received by it
at a place or places other than as set out in this document or the
Acceptance Forms. In that event, the consideration under the Offer will be
despatched only when the acceptance is entirely in order and (as applicable)
the relevant transfer to escrow or the relevant share certificate(s) and/or
other document(s) of title or indemnity satisfactory to PacifiCorp
Acquisitions has/have been received.
(o) If the Offer lapses, all documents lodged for acceptance will be returned
within 14 calendar days thereafter at the risk of the holder of Energy Group
Shares concerned.
(p) No acknowledgment of receipt of any Form of Acceptance, share certificate(s)
and/or other document(s) of title will be given by, or on behalf of,
PacifiCorp Acquisitions. The method of delivery of share certificate(s)
and/or other document(s) of title for Energy Group Shares and all other
required documents is at the option and risk of the accepting holder of
Energy Group Shares. In all cases, sufficient time should be allowed to
ensure timely delivery and in any event to ensure delivery by 10.00 p.m.
(London time), 5.00 p.m. (New York City time) on 9 March 1998.
(q) Any holder of Energy Group Shares who is in any doubt as to the procedure
for acceptance should contact the UK Receiving Agent by telephone on 0181
639 2166. Such holder is also reminded that, if he is a CREST sponsored
member, he should contact his CREST Sponsor before taking any action.
11 FORMS OF ACCEPTANCE
Each holder of Energy Group Shares by whom, or on whose behalf, a Form of
Acceptance is executed and lodged with the UK Receiving Agent or US Depositary
(subject to the rights of withdrawal set forth in this document) undertakes,
represents, warrants to and agrees with PacifiCorp Acquisitions, Goldman Sachs
International, Independent Registrars Group Limited and Continental Stock
Transfer & Trust Company (so as to bind such holder and his personal or legal
representatives, heirs, successors and assigns) to the following effect:
(a) that execution of the Form of Acceptance and its delivery to the UK
Receiving Agent or US Depositary constitutes (i) an acceptance of the Offer
in respect of the number of Energy Group Shares inserted or deemed to have
been inserted in Box 1 of the Form of Acceptance; (ii) an election under the
Loan Note Alternative in respect of the number of Energy Group Shares
inserted, or deemed to be inserted, in Box 2 of the Form of Acceptance; and
(iii) an undertaking to execute any further documents and give any further
assurances which may be required to enable PacifiCorp Acquisitions to obtain
the full benefit of paragraph 10 of this Part B of Appendix I above and this
paragraph 11 and/or to perfect any of the authorities expressed to be given
hereunder on and subject to the terms and Conditions set out or referred to
in this document and the Form of Acceptance;
(b) that such holder has full power and authority to tender, sell, assign or
transfer the Energy Group Shares in respect of which the Offer is accepted
or deemed to be accepted (together with all rights attaching to them) and
when the same are transferred to PacifiCorp Acquisitions pursuant to the
terms of the Offer, PacifiCorp Acquisitions will acquire such Energy Group
Shares fully paid and free from all liens, charges, equities, encumbrances
and other interests and together with all rights now
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or hereafter attaching thereto, including, without limitation, the right to
receive and retain all dividends, interest and other distributions, if any,
declared, made or paid on or after 3 February 1998 (the date on which the
Offer was announced);
(c) that the execution of the Form of Acceptance and its delivery to the UK
Receiving Agent or US Depositary constitutes, subject to the Conditions
being satisfied, fulfilled or, where permitted, waived and to the holder of
Energy Group Shares not having validly withdrawn his acceptance and as
security for its obligations to PacifiCorp Acquisitions under paragraph
11(a)(iii) above, the irrevocable appointment of any director of, or other
person nominated by, PacifiCorp Acquisitions to act on its behalf as such
holder's attorney and agent ("attorney"), and an irrevocable instruction to
the attorney, to complete and execute all or any forms of transfer and/or
such other documents at the attorney's discretion in relation to the Energy
Group Shares referred to in paragraph 11(a) above in favour of PacifiCorp
Acquisitions or such other person or persons as PacifiCorp Acquisitions may
direct and to deliver such forms of transfer and/or other documents at the
attorney's discretion together with the share certificate(s) and/or other
document(s) of title relating to such Energy Group Shares for registration
within six months of their purchase and to do all such other acts and things
as may in the opinion of such attorney be necessary or expedient for the
purpose of, or in connection with, the acceptance of the Offer and to vest
in PacifiCorp Acquisitions or its nominees the Energy Group Shares to which
such Form of Acceptance relates as aforesaid;
(d) that the execution of the Form of Acceptance and its delivery to the UK
Receiving Agent or US Depositary constitutes, subject to the Conditions
being satisfied, fulfilled or, where permitted, waived, an irrevocable
authority and request:
(i) to transfer to PacifiCorp Acquisitions (or to such other person or
persons as PacifiCorp Acquisitions or its agents may direct) by means of
CREST all or any of the Relevant Energy Group Shares (as defined below)
(but not exceeding the number of Energy Group Shares in respect of which
the Offer is accepted or deemed to be accepted);
(ii) if the Conditions are not satisfied, fulfilled or, where permitted,
waived, to give instructions to CRESTCo, immediately after the lapsing of
the Offer (or within such longer period as the Panel may permit, not
exceeding 14 days of the lapsing of the Offer), to transfer all Relevant
Energy Group Shares to the original available balance of the accepting
holder of Energy Group Shares. "Relevant Energy Group Shares" means
Energy Group Shares in uncertificated form and in respect of which a
transfer or transfers to escrow has or have been effected pursuant to the
procedures described in paragraphs 10(d) to 10(l) of this Part B of
Appendix I above and where the transfer(s) to escrow was or were made in
respect of Energy Group Shares held under the same member account ID and
participant ID as the member account ID and participant ID relating to
the Form of Acceptance concerned (but irrespective of whether or not any
Form of Acceptance Reference Number, or a Form of Acceptance Reference
Number corresponding to that appearing on the Form of Acceptance
concerned, was included in the TTE instruction concerned);
(iii) to The Energy Group or its agents to procure the registration of the
transfer of the Energy Group Shares in certificated form pursuant to the
Offer and the delivery of the share certificate(s) and/ or other
document(s) of title in respect of them to PacifiCorp Acquisitions or as
it may direct;
(iv) if the Energy Group Shares concerned are in certificated form, or if
either of the provisos to sub-paragraph (v) of this paragraph 11(d)
apply, to PacifiCorp Acquisitions or its agents to procure the despatch
by post (or by such other methods as may be approved by the Panel) of a
cheque drawn on a branch of a UK clearing bank for any cash to which an
accepting Energy Group shareholder is entitled, at the risk of such
shareholder, to the person or agent whose name and address outside
Canada, Australia and Japan is set out in Box 7 of the Form of
Acceptance, or if no name and address is set out in Box 7, to the
first-named holder at his registered address
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outside Canada, Australia or Japan as set out in Box 3 (or, if
applicable, Box 4) on the Form of Acceptance together with a cheque for
any cash payable to such holder of Energy Group Shares in respect of
fractional entitlements;
(v) if the Energy Group Shares concerned are in uncertificated form, to
PacifiCorp Acquisitions or its agents to procure the creation of an
assured payment obligation in favour of the holder of Energy Group
Shares' payment bank in accordance with the CREST assured payment
arrangements in respect of the cash consideration to which such
shareholder is entitled, provided that (aa) PacifiCorp Acquisitions may
(if, for any reason, it wishes to do so) determine that all or any part
of any such cash consideration shall be paid by cheque despatched by post
and/or that all or any of such Energy Group Shares shall be issued in
certificated form and (bb) if the Energy Group shareholder concerned is a
CREST member whose registered address is in Canada, Australia or Japan,
any cash consideration to which such shareholder is entitled shall be
paid by cheque despatched by post, and in either of such cases,
sub-paragraph (iii) of this paragraph 11(d) shall apply; and
(vi) to PacifiCorp Acquisitions or its agent(s) to record and act upon any
instructions with regard to payment or notices which have been recorded
in the records of The Energy Group in respect of such holder of Energy
Group Shares as if such instructions had been given in respect of his
entitlement to Loan Notes (if any);
(e) that subject to the Offer becoming or being declared wholly unconditional
(or if the Offer will become unconditional in all respects or lapses
immediately upon the outcome of the resolution in question) or if the Panel
otherwise gives its consent and pending registration:
(i) PacifiCorp Acquisitions or its agents shall be entitled to direct the
exercise of any votes attaching to any Energy Group Securities in respect
of which the Offer has been accepted or is deemed to have been accepted
and any of the rights and privileges attaching to such Energy Group
Securities including the right to requisition a general meeting of The
Energy Group or of any class of its securities; and
(ii) the execution of the Form of Acceptance and its delivery to the UK
Receiving Agent or US Depositary shall constitute:
(aa) an authority to The Energy Group or its agents from such holder to
send any notice, circular, warrant, document or other
communication, which may be required to be sent to him or her as a
shareholder of The Energy Group, to PacifiCorp Acquisitions at its
registered office;
(bb) an authority to PacifiCorp Acquisitions or its agents to sign any
consent to short notice of a general meeting or separate class
meeting on his behalf and/or to execute a form of proxy in respect
of such Energy Group Shares appointing any person nominated by
PacifiCorp Acquisitions to attend general meetings and separate
class meetings of The Energy Group or its members (or any of them)
(or any adjournment of them) and to exercise the votes attaching to
such Energy Group Shares on his behalf; and
(cc) the agreement of such holder not to exercise any of such rights
without the consent of PacifiCorp Acquisitions and the irrevocable
undertaking of such holder not to appoint a proxy for or to attend
general meetings or separate class meetings;
(f) that such holder will deliver, or procure the delivery to the UK Receiving
Agent or US Depositary of, his share certificates and/or other documents of
title in respect of the Energy Group Shares in certificated form referred to
in paragraph 11(a) above, or an indemnity acceptable to PacifiCorp
Acquisitions in lieu thereof, as soon as possible and in any event within
six months of the purchase of such Energy Group Shares;
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(g) that such holder will take (or procure to be taken) the action necessary to
transfer all Energy Group Shares in respect of which the Offer has been
accepted or is deemed to have been accepted held by him in uncertificated
form to an escrow balance as soon as possible and in any event so that the
transfer to escrow settles within two months of the Offer becoming
unconditional in all respects;
(h) that if, for any reason, any Energy Group Shares in respect of which a
transfer to an escrow balance has been effected are converted to
certificated form, he will immediately deliver or procure the immediate
delivery of, the share certificate(s) and/or other document(s) of title in
respect of all such Energy Group Shares as so converted to IRG plc at one of
its addresses set out at the back of this document;
(i) that the creation of an assured payment obligation in favour of his payment
bank in accordance with the CREST assured payments arrangements as referred
to in paragraph 11(d)(v) of this Part B of Appendix I above shall, to the
extent of the obligation so created, discharge in full any obligation of
PacifiCorp Acquisitions and/or Goldman Sachs International to pay to him the
cash consideration to which he is entitled pursuant to the Offer;
(j) that the terms and Conditions contained in this document shall be deemed to
be incorporated in, and form part of, the Form of Acceptance, which shall be
read and construed accordingly;
(k) that such holder agrees to do all such acts and things as shall be
necessary, and execute any additional documents deemed by PacifiCorp
Acquisitions to be desirable, to complete the purchase and transfer of the
Energy Group Shares and to vest in PacifiCorp Acquisitions or its nominees
the Energy Group Shares aforesaid and all such acts and things as may be
necessary or expedient to enable the UK Receiving Agent to perform its
functions as escrow agent for the purposes of the Offer;
(l) that unless "Yes" is put in Box 8 on the Form of Acceptance, such holder:
(i) has not received or sent copies of this document or any Acceptance
Forms or any related documents in, into or from Canada, Japan or
Australia and has not otherwise utilised in connection with the Offer,
directly or indirectly, the Canadian, Australian or Japanese mails or any
means or instrumentality (including, without limitation, facsimile
transmission, telex and telephone) of interstate or foreign commerce, or
any facilities of a national securities exchange, of Canada, Australia or
Japan;
(ii) is accepting the Offer from outside Canada, Japan or Australia; and
(iii) is not an agent or fiduciary acting on a non-discretionary basis for a
principal, unless such agent or fiduciary is an authorised employee of
such principal or such principal has given any instructions with respect
to the Offer from outside Canada, Japan or Australia;
(m) that the execution of the Form of Acceptance constitutes an authority to
PacifiCorp Acquisitions and its agent in the terms of paragraph 6(a) of this
Part B of Appendix I above;
(n) that such holder agrees and acknowledges that he is not a customer (as
defined in the rules of The Securities and Futures Authority Limited) of
Goldman Sachs International, Lazard or Morgan Stanley in connection with the
Offer;
(o) that such holder agrees to ratify each and every act or thing which may be
done or effected by any director of, or other person nominated by,
PacifiCorp Acquisitions or their respective agents, as the case may be, in
the exercise of any of his powers and/or authorities hereunder;
(p) that if any provision of this paragraph 11 shall be unenforceable or invalid
or shall not operate so as to afford PacifiCorp Acquisitions or the UK
Receiving Agent or the US Depositary or their respective agents the benefit
of the authority expressed to be given herein, he shall with all practicable
speed
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do all such acts and things and execute all such documents that may be
required to enable those persons to secure the full benefits of this
section;
(q) that the execution of the Form of Acceptance constitutes the submission of
such holder, in relation to all matters arising out of the Offer and the
Form of Acceptance, to the jurisdiction of the Courts of England;
(r) that on execution of a Form of Acceptance, it shall take effect as a Deed;
and
(s) that, if such holder elects for the Loan Note Alternative (in whole or in
part), he is not a citizen or resident of the United States, nor acting on
behalf of such person.
DELIVERY OF THE FORM OF ACCEPTANCE AND CERTIFICATES REPRESENTING ENERGY
GROUP SHARES AND/OR OTHER DOCUMENTS OF TITLE TO THE US DEPOSITARY WILL
CONSTITUTE DELIVERY OF THEM TO THE UK RECEIVING AGENT FOR THE PURPOSES OF
PARAGRAPH 10 OF THIS PART B OF APPENDIX I ABOVE AND THIS PARAGRAPH.
12 CERTAIN PROVISIONS CONCERNING ACCEPTANCES
(a) Without prejudice to the right reserved by PacifiCorp Acquisitions to treat
Acceptance Forms as valid even though not entirely in order or not
accompanied by, where Energy Group Shares are in certificated form, the
relevant share certificates and/or other documents of title, or not
accompanied by the relevant transfer to escrow, except as otherwise agreed
by the Panel:
(i) an acceptance of the Offer will only be counted towards fulfilling the
Acceptance Condition if the requirements of Note 4 and, if applicable,
Note 6 to Rule 10 of the City Code are satisfied in respect of such
acceptance. For additional information on Note 4 and Note 6 to Rule 10 of
the City Code, see paragraph 12(b) below;
(ii) a purchase of Energy Group Securities by PacifiCorp Acquisitions or its
nominee(s) (or a person acting in concert with PacifiCorp Acquisitions or
its nominee(s)) will only be counted towards fulfilling the Acceptance
Condition if the requirements of Note 5 and, if applicable, Note 6 to
Rule 10 of the City Code are satisfied in respect of such purchase. For
additional information on Note 5 and Note 6 to Rule 10 of the City Code,
see paragraph 12(b) below; and
(iii) the Acceptance Condition will not be declared satisfied until the UK
Receiving Agent has issued a certificate to PacifiCorp Acquisitions (or
its agent) which states the number of Energy Group Securities in respect
of which acceptances have been received which comply with paragraph (i)
above and the number of Energy Group Securities otherwise acquired,
whether before or during the Initial Offer Period, which comply with
paragraph 12(a)(ii) above.
(b) Notes 4 to 6 to Rule 10 of the City Code contain detailed provisions for
verifying which acceptances and purchases may be counted towards fulfilling
the Acceptance Condition or in determining whether the Acceptance Condition
has been fulfilled and are principally concerned to ensure that the acceptor
is the registered owner of the securities which he is tendering. The
principal requirements of Notes 4 to 6 to Rule 10 are that any Acceptance
Form must be completed to a suitable standard (i.e. it must constitute a
transfer or a valid and irrevocable appointment of PacifiCorp Acquisitions
or some person on its behalf or as agent or attorney for the purpose of
executing a transfer) and it must be accompanied by, where Energy Group
Shares are in certificated form, the appropriate share certificate or other
documents of title and, in all cases, any relevant supporting documentation
(such as powers of attorney). Immediately prior to the satisfaction of the
Acceptance Condition, the UK Receiving Agent will issue a certificate to
PacifiCorp Acquisitions stating the number of Energy Group Securities
tendered and not validly withdrawn pursuant to the Offer and the number of
Energy Group Securities otherwise acquired, on or before the Initial Closing
Date as the case may be, in compliance with the provisions referred to in
paragraph 12(a) above. Copies of such certificates will be sent to the Panel
as soon as possible after they are issued.
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(c) Subject to the City Code, PacifiCorp Acquisitions reserves the right to
treat as valid in whole or in part any acceptance of the Offer which is not
entirely in order or which is not accompanied by the (as applicable)
relevant transfer to escrow or the relevant share certificate(s) and/or
other document(s) of title or which is received by it at a place or places
other than set out in this document or the Acceptance Form. In that event,
no payment of cash or issue of Loan Notes under the Offer will be made until
after the relevant transfer to escrow has settled or (as applicable) the
relevant share certificate(s) and/or other document(s) of title or
indemnities satisfactory to PacifiCorp Acquisitions have been received.
13 SUBSTITUTE ACCEPTANCE FORMS
The holders of Energy Group Securities have been sent with this document
either a Letter of Transmittal (accompanied by a Notice of Guaranteed
Delivery) and/or a Form of Acceptance. All holders of Energy Group ADSs have
been sent a Letter of Transmittal and a Notice of Guaranteed Delivery, which
they must use to tender their Energy Group ADSs and accept the Offer. All
holders of Energy Group Shares, including persons in the US who hold Energy
Group Shares, have been sent a Form of Acceptance, which they must use to
tender their Energy Group Shares and accept the Offer. Should any holder of
Energy Group Securities receive an incorrect form with which to accept the
Offer or require any additional forms, that person should contact the UK
Receiving Agent or the US Depositary at the addresses set out at the end of
this document, who will provide the appropriate forms.
14 SETTLEMENT
Subject to the satisfaction, fulfilment or, where permitted, waiver of all
Conditions (except as provided in paragraph 8 of this Part B of Appendix I
in the case of certain overseas holders of Energy Group Securities),
settlement of the consideration to which any holder of Energy Group
Securities is entitled under the Offer will be effected (i) in the case of
acceptances received, complete in all respects, by the Initial Closing Date,
within 14 days of such date, or (ii) in the case of acceptances of the Offer
received, complete in all respects, after such date, but while the Offer
remains open for acceptance, within 14 days of such receipt, in the
following manner:
(A) ENERGY GROUP SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
Where an acceptance relates to Energy Group Shares in uncertificated form,
the cash consideration to which the accepting holder of Energy Group Shares
is entitled will be paid by means of CREST by PacifiCorp Acquisitions
procuring the creation of an assured payment obligation in favour of such
accepting holder's payment bank in respect of the cash consideration due, in
accordance with the CREST assured payment arrangements. Loan Notes will be
despatched by first class post (or by such other method as may be approved
by the Panel). PacifiCorp Acquisitions reserves the right to settle all or
any part of the consideration referred to in this paragraph, for all or any
accepting holders of Energy Group Securities, in the manner referred to in
paragraph 14(b) below, if, for any reason, it wishes to do so.
(B) ENERGY GROUP SECURITIES IN CERTIFICATED FORM
Where an acceptance relates to Energy Group Securities in certificated form,
cheques for cash due or Loan Notes will be despatched by first class post
(or by such other method as may be approved by the Panel).
15 CURRENCY OF CASH CONSIDERATION
Instead of receiving cash consideration in pounds sterling, holders of
Energy Group Shares who so wish may receive US dollars on the following basis:
the cash amount payable in pounds sterling to which
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such holder would otherwise be entitled pursuant to the terms of the Offer will
be converted, without charge, from pounds sterling to US dollars at the exchange
rate obtainable by the relevant payment agent (either the UK Receiving Agent or
the US Depositary) on the spot market in London at approximately noon (London
time) on the date the cash consideration is made available by PacifiCorp
Acquisitions to the relevant payment agent for delivery in respect of the
relevant Energy Group Shares. A holder of Energy Group Shares may receive such
amount on the basis set out above only in respect of the whole of his holding of
Energy Group Shares in respect of which he accepts the Offer. Holders of Energy
Group Securities may not elect to receive pounds sterling and US dollars. Unless
they elect to receive pounds sterling, holders of Energy Group ADSs will receive
consideration converted into US dollars as described above, as if such holders
of Energy Group ADSs had elected to receive dollars. Consideration in US dollars
may be inappropriate for holders of Energy Group Shares other than persons in
the US and holders of Energy Group ADSs.
THE ACTUAL AMOUNT OF US DOLLARS RECEIVED WILL DEPEND UPON THE EXCHANGE RATE
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY PACIFICORP ACQUISITIONS. HOLDERS OF ENERGY GROUP SECURITIES
SHOULD BE AWARE THAT THE US DOLLAR/POUNDS STERLING EXCHANGE RATE WHICH IS
PREVAILING AT THE DATE ON WHICH AN ELECTION IS MADE TO RECEIVE DOLLARS AND ON
THE DATES OF DESPATCH AND RECEIPT OF PAYMENT MAY BE DIFFERENT FROM THAT
PREVAILING ON THE BUSINESS DAY ON WHICH FUNDS ARE MADE AVAILABLE TO THE RELEVANT
PAYMENT AGENT BY PACIFICORP ACQUISITIONS. IN ALL CASES, FLUCTUATIONS IN THE US
DOLLAR/POUNDS STERLING EXCHANGE RATE ARE AT THE RISK OF ACCEPTING HOLDERS OF
ENERGY GROUP SECURITIES WHO ELECT OR ARE TREATED AS HAVING ELECTED TO RECEIVE
THEIR CONSIDERATION IN US DOLLARS. NEITHER PACIFICORP ACQUISITIONS NOR ANY OF
ITS ADVISERS OR AGENTS SHALL HAVE RESPONSIBILITY WITH RESPECT TO THE ACTUAL
AMOUNT OF CASH CONSIDERATION PAYABLE OTHER THAN IN POUNDS STERLING.
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APPENDIX II
SUMMARY OF THE TERMS OF THE LOAN NOTES
The Floating Rate Unsecured Loan Notes 2004 of PacifiCorp Acquisitions will
be created by a resolution of the Board or a duly authorised committee thereof
and will be constituted by a Loan Note Instrument (the "Loan Note Instrument")
executed as a deed by PacifiCorp Acquisitions. The Loan Notes will not be
guaranteed. The issue of the Loan Notes is conditional on all Conditions being,
where applicable, waived, fulfilled or satisfied. Loan Notes will be issued only
if the aggregate valid elections for the Loan Note Alternative received on or
before the date on which all Conditions are so waived, fulfilled or satisfied,
as applicable, will result in PacifiCorp Acquisitions issuing in excess of L1
million nominal value of Loan Notes. The Loan Note Alternative is not available
to any person who is a citizen or resident of the United States and certain
other jurisdictions. The Loan Note Instrument will contain provisions, INTER
ALIA, substantially to the effect set out below.
1 The Loan Notes will be issued by PacifiCorp Acquisitions in amounts and
integral multiples of L1 in nominal amount only and will constitute
unsecured obligations of PacifiCorp Acquisitions. No payment will be made in
respect of any amount payable of less than L1. The Loan Note Instrument will
not contain any restrictions on borrowing, disposals or charging of assets
by PacifiCorp Acquisitions.
2 Interest on the Loan Notes will be payable (subject to any requirement to
deduct income tax therefrom) semi-annually in arrear on 30 June and 31
December in each year or, if such a day is not a Business Day, on the
immediately preceding Business Day ("interest payment dates") except that
the first payment of interest on the Loan Notes will be made on 31 December
1998 in respect of the period from and including the date of issue of the
relevant Loan Note up to but excluding 31 December 1998. The period from and
including the date of issue of the relevant Loan Note up to but excluding 31
December 1998 and the period from and including that date or any subsequent
interest payment date up to but excluding the next following interest
payment date is herein called an "interest period".
3(A) The rate of interest on the Loan Notes for each interest period will be the
rate per annum which is 0.5 per cent. below LIBOR. "LIBOR" means the
arithmetic mean (rounded down, if necessary, to four decimal places) of the
respective rates which are quoted as of 11.00 a.m. (London time) on the
first Business Day of the interest period on the "LIBP" page on the Reuter
Monitor Money Rate Service (or such other page or service as may replace it
for the purpose of displaying London inter-bank sterling offered rates of
leading reference banks) as being the interest rates offered in the London
inter-bank market for six month sterling deposits but:
(i) if only two or three such offered quotations appear, the relevant
arithmetic mean (rounded as mentioned above) shall be determined on the
bases of those offered quotations; and
(ii) if no, or only one, such offered quotation appears, the relevant
arithmetic mean (rounded as mentioned above) shall be determined instead
on the basis of the respective rates (as quoted to PacifiCorp
Acquisitions at its request) at which each of Barclays Bank PLC and
National Westminster Bank plc is offering six month sterling deposits to
prime banks in the London inter-bank market at or about 11.00 a.m.
(London time) on the first Business Day of the relevant interest period.
(B) If LIBOR cannot be established in accordance with the provisions of
paragraph 3(a) above for any interest period, the rate of interest on the
Loan Notes for such interest period shall be the same as that applicable to
the Loan Notes during the previous interest period, unless in such case such
other prime bank in the London inter-bank market as PacifiCorp Acquisitions
shall reasonably select for
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the purpose shall have been prepared to offer a rate as aforesaid, in which
case the rate of interest in respect of the relevant interest period shall
be the rate so offered.
(C) Each instalment of interest shall be calculated on the basis of a 365 day
year (or a 366 day year in the case of a leap year) and the number of days
elapsed in the relevant interest period.
4 A holder of Loan Notes (a "Noteholder") shall be entitled to require
PacifiCorp Acquisitions to repay the whole (whatever the amount) or any part
(being any integral amount of L1) of the principal amount of his holding of
Loan Notes at par, together with accrued interest (subject to any
requirement to deduct income tax therefrom) up to but excluding the date of
repayment, on any interest payment date, from and including 31 December 1998
and thereafter on any interest payment date falling prior to 31 December
2004 by giving not less than 30 days' prior notice in writing to the
registrars of PacifiCorp Acquisitions accompanied by the certificate(s) for
all the Loan Notes to be repaid and notice of redemption (duly completed) in
the prescribed form on the Loan Notes to be repaid.
5 If at any time the principal amount of all Loan Notes outstanding is 20 per
cent. or less of the total nominal amount of Loan Notes issued in connection
with the Offer, PacifiCorp Acquisitions shall have the right, on giving the
remaining Noteholders not less than 30 days' notice in writing expiring on
31 December 1998 or any subsequent interest payment date, to redeem all (but
not some only) of the outstanding Loan Notes at par together with accrued
interest thereon (subject to any requirement to deduct income tax therefrom)
up to but excluding the date of redemption.
6 Any Loan Notes not previously repaid, redeemed or purchased will be repaid in
full at par on 31 December 2004, together with accrued interest thereon
(subject to any requirement to deduct income tax therefrom) up to and
excluding that date.
7 Any Loan Notes repaid, purchased or redeemed will be cancelled and shall not
be available for re-issue.
8 The Noteholders will have power by extraordinary resolution of the
Noteholders passed in accordance with the provisions of the Loan Note
Instrument or by resolution in writing signed by holders of not less than 75
per cent. of the outstanding Loan Notes, INTER ALIA, to sanction any
modification, abrogation or compromise of or arrangement in respect of their
rights against PacifiCorp Acquisitions and to assent to any amendment in
respect of their rights against PacifiCorp Acquisitions and to assent to any
amendment of the provisions of the Loan Note Instrument (but in each case
subject to the consent of PacifiCorp Acquisitions). PacifiCorp Acquisitions
may, with the consent of its financial advisers, amend the provisions of the
Loan Note Instrument, without such sanction or consent, if such amendment is
of a formal, minor or technical nature or to correct a manifest error.
9 Each Noteholder will have the right to acquire (by subscription at a nominal
value of an amount up to or equal to such Noteholder's holding of Notes)
additional loan notes to be issued by a subsidiary of PacifiCorp
Acquisitions (the "Additional Notes") on terms and conditions substantially
the same as those applicable to the Loan Notes, except as follows:
(A) the Additional Notes will not be issued before 31 December 2003;
(B) the rate of interest on the Additional Notes will be 1.5 per cent. below the
rate per annum described in paragraph 3(a) above; and
(C) the Additional Notes will not carry any right to acquire any additional
securities.
10 Each Noteholder shall be entitled to require all or part (being L1 nominal
amount or any integral multiple thereof) of the Loan Notes held by him to be
repaid at par together with accrued interest (subject to any requirement to
deduct any income tax therefrom) if:
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(A) any principal or interest on any of the Loan Notes held by that Noteholder
shall fail to be paid in full within 30 days after the due date for payment
thereof; or
(B) an order is made or an effective resolution is passed for the winding-up or
dissolution of PacifiCorp Acquisitions (other than for the purposes of a
solvent reconstruction or a solvent amalgamation or a members' voluntary
winding-up on terms previously approved by extraordinary resolution of the
Noteholders); or
(C) an encumbrancer takes possession of, or a trustee, receiver, administrator
or similar officer is appointed or an administration order is made in
respect of, the whole or substantially the whole of the undertaking of
PacifiCorp Acquisitions and such person has not been paid out or discharged
within 30 days.
11 PacifiCorp Acquisitions shall be entitled at any time to purchase any Loan
Notes at any price by tender (available to all Noteholders alike), private
treaty or otherwise by agreement with the relevant Noteholder(s).
12 The Loan Notes will contain provisions entitling PacifiCorp Acquisitions,
without the consent of Noteholders, to substitute any of its subsidiaries or
any holding company or subsidiaries of such holding company resident in the
UK for tax purposes (other than Eastern or any of its subsidiaries) as the
principal debtor under the Loan Note Instrument and the Loan Notes or to
require all or any of the Noteholders to exchange their Loan Notes for loan
notes issued on the same terms MUTATIS MUTANDIS by any such company provided
that (a) PacifiCorp Acquisitions guarantees such company's obligations
thereunder; and (b) following such substitution or exchange, the Loan Notes
or (as the case may be) such loan notes shall not contain a provision
equivalent to this paragraph 12. References to PacifiCorp Acquisitions in
this summary shall be construed accordingly. PacifiCorp Acquisitions' right
to require substitution of such company as principal debtor (but not the
right to require exchange of the Loan Notes) will be exercisable only if
prior clearance has been obtained from the Inland Revenue to the effect that
the substitution will not be treated as a disposal of the Loan Notes for the
purposes of United Kingdom taxation of chargeable gains and PacifiCorp
Acquisitions' right to require such an exchange will be exercisable only if
the exchange will fall within section 135 of the Taxation of Chargeable
Gains Act 1992, and to the extent relevant, clearance has been received from
the Inland Revenue under section 138 of that Act in respect of the exchange.
13 The Loan Notes will be evidenced by certificates, will be registered and will
be transferable in integral multiples of L1 in excess of that amount,
provided that transfers of Loan Notes will not be registered while the
register of Noteholders is closed.
14 No application has been made or is intended to be made to any stock exchange
or other dealing service for the Loan Notes to be listed or otherwise
traded.
15 The Loan Notes and the Loan Note Instrument will be governed by and construed
in accordance with English law.
II-3
<PAGE>
APPENDIX III
FINANCIAL AND OTHER INFORMATION
ON THE TEG GROUP
1. RESULTS FOR THE NINE MONTHS ENDED 31 DECEMBER 1997.
The text on pages III-1 to III-5 is a reproduction of the announcement made
by The Energy Group on 3 February 1998:
"THE ENERGY GROUP -- THIRD QUARTER RESULTS
FINANCIAL HIGHLIGHTS
- TURNOVER AT L3.4 BILLION UP 10%
- OPERATING PROFIT UP 15%
The Energy Group PLC today announces its results for the period 1 October 1997
to 31 December 1997. The results for the quarter have been compared to the pro
forma operating results for the equivalent period in 1996 of certain of the
businesses which were previously reported as part of Hanson PLC.
FINANCIAL RESULTS
Group turnover for the nine months to 31 December 1997 was L3,390 million, an
increase of 10 per cent on the same period last year (pro forma 1996: L3,084
million) Operating profit for the nine month period was L379 million up 15 per
cent (pro forma 1996: L330 million), before exceptional costs associated with
the PacifiCorp bid and restructuring charges. Pre-exceptional earnings per share
for this period were 40.0p.
TRADING
COAL
Third quarter turnover declined slightly to L323 million (pro forma 1996:
L325 million) mainly due to adverse exchange rate movements. Operating profit
rose 8 per cent to L27 million (pro forma 1996: L25 million). Peabody sold 40
million tons (1996: 41 million tons) of steam and metallurgical coal during the
quarter and its steam coal products continue to fuel approximately 9 per cent of
all electricity produced by US electricity companies.
POWER
Third quarter turnover was up 17 per cent to L1,005 million (pro forma L860
million) and operating profit rose 88 per cent to L107 million (pro forma 1996:
L57 million). This substantial improvement reflects an excellent performance
from our trading activities including Citizens Power and the UK coal-fired power
stations. The new gas-fired power station at King's Lynn was fully commissioned
in December and Eastern's gas and electricity retail business has also shown an
upturn, reflecting improved margins.
III-1
<PAGE>
NETWORKS
Third quarter turnover rose 9 per cent to L139 million (pro forma L127
million) with operating profit increasing 18 per cent to L66 million (pro forma
1996: L56 million). These improved results are mainly due to property disposal
and other one-off profits. The underlying networks business was broadly flat,
reflecting continuing regulatory price reductions, offset by cost reductions.
Derek Bonham, Chairman said: "These results demonstrate the strengths of The
Energy Group's businesses. The increases in profit in our three sectors are very
encouraging. With our mix of generating capacity this was always going to be a
good quarter for us.
Today we have announced the terms of a recommended renewed offer by
PacifiCorp for The Energy Group. Together we can create a group with the scale
and scope of operations to compete more effectively in international energy
markets. Detailed terms of the offer will be mailed to our shareholders
shortly."
III-2
<PAGE>
UNAUDITED FINANCIAL RESULTS
THIRD QUARTER ENDED 31 DECEMBER 1997
<TABLE>
<CAPTION>
PRO FORMA 3 PRO FORMA 9
3 MONTHS TO 31 MONTHS TO 31 9 MONTHS TO 31 MONTHS TO 31
DECEMBER 1997 DECEMBER 1996 DECEMBER 1997 DECEMBER 1996
LMN LMN LMN LMN
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
TURNOVER
Coal (Note 1).................................... 323 325 1,014 1,058
Power............................................ 1,005 860 2,253 1,946
Networks......................................... 139 127 354 331
Other............................................ 5 4 18 19
Intra-group...................................... (89) (101) (249) (270)
----- ----- ----- -----
1,383 1,215 3,390 3,084
----- ----- ----- -----
OPERATING PROFIT
Coal (Note 1).................................... 27 25 112 113
Power............................................ 107 57 138 96
Networks......................................... 66 56 147 134
Other (Note 2)................................... (8) (4) (18) (13)
----- ----- ----- -----
PRE-EXCEPTIONAL OPERATING PROFIT................. 192 134 379 330
Bid-related costs (Note 3)....................... (1) -- (10) --
Restructuring and re-organisation costs (Note
3)............................................. -- -- (7) --
----- ----- ----- -----
TOTAL OPERATING PROFIT........................... 191 134 362 330
----- ----- -----
Net interest and similar charges................. (103)
-----
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.... 259
Taxation charge for the period on results........ (66)
-----
193
Windfall tax..................................... (112)
-----
Profit on ordinary activities after taxation..... 81
Dividends........................................ (41)
-----
Profit retained for the period................... 40
-----
Earnings per ordinary share (Note 4)
Pre-exceptional.................................. 40.0
Basic............................................ 15.7
</TABLE>
Notes
(1) Turnover and operating profit for coal include the results for contract
restructuring.
(2) Pro forma adjustments have been made to the figures to 31 December 1996 in
respect of the additional administration costs that arose following the
demerger. The directors estimate that such costs amount to approximately L15
million per annum.
(3) Exceptional costs in the nine months ended 31 December 1997 relate to L7
million of restructuring costs within the Power segment and bid-related
costs of Ll0 million, of which Ll million arose in the quarter ended 31
December 1997.
(4) The earnings per share for the 9 months ended 31 December 1997 are based on
the profits for that period and on 516,756,926 shares which excludes the
4,100,891 shares held by The Energy Group Employee Benefit Trust, which has
waived the right to dividends on the shares it holds.
III-3
<PAGE>
UNAUDITED FINANCIAL RESULTS
THIRD QUARTER ENDED 31 DECEMBER 1997
<TABLE>
<CAPTION>
PRO FORMA 3 PRO FORMA 9
3 MONTHS TO 31 MONTHS TO 31 9 MONTHS TO 31 MONTHS TO 31
DECEMBER 1997 DECEMBER 1996 DECEMBER 1997 DECEMBER 1996
$MN $MN $MN $MN
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
TURNOVER
Coal (Note 2).................................... 532 535 1,670 1,743
Power............................................ 1,656 1,417 3,712 3,206
Networks......................................... 229 209 583 545
Other............................................ 8 7 30 31
Intra-group...................................... (147) (166) (410) (444)
----- ----- ----- -----
2,278 2,002 5,585 5,081
----- ----- ----- -----
OPERATING PROFIT
Coal (Note 2).................................... 44 41 185 186
Power............................................ 176 94 227 158
Networks......................................... 109 92 242 221
Other (Note 3)................................... (13) (6) (30) (21)
----- ----- ----- -----
PRE-EXCEPTIONAL OPERATING PROFIT................. 316 221 624 544
Bid-related costs (Note 4)....................... (2) -- (16) --
Restructuring and re-organisation costs (Note
4)............................................. -- -- (12) --
----- ----- ----- -----
TOTAL OPERATING PROFIT........................... 314 221 596 544
----- ----- -----
Net interest and similar charges................. (169)
-----
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION.... 427
Taxation charge for the period on results........ (109)
-----
318
Windfall tax..................................... (185)
-----
Profit on ordinary activities after taxation..... 133
Dividends........................................ (67)
-----
Profit retained for the period................... 66
-----
Earnings per ordinary ADS (Note 5)
Pre-exceptional.................................. 2.64
Basic............................................ 1.03
</TABLE>
Notes
(1) The above US$ figures have been translated at the average exchange rate for
the nine months to 31 December 1997 of $1.6474 to the L.
(2) Turnover and operating profit for coal include the results for contract
restructuring.
(3) Pro forma adjustments have been made to the figures to 31 December 1996 in
respect of the additional administration costs that arose following the
demerger. The directors estimate that such costs amount to approximately $25
million per annum.
III-4
<PAGE>
(4) Exceptional costs in the nine months ended 31 December 1997 relate to $12
million of restructuring costs within the Power segment and bid-related
costs of $16 million, of which $2 million arose in the quarter ended 31
December 1997.
(5) The earnings per ADS for the 9 months ended 31 December 1997 are based on
the profits for that period and on 516,756,926 shares which excludes the
4,100,891 shares held by The Energy Group Employee Benefit Trust, which has
waived the right to dividends on the shares it holds. One ADS is equivalent
to four ordinary shares."
2. RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 1997.
The figures on pages III-5 to III-32 have been extracted from the audited
financial statements of The Energy Group for the six months ended 31 March 1997,
but do not themselves constitute statutory accounts within the meaning of the
Companies Act. The Energy Group's auditors made a report under Section 235 of
the Companies Act on those financial statements which was unqualified and did
not contain a statement under Section 237(2) to (4) of the Companies Act.
Statutory accounts have been delivered to the Registrar of Companies for that
period.
THE ENERGY GROUP PLC--CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE SIX MONTHS ENDED 31 MARCH 1997
<TABLE>
<CAPTION>
NOTE 1997
----- ---------
<S> <C> <C>
LM
Turnover......................................................................................... 1 2,519
Costs and overheads less other income............................................................ 3 (2,222)
---------
Operating profit................................................................................. 1 297
Net interest payable and similar charges......................................................... 5 (37)
---------
Profit on ordinary activities before taxation.................................................... 260
Taxation charge for period....................................................................... 7 (81)
---------
Profit on ordinary activities after taxation..................................................... 179
Dividend......................................................................................... 6 (29)
---------
Profit retained for the period................................................................... 17 150
---------
---------
Earnings per ordinary share:
Pre-exceptional.............................................................................. 8 38.2p
Basic........................................................................................ 8 34.5p
</TABLE>
III-5
<PAGE>
THE ENERGY GROUP PLC--BALANCE SHEETS
AS AT 31 MARCH 1997
<TABLE>
<CAPTION>
GROUP COMPANY
NOTE 1997 1997
----- --------- -------------
<S> <C> <C> <C>
LMN LMN
FIXED ASSETS
Tangible fixed assets................................................................ 9 3,910 --
Investments.......................................................................... 10 72 63
--------- ---
3,982 63
--------- ---
CURRENT ASSETS
Stocks............................................................................... 11 256 --
Debtors.............................................................................. 12 1,359 50
Investments.......................................................................... 10 10 --
Short-term deposits.................................................................. 13 753 --
Cash................................................................................. 13 385 40
--------- ---
2,763 90
--------- ---
CREDITORS--DUE WITHIN ONE YEAR
Short-term borrowings................................................................ 14 (738) --
Overdrafts........................................................................... 14 (61) --
Other creditors...................................................................... 14 (948) (45)
--------- ---
(1,747) (45)
--------- ---
NET CURRENT ASSETS................................................................... 1,016 45
--------- ---
TOTAL ASSETS LESS CURRENT LIABILITIES................................................ 4,998 108
CREDITORS--DUE AFTER ONE YEAR........................................................ 14 (1,655) --
PROVISIONS FOR LIABILITIES AND CHARGES............................................... 15 (1,498) --
--------- ---
NET ASSETS........................................................................... 1,845 108
--------- ---
--------- ---
CAPITAL AND RESERVES
Called up share capital.............................................................. 16 52 52
Other reserves....................................................................... 17 639 --
Profit and loss account.............................................................. 17 1,154 56
--------- ---
EQUITY SHAREHOLDERS' FUNDS........................................................... 1,845 108
--------- ---
--------- ---
</TABLE>
Included within Group debtors are amounts recoverable after more than one
year of L561 million (Company L7 million).
III-6
<PAGE>
THE ENERGY GROUP PLC--CONSOLIDATED CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 31 MARCH 1997
<TABLE>
<CAPTION>
NOTE
-----
LMN LMN
<S> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES........................................................ 20 346
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received.......................................................................... 29
Interest paid.............................................................................. (83)
Dividends received from investments........................................................ 1
---
(53)
TAXATION................................................................................... (23)
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets.......................................................... (133)
Purchase of investments.................................................................... (39)
Sale of tangible fixed assets.............................................................. 4
Sale of investments........................................................................ 12
---
(156)
ACQUISITION
Purchase of subsidiary undertaking......................................................... 18 (20)
---
CASH FLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING..................................... 94
MANAGEMENT OF LIQUID RESOURCES
Net cash placed on short-term deposit...................................................... 22 (753)
FINANCING
Net new short-term borrowings.............................................................. 22 149
Debt due beyond a year:
New secured loan repayable within 5 years.................................................. 22 907
Repayment of amounts borrowed.............................................................. 22 (118)
---
938
---
INCREASE IN CASH IN THE PERIOD............................................................. 22 279
---
</TABLE>
III-7
<PAGE>
BASIS OF CONSOLIDATION AND PRESENTATION OF FINANCIAL INFORMATION FOR THE SIX
MONTHS ENDED 31 MARCH 1997
The Company was incorporated as a private limited company on 1 October 1996
as The Energy Group Limited and was re-registered as a public limited company
under the name The Energy Group PLC on 6 December 1996.
The Group financial statements consolidate the financial statements of the
Company and its subsidiary undertakings, comprising the demerged energy-related
businesses of Hanson.
In accordance with an agreement dated 27 January 1997 (the "Demerger
Agreement") providing for the demerger of these businesses, Hanson transferred
the entire issued share capital of Rollalong to the Company on 24 February 1997.
At that date Rollalong owned or had contracted to acquire all of the
energy-related businesses of Hanson. The consideration for this transfer was
satisfied by the issue to Hanson shareholders of ordinary shares in the Company,
credited as fully paid, as a dividend in specie.
Rollalong acquired the various subsidiary undertakings, other than Peabody
Holding, as a result of internal reorganisations within Hanson at various dates
between 30 September 1996 and 27 January 1997. Peabody Holding and its
subsidiary undertakings were transferred to a subsidiary undertaking of
Rollalong on 7 March 1997.
The transactions provided for under the Demerger Agreement, together with
the transfer of Peabody Holding, are referred to as the "Demerger Transactions".
The financial statements are presented under merger accounting principles,
as if Rollalong and its subsidiary undertakings had been owned and controlled by
the Company throughout the period or, in the case of those acquired or disposed
of subsequent to the Demerger Transactions, from or up to the date control
passed, as appropriate.
Some individual elements of both the reorganisation under Rollalong and the
Demerger Transactions do not satisfy all of the conditions for merger accounting
to be permitted in accordance with Financial Reporting Standard 6 and Schedule
4A to the Companies Act, both of which would require such elements to be
accounted for using acquisition principles.
The adoption of acquisition accounting principles for any part of the
reorganisation under Rollalong or the Demerger Transactions would have required:
the restatement to fair value of certain assets and liabilities; the recognition
of goodwill which, in some cases, would not be representative of that arising
had the transfers been conducted at arm's length; and the inclusion of the
results of certain businesses only from the various arbitrary dates on which the
relevant transfers took place within the Company's accounts. As a result of the
foregoing, the Directors consider that to apply acquisition accounting would
fail to give a true and fair view of the Group's state of affairs and results
since the shareholders have had a continuing interest in the energy-related
businesses of Hanson following the demerger. Accordingly, the Directors consider
that the Demerger Transactions, taken as a whole, require the adoption of merger
accounting principles in order to show a true and fair view, having regard to
section 226(5) of the Companies Act. No quantification has been given of the
effects of the departure because to do so would be misleading.
In the Company's financial statements its investment in Rollalong is stated
at the nominal value of shares issued. As permitted by sections 131 and 133 of
the Companies Act, no premium has been recorded on those ordinary shares issued.
On consolidation the difference between the nominal value of the Company's
shares issued and the amount of share capital and share premium of Rollalong has
been credited to a merger reserve.
III-8
<PAGE>
PRINCIPAL ACCOUNTING POLICIES USED IN THE PREPARATION OF FINANCIAL INFORMATION
FOR THE SIX MONTHS ENDED 31 MARCH 1997
The consolidated financial statements have been prepared in accordance with
applicable UK Accounting Standards. The principal accounting policies, which
have been applied consistently throughout the period, are set out below.
ACCOUNTING CONVENTION
The financial statements have been prepared in accordance with the
historical cost convention.
ACCOUNTING FOR ACQUISITIONS
Other than in respect of the Demerger Transactions, the results of acquired
companies and businesses are dealt with in the financial statements from the
date of acquisition. On the acquisition of a company or business, fair values
reflecting conditions at the date of acquisition are attributed to the
identifiable tangible assets and liabilities acquired. Where the consideration
paid exceeds the fair value of the net tangible assets acquired, the difference
is treated as goodwill and is set off against reserves in the acquisition
period.
ASSOCIATED UNDERTAKINGS
Investments which are not subsidiary undertakings and over which the Group
exercises significant influence (other than those which are unincorporated joint
ventures) have been accounted for as associated undertakings using the equity
method of accounting. Where the Group has an interest in an unincorporated joint
venture or a partnership, such interest has been accounted for as follows:
(i) where all of the venturers share in common the benefits and risks of
the entire venture, the Group's interest is accounted for using the equity
method of accounting.
(ii) Where each venturer has its own separate interest in the benefits and
risks, the Group's interest is accounted for using proportional consolidation on
a line-by-line basis.
TURNOVER
Coal sales revenue is recognized at the time of shipment. Electricity and
gas sales include an estimated accrual for the value of electricity and gas
consumed by customers between the date of their last meter reading and the
period end. Turnover is stated exclusive of UK value added tax, but inclusive of
related US coal production duties and UK fossil fuel levy.
TANGIBLE FIXED ASSETS
(A) CAPITALIZATION
Tangible fixed assets are stated at cost less accumulated depreciation.
Interest costs relating to the construction or development of production
facilities are capitalised during the pre-production period. Interest costs
incurred after production has commenced are expensed.
Costs incurred to increase the productive capacity of a mine or gas field
are capitalised. Costs incurred to maintain the productive capacity of a coal
mine or gas field are expensed.
III-9
<PAGE>
(B) DEPRECIATION AND DEPLETION
Buildings and improvements at coal mines are depreciated over the expected
productive life of the mine from the date that full production commences.
Depletion of coal and gas reserves is charged on a unit-of-production basis,
based on an assessment of available and proven reserves respectively.
Freehold land is not depreciated.
Depreciation of assets other than freehold land, coal and gas reserves and
buildings and improvements at coal mines is charged as follows:
<TABLE>
<S> <C>
Electricity generating station 30 years
assets
Electricity distribution system 40 years at a rate of 3 per cent. per annum for first 20
assets years and 2 per cent. per annum for remaining 20 years
Freehold buildings up to 60 years
Leasehold buildings shorter of 60 years and remaining period of lease
Telecommunications network 10 to 40 years
assets
Plant, equipment and motor 2 to 49 years
vehicles
</TABLE>
(C) ASSETS HELD UNDER LEASES
Assets held under finance leases are included within fixed assets at the
capitalised value of future minimum lease payments and are depreciated over the
shorter of their lease period and their useful life. The capital element of the
future payments is treated as a liability and the interest element is charged to
the profit and loss account so as to reflect a constant annual rate of interest
on the remaining balance of the outstanding obligation.
Rentals paid on operating leases are charged to the profit and loss account
on a straight line basis over the shorter of the lease period and the useful
life of the leased asset.
(D) IMPAIRMENT
At each financial period end, an assessment is made of the recoverability of
the balance sheet carrying values of coal and gas assets. This assessment is
made individually at the lowest operational level at which income and cash flows
are monitored as a separate unit. A reduction in carrying value is triggered
when the current book value of such a unit of assets exceeds the undiscounted
future cash flows. Where shortfalls in cash flows compared with carrying values
arise, the assets are written down to fair value, determined usually by
discounted future cash flows generated from the assets.
(E) RECLAMATION, RESTORATION AND ABANDONMENT COSTS
Provision is made for surface reclamation and restoration costs in respect
of coal mines and for abandonment costs in respect of gas fields in accordance
with local conditions and requirements on the basis of costs estimated at the
balance sheet date. The costs are charged to accounting periods on a unit-of-
production basis for gas assets and over the life of the mine for coal.
III-10
<PAGE>
(F) ENVIRONMENTAL COSTS AND OBLIGATIONS
Costs incurred in respect of environmental protection are capitalised if
they provide future economic benefits for the related production facility.
Liabilities for environmental clean-up costs are recognized when clean-ups are
probable and the associated costs can be estimated reasonably.
(G) CUSTOMER CONTRIBUTIONS
Customer contributions to electricity distribution system assets are
credited to the profit and loss account over a 40 year period at a rate of 3 per
cent. per annum for the first 20 years followed by 2 per cent. per annum for the
following 20 years. The unamortised amount of these contributions is deducted
from tangible fixed assets.
(H) DISPOSAL OF FIXED ASSETS
HM Government is entitled to a proportion of any gain realised by Eastern on
certain property disposals made up to 31 March 2000. A provision for clawback in
respect of such disposals is made to the extent that it is probable that a
liability will crystallise. Such a liability would crystallise when an actual or
deemed disposal occurs.
STOCKS
Stocks are stated at the lower of cost and net realisable value. Cost
includes labour, supplies, equipment and an appropriate proportion of operating
and overhead costs.
INVESTMENTS
Fixed asset investments are stated at cost or directors' valuation less
provisions for permanent diminutions in value. Current asset investments are
stated at the lower of cost and net realisable value. Investment income is
included in the financial statements of the period to which it relates.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the exchange rates ruling
at the date of the transactions. Monetary assets and liabilities denominated in
foreign currencies are translated at the rates of exchange ruling at the balance
sheet date. All differences on translation are taken to the profit and loss
account.
Average rates of exchange ruling during the period are used to translate the
profit and loss accounts of overseas subsidiary and associated undertakings. The
balance sheets of overseas subsidiary undertakings are translated at rates
ruling at the balance sheet date. Differences on translation arising from
changes in the sterling value of overseas net assets, together with the
differences between profit and loss accounts translated at average rates and at
balance sheet rates, are shown as a movement on reserves and in the statement of
recognised gains and losses.
Other exchange rate differences are dealt with in the profit and loss
account for the period.
DEFERRED TAXATION
Deferred taxation is provided using the liability method in respect of
timing differences except where the liability or asset is not expected to
crystallise in the foreseeable future. No deferred tax asset is recognised
corresponding to liabilities provided for in respect of post-retirement
healthcare benefits. Provision is not made for additional taxation which might
be payable if profits retained by overseas companies were distributed as
dividends.
III-11
<PAGE>
HEALTHCARE AND OTHER OBLIGATIONS TO EMPLOYEES
The Group provides healthcare and other benefits, including workers'
compensation benefits, to certain qualifying employees and former employees of
the Peabody companies and their dependants under the provisions of various
benefit plans or as required by US state or federal law. These benefits are
accrued and charged to the profit and loss account over the expected service
lives of the employees with the exception of pneumoconiosis ("black lung")
benefits in respect of employees ceasing employment prior to 1 July 1973, which
are accounted for as payments are made. Pneumoconiosis benefits in respect of
employees ceasing employment after 30 June 1973 are estimated actuarially; the
last actuarial review was performed as at 1 October 1996. Other workers'
compensation benefits are also assessed actuarially.
PENSION COSTS
The Group operates retirement benefit schemes in the UK, the USA and
Australia, in accordance with local regulation and custom. The assets of the
schemes are held in separate funds administered by trustees.
The costs of providing pensions are charged to the profit and loss account
over employees' service lives. The pension costs relating to those schemes which
provide defined benefits are assessed in accordance with the advice of qualified
actuaries.
NOTES TO THE FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 31 MARCH 1997
1. OPERATING PROFIT, TURNOVER AND CAPITAL EMPLOYED BY SEGMENT
<TABLE>
<CAPTION>
1997
---------------------------------------
OPERATING CAPITAL
PROFIT TURNOVER EMPLOYED
LM LM LM
------------- ----------- -----------
<S> <C> <C> <C>
By activity:
Coal.......................................................................... 66 647 1,370
Power......................................................................... 129 1,801 1,117
Networks...................................................................... 122 274 1,063
Other......................................................................... -- 9 8
Intra-Group trading........................................................... -- (212) --
--- ----- -----
317 2,519 3,558
Exceptional restructuring and reorganisation costs............................ (20) -- --
--- ----- -----
297 2,519 3,558
--- ----- -----
--- ----- -----
</TABLE>
Power turnover includes gas sales of L251 million in the period. All
intra-group trading represents charges from the Networks business to the Power
business, at market rates, for use of the distribution system.
III-12
<PAGE>
1. OPERATING PROFIT, TURNOVER AND CAPITAL EMPLOYED BY SEGMENT (CONTINUED)
<TABLE>
<CAPTION>
1997
---------------------------------------
OPERATING CAPITAL
PROFIT TURNOVER EMPLOYED
LM LM LM
------------- ----------- -----------
<S> <C> <C> <C>
By geographical location:
United Kingdom................................................................ 228 1,853 2,166
USA........................................................................... 52 574 1,148
Australia..................................................................... 14 74 226
Other......................................................................... 3 18 18
--- ----- -----
297 2,519 3,558
--- ----- -----
--- ----- -----
</TABLE>
The above analysis shows the geographical segments from which goods and
services are supplied.
<TABLE>
<CAPTION>
1997
LM
---------
<S> <C>
Turnover by geographical destination:
United Kingdom........................................................................................... 1,861
North and South America.................................................................................. 542
Rest of Europe........................................................................................... 42
Asia/Pacific............................................................................................. 74
---------
2,519
---------
---------
</TABLE>
The contribution from the acquisition during the period is shown in note 18.
2. CAPITAL EMPLOYED RECONCILIATION
<TABLE>
<CAPTION>
1997
LM
---------
<S> <C>
Shareholders' funds...................................................................................... 1,845
Current and deferred taxes............................................................................... 285
Dividend................................................................................................. 29
Net debt, investments and non-operating assets........................................................... 1,399
---------
Capital employed as per note 1........................................................................... 3,558
---------
---------
</TABLE>
III-13
<PAGE>
3. COSTS AND OVERHEADS LESS OTHER INCOME
<TABLE>
<CAPTION>
1997
LM
---------
<S> <C>
Changes in stocks of finished goods and work in progress................................................. (10)
Raw materials and consumables............................................................................ 1,334
Employment costs (note 4)................................................................................ 220
Depreciation............................................................................................. 64
Depletion................................................................................................ 36
Exceptional restructuring and reorganisation cost........................................................ 20
Production taxes......................................................................................... 70
Other operating charges less other income................................................................ 488
---------
2,222
---------
---------
</TABLE>
Included above are costs and overheads within Teplarny Brno of L15 million.
Exceptional restructuring and reorganisation costs reflect full provision
for the re-opening of Eastern's voluntary severance scheme in its Networks
business.
<TABLE>
<CAPTION>
1997
LM
-----
<S> <C>
Included above
Operating lease rental..................................................................................... 138
Research and development................................................................................... --
</TABLE>
<TABLE>
<CAPTION>
1997
LM
-----
<S> <C>
Remuneration paid to auditors for audit services worldwide................................................. 1
Fees for non-audit services paid to Ernst & Young within the UK............................................ 6
Fees for non-audit services paid to Ernst & Young outside the UK and to other auditors..................... 2
</TABLE>
Non-audit services mainly relate to the demerger and acquisitions, taxation
and regulatory advice and information technology services. Payments to auditors
for audit and non-audit services are reviewed by the Audit Committee and
approved by the Board.
III-14
<PAGE>
4. DIRECTORS AND EMPLOYEES
<TABLE>
<CAPTION>
1997
LM
---------
<S> <C>
Employment costs:
Aggregate gross wages and salaries.................................................................... 208
Employers' social security costs...................................................................... 14
Post-retirement benefits.............................................................................. 17
Pension costs (note 24)............................................................................... 10
---------
249
Less: amounts capitalised............................................................................. (29)
---------
Charged to profit and loss account...................................................................... 220
---------
---------
Average number of persons employed by the Group: 1997
United Kingdom.......................................................................................... 6,770
USA..................................................................................................... 6,549
Australia............................................................................................... 1,120
Other................................................................................................... 669
---------
15,108
---------
---------
</TABLE>
The total number of employees at 31 March 1997 was 15,025.
5. NET INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1997
LM
-----
<S> <C>
Interest payable
Bank loans................................................................................................. 42
Other loans................................................................................................ 35
--
Total payable (including L3 million relating to finance leases)............................................ 77
Interest receivable........................................................................................ (35)
Interest capitalised....................................................................................... (5)
--
Net Interest payable and similar charges................................................................... 37
--
</TABLE>
6. DIVIDEND
<TABLE>
<CAPTION>
PENCE PER 1997
SHARE LM
------------- -----
<S> <C> <C>
Dividend payable on 4 July 1997............................................................... 5.5p 29
</TABLE>
Prior to demerger the businesses comprising the Group were owned by Hanson
and appropriations of cash and other assets have been treated as diminutions in
net assets.
III-15
<PAGE>
7. TAXATION
<TABLE>
<CAPTION>
1997
-----------------------------------------------
BEFORE
EXCEPTIONAL EXCEPTIONAL
ITEMS ITEMS TOTAL
LM LM LM
----------------- --------------- -----
<S> <C> <C> <C>
UK:
Corporation tax at 33%......................................................... 69 (1) 68
Deferred tax................................................................... 2 -- 2
-- -- --
71 (1) 70
Overseas:
Current tax.................................................................... 7 -- 7
Deferred....................................................................... 4 -- 4
-- -- --
82 (1) 81
-- -- --
-- -- --
</TABLE>
<TABLE>
<CAPTION>
Reconciliation of effective tax rate after exceptional items:
%
---------
Statutory UK corporation tax rate.................................................... 33.0
<S> <C>
Non-deductible and non-taxable items................................................. 4.7
Tax rate differences................................................................. 1.6
Exceptional item..................................................................... 2.1
Group relief......................................................................... (10.2)
---------
Effective tax rate................................................................... 31.2
---------
---------
</TABLE>
8. EARNINGS PER ORDINARY SHARE
<TABLE>
<CAPTION>
1997
LM
---------
<S> <C>
Net profit for the period before exceptional items....................................................... 198
Exceptional items after tax.............................................................................. (19)
---------
Net profit for the period................................................................................ 179
---------
---------
Earnings per ordinary share before exceptional items..................................................... 38.2p
Loss per ordinary share on exceptional items............................................................. (3.7)p
---------
Earnings per ordinary share.............................................................................. 34.5p
---------
---------
</TABLE>
The earnings per ordinary share for the six months ended 31 March 1997 are
calculated on the basis of 518,607,817 ordinary shares. This excludes the
2,250,000 shares held by The Energy Group Employee Benefit Trust which has
waived its right to dividends on the shares it holds.
The effect on earnings per ordinary share of the issue of shares under
option (see note 16) would not be material. Earnings per ordinary share before
exceptional items have been calculated to show the impact of exceptional items
on the results, as such items can have a distorting effect on earnings from year
to year and therefore warrant separate consideration.
III-16
<PAGE>
9. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
PLANT,
EQUIPMENT
LAND AND COAL AND DISTRIBUTION GENERATING AND MOTOR
BUILDINGS GAS ASSETS SYSTEM STATIONS VEHICLES
GROUP LM LM LM LM LM
- ------------------------------------------------- --------------- ------------- ------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
Cost:
As at 1 October 1996............................. 75 2,466 987 354 1,096
Exchange adjustments............................. -- (116) -- -- (45)
Acquisitions..................................... -- -- -- 36 7
Additions........................................ 14 21 48 13 54
Disposals and other.............................. -- (75) (3) (1) (44)
--
----- ----- --- -----
As at 31 March 1997.............................. 89 2,296 1,032 402 1,068
--
----- ----- --- -----
Accumulated deprecation and depletion:
As at 1 October 1996............................. 2 389 39 7 566
Exchange adjustments............................. -- (19) -- -- (26)
Charge for the period............................ 1 36 20 -- 43
Disposals and other.............................. -- (20) -- (1) (60)
--
----- ----- --- -----
As at 3l March l997.............................. 3 386 59 6 523
--
----- ----- --- -----
Net book value:
As at 1 October 1996............................. 73 2,077 948 347 530
--
----- ----- --- -----
As at 31 March 1997.............................. 86 1,910 973 396 545
--
----- ----- --- -----
<CAPTION>
TOTAL
GROUP LM
- ------------------------------------------------- ---------
<S> <C>
Cost:
As at 1 October 1996............................. 4,978
Exchange adjustments............................. (161)
Acquisitions..................................... 43
Additions........................................ 150
Disposals and other.............................. (123)
---------
As at 31 March 1997.............................. 4,887
---------
Accumulated deprecation and depletion:
As at 1 October 1996............................. 1,003
Exchange adjustments............................. (45)
Charge for the period............................ 100
Disposals and other.............................. (81)
---------
As at 3l March l997.............................. 977
---------
Net book value:
As at 1 October 1996............................. 3,975
---------
As at 31 March 1997.............................. 3,910
---------
</TABLE>
The net book value of land and buildings as at 31 March 1997 comprised
freeholds of L85 million (1 October 1996 L72 million), long leaseholds of L1
million (1 October 1996 L1 million) and short leaseholds of Lnil (1 October 1996
Lnil).
Coal and gas assets at 31 March 1997 included natural gas assets with a cost
of L40 million (1 October 1996 L35 million), accumulated depletion of L8 million
(1 October 1996 L2 million) and net book value of L32 million (1 October 1996
L33 million).
Capitalised interest at 31 March 1997 included within fixed assets amounted
to L13 million (1 October 1996 L8 million).
The cost of distribution system fixed assets at 31 March 1997 is shown net
of customer contributions of L359 million (1 October 1996 L343 million). The net
book value of customer contributions at 31 March 1997 was L267 million (1
October 1996 L256 million).
Other movements consist mainly of the change in treatment of Black Beauty
Coal Company which is described in note 10.
Assets in the course of construction at 31 March 1997 amounted to L298
million (1 October 1996 L310 million).
III-17
<PAGE>
9. TANGIBLE FIXED ASSETS (CONTINUED)
Generating stations included assets held under finance leases as follows:
<TABLE>
<CAPTION>
31 MARCH 1997
LM
-------------------
<S> <C>
Cost............................................................................................. 128
Accumulated depreciation......................................................................... (14)
---
Net book value................................................................................... 114
---
</TABLE>
10. INVESTMENTS
<TABLE>
<CAPTION>
UNLISTED INVESTMENTS
------------------------------
ASSOCIATED INVESTMENT IN
UNDERTAKINGS OTHER OWN SHARES
FIXED ASSET INVESTMENTS LM LM LM
- ------------------------------------------------------------------- ----------------- ----------- -------------------
<S> <C> <C> <C>
Group
As at 1 October 1996............................................... 5 12 --
Adjustment......................................................... 25 -- --
Acquisitions....................................................... -- 2 --
Additions.......................................................... -- 28 11
Share of retained profit........................................... 1 -- --
Disposals.......................................................... -- (12) --
-- -- --
As at 31 March 1997................................................ 31 30 11
-- -- --
<CAPTION>
TOTAL
FIXED ASSET INVESTMENTS LM
- ------------------------------------------------------------------- -----
<S> <C>
Group
As at 1 October 1996............................................... 17
Adjustment......................................................... 25
Acquisitions....................................................... 2
Additions.......................................................... 39
Share of retained profit........................................... 1
Disposals.......................................................... (12)
--
As at 31 March 1997................................................ 72
--
</TABLE>
The investment in own shares represents The Energy Group Employee Benefit
Trust's investment in the company's shares (see note 16),
Following a detailed consideration of the nature of the joint venture
agreement governing Black Beauty Coal Company ("BBCC"), the Group's interest in
that operation is now accounted for on an equity accounting basis, rather than
the proportional consolidation basis which had historically been applied. This
change in treatment better reflects the nature of the Group's interest in the
operation, its revenues and its assets. A summary of the effect of this change
in accounting treatment on the Group balance sheet is shown below:
<TABLE>
<CAPTION>
GROUP'S SHARE OF
BBCC'S BALANCE SHEET
----------------------------
AS AT AS AT
31 MARCH 1 OCTOBER
1997 1996
LM LM
------------- -------------
<S> <C> <C>
Tangible fixed assets..................................................................... 44 41
Working capital........................................................................... 43 37
Net debt.................................................................................. (62) (53)
-- --
Group's share of net assets............................................................... 25 25
-- --
</TABLE>
Each of the individual items in the summarised BBCC balance sheet at 1
October 1996 was included within the Group balance sheet as at 1 October 1996
under proportional consolidation. During the six month period ended 31 March
1997 adjustments have been made to remove these items due to the change in
treatment. The above BBCC balance sheet analysis as at 31 March 1997 is purely
for information purposes as it is only the Group's share of the net assets of
BBCC which is included within
III-18
<PAGE>
10. INVESTMENTS (CONTINUED)
the consolidated balance sheet under "Fixed Asset Investments-Associated
Undertakings". The balance at the start of the period is shown as an adjustment
in the above table of fixed asset investments.
The principal associated undertaking at 31 March 1997 was:
<TABLE>
<CAPTION>
SHARE
FINANCIAL CAPITAL PRE-TAX %
COUNTRY YEAR END AND RESERVES PROFIT OWNED
----------- ---------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Black Beauty Coal Company.......................... USA 31 December L74m L6m 33
</TABLE>
<TABLE>
<CAPTION>
INVESTMENT IN OWN SUBSIDIARY
SHARES UNDERTAKINGS NET
LM LM LM
------------------- ----------------- ---
<S> <C> <C> <C>
Company
As at 1 October 1996........................................................ -- -- --
Additions and acquisitions on demerger...................................... -- 52 52
Investment in own shares.................................................... 11 -- 11
-- -- --
As at 31 March 1997......................................................... 11 52 63
-- -- --
</TABLE>
<TABLE>
<CAPTION>
GROUP
1997
LM
-----------
<S> <C>
Current asset investments
Unlisted.................................................................................................. 10
--
</TABLE>
11. STOCKS
<TABLE>
<CAPTION>
GROUP
1997
LM
-----------
<S> <C>
Raw materials and consumables............................................................................. 118
Work in progress.......................................................................................... 66
Finished stock and items for resale....................................................................... 72
---
256
---
</TABLE>
III-19
<PAGE>
12. DEBTORS
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1997
LM LM
--------- ---------------
<S> <C> <C>
Due within one year:
Trade debtors.............................................................................. 647 --
Amounts owed by subsidiary undertakings.................................................... -- 42
Other debtors and prepayments.............................................................. 151 1
--
---------
798 43
--
---------
Due after one year:
Trade debtors.............................................................................. 6 --
Royalties receivable and other debtors..................................................... 232 --
Advance corporation tax recoverable........................................................ 91 7
Operating lease prepayments................................................................ 232 --
--
---------
561 7
--
---------
1,359 50
--
--
---------
---------
</TABLE>
13. CASH AND SHORT-TERM DEPOSITS
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1997
LM LM
--------- ---------------
<S> <C> <C>
Short-term deposits.......................................................................... 753 --
Cash......................................................................................... 385 40
--
---------
1,138 40
--
---------
</TABLE>
L408 million of the short-term deposits has been used to cash-collateralise
existing future obligations to certain banks in respect of the funding of the
operating leases of power stations leased from National Power.
III-20
<PAGE>
14. CREDITORS
<TABLE>
<CAPTION>
GROUP COMPANY
1997 1997
LM LM
--------- ---------------
<S> <C> <C>
Amounts falling due within one year:
Short-term loans and commercial paper.................................. 732 --
Finance leases......................................................... 6 --
Bank overdrafts........................................................ 61 --
Trade creditors........................................................ 376 1
Corporation tax........................................................ 105 7
Other taxation and social security..................................... 20 --
Other creditors........................................................ 148 5
Accruals and deferred income........................................... 270 --
Amounts owed to subsidiary undertakings................................ -- 3
Dividend proposed...................................................... 29 29
--
---------
1,747 45
--
--
---------
---------
</TABLE>
Weighted average interest rates as at 31 March 1997 on bank overdrafts were
12.8%, and on short-term loans and commercial paper 6.5%.
<TABLE>
<CAPTION>
GROUP
1997
LM
---------
<S> <C>
Amounts falling due after more than one year:
Loans not wholly repayable within 5 years:
$300 million 5% subordinated income note 2006.................................... 170
L350 million 8.375% bonds due 2004............................................... 348
L200 million 8.5% bonds due 2025................................................. 197
---------
715
Other loans repayable within 5 years................................................. 791
Net obligations under finance leases................................................. 149
---------
1,655
---------
---------
</TABLE>
L100 million of the L350 million 8.375% bonds has been converted into
floating rate debt by way of interest rate swaps expiring in 2004. As at 31
March 1997, the weighted average interest rate payable was 7.4%. Amounts shown
above for bonds are net of unamortised issue costs.
<TABLE>
<CAPTION>
GROUP
1997
LM
---------
<S> <C>
Long term debt is repayable as follows:
Years ending 31 March
1999............................................................................. 227
2000............................................................................. 243
2001............................................................................. 261
2002............................................................................. 149
Thereafter......................................................................... 775
---------
1,655
---------
---------
</TABLE>
III-21
<PAGE>
14. CREDITORS (CONTINUED)
The Group is exposed to loss in the event of non-performance by banks under
currency swap and interest rate protection agreements described above. The
extent of this exposure varies with the prevailing interest and currency rates
and was not material throughout the period. No single bank is party to more than
L235 million nominal value of such agreements. The Group does not anticipate
non-performance by any of its counterparties.
Obligations of commercial banks under standby letters of credit totalled
L135 million.
15. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
HEALTHCARE RECLAMATION
AND OTHER AND
OBLIGATIONS ENVIRONMENTAL DEFERRED
TO EMPLOYEES OBLIGATIONS TAXATION OTHER TOTAL
LM LM LM LM LM
----------------- ----------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
As at 1 October 1996................................. 899 285 192 181 1,557
Exchange adjustments................................. (43) (14) (9) (1) (67)
Utilised in period................................... (34) (13) (7) (15) (69)
Provided in period................................... 26 22 4 25 77
--- --- --- --- ---------
As at 31 March 1997.................................. 848 280 180 190 1,498
--- --- --- --- ---------
</TABLE>
The provided and unprovided liabilities for deferred taxation at 31 March
1997 were as follows:
<TABLE>
<CAPTION>
AMOUNTS AMOUNTS
PROVIDED UNPROVIDED
1997 1997
LM LM
------------- -------------
<S> <C> <C>
Excess of capital allowances............................................................. 87 753
Post-retirement healthcare benefits...................................................... -- (215)
Other timing differences................................................................. 93 (220)
--- ---
180 318
--- ---
--- ---
</TABLE>
16. SHARE CAPITAL
The share capital of the Company at 31 March 1997 was:
<TABLE>
<CAPTION>
ALLOTTED
CALLED-UP AND
AUTHORISED FULLY PAID
LM LM
--------------- -------------------
<S> <C> <C>
Ordinary shares (10p each)....................................... 100 52
--
--
---
---
</TABLE>
(a) On incorporation, the Company had an authorised share capital of L50,000
divided into 5,000,000 ordinary shares of 1p each, of which two fully paid
shares were issued to the subscribers.
(b) On 4 December 1996, 4,999,998 ordinary shares of 1p each in the authorised
but unissued share capital were redesignated as redeemable preference shares
of 1p each and issued for cash at par.
(c) On 22 January 1997 the authorised share capital was increased from L50,000
to L100 million by the creation of a further 9,995,000,000 ordinary shares
of 1p each.
(d) On 21 February 1997 the 4,999,998 preference shares of 1p each were redeemed
at par and redesignated as ordinary shares of 1p each in the authorised
share capital.
III-22
<PAGE>
16. SHARE CAPITAL (CONTINUED)
(e) On 24 February 1997:
(i) 5,208,578,160 ordinary shares of 1p each were issued, credited as fully
paid, to Hanson shareholders as a specie dividend to effect the demerger;
(ii) 8 ordinary shares of 1p each were issued at par, for cash; and
(iii) immediately on listing on the London Stock Exchange every 10 ordinary
shares of 1p each in the authorised and issued share capital were
consolidated into one ordinary share of 10p so that the authorised share
capital became L100 million divided into 1,000,000,000 ordinary shares of
10p each and the issued share capital became L52.1 million divided into
520,857,817 ordinary shares of 10p each.
(f) At 31 March 1997 a total of 9,506,511 ordinary shares with a nominal value
of L0.9 million were reserved for issue as follows:
(i) 1,598,538 shares in respect of contingent awards under the Company's
long term incentive plan. Subject to the requisite performance conditions
being met, this maximum number of shares will vest in February or March
2000;
(ii) 871,797 shares in respect of options under the Sharesave Scheme
exercisable from April to September 2000 at a subscription price of 465p
per share;
(iii) 5,168,260 shares in respect of options under the Sharesave Scheme
exercisable from April to September 2002 at a subscription price of 438p
per share;
(iv) 1,624,572 shares in respect of options issued under the Executive Share
Option Scheme exercisable from February 2000 to February 2007 at a
subscription price of 547.5p per share; and
(v) 243,344 shares in respect of contingent rights under the Company's
special bonus arrangement. Subject to the requisite performance
conditions being met, the shares will vest in June or July 1998.
The Energy Group Employee Benefit Trust has been established to acquire
ordinary shares in the Company, by subscription or purchase, with funds provided
by the Company to satisfy rights to shares arising on the exercise of share
options and on the vesting of performance-related share awards. At 31 March 1997
the trust had acquired 2,250,000 ordinary shares at a cost of L10.7 million,
financed by interest-free loans from the Company, which at the balance sheet
date totalled L15 million. Since 31 March 1997 the trust has acquired a further
1,850,891 ordinary shares at a cost of L9.3 million and a further interest-tree
loan of L5 million has been made to the trust. The trust has waived its right to
dividends on the ordinary shares held by it.
III-23
<PAGE>
17. RESERVES
<TABLE>
<CAPTION>
PROFIT AND OTHER TOTAL
LOSS ACCOUNT RESERVES 1997
GROUP LM LM LM
- ------------------------------------------------------------------------------- --------------- ----------- ---------
<S> <C> <C> <C>
As at 1 October 1996
Actual invested capital...................................................... 1,056 1,129 2,185
Pro forma adjustments........................................................ -- (383) (383)
----- ----- ---------
Pro forma invested capital................................................... 1,056 746 1,802
Increase in net debt........................................................... -- (42) (42)
Issue of share capital......................................................... -- (52) (52)
Other movements................................................................ -- (13) (13)
Exchange fluctuation on foreign net investments................................ (52) -- (52)
Profit retained for the period................................................. 150 -- 150
----- ----- ---------
As at 31 Match 1997............................................................ 1,154 639 1,793
----- ----- ---------
----- ----- ---------
</TABLE>
The pro forma invested capital reflects the figures included within the
Energy Group Listing Particulars.
No goodwill arose on the acquisition of the Group's interest in Teplarny
Brno.
The cumulative amount of goodwill resulting from acquisitions prior to 31
March 1997, net of goodwill attributable to subsidiary undertakings or
businesses disposed of prior to 31 March 1997, amounted to L1,147 million
derived by calculating the amount of historical goodwill in the currency of
acquisition at period end rates of exchange. This has been set off against
merger reserve and the net amount reported as other reserves.
Included in the consolidated reserves above was L1 million in respect of
associated undertakings, all of which arose in the period ended 31 March 1997.
There are no significant statutory or contractual restrictions on the
distribution of current profits of subsidiary or associated undertakings:
undistributed profits of prior years are, in the main, permanently employed in
the businesses of these companies. The undistributed profits of Group companies
overseas may be liable to overseas taxes and/or UK taxation (after allowing for
double taxation relief) if they were to be distributed as dividends.
<TABLE>
<CAPTION>
PROFIT AND
LOSS ACCOUNT
1997
COMPANY LM
- --------------------------------------------------------------------------------------------------- -----------------
<S> <C>
As at 1 October 1996............................................................................... --
Profit retained for the period..................................................................... 56
--
As at 31 March 1997................................................................................ 56
--
--
</TABLE>
As permitted by section 230 of the Companies Act, the Company has not
presented its own profit and loss account. The profit for the period dealt with
in the financial statements of the Company was L85 million. After the proposed
dividend of L29 million, the retained profit for the period was L56 million.
18. ACQUISITIONS AND DISPOSALS
During the period the Group acquired 52.8% of the issued share capital of
Teplarny Brno, a heating and generation company based in the Czech Republic. For
the period since acquisition, turnover of
III-24
<PAGE>
18. ACQUISITIONS AND DISPOSALS (CONTINUED)
L18 million and operating profit of L3 million in respect of this acquisition
are included within the consolidated profit and loss account. The total purchase
consideration for the acquisition of this 52.8% interest was L21 million. Its
operating assets and liabilities were as follows:
<TABLE>
<CAPTION>
BOOK VALUE ADJUSTMENTS FAIR VALUE
LM LM LM
----------------- ----------------- ---------------
<S> <C> <C> <C>
Tangible fixed asset..................................................... 33 10 43
Fixed asset investments.................................................. 2 -- 2
Working capital.......................................................... (4) (2) (6)
Cash..................................................................... 1 -- 1
-- -- --
32 8 40
-- -- --
-- -- --
Cash consideration....................................................... 21
Minority interest........................................................ 19
--
40
--
--
</TABLE>
The net cash flow for the acquisition was:
<TABLE>
<CAPTION>
LM
-------------
<S> <C> <C> <C>
Cash consideration....................................................... 21
Cash acquired............................................................ (1)
--
Net cash paid............................................................ 20
--
--
</TABLE>
Fair value adjustments were made to the book value of the assets and
liabilities of the above acquisition to bring them into alignment with the
Company's accounting policies and to adjust where applicable the carrying values
of certain assets and liabilities.
The above figures reflect a preliminary allocation of the purchase
consideration to the net assets and liabilities of the acquisition made in the
period. The preliminary allocation will be reviewed based on additional
information up to 31 March 1998. The directors do not believe that any net
adjustments resulting from such a review would have a material adverse effect on
the Group.
For the year prior to acquisition, Teplarny Brno reported profit after tax
of L4 million.
The Group made no significant disposals during the period.
19. FINANCIAL COMMITMENTS
(a) Capital commitments of the Group as at 31 March 1997 were as follows:
<TABLE>
<CAPTION>
LM
---------
<S> <C>
Contracted but not provided for............................................................................ 146
---
---
</TABLE>
III-25
<PAGE>
19. FINANCIAL COMMITMENTS (CONTINUED)
(b) Gas "take or pay" contracts
There are various types of contract for the purchase of gas. Almost all
include "take or pay" obligations, under which the buyer agrees to pay for a
minimum quantity of gas in a year. In order to help meet the expected needs of
its wholesale and retail customers, Eastern has entered into a range of gas
purchase contracts. As at 31 March 1997 the commitments under long-term gas
purchase contracts amounted to an estimated L2.2 billion covering periods up to
18 years forward.
(c) The future minimum rental commitments as at 31 March 1997 under finance
leases and non-cancellable operating leases, together with the present value of
minimum lease payments under finance leases were as follows:
<TABLE>
<CAPTION>
OPERATING FINANCE
LEASES LEASES
LM LM
------------- -----------
<S> <C> <C>
Year ending 31 March
1998...................................................................................... 22 16
1999...................................................................................... 66 19
2000...................................................................................... 62 20
2001...................................................................................... 38 18
2002...................................................................................... 36 17
Thereafter.................................................................................. 120 121
--- ---
Total minimum lease payments................................................................ 344 211
---
Less amount representing interest........................................................... (56)
---
Present value of minimum lease commitments.................................................. 155
---
</TABLE>
The majority of the operating lease commitments relate to coal-fired power
stations. Additional payments of approximately L6 per megawatt hour (indexed)
linked to output levels from these stations are payable for between the first
five and seven years of their operation by the Group.
(d) The annual commitments under non-cancellable operating leases at 31
March 1997 were:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
LM LM
--------------- -----------
<S> <C> <C>
Leases expiring:
Within one year........................................................................... -- --
Within two to five years.................................................................. 2 5
After five years.......................................................................... 1 14
--- ---
3 19
--- ---
</TABLE>
III-26
<PAGE>
20. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1997
LM
-----
<S> <C>
Operating profit before exceptional item................................................................... 317
Depreciation and depletion................................................................................. 100
Profit on sales of tangible fixed assets................................................................... (3)
Share of profit of associated undertakings................................................................. (2)
Increase in investments.................................................................................... (2)
Increase in stocks......................................................................................... (8)
Increase in debtors........................................................................................ (83)
Increase in creditors...................................................................................... 50
Provisions................................................................................................. (23)
---
Net cash inflow from operating activities.................................................................. 346
---
</TABLE>
21. ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
SHARE LOANS AND CURRENT CURRENT
CAPITAL FINANCE LEASES DEBENTURE LOANS BANK LOANS
LM LM LM LM
----------- --------------- ------------------- ---------------
<S> <C> <C> <C> <C>
Balance as at 1 October 1996............................ -- 945 154 14
Pro forma additional net debt at 1 October 1996......... -- -- -- 381
--- ----- --- ---
Pro forma balance at 1 October 1996..................... -- 945 154 395
Non-cash demerger share issue........................... 52 -- -- --
Additional debt on demerger............................. -- -- -- 42
Exchange movements...................................... -- (12) (9) --
Cash inflow (outflow) from financing.................... -- 789 (113) 262
Other movements......................................... -- (54) -- (6)
Current loan reallocations.............................. -- (13) 13 --
--- ----- --- ---
Balance as at 31 March 1997............................. 52 1,655 45 693
--- ----- --- ---
</TABLE>
The pro forma balance at 1 October 1996 reflects the figures included within
the Energy Group Listing Particulars. Other movements principally comprise the
debt of BBCC which is now accounted for on an equity accounting basis (see note
10).
III-27
<PAGE>
22. ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
PRO FORMA AS AT ADDITIONAL DEBT OTHER EXCHANGE
1 OCTOBER 1996 ON DEMERGER CASH FLOW MOVEMENTS MOVEMENTS
LM LM LM LM LM
----------------- ----------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Cash......................... 173 -- 221 (1) (8)
Overdrafts................... (119) -- 58 -- --
---
279
---
Debt due after 1 year........ (945) -- (789) 67 12
Debt due within 1 year....... (549) (42) (149) (7) 9
---
(938)
---
Short-term deposits.......... -- -- 753 -- --
------ --- --- --- ---
(1,440) (42) 94 59 13
------ --- --- --- ---
<CAPTION>
AS AT
31 MARCH 1997
LM
---------------
<S> <C>
Cash......................... 385
Overdrafts................... (61)
Debt due after 1 year........ (1,655)
Debt due within 1 year....... (738)
Short-term deposits.......... 753
------
(1,316)
------
</TABLE>
The pro forma net debt at 1 October 1996 reflects the figures included
within the Energy Group Listing Particulars. Other movements principally arise
from the change in accounting treatment of the Group's interest in Black Beauty
Coal Company.
23. RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN NET DEBT (NOTE 22)
<TABLE>
<CAPTION>
1997
LM
---------
<S> <C>
Net cash inflow in the period........................................................................... 279
Increase in liquid cash resources....................................................................... 753
Change in debt resulting from cash flows................................................................ (938)
---------
94
Additional debt on demerger............................................................................. (42)
Other movements......................................................................................... 59
Exchange movements...................................................................................... 13
---------
Movement in net debt in the period...................................................................... 124
Opening pro forma net debt.............................................................................. (1,440)
---------
Closing net debt........................................................................................ (1,316)
---------
</TABLE>
Other financing movements principally arise from the change in accounting
treatment of the Group's interest in Black Beauty Coal Company.
24. PENSIONS AND OTHER POST-RETIREMENT BENEFITS
PENSIONS
The Group participates in several defined benefit pension plans in the UK,
the USA and Australia which cover the majority of employees. The benefits for
these plans are based primarily on years of credited service and final average
pensionable pay as defined under the respective plan provisions.
The total cost of all pensions of the Group in the six months ended 31 March
1997 was L10 million.
In the USA, Peabody sponsors four main defined benefit pension plans. With
the exception of one plan, assets are set aside in separate trustee-administered
funds. Each of these plans is assessed annually by independent qualified
actuaries using the projected unit method, the latest valuation being
III-28
<PAGE>
24. PENSIONS AND OTHER POST-RETIREMENT BENEFITS (CONTINUED)
as at 30 September 1996. In addition, Peabody participates in two multi-employer
plans. In these plans, the assets contributed by the participating employers are
aggregated and the contributions payable are determined by independent qualified
actuaries in accordance with industry-wide agreements. Peabody also has a number
of defined contribution plans. Costs relating to the multi-employer and the
defined contribution plans are recognised as incurred.
In the UK, the majority of Eastern employees are members of the ESPS which
provides pensions of a defined benefit nature for employees throughout the
Electricity Supply Industry. The ESPS operates on the basis that there is no
cross-subsidy between employers and the financing of Eastern's pensions
liabilities is therefore independent of the experience of other participating
employers. The assets of the ESPS are held in a separate trustee-administered
fund.
The pension cost relating the Eastern section of the ESPS is assessed in
accordance with the advice of independent qualified actuaries using the
projected unit method. The latest actuarial valuation was carried out as at 31
March 1995.
The total market value of the assets of the US plans, excluding the
multi-employer and defined contribution plans, was L255 million as at 30
September 1996. The market value of the assets of Eastern's section of the ESPS
was L681 million as at 31 March 1995.
The assumptions which had the most significant effect on the results of the
valuations were that the rate of investment return would exceed salary increases
(exclusive of merit awards) by 2 1/2% per annum for the UK plans and by an
average of 3 1/2% per annum in the USA, and with investment returns in the UK
being assumed to exceed future pension increases by 4% per annum. The actuarial
value of the assets was sufficient to cover 104% of the benefits that had
accrued to members in the UK and 98% in the USA.
Provisions for liabilities and charges (note 15) include a provision of L4
million representing the excess of the accumulated amount charged against the
Group's profits in respect of pension costs over the contributions paid to the
plans concerned.
POST-RETIREMENT HEALTHCARE
The Group also provides post-retirement healthcare and life assurance
benefits under plans mainly in the USA to certain groups of its retired and
active employees.
As at 31 March 1997 the accumulated post-retirement benefit obligation
excluding pensions, as assessed by independent qualified actuaries, for retirees
and the obligation for prior service costs of currently active employees is
approximately L576 million. The charge for the six months ended 31 March 1997
has been accrued based upon actuarial calculations determined in accordance with
required accounting standards. This resulted in the recognition of service costs
for benefits earned during the year of approximately L2 million, and interest
cost on accumulated benefit obligations of approximately L21 million. The
actuarial assumptions used to estimate the obligations vary according to the
claims experience and economic conditions relevant to each plan. It has been
assumed that the annual per capita cost of benefits will increase 6%--8%
depending on claims experience and economic conditions relevant to each plan.
This rate is assumed to decrease 1/2% a year to 5%. The weighted average
discount rate used in determining the accumulated post-retirement benefit
obligation was 7 1/2% as at 31 March 1997.
25. CONTINGENT LIABILITIES
Certain properties in the USA in which the Group has, or had, an interest
are subject to actual or potential environmental claims. The directors have made
a L42 million provision, included in provisions
III-29
<PAGE>
25. CONTINGENT LIABILITIES (CONTINUED)
for reclamation and environmental obligations (note 15), in relation to these
claims, but significant uncertainty exists as to whether these claims will be
pursued against the Group in all cases and, where they are pursued, the amount
of the eventual costs and liabilities.
Following its election to government in the UK, the Labour Party has
reaffirmed its intention to impose a one-off "windfall levy" on regulated
industries in the UK. It is not possible to predict the amount of any such levy,
but, if imposed, such levy could be substantial.
In February 1997 final determinations were made against The National Grid
Company plc ("National Grid") and its group trustees by the Pensions Ombudsman
on complaints by two pensioners in National Grid's section of the ESPS relating
to the use of the surplus arising under the actuarial valuation of the National
Grid section as at 31 March 1992 to meet certain additional costs arising from
the payment of pensions on early retirement pursuant to reorganisation or
redundancy and certain additional contributions. These determinations were set
aside by the High Court on 10 June 1997 and the arrangements made by National
Grid and its trustees in dealing with its section's surplus were confirmed,
although leave to appeal to the Court of Appeal has been granted to the two
pensioners. If a similar complaint were to be made against Eastern in relation
to its use of actuarial surplus in its section of the ESPS, it would resist it,
ultimately through the courts. However, if a determination were finally to be
made against it and upheld by the courts, Eastern could have a potential
liability to repay to its section of the ESPS an amount estimated by the
directors to be up to L75 million (exclusive of any applicable interest
charges).
The Group is subject to business risks which are actively managed against
exposures. A list of risk factors was described in the Energy Group Listing
Particulars.
III-30
<PAGE>
THE ENERGY GROUP PLC--PRO FORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA PRO FORMA SIX MONTHS SIX MONTHS
PRO FORMA YEAR ENDED YEAR ENDED ENDED ENDED
NOTE 31 MAR 1997 30 SEPT 1996 31 MAR 1997 31 MAR 1996
----------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
LMN LMN LMN LMN
TURNOVER
Coal...................................... 1,452 1,461 647 656
Power..................................... 2,887 2,178 1,801 1,092
Networks.................................. 478 482 274 278
Other..................................... 24 24 9 9
Intra-group............................... (381) (378) (212) (209)
------ ------ ------ ------
4,460 3,767 2,519 1,826
------ ------ ------ ------
OPERATING PROFIT
Coal...................................... 154 154 66 66
Power..................................... 168 83 129 44
Networks.................................. 200 211 122 133
Other..................................... (2) (2) -- --
------ ------ ------ ------
PRE-EXCEPTIONAL OPERATING PROFIT.......... 520 446 317 243
Restructuring and reorganisation costs.... (2) (20) (20)
National Grid Group flotation............. (3) 44 44
------ ------ ------ ------
TOTAL OPERATING PROFIT.................... 500 490 297 287
Profit on disposal of First Hydro......... (4) 25 25
Net interest payable and similar
charges................................. (5) (88) (68) (37) (33)
------ ------ ------ ------
PROFIT ON ORDINARY ACTIVITIES BEFORE
TAXATION................................ 412 447 260 279
Taxation charge for the period............ (6) (126) (137) (81) (89)
------ ------ ------ ------
PROFIT ON ORDINARY ACTIVITIES AFTER
TAXATION................................ 286 310 179 190
------ ------ ------ ------
EARNINGS PER SHARE
Pre-exceptional........................... (7) 58.8p 51.8p 38.2p 28.8p
Basic..................................... (7) 55.1p 59.5p 34.5p 36.5p
</TABLE>
Notes to the above pro forma consolidated profit and loss account are shown on
page III-33.
III-31
<PAGE>
NOTES TO THE PRO FORMA CONSOLIDATED PROFIT AND LOSS ACCOUNT
(1) The pro forma information for the year ended 30 September 1996 has been
extracted from the Listing Particulars issued during January 1997 in respect
of the demerger. This assumed additional net debt of L381 million arising as
a result of the demerger, together with an average interest rate of 6.2 per
cent.
(2) Restructuring and reorganisation costs relate to the re-opening of Eastern's
voluntary severance scheme.
(3) National Grid Group flotation relates to an interim dividend of L11 million
and special dividends (net of associated costs) totalling L165 million
received in connection with the flotation of the National Grid Group.
Amounts credited to electricity customers in the form of a discount on
electricity bills connected with this flotation totalled L132 million.
(4) Profit on disposal of First Hydro arose on the disposal of the Group's
interest in the pumped storage business of National Grid Group.
(5) Pro forma net interest payable and similar charges for the year ended 31
March 1997 are based on the actual interest charges borne by the individual
operating entities which now comprise the Group, increased for an additional
pro forma interest charge calculated as 7.5 per cent. of the actual
additional net debt allocated to the Group by Hanson on demerger.
Pro forma net interest payable and similar charges for the six months ended
31 March 1996 are calculated on a similar basis, but incorporating an
additional pro forma interest charge based on the additional net debt and
average interest rate assumed in the Listing Particulars.
(6) Pro forma tax charge for the year ended 31 March 1997 has been calculated at
the same effective rate before exceptional items as that which existed for
the six months ended 31 March 1997.
Pro forma tax charge for the six months ended 31 March 1996 has been
calculated at the same effective rate before exceptional items as that
assumed in the pro forma tax charge for the year ended 30 September 1996.
(7) The pro forma earnings per share for the six months ended 31 March 1996 have
been calculated on the pro forma profit for the period and on 520,857,817
shares, being the number of ordinary shares assumed in the Listing
Particulars.
The actual earnings per share for the six months ended 31 March 1997 and the
pro forma earnings per share for the year ended 31 March 1997 are based on
the respective actual and pro forma profits for the relevant periods and on
518,607,817 shares which excludes the 2,250,000 shares held by The Energy
Group Employee Benefit Trust, which has waived its right to dividends on the
shares it holds.
(8) No pro forma adjustments have been made for additional annual administration
costs that are expected to arise following the demerger. The directors
estimate that such costs will amount to approximately L15 million per annum.
III-32
<PAGE>
UNAUDITED PRO FORMA COMBINED PROFIT AND LOSS ACCOUNT AND STATEMENT OF NET
ASSETS.
The text on pages III-33 to III-35 has been extracted from pages 62 and 63
of the Energy Group Listing Particulars:
"UNAUDITED PRO FORMA COMBINED PROFIT AND LOSS ACCOUNT
The pro forma combined profit and loss account of the Group for the year
ended 30 September 1996 is as follows:
<TABLE>
<CAPTION>
NOTE HISTORICAL ADJUSTMENTS PRO FORMA
----- ----------- --------------- -----------
<S> <C> <C> <C> <C>
LMN LMN LMN
Turnover before special discount.................................... 3,767 -- 3,767
Costs and overheads less other income............................... (3,321) -- (3,321)
----------- --- -----------
Operating profit before exceptional items........................... 446 -- 446
National Grid Group flotation....................................... 44 -- 44
----------- --- -----------
Operating profit.................................................... 490 -- 490
Profit on disposal of First Hydro................................... 25 -- 25
Net interest........................................................ (1) (43) (25) (68)
----------- --- -----------
Profit on ordinary activities before taxation....................... 472 (25) 447
Taxation............................................................ (2) (115) (22) (137)
----------- --- -----------
Profit for the year................................................. 357 (47) 310
----------- --- -----------
----------- --- -----------
Earnings per share.................................................. (4) 68.5p 59.5p
----------- -----------
----------- -----------
Adjusted earnings per share......................................... 60.8p 51.8p
----------- -----------
----------- -----------
</TABLE>
Notes
(1) The adjustment to interest reflects the drawdown of L381 million under the
Group's principal banking facilities. Additional interest expense has been
calculated thereon at an effective rate of 6.2 per cent. based on three
month LIBOR at 30 September 1996 together with the margin payable under such
facilities. A change of 1/8 per cent. in the effective rate would change the
interest expense by less than L1 million per annum.
(2) The pro forma taxation adjustment has been calculated to reflect the impact
of the adjusted interest charge resulting from the change in the capital
structure of the Group following the Demerger (L8 million) and after
allowing for Group relief surrendered (L30 million) for nil consideration by
other Hanson Group companies.
(3) No adjustment has been made for additional annual administration costs that
are expected to arise following the Demerger. The Directors estimate that
such costs will amount to approximately L15 million per annum.
(4) Pro forma earnings per share have been calculated on the basis of the pro
forma profit for the year and on 521 million shares, being the expected
minimum number of Energy ordinary shares in issue at Admission. Adjusted pro
forma earnings per share are based on the same number of shares and the
profit for the year after excluding the items relating to the National Grid
Group flotation, the profit on disposal of the Group's interest in First
Hydro and related taxation.
III-33
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF NET ASSETS
The pro forma combined statement of net assets of the Group, based on its
combined balance sheet as at 30 September 1996, is as follows:
<TABLE>
<CAPTION>
PRO
NOTE HISTORICAL ADJUSTMENTS FORMA
----- ----------- --------------- ---------
<S> <C> <C> <C> <C>
LMN LMN LMN
FIXED ASSETS
Tangible.............................................................. 3,975 -- 3,975
Investments........................................................... 17 -- 17
----------- --- ---------
3,992 -- 3,992
----------- --- ---------
CURRENT ASSETS
Stocks................................................................ 254 -- 254
Amounts owed by Hanson Group.......................................... (1) 2 (2) --
Debtors falling due after one year.................................... 536 -- 536
Debtors falling due within one year................................... 763 -- 763
Investments........................................................... 8 -- 8
Cash at bank and in hand.............................................. (2) 173 -- 173
----------- --- ---------
1,736 (2) 1,734
----------- --- ---------
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Bank and other borrowings......................................... (2) (287) (381) (668)
Other creditors................................................... (754) -- (754)
----------- --- ---------
(1,041) (381) (1,422)
----------- --- ---------
NET CURRENT ASSETS.................................................... 695 (383) 312
----------- --- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES................................. 4,687 (383) 4,304
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Long-term debt and finance leases................................. (2) (945) -- (945)
Provision for liabilities and charges............................. (1,557) -- (1,557)
----------- --- ---------
NET ASSETS............................................................ 2,185 (383) 1,802
----------- --- ---------
----------- --- ---------
</TABLE>
Net cash/(debt) is analysed as follows:
<TABLE>
<CAPTION>
PRO
HISTORICAL ADJUSTMENTS FORMA
----------- --------------- ---------
<S> <C> <C> <C>
LMN LMN LMN
Cash at bank and in hand...................................................... 173 -- 173
----------- --- ---------
Bank and other borrowings due within one year................................. (287) (381) (668)
Bank borrowings and loan notes due after one year............................. (945) -- (945)
----------- --- ---------
GROSS DEBT.................................................................... (1,232) (381) (1,613)
----------- --- ---------
NET DEBT...................................................................... (1,059) (381) (1,440)
----------- --- ---------
----------- --- ---------
</TABLE>
Notes:
(1) Immediately prior to the Demerger, net amounts owed by the Hanson Group
(other than the Relevant Peabody Debt, which will be settled before
completion of the Peabody Holding Transaction) will be settled.
(2) Under the Demerger Agreement, the Group is to assume additional borrowings
which on a pro forma basis as at 30 September 1996 would increase the
Group's net bank and other borrowings to
III-34
<PAGE>
L1,440 million. The adjustment shown above gives effect to the draw down of
L381 million under the New Credit Facility.
(3) In addition to the adjustment for the draw down of L381 million referred to
above, further adjustments have been agreed between the Company and Hanson
in respect of the period since 30 September 1996, reflecting principally the
Group's contribution towards the dividend paid by Hanson on 10 January 1997.
These adjustments amount to L30 million, as a result of which the total
amount expected to be drawn down under the New Credit Facility after
completion of the Demerger Transactions is approximately L411 million.
(4) No adjustments have been made to reflect trading since 30 September 1996."
4. COMBINED FINANCIAL INFORMATION.
The combined financial information on pages III-35 to III-60 has been
extracted from the ACCOUNTANTS' REPORTS--SECTION 1: THE GROUP contained in Part
4 of the Energy Group Listing Particulars.
"Basis of Preparation
The combined financial information has been prepared to show the performance
of the Group for the three years ended 30 September 1996 as if it had been in
existence from 1 October 1993 as described below. It is based on the audited
annual financial returns submitted to Hanson for consolidation purposes in
respect of Eastern, Peabody and the infrastructure companies. Peabody and the
infrastructure companies were wholly-owned by Hanson throughout the period.
Eastern was acquired by Hanson on 18 September 1995.
(i) The combined financial information has been prepared using merger
accounting principles as if the companies and businesses comprising the
Group had been part of the Group for all periods presented, or, in the
case of those acquired or disposed of by Hanson during this period, from
or up to the date control passed, as appropriate. In order for the Group
accounts to show a true and fair view, this basis of accounting will be
used following the Demerger.
Some individual elements of the reorganisation under Rollalong and of the
Demerger Transactions have been or will be for cash consideration. Such
individual elements do not satisfy all of the conditions for merger
accounting to be permitted in accordance with UK Financial Reporting
Standard 6 and Schedule 4A to the Companies Act 1985 (the "Companies
Act"), which would require such transfers to be accounted for using
acquisition accounting principles.
The Directors took account of the continuity of ownership under Hanson of
all of its energy-related businesses that will form the Group following
completion of the Demerger Transactions and considered that the Demerger
Transactions, taken as a whole, required the adoption of merger
accounting principles in order to show a true and fair view in accordance
with section 226(5) of the Companies Act.
The adoption of acquisition accounting principles for some individual
elements of the reorganisation under Rollalong and of the Demerger
Transactions would have required: the restatement at fair value of
certain assets and liabilities transferred; the recognition of goodwill
which, in some cases, would not be representative of that arising had the
transfers been conducted at arm's length; and the inclusion of the
results of certain businesses only from the various arbitrary dates
chosen for the transfers. As a result of the foregoing, in the opinion of
the directors, combined financial information using different bases of
accounting would not give a true and fair view. No quantification has
been given of the effects of this departure because to do so would be
misleading.
(ii) Although Eastern was acquired by Hanson on 18 September 1995, its
results and cash flows have been included in the combined financial
information based on an effective acquisition
III-35
<PAGE>
date of 30 September 1995. The results and cash flows for the period 19
to 30 September 1995 are not material.
(iii) Transactions and balances owing between companies and businesses
forming part of the Group have been eliminated.
(iv) Interest income and expense are based on amounts recorded in the
historical financial returns submitted to Hanson in respect of the
companies and businesses forming part of the Group. No adjustments have
been made to reflect the capital structure of the Group as it will be
following the Demerger and, as such, the historical level of interest
income and expense may not be representative of such amounts following
the Demerger.
(v) Taxation charges and liabilities are based on amounts recorded in the
historical financial returns submitted to Hanson in respect of the
companies and businesses forming part of the Group, except that
adjustments have been made, where appropriate, to provide for deferred
tax liabilities consequent upon the Group being on a stand-alone basis
following Demerger. Prior to the Demerger and in previous accounting
periods, there have been various tax-sharing arrangements between Hanson,
those subsidiaries that will form part of the Group after the Demerger
and other Hanson subsidiaries. These arrangements have had the effect
that tax charges shown in the combined financial information may not be
representative of tax charges that will be incurred following the
Demerger.
PRINCIPAL ACCOUNTING POLICIES
The combined financial information has been prepared in accordance with
applicable UK Accounting Standards. The principal accounting policies, which
have been applied consistently for all periods, are set out below.
ACCOUNTING CONVENTION
The combined financial information has been prepared in accordance with the
historical cost convention.
ACCOUNTING FOR ACQUISITIONS
The results of acquired companies and businesses are dealt with in the
combined financial information from the date of acquisition. On the acquisition
of a company or business, fair values reflecting conditions at the date of
acquisition are attributed to the identifiable tangible assets and liabilities
acquired. Where the consideration paid exceeds the fair value of the net
tangible assets acquired, the difference is treated as goodwill and is set off
against invested capital in the acquisition period.
ASSOCIATED UNDERTAKINGS
Investments that are not subsidiary undertakings but in which the Group has
a long-term interest of between 20 per cent. and 50 per cent. of the equity and
over which the Group exercises significant influence (other than those which are
joint ventures) have been accounted for as associated companies using the equity
method of accounting. Where the Group has an interest in an unincorporated joint
venture or a partnership, such interest has been accounted for using
proportional consolidation on a line-by-line basis.
TURNOVER
Coal sales revenue is recognised at the time of shipment. Electricity and
gas sales represent consumption by the customer during the year including an
estimated accrual for the value of electricity and gas consumed by customers
between the date of their last meter reading and the year end.
III-36
<PAGE>
Turnover is stated exclusive of UK value added tax but inclusive of related US
coal production duties and UK fossil fuel levy.
TANGIBLE FIXED ASSETS
(A) CAPITALISATION
Tangible fixed assets are stated at cost or valuation less accumulated
depreciation.
Interest costs relating to the construction or development of production
facilities are capitalised during the pre-production period. Interest costs
incurred after production has commenced are expensed.
Costs incurred to increase the productive capacity of a coal mine or gas
field are capitalised. Costs incurred to maintain the productive capacity of a
coal mine or gas field are expensed.
(B) DEPRECIATION AND DEPLETION
Buildings and improvements at coal mines are depreciated over the expected
productive life of the mine from the date that full production commences.
Depletion of coal and gas reserves is charged on a unit-of-production basis,
based on an assessment of available and proven reserves respectively.
Freehold land is not depreciated.
Depreciation of assets other than freehold land, coal and gas reserves and
buildings and improvements at coal mines is charged as follows:
<TABLE>
<S> <C>
Electricity generating system assets 30 years
Electricity distribution system assets 40 years at a rate of 3 per cent. per annum
for first 20 years and 2 per cent. per annum
for remaining 20 years
Freehold buildings up to 60 years
Leasehold buildings shorter of 60 years and remaining period of
lease
Telecommunications network 10 to 40 years
Plant, equipment and motor vehicles 2 to 49 years
</TABLE>
(C) ASSETS HELD UNDER LEASES
Assets held under finance leases are included within fixed assets at the
capitalised value of future minimum lease payments and are depreciated over the
shorter of their lease period and their useful life. The capital element of the
future payments is treated as a liability and the interest element is charged to
the profit and loss account so as to reflect a constant annual rate of interest
on the remaining balance of the outstanding obligation.
Rentals paid on operating leases are charged to the profit and loss account
on a straight-line basis over the shorter of the lease period and the useful
life of the leased asset.
(D) IMPAIRMENT
At each financial year end, an assessment is made of the recoverability of
the balance sheet carrying values of coal and gas assets. This assessment is
made individually at the lowest operational level at which income and cash flows
are monitored as a separate unit. A reduction in carrying value is triggered
when the current book value of such a unit of assets exceeds the undiscounted
future cash
III-37
<PAGE>
flows. Where shortfalls in cash flows compared with carrying values arise, the
assets are written down to fair value, determined usually by discounted future
cash flows from the assets.
(E) RECLAMATION, RESTORATION AND ABANDONMENT COSTS
Provision is made for surface reclamation and restoration costs in respect
of coal mines and for abandonment costs in respect of gas fields in accordance
with local conditions and requirements on the basis of costs estimated at the
balance sheet date. The costs are charged to accounting periods on a
unit-of-production basis for gas assets and over the life of the mine for coal.
(F) ENVIRONMENTAL COSTS AND OBLIGATIONS
Costs incurred in respect of environmental protection are capitalised if
they provide future economic benefit from the related production facility.
Liabilities for environmental clean-up costs are recognised when clean-ups are
probable and the associated costs can be estimated reasonably.
(G) CUSTOMERS' CONTRIBUTIONS
Customer contributions to electricity distribution system assets are
credited to the profit and loss account over a 40-year period at a rate of 3 per
cent. per annum for the first 20 years followed by 2 per cent. per annum for the
following 20 years. The unamortised amount of these contributions is shown as a
deduction from tangible fixed assets.
(H) DISPOSAL OF FIXED ASSETS
HM Government is entitled to a proportion of any gain realised by Eastern on
certain property disposals made up to 31 March 2000. A provision for clawback in
respect of such disposals is made to the extent that it is probable that a
liability would crystallise. Such a liability would crystallise when an actual
or deemed disposal occurs.
STOCKS
Stocks are stated at the lower of cost and net realisable value. Cost
includes labour, supplies, equipment and an appropriate proportion of operating
and overhead costs.
INVESTMENTS
Fixed asset investments are stated at cost or Directors' valuation less
provisions for permanent diminutions in value. Current asset investments are
stated at the lower of cost and net realisable value. Investment income is
included in the accounts of the year in which it is receivable.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded at the exchange rates ruling
at the date of the transactions. Monetary assets and liabilities denominated in
foreign currencies are translated at the rates of exchange ruling at the balance
sheet date. All differences on translation are taken to the profit and loss
account.
Average rates of exchange ruling during the period are used to translate the
profit and loss accounts of overseas subsidiary and associated undertakings. The
balance sheets of overseas subsidiary undertakings are translated at rates
ruling at the balance sheet date. Differences on translation arising from
changes in the sterling value of overseas net assets, together with the
differences between profit and loss accounts translated at average rates and at
balance sheet rates, are shown as a movement in invested capital and in the
statement of recognised gains and losses. Other exchange rate differences are
dealt with in the profit and loss account for the period.
III-38
<PAGE>
DEFERRED TAXATION
Deferred taxation is provided on the liability method in respect of timing
differences except where the liability or asset is not expected to crystallise
in the foreseeable future. No deferred tax asset is recognised corresponding to
liabilities provided for in respect of post-retirement healthcare benefits.
Provision is not made for additional taxation which might be payable if profits
retained by overseas companies were distributed as dividends.
HEALTHCARE AND OTHER OBLIGATIONS TO EMPLOYEES
The TEG Group provides healthcare and other benefits, including workers'
compensation benefits, to certain qualifying employees and former employees of
the Peabody companies and their dependants under the provisions of various
benefit plans or as required by US state or federal law. These benefits are
accrued and charged to the profit and loss account over the expected service
lives of the employees with the exception of pneumoconiosis (black lung)
benefits in respect of employees ceasing employment prior to 1 July 1973, which
are accounted for as payments are made. Pneumoconiosis benefits in respect of
employees ceasing employment after 30 June 1973 are estimated actuarially; the
last actuarial review was performed as at 1 October 1995. Other workers'
compensation benefits are also assessed actuarially.
PENSION COSTS
The Group operates retirement benefit schemes in the UK, the US and
Australia, in accordance with local regulations and custom. The assets of the
schemes are held in separate funds administered by trustees.
The cost of providing pensions is charged to the combined profit and loss
account over employees' service lives. The pension costs relating to those
schemes which provide defined benefits are assessed in accordance with the
advice of qualified actuaries.
III-39
<PAGE>
COMBINED PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C> <C>
NOTE 1994 1995 1996
----------- --------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C> <C>
Turnover..................................................................... 1,247 1,446 3,635
Add: Special discount........................................................ -- -- 132
--------- --------- ---------
Turnover before special discount............................................. 1 1,247 1,446 3,767
Costs and overheads less other income........................................ 2 (1,148) (1,311) (3,321)
--------- --------- ---------
Operating profit before National Grid Group flotation........................ 99 135 446
National Grid Group flotation
dividends receivable..................................................... 4 -- -- 176
special discount......................................................... 4 -- -- (132)
--------- --------- ---------
Operating profit............................................................. 1 99 135 490
Profit on disposal of First Hydro............................................ 4 -- -- 25
Net interest................................................................. 5 (14) (11) (43)
--------- --------- ---------
Profit on ordinary activities before taxation................................ 85 124 472
Taxation..................................................................... 6 (17) (56) (115)
--------- --------- ---------
Profit for the year.......................................................... 68 68 357
--------- --------- ---------
--------- --------- ---------
Earnings per share........................................................... 7 13.1p 13.1p 68.5p
--------- --------- ---------
--------- --------- ---------
Adjusted earnings per share.................................................. 7 13.1p 13.1p 60.8p
--------- --------- ---------
--------- --------- ---------
</TABLE>
The net interest expense and taxation shown above were affected
significantly by the financing and taxation arrangements of Hanson Group.
Accordingly, the amounts of those items included above may not be representative
of those that may arise following the Demerger. The results of Eastern are
included from 1 October 1995. The results of Peabody Holding are included for
the three years ended 30 September 1996 as disclosed in Note 1.
COMBINED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES:
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Profit for the year......................................................................... 68 68 357
Currency differences on foreign net investments............................................. (29) -- 20
-- --
---
Total recognised gains relating to the year................................................. 39 68 377
-- --
-- --
---
---
</TABLE>
III-40
<PAGE>
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C> <C>
NOTE 1994 1995 1996
----------- --------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets.............................................................. 8 2,190 3,774 3,975
Investments.................................................................. 9 6 37 17
--------- --------- ---------
2,196 3,811 3,992
--------- --------- ---------
CURRENT ASSETS
Stocks....................................................................... 10 120 161 254
Amounts due from the Hanson Group............................................ 196 12 2
Debtors
amounts falling due after one year......................................... 11 164 189 536
amounts falling due within one year........................................ 11 237 579 763
Investments.................................................................. 12 -- 547 8
Short-term deposits.......................................................... -- 264 --
Cash at bank and in hand..................................................... 106 79 173
--------- --------- ---------
823 1,831 1,736
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR............................... 13 (451) (862) (1,041)
--------- --------- ---------
NET CURRENT ASSETS........................................................... 372 969 695
--------- --------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES........................................ 2,568 4,780 4,687
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR...................... 13 (224) (911) (945)
PROVISIONS FOR LIABILITIES AND CHARGES....................................... 14 (1,372) (1,761) (1,557)
--------- --------- ---------
972 2,108 2,185
--------- --------- ---------
--------- --------- ---------
INVESTED CAPITAL............................................................. 15 972 2,108 2,185
--------- --------- ---------
--------- --------- ---------
</TABLE>
Amounts due from Hanson Group, investments, cash balances and borrowings may
not be representative of the financial position of the Group following the
Demerger. The net assets of Eastern are included as at 30 September 1995 and
1996. The net assets of Peabody Holding, further details of which are disclosed
in Note 1, are included at each of the dates shown above.
III-41
<PAGE>
COMBINED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C> <C>
NOTE 1994 1995 1996
----------- --------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES........................................ 20 143 402 12
--- --- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
National Grid Group flotation.................................................... -- -- 44
Interest paid.................................................................... (19) (11) (33)
--- --- ---------
(19) (11) 11
--- --- ---------
TAXATION
Tax paid......................................................................... (5) (4) (128)
--- --- ---------
INVESTING ACTIVITIES
Payments to acquire tangible fixed assets........................................ 8 (133) (140) (374)
Receipts from sales of tangible fixed assets..................................... 76 31 29
Sale of investments.............................................................. -- -- 235
Purchase of subsidiary undertakings.............................................. 21 -- 36 (2,495)
--- --- ---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES....................................... (57) (73) (2,605)
--- --- ---------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING....................................... 62 314 (2,710)
--- --- ---------
FINANCING
Increase/(decrease) in borrowings................................................ 21 27 (20) 128
Changes in invested capital from cash funding.................................... 15 (61) (57) 2,290
--- --- ---------
Net cash (outflow)/inflow from financing......................................... (34) (77) 2,418
--- --- ---------
Net cash inflow/(outflow) after financing........................................ 22 28 237 (292)
--- --- ---------
--- --- ---------
</TABLE>
The returns on investments and servicing of finance, taxation and financing
cash flows shown above were affected significantly by the financing and taxation
arrangements of the Hanson Group. Accordingly, the cash flows of those items
included above may not be representative of those that may arise following the
Demerger. The cash flows of Eastern are included from 1 October 1995. The cash
flows for Peabody Holding are included for the three years ended 30 September
1996.
III-42
<PAGE>
NOTES TO THE COMBINED FINANCIAL INFORMATION
1 SEGMENTAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996
---------------------------- ---------------------------- -----------
<CAPTION>
OPERATING OPERATING
TURNOVER PROFIT/(LOSS) TURNOVER PROFIT/(LOSS) TURNOVER
----------- --------------- ----------- --------------- -----------
LMN LMN LMN LMN LMN
<S> <C> <C> <C> <C> <C>
By activity:
Coal....................................... 1,217 102 1,418 160 1,461
Power...................................... -- -- -- -- 2,178
Networks................................... -- -- -- -- 482
Other...................................... 30 (3) 28 (25) 24
Intra-group trading........................ -- -- -- -- (378)
----- --- ----- --- -----
1,247 99 1,446 135 3,767
Exceptional items
National Grid Group flotation.............. -- -- -- -- (132)
----- --- ----- --- -----
1,247 99 1,446 135 3,635
----- --- ----- --- -----
----- --- ----- --- -----
<CAPTION>
<S> <C>
OPERATING
PROFIT/(LOSS)
---------------
LMN
<S> <C>
By activity:
Coal....................................... 154
Power...................................... 83
Networks................................... 211
Other...................................... (2)
Intra-group trading........................ --
---
446
Exceptional items
National Grid Group flotation.............. 44
---
490
---
---
</TABLE>
Power turnover includes gas sales of L258 million in the year ended 30
September 1996.
All intra-group trading represent charges, at market rates, for use of the
distribution system from the Networks business to the Power business.
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996
---------------------------- ---------------------------- -----------
<CAPTION>
OPERATING OPERATING
TURNOVER PROFIT TURNOVER PROFIT/(LOSS) TURNOVER
----------- --------------- ----------- --------------- -----------
LMN LMN LMN LMN LMN
<S> <C> <C> <C> <C> <C>
By geographical location:
United Kingdom................................ 22 6 22 (31) 2,303
US............................................ 1,108 66 1,297 141 1,317
Australia..................................... 117 27 127 25 147
--
----- ----- --- -----
1,247 99 1,446 135 3,767
Exceptional items
National Grid Group flotation................. -- -- -- -- (132)
--
----- ----- --- -----
1,247 99 1,446 135 3,635
--
--
----- ----- --- -----
----- ----- --- -----
<CAPTION>
<S> <C>
OPERATING
PROFIT
-------------
LMN
<S> <C>
By geographical location:
United Kingdom................................ 293
US............................................ 125
Australia..................................... 28
---
446
Exceptional items
National Grid Group flotation................. 44
---
490
---
---
</TABLE>
The above analysis of turnover shows the geographical segments from which
goods and services are supplied.
III-43
<PAGE>
1 SEGMENTAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Turnover by geographical destination:
United Kingdom..................................................................... 27 34 2,183
North and South America............................................................ 1,053 1,197 1,218
Rest of Europe..................................................................... 35 57 62
Asia/Pacific....................................................................... 132 158 172
--------- --------- ---------
1,247 1,446 3,635
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1994 1995 1996
---------------------- ---------------------- ----------------------
<CAPTION>
TOTAL CAPITAL TOTAL CAPITAL TOTAL CAPITAL
ASSETS EMPLOYED ASSETS EMPLOYED ASSETS EMPLOYED
--------- ----------- --------- ----------- --------- -----------
LMN LMN LMN LMN LMN LMN
<S> <C> <C> <C> <C> <C> <C>
By activity:
Coal................................................... 2,933 1,277 3,004 1,399 3,102 1,440
Power.................................................. -- -- 608 273 1,317 889
Networks............................................... -- -- 1,149 1,008 1,192 1,089
Other.................................................. 86 (7) 69 (23) 30 (4)
--------- ----- --------- ----- --------- -----
3,019 1,270 4,830 2,657 5,641 3,414
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
By geographical location:
United Kingdom......................................... 44 7 1,780 1,283 2,520 1,981
US..................................................... 2,685 1,048 2,723 1,154 2,727 1,226
Australia.............................................. 290 215 327 220 394 207
--------- ----- --------- ----- --------- -----
3,019 1,270 4,830 2,657 5,641 3,414
--------- ----- --------- ----- --------- -----
--------- ----- --------- ----- --------- -----
</TABLE>
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Total assets are reconciled to the combined balance sheet as follows:
Assets analysed by activity........................................................ 3,019 4,830 5,641
Unallocated cash, investments and other assets..................................... -- 812 87
--------- --------- ---------
Total assets........................................................................... 3,019 5,642 5,728
--------- --------- ---------
--------- --------- ---------
</TABLE>
III-44
<PAGE>
1 SEGMENTAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Capital employed is reconciled to invested capital as follows:
Capital employed by activity.......................................................... 1,270 2,657 3,414
Current and deferred taxes........................................................ (99) (303) (147)
Borrowings less cash, investments and other unallocated assets and liabilities.... (199) (246) (1,082)
--------- --------- ---------
Invested capital...................................................................... 972 2,108 2,185
--------- --------- ---------
--------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1995 1996
-------------------------------- -------------------------------- ---------------
<CAPTION>
DEPRECIATION DEPRECIATION
CAPITAL AND CAPITAL AND CAPITAL
EXPENDITURE DEPLETION EXPENDITURE DEPLETION EXPENDITURE
--------------- --------------- --------------- --------------- ---------------
LMN LMN LMN LMN LMN
<S> <C> <C> <C> <C> <C>
By activity:
Coal............................ 133 113 140 119 98
Power........................... -- -- -- -- 134
Networks........................ -- -- -- -- 142
--- --- --- --- ---
133 113 140 119 374
--- --- --- --- ---
--- --- --- --- ---
<CAPTION>
<S> <C>
DEPRECIATION
AND
DEPLETION
---------------
LMN
<S> <C>
By activity:
Coal............................ 121
Power........................... 15
Networks........................ 61
---
197
---
---
</TABLE>
Included within Coal above are the following amounts in respect of Peabody
Holding which is expected to be transferred to the Group on 7 March 1997:
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Turnover............................................................................... 1,051 1,234 1,255
Operating profit....................................................................... 46 107 101
Capital expenditure.................................................................... 64 98 69
Depreciation and depletion............................................................. 89 99 104
</TABLE>
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Total assets........................................................................... 2,389 2,408 2,422
Capital employed....................................................................... 648 668 949
</TABLE>
III-45
<PAGE>
2 COSTS AND OVERHEADS LESS OTHER INCOME
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-------------------------------
<S> <C> <C> <C>
1994 1995 1996
--------- --------- ---------
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Changes in stocks of finished goods and work in progress............................... (6) (18) (19)
Raw materials and consumables.......................................................... 194 232 1,983
Employment costs (Note 3).............................................................. 304 321 411
Depreciation........................................................................... 60 58 128
Depletion.............................................................................. 53 61 69
Restructuring and reorganisation....................................................... -- 29 (29)
Other acquisition related costs of Eastern............................................. -- -- 31
Production taxes....................................................................... 113 138 162
Other operating charges less other income.............................................. 430 490 585
--------- --------- ---------
1,148 1,311 3,321
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reorganisation provision created on the acquisition of Eastern in 1995
of L29 million is no longer deemed necessary and has been reversed in 1996. A
deferred tax asset of L11 million, recognised in 1995 to reflect the taxation
relief in respect of this provision, has also been reversed in 1996.
Other operating charges less other income for the year ended 30 September
1996 includes operating lease rentals payable of L77 million (1995 L20 million,
1994 L20 million) primarily in respect of plant and machinery and a credit of
L15 million, part of a L42 million reduction in the Group's provision relating
to an UMWA Combined Fund established under the Coal Mine Retiree Health Benefit
Act of 1992, which is being released over three years commencing in 1996.
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----------- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Audit fees.................................................................................. 0.4 0.4 0.8
Non-audit fees payable to Ernst & Young in the UK........................................... -- -- 7.3
</TABLE>
III-46
<PAGE>
3 EMPLOYEES
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
(A) EMPLOYMENT COSTS
Wages and salaries.......................................................................... 270 288 411
Employers' social security costs............................................................ 20 20 28
Pension costs (note 19)..................................................................... 14 13 17
--- --- ---
304 321 456
Less: amounts capitalised................................................................... -- -- (45)
--- --- ---
Charged to profit and loss account.......................................................... 304 321 411
--- --- ---
--- --- ---
</TABLE>
(B) NUMBERS EMPLOYED
The average number of persons employed by the Group was:
<TABLE>
<CAPTION>
NUMBER NUMBER NUMBER
----------- ----------- -----------
<S> <C> <C> <C>
United Kingdom..................................................................... 193 201 6,195
US................................................................................. 7,442 7,336 6,824
Australia.......................................................................... 1,054 1,069 1,098
----- ----- -----------
8,689 8,606 14,117
----- ----- -----------
----- ----- -----------
</TABLE>
The average number of persons employed by the Group by activity was:
<TABLE>
<CAPTION>
1994 1995 1996
NUMBER NUMBER NUMBER
----------- ----------- -----------
<S> <C> <C> <C>
Coal............................................................................... 8,488 8,399 7,916
Power.............................................................................. -- -- 1,630
Networks........................................................................... -- -- 4,370
Other.............................................................................. 201 207 201
----- ----- -----------
8,689 8,606 14,117
----- ----- -----------
----- ----- -----------
</TABLE>
4 EXCEPTIONAL ITEMS
During 1996, the Group received an interim dividend of L11 million and
special dividends (net of associated costs) totalling L165 million connected
with the flotation of The National Grid Group plc ("National Grid Group").
Amounts credited to electricity customers in the form of a discount on
electricity bills connected with this flotation totalled L132 million.
The profit on disposal of First Hydro of L25 million in 1996 arose on the
disposal of the Group's interest in the pumped storage business of National Grid
Group.
5 NET INTEREST
A significant proportion of the Group's cash and bank balances and borrowing
requirements were transferred to, or provided by, the Hanson Group. No interest
was received or paid on the amounts so transferred or provided.
III-47
<PAGE>
5 NET INTEREST (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Interest expense
On loans wholly repayable within five years............................................. 7 5 68
On other loans.......................................................................... 10 10 20
Interest capitalised........................................................................ -- -- (8)
-- -- --
17 15 80
Interest income............................................................................. (3) (4) (37)
-- -- --
Net interest expense........................................................................ 14 11 43
-- -- --
-- -- --
</TABLE>
Included in interest payable is L7 million relating to finance leases for
the year ended 30 September 1996.
6 TAXATION CHARGE/(CREDIT)
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
UNITED KINGDOM
Corporation tax at 33 per cent.............................................................. -- -- 3
Adjustment in respect of previous years..................................................... -- -- (15)
Advance corporation tax written off......................................................... 1 -- --
Deferred taxation........................................................................... -- (11) 22
Tax credit on franked investment income..................................................... -- -- 29
-- --
---
1 (11) 39
OVERSEAS
Current taxation............................................................................ 21 25 19
Deferred taxation........................................................................... (5) 42 57
-- --
---
Charge for the period....................................................................... 17 56 115
-- --
-- --
---
---
This taxation charge for the period has been reduced by the following amounts arising from
group relief surrendered for nil consideration by other Hanson Group companies............ -- -- 30
-- --
-- --
---
---
</TABLE>
If full provision had been made for deferred tax for the year ended 30
September 1996, the tax charge would have increased by L31 million (1995 Lnil,
1994 reduced by L6 million) being L32 million in respect of capital allowances
in excess of depreciation less L1 million in respect of other timing
differences. As a result of the stand-alone basis of providing for deferred tax,
the charge for deferred tax shown above has been increased by L57 million for
the year ended 30 September 1996 (1995 L42 million, 1994 reduced by L5 million).
As a result of the surrender of group relief for nil consideration, together
with the taxation effects of the National Grid Group flotation, the tax charge
shown is not representative of the charge that may arise following the Demerger
Transactions.
III-48
<PAGE>
6 TAXATION CHARGE/(CREDIT) (CONTINUED)
A reconciliation of the tax charge at the UK statutory rate of corporation
tax to the actual tax charge is as follows:
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Profit before taxation...................................................................... 85 124 472
--
--
--- ---
--- ---
Notional UK corporation tax at 33 per cent.................................................. 28 41 156
Permanent differences....................................................................... (4) (20) (4)
Timing differences.......................................................................... (4) 3 (31)
Free group relief........................................................................... -- -- (30)
Effect of overseas tax rates................................................................ (3) 32 39
Adjustments in respect of prior years....................................................... -- -- (15)
--
--- ---
Actual tax charge........................................................................... 17 56 115
--
--
--- ---
--- ---
</TABLE>
7 EARNINGS PER SHARE
Earnings per share are based on the profit for the year in each year and on
521 million ordinary shares, being the expected minimum number of ordinary
shares in the Company which will be issued in respect of the Demerger. Adjusted
earnings per share are based on the same number of shares and the profit for the
year after excluding the items relating to the National Grid Group flotation,
the profit on disposal of First Hydro and the related taxation as follows:
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER
-------------------------------------
<S> <C> <C> <C>
1994 1995 1996
----- ----- -----
<CAPTION>
LMN LMN LMN
<S> <C> <C> <C>
Profit for the year as reported............................................................. 68 68 357
Adjusted for
National Grid Group flotation........................................................... -- -- (44)
Profit on disposal of First Hydro....................................................... -- -- (25)
Related taxation........................................................................ -- -- 29
-- --
---
Profit as adjusted.......................................................................... 68 68 317
-- --
-- --
---
---
</TABLE>
III-49
<PAGE>
8 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
PLANT,
COAL EQUIPMENT
LAND AND AND GAS DISTRIBUTION GENERATING AND MOTOR
BUILDINGS ASSETS SYSTEM STATIONS VEHICLES
------------- ----------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
LMN LMN LMN LMN LMN
COST
As at 1 October 1993............................... -- 2,298 -- -- 832
Exchange adjustments............................... -- (99) -- -- (26)
Additions.......................................... -- 55 -- -- 77
Disposals.......................................... -- (101) -- -- (52)
--
----- --- --- -----
As at 30 September 1994............................ -- 2,153 -- -- 831
Exchange adjustments............................... -- (5) -- -- --
Additions.......................................... -- 36 -- -- 104
Acquisitions....................................... 78 228 904 261 118
Disposals.......................................... -- (30) -- -- (72)
--
----- --- --- -----
As at 30 September 1995............................ 78 2,382 904 261 981
Exchange adjustments............................... -- 35 -- -- 18
Additions.......................................... 14 55 83 93 129
Disposals.......................................... (17) (6) -- -- (32)
--
----- --- --- -----
As at 30 September 1996............................ 75 2,466 987 354 1,096
--
--
----- --- --- -----
----- --- --- -----
ACCUMULATED DEPRECIATION AND DEPLETION
As at 1 October 1993............................... -- 289 -- -- 505
Exchange adjustments............................... -- (14) -- -- (18)
Charge for the year................................ -- 53 -- -- 60
Disposals.......................................... -- (34) -- -- (47)
--
----- --- --- -----
As at 30 September 1994............................ -- 294 -- -- 500
Exchange adjustments............................... -- (2) -- -- --
Charge for the year................................ -- 61 -- -- 58
Disposals.......................................... -- (23) -- -- (56)
--
----- --- --- -----
As at 30 September 1995............................ -- 330 -- -- 502
Exchange adjustments............................... -- 6 -- -- 10
Charge for the year................................ 2 69 39 7 80
Disposals.......................................... -- (16) -- -- (26)
--
----- --- --- -----
As at 30 September 1996............................ 2 389 39 7 566
--
--
----- --- --- -----
----- --- --- -----
NET BOOK VALUE
As at 1 October 1993............................... -- 2,009 -- -- 327
--
--
----- --- --- -----
----- --- --- -----
As at 30 September 1994............................ -- 1,859 -- -- 331
--
--
----- --- --- -----
----- --- --- -----
As at 30 September 1995............................ 78 2,052 904 261 479
--
--
----- --- --- -----
----- --- --- -----
As at 30 September 1996............................ 73 2,077 948 347 530
--
--
----- --- --- -----
----- --- --- -----
<CAPTION>
TOTAL
---------
<S> <C>
LMN
COST
As at 1 October 1993............................... 3,130
Exchange adjustments............................... (125)
Additions.......................................... 132
Disposals.......................................... (153)
---------
As at 30 September 1994............................ 2,984
Exchange adjustments............................... (5)
Additions.......................................... 140
Acquisitions....................................... 1,589
Disposals.......................................... (102)
---------
As at 30 September 1995............................ 4,606
Exchange adjustments............................... 53
Additions.......................................... 374
Disposals.......................................... (55)
---------
As at 30 September 1996............................ 4,978
---------
---------
ACCUMULATED DEPRECIATION AND DEPLETION
As at 1 October 1993............................... 794
Exchange adjustments............................... (32)
Charge for the year................................ 113
Disposals.......................................... (81)
---------
As at 30 September 1994............................ 794
Exchange adjustments............................... (2)
Charge for the year................................ 119
Disposals.......................................... (79)
---------
As at 30 September 1995............................ 832
Exchange adjustments............................... 16
Charge for the year................................ 197
Disposals.......................................... (42)
---------
As at 30 September 1996............................ 1,003
---------
---------
NET BOOK VALUE
As at 1 October 1993............................... 2,336
---------
---------
As at 30 September 1994............................ 2,190
---------
---------
As at 30 September 1995............................ 3,774
---------
---------
As at 30 September 1996............................ 3,975
---------
---------
</TABLE>
The net book value of land and buildings at 30 September 1996 comprises
freeholds of L72 million (1995 L77 million, 1994 Lnil), long leaseholds of L1
million (1995 L1 million, 1994 Lnil) and short leaseholds of Lnil (1995 Lnil,
1994 Lnil).
III-50
<PAGE>
8 TANGIBLE FIXED ASSETS (CONTINUED)
Coal and gas assets at 30 September 1996 include natural gas assets with a
cost of L35 million (1995 L17 million, 1994 Lnil), accumulated depletion of L2
million (1995 Lnil, 1994 Lnil) and net book value of L33 million (1995 L17
million, 1994 Lnil).
Plant, equipment and motor vehicles at 30 September 1996 include assets
relating to the coal business with a cost of L931 million (1995 L888 million,
1994 L820 million), accumulated depreciation of L540 million (1995 L502 million,
1994 L500 million) and net book value of L391 million (1995 L386 million, 1994
L320 million).
Capitalised interest at 30 September 1996 included within fixed assets
amounts to L8 million (1995 Lnil, 1994 Lnil).
The cost of distribution system fixed assets at 30 September 1996 is shown
net of customer contributions of L343 million (1995 L308 million, 1994 Lnil).
The net book value of customer contributions at 30 September 1996 was L256
million (1995 L230 million, 1994 Lnil).
Assets in the course of construction at 30 September 1996 amounted to L310
million (1995 L176 million, 1994 Lnil).
Generating stations include assets held under finance leases as follows:
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
LMN LMN LMN
Cost........................................................................................ -- 120 128
Accumulated depreciation.................................................................... -- -- (12)
--- --- ---
Net book value.............................................................................. -- 120 116
--- --- ---
--- --- ---
</TABLE>
9 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
LOANS TO UNLISTED
ASSOCIATES INVESTMENTS TOTAL
--------------- ----------------- -----
<S> <C> <C> <C>
LMN LMN LMN
As at 1 October 1993........................................................... -- 5 5
Share of retained profit/(loss)................................................ -- 1 1
-- -- --
As at 30 September 1994........................................................ -- 6 6
Acquisitions................................................................... 16 15 31
-- -- --
As at 30 September 1995........................................................ 16 21 37
Disposals...................................................................... (16) (4) (20)
-- -- --
As at 30 September 1996........................................................ -- 17 17
-- -- --
-- -- --
</TABLE>
III-51
<PAGE>
10 STOCKS
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
LMN LMN LMN
Raw materials and consumables............................................................... 52 65 152
Work in progress............................................................................ 20 48 52
Finished stock and items for resale......................................................... 48 48 50
--- --- ---
120 161 254
--- --- ---
--- --- ---
</TABLE>
11 DEBTORS
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
LMN LMN LMN
Amounts falling due after more than one year
Advance corporation tax recoverable..................................................... -- 12 84
Royalties receivable and other debtors.................................................. 164 177 182
Operating lease prepayments............................................................. -- -- 270
--- --- ---
164 189 536
--- --- ---
--- --- ---
Amounts falling due within one year
Trade debtors........................................................................... 167 483 502
Other debtors and prepayments........................................................... 70 96 261
--- --- ---
237 579 763
--- --- ---
--- --- ---
</TABLE>
12 CURRENT ASSET INVESTMENTS
Current asset investments at 30 September 1995 include the Group's
investment in National Grid Group of L393 million, which was distributed to
Hanson during 1996 as a dividend in specie.
13 CREDITORS
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-----------------------------------
1994 1995 1996
----- ----- ---------
<S> <C> <C> <C>
LMN LMN LMN
Amounts falling due within one year
Bank overdrafts....................................................................... -- -- 119
Short-term loans...................................................................... 33 7 14
Commercial paper...................................................................... 54 61 144
Finance leases........................................................................ -- -- 10
Trade creditors....................................................................... 90 288 313
Corporation tax....................................................................... 12 115 39
Other taxation and social security.................................................... 32 43 61
Other creditors....................................................................... 8 105 49
Accruals and deferred income.......................................................... 222 243 292
--- --- ---------
451 862 1,041
--- --- ---------
--- --- ---------
</TABLE>
III-52
<PAGE>
13 CREDITORS (CONTINUED)
Weighted average interest rates at 30 September 1996 on bank overdrafts were
7.4 per cent., short-term loans 7.5 per cent. and commercial paper 7.1 per cent.
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
LMN LMN LMN
Amounts falling due after more than one year
Loans not wholly repayable within 5 years
$300 million 5% subordinated income note 2006 (1994 $320 million,
1995 $310 million).................................................................. 203 196 192
L350 million 8.375% bonds 2004........................................................ -- 347 347
L200 million 8.5% bonds 2025.......................................................... -- 197 197
--- --- ---
203 740 736
Other loans repayable within 5 years.................................................... 21 27 56
Net obligations under finance leases.................................................... -- 144 153
--- --- ---
224 911 945
--- --- ---
--- --- ---
</TABLE>
L100 million of the L350 million 8.375 per cent. bonds has been converted
into floating rate debt by way of interest rate swaps expiring in 2004. At 30
September 1996, the weighted average interest rate payable was 5.7 per cent.
(1995 6.6 per cent.). Amounts shown above for bonds are net of unamortised issue
costs.
Long-term debt and finance leases are repayable as at 30 September 1996 as
follows:
<TABLE>
<CAPTION>
LMN
<S> <C>
1998....................................................................................................... 29
1999....................................................................................................... 32
2000....................................................................................................... 43
2001....................................................................................................... 28
2002....................................................................................................... 26
thereafter................................................................................................. 787
---
945
---
---
</TABLE>
Long-term debt and finance leases are denominated in the following
currencies:
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
LMN LMN LMN
Sterling.................................................................................... -- 688 689
US dollars.................................................................................. 224 223 248
Australian dollars.......................................................................... -- -- 8
--- --- ---
224 911 945
--- --- ---
--- --- ---
</TABLE>
III-53
<PAGE>
14 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
HEALTH CARE AND RECLAMATION AND
OBLIGATIONS TO ENVIRONMENTAL DEFERRED
EMPLOYEES OBLIGATIONS TAXATION OTHERS TOTAL
------------------- ------------------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
LMN LMN LMN LMN LMN
As at 1 October 1993........................... 966 378 101 68 1,513
Exchange adjustments........................... (49) (20) (5) (2) (76)
Utilised in year............................... (84) (38) (4) (8) (134)
Provided/(released) in year.................... 84 (8) (5) 2 73
Acquisitions................................... -- (3) -- (1) (4)
--- --- --- --- ---------
As at 30 September 1994........................ 917 309 87 59 1,372
Exchange adjustments........................... (3) (1) (2) -- (6)
Utilised in year............................... (68) (43) -- (29) (140)
Provided/(released) in year.................... 65 23 42 36 166
Acquisitions................................... 8 17 86 258 369
--- --- --- --- ---------
As at 30 September 1995........................ 919 305 213 324 1,761
Exchange adjustments........................... 12 4 1 -- 17
Utilised in year............................... (80) (43) 7 (62) (178)
Provided/(released) in year.................... 48 19 57 (4) 120
Acquisition adjustment (Note 16)............... -- -- (86) (77) (163)
--- --- --- --- ---------
As at 30 September 1996........................ 899 285 192 181 1,557
--- --- --- --- ---------
--- --- --- --- ---------
</TABLE>
Deferred tax provided as at 30 September 1996 includes L142 million (1995
L119 million, 1994 liabilities reduced by L7 million) in respect of liabilities
recognised by the Group, consequent upon being on a stand-alone basis following
Demerger. The provided and unprovided liabilities to deferred taxation were as
follows:
<TABLE>
<CAPTION>
AMOUNTS PROVIDED AMOUNTS
UNPROVIDED
AS AT 30 SEPTEMBER AS AT 30
SEPTEMBER
-------------------- ---------
1994 1995 1996 1994
----- ----- ----- ---------
<S> <C> <C> <C> <C>
LMN LMN LMN LMN
Excess of capital allowances................................................. 27 82 100 543
Post retirement healthcare benefits.......................................... -- -- -- (209)
Other timing differences..................................................... 60 45 92 (194)
--
--- --- ---
87 127 192 140
Acquisitions
Excess of capital allowances................................................. -- -- -- --
Other timing differences..................................................... -- 86 -- --
--
--- --- ---
87 213 192 140
--
--
--- --- ---
--- --- ---
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
LMN LMN
Excess of capital allowances................................................. 543 803
Post retirement healthcare benefits.......................................... (220) (226)
Other timing differences..................................................... (183) (200)
--- ---
140 377
Acquisitions
Excess of capital allowances................................................. 228 --
Other timing differences..................................................... (22) --
--- ---
346 377
--- ---
--- ---
</TABLE>
III-54
<PAGE>
15 INVESTED CAPITAL
Invested capital represents the total investment and long-term funding of
the Group by the Hanson Group. A reconciliation of movements in invested capital
is as follows:
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
---------------------------------
1994 1995 1996
----- --------- ---------
<S> <C> <C> <C>
LMN LMN LMN
Profit for the year.................................................................... 68 68 357
Other net recognised gains/(losses) relating to the year............................... (29) -- 20
Increases/(decreases) in funding by Hanson
Cash............................................................................... (61) (57) 2,290
Non-cash........................................................................... 95 2,493 (2,418)
Dividend in specie of investment in National Grid Group............................ -- -- (393)
Goodwill (set off)/write back.......................................................... -- (1,368) 221
--- --------- ---------
Net addition to invested capital....................................................... 73 1,136 77
Opening invested capital............................................................... 899 972 2,108
--- --------- ---------
Closing invested capital............................................................... 972 2,108 2,185
--- --------- ---------
--- --------- ---------
</TABLE>
The total amount of goodwill set off against invested capital at 30
September 1996 is L1,147 million (1995 L1,368 million, 1994 Lnil).
16 ACQUISITIONS
There were no significant acquisitions in the year ended 30 September 1994
and the year ended 30 September 1996.
Eastern was acquired by Hanson on 18 September 1995. As explained above,
Eastern has been included in the combined balance sheet of the Group as at 30
September 1995 and in its results from 1 October 1995. The Caballo and Rawhide
mines were acquired by Peabody on 1 November 1994.
The operating assets and liabilities of Eastern and the Caballo and Rawhide
mines together with the fair value adjustments were as follows:
<TABLE>
<CAPTION>
CABALLO
EASTERN AND RAWHIDE 1995 1996
BOOK MINES TOTAL TOTAL TOTAL TOTAL
VALUE BOOK VALUE BOOK VALUE ADJUSTMENTS FAIR VALUE ADJUSTMENTS
----------- ----------------- ------------- --------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
LMN LMN LMN LMN LMN LMN
Fixed assets..................... 1,106 124 1,230 359 1,589 --
Stock............................ 12 10 22 -- 22 --
Debtors.......................... 379 2 381 (13) 368 13
Cash............................. 264 -- 264 -- 264 --
Unlisted investments............. 284 -- 284 295 579 44
Creditors........................ (392) (10) (402) (17) (419) 17
Loans and finance leases......... (688) -- (688) -- (688) --
Provisions for liabilities and
charges........................ (129) (11) (140) (220) (360) 147
----- --- ----- --- ----------- ---
836 115 951 404 1,355 221
----- --- ----- --- ----------- ---
----- --- ----- --- ----------- ---
Consideration (Eastern L2,496 million; Caballo and Rawhide L227 million).........................
2,723
Goodwill (Eastern)............................................................................... (1,368)
-----------
1,355
-----------
-----------
<CAPTION>
1996
TOTAL
FAIR VALUE
-----------
<S> <C>
LMN
Fixed assets..................... 1,589
Stock............................ 22
Debtors.......................... 381
Cash............................. 264
Unlisted investments............. 623
Creditors........................ (402)
Loans and finance leases......... (688)
Provisions for liabilities and
charges........................ (213)
-----------
1,576
-----------
-----------
Consideration (Eastern L2,496 mil
2,723
Goodwill (Eastern)............... (1,147)
-----------
1,576
-----------
-----------
</TABLE>
III-55
<PAGE>
16 ACQUISITIONS (CONTINUED)
The following fair value adjustments relating to Eastern and the Caballo and
Rawhide mines were made to the book values of the assets and liabilities
acquired:
<TABLE>
<CAPTION>
CABALLO
AND
RAWHIDE 1995 1996 1996
EASTERN MINES TOTAL EASTERN TOTAL
----------- ------------- --------- ----------- -----
<S> <C> <C> <C> <C> <C>
LMN LMN LMN LMN LMN
Tangible fixed assets.............................................. 242 117 359 -- 359
Unlisted investments............................................... 295 -- 295 44 339
Debtors............................................................ (13) -- (13) 13 --
Liabilities in respect of purchase contracts....................... (129) -- (129) 61 (68)
Creditors.......................................................... (17) -- (17) 17 --
Deferred tax....................................................... (86) -- (86) 86 --
Other liabilities.................................................. -- (5) (5) -- (5)
--- --- --- --- ---
292 112 404 221 625
--- --- --- --- ---
--- --- --- --- ---
</TABLE>
Goodwill arising at the time of acquisition of Eastern of L1,368 million has
been reduced in 1996 by L221 million principally as a result of the release of
provisions no longer considered necessary.
17 CONTINGENT LIABILITIES
Certain properties in the US in which the Group has or has had an interest
are subject to actual or potential environmental claims. The Directors have made
a L44 million provision, included in provisions for reclamation and
environmental obligations (Note 14), in relation to these claims, but
significant uncertainty exists as to whether these claims will be pursued
against the Group in all cases and, where they are pursued, the amount of the
eventual costs and liabilities. In the event that future costs and liabilities
are in excess of amounts accrued, the Directors do not anticipate that they will
have a material adverse effect on the combined results of operations, financial
position or liquidity of the Group.
The next general election in the UK must be held by no later than 22 May
1997. The Labour Party has announced that, if it is elected to office at that
election, it will impose a one-off "windfall levy" on profits of the privatised
utilities. It is not possible to predict the amount of any such levy, but, if
imposed, such levy could be substantial.
In December 1996, a provisional ruling was made against National Grid Group
and its Group Trustees by the Pensions Ombudsman on a complaint by two
pensioners in the National Grid Group's section of the Electricity Supply Scheme
("ESPS") relating to the use of the surplus arising under the actuarial
valuation of the National Grid Group section as at 31 March 1992 to meet certain
additional costs arising from the payment of pensions on early retirement
pursuant to reorganisation or redundancy and certain additional contributions.
This ruling is under appeal. If a similar complaint were to be made against
Eastern in relation to its use of actuarial surplus in its section of the ESPS,
it would resist it, ultimately through the courts. However, if an equivalent
determination were finally to be made against it and upheld by the courts,
Eastern could have a potential liability to repay to its part of that scheme an
amount estimated by the directors to be up to L75 million (exclusive of any
applicable interest charges).
III-56
<PAGE>
18 FINANCIAL COMMITMENTS
(a) Capital commitments of the Group were as follows:
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
-------------------------------------
1994 1995 1996
----- ----- -----
<S> <C> <C> <C>
LMN LMN LMN
Contracted but not provided for............................................................. 49 110 83
Authorised but not contracted for........................................................... -- 30 164
--
--- ---
49 140 247
--
--
--- ---
--- ---
</TABLE>
(b) Gas take or pay contracts
There are various types of contracts for the purchase of gas. Almost all
include "take or pay" obligations under which the buyer agrees to pay for a
minimum quantity of gas in a year. In order to help meet the expected needs of
its wholesale and retail customers, Eastern has entered into a range of purchase
contracts. As at 30 September 1996 the commitments under long-term gas purchase
contracts amounted to an estimated L2.3 billion (1995 L1.4 billion) covering
periods up to 18 years forward. The directors do not consider it likely, on the
basis of the Group's current expectations of demand from its customers as
compared with its take or pay obligations under such purchase contracts, that
any material payments will become due from the Group in the foreseeable future
for gas not taken.
(c) The future minimum rental commitments at 30 September 1996, under
finance leases and non-cancellable operating leases, together with the present
value of minimum lease payments under finance leases were as follows:
<TABLE>
<CAPTION>
OPERATING FINANCE
YEAR ENDED 30 SEPTEMBER LEASES LEASES
- -------------------------------------------------------------------------------------------- ------------- -----------
<S> <C> <C>
LMN LMN
1997........................................................................................ 40 16
1998........................................................................................ 51 16
1999........................................................................................ 50 16
2000........................................................................................ 87 16
2001........................................................................................ 86 16
thereafter.................................................................................. 389 139
--- ---
Total minimum lease payments................................................................ 703 219
---
---
Less amount representing interest........................................................... (56)
---
Present value of minimum lease payments..................................................... 163
---
---
</TABLE>
The majority of the operating lease commitments relate to coal-fired power
stations. Additional payments of approximately L6 per megawatt hour (indexed)
linked to output levels from these stations are payable for between the first
five and seven years of their operation by the Group.
(d) The annual commitments under non-cancellable operating leases at 30
September 1996 were:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
------------- -----------
<S> <C> <C>
LMN LMN
Leases expiring
Within one year........................................................................... -- --
Within two to five years.................................................................. -- 9
After five years.......................................................................... 2 29
--- ---
2 38
--- ---
--- ---
</TABLE>
III-57
<PAGE>
19 PENSION AND POST-RETIREMENT HEALTHCARE
PENSIONS
The Group participates in several defined benefit pension plans in the UK,
the US and Australia which cover the majority of employees. The benefits for
these plans are based primarily on years of credited service and final average
pensionable pay as defined under the respective plan provisions.
The total cost of all pensions of the Group in the years ended 30 September
1994, 1995 and 1996, was L14 million, L13 million and L17 million, respectively.
The latter amount includes L4 million relating to UK employees and L10 million
in respect of additional one-off cash retirement costs for US employees.
In the US, Peabody sponsors four main defined benefit pension plans. With
the exception of one plan, assets are set aside in separate trustee-administered
funds. Each of these plans is assessed annually by independent qualified
actuaries, the latest valuations being as at 30 September 1996. In addition,
Peabody participates in two multi-employer plans. In these plans, the assets
contributed by the participating employers are aggregated and the contributions
payable are determined by independent qualified actuaries in accordance with
industry-wide agreements. Peabody also has a number of defined contribution
plans. Costs relating to the multi-employer and the defined contribution plans
are recognised as incurred.
In the UK, the majority of Eastern employees are members of the ESPS which
provides pensions of a defined benefit nature for employees throughout the
Electricity Supply Industry. The ESPS operates on the basis that there is not
cross-subsidy between employers and the financing of Eastern's pension
liabilities is therefore independent of the experience of other participating
employers. The assets of the ESPS are held in a separate trustee-administered
fund.
The pension cost relating to the Eastern part of the ESPS is assessed in
accordance with the advice of independent qualified actuaries using the
projected unit method. The latest actuarial valuation was carried out as at 31
March 1995.
The total market value of the assets of the US plans, excluding the
multi-employer and defined contribution plans, was L255 million as at 30
September 1996. The market value of the assets of Eastern's section of the ESPS
was L681 million at 31 March 1995.
The assumptions which had the most significant effect on the results of the
valuations were that the rate of investment return would exceed salary increases
(exclusive of merit awards) by 2 1/2 per cent. per annum for the UK plans and by
an average 3 1/2 per cent. per annum in the US, and with investment returns in
the UK being assumed to exceed future pension increases by 4 per cent. per
annum. The actuarial value of the assets was sufficient to cover 104 per cent.
of the benefits that had accrued to members in the UK and 91 per cent. in the
US.
Provisions for liabilities and charges (Note 14) include a prepayment of L1
million (provision of L1 million at 30 September 1994 and L10 million at 30
September 1995) representing the excess of the contributions paid to the plans
concerned over the accumulated amount charged against the Group's profits in
respect of pension costs.
POST-RETIREMENT HEALTHCARE
The Group also provides post-retirement healthcare and life assurance
benefits under plans mainly in the US to certain groups of its retired and
active employees.
III-58
<PAGE>
20 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
-----------------------------------
1994 1995 1996
----- ----- ---------
<S> <C> <C> <C>
LMN LMN LMN
Operating profit before National Grid Group flotation...................................... 99 135 446
Depreciation and depletion................................................................. 113 119 197
Profit on sale of fixed assets............................................................. (4) (8) (16)
Increase in stocks......................................................................... (11) (19) (93)
(Increase)/decrease in debtors............................................................. (62) 197 (94)
Operating lease prepayments................................................................ -- -- (342)
Increase/(decrease) in creditors........................................................... 60 (6) 36
Decrease in provisions and other long-term creditors....................................... (52) (16) (122)
--- --- ---
Net cash inflow from operating activities.................................................. 143 402 12
--- --- ---
--- --- ---
</TABLE>
21 ANALYSIS OF CHANGES IN FINANCING
<TABLE>
<CAPTION>
LONG-TERM LOANS CURRENT LOANS
AND FINANCE LEASE AND NOTES
OBLIGATIONS PAYABLE TOTAL
--------------------- ----------------- ---------
<S> <C> <C> <C>
LMN LMN LMN
As at 1 October 1993................................................. 245 51 296
Exchange adjustments................................................. (12) -- (12)
Cash (outflow)/inflow from financing................................. (9) 36 27
--- --- ---------
As at 30 September 1994.............................................. 224 87 311
Exchange adjustments................................................. (1) 1 --
Cash inflow/(outflow) from financing................................. -- (20) (20)
Loans and finance lease obligations of Eastern....................... 688 -- 688
--- --- ---------
As at 30 September 1995.............................................. 911 68 979
Exchange adjustments................................................. 3 3 6
Cash inflow from financing........................................... 31 97 128
--- --- ---------
As at 30 September 1996.............................................. 945 168 1,113
--- --- ---------
--- --- ---------
</TABLE>
In 1996, the Group distributed its shareholding in National Grid Group to
Hanson as a dividend in specie of L393 million which is reflected in invested
capital.
Analysis of net inflow/(outflow) of cash and cash equivalents in respect of
the acquisition of subsidiaries:
<TABLE>
<CAPTION>
YEAR ENDED 30 SEPTEMBER
---------------------------------
1994 1995 1996
----- --------- ---------
<S> <C> <C> <C>
LMN LMN LMN
Cash consideration for Eastern........................................................... -- (1) (2,495)
Cash consideration for the Caballo and Rawhide mines..................................... -- (227) --
Deposits acquired on acquisition of Eastern.............................................. -- 264 --
--- --- ---------
-- 36 (2,495)
--- --- ---------
--- --- ---------
</TABLE>
III-59
<PAGE>
22 ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS AND DEPOSITS
<TABLE>
<CAPTION>
CASH AND
SHORT-TERM
DEPOSITS OVERDRAFTS TOTAL
------------- ------------- ---------
<S> <C> <C> <C>
LMN LMN LMN
As at 1 October 1993............................................................. 79 -- 79
Exchange adjustments............................................................. (1) -- (1)
Net cash inflow.................................................................. 28 -- 28
--- --- ---
As at 30 September 1994.......................................................... 106 -- 106
Net cash inflow.................................................................. 237 -- 237
--- --- ---
As at 30 September 1995.......................................................... 343 -- 343
Exchange adjustments............................................................. 3 -- 3
Net cash outflow................................................................. (173) (119) (292)
--- --- ---
As at 30 September 1996.......................................................... 173 (119) 54"
--- --- ---
--- --- ---
</TABLE>
5. DEFINITIONS
In this Appendix III, the following definitions apply in addition to the
definitions set out in Appendix VI below:
<TABLE>
<S> <C>
"ADMISSION" the admission of Energy Group Shares to the Official List
of the London Stock Exchange, which became effective on 24
February 1997
"COMPANY" The Energy Group PLC
"ESPS" The Electricity Supply Pension Scheme
"GROUP" The Energy Group PLC and its subsidiary undertakings as
constituted immediately after the completion of all the
Demerger Transactions save in relation to the results for
the nine months ended 31 December 1997 where references to
the "Group" mean The Energy Group PLC and its subsidiary
undertakings as at that date
"HANSON GROUP" (a) in relation to any period prior to the Demerger,
Hanson and its subsidiary undertakings from time to time
(including the Group other than the Company); or (b) in
relation to any period after the Demerger, Hanson and its
subsidiary undertakings (excluding the Group)
"INFRASTRUCTURE COMPANIES" Rollalong Limited, Consolidated Gold Fields Limited, Major
Insurance Company Limited and various other subsidiaries
and intermediate holding companies and non-trading
companies that were wholly-owned by Hanson prior to the
Demerger
"NEW CREDIT FACILITY" the facility referred to in paragraph 8(b)(iv) of Appendix
V ("Material Contracts") below
"RELEVANT PEABODY DEBT" an amount of approximately $1,817 million plus interest
from 16 January 1997 owed by members of the Hanson Group
to members of the Group at the Demerger Date
</TABLE>
III-60
<PAGE>
APPENDIX IV
FINANCIAL AND OTHER INFORMATION ON PACIFICORP
ACQUISITIONS AND PACIFICORP
1 NATURE OF BUSINESS OF PACIFICORP ACQUISITIONS AND PACIFICORP
PacifiCorp is a US electric utility, headquartered in Portland, Oregon, that
conducts a retail electric utility business through Pacific Power & Light
Company and Utah Power & Light Company and engages in competitive power
production and sales on a wholesale basis under the name PacifiCorp.
PacifiCorp's US electric operations serve approximately 1.4 million retail
customers in service territories aggregating approximately 153,000 square miles
in portions of seven states in the western United States: Utah, Oregon, Wyoming,
Washington, Idaho, California and Montana.
PacifiCorp Group Holdings Company (formerly, PacifiCorp Holdings, Inc.), a
wholly owned subsidiary of PacifiCorp, holds the stock of subsidiaries
conducting businesses not regulated as US electric utilities. Historically,
PacifiCorp Group Holdings Company's principal subsidiaries were engaged in
telecommunications, mining and resource development and financial services. In
recent years, PacifiCorp Group Holdings Company reduced the size and scope of
its financial services operations and sold its mining and resource development
subsidiary. In connection with the financing of the Offer, PacifiCorp Group
Holdings Company sold Pacific Telecom, Inc., its telecommunications subsidiary,
to Century Telephone Enterprises, Inc. on 1 December 1997 for $1.5 billion in
cash plus the assumption of debt, and Pacific Generation Company, its
independent power production and cogeneration subsidiary, to NRG Energy, Inc. on
5 November 1997 for $150 million. At the present time, PacifiCorp Group Holdings
Company's principal subsidiaries are engaged primarily in international power
production, distribution and marketing, domestic power marketing and natural gas
storage and marketing.
PacifiCorp Group Holdings Company indirectly owns 100 per cent. of Powercor
Australia Limited, an Australian electric distribution company. Powercor serves
approximately 550,000 customers in suburban Melbourne and the western and
central regions of the State of Victoria in southeast Australia. PacifiCorp
Group Holdings Company indirectly owns a 19.9 per cent. partnership interest in
the 1,600 megawatt Hazelwood brown coal-fired generating station and adjacent
brown coal mine located in Victoria, Australia.
On 15 April 1997, PacifiCorp Group Holdings Company, through a wholly-owned
subsidiary, acquired all of the share capital of TPC Corporation, a natural gas
gathering, processing, storage and marketing company based in Houston, Texas,
for approximately $265 million in cash and assumed debt of approximately $140
million. TPC Corporation sold its natural gas gathering and processing systems
to a subsidiary of El Paso Energy Corporation on 2 December 1997 for $196.5
million.
PacifiCorp Acquisitions, an English unlimited company and wholly-owned
subsidiary of PacifiCorp Finance (UK) Limited, was incorporated for the purpose
of making the Previous Offer and has not conducted any unrelated activities
since its incorporation. PacifiCorp Finance (UK) Limited is an English private
limited company and wholly-owned subsidiary of PacifiCorp Services Limited.
PacifiCorp Services Limited is an English private limited company and
wholly-owned subsidiary of PacifiCorp EnergyCo, which, in turn, is an English
unlimited company and wholly-owned subsidiary of PacifiCorp Group Holdings
Company. PacifiCorp Group Holdings Company also wholly owns PacifiCorp Powercoal
LLC, an Oregon limited liability company. PacifiCorp Finance (UK) Limited,
PacifiCorp Services Limited, PacifiCorp EnergyCo and PacifiCorp Powercoal LLC
were all organised in connection with structuring the financing for the Previous
Offer. See paragraph 10 of Appendix V ("Financing arrangements") below.
IV-1
<PAGE>
2 DIRECTORS AND EXECUTIVE OFFICERS OF PACIFICORP ACQUISITIONS AND PACIFICORP
Set forth in the table below are the names and present principal occupations
or employments, and the material occupations, positions, offices, and
employments during the past five years, for the directors and executive officers
of PacifiCorp Acquisitions and PacifiCorp, and the name, principal business and
address for any corporation or other organisation in which such employment is
carried on. Each person listed below is of United States citizenship, and,
unless otherwise indicated, positions have been held for the past five years.
Directors are identified by the year in which such person became a director in
parentheses. The address of the corporation or other organisation for which a
listed individual's principal occupation is conducted is set forth at the first
place at which the name of such corporation or other organisation appears in
this paragraph 2.
<TABLE>
<CAPTION>
PACIFICORP ACQUISITIONS
<S> <C>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS HELD
OR BUSINESS ADDRESS DURING PAST FIVE YEARS
Frederick W. Buckman (1997) President and Chief Executive Officer of PacifiCorp (since
PacifiCorp February 1994); Chairman of PacifiCorp Group Holdings
700 NE Multnomah, Suite 1600 Company (since 1994); Chairman of PacifiCorp Acquisitions
Portland, Oregon 97232 (since June 1997); President and Chief Executive Officer
(1992-1994) and President and Chief Operating Officer
(1988-1991) of Consumers Power Company, Jackson, Michigan
Richard T. O'Brien (1997) Senior Vice President and Chief Financial Officer (since
PacifiCorp 1995) and Vice President (1993-1995) of PacifiCorp;
President and Chief Executive Officer (since January 1998)
and Senior Vice President (1993-1998) and Chief Financial
Officer (since 1996) of PacifiCorp Group Holdings Company;
Chief Financial Officer (1992-1993) and Vice President and
Treasurer (1989-1992) of NERCO, Inc., a former mining and
resource subsidiary of PacifiCorp; Chief Financial Officer
of PacifiCorp Acquisitions (since June 1997)
Dennis P. Steinberg (1997) Senior Vice President (since 1994) and Vice President
PacifiCorp (1990-1994) of PacifiCorp
Verl R. Topham (1997) Senior Vice President and General Counsel of PacifiCorp
PacifiCorp (since May 1994); Senior Vice President and General
One Utah Center, Suite 2300 Counsel of PacifiCorp Group Holdings Company (since 1995);
201 South Main President of Utah Power & Light Company (1990-1994)
Salt Lake City, Utah 84140
</TABLE>
IV-2
<PAGE>
<TABLE>
<CAPTION>
PACIFICORP ACQUISITIONS
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS HELD
OR BUSINESS ADDRESS DURING PAST FIVE YEARS
<S> <C>
William E. Peressini (1997) Vice President (since 1996) and Treasurer (since 1994) of
PacifiCorp PacifiCorp; Treasurer of PacifiCorp Group Holdings Company
(since 1994); Executive Vice President of PacifiCorp
Financial Services, Inc. (1992-1994); Senior Vice
President and Chief Financial Officer of PacifiCorp
Financial Services, Inc. (1989-1992); Deputy Chief
Financial Officer of PacifiCorp Acquisitions (since June
1997)
Michael J. Pittman (1997) Vice President (since 1993) and Assistant Vice President
Pacific Power & Light Company (1990-1993) of PacifiCorp
1500 Public Service Building
Portland, Oregon 97204
Thomas J. Imeson (1997) Vice President of PacifiCorp
PacifiCorp
</TABLE>
IV-3
<PAGE>
<TABLE>
<CAPTION>
PACIFICORP
<S> <C>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS HELD
OR BUSINESS ADDRESS DURING PAST FIVE YEARS
W. Charles Armstrong (1996) Independent Consultant (since 1997); Former Chief
RR, Box 1074, East Sound, Wash- Executive Officer, Bank of America Oregon (1992-1996)
ington 98245-9409
Kathryn A. Braun (1994) Executive Vice President, Western Digital Corporation
Western Digital Corporation
8105 Irvine Center Drive
Irvine, California 92718
Frederick W. Buckman (1994) (See above)
PacifiCorp
C. Todd Conover (1991) President and Chief Executive Officer, The Vantage
The Vantage Company Company, a business consulting firm, Los Altos,
101 First Street, Suite 670 California; General Manager, Finance Industry Group,
Los Altos, California 94022 Tandem Computers Incorporated, a computer manufacturing
company (January 1994-May 1995); President and Chief
Executive Officer, Central Banks of Colorado (1991-1992)
Nolan E. Karras (1993) Investment Advisor, Karras & Associates, Inc., an
Karras & Associates, Inc. investment advisory firm
4695 South 1900 West #3
Roy, Utah 84067
Keith R. McKennon (1990) Chairman of the Board of PacifiCorp (since 1994); formerly
PacifiCorp Chairman (1992-1994) and Chief Executive Officer
(1992-1993), Dow Corning Corporation, Midland, Michigan
Robert G. Miller (1994) Chairman of the Board and Chief Executive Officer of Fred
Fred Meyer, Inc. Meyer, Inc., a retail merchandising chain
3800 SE 22nd
Portland, Oregon 97202
Alan K. Simpson (1997) Former Wyoming US Senator
1201 Sunshine Avenue,
Cody, Wyoming 82414
Verl R. Topham (1994) (See above)
PacifiCorp
Don M. Wheeler (1989) Chairman and Chief Executive Officer, ICM Equipment Com-
ICM Equipment Company pany, a materials handling and equipment company (since
4899 West 2100 South 1996); formerly Chairman, Chief Executive Officer,
Salt Lake City, Utah 84120 President and General Manager of Wheeler Machinery Company
(1955-1996)
Nancy Wilgenbusch (1986) President, Marylhurst College
Marylhurst College
Marylhurst, Oregon 97036
</TABLE>
IV-4
<PAGE>
<TABLE>
<CAPTION>
PACIFICORP
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS HELD
OR BUSINESS ADDRESS DURING PAST FIVE YEARS
<S> <C>
Peter I. Wold (1995) President, Wold Oil & Gas Company, an oil and gas explora-
Wold Oil & Gas Company tion and production company
139 West Second Street,
Suite 200
Casper, Wyoming 82602
Donald A. Bloodworth Vice President of PacifiCorp (since November 1997),
PacifiCorp formerly with Air Touch Cellular (April 1997-November
1997); controller of PacifiCorp (August 1996-April 1997);
Vice President, Regulatory Requirements and Controller,
Pacific Telecom, Inc. (May 1993-August 1996); and
Assistant Treasurer of PacifiCorp (February 1992-May 1993)
John A. Bohling Senior Vice President of PacifiCorp (since 1993);
PacifiCorp Executive Vice President of Pacific Power & Light Company
(1991-1993)
William C. Brauer Senior Vice President (since 1996) and Vice President
PacifiCorp (1992-1996) of PacifiCorp
One Utah Center, Suite 2300,
201 South Main Street,
Salt Lake City, Utah 84140
Shelley R. Faigle Senior Vice President (since 1993) and Vice President
Pacific Power & Light Company (1992-1993) of PacifiCorp; Vice President (1989-1992) of
1500 Public Service Building Pacific Power & Light Company
Portland, Oregon 97204
James H. Huesgen Vice President and Controller of PacifiCorp (since
PacifiCorp November 1997); Executive Vice President and Chief
Financial Officer of Pacific Telecom, Inc. (1989-1997);
Controller of PacifiCorp Group Holdings Company (since
January 1998)
Paul G. Lorenzini Senior Vice President of PacifiCorp (since 1994);
Pacific Power & Light Company President (1992-1994) and Executive Vice President
(1989-1992) of Pacific Power & Light Company
Richard T. O'Brien (See above)
PacifiCorp
Michael J. Pittman (See above)
Pacific Power & Light Company
Daniel L. Spalding Chairman and Chief Executive Officer of Powercor Australia
Powercor Australia Limited Limited (since 1995); Senior Vice President (since 1992)
Level 3, 77 Southbank Blvd. and Vice President (1987-1992) of PacifiCorp
Southbank, Victoria 3006,
Australia
Dennis P. Steinberg (See above)
PacifiCorp
</TABLE>
IV-5
<PAGE>
<TABLE>
<CAPTION>
PACIFICORP
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT
NAME AND RESIDENCE (AND PRINCIPAL BUSINESS); MATERIAL POSITIONS HELD
OR BUSINESS ADDRESS DURING PAST FIVE YEARS
<S> <C>
Thomas J. Imeson (See above)
PacifiCorp
Sally A. Nofziger (See above)
PacifiCorp
William E. Peressini (See above)
PacifiCorp
</TABLE>
3 REGISTERED/PRINCIPAL OFFICES
PACIFICORP ACQUISITIONS
The registered office of PacifiCorp Acquisitions is One Silk Street, London
EC2Y 8HQ, United Kingdom.
PACIFICORP
The principal executive offices of PacifiCorp are located at 700 NE
Multnomah Street, Portland, Oregon 97232, United States.
4 RESULTS FOR YEAR ENDED 31 DECEMBER 1997
The text contained in this section of the document has been extracted from
the press release issued by PacifiCorp on 27 January 1998:
"PORTLAND, Oregon--PacifiCorp (NYSE: PPW) today reported earnings on common
stock of $451 million, or $1.52 per share, excluding asset sale gains and a
series of special charges and other adjustments recorded in 1997 (see chart
following). The Company recorded asset sale gains in 1997 totaling $395 million,
or $1.33 per share, and special charges and other adjustments totaling $205
million, or $0.69 per share. Total reported earnings on common stock was $2.16
per share for the year.
In 1996, PacifiCorp reported earnings on common stock of $475 million, or
$1.62 per share.
Fourth quarter 1997 earnings on common stock were $118 million, or $0.39 per
share, excluding asset sale gains, special charges and other adjustments. The
Company recorded asset sale gains of $395 million, or $1.33 per share and
special charges and other adjustments totaling $144 million, or $0.48 per share,
in the fourth quarter of 1997. Total reported earnings on common stock was $1.24
per share for the quarter.
In the fourth quarter of 1996, PacifiCorp reported earnings on common stock
of $127 million, or $0.42 per share.
The earnings contribution from the Company's Domestic Electric Operations
totaled $297 million in 1997, excluding special charges and other adjustments.
The 1996 earnings contribution from Domestic Electric Operations was $342
million. The $45 million decline in earnings contribution was attributable to
higher depreciation, outside services, and employee related costs.
On January 12, 1998, the Company announced a series of initiatives aimed at
reducing costs in its domestic electric business. These initiatives include
workforce reductions, closure of the Company's Glenrock coal mine and certain
asset write-offs.
Earnings from the Company's Australian electric operations increased to $54
million in 1997, from $32 million in 1996. This increase was attributable to
renegotiations of Tariff H industrial contracts, decreased maintenance costs and
lower interest expense.
IV-6
<PAGE>
"Despite growth in our Australian electric distribution business and
substantial increases in domestic wholesale electricity sales, higher costs in
our domestic electric business have resulted in the Company's earnings being
significantly below our expectations for the year," said Fred Buckman,
PacifiCorp's President and Chief Executive Officer. "The initiatives we
announced earlier this month are a direct attempt to improve the cost profile of
our domestic electric business. We are continuing to seek additional ways to
both reduce costs and add new revenue sources in an effort to improve our
earnings outlook."
In December of 1997, PacifiCorp completed the sale of its telecommunications
subsidiary, Pacific Telecom, Inc. (PTI), to Century Telephone Enterprises, Inc.
This business was reported as a discontinued operation during 1997.
During 1997, PacifiCorp actively sought to acquire The Energy Group PLC. On
December 19, 1997, the Company received unconditional approval from the U.K.
government to proceed with the transaction. However, approval from the U.S.
Federal Trade Commission has not yet been received.
IV-7
<PAGE>
1997 EARNINGS OVERVIEW
<TABLE>
<CAPTION>
ITEM (MILLIONS EXCEPT EPS) PRE-TAX NET INCOME EPS SEGMENT
- --------------------------------------- --------- ----------- --------- ---------------------------------------
<S> <C> <C> <C> <C>
Reported Earnings Contribution......... $ 640.9 $ 2.16
Adjustments (Location in Statements):
ASSET SALE GAINS
PTI Sale Gain (Discontinued Ops)....... (669.8) (365.1) (1.23) Telecommunications
PGC Sale Gain (Other Income)........... (56.5) (30.0) (0.10) Other Operations
--------- ----------- ---------
Total Asset Sales Gains................ (726.3) (395.1) (1.33)
--------- ----------- ---------
SPECIAL CHARGES:
Glenrock Closure....................... 64.4 39.9 0.14 Domestic Electric
Deferred Regulatory Pension cost....... 86.9 53.9 0.18
Valuation charges on IT systems........ 19.1 11.9 0.04
--------- ----------- ---------
Total Special Charges.................. 170.4 105.7 0.36
--------- ----------- ---------
--------- ----------- ---------
OTHER ADJUSTMENTS:
Depreciation rate changes Domestic Electric
(Depreciation)....................... 17.0 10.2 0.03
Reserve for uncollectibles (Other Domestic Electric
Operations & Maint.)................. 10.0 6.2 0.02
Industrial Billing Adjustments Domestic Electric
(Revenues)........................... 5.6 3.5 0.01
SAP process re-engineering (Admin. & Domestic Electric & Australia
General)............................. 13.8 8.6 0.03
Tariff H Contract Adjustments Australia
(Revenues)........................... (15.4) (9.6) (0.03)
Foreign Currency Option Loss (Other Other Operations
Expense)............................. 105.6 64.5 0.22
Regulatory Asset Impairments Domestic Electric
(Extraordinary Item)................. 25.6 16.0 0.05
--------- ----------- ---------
Adjusted Earnings and EPS.............. $ 450.9 $ 1.52
----------- ---------
----------- ---------
</TABLE>
DOMESTIC ELECTRIC OPERATIONS
EARNINGS CONTRIBUTION
Domestic Electric Operations reported earnings contribution of $166 million,
or $0.56 per share, in 1997, compared to $342 million, or $1.17 per share, in
1996. Domestic Electric's 1997 earnings contribution was $297 million, or $1.00
per share, before special charges and other adjustments of $132 million after
tax.
REVENUES
Total 1997 Domestic Electric revenues increased $715 million, or 24 percent,
from 1996 to $3,700 million primarily from the increased wholesale revenues of
$689 million, or 93 percent. Retail revenues were $2,200 million in 1997,
approximately equal to 1996.
IV-8
<PAGE>
Residential revenues were up $13 million, or 2 percent, to $814 million.
Growth in the average number of residential customers of 3 percent added $20
million to revenues. Price increases in Oregon, effective July 1996, added $9
million in 1997, offset in part by price decreases of $4 million in Utah that
became effective April 1997. Declines in customer usage, primarily attributable
to weather, reduced revenues $14 million in 1997 compared to 1996.
Commercial revenues increased $18 million, or 3 percent, to $641 million.
This increase was attributable to a 3 percent growth in average number of
customers in Utah and Oregon.
Industrial revenues decreased $9 million, or 1 percent, to $710 million.
Increased customer usage added revenues of $6 million in Eastern Wyoming and $4
million in Oregon. However, this was more than offset by reduced revenues of $8
million from lower usage by irrigation customers and $6 million of unfavorable
billing adjustments in the first quarter 1997 resulting from the implementation
of the new customer service system in late 1996.
During 1997, the active wholesale market led to an increase in revenues of
$689 million, or 93 percent, to a record $1,400 million. Energy volumes
increased 99 percent, driven by a $589 million increase in short-term firm and
spot market sales. Sales prices for short-term firm and spot market sales
averaged $20 per mWh in 1997, compared to $15 per mWh in 1996, resulting in $80
million in additional revenues. Increased long-term firm contract volumes added
$14 million to wholesale revenues.
OPERATING EXPENSE
Operating expenses increased $984 million, or 46 percent, to $3,100 million,
attributable to a significant increase in purchased power costs, special
charges, and higher depreciation and administrative costs.
Purchased power expenses increased $678 million to $1,300 million, more than
double last year, and was attributable to the growth of the Company's wholesale
business. Short-term firm and spot market purchases totaled 45.6 million mWh in
1997, nearly three times the level of 1996 purchases, adding $570 million to
purchased power expenses. Short-term firm and spot market purchase prices
averaged $19 per mWh in 1997 compared to $13 per mWh in 1996, a 46 percent
increase, adding $76 million to purchased power expenses.
Net power costs in 1997 were $6.99 per mWh, compared to $7.20 per mWh in
1996, a 3 percent decrease. Electric operations net power cost represents the
net cost to serve the Company's retail customers on a mWh basis. This is
measured by the sum of fuel, purchased power and wheeling expense, less
wholesale power and wheeling revenues. The decrease in net power cost was
attributable to increased hydro generation which displaced higher cost
resources, reduced system losses and improved margins from higher short-term and
spot market sales, offset in part by increased fuel costs.
Other operations and maintenance expense increased $26 million, to $470
million in 1997. Included in this 6 percent increase was $11 million of higher
plant maintenance and tree trimming, and a $10 million special reserve provision
for uncollectible accounts resulting from issues related to the strengthening of
the payment treatment processes in the new customer billing system implemented
late last year.
Depreciation and amortization expense increased $46 million, or 13 percent,
to $389 million in 1997. The Company completed a depreciation study of its fixed
assets and has filed with the appropriate regulatory bodies for approval to
increase its annual depreciation rates. As part of the study, the Company
recorded charges of $17 million in the fourth quarter to reflect the new higher
depreciation rates. An additional $26 million in depreciation is attributable to
increased plant in service, the new customer service system and a full year of
operations at the Hermiston plant.
IV-9
<PAGE>
Administrative and general expenses increased $53 million to $325 million in
1997, a 19 percent increase over 1996. This increase was primarily the result of
higher outside services of $18 million, expensing process re-engineering costs
of $10 million, in accordance with new accounting rules, relating to the
Company's new SAP software operating environment, and increased employee related
costs of $20 million, primarily attributable to the Company's significant
increase in its marketing activities in the wholesale markets.
SPECIAL CHARGES
During the fourth quarter of 1997, Domestic Electric Operations recorded in
operating income certain special charges totaling $170 million pre-tax. These
special charges included $64 million for the Glenrock mine closure, $87 million
for the write-off of deferred regulatory pension assets and $19 million for the
valuation impairment of certain information systems assets.
OTHER INCOME/EXPENSE
Domestic Electric interest expense increased $27 million, or 9 percent, to
$319 million in 1997. This increase was attributable to higher debt balances as
a result of the Hermiston plant acquisition in July 1996 and capital
contributions to PacifiCorp Holdings, Inc. relating to the acquisition of TPC
Corporation (TPC) in April 1997. Other income increased $7 million in 1997
primarily as a result of increased sales of emission allowances.
As previously reported, the Company's 1997 results included an extraordinary
charge of $16 million, or $0.05 per share ($26 million pre-tax), related to its
decision to record a valuation allowance for regulatory assets pertaining to
generation resources allocable to its operations in California and Montana. The
decision to impair these assets is based primarily on recent regulatory and
legislative actions in those states that have mandated customer choice of
electric supplier and eliminated cost-based regulation for the generation
portion of the electricity business. Regulatory assets represent costs incurred
in the past that have been deferred under regulatory accounting practices for
future recovery. Because of the potential regulatory and legislative actions in
its other states jurisdictions, the Company may have additional regulatory asset
write-offs and charges for impairment of long-lived assets in future periods.
AUSTRALIAN ELECTRIC OPERATIONS
FOR THE YEAR (IN MILLIONS):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
POWERCOR:
Revenue..................................................................... $ 716 $ 659
Purchased power............................................................. (309) (305)
Depreciation and amortization............................................... (67) (72)
Other operating expenses.................................................... (189) (155)
--------- ---------
Income from operations...................................................... 151 127
Interest expense and other.................................................. (62) (75)
--------- ---------
Income before income taxes.................................................. 89 52
Income taxes................................................................ (33) (19)
--------- ---------
POWERCOR EARNINGS CONTRIBUTION.............................................. 56 33
HAZELWOOD NET LOSS.......................................................... (2) (1)
--------- ---------
AUSTRALIAN ELECTRIC OPERATIONS CONTRIBUTION................................. $ 54 $ 32
--------- ---------
--------- ---------
</TABLE>
IV-10
<PAGE>
EARNINGS CONTRIBUTION
In 1997, Australian Electric Operations contributed earnings of $54 million,
or $0.18 per share, compared to the 1996 results of $32 million, or $0.11 per
share. The 1997 earnings included adjustments associated with renegotiating
certain Tariff H industrial customer contracts that added $10 million, or $0.03
per share.
POWERCOR REVENUES
Powercor reported 1997 revenues of $716 million, a $57 million increase, or
9 percent, over the prior year. The increase was attributable to higher energy
sales volumes of 2,734 million kWh, or 33 percent. Powercor continued to
increase market share in the contestable markets of Victoria and New South Wales
outside Powercor's franchise area and added 2,843 million kWh and $100 million
of revenue in 1997. Powercor now holds an estimated 42 percent of the
contestable markets in Victoria and 13 percent in New South Wales.
Revenue from inside Powercor's franchise area decreased $47 million, or 8
percent, to $539 million. Lower average realized prices reduced revenues by $39
million. Energy volumes decreased 108 million kWh, or $8 million, due to
customers lost from the effect of contestability in Powercor's franchise area.
The currency exchange rate for converting Australian dollars to United
States dollars was 0.744 in 1997 compared to 0.783 in 1996, a 5 percent decrease
for the year. The effect of the exchange rate fluctuation significantly lowered
revenues by $33 million and expenses by $31 million during 1997.
POWERCOR OPERATING EXPENSES
Purchased power expenses increased $4 million, or 1 percent, to $309
million. Volumes of purchased power increased 2,734 million kWh, or 33 percent,
adding $101 million to costs, offset in part by lower pool power prices that
reduced purchased power costs by $97 million. Purchased power prices averaged
$28 per mWh in 1997, compared to $37 per mWh in 1996.
Other operating expenses increased $34 million, or 22 percent, to $189
million. Increased sales to contestable customers outside Powercor's franchised
area resulted in higher network and grid fees of $52 million. This was partially
offset by higher network revenues of $15 million from customers inside
Powercor's franchise area that are serviced by other energy suppliers and a
decrease in maintenance expenses of $17 million attributable to increased
productivity and cost reduction efforts. Administrative and general expenses
increased $14 million due to higher outside services of $10 million and
expensing process re-engineering costs of $4 million relating to the new SAP
software operating environment in accordance with new accounting rules.
HAZELWOOD
For 1997, the Company recorded an after tax loss of $2 million on its 19.9
percent ownership interest in the Hazelwood Power Station, a coal-fired
generating station and associated coal mine in Victoria, Australia, as compared
to a loss of $1 million in 1996. Hazelwood was purchased in September 1996.
TELECOMMUNICATIONS
On December 1, 1997, the Company completed the sale of PTI to Century
Telephone Enterprises, Inc. for $1.5 billion in cash, plus the assumption of PTI
debt. The Company realized an after tax gain of $365 million, or $1.23 per
share. For the eleven months of 1997, PTI reported net income of $89 million or
$0.30 per share, compared to $75 million, or $0.25 per share, for the entire
year of 1996.
IV-11
<PAGE>
OTHER OPERATIONS
The Company's other operations reported net losses of $17 million, or $0.06
per share, compared to earnings of $27 million, or $0.09 in 1996, a $44 million
decrease, or $0.15 per share.
In the third quarter of 1997, the Company recorded an after tax loss of $65
million, or $0.22 per share, associated with the closing of foreign exchange
positions related to the Company's tender offer for The Energy Group PLC (TEG).
As previously reported, the Company purchased the foreign exchange positions to
hedge risk of exchange rate fluctuations associated with its recommended offer
for TEG. On August 1, the tender offer lapsed and the Company closed the foreign
exchange position as required by its hedging policies.
The Company estimates that it has incurred approximately $60 million of
other costs related to the TEG transaction for bank fees, legal expenses and
other related costs. These costs have been deferred because the Company expects
to make a new bid for TEG. It is possible that the outcome of the potential
transaction will be known before the Company files its 1997 financial statements
with the Securities and Exchange Commission in March. If it is an unsuccessful
outcome, the Company will adjust its 1997 reported earnings to reflect the after
tax write off of the deferred costs of approximately $38 million, or $0.13 per
share.
On November 5, 1997, the Company completed the sale of its independent power
subsidiary, Pacific Generation Company (PGC), to NRG Energy, Inc. for
approximately $150 million in cash resulting in a gain of $30 million, or $0.10
per share.
PacifiCorp Power Marketing, Inc. (PPM), the Company's eastern wholesale
energy trading company, completed its first full year of operations with
revenues of $913 million and reported a net loss of $2 million. TPC, the
Company's natural gas marketing and storage company acquired in April of this
year, reported revenues of $816 million and a net loss of $6 million for the
year.
The Company's other unregulated businesses and equity investments reported
1997 earnings of $25 million, compared to $35 million in 1996, a decrease of $10
million, or $0.03 per share.
Other after-tax interest expense for 1997 increased $7 million over 1996 due
to higher debt balances resulting primarily from the Hazelwood acquisition.
Interest income increased $7 million from temporary cash investments as a result
of the late 1997 asset sales. Income taxes were benefited $6 million by
favorable state tax adjustments in 1997.
IV-12
<PAGE>
FOURTH QUARTER 1997 EARNINGS ANALYSIS
DOMESTIC ELECTRIC OPERATIONS
EARNINGS CONTRIBUTION
For the fourth quarter of 1997, Domestic Electric Operations reported a
total net loss before extraordinary item of $59 million, or $0.20 per share,
compared to earnings of $93 million, or $0.32 per share, in the last quarter of
1996. Excluding the special charges and other adjustments, the 1997 fourth
quarter earnings were $70 million, or $0.23 per share.
Domestic Electric reported an operating loss of $7 million in the last
quarter 1997, a decline of $242 million from the same period in 1996. This
decrease resulted from special charges, higher depreciation expense and
increased general and administrative expenses in 1997.
REVENUES
Domestic Electric Operations revenue increased $297 million in the quarter,
or 36 percent, to $1,100 million, primarily from increased wholesale revenues of
$303 million. Retail revenues were flat with a slight increase in energy volumes
of 360 million kWh, or 3 percent.
Residential revenues were $225 million on energy sales of 3.6 million kWh,
up slightly from the prior year. Growth in the average number of residential
customers of 3 percent, primarily in Utah and Oregon, added $5 million to
revenue. This increase was offset by price decreases of $1 million in the
Company's Utah jurisdiction and by declining customer usage of $4 million, which
was largely attributable to weather.
Commercial revenues grew by $2 million, or 1 percent, to $166 million on a 2
percent increase in energy sales. Growth in the average number of customers of 2
percent added $3 million to revenues, while decreased prices in Utah lowered
revenues by $1 million.
Industrial revenues decreased $2 million, or 1 percent, to $172 million. The
decrease was attributable to a contract amendment of $2 million and lower prices
in Utah of $1 million, offset in part by increased energy sales of 252 million
kWh that added $3 million to revenue.
Wholesale revenues increased $303 million, to $534 million, on a 128 percent
increase in energy sales. Increased short-term firm and spot market energy sales
volumes added $269 million. Short-term firm and spot market sales prices
averaged $23 per mWh in 1997, compared to $18 per mWh for the same period in
1996. The increased prices added $28 million in revenues. Increased long-term
firm contract volumes added $2 million to wholesale revenues for the quarter.
OPERATING EXPENSES
Total operating expenses increased $539 million, or 90 percent, to $1,100
million in the quarter, primarily attributable to higher purchased power
expenses, special charges, and higher depreciation and administrative costs.
Purchased power expenses for the fourth quarter of 1997 increased $308
million, to $510 million. Short-term firm and spot market energy purchases were
up $274 million, or 12.2 million mWh, more than three times the amount of
purchases in the same period of 1996. Short-term firm and spot market purchase
prices averaged $23 per mWh in the quarter versus $18 per mWh in the fourth
quarter of 1996. The increase in purchased power costs included $26 million
related to increased prices.
Fuel expense for the quarter was down $12 million, or 9 percent, to $115
million. This decrease was attributable to reduced generation of 747 million
kWh, or 5 percent, and lower average fuel costs of $5
IV-13
<PAGE>
million. The Company's hydro generation resources were 153 million kWh, or 11
percent, above the same period in 1996.
Net power costs in the quarter were $7.53 per mWh, compared to $8.23 per mWh
in the fourth quarter of 1996, a 9 percent decrease. The decrease in net power
cost was attributable to increased hydro generation which displaced higher cost
resources, reduced system losses and improved margins from higher short-term and
spot market sales.
Other operations and maintenance expense increased $8 million, or 7 percent,
to $125 million in the fourth quarter of 1997. This increase was attributable to
a $10 million special reserve provision for uncollectible accounts resulting
from issues related to the strengthening of the payment treatment process in the
new customer billing system implemented late last year.
Depreciation and amortization expense increased $28 million, or 31 percent,
to $117 million. The increase was attributed to a $17 million charge in the
quarter to reflect higher depreciation rates and $9 million for increased plant
in service.
Administrative and general expenses increased $36 million, or 56 percent, to
$100 million. This increase was attributable to $10 million of process
re-engineering costs relating to the Company's new SAP software operating
environment, higher outside services of $8 million, increased employee related
costs of $11 million primarily related to the significant increase in the
wholesale markets and software expenses of $5 million.
SPECIAL CHARGES
During the fourth quarter of 1997, Domestic Electric Operations recorded in
operating income certain special charges totaling $170 million pre-tax. These
special charges included $64 million for the Glenrock mine closure, $87 million
for the write-off of deferred regulatory pension assets and $19 million for the
valuation impairment of certain information systems assets.
OTHER INCOME/EXPENSE
Electric interest expense increased $9 million, or 12 percent, to $83
million. The increase was attributable to higher debt balances as the result of
increased capital contributions to PacifiCorp Holdings, Inc. relating to the
acquisition of TPC in the second quarter of 1997. Domestic Electric income tax
expense declined $90 million, resulting in a tax benefit of $32 million in 1997
due to the level of pre-tax losses in the quarter.
The Company's 1997 fourth quarter results included an extraordinary charge
of $16 million, or $0.05 per share, ($26 million pre-tax) related to the
valuation allowance for regulatory generation assets allocable to its operations
in California and Montana.
IV-14
<PAGE>
AUSTRALIAN ELECTRIC OPERATIONS
FOURTH QUARTER RESULTS (IN MILLIONS):
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
POWERCOR:
Revenues.................................................................. $ 169 $ 181
Purchased power........................................................... (73) (84)
Depreciation and amortization............................................. (15) (18)
Other operating expenses.................................................. (51) (46)
--------- ---------
Income from operations.................................................... 30 33
Interest expense and other................................................ (13) (17)
--------- ---------
Income before income taxes................................................ 17 16
Income taxes.............................................................. (7) (6)
--------- ---------
POWERCOR EARNINGS CONTRIBUTION............................................ 10 10
HAZELWOOD NET LOSS........................................................ (1) (1)
--------- ---------
AUSTRALIAN ELECTRIC OPERATIONS CONTRIBUTION............................... $ 9 $ 9
--------- ---------
--------- ---------
</TABLE>
EARNINGS CONTRIBUTION
Australian Electric Operations contributed $9 million, or $0.03 per share,
in the fourth quarters of 1997 and 1996.
POWERCOR REVENUES
Powercor's revenues decreased $12 million, or 7 percent, to $169 million.
The decrease was attributable to lower average realized prices, offset in part
by increased energy sales volumes of 751 million kWh, or 32 percent.
Energy volumes to contestable customers outside Powercor's franchise area
were up 835 million kWh and added $22 million to revenue due to customer gains
in Victoria and New South Wales. This included increased energy volumes for
customers in Victoria of 228 million kWh that added $1 million to revenue, and
energy volumes for new customers in New South Wales of 607 million kWh that
added $21 million to revenue.
Revenue inside Powercor's franchise area from franchise and contestable
customers decreased $26 million, or 17 percent, to $121 million. Lower average
realized prices reduced revenue by $19 million and decreased energy volumes of
84 million kWh reduced revenues by $7 million, including $4 million as a result
of customers lost due to the effects of contestability in Powercor's franchise
area in 1997. The fourth quarter of 1997 included adjustments associated with
certain Tariff H industrial contracts that added $3 million to revenues.
The currency exchange rate for converting Australian dollars to United
States dollars was 0.692 in the fourth quarter 1997 compared to 0.796 in 1996, a
13 percent decrease in the quarter. The effect of the exchange rate fluctuation
lowered revenues by $24 million and costs by $23 million during the fourth
quarter of 1997.
POWERCOR OPERATING EXPENSES
Purchased power expense decreased $11 million, or 13 percent, to $73
million. Lower pool prices reduced power costs by $39 million, offset in part by
a 32 percent increase in purchased power volumes
IV-15
<PAGE>
that added $27 million to costs. Purchased power prices averaged $24 per mWh in
the fourth quarter of 1997, compared to $36 per mWh in 1996.
Other operating expenses increased $5 million, or 11 percent, to $51
million. Increased sales to contestable customers outside Powercor's franchise
area resulted in higher network and grid fees of $13 million. This was offset in
part by higher network revenues of $5 million from customers inside Powercor's
franchise area serviced by other energy suppliers. Administrative expenses
increased $8 million expensing process re-engineering costs of $4 million, in
accordance with new accounting rules, relating to the new SAP software operating
environment and higher outside services expenses. Maintenance expenses decreased
$13 million attributable to increased productivity and cost reduction efforts.
Interest expense and other decreased $4 million, or 24 percent, to $13
million, due to lower average interest rates and debt balances.
HAZELWOOD
The Company recorded an after tax loss of $1 million in the fourth quarters
of 1997 and 1996 on its 19.9 percent ownership interest in the Hazelwood Power
Station.
TELECOMMUNICATIONS
As previously discussed, the Company completed the sale of PTI to Century
Telephone Enterprises, Inc. for $1.5 billion in cash, plus the assumption of
PTI's debt and recorded an after tax gain of $365 million, or $1.23 per share.
For the two months prior to the sale PTI reported net income of $25 million, or
$0.08 per share, compared to $21 million, or $0.06 per share, for the entire
fourth quarter of 1996.
OTHER BUSINESSES
In the fourth quarter of 1997, the Company's other operations reported
earnings of $45 million, or $0.15 per share, compared to $4 million, or $0.01 in
1996. During the quarter, the sale of PGC to NRG Energy, Inc. resulted in a gain
of $30 million, or $0.10 per share.
PPM reported a loss of $1 million in the fourth quarter of 1997 compared to
break even results last year. PPM's fourth quarter revenues increased $252
million to $260 million on increased energy trading activities. TPC reported a
loss of $4 million on revenues of $405 million in the fourth quarter of 1997.
For its other unregulated businesses, the Company reported earnings of $13
million in the fourth quarter of 1997, as compared to $9 million in 1996.
Interest income increased $5 million over the fourth quarter of 1996
primarily due to increased temporary cash investments from the sales of PTI and
PGC. Income taxes were benefited by $6 million of favorable state tax
adjustments in 1997.
IV-16
<PAGE>
PACIFICORP
AND ITS CONSOLIDATED SUBSIDIARIES
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED
DECEMBER 31
--------------------- $ %
1997 1996 (1) CHANGE CHANGE
---------- --------- --------- -----------
<S> <C> <C> <C> <C>
REVENUES
Domestic Electric Operations (See next page).................... $1,129,400 $ 832,800 $ 296,600 36
Australian Electric Operations (See next page).................. 169,300 181,200 (11,900) (7)
Other Operations (2)............................................ 706,800 37,800 669,000 *
---------- --------- --------- ---
TOTAL....................................................... 2,005,500 1,051,800 953,700 91
---------- --------- --------- ---
EXPENSES
Domestic Electric Operations (See next page).................... 1,136,700 598,200 538,500 90
Australian Electric Operations.................................. 139,100 147,600 (8,500) (6)
Other Operations (2)............................................ 691,600 12,300 679,300 *
---------- --------- --------- ---
TOTAL....................................................... 1,967,400 758,100 1,209,300 *
---------- --------- --------- ---
INCOME FROM OPERATIONS
Domestic Electric Operations.................................... (7,300) 234,600 (241,900) (103)
Australian Electric Operations.................................. 30,200 33,600 (3,400) (10)
Other Operations (2)............................................ 15,200 25,500 (10,300) (40)
---------- --------- --------- ---
TOTAL....................................................... 38,100 293,700 (255,600) (87)
Interest expense.................................................... 107,900 106,000 1,900 2
Other (income) expense.............................................. (67,000) 13,100 (80,100) *
---------- --------- --------- ---
Income from continuing operations before income taxes............... (2,800) 174,600 (177,400) (102)
Income taxes........................................................ (2,900) 62,300 (65,200) (105)
---------- --------- --------- ---
Income from continuing operations before extraordinary item......... 100 112,300 (112,200) (100)
Discontinued operations (3)......................................... 389,800 20,600 369,200 *
Extraordinary item (4).............................................. (16,000) -- (16,000) *
---------- --------- --------- ---
NET INCOME.......................................................... 373,900 132,900 241,000 *
Preferred dividend requirement...................................... 4,800 5,500 (700) (13)
---------- --------- --------- ---
EARNINGS CONTRIBUTION ON COMMON
STOCK (5)
Domestic Electric Operations.................................... (58,800) 93,000 (151,800) *
Australian Electric Operations.................................. 9,300 9,400 (100) (1)
Other Operations (2)............................................ 44,800 4,400 40,400 *
---------- --------- --------- ---
Continuing operations............................................... (4,700) 106,800 (111,500) (104)
Discontinued operations (3)......................................... 389,800 20,600 369,200 *
Extraordinary item (4).............................................. (16,000) -- (16,000) *
---------- --------- --------- ---
TOTAL....................................................... $ 369,100 $ 127,400 $ 241,700 *
---------- --------- --------- ---
---------- --------- --------- ---
Average common shares outstanding................................... 296,719 294,897 1,822 1
EARNINGS PER COMMON SHARE
Domestic Electric Operations.................................... $ (0.20) $ 0.32 $ (0.52) *
Australian Electric Operations.................................. 0.03 0.03 -- --
Other Operations (2)............................................ 0.15 0.01 0.14 *
---------- --------- --------- ---
Continuing operations............................................... (0.02) 0.36 (0.38) (106)
Discontinued operations (3)......................................... 1.31 0.06 1.25 *
Extraordinary item (4).............................................. (0.05) -- (0.05) *
---------- --------- --------- ---
TOTAL (6)................................................... $ 1.24 $ 0.42 $ 0.82 *
---------- --------- --------- ---
---------- --------- --------- ---
Dividends paid per common share..................................... $ 0.27 $ 0.27 $ -- --
---------- --------- --------- ---
---------- --------- --------- ---
</TABLE>
- ------------------------
* Not a meaningful number.
(See accompanying notes)
IV-17
<PAGE>
PACIFICORP
AND ITS CONSOLIDATED SUBSIDIARIES
SUMMARY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
3 MONTHS ENDED
DECEMBER 31
--------------------- $ %
1997 1996 CHANGE CHANGE
---------- --------- --------- -------------
<S> <C> <C> <C> <C>
DOMESTIC ELECTRIC REVENUES (In thousands)
Residential..................................................... $ 225,400 $ 224,900 $ 500 --
Commercial...................................................... 166,000 164,000 2,000 1
Industrial...................................................... 172,400 174,000 (1,600) (1)
Other........................................................... 7,600 8,300 (700) (8)
---------- --------- --------- ---
Retail Sales................................................ 571,400 571,200 200 --
Wholesale sales................................................. 534,200 231,300 302,900 131
Other........................................................... 23,800 30,300 (6,500) (21)
---------- --------- --------- ---
TOTAL....................................................... $1,129,400 $ 832,800 $ 296,600 36
---------- --------- --------- ---
---------- --------- --------- ---
DOMESTIC ELECTRIC ENERGY SALES
(Millions of kWh)
Residential..................................................... 3,608 3,559 49 1
Commercial...................................................... 3,057 2,997 60 2
Industrial...................................................... 5,202 4,950 252 5
Other........................................................... 159 160 (1) (1)
---------- --------- --------- ---
Retail Sales................................................ 12,026 11,666 360 3
Wholesale sales................................................. 21,687 9,499 12,188 128
---------- --------- --------- ---
TOTAL....................................................... 33,713 21,165 12,548 59
---------- --------- --------- ---
---------- --------- --------- ---
DOMESTIC ELECTRIC EXPENSES (In thousands)
Fuel............................................................ 114,900 126,400 (11,500) (9)
Purchased power................................................. 510,000 201,700 308,300 *
Other operations and maintenance................................ 124,800 117,000 7,800 7
Depreciation and amortization................................... 117,000 89,200 27,800 31
Administrative and general...................................... 99,600 63,900 35,700 56
Special charges................................................. 170,400 -- 170,400 *
---------- --------- --------- ---
TOTAL....................................................... 1,136,700 598,200 538,500 90
---------- --------- --------- ---
---------- --------- --------- ---
AUSTRALIAN ELECTRIC REVENUES (In thousands)
Residential..................................................... $ 52,900 $ 58,900 $ (6,000) (10)
Commercial...................................................... 58,100 50,400 7,700 15
Industrial...................................................... 54,800 59,700 (4,900) (8)
---------- --------- --------- ---
Retail Sales................................................ 165,800 169,000 (3,200) (2)
Other........................................................... 3,500 12,200 (8,700) (71)
---------- --------- --------- ---
TOTAL....................................................... $ 169,300 $ 181,200 $ (11,900) (7)
---------- --------- --------- ---
---------- --------- --------- ---
AUSTRALIAN ELECTRIC ENERGY SALES
(Millions of kWh)
Residential..................................................... 623 604 19 3
Commercial...................................................... 1,068 658 410 62
Industrial...................................................... 1,380 1,058 322 30
---------- --------- --------- ---
TOTAL....................................................... 3,071 2,320 751 32
---------- --------- --------- ---
---------- --------- --------- ---
</TABLE>
(See accompanying notes)
IV-18
<PAGE>
PACIFICORP
AND ITS CONSOLIDATED SUBSIDIARIES
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 MONTHS ENDED
DECEMBER 31
---------------------- $ %
1997 1996(1) CHANGE CHANGE
---------- ---------- --------- -------------
<S> <C> <C> <C> <C>
REVENUES
Domestic Electric Operations (See next page)................... $3,706,900 $2,991,800 $ 715,100 24
Australian Electric Operations (See next page)................. 716,200 658,800 57,400 9
Other Operations (2)........................................... 1,854,900 153,100 1,701,800 *
---------- ---------- --------- ---
TOTAL...................................................... 6,278,000 3,803,700 2,474,300 65
---------- ---------- --------- ---
EXPENSES
Domestic Electric Operations (See next page)................... 3,105,600 2,122,000 983,600 46
Australian Electric Operations................................. 565,700 531,400 34,300 6
Other Operations (2)........................................... 1,804,200 63,900 1,740,300 *
---------- ---------- --------- ---
TOTAL...................................................... 5,475,500 2,717,300 2,758,200 102
---------- ---------- --------- ---
INCOME FROM OPERATIONS
Domestic Electric Operations................................... 601,300 869,800 (268,500) (31)
Australian Electric Operations................................. 150,500 127,400 23,100 18
Other Operations (2)........................................... 50,700 89,200 (38,500) (43)
---------- ---------- --------- ---
TOTAL...................................................... 802,500 1,086,400 (283,900) (26)
Interest expense................................................... 439,500 415,000 24,500 6
Other (income) expense............................................. 28,100 4,800 23,300 *
---------- ---------- --------- ---
Income from continuing operations before income taxes.............. 334,900 666,600 (331,700) (50)
Income taxes 109,500 236,400 (126,900) (54)
---------- ---------- --------- ---
Income from continuing operations before extraordinary item........ 225,400 430,200 (204,800) (48)
Discontinued operations (3)........................................ 454,300 74,700 379,600 *
Extraordinary item (4)............................................. (16,000) -- (16,000) *
---------- ---------- --------- ---
NET INCOME......................................................... 663,700 504,900 158,800 31
Preferred dividend requirement..................................... 22,800 29,800 (7,000) (23)
---------- ---------- --------- ---
EARNINGS CONTRIBUTION ON COMMON STOCK (5)
Domestic Electric Operations................................... 165,500 341,500 (176,000) (52)
Australian Electric Operations................................. 54,200 31,900 22,300 70
Other Operations (2)........................................... (17,100) 27,000 (44,100) *
---------- ---------- --------- ---
Continuing operations.............................................. 202,600 400,400 (197,800) (49)
Discontinued operations (3)........................................ 454,300 74,700 379,600 *
Extraordinary item (4)............................................. (16,000) -- (16,000) *
---------- ---------- --------- ---
TOTAL...................................................... $ 640,900 $ 475,100 $ 165,800 35
---------- ---------- --------- ---
---------- ---------- --------- ---
Average common shares outstanding.................................. 296,094 292,424 3,670 1
EARNINGS PER COMMON SHARE
Domestic Electric Operations................................... $ 0.56 $ 1.17 $ (0.61) (52)
Australian Electric Operations................................. 0.18 0.11 0.07 64
Other Operations (2)........................................... (0.06) 0.09 (0.15) *
---------- ---------- --------- ---
Continuing operations.............................................. 0.68 1.37 (0.69) (50)
Discontinued operations (3)........................................ 1.53 0.25 1.28 *
Extraordinary item (4)............................................. (0.05) -- (0.05) *
---------- ---------- --------- ---
TOTAL (6).................................................. $ 2.16 $ 1.62 $ 0.54 33
---------- ---------- --------- ---
---------- ---------- --------- ---
Dividends paid per common share.................................... $ 1.08 $ 1.08 $ -- --
---------- ---------- --------- ---
---------- ---------- --------- ---
</TABLE>
- ------------------------
* Not a meaningful number.
(See accompanying notes)
IV-19
<PAGE>
PACIFICORP
AND ITS CONSOLIDATED SUBSIDIARIES
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
12 MONTHS ENDED
DECEMBER 31
---------------------- $ %
1997 1996 CHANGE CHANGE
---------- ---------- --------- -------------
<S> <C> <C> <C> <C>
DOMESTIC ELECTRIC REVENUES (In thousands)
Residential.................................................... $ 814,000 $ 801,400 $ 12,600 2
Commercial..................................................... 640,900 623,300 17,600 3
Industrial..................................................... 709,900 719,300 (9,400) (1)
Other.......................................................... 31,700 32,500 (800) (2)
---------- ---------- --------- ---
Retail Sales............................................... 2,196,500 2,176,500 20,000 1
Wholesale sales................................................ 1,428,000 738,800 689,200 93
Other.......................................................... 82,400 76,500 5,900 8
---------- ---------- --------- ---
TOTAL...................................................... $3,706,900 $2,991,800 $ 715,100 24
---------- ---------- --------- ---
---------- ---------- --------- ---
DOMESTIC ELECTRIC ENERGY SALES
(Millions of kWh)
Residential.................................................... 12,902 12,819 83 1
Commercial..................................................... 11,868 11,497 371 3
Industrial..................................................... 20,674 20,332 342 2
Other.......................................................... 705 640 65 10
---------- ---------- --------- ---
Retail Sales............................................... 46,149 45,288 861 2
Wholesale sales................................................ 59,143 29,665 29,478 99
---------- ---------- --------- ---
TOTAL...................................................... 105,292 74,953 30,339 40
---------- ---------- --------- ---
---------- ---------- --------- ---
DOMESTIC ELECTRIC EXPENSES (In thousands)
Fuel........................................................... 454,200 443,000 11,200 3
Purchased power................................................ 1,296,500 618,700 677,800 110
Other operations and maintenance............................... 470,000 444,200 25,800 6
Depreciation and amortization.................................. 389,100 343,400 45,700 13
Administrative and general..................................... 325,400 272,700 52,700 19
Special charges................................................ 170,400 -- 170,400 *
---------- ---------- --------- ---
TOTAL...................................................... 3,105,600 2,122,000 983,600 46
---------- ---------- --------- ---
---------- ---------- --------- ---
AUSTRALIAN ELECTRIC REVENUES
(In thousands)
Residential.................................................... $ 239,200 $ 239,400 $ (200) --
Commercial..................................................... 207,900 165,500 42,400 26
Industrial..................................................... 236,200 223,700 12,500 6
---------- ---------- --------- ---
Retail Sales............................................... 683,300 628,600 54,700 9
Other.......................................................... 32,900 30,200 2,700 9
---------- ---------- --------- ---
TOTAL...................................................... $ 716,200 $ 658,800 $ 57,400 9
---------- ---------- --------- ---
---------- ---------- --------- ---
AUSTRALIAN ELECTRIC ENERGY SALES
(Millions of kWh)
Residential.................................................... 2,683 2,608 75 3
Commercial..................................................... 3,082 1,926 1,156 60
Industrial..................................................... 5,279 3,776 1,503 40
---------- ---------- --------- ---
TOTAL...................................................... 11,044 8,310 2,734 33
---------- ---------- --------- ---
---------- ---------- --------- ---
</TABLE>
(See accompanying notes)
IV-20
<PAGE>
PACIFICORP
AND ITS CONSOLIDATED SUBSIDIARIES
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
DECEMBER DECEMBER $ %
1997 1996 CHANGE CHANGE
---------- ----------- --------- -------------
<S> <C> <C> <C> <C>
CONSOLIDATED CAPITALIZATION
Common equity................................................ $4,332,000 $ 4,032,000 $ 300,000 7
Preferred stock.............................................. 241,000 314,000 (73,000) (23)
Preferred securities of trust holding solely PacifiCorp
debentures................................................. 340,000 210,000 130,000 62
Long-term debt............................................... 4,415,000 4,829,000 (414,000) (9)
Short-term debt.............................................. 555,000 903,000 (348,000) (39)
---------- ----------- --------- ---
TOTAL.................................................... $9,883,000 $10,288,000 $(405,000) (4)
---------- ----------- --------- ---
---------- ----------- --------- ---
</TABLE>
- ------------------------
(1) Certain amounts from the prior year have been reclassified to conform with
the 1997 method of presentation. Reclassification had no effect on
previously reported consolidated net income.
(2) Other Operations includes the operations of PacifiCorp Financial Services,
Inc., Pacific Generation Company (sold Nov. 1, 1997), TPC Corporation and
PacifiCorp Power Marketing, as well as activities of PacifiCorp Holdings,
Inc.
(3) Represents the discontinued operations of Pacific Telecom, Inc., a
telecommunications subsidiary.
(4) Extraordinary charges for unrecoverability of regulatory assets in
California and Montana.
(5) Earnings contribution on common stock by segment:
(a) Does not reflect elimination for interest on intercompany borrowing
arrangements.
(b) Includes income taxes on a separate company basis, with any benefit or
detriment of consolidation reflected in Other Operations.
(c) Amounts are net of preferred dividend requirements and minority
interest.
(6) Basic earnings per share is equivalent to fully diluted earnings per share."
5 FINANCIAL STATEMENTS
The financial information for the three years ended 31 December 1996
relating to PacifiCorp contained in this section of the document has been
extracted from the published audited financial statements of PacifiCorp for each
of these years. The financial information for the nine months ended 30 September
1996 and 1997 has been extracted from the unaudited published financial
statements of PacifiCorp for those periods. PacifiCorp's accounting policies
conform to US GAAP. Additional financial and other information for PacifiCorp
can be obtained from PacifiCorp's reports filed pursuant to the Exchange Act.
The information contained herein is qualified in its entirety by reference to
PacifiCorp's Annual Report on Form 10-K for the year ended 31 December 1996 and
PacifiCorp's Quarterly Reports on Form 10-Q for the quarters ended 31 March, 30
June and 30 September 1997. PacifiCorp's reports can be inspected and copied at
the public reference facilities maintained by the SEC at Room 1024, 450 Fifth
Street, NW, Washington, DC 20549 and at the following Regional Offices of the
SEC: 7 World Trade Center, Suite 1300, New York, NY 10048; and 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Copies of such material can also be
obtained by mail from the Public Reference Section of the SEC at 450 Fifth
Street, NW, Washington, DC 20549, at prescribed rates. In addition, such
material may be inspected and copied at the offices of the NYSE, 20 Broad
Street, New York, NY 10005. Copies of such material can also be obtained by
writing to PacifiCorp Investor Relations, at 700 NE Multnomah Street, Portland,
OR 97232, United States.
IV-21
<PAGE>
PACIFICORP
STATEMENTS OF CONSOLIDATED INCOME AND RETAINED EARNINGS
(MILLIONS OF US DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
REVENUES..................................................................... $ 4,293.8 $ 3,416.9 $ 3,498.0
---------- ---------- ----------
EXPENSES
Operations............................................................... 1,782.4 1,259.4 1,391.8
Maintenance.............................................................. 308.5 281.0 292.3
Administrative and general............................................... 308.5 254.9 244.6
Depreciation and amortisation............................................ 530.4 445.6 424.3
Taxes, other than income taxes........................................... 118.9 120.1 122.7
---------- ---------- ----------
Total................................................................ 3,048.7 2,361.0 2,475.7
---------- ---------- ----------
INCOME FROM OPERATIONS....................................................... 1,245.1 1,055.9 1,022.3
---------- ---------- ----------
Interest Expense and Other
Interest expense......................................................... 465.7 378.7 334.5
Interest capitalised..................................................... (11.9) (15.1) (14.5)
Minority interest and other.............................................. 2.5 (51.5) (15.5)
---------- ---------- ----------
Total................................................................ 456.3 312.1 304.5
---------- ---------- ----------
Income before income taxes................................................... 788.8 743.8 717.8
Income taxes................................................................. 283.9 238.8 249.8
---------- ---------- ----------
NET INCOME................................................................... 504.9 505.0 468.0
Retained Earnings, January 1................................................. 632.4 474.3 351.3
CASH DIVIDENDS DECLARED
Preferred stock.......................................................... (29.1) (38.4) (39.6)
Common stock per share of $1.08.......................................... (317.9) (306.6) (305.4)
Preferred stock retired.................................................. (7.5) (1.9) --
---------- ---------- ----------
Retained Earnings, December 31............................................... $ 782.8 $ 632.4 $ 474.3
---------- ---------- ----------
---------- ---------- ----------
Earnings on Common Stock (Net income less preferred dividend requirement).... $ 475.1 $ 466.3 $ 428.3
Average number of common shares outstanding (Thousands)...................... 292,424 284,272 282,912
Earnings per Common Share.................................................... $ 1.62 $ 1.64 $ 1.51
</TABLE>
See accompanying Notes to Consolidated Financial Statements
IV-22
<PAGE>
PACIFICORP
STATEMENTS OF CONSOLIDATED CASH FLOWS
(MILLIONS OF US DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income............................................................... $ 504.9 $ 505.0 $ 468.0
Adjustments to reconcile net income to net cash provided by operating
activities
Depreciation and amortization........................................ 552.0 466.2 472.5
Deferred income taxes and investment tax credits--net................ 48.4 62.5 (7.5)
Minority interest and other.......................................... (33.3) (28.6) 23.6
Accounts receivable and prepayments.................................. (171.2) (71.5) 5.4
Materials, supplies, fuel stock and inventory........................ 31.9 (8.6) 11.8
Accounts payable and accrued liabilities............................. 144.6 (13.0) (11.7)
---------- ----------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES.................................... 1,077.3 912.0 962.1
---------- ----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction............................................................. (650.8) (578.6) (788.7)
Operating companies and assets acquired.................................. (199.4) (2,002.1) (5.9)
Investments in and advances to affiliated companies--net................. (153.5) (138.4) (9.5)
Proceeds from sales of assets............................................ 55.1 377.0 381.6
Proceeds from sales of finance assets and principal payments............. 55.8 36.6 109.1
Other.................................................................... (10.5) (27.4) (26.7)
---------- ----------- ---------
NET CASH USED IN INVESTING ACTIVITIES........................................ (903.3) (2,332.9) (340.1)
---------- ----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in short-term debt............................................... (319.6) 581.5 (98.7)
Proceeds from long-term debt............................................. 669.4 1,530.8 246.6
Proceeds from issuance of common stock................................... 221.3 .4 57.2
Proceeds from issuance of preferred securities of Trust holding solely
PacifiCorp debentures.................................................. 209.6 -- --
Dividends paid........................................................... (346.4) (346.5) (344.8)
Repayments of long-term debt............................................. (341.1) (285.8) (448.5)
Redemptions of capital stock............................................. (221.6) (2.6) --
Other.................................................................... (50.0) (58.0) (41.7)
---------- ----------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES.......................... (178.4) 1,419.8 (629.9)
---------- ----------- ---------
Decrease in Cash and Cash Equivalents........................................ (4.4) (1.1) (7.9)
Cash and Cash Equivalents at Beginning of Year............................... 22.2 23.3 31.2
---------- ----------- ---------
Cash and Cash Equivalents at End of Year..................................... $ 17.8 $ 22.2 $ 23.3
---------- ----------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for Interest (net of amount capitalized)....... $ 505.7 $ 407.7 $ 399.4
Income taxes............................................................. 207.9 185.5 225.6
Non-cash financing activities
8.55% Junior subordinated debentures exchanged for 2,233,037 shares of
$1.98 No Par Serial Preferred Stock.................................... -- 55.9 --
</TABLE>
See accompanying Notes to Consolidated Financial Statements
IV-23
<PAGE>
PACIFICORP
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF US DOLLARS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
<S> <C> <C>
1996 1995
----------- -----------
Current Assets
Cash and cash equivalents.......................................................... $ 17.8 $ 22.2
Accounts receivable less allowance for doubtful accounts: 1996/$8.6 and
1995/$7.4........................................................................ 718.6 545.0
Materials, supplies and fuel stock at average cost................................. 188.7 212.1
Inventory.......................................................................... 55.2 62.8
Other.............................................................................. 78.2 70.1
----------- -----------
TOTAL CURRENT ASSETS................................................................... 1,058.5 912.2
Property, Plant and Equipment
Domestic Electric Operations
Production..................................................................... 4,659.2 4,420.0
Transmission................................................................... 2,069.2 2,042.5
Distribution................................................................... 3,029.7 2,829.9
Other.......................................................................... 1,687.9 1,655.7
Construction work in progress.................................................. 252.8 310.0
----------- -----------
TOTAL DOMESTIC ELECTRIC OPERATIONS............................................. 11,698.8 11,258.1
Australian Electric Operations..................................................... 1,361.9 1,302.8
Telecommunications................................................................. 1,670.0 1,606.9
Other Operations................................................................... 68.8 65.0
Accumulated depreciation and amortization.......................................... (4,583.8) (4,280.5)
----------- -----------
TOTAL PROPERTY, PLANT AND EQUIPMENT--NET........................................... 10,215.7 9,952.3
Other Assets
Investments in and advances to affiliated companies................................ 358.9 187.9
Intangible assets--net............................................................. 870.5 743.2
Regulatory assets--net............................................................. 1,017.4 1,060.3
Finance note receivable............................................................ 214.6 217.5
Finance assets--net................................................................ 425.6 453.7
Real estate investments............................................................ 217.0 179.8
Deferred charges and other......................................................... 256.3 308.3
----------- -----------
TOTAL OTHER ASSETS................................................................. 3,360.3 3,150.7
----------- -----------
TOTAL ASSETS........................................................................... $ 14,634.5 $ 14,015.2
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
IV-24
<PAGE>
PACIFICORP
CONSOLIDATED BALANCE SHEETS
(MILLIONS OF US DOLLARS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
<S> <C> <C>
1996 1995
----------- -----------
Current Liabilities
Long-term debt currently maturing.................................................. $ 235.6 $ 206.1
Notes payable and commercial paper................................................. 701.5 1,021.1
Accounts payable................................................................... 469.7 345.3
Taxes, interest and dividends payable.............................................. 303.5 256.4
Customer deposits and other........................................................ 152.6 176.0
----------- -----------
TOTAL CURRENT LIABILITIES.............................................................. 1,862.9 2,004.9
Deferred Credits
Income taxes....................................................................... 1,953.1 1,910.1
Investment tax credits............................................................. 148.4 159.2
Other.............................................................................. 758.9 786.2
----------- -----------
TOTAL DEFERRED CREDITS................................................................. 2,860.4 2,855.5
Minority Interest...................................................................... 31.9 23.0
Long-Term Debt......................................................................... 5,323.8 4,968.2
Guaranteed Preferred Beneficial Interests in Company's Junior Subordinated
Debentures........................................................................... 209.7 --
Preferred Stock Subject to Mandatory Redemption........................................ 178.0 219.0
Preferred Stock........................................................................ 135.5 311.5
Common Equity
Common shareholders' capital shares authorised 750,000,000; shares outstanding:
1996/295,139,753 and 1995/284,276,709............................................ 3,236.8 3,012.9
Retained earnings.................................................................. 782.8 632.4
Cumulative currency translation adjustment......................................... 12.7 --
Guarantees of Employee Stock Ownership Plan borrowings............................. -- (12.2)
----------- -----------
TOTAL COMMON EQUITY.................................................................... 4,032.3 3,633.1
----------- -----------
Commitments and Contingencies (See Notes 9 and 10)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY............................................. $ 14,634.5 $ 14,015.2
----------- -----------
----------- -----------
</TABLE>
See accompanying Notes to Consolidated Financial Statements
IV-25
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
The following notes regarding significant accounting policies together with
other information in the notes to the financial statements which is of major
relevance to an appreciation of PacifiCorp's financial information have been
extracted from the published financial statements of PacifiCorp for the three
years ended December 31, 1996.
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The consolidated financial statements of PacifiCorp (the "Company") include
its integrated domestic electric utility operating divisions of Pacific Power
and Utah Power and its wholly owned and majority owned subsidiaries. Major
subsidiaries, all of which are wholly owned, are: PacifiCorp Holdings, Inc.
("Holdings"), which holds all of the Company's nonintegrated electric utility
investments, including Powercor Australia Limited ("Powercor"), an Australian
electricity distributor purchased December 12, 1995; Pacific Telecom, Inc.
("PTI"), a telecommunications operation (formerly 87% owned, see Note 14); and
PacifiCorp Financial Services, Inc., a financial services business. Together
these businesses are referred to herein as the Companies. Significant
intercompany transactions and balances have been eliminated.
Investments in and advances to affiliated companies represent investments in
unconsolidated affiliated companies carried on the equity basis, which
approximates the Company's equity in their underlying net book value.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates.
REGULATION
Accounting for the domestic utility businesses conforms with generally
accepted accounting principles as applied to regulated public utilities and as
prescribed by agencies and the commissions of the various locations in which the
utility businesses operate. The Company prepares its financial statements as
they relate to Domestic Electric Operations and Telecommunications in accordance
with Statement of Financial Accounting Standards ("SFAS") 71, "Accounting for
the Effects of Certain Types of Regulation." See Note 2.
ASSET IMPAIRMENTS
Effective January 1, 1996, the Company adopted SFAS 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
This Statement requires that long-lived assets and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. The Company evaluated all its assets based upon SFAS 121
and within the context of SFAS 71 for its regulated operations and concluded
that no material adjustments were required. See Note 2.
IV-26
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
CASH AND CASH EQUIVALENTS
For the purposes of these financial statements, the Company considers all
liquid investments with original maturities of three months or less to be cash
equivalents.
FOREIGN CURRENCY TRANSLATION
Financial statements for foreign subsidiaries are translated into United
States dollars at end of period exchange rates as to assets and liabilities and
weighted average exchange rates as to revenues and expenses. The resulting
exchange gains or losses are accumulated in the "cumulative currency translation
adjustment" account, a component of common equity. All significant gains and
losses resulting from foreign currency transactions are included in income.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at original cost of contracted
services, direct labor and material, interest capitalized during construction
and indirect charges for engineering, supervision and similar overhead items.
The cost of depreciable utility properties retired, including the cost of
removal, less salvage, is charged to accumulated depreciation.
DEPRECIATION AND AMORTIZATION
At December 31, 1996, the average depreciable life of property, plant and
equipment by category was: Domestic Electric Operations--Production, 41 years;
Transmission, 42 years; Distribution, 30 years; Other, 18 years; Australian
Electric Operations, 21 years; and Telecommunications, 16 years.
Depreciation and amortization is generally computed by the straight-line
method over the estimated economic useful lives of the related assets after
giving effect to requirements as prescribed by the Company's various regulatory
jurisdictions. Provisions for depreciation (excluding amortization of capital
leases) in the domestic electric, Australian electric and telecommunications
businesses were 3.6%, 3.5% and 3.4% of average depreciable assets in 1996, 1995
and 1994, respectively.
MINE RECLAMATION AND CLOSURE COSTS
The Company expenses current mine reclamation costs and accrues for
estimated final mine reclamation and closure costs using the units-of-production
method.
INVENTORY VALUATION
Inventories are generally valued at the lower of average cost or market.
INTANGIBLE ASSETS
Intangible assets consist of: license and other intangible costs relating to
Australian Electric Operations ($460 million and $32 million, respectively, in
1996 and $312 million and $30 million, respectively, in 1995); franchises of
local exchange and cellular companies ($397 million in 1996 and $398 million in
1995); and excess cost over net assets of businesses acquired ($43 million in
1996 and 1995). These
IV-27
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
costs are offset by accumulated amortization ($62 million in 1996 and $40
million in 1995). Intangible assets are generally being amortized over 40 years.
FINANCE ASSETS
Finance assets consist of finance receivables, leveraged leases and
operating leases and are not significant to the Company in terms of revenue, net
income or assets. The Company's leasing operations consist principally of
leveraged aircraft leases. Investments in finance assets are net of allowances
for credit losses and accumulated impairment charges of $63 million and $71
million at December 31, 1996 and 1995, respectively.
DERIVATIVES
Gains and losses on hedges of existing assets and liabilities are included
in the carrying amounts of those assets or liabilities and are recognized in
income as part of those carrying amounts. Gains and losses related to hedges of
anticipated transactions and firm commitments are deferred on the balance sheet
and recognized in income when the transaction occurs.
INTEREST CAPITALIZED
Costs of debt applicable to domestic utility properties are capitalized
during construction. Generally, the composite capitalization rates were 5.7% for
1996, 6.2% for 1995 and 4.7% for 1994.
INCOME TAXES
The Company uses the liability method of accounting for deferred income
taxes. Deferred tax liabilities and assets reflect the expected future tax
consequences, based on enacted tax law, of temporary differences between the tax
bases of assets and liabilities and their financial reporting amounts.
Investment tax credits for regulated operations in the United States are
deferred and amortized to income over the average estimated lives of the
properties. All other investment tax credits are recognized when utilized.
Provision is made for U.S. income taxes on the undistributed earnings of the
Company's international businesses.
REVENUE RECOGNITION
The Company accrues estimated unbilled revenues for electric services
provided after cycle billing to month-end.
PTI participates with other telephone companies in access revenue pools for
certain interstate and intrastate revenues, which are initially recorded based
on estimates.
IV-28
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED):
PREFERRED STOCK RETIRED
Amounts paid in excess of the net carrying value of preferred stock retired
are amortized in accordance with regulatory orders.
RECLASSIFICATION
Certain amounts from prior years have been reclassified to conform with the
1996 method of presentation. These reclassifications had no effect on previously
reported consolidated net income.
NOTE 2 ACCOUNTING FOR THE EFFECTS OF REGULATION
Regulated utilities have historically applied the provisions of SFAS 71
which is based on the premise that regulators will set rates that allow for the
recovery of a utility's costs, including cost of capital. Accounting under SFAS
71 is appropriate as long as: rates are established by or subject to approval by
independent, third-party regulators; rates are designed to recover the specific
enterprise's cost-of-service; and in view of demand for service, it is
reasonable to assume that rates are set at levels that will recover costs and
can be collected from customers. In applying SFAS 71, the Company must give
consideration to changes in the level of demand or competition during the cost
recovery period. In accordance with SFAS 71, the Company's domestic utility
operations capitalize certain costs, regulatory assets, in accordance with
regulatory authority whereby those costs will be expensed and recovered in
future periods. Regulatory assets-net at December 31, 1996 and 1995 included the
following:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------
<S> <C> <C>
1996 1995
------------- ----------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C>
Deferred taxes--net......................................................... $ 670.6 $ 687.1
Deferred pension costs...................................................... 102.9 116.8
Demand-side resource costs.................................................. 118.8 110.0
Unamortized net loss on reacquired debt..................................... 68.4 71.8
Unrecovered Trojan Plant and regulatory study costs......................... 26.8 28.4
Various other costs......................................................... 29.9 46.2
------------- ----------
Total................................................................... $ 1,017.4 $ 1,060.3
------------- ----------
------------- ----------
</TABLE>
If the Company, at some point in the future, determines that all or a
portion of the domestic utility operations no longer meet the criteria for
continued application of SFAS 71, the Company would be required to adopt the
provisions of SFAS 101, "Regulated Enterprises--Accounting for the
Discontinuation of Application of FASB Statement No. 71." Adoption of SFAS 101
would require the Company to write off the regulatory assets and liabilities
relating to those operations not meeting SFAS 71 requirements.
The utility industry will also be impacted by the application of SFAS 121 as
a result of deregulation. This accounting statement requires the recognition of
impairment on long-lived assets when book values exceed expected future cash
flows. Integral parts of future cash flow estimates include estimated future
prices to be received, the expected future cash cost of operations, sales and
load growth forecasts and the nature of any legislative cost recovery
mechanisms.
IV-29
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 2 ACCOUNTING FOR THE EFFECTS OF REGULATION -- (CONTINUED):
Restructuring bills are being considered in all states in which the Company
provides retail service. The Company expects any legislation passed to provide
an opportunity to recover costs which have been placed at risk.
NOTE 3 SHORT-TERM DEBT AND BORROWING ARRANGEMENTS
The Companies' short-term debt and borrowing arrangements were as follows:
<TABLE>
<CAPTION>
DECEMBER 31 FOR THE YEAR
-------------------------- ----------------------------
<S> <C> <C> <C> <C>
AVERAGE AVERAGE
INTEREST AVERAGE INTEREST
BALANCE RATE(A) OUTSTANDING RATE(B)
----------- ------------- ------------- -------------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C> <C> <C>
1996
PacifiCorp...................................................... $ 549.3 5.6% $ 424.4 5.4%
Subsidiaries.................................................... 152.2 5.6 287.2 5.6
1995
PacifiCorp...................................................... $ 479.9 5.9% $ 407.2 5.9%
Subsidiaries.................................................... 541.2 6.1 180.0 6.2
1994
PacifiCorp...................................................... $ 433.0 6.0% $ 372.8 4.5%
Subsidiaries.................................................... 21.7 7.5 95.0 4.6
</TABLE>
- ------------------------
(a) Computed by dividing the total interest on principal amounts outstanding at
the end of the period by the weighted daily principal amounts outstanding.
(b) Computed by dividing the total interest expense for the period by the
average daily principal amount outstanding for the period.
At December 31, 1996, PacifiCorp's commercial paper and bank line borrowings
were supported by revolving credit agreements totaling $700 million. At December
31, 1996, subsidiaries had committed bank revolving credit agreements totaling
$2.1 billion.
The Companies have the intent and ability to support short-term borrowings
through various revolving credit agreements on a long-term basis. At December
31, 1996, PacifiCorp had $123 million and subsidiaries had $1.1 billion of
short-term debt classified as long-term. Consolidated commitment fees were
approximately $2 million in 1996 and 1995 and $3 million in 1994.
IV-30
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 4 LONG-TERM DEBT
The Company's long-term debt was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
<S> <C> <C>
1996 1995
---------- ----------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C>
PacifiCorp
First mortgage and collateral trust bonds
Maturing 1997 through 2001/5.9%-9.5% (a)............................................. $ 946.5 $ 1,112.1
Maturing 2002 through 2006/6.1%-9%................................................... 601.0 519.8
Maturing 2007 through 2011/6.6%-9.2%................................................. 235.8 237.5
Maturing 2012 through 2016/7.3%-8.8%................................................. 172.9 175.6
Maturing 2017 through 2021/8.4%-8.5%................................................. 38.1 38.4
Maturing 2022 through 2026/6.7%-8.6%................................................. 441.5 341.5
Guaranty of pollution control revenue bonds
5.6%-5.7% due 2021 through 2023 (b).................................................. 71.2 71.2
Variable rate due 2013 through 2024 (b)(c)........................................... 216.5 216.5
Variable rate due 2005 through 2030 (c).............................................. 450.7 456.6
Funds held by trustees............................................................... (12.1) (12.4)
8.4%-8.6% Junior subordinated debentures due 2025 through 2035......................... 175.8 175.8
Commercial paper (c)(e)................................................................ 123.4 200.0
Other.................................................................................. 28.1 31.3
---------- ----------
Total.................................................................................. 3,489.4 3,563.9
Less current maturities................................................................ 203.8 176.8
---------- ----------
Total.................................................................................. 3,285.6 3,387.1
---------- ----------
Subsidiaries
2%-11.8% First mortgage notes and bonds maturing through 2028.......................... 139.3 143.2
6.8%-10.2% Notes due through 2020...................................................... 291.2 59.8
Australian bank bill borrowings (d)(e)................................................. 922.3 896.2
Commercial paper and committed bank lines (c)(e)....................................... 185.0 75.0
Variable rate notes due through 2007 (c)............................................... 35.8 42.0
6.6%-9.4% Medium-term notes due through 2008........................................... 323.5 223.5
4.5%-11% Nonrecourse debt due through 2031............................................. 170.8 155.9
Other.................................................................................. 2.1 14.8
---------- ----------
Total.................................................................................. 2,070.0 1,610.4
Less current maturities................................................................ 31.8 29.3
---------- ----------
Total.................................................................................. 2,038.2 1,581.1
---------- ----------
Total.................................................................................... $ 5,323.8 $ 4,968.2
---------- ----------
---------- ----------
</TABLE>
- ------------------------
(a) Includes $50 million of 9.4% bonds issued to secure obligations under an
equivalent 10-year yen loan. A currency swap converted the fixed rate yen
liability to a floating rate U.S. dollar liability based on six-month LIBOR
plus .02% (interest rate 5.9% at December 31, 1996).
IV-31
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 4 LONG-TERM DEBT -- (CONTINUED):
(b) Secured by pledged first mortgage and collateral trust bonds generally at
the same interest rates, maturity dates and redemption provisions as the
secured pollution control revenue bonds.
(c) Interest rates fluctuate based on various rates, primarily on certificate of
deposit rates, interbank borrowing rates, prime rates or other short- term
market rates.
(d) Interest rates fluctuate based on Australian Bank Bill Acceptance Rates. The
loan agreement requires that at least 50% of the borrowings must be hedged
against variations in interest rates. Approximately $630 million was hedged
at December 31, 1996 at an average rate of 7.6% and for an average life of
4.4 years.
(e) The Companies have the ability to support short-term borrowings and current
debt being refinanced on a long-term basis through revolving lines of credit
and, therefore, based upon management's intent, have classified $1.2 billion
of short-term debt as long-term debt.
Approximately $7 billion of the assets of the Companies secure long-term
debt and capital lease obligations. First mortgage and collateral trust bonds of
the Company may be issued in amounts limited by Domestic Electric Operations'
property, earnings and other provisions of the mortgage indenture.
The junior subordinated debentures are unsecured obligations of the Company
and are subordinated to the Company's first mortgage bonds, pollution control
revenue bonds, commercial paper, bank debt, capital lease obligations and any
future senior indebtedness.
Nonrecourse long-term notes are secured by assignment of related finance
receivables, asset security interests and cash flows from operating leases. The
noteholders have no additional recourse to the Companies.
The annual maturities of long-term debt and redeemable preferred stock
outstanding are $236 million, $241 million, $353 million, $1.1 billion and $622
million in 1997 through 2001, respectively.
NOTE 5 GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S JUNIOR
SUBORDINATED
DEBENTURES
On June 11, 1996, PacifiCorp Capital I, a wholly owned subsidiary trust of
the Company (the "Trust"), issued, in a public offering, 8,680,000 of its 8 1/4%
Company Obligated Mandatorily Redeemable Preferred Securities (the "Preferred
Securities"), representing preferred undivided beneficial interests in the
assets of the Trust, with a liquidation preference of $25 per Preferred
Security. The sole assets of the Trust are $224 million, in aggregate principal
amount, of the Company's 8 1/4% Junior Subordinated Deferrable Interest
Debentures, Series C, due June 30, 2036 and certain rights under a related
guarantee by the Company. The Company's guarantee of the Preferred Securities,
considered together with the other obligations of the Company with respect to
Preferred Securities, constitutes a full and unconditional guarantee by the
Company of the Trust's obligations with respect to the Preferred Securities.
IV-32
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6 COMMON AND PREFERRED STOCK
<TABLE>
<CAPTION>
THOUSANDS OF SHARES
---------------------- COMMON
SHARES SHARES SHARE-
COMMON PREFERRED HOLDERS'
STOCK STOCK CAPITAL
--------- ----------- -----------
<S> <C> <C> <C>
MILLIONS OF
US DOLLARS
At January 1, 1994............................................................ 281,021 10,532 $ 2,953.4
Sales through Dividend Reinvestment and Stock Purchase Plan................. 2,194 -- 38.0
Sales through Employees' Stock Plans........................................ 1,036 -- 19.2
--------- ----------- -----------
At December 31, 1994.......................................................... 284,251 10,532 3,010.6
Sales through Employees' Stock Plans........................................ 26 -- .4
Junior subordinated debentures exchanged for preferred stock................ -- (2,233) 1.9
--------- ----------- -----------
At December 31, 1995.......................................................... 284,277 8,299 3,012.9
Sales to public............................................................. 8,790 -- 177.8
Sales through Dividend Reinvestment and Stock Purchase Plan................. 2,073 -- 43.2
Redemptions and repurchases................................................. -- (2,342) 2.9
--------- ----------- -----------
At December 31, 1996.......................................................... 295,140 5,957 $ 3,236.8
--------- ----------- -----------
--------- ----------- -----------
</TABLE>
At December 31, 1996, there were 28,905,056 authorized but unissued shares
of common stock reserved for issuance under the Dividend Reinvestment and Stock
Purchase Plan and the Employee Savings and Stock Ownership Plans and for sales
to the public. Eligible employees under the employee plans may direct their
pretax elective contributions into the purchase of the Company's common stock.
The Company makes matching contributions, equal to a percentage of employee
contributions, which are invested in the Company's common stock. Employee
contributions eligible for matching contributions are limited to 6% of
compensation.
Generally, preferred stock is redeemable at stipulated prices plus accrued
dividends, subject to certain restrictions. Upon involuntary liquidation, all
preferred stock is entitled to stated value or a specified preference amount per
share plus accrued dividends.
IV-33
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6 COMMON AND PREFERRED STOCK -- (CONTINUED)
PREFERRED STOCK OUTSTANDING
<TABLE>
<CAPTION>
DECEMBER 31
----------------------------------------------
1996 1996 1995 1995
SERIES SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
THOUSANDS OF SHARES/
MILLIONS OF US DOLLARS
Subject to Mandatory Redemption
No Par Serial Preferred, ($100 stated value)
16,000 Shares Authorized
$7.12................................................................. 30 $ 3.0 440 $ 44.0
7.70................................................................. 1,000 100.0 1,000 100.0
7.48................................................................. 750 75.0 750 75.0
----- --------- ----- ---------
Total............................................................. $ 178.0 $ 219.0
--------- ---------
--------- ---------
Not Subject to Mandatory Redemption
No Par Serial Preferred ($25 stated value)
$1.16................................................................. 193 $ 4.8 193 $ 4.8
1.18................................................................. 420 10.5 420 10.5
1.28................................................................. 381 9.5 381 9.5
1.76................................................................. -- -- 394 9.8
1.98................................................................. -- -- 502 12.6
2.13................................................................. -- -- 666 16.7
1.98, Series 1992.................................................... 2,767 69.1 2,767 69.1
Auction Rate ($100,000 stated value).................................. -- -- 1 100.0
Serial Preferred $100 Stated Value Per Share,
3,500 Shares Authorized
4.52%................................................................ 2 .2 2 .2
4.56................................................................. 85 8.5 85 8.5
4.72................................................................. 70 7.0 70 7.0
5.00................................................................. 42 4.2 42 4.2
5.40................................................................. 66 6.6 66 6.6
6.00................................................................. 6 .6 6 .6
7.00................................................................. 18 1.8 18 1.8
7.96................................................................. -- -- 135 13.5
8.92................................................................. -- -- 69 6.9
9.08................................................................. -- -- 165 16.5
5% Preferred, $100 Stated Value, 127 Shares Authorized and Outstanding.... 127 12.7 127 12.7
----- --------- ----- ---------
Total............................................................. $ 135.5 $ 311.5
--------- ---------
--------- ---------
</TABLE>
Mandatory redemption requirements at stated value plus accrued dividends on
No Par Serial Preferred Stock are as follows: beginning in 1997, 15,000 shares
of the $7.12 series are redeemable annually; the $7.70 series is redeemable in
its entirety on August 15, 2001; and 37,500 shares of the
IV-34
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 6 COMMON AND PREFERRED STOCK -- (CONTINUED)
$7.48 series are redeemable on each June 15 from 2002 through 2006, with all
shares outstanding on June 15, 2007 redeemable on that date. If the Company is
in default in its obligation to make any future redemptions on the $7.12 series
or the $7.48 series, it may not pay cash dividends on common stock.
NOTE 7 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
The Company seeks to reduce net income and cash flow exposure to changing
interest and currency exchange rates and commodity price risks through the use
of derivative financial instruments.
The Company's participation in derivative transactions involves instruments
that have a close correlation with its portfolio of liabilities, thereby
managing its risk. Derivatives have been designed for hedging purposes and are
not held or issued for speculative purposes.
NOTIONAL AMOUNTS AND CREDIT EXPOSURE OF DERIVATIVES--The notional amounts of
derivatives summarized below do not represent amounts exchanged and, therefore,
are not a measure of the exposure of the Company through its use of derivatives.
The amounts exchanged are calculated on the basis of the notional amounts and
other terms of the derivatives, which relate to interest rates, exchange rates
or other indexes.
IV-35
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 7 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT -- (CONTINUED):
The Company is exposed to credit-related losses in the event of
nonperformance by counterparties to financial instruments, but it does not
expect any counterparties to fail to meet their obligations given their high
credit ratings. The Company's credit policy provides that counterparties satisfy
minimum credit ratings. The credit exposure of interest rate, foreign exchange
and forward contracts is represented by the fair value of contracts with a
positive fair value at the reporting date.
INTEREST RATE RISK MANAGEMENT--The Company enters into various types of
interest rate contracts in managing its interest rate risk, as indicated in the
following table:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT
--------------------
DECEMBER 31
--------------------
1996 1995
--------- ---------
<S> <C> <C>
MILLIONS OF US
DOLLARS
Interest rate swaps...................................................... $ 846.4 $ 219.9
Interest rate collars purchased.......................................... 52.0 --
Interest rate futures and forwards....................................... 60.0 --
</TABLE>
The Company uses interest rate swaps, collars, futures and forwards to
adjust the characteristics of its liability portfolio from variable to fixed
interest rates, allowing the Company to establish a mix of fixed or variable
interest rates on its outstanding debt. Additionally, under terms of the
variable rate Australian bank bill borrowings, Australian Electric Operations is
required to obtain a fixed interest rate, via financial derivatives, on at least
50% of the principal outstanding.
Under the various swap agreements, the Company agrees with other parties to
exchange, at specified intervals, the difference between fixed-rate and
floating-rate interest amounts calculated by reference to an agreed notional
principal amount. The following table indicates the weighted-average interest
rates of the swaps. Average variable rates are based on rates implied in the
yield curve at December 31; these may change significantly, affecting future
cash flows. Swap contracts are principally between one and fifteen years in
duration.
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Pay-fixed swaps
Average pay rate........................................................ 7.7% 7.7%
Average receive rate.................................................... 5.6 4.4
</TABLE>
Interest rate futures and forward contracts are generally used by Australian
Electric Operations to mitigate variable interest rate exposure on Australian
bank bill borrowings and are usually settled in cash. The futures and forwards
are accounted for as hedges of the Australian bank bill borrowings.
Additionally, Australian Electric Operations purchases interest rate collar
agreements. The collar agreements entitle the Company to receive from the
counterparties the amounts, if any, by which the Australian bank bill borrowings
interest payments exceed 8.75% and the Company would pay the counterparties if
interest payments fall below 6.5%-6.8%.
IV-36
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 7 FINANCIAL INSTRUMENTS AND RISK MANAGEMENT -- (CONTINUED):
FOREIGN EXCHANGE RISK MANAGEMENT--At December 31, 1996, the Company held a
foreign currency exchange agreement, which provides for the exchange of $50
million for 7.4 billion yen to meet a 1997 yen-denominated obligation of an
equivalent amount. In addition, at December 31, 1996, Holdings held three
combined interest rate and currency swaps that terminate in 2002, with an
aggregate notional amount of $291 million to hedge a portion of the exposure to
fluctuations in the Australian dollar relating to its investment in Powercor.
The interest rate portions of the three swaps, which also were designated as
a hedge of Holdings' investment in Powercor, were effectively offset in 1997 by
the purchase of a swap transaction with approximately the same terms. The net
amount of the swaps should not have a significant impact on future net income.
COMMODITY RISK MANAGEMENT--The Company has utilized electricity forward
contracts (referred to as "contracts for differences") to hedge exposure to
electricity price risk on anticipated transactions or firm commitments in its
Australian Electric Operations. Under these forward contracts, the Company
receives or makes payment based on a differential between a contracted price and
the actual spot market of electricity. Additionally, electricity futures
contracts are utilized to hedge Domestic Electric Operations' excess or shortage
of net electricity for future months.
At December 31, 1996, Australian Electric Operations had 23 forward
contracts with electricity generation companies on notional quantities amounting
to approximately 26.8 million MWh through December 31, 2000. The average fixed
price to be paid by Australian Electric Operations was $28.75 per MWh compared
to the average price of similar contracts at December 31, 1996 of $27.46.
At December 31, 1996, Domestic Electric Operations had 67 NYMEX futures
contracts to sell electricity with notional quantities amounting to
approximately 49,300 MWh all expiring in 1997. The average fixed price to be
received by Domestic Electric Operations was $19.33 per MWh compared to the
NYMEX average spot market price of $15.78 per MWh.
TRADING ACTIVITIES--During 1996 a subsidiary of Holdings began to trade
electricity related products. Such transactions involved the physical delivery
of electricity and are accounted for as revenue or purchased power upon delivery
and, at December 31, 1996, amounted to a net purchase position of 1,200 MWh. As
additional markets for electricity-related products develop, including
derivative products, the Company anticipates that this activity will expand.
IV-37
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 8 FAIR VALUE OF FINANCIAL INSTRUMENTS
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
(MILLIONS OF US (MILLIONS OF US
DOLLARS) DOLLARS)
---------------------- ----------------------
<S> <C> <C> <C> <C>
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
---------- ---------- ---------- ----------
Long-term debt.................................................. $ 5,536.6 $ 5,621.5 $ 5,134.4 $ 5,370.5
Preferred securities of Trust holding solely PacifiCorp
debentures.................................................... 209.7 210.9 -- --
Preferred stock subject to mandatory redemption................. 178.0 195.8 219.0 240.3
Derivatives relating to
Currency.................................................... (21.5) (21.5) -- (1.4)
Interest.................................................... (10.8) (52.5) -- (35.4)
Electricity futures......................................... -- .2 -- --
</TABLE>
The carrying value of cash and cash equivalents, receivables, payables,
accrued liabilities and short-term borrowings approximates fair value because of
the short-term maturity of these instruments. The fair value of the finance note
receivable approximates its carrying value at December 31, 1996.
The fair value of the Company's long-term debt has been estimated by
discounting projected future cash flows, using the current rate at which similar
loans would be made to borrowers with similar credit ratings and for the same
maturities. Current maturities of long-term debt were included and capital lease
obligations were excluded. The fair value of the Preferred Securities was based
on closing market prices and the fair value of redeemable preferred stock was
based on bid prices from an investment bank.
The fair value of interest rate derivatives, currency swaps and electricity
futures is the estimated amount the Company would have to pay to terminate the
agreements, taking into account current interest and currency exchange rates,
electricity market prices and the current creditworthiness of the agreement
counterparties. It is not practicable to determine the fair value of the forward
contracts held by Australian Electric Operations because of the limited number
of transactions entered into for long-term forward contracts and the inactive
trading in the electricity spot market.
NOTE 9 LEASES
The Companies lease certain properties under leases with various expiration
dates and renewal options. Rentals on lease renewals are subject to negotiation.
Certain leases provide for options to purchase at fair market value. The
Companies are also committed to pay all taxes, expenses of operation (other than
depreciation) and maintenance applicable to the leased property.
Net rent expense for the years ended December 31, 1996, 1995 and 1994 was
$29 million, $50 million and $59 million, respectively.
Future minimum lease payments under non-cancellable operating leases are $20
million, $14 million, $7 million, $5 million and $4 million for 1997 through
2001, respectively.
IV-38
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 10 COMMITMENTS AND CONTINGENCIES
CONSTRUCTION AND OTHER
Construction and acquisitions are estimated at $1 billion for 1997. As a
part of these programs, substantial commitments have been made.
The Company is subject to numerous environmental laws including: the Federal
Clean Air Act, as enforced by the Environmental Protection Agency and various
state agencies; the 1990 Clean Air Act Amendments; the Endangered Species Act as
it relates to certain potentially endangered species of salmon; the
Comprehensive Environmental Response, Compensation and Liability Act, relating
to environmental cleanups; along with the Federal Resource Conservation and
Recovery Act and the Clean Water Act relating to water quality. These laws could
potentially impact future operations. For those contingencies identified at
December 31, 1996, principally the Superfund sites where the Company has been or
may be designated as a potentially responsible party and violations under the
Clean Air Act, future costs associated with the disposition of these matters are
not expected to be material to the Company's consolidated financial statements.
The Company's mining operations are subject to reclamation and closure
requirements. The Company monitors these requirements and periodically revises
its cost estimates to meet existing legal and regulatory requirements of the
various jurisdictions in which it operates. Costs for reclamation are accrued
using the units-of-production method such that estimated final mine reclamation
and closure costs are fully accrued at completion of mining activities. This is
consistent with industry practices and, the Company believes its reclamation
obligations are adequately provided for.
The Company and its subsidiaries are parties to various legal claims,
actions and complaints, certain of which involve material amounts. Although the
Company is unable to predict with certainty whether or not it will ultimately be
successful in these legal proceedings or, if not, what the impact might be,
management currently believes that disposition of these matters will not have a
materially adverse effect on the Company's consolidated financial statements.
IV-39
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 10 COMMITMENTS AND CONTINGENCIES -- (CONTINUED):
JOINTLY OWNED PLANTS
At December 31, 1996, Domestic Electric Operations' participation in jointly
owned plants was as follows:
<TABLE>
<CAPTION>
ELECTRIC PLANT CONSTRUCTION
OPERATIONS' IN ACCUMULATED WORK IN
SHARE SERVICE DEPRECIATION PROGRESS
--------------- --------- ------------- ---------------
<S> <C> <C> <C> <C>
MILLIONS OF US DOLLARS
Centralia................................................. 47.5% $ 178.1 $ 108.0 $ 4.2
Jim Bridger Units 1, 2, 3 and 4........................... 66.7 789.7 308.1 2.2
Trojan (a)................................................ 2.5 -- -- --
Colstrip Units 3 and 4.................................... 10.0 203.4 63.2 1.1
Hunter Unit 1............................................. 93.8 260.2 100.9 .8
Hunter Unit 2............................................. 60.3 187.6 66.4 1.3
Wyodak.................................................... 80.0 303.9 96.6 1.8
Craig Station Units 1 and 2............................... 19.3 150.0(b) 56.9 1.1
Hayden Station Unit 1..................................... 24.5 17.1(b) 10.6 1.1
Hayden Station Unit 2..................................... 12.6 17.0(b) 9.9 0.8
Hermiston (c)............................................. 50.0 164.9 3.4 --
</TABLE>
- ------------------------
(a) Plant, inventory, fuel and decommissioning costs totaling $27 million
relating to the Trojan Plant, were included in regulatory assets-net at
December 31, 1996.
(b) Excludes unallocated acquisition adjustments of $119 million.
(c) Additionally, the Company has contracted to purchase the remaining 50% of
the output of the plant.
Under the joint agreements, each participating utility is responsible for
financing its share of construction, operating and leasing costs. Domestic
Electric Operations' portion is recorded in its applicable operations,
maintenance and tax accounts.
PURCHASED POWER
Domestic Electric Operations manages its energy resource requirements by
integrating long-term firm, short-term and spot market purchases with its own
generating resources to economically dispatch the system and meet commitments
for wholesale sales, including sales contracts with minimum payment
requirements, and retail load growth. As part of its energy resource portfolio,
Domestic Electric Operations acquires power through long-term purchases and/or
exchange agreements which require minimum fixed payments of $298 million in
1997, $294 million in 1998 and 1999, $291 million in 2000 and $252 million in
2001.
These contracts include agreements with the Bonneville Power Administration,
the Hermiston Plant and a number of cogenerating facilities.
Excluded from the minimum fixed annual payments above, are commitments to
purchase power from several hydroelectric projects under long-term arrangements
with public utility districts. These purchases are made on a "cost-of-service"
basis for a stated percentage of project output and for a like percentage of
project annual costs (operating expenses and debt service). These costs are
included in
IV-40
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 10 COMMITMENTS AND CONTINGENCIES -- (CONTINUED):
operations expense. Domestic Electric Operations is required to pay its portion
of the debt service, whether or not any power is produced. The arrangements
provide for nonwithdrawable power and the majority also provide for additional
power, withdrawable by the districts upon one to five years' notice. For 1996,
such purchases approximated 3.5% of energy requirements.
At December 31, 1996, Domestic Electric Operations' share of long-term
arrangements with public utility districts was as follows:
<TABLE>
<CAPTION>
YEAR CONTRACT CAPACITY PERCENTAGE ANNUAL
GENERATING FACILITY EXPIRES (KW) OF OUTPUT COSTS(A)
- ------------------------------------------ --------------- --------- ------------- -----------
<S> <C> <C> <C> <C>
Wanapum................................... 2009 155,444 18.7% $ 5.0
Priest Rapids............................. 2005 109,602 13.9 3.7
Rocky Reach............................... 2011 64,297 5.3 2.4
Wells..................................... 2018 59,617 7.7 1.9
--------- -----
Total................................. 388,960 $ 13.0
--------- -----
--------- -----
</TABLE>
- ------------------------
(a) Annual costs, in millions of US dollars, include debt service of $6 million.
The Company has a 4% interest in the Intermountain Power Project
("Project"), located in central Utah. The Company and the City of Los Angeles
have agreed that the City will purchase capacity and energy from Company plants
equal to the Company's 4% entitlement of the Project at a price equivalent to 4%
of the expenses and debt service of the Project.
IV-41
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 11 INCOME TAXES
The Company's combined federal and state effective income tax rate was 36%
in 1996, 32% in 1995 and 35% in 1994. The difference between taxes calculated as
if the statutory federal tax rate of 35% was applied to income before income
taxes and the recorded tax expense is reconciled as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C> <C>
Computed Federal Income Taxes...................................................... $ 276.1 $ 260.3 $ 251.2
Increase (Reduction) in Tax Resulting from
Depreciation differences....................................................... 12.8 9.7 8.4
Investment tax credits......................................................... (11.0) (12.3) (15.5)
Excess of tax over book stock basis............................................ (1.0) (24.4) (1.4)
Audit settlement............................................................... .5 (16.8) --
Affordable housing credits..................................................... (10.6) (8.4) (8.2)
Other items capitalized and miscellaneous differences.......................... (5.3) 4.8 .7
--------- --------- ---------
Total...................................................................... (14.6) (47.4) (16.0)
--------- --------- ---------
Federal Income Tax................................................................. 261.5 212.9 235.2
State Income Tax, Net of Federal Income Tax Benefit................................ 22.4 25.9 14.6
--------- --------- ---------
Total Income Tax Expense........................................................... $ 283.9 $ 238.8 $ 249.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
IV-42
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 11 INCOME TAXES: -- (CONTINUED):
The provision for income taxes is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C> <C>
Current
Federal........................................................................ $ 207.5 $ 152.2 $ 222.7
State.......................................................................... 28.0 23.1 34.6
Foreign........................................................................ -- 1.0 --
--------- --------- ---------
Total...................................................................... 235.5 176.3 257.3
--------- --------- ---------
Deferred
Federal........................................................................ 43.7 56.5 17.8
State.......................................................................... 7.6 17.3 (9.8)
Foreign........................................................................ 8.1 1.0 --
--------- --------- ---------
Total...................................................................... 59.4 74.8 8.0
--------- --------- ---------
Investment Tax Credits............................................................. (11.0) (12.3) (15.5)
--------- --------- ---------
Total Income Tax Expense........................................................... $ 283.9 $ 238.8 $ 249.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
The tax effects of significant items comprising the Company's net deferred
tax liability were as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
<S> <C> <C>
1996 1995
---------- ----------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C>
Deferred Tax Liabilities
Property, plant and equipment........................................................ $ 1,306.8 $ 1,213.1
Regulatory assets.................................................................... 733.6 756.8
Other deferred liabilities........................................................... 30.7 52.5
Deferred Tax Assets
Regulatory liabilities............................................................... (63.0) (69.7)
Book reserves not deductible for tax................................................. (55.0) (42.6)
---------- ----------
Net Deferred Tax Liability............................................................... $ 1,953.1 $ 1,910.1
---------- ----------
---------- ----------
</TABLE>
During 1995, the Company and the Internal Revenue Service (the "IRS") agreed
on a settlement of all issues related to the IRS examination of the Company's
federal income tax returns for the years 1983 through 1988, including matters
relating to the Company's abandonment of its 10% interest in Washington Public
Power Supply System Unit No. 3.
During 1996, the Company received an examination report for 1989 and 1990
proposing adjustments that would increase income tax by $11 million. The Company
filed a protest of certain proposed adjustments on July 30, 1996. The Company's
1991, 1992 and 1993 federal income tax returns are currently under examination
by the IRS.
IV-43
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 11 INCOME TAXES: -- (CONTINUED):
Financial Services acquires housing projects that qualify for the low-income
housing credit established as part of the Tax Reform Act of 1986 to provide an
incentive for the development and preservation of privately owned affordable
rental housing. Annual tax benefits scheduled to be received from these projects
are expected to be $13 million, $12 million, $11 million, $7 million and $6
million for 1997 through 2001, respectively.
NOTE 12 RETIREMENT PLANS
The Companies have pension plans covering substantially all of their
employees. Benefits under plans in the United States are generally based on the
employee's years of service and average monthly pay in the 60 consecutive months
of highest pay out of the last 120 months, with adjustments to reflect benefits
estimated to be received from Social Security. Pension costs are funded annually
by no more than the maximum amount of pension expense which can be deducted for
federal income tax purposes. Unfunded prior service costs are amortized over the
remaining service period of employees expected to receive benefits. At December
31, 1996, plan assets were primarily invested in common stocks, bonds and U.S.
government obligations.
All permanent employees of Powercor engaged prior to October 4, 1994 are
members of Divisions B or C of the Superannuation Fund ("Fund") which provides
defined benefits in the form of pensions (Division B) or lump sums (Division C).
Both defined benefit Funds are closed to new members. Division B members
contribute at 6% of superannuation salary, and Division C members can contribute
at 0, 3, or 6%. During 1996, contributions were made to the Fund at the rate of
9.25% for the defined benefit.
Net pension cost is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C> <C>
Service cost--benefits earned......................................................... $ 35.5 $ 24.4 $ 26.4
Interest cost on projected benefit obligation......................................... 89.0 80.1 74.1
Actual (gain) loss on plan assets..................................................... (79.9) (153.5) 4.9
Net amortization and deferral......................................................... 9.3 100.5 (59.7)
Regulatory deferral (a)............................................................... 14.2 29.4 .7
--------- --------- ---------
Net Pension Cost...................................................................... $ 68.1 $ 80.9 $ 46.4
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------
(a) Domestic Electric Operations has received accounting orders from its primary
and certain other regulatory authorities to defer the difference between
pension cost as determined in accordance with SFAS 87 and 88 and that
determined for funding purposes. See Note 2.
IV-44
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 12 RETIREMENT PLANS -- (CONTINUED):
The funded status, net pension liability and significant assumptions are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
<S> <C> <C>
1996 1995
-------------- ----------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C>
Actuarial present value of benefit obligations
Vested benefit obligation............................................................ $ 1,045.5 $ 1,033.9
Accumulated benefit obligation....................................................... 1,120.8 1,090.1
Projected benefit obligation......................................................... 1,270.7 1,262.1
Plan assets at fair value............................................................ 1,042.5 895.6
-------------- ----------
Projected benefit obligation in excess of plan assets................................ 228.2 366.5
Unrecognized prior service cost...................................................... (11.9) (9.8)
Unrecognized net loss................................................................ (65.5) (104.0)
Unrecognized net obligation.......................................................... (7.5) (89.5)
Minimum liability adjustment......................................................... 2.9 65.2
-------------- ----------
Net Pension Liability................................................................ $ 146.2 $ 228.4
-------------- ----------
Discount rate........................................................................ 7.25%-7.5% 7.25%
Expected long-term rate of return on assets.......................................... 8.5%-9% 8.5%-9%
Rate of increase in compensation levels.............................................. 4.5%-6% 5%-6%
</TABLE>
Domestic Electric Operations offered early retirement incentive programs in
1987 and 1990. Included in the table above is the present value of all future
termination benefits provided of $58 million. Domestic Electric Operations
received regulatory accounting orders to defer early retirement costs as a
regulatory asset to be amortized through the year 2020. See Note 2.
NOTE 13 OTHER POST-RETIREMENT BENEFITS
Domestic Electric Operations and Telecommunications provide health care and
life insurance benefits through various plans for their eligible retirees on a
basis substantially similar to those who are active employees. The cost of
postretirement benefits is accrued over the active service period of employees.
The transition obligation represents the unrecognized prior service cost and is
being amortized over a period of 20 years. For those employees retired at
January 1, 1993, the Company funds postretirement benefit expense on a
pay-as-you-go basis. For those employees retiring after January 1, 1993, the
Company funds postretirement benefit expense through a combination of funding
vehicles. The Company funded $38 million and $40 million of postretirement
benefit expense during 1996 and 1995, respectively. These funds are invested in
common stocks, bonds and U.S. government obligations.
IV-45
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 13 OTHER POST-RETIREMENT BENEFITS -- (CONTINUED):
The net periodic post retirement benefit cost is summarized as follows:
<TABLE>
<CAPTION>
FOR THE YEAR
-------------------------------
<S> <C> <C> <C>
1996 1995 1994
--------- --------- ---------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C> <C>
Service cost--benefits earned........................................................ $ 9.6 $ 8.3 $ 9.5
Interest cost on accumulated postretirement benefit obligation....................... 27.8 32.6 30.7
Amortization of transition obligation................................................ 14.3 15.7 16.3
Regulatory deferral.................................................................. 3.4 (4.5) (5.2)
Net asset gain (loss) during the period deferred for future recognition.............. 3.7 3.7 (4.4)
Actual return on plan assets......................................................... (14.5) (10.7) .3
--------- --------- ---------
Net Periodic Postretirement Benefit Cost............................................. $ 44.3 $ 45.1 $ 47.2
--------- --------- ---------
--------- --------- ---------
The accumulated postretirement benefit obligation ("APBO") was as follows:
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
<S> <C> <C>
1996 1995
-------------- ----------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C>
Retirees and dependents.............................................................. $ 209.5 $ 267.7
Fully eligible active plan participants.............................................. 22.2 23.5
Other active plan participants....................................................... 160.8 174.5
-------------- ----------
APBO................................................................................. 392.5 465.7
Plan assets at fair value............................................................ 166.2 117.4
-------------- ----------
APBO in excess of plan assets........................................................ 226.3 348.3
Unrecognized prior service cost .5 .6
Unrecognized transition obligation................................................... (251.0) (266.7)
Unrecognized net gain (loss)......................................................... 48.2 (50.1)
-------------- ----------
Accrued Postretirement Benefit Obligation............................................ $ 24.0 $ 32.1
-------------- ----------
-------------- ----------
Discount rate........................................................................ 7.5% 7.25%
Estimated long-term rate of return on assets......................................... 9% 8.8%-9%
Initial health care cost trend rate--under 65........................................ 8.8%-11% 11%
Initial health care cost trend rate--over 65......................................... 8.4%-10.5% 10%
Ultimate health care cost trend rate................................................. 4.5% 4.5%
</TABLE>
The assumed health care cost trend rates gradually decrease over eight
years. The health care cost trend rate assumptions have a significant effect on
the amounts reported. Increasing the assumed health care cost trend rate by one
percentage point would have increased the APBO as of December 31, 1996 by $29
million, and the annual net periodic postretirement benefit costs by $3 million.
NOTE 14 ACQUISITIONS AND DISPOSITIONS
In September 1996, a consortium, known as the Hazelwood Power Partnership,
purchased a 1,600 megawatt, coal-fired generating station and associated coal
mine in Victoria, Australia for approximately
IV-46
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 14 ACQUISITIONS AND DISPOSITIONS -- (CONTINUED):
$1.9 billion. The consortium financed the acquisition of the Hazelwood plant and
mine with approximately $858 million in equity contributions from the partners
and $1 billion of nonrecourse borrowings at the partnership level. Holdings,
which has a 19.9% interest in the partnership, financed its $145 million portion
of the equity investment and the associated $12 million advance with long-term
borrowings in the United States. The other partners in the partnership are
subsidiaries of National Power PLC (51.9%), Destec Energy (20%) and Commonwealth
Bank Group of Australia (8.2%).
On December 12, 1995, Holdings purchased Powercor, an electricity
distributor in Australia, for approximately $1.6 billion in cash. Powercor's
service territory includes a portion of suburban Melbourne and the western and
central regions of the State of Victoria. Powercor currently has approximately
547,000 customers. The acquisition was accounted for as a purchase and the
results of operations of Powercor have been included in the consolidated
financial statements since December 12, 1995.
On September 27, 1995, holders of a majority of the 5.3 million shares of
outstanding common stock held by minority shareholders of PTI voted in favor of
the merger of a wholly owned subsidiary of Holdings into PTI. Shareholders
tendering shares pursuant to the merger were paid a total of $131 million, or
$30 per share, and an accrued liability of $28 million was established to cover
estimated amounts payable to dissenters.
During 1995, PTI purchased certain rural telephone exchange assets in
Colorado, Washington and Oregon for approximately $376 million.
On August 7, 1995, PTI closed the sale of the stock of Alascom, Inc.
("Alascom") to AT&T Corp. ("AT&T"), in a transaction providing $366 million in
proceeds. Under terms of the agreement, AT&T paid $291 million in cash for the
Alascom stock and for settlement of all past cost study issues. AT&T agreed to
allow PTI to retain a $75 million transition payment made by AT&T to Alascom in
July 1994. AT&T made a down payment of $30 million to PTI upon signing the stock
purchase agreement in October 1994. The remaining $261 million was paid when the
transaction closed. The Company recognized an after-tax gain of $37 million from
the sale of Alascom.
Summarized income statement data for Alascom are as follows:
<TABLE>
<CAPTION>
7 MONTHS
ENDED JULY 31, FOR THE YEAR
1995 1994
--------------- -------------
<S> <C> <C>
MILLIONS OF US DOLLARS
(UNAUDITED)
Revenues........................................................................... $ 193.1 $ 343.5
Income from operations............................................................. 36.9 80.7
</TABLE>
NOTE 15 SUBSEQUENT EVENTS
On March 4, 1997, the Utah Legislature passed a bill which creates a
legislative task force to study stranded cost issues and the timing of customer
choice. The bill freezes rates at January 31, 1997 levels until 60 days
following the conclusion of the 1998 legislative general session. The PSC is
precluded from holding any hearings on rate changes during the freeze period.
The Company has committed to reduce prices to Utah customers by $12 million
annually on approximately May 1, 1997.
IV-47
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 15 SUBSEQUENT EVENTS -- (CONTINUED):
On March 11, 1997, Holdings entered into an agreement to acquire TPC
Corporation, a natural gas gathering, processing, storage and marketing company.
The acquisition is expected to cost approximately $288 million in cash plus
assumed debt of approximately $149 million.
NOTE 16 SELECTED FINANCIAL AND SEGMENT INFORMATION
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------
<S> <C> <C> <C>
1996 1995 1994
---------- ---------- ----------
<CAPTION>
MILLIONS OF US DOLLARS
<S> <C> <C> <C>
REVENUES
Domestic Electric Operations............................................. $ 2,960.8 $ 2,616.1 $ 2,647.8
Australian Electric Operations........................................... 658.8 25.9 --
Telecommunications....................................................... 521.1 640.1 696.5
Other Operations (a)..................................................... 153.1 134.8 153.7
---------- ---------- ----------
Total................................................................ $ 4,293.8 $ 3,416.9 $ 3,498.0
---------- ---------- ----------
---------- ---------- ----------
INCOME FROM OPERATIONS
Domestic Electric Operations............................................. $ 869.8 $ 800.9 $ 819.3
Australian Electric Operations........................................... 127.4 5.5 --
Telecommunications....................................................... 158.7 165.3 164.7
Other Operations (a)..................................................... 89.2 84.2 38.3
---------- ---------- ----------
Total................................................................ $ 1,245.1 $ 1,055.9 $ 1,022.3
---------- ---------- ----------
---------- ---------- ----------
Net Income (Loss)............................................................ $ 504.9 $ 505.0 $ 468.0
EARNINGS CONTRIBUTION (LOSS) ON COMMON STOCK
Continuing operations
Domestic Electric Operations............................................. $ 341.5 $ 276.4 $ 339.8
Australian Electric Operations........................................... 30.1 .7 --
Telecommunications....................................................... 74.7 103.0 70.5
Other Operations (a)..................................................... 28.8 86.2 18.0
---------- ---------- ----------
Total................................................................ $ 475.1 $ 466.3 $ 428.3
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
IV-48
<PAGE>
PACIFICORP
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NOTE 16 SELECTED FINANCIAL AND SEGMENT INFORMATION -- (CONTINUED):
<TABLE>
<CAPTION>
FOR THE YEAR
----------------------------------
1996 1995 1994
---------- ---------- ----------
MILLIONS OF US DOLLARS
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Domestic Electric Operations............................................. $ 9,864 $ 9,599 $ 9,372
Australian Electric Operations........................................... 2,065 1,751 --
Telecommunications....................................................... 1,592 1,599 1,378
Other Operations (a)..................................................... 1,114 1,066 1,096
CAPITAL SPENDING
Domestic Electric Operations............................................. $ 595 $ 455 $ 638
Australian Electric Operations........................................... 226 1,591 --
Telecommunications....................................................... 127 498 153
Other Operations (a)..................................................... 56 175 13
DEPRECIATION AND AMORTIZATION
Domestic Electric Operations............................................. $ 343 $ 320 $ 302
Australian Electric Operations........................................... 72 3 --
Telecommunications....................................................... 107 86 66
Other Operations (a)..................................................... 9 10 18
</TABLE>
- ------------------------
(a) Other Operations includes the operations of PacifiCorp Financial Services,
Inc., Pacific Generation Company, and several start-up-phase ventures, as
well as the activities of PacifiCorp Holdings, Inc., including financing
costs.
IV-49
<PAGE>
UNAUDITED FINANCIAL INFORMATION FOR THE NINE MONTHS
ENDED 30 SEPTEMBER 1996 AND 1997
PACIFICORP
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
(MILLIONS OF DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
----------- ----------- ----------- -----------
<CAPTION>
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES..................................................... $ 2,010.6 $ 1,011.9 $ 4,272.5 $ 2,751.9
----------- ----------- ----------- -----------
EXPENSES
Operations............................................... 1,464.0 464.2 2,700.0 1,211.9
Maintenance.............................................. 49.9 49.2 164.6 158.9
Administrative and general............................... 74.9 69.3 225.0 194.4
Depreciation and amortization............................ 114.9 106.1 338.9 313.4
Taxes, other than income taxes........................... 25.8 25.8 79.6 80.6
----------- ----------- ----------- -----------
Total................................................ 1,729.5 714.6 3,508.1 1,959.2
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS....................................... 281.1 297.3 764.4 792.7
----------- ----------- ----------- -----------
INTEREST EXPENSE AND OTHER
Interest expense......................................... 112.8 103.1 331.6 309.0
Interest capitalized..................................... (3.5) (2.4) (9.7) (8.9)
Other expense--net....................................... 109.2 3.6 104.8 0.6
----------- ----------- ----------- -----------
Total................................................ 218.5 104.3 426.7 300.7
----------- ----------- ----------- -----------
Income from continuing operations before income taxes........ 62.6 193.0 337.7 492.0
Income tax expense........................................... 15.7 70.4 112.4 174.1
----------- ----------- ----------- -----------
Income from continuing operations............................ 46.9 122.6 225.3 317.9
Discontinued Operations (less applicable income tax expense):
1997/$16.6 and $41.8, 1996/$13.0 and $34.7................... 27.1 20.3 64.5 54.1
----------- ----------- ----------- -----------
NET INCOME................................................... 74.0 142.9 289.8 372.0
RETAINED EARNINGS BEGINNING OF PERIOD........................ 827.7 685.0 782.8 632.4
Cash dividends declared Preferred stock...................... (5.5) (5.7) (16.6) (23.5)
Common stock per share: 1997 and 1996/$.27 and $.81...... (80.1) (79.5) (239.9) (238.2)
Preferred stock retired.................................. -- (7.5) -- (7.5)
----------- ----------- ----------- -----------
RETAINED EARNINGS END OF PERIOD.............................. $ 816.1 $ 735.2 $ 816.1 $ 735.2
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
EARNINGS ON COMMON STOCK (Net income less preferred dividend
requirement)................................................. $ 68.2 $ 136.6 $ 271.8 $ 347.7
Average number of common shares outstanding (Thousands)...... 296,347 294,396 295,884 291,594
EARNINGS PER COMMON SHARE
Continuing operations.................................... $ 0.14 $ 0.39 $ 0.70 $ 1.00
Discontinued operations.................................. 0.09 0.07 0.22 0.19
----------- ----------- ----------- -----------
Total................................................ $ 0.23 $ 0.46 $ 0.92 $ 1.19
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
IV-50
<PAGE>
PACIFICORP
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
--------------------
<S> <C> <C>
1997 1996
--------- ---------
<CAPTION>
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income from continuing operations....................................................... $ 225.3 $ 317.9
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization....................................................... 351.5 326.0
Deferred income taxes and investment tax credits--net............................... 20.7 18.1
Other............................................................................... 82.8 (0.7)
Accounts receivable and prepayments................................................. (225.6) (67.9)
Materials, supplies, fuel stock and inventory....................................... (10.1) 9.3
Accounts payable and accrued liabilities............................................ 168.8 106.4
--------- ---------
Net cash provided by continuing operations.................................................. 613.4 709.1
Net cash provided by (used in) discontinued operations...................................... (3.7) 36.8
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES................................................... 609.7 745.9
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Construction............................................................................ (440.2) (377.2)
Investments in and advances to affiliated companies--net................................ (43.5) (145.9)
Operating companies and assets acquired................................................. (293.7) (176.8)
Proceeds from sales of assets........................................................... 2.5 28.8
Proceeds from sales of finance assets and principal payments............................ 52.6 61.8
Other................................................................................... (37.2) (14.6)
--------- ---------
NET CASH USED IN INVESTING ACTIVITIES....................................................... (759.5) (623.9)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Changes in short-term debt.............................................................. 23.8 (200.6)
Proceeds from long-term debt............................................................ 742.4 429.1
Proceeds from issuance of common stock.................................................. 29.1 210.7
Proceeds from issuance of Trusts holding solely PacifiCorp debentures preferred
securities.............................................................................. 130.7 210.1
Dividends paid.......................................................................... (256.0) (261.5)
Repayments of long-term debt............................................................ (373.3) (246.6)
Redemptions of preferred stock.......................................................... (72.2) (223.8)
Other................................................................................... (65.0) (43.4)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES......................................... 159.5 (126.0)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................................ 9.7 (4.0)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................................ 8.4 15.8
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................................................. $ 18.1 $ 11.8
--------- ---------
--------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for Interest (net of amount capitalized).................... $ 382.9 $ 350.1
Income taxes............................................................................ 115.2 150.6
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
IV-51
<PAGE>
PACIFICORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
(UNAUDITED)
CURRENT ASSETS
Cash and cash equivalents.................................................... $ 18.1 $ 8.4
Accounts receivable less allowance for doubtful accounts: 1997/$10.0 and
1996/$8.5.................................................................... 915.1 620.9
Materials, supplies and fuel stock at average cost........................... 190.8 181.3
Net assets of discontinued operations........................................ 803.5 779.5
Other........................................................................ 46.9 71.8
-------------- --------------
TOTAL CURRENT ASSETS......................................................... 1,974.4 1,661.9
PROPERTY, PLANT AND EQUIPMENT
Domestic Electric Operations................................................. 11,997.8 11,698.8
Australian Electric Operations............................................... 1,292.4 1,361.9
Other Operations............................................................. 262.1 68.8
Accumulated depreciation and amortization.................................... (4,125.9) (3,862.4)
-------------- --------------
TOTAL PROPERTY, PLANT AND EQUIPMENT--NET......................................... 9,426.4 9,267.1
OTHER ASSETS
Investments in and advances to affiliated companies.......................... 388.1 253.9
Intangible assets--net....................................................... 567.3 480.7
Regulatory assets--net....................................................... 1,008.4 1,022.8
Finance note receivable...................................................... 212.1 214.6
Finance assets--net.......................................................... 420.9 425.6
Real estate investments...................................................... 239.9 217.0
Deferred charges and other................................................... 358.5 268.7
-------------- --------------
TOTAL OTHER ASSETS............................................................... 3,195.2 2,883.3
-------------- --------------
TOTAL ASSETS..................................................................... $ 14,596.0 $ 13,812.3
-------------- --------------
-------------- --------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
IV-52
<PAGE>
PACIFICORP
CONDENSED CONSOLIDATED BALANCE SHEETS
(MILLIONS OF DOLLARS)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
-------------- --------------
<S> <C> <C>
(UNAUDITED)
CURRENT LIABILITIES
Long-term debt currently maturing............................................ $ 627.8 $ 219.8
Notes payable and commercial paper........................................... 707.4 683.5
Accounts payable............................................................. 602.7 477.5
Taxes, interest and dividends payable........................................ 344.7 290.8
Customer deposits and other.................................................. 182.3 83.7
-------------- --------------
TOTAL CURRENT LIABILITIES........................................................ 2,464.9 1,755.3
DEFERRED CREDITS
Income taxes................................................................. 1,816.7 1,801.0
Investment tax credits....................................................... 137.2 143.2
Other........................................................................ 660.4 713.2
-------------- --------------
TOTAL DEFERRED CREDITS........................................................... 2,614.3 2,657.4
MINORITY INTEREST................................................................ 15.1 14.7
LONG-TERM DEBT................................................................... 4,859.6 4,829.4
GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S JUNIOR SUBORDINATED
DEBENTURES....................................................................... 340.4 209.7
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION.................................. 175.0 178.0
PREFERRED STOCK.................................................................. 66.4 135.5
COMMON EQUITY
Common shareholders' capital shares authorized 750,000,000; shares
outstanding: 1997/296,537,648 and 1996/295,139,753........................... 3,266.1 3,236.8
Retained earnings............................................................ 816.1 782.8
Cumulative currency translation adjustment................................... (21.9) 12.7
-------------- --------------
TOTAL COMMON EQUITY.............................................................. 4,060.3 4,032.3
-------------- --------------
COMMITMENTS AND CONTINGENCIES (SEE NOTE 5)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY....................................... $ 14,596.0 $ 13,812.3
-------------- --------------
-------------- --------------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
IV-53
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
1. FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements as of
September 30, 1997 and December 31, 1996 and for the periods ended September 30,
1997 and 1996, in the opinion of management, include all adjustments,
constituting only normal recording of accruals, necessary for a fair
presentation of financial position, results of operations and cash flows for
such periods. A significant part of the business of PacifiCorp (the "Company")
is of a seasonal nature; therefore, results of operations for the periods ended
September 30, 1997 and 1996 are not necessarily indicative of the results for a
full year. These condensed consolidated financial statements should be read in
conjunction with the financial statements and related notes incorporated by
reference in the Company's 1996 Annual Report on Form 10-K.
The condensed consolidated financial statements of the Company include its
integrated domestic electric utility operating divisions of Pacific Power and
Utah Power and its wholly owned and majority owned subsidiaries. Major
subsidiaries, all of which are wholly owned, are: PacifiCorp Holdings, Inc.
("Holdings"), which holds all of the Company's nonintegrated electric utility
investments, including Powercor Australia Limited ("Powercor"), an Australian
electricity distributor; PacifiCorp Financial Services, Inc. ("PFS"), a
financial services business; and PacifiCorp Power Marketing, Inc. ("PPM"),
engaged in wholesale power trading in the eastern energy markets. On April 15,
1997, Holdings acquired 100% of TPC Corporation ("TPC"), a natural gas
gathering, processing, storage and marketing company. Together these businesses
are referred to herein as the Companies. Significant intercompany transactions
and balances have been eliminated.
The Company also owns a telecommunications operation, Pacific Telecom, Inc.
("PTI"). The Company has agreed to the disposal of this operation. See Note 3.
The Company disposed of Pacific Generation Company ("PGC") on November 1, 1997,
and has agreed to the disposal of the natural gas gathering and processing
assets of TPC. See Note 4. In addition, the Company has announced its intention
to sell certain other assets held by its financial services business.
Investments in and advances to affiliated companies represent investments in
unconsolidated affiliated companies carried on the equity basis, which
approximates the Company's equity in their underlying net book value.
Certain amounts from the prior period have been reclassified to conform with
the 1997 method of presentation. These reclassifications had no effect on
previously reported consolidated net income.
2. PROPOSED ACQUISITION
On June 13, 1997, PacifiCorp announced a cash tender offer by PacifiCorp
Acquisitions, a wholly owned subsidiary of Holdings, for The Energy Group PLC
("TEG") in a transaction valued at approximately $9.6 billion in debt and
equity. TEG is a diversified international energy group with operations in the
United Kingdom (the "U.K."), the United States and Australia and includes
Peabody Holding Company, Inc., the world's largest private producer of coal, and
Eastern Group PLC, one of the leading integrated electricity and gas groups in
the U.K. On August 1, 1997, the U.K. Secretary of State for Trade and Industry
referred the proposed acquisition of TEG to the Monopolies and Mergers
Commission (the "MMC"). The MMC is required to investigate whether the
acquisition operates or may be expected to operate against the public interest
and has stated its intent to deliver its report to the Secretary of State by
November 21, 1997. The Company is cooperating fully with the MMC's
investigation. The TEG
IV-54
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
2. PROPOSED ACQUISITION (CONTINUED)
acquisition also remains subject to antitrust review in the United States. The
Company is in the process of responding to a second request for information from
the Federal Trade Commission. Any recommend offer by the Company to acquire TEG
will also require approval of TEG's Board of Directors.
As required under the rules of the U.K. Takeover Code, the Company was
required to demonstrate that it had both adequate committed financing and the
appropriate amount of sterling to eliminate the risk of exchange rate changes
between the offer announcement date and the expected closing date. As a result,
the Company entered into 1.45 billion pounds of foreign exchange contracts to
lock-in a strike price of approximately $1.64 per pound sterling.
Under the terms of the original tender offer, the referral by the U.K.
Secretary of State caused the tender offer to lapse. As a result, the financing
facilities associated with the TEG acquisition terminated and the Company
initiated steps to unwind its foreign exchange positions consistent with its
policies on derivatives. As a result of the termination of these foreign
exchange positions and initial option costs, the Company realized an after-tax
loss of approximately $65 million, or $0.22 per share, in the third quarter of
1997. Generally accepted accounting principles require all costs related to
currency hedge positions entered into in anticipation of an acquisition be
expensed in the period incurred whether or not the Company is successful in
completing the transaction.
Additionally, the Company estimates it has incurred approximately $60
million of other costs related to the TEG transaction for bank commitment and
facility fees, legal expenses and other related costs. These costs have been
deferred because the Company expects to make a new bid for TEG, if allowed. As
mentioned above, there is risk that a transaction with TEG will not occur. If it
becomes likely that the transaction will not occur or significant uncertainty
arises, the Company will write off these transaction costs as a charge to
income.
3. DISCONTINUED OPERATIONS
On June 13, 1997, the Company announced the planned sale of its wholly owned
telecommunications subsidiary, PTI, to Century Telephone Enterprises, Inc.
("Century") for $1.5 billion in cash plus the assumption of PTI's debt. The sale
of PTI is subject to regulatory approvals in certain of the states in which it
does business. Approval from the Federal Communications Commission was received
on October 10, 1997. The sale of PTI is expected to close in the fourth quarter
of 1997 at which time the Company expects to recognize an after-tax gain of
approximately $370 million, or $1.25 per share.
The net assets, operating results and cash flows of PTI have been classified
as discontinued operations for all periods presented in the condensed financial
statements and notes.
IV-55
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
3. DISCONTINUED OPERATIONS (CONTINUED)
Summarized results for PTI were as follows:
<TABLE>
<CAPTION>
THREE-MONTH NINE-MONTH
PERIODS ENDED PERIODS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- --------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
--------- --------- --------- ---------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Revenues................................................................ $ 154.0 $ 136.6 $ 416.2 $ 386.2
--------- --------- --------- ---------
Income from discontinued operations before income taxes................. $ 43.7 $ 33.3 $ 106.3 $ 88.8
Income taxes............................................................ 16.6 13.0 41.8 34.7
--------- --------- --------- ---------
Income from discontinued operations..................................... $ 27.1 $ 20.3 $ 64.5 $ 54.1
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
4. SALES OF SUBSIDIARIES
On November 1, 1997, the Company completed the sale of PGC to NRG Energy,
Inc. for $151 million in cash. An after-tax gain on the sale of approximately
$30 million, or $0.10 per share, will be recognized in the fourth quarter of
1997. On October 28, 1997, TPC reached an agreement to sell all of the capital
stock of three subsidiaries that hold its natural gas gathering and processing
assets to El Paso Field Services Company for $195 million in cash. The sale of
the natural gas gathering and processing assets of TPC is subject to certain
conditions, including the expiration or termination of all applicable waiting
periods under the Hart-Scott-Rodino Act, and is expected to close in the fourth
quarter of 1997. Holdings acquired the outstanding common stock of TPC in a cash
tender offer in April this year and, under purchase accounting rules, no gain or
loss will be recognized on the sale.
5. CONTINGENT LIABILITIES
The Company is subject to numerous environmental laws including: the Federal
Clean Air Act, as enforced by the Environmental Protection Agency and various
state agencies; the 1990 Clean Air Act Amendments; the Endangered Species Act as
it relates to certain potentially endangered species of salmon; the
Comprehensive Environmental Response, Compensation and Liability Act, relating
to environmental cleanups; along with the Federal Resource Conservation and
Recovery Act and the Clean Water Act relating to water quality. These laws could
potentially impact future operations. Future costs associated with the
disposition of contingencies identified at December 31, 1996 are not expected to
be material to the Company's consolidated financial statements. These matters
include the Superfund sites where the Company has been or may be designated as a
potentially responsible party and Clean Air Act matters.
The Company's mining operations are subject to reclamation and closure
requirements. The Company monitors these requirements and periodically revises
its cost estimates to meet existing legal and regulatory requirements of the
various jurisdictions in which it operates. Costs for reclamation are accrued
using the units-of-production method such that estimated final mine reclamation
and closure costs are fully accrued at completion of mining activities. This is
consistent with industry practices, and the Company believes that it has
adequately provided for its reclamation obligations.
IV-56
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
5. CONTINGENT LIABILITIES (CONTINUED)
The Company and its subsidiaries are parties to various legal claims,
actions and complaints, certain of which involve material amounts. Although the
Company is unable to predict with certainty whether or not it will ultimately be
successful in these legal proceedings or, if not, what the impact might be,
management currently believes that disposition of these matters will not have a
materially adverse effect on the Company's consolidated financial statements.
The Company's 1991, 1992 and 1993 federal income tax returns are currently
under examination by the Internal Revenue Service (the "IRS"). The Company has
received an examination report for 1989 and 1990 proposing adjustments that
would increase income tax by $11 million. The Company filed a protest of certain
proposed adjustments on July 30, 1996 and is currently holding discussions with
the Appeals Division of the IRS.
6. GUARANTEED PREFERRED BENEFICIAL INTERESTS IN COMPANY'S JUNIOR
SUBORDINATED DEBENTURES
On August 4, 1997, PacifiCorp Capital II, a wholly owned subsidiary trust of
the Company (the "Trust"), issued, in a public offering, 5,400,000 of its 7.70%
Trust Preferred Securities, Series B (the "Preferred Securities"), representing
preferred undivided beneficial interests in the assets of the Trust, with a
liquidation amount of $25 per Preferred Security. The sole assets of the Trust
are $139 million, in aggregate principal amount, of the Company's Series D
Debentures due September 30, 2027, and certain rights under a related guarantee
by the Company. The Company's guarantee of the Preferred Securities, considered
together with the other obligations of the Company with respect to Preferred
Securities, constitutes a full and unconditional guarantee by the Company of the
Trust's obligations with respect to the Preferred Securities.
7. STOCK INCENTIVE PLAN
During 1997, the Company formalized a plan under which selected employees,
officers and directors and selected nonemployee agents, consultants, advisors
and independent contractors may be granted options to purchase the Company's
common stock. Options generally become exercisable in three equal installments
on each of the first through third anniversaries of the grant date and have a
maximum term of ten years. As of September 30, 1997, options have been granted
to 193 officers and employees. Under the plan, 1,322,500 options were granted on
June 3, 1997 and 193,500 options were granted on August 12, 1997 at prices of
$19.75 and $21.25, respectively. These options to purchase the Company's common
stock were issued at 100% of market price on the dates the options were granted.
None of the options were exercisable as of September 30, 1997. The Company
applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued
to Employees," and related interpretations in accounting for its plan.
Accordingly, no compensation expense has been recognized for its stock-based
compensation plan.
IV-57
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 1997
8. NEW ACCOUNTING PRONOUNCEMENT ISSUED BUT NOT ADOPTED
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 131, "Disclosures about Segments of
an Enterprise and Related Information." SFAS No. 131 establishes standards for
public enterprises reporting information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. This Statement is
effective for fiscal years beginning after December 15, 1997. Management is
assessing the disclosure implications of this Statement.
IV-58
<PAGE>
APPENDIX V
ADDITIONAL INFORMATION
1 RESPONSIBILITY
(a) The directors of PacifiCorp Acquisitions, whose names are set out in
paragraph 2(a) of this Appendix V, accept responsibility for the information
contained in this document other than information relating to The Energy
Group, the TEG Group and the directors of The Energy Group and their
immediate families. To the best of the knowledge and belief of the directors
of PacifiCorp Acquisitions (who have taken all reasonable care to ensure
that such is the case), the information contained in this document for which
they are responsible is in accordance with the facts and does not omit
anything likely to affect the import of such information.
(b) The directors of The Energy Group, whose names are set out in paragraph 2(b)
of this Appendix V, accept responsibility for the information contained in
this document relating to The Energy Group, the TEG Group and the directors
of The Energy Group and their immediate families. To the best of the
knowledge and belief of the directors of The Energy Group (who have taken
all reasonable care to ensure that such is the case), the information
contained in this document for which they are responsible is in accordance
with the facts and does not omit anything likely to affect the import of
such information.
2 DIRECTORS
(a) The directors of PacifiCorp Acquisitions are:
<TABLE>
<S> <C>
Frederick W. Buckman -Chairman
Richard T. O'Brien -Chief Financial Officer
William E. Peressini -Deputy Chief Financial Officer
Dennis P. Steinberg
Verl R. Topham
Thomas J. Imeson
Michael J. Pittman
</TABLE>
(b) The directors of The Energy Group are:
<TABLE>
<S> <C>
Derek C. Bonham -Chairman
John F. Devaney -Chief Executive--Eastern
Irl F. Engelhardt -Chief Executive--Peabody
Eric E. Anstee -Finance Director
Baroness Hogg -Non-executive director
David P. Nash -Non-executive director
John Neerhout, Jr. -Non-executive director
</TABLE>
3 STOCK EXCHANGE QUOTATIONS, MARKET PRICE DATA AND PRINCIPAL PURCHASES
The following table shows the Closing Price for Energy Group Shares and the
closing sale price on the New York Stock Exchange for Energy Group ADSs on the
first dealing day of each of the six months immediately prior to the date of
this document, on 23 January 1998 (the last Business Day before the
V-1
<PAGE>
commencement of the Offer period) and on 2 February 1998 (the latest practicable
date prior to the publication of this document):
<TABLE>
<CAPTION>
ENERGY
GROUP ENERGY
SHARES GROUP
DATE (PENCE) ADSS ($)
<S> <C> <C>
1 August 1997 624 40 1/2
1 September 1997 628 40 1/16
1 October 1997 652 1/2 41 13/16
3 November 1997 611 1/2 40 13/16
1 December 1997 634 1/2 42 9/16
2 January 1998 677(xd) 44 1/2
23 January 1998 685 1/2 45 3/8
2 February 1998 754 49 5/16
</TABLE>
Energy Group Shares have been listed and traded on the London Stock Exchange
and Energy Group ADSs have been listed and traded on the New York Stock Exchange
since 24 February 1997. The following table sets out, for the periods indicated,
(i) the reported closing highest and lowest mid-price quotations for Energy
Group Shares on the London Stock Exchange as derived from the Daily Official
List of the London Stock Exchange and (ii) the high and low closing sales prices
for Energy Group ADSs on the New York Stock Exchange as obtained from the New
York Stock Exchange. Each Energy Group ADS represents four Energy Group Shares.
For current price information, holders of Energy Group Shares and Energy Group
ADSs are urged to consult publicly available sources.
<TABLE>
<CAPTION>
ENERGY GROUP
ENERGY GROUP
SHARES (PENCE)
ADSS ($)
-------------------- --------------------
PERIOD HIGH LOW HIGH LOW
- ----------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
24 February to 31 March 1997 inclusive (1st quarter) 568 1/2 466 1/2 36 1/8 29 1/4
1 April to 30 June 1997 inclusive (2nd quarter) 648 486 42 3/4 31 3/8
1 July to 30 September 1997 inclusive (3rd quarter) 658 1/2 617 43 11/16 39 1/4
1 October to 31 December 1997 inclusive (4th quarter) 679 1/2 606 45 3/16 40 1/4
1 January to 2 February 1998 inclusive (1st quarter) 754 676 49 5/16 43 13/16
</TABLE>
In accordance with normal UK practice, PacifiCorp Acquisitions or its
nominees or brokers (acting as agents for PacifiCorp Acquisitions) or a
subsidiary of PacifiCorp (other than PacifiCorp Acquisitions) may make certain
purchases of Energy Group Securities outside the United States during the period
in which the Offer remains open for acceptance, and affiliates of Goldman Sachs
International and Morgan Stanley will continue to act as market makers and
principal traders for Energy Group Shares on the London Stock Exchange, pursuant
to relief granted by the SEC staff from Rule 10b-13 under the Exchange Act. In
accordance with the terms of this relief, among other things, (i) such purchases
may not be effected within the United States, (ii) information regarding such
purchases must be disclosed in the United States by press release to the extent
disclosure is required pursuant to the City Code, and (iii) PacifiCorp
Acquisitions and any such other persons must comply with any applicable rules of
UK regulatory organisations.
V-2
<PAGE>
4 SHAREHOLDINGS AND DEALINGS
In this paragraph:
"DISCLOSURE PERIOD" means the period commencing 26 January 1997 (the date 12
months prior to the commencement of the Offer period) and ending on 2 February
1998 (the latest practicable date prior to the publication of this document);
"RELEVANT SECURITIES" means Energy Group Securities, including any
securities convertible into, rights to subscribe for, or options (including
traded options) in respect of, or derivatives referenced to, such Energy Group
Securities;
"ARRANGEMENT" includes indemnity or option arrangements, and any agreement
or understanding, formal or informal, of whatever nature which may be an
inducement to deal or refrain from dealing; and
"ASSOCIATE" means, in relation to The Energy Group, any member of the TEG
Group and any associated company of any member of the TEG Group, their banks and
financial and other professional advisers (including stockbrokers), including
persons controlling, controlled by or under the same control as such banks or
financial or other professional advisers, their directors and such directors'
close relatives and related trusts and their pension funds.
(A) SHAREHOLDINGS AND DEALINGS IN PACIFICORP SECURITIES
Neither The Energy Group nor any of the directors of The Energy Group or
member of their immediate families, owns or controls or (in the case of the
directors of The Energy Group and their immediate families) is directly or
indirectly interested in any securities in PacifiCorp or any securities
convertible into, rights to subscribe for, or options (including traded options)
in respect of, or derivatives referenced to, any such securities, nor has any
such person dealt for value therein during the disclosure period.
(B) SHAREHOLDINGS AND DEALINGS IN ENERGY GROUP SECURITIES
(I) PACIFICORP
Details of holdings as at the close of business on 2 February 1998 (being
the latest practicable date prior to the publication of this document):
(aa) PacifiCorp Master Retirement Trust, an independently managed pension
fund of the PacifiCorp Group, beneficially owned 241,589 Energy Group
Shares;
(bb) the following dealings for value in Energy Group Shares by PacifiCorp
Master Retirement Trust have taken place during the disclosure period:
-- acquisition of 47,300 Energy Group Shares in February 1997 pursuant
to the Demerger;
-- purchase of 10,572 Energy Group Shares on 10 June 1997 at L5.75 per
share;
-- purchase of 68,717 Energy Group Shares on 11 June 1997 at L6.55 per
share; and
-- purchase of 115,000 Energy Group Shares on 14 October 1997 at L6.59
per share;
V-3
<PAGE>
(cc) the following persons deemed to be acting in concert with PacifiCorp
Acquisitions owned or controlled the following Energy Group Securities:
<TABLE>
<S> <C> <C>
NUMBER OF ENERGY TYPE OF ENERGY
NAME GROUP SECURITIES GROUP SECURITIES
CIN Management 6,517,433 Energy Group Shares
Goldman, Sachs & Co.
Discretionary customer
accounts 72,000 Energy Group Shares
Goldman, Sachs & Co.
Discretionary customer
accounts 175,581 Energy Group ADSs
</TABLE>
(dd) the following dealings for value in Energy Group Securities by persons
deemed to be acting in concert with PacifiCorp Acquisitions have taken
place during the disclosure period:
ENERGY GROUP SHARES
<TABLE>
<CAPTION>
NUMBER OF
RELEVANT
ENERGY
NATURE OF GROUP NATURE OF
NAME TRANSACTION DATE SECURITIES PRICE NAME TRANSACTION DATE
- ----------------------- ----------- ----------- ----------- ----------- ----------------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Goldman, Sachs & Co. Buy 25.06.97 13,700 $10.69 Goldman, Sachs & Co. Sell 28.05.97
Goldman, Sachs & Co. Sell 25.06.97 13,700 L6.41 Goldman, Sachs & Co. Buy 10.06.97
Goldman, Sachs & Co. Buy 11.07.97 20,000 $10.90 Goldman, Sachs & Co. Sell 10.06.97
Goldman, Sachs & Co. Sell 11.07.97 20,000 L6.45 CIN Management Buy 01.04.97
Goldman, Sachs & Co. Buy 09.10.97 3,400 $10.47 CIN Management Buy 02.04.97
Goldman, Sachs & Co. Sell 09.10.97 3,400 L6.45 CIN Management Buy 03.04.97
Goldman, Sachs & Co. Buy 16.12.97 2,300 $10.54 CIN Management Buy 07.04.97
Goldman, Sachs & Co. Sell 16.12.97 2,300 L6.46 CIN Management Buy 08.04.97
Goldman, Sachs & Co. Buy 14.05.97 120,700 L5.31 CIN Management Buy 09.04.97
Goldman, Sachs & Co. Sell 14.05.97 5,700 $8.75 CIN Management Buy 10.04.97
Goldman, Sachs & Co. Sell 14.05.97 115,000 $8.85 CIN Management Buy 21.04.97
Goldman, Sachs & Co. Buy 16.05.97 13,700 L5.38 CIN Management Buy 28.04.97
Goldman, Sachs & Co. Sell 16.05.97 13,700 $8.82 CIN Management Buy 01.05.97
Goldman, Sachs & Co. Buy 28.05.97 1,000 $9.21 CIN Management Buy 09.05.97
<CAPTION>
NUMBER OF
RELEVANT
ENERGY
GROUP
NAME SECURITIES PRICE
- ----------------------- ----------- -----------
<S> <C> <C>
Goldman, Sachs & Co. 1,000 L5.65
Goldman, Sachs & Co. 2,856 L5.63
Goldman, Sachs & Co. 2,856 L5.63
Goldman, Sachs & Co. 14,745 L4.99
Goldman, Sachs & Co. 200,000 L5.06
Goldman, Sachs & Co. 100,000 L5.00
Goldman, Sachs & Co. 350,000 L5.06
Goldman, Sachs & Co. 250,000 L5.04
Goldman, Sachs & Co. 100,000 L5.01
Goldman, Sachs & Co. 100,000 L4.90
Goldman, Sachs & Co. 100,000 L5.02
Goldman, Sachs & Co. 250,000 L4.94
Goldman, Sachs & Co. 14,661 L4.89
Goldman, Sachs & Co. 250,000 L5.23
</TABLE>
V-4
<PAGE>
ENERGY GROUP ADSS
<TABLE>
<CAPTION>
NUMBER OF
RELEVANT
ENERGY
NATURE OF GROUP
NAME TRANSACTION DATE SECURITIES PRICE
- ----------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Goldman, Sachs & Co. Buy 09.12.97 50,000 L42.10
Goldman, Sachs & Co. Buy 09.12.97 10,000 $42.06
Goldman, Sachs & Co. Sell 09.12.97 50,000 L25.62
Goldman, Sachs & Co. Sell 09.12.97 10,000 L25.58
Goldman, Sachs & Co. Buy 10.12.97 25,000 $42.00
Goldman, Sachs & Co. Buy 10.12.97 22,500 $42.02
Goldman, Sachs & Co. Sell 10.12.97 22,500 L25.49
Goldman, Sachs & Co. Sell 10.12.97 25,000 L25.52
Goldman, Sachs & Co. Buy 11.12.97 25,000 $42.13
Goldman, Sachs & Co. Buy 11.12.97 25,000 $42.16
Goldman, Sachs & Co. Sell 11.12.97 25,000 L25.52
Goldman, Sachs & Co. Sell 11.12.97 25,000 L25.54
Goldman, Sachs & Co. Buy 12.12.97 75,000 $42.49
Goldman, Sachs & Co. Sell 12.12.97 75,000 L25.64
Goldman, Sachs & Co. Buy 26.03.97 31,100 $31.75
Goldman, Sachs & Co. Buy 26.03.97 15,000 $31.88
Goldman, Sachs & Co. Sell 26.03.97 16,100 L19.62
Goldman, Sachs & Co. Sell 26.03.97 30,000 L19.55
Goldman, Sachs & Co. Buy 27.03.97 1,100 $32.63
Goldman, Sachs & Co. Buy 27.03.97 22,900 $32.75
Goldman, Sachs & Co. Sell 27.03.97 24,000 L20.12
Goldman, Sachs & Co. Buy 31.03.97 600 $32.13
Goldman, Sachs & Co. Sell 01.04.97 600 $32.75
Goldman, Sachs & Co. Buy 03.04.97 25,000 $32.50
Goldman, Sachs & Co. Sell 03.04.97 25,000 L19.80
Goldman, Sachs & Co. Buy 07.04.97 100 $32.38
Goldman, Sachs & Co. Sell 08.04.97 100 $32.13
Goldman, Sachs & Co. Buy 10.04.97 10,000 $31.88
Goldman, Sachs & Co. Buy 10.04.97 102,500 $31.75
Goldman, Sachs & Co. Sell 10.04.97 10,000 L19.72
Goldman, Sachs & Co. Sell 10.04.97 40,000 L19.60
Goldman, Sachs & Co. Sell 10.04.97 62,500 L19.67
Goldman, Sachs & Co. Buy 11.04.97 11,250 $31.88
Goldman, Sachs & Co. Buy 11.04.97 120,000 $31.75
Goldman, Sachs & Co. Sell 11.04.97 12,500 L19.59
Goldman, Sachs & Co. Sell 11.04.97 18,750 L19.62
Goldman, Sachs & Co. Sell 11.04.97 50,000 L19.67
Goldman, Sachs & Co. Sell 11.04.97 50,000 L19.58
Goldman, Sachs & Co. Buy 14.04.97 35,100 $32.13
Goldman, Sachs & Co. Buy 14.04.97 19,800 $32.25
Goldman, Sachs & Co. Sell 14.04.97 4,900 $32.25
Goldman, Sachs & Co. Sell 14.04.97 25,000 L19.88
Goldman, Sachs & Co. Sell 14.04.97 25,000 L19.90
Goldman, Sachs & Co. Buy 15.04.97 25,000 $32.75
Goldman, Sachs & Co. Sell 15.04.97 25,000 L20.22
Goldman, Sachs & Co. Sell 17.04.97 10,000 $32.38
<CAPTION>
NUMBER OF
RELEVANT
ENERGY
NATURE OF GROUP
NAME TRANSACTION DATE SECURITIES PRICE
- ----------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Goldman, Sachs & Co. Buy 18.04.97 12,500 $32.50
Goldman, Sachs & Co. Sell 18.04.97 12,500 L19.95
Goldman, Sachs & Co. Buy 21.04.97 12,500 $32.50
Goldman, Sachs & Co. Buy 21.04.97 12,500 $32.25
Goldman, Sachs & Co. Buy 21.04.97 10,000 L20.00
Goldman, Sachs & Co. Sell 21.04.97 12,500 L19.92
Goldman, Sachs & Co. Sell 21.04.97 12,500 $32.63
Goldman, Sachs & Co. Buy 22.04.97 1,500 $32.00
Goldman, Sachs & Co. Buy 22.04.97 16,250 $32.25
Goldman, Sachs & Co. Sell 22.04.97 12,500 L19.71
Goldman, Sachs & Co. Sell 23.04.97 5,250 $31.88
Goldman, Sachs & Co. Buy 28.04.97 20,000 L19.40
Goldman, Sachs & Co. Sell 28.04.97 20,000 $31.50
Goldman, Sachs & Co. Buy 02.05.97 72,700 $31.63
Goldman, Sachs & Co. Sell 02.05.97 5,000 L19.62
Goldman, Sachs & Co. Sell 02.05.97 12,700 $31.63
Goldman, Sachs & Co. Sell 02.05.97 10,000 L19.59
Goldman, Sachs & Co. Sell 02.05.97 20,000 L19.61
Goldman, Sachs & Co. Sell 02.05.97 25,000 L19.62
Goldman, Sachs & Co. Buy 08.05.97 25,000 $32.88
Goldman, Sachs & Co. Sell 08.05.97 25,000 L20.32
Goldman, Sachs & Co. Buy 09.05.97 34,600 $33.88
Goldman, Sachs & Co. Buy 09.05.97 25,000 $34.00
Goldman, Sachs & Co. Sell 09.05.97 4,000 L20.89
Goldman, Sachs & Co. Sell 09.05.97 25,000 L20.91
Goldman, Sachs & Co. Sell 09.05.97 30,000 L20.95
Goldman, Sachs & Co. Buy 14.05.97 5,500 L21.33
Goldman, Sachs & Co. Buy 14.05.97 6,000 $34.63
Goldman, Sachs & Co. Buy 14.05.97 19,000 $34.88
Goldman, Sachs & Co. Buy 14.05.97 44,300 $35.00
Goldman, Sachs & Co. Sell 14.05.97 5,500 $34.63
Goldman, Sachs & Co. Sell 14.05.97 14,500 L21.33
Goldman, Sachs & Co. Sell 14.05.97 25,000 L21.25
Goldman, Sachs & Co. Sell 14.05.97 30,000 L21.37
Goldman, Sachs & Co. Buy 19.05.97 4,400 $34.88
Goldman, Sachs & Co. Buy 19.05.97 40,600 $35.00
Goldman, Sachs & Co. Sell 19.05.97 20,000 L21.37
Goldman, Sachs & Co. Sell 19.05.97 25,000 L21.38
Goldman, Sachs & Co. Buy 22.05.97 28,700 $36.50
Goldman, Sachs & Co. Sell 22.05.97 3,700 L22.35
Goldman, Sachs & Co. Sell 22.05.97 4,100 L22.37
Goldman, Sachs & Co. Sell 22.05.97 10,000 L22.36
Goldman, Sachs & Co. Sell 22.05.97 10,900 L22.45
Goldman, Sachs & Co. Buy 30.05.97 25,000 $35.75
Goldman, Sachs & Co. Sell 30.05.97 25,000 L21.82
</TABLE>
V-5
<PAGE>
(II) THE ENERGY GROUP
(aa) At the close of business on 2 February 1998 (the latest practicable
date prior to the publication of this document), the interests of the
directors of The Energy Group and their immediate families, all of which
are beneficial (unless stated otherwise), in Energy Group Securities,
which have been notified to The Energy Group under sections 324 and 328
of the Companies Act or which were required to be entered in the register
of directors' interests maintained under the provisions of section 325 of
the Companies Act, are set out below:
<TABLE>
<CAPTION>
CONDITIONAL AWARD
OF ENERGY GROUP
SHARES UNDER THE
ENERGY GROUP
LONG-TERM
ENERGY GROUP INCENTIVE PLAN
DIRECTOR SHARES ("LTIP")(1) CONDITIONAL
AWARD OF ENERGY
GROUP SHARES
UNDER THE
ENERGY GROUP
SPECIAL
ADDITIONAL BONUS
SCHEME(2)
<S> <C> <C> <C>
Derek C. Bonham 90,870 64,285 21,428
John F. Devaney 5,000 50,000 16,666
Irl F. Engelhardt 10,844 48,292 16,097
Eric E. Anstee 5,000 35,714 11,904
David P. Nash 2,000 -- --
</TABLE>
(1) Under the terms of the LTIP, certain executives are granted
performance-related awards of Energy Group Shares up to a maximum market value
of 75 per cent. of base salary each year. The first awards, granted in February
1997, require the achievement of a total shareholder return over the relevant
performance period which is greater than the return achieved by at least half of
the constituents of the FTSE 100 Index for the awards to vest. 30 per cent. of
the awards will vest if The Energy Group achieves a total shareholder return
greater than that achieved by 50 per cent. of the comparator group, with all the
awards vesting if the total shareholder return is greater than that achieved by
80 per cent. of the comparator group over the performance period. Awards will
vest proportionately if total shareholder return falls between these two points.
In the event of a change of control of The Energy Group, the performance period
for outstanding awards will be foreshortened to the date of the change of
control.
(2) In recognition of the fact that the first awards under the LTIP were not due
to vest, in the absence of special circumstances, until the expiration of a
three year performance period, a special additional bonus scheme for certain
executives was established. Under this arrangement, if earnings of the TEG Group
increased by RPI plus 6 per cent. or more in each of the years ending 31 March
1998 and 1999, participants would be entitled to receive an award of Energy
Group Shares, valued at the beginning of the respective year, equal to 25 per
cent. of base salary for that year. These awards are payable in cash, rather
than Energy Group Shares, following a change of control of The Energy Group.
(bb)In addition to the beneficial interests in Energy Group Securities set
out above, the executive directors of The Energy Group are for the purposes
of the Companies Act regarded as interested in the 4,069,816 Energy Group
Shares held by The Energy Group Employee Benefit Trust (the "Trust"). These
are technical interests in shares, and it is not expected that any of the
executive directors will be entitled to receive from the Trust a greater
number of shares than that to which he is entitled on exercise of options
or the vesting of outstanding awards under the Energy Group Share Schemes;
V-6
<PAGE>
OPTIONS ISSUED PURSUANT TO THE ENERGY GROUP SHARESAVE SCHEME(1)
<TABLE>
<S> <C> <C> <C> <C>
DIRECTOR DATE OF GRANT NUMBER OF EXERCISE EXERCISE PERIOD
ENERGY PRICE (P)
GROUP
SHARES
Derek C. Bonham 25.03.97 2,363 438 4/2002 to 9/2002
John F. Devaney 25.03.97 3,938 438 4/2002 to 9/2002
Eric E. Anstee 25.03.97 3,150 438 4/2002 to 9/2002
Eric E. Anstee 25.03.97 419 465 4/2000 to 9/2000
</TABLE>
(1) Under the Energy Group Sharesave Scheme, options over Energy Group Shares
may be granted at a price equivalent to not less than 80 per cent. of the market
value of Energy Group Shares at the time when participation in the scheme is
offered, and are normally exercisable three or five years after the date of
grant.
(cc) At the close of business on 2 February 1998 (being the latest
practicable date prior to the publication of this document): Morgan
Stanley Capital (Luxembourg) SA held 77,952 Energy Group Shares; Dean
Witter Inter-Capital held 1,225,000 Energy Group Shares; Morgan Stanley
Asset Management Inc. held 4 Energy Group Shares and 57,514 Energy Group
ADSs; Van Kampen American Capital Inc. held 80,000 Energy Group ADSs; and
person(s) whose investments are managed on a discretionary basis by
Cazenove Suisse S.A. held 390 Energy Group Shares;
(dd) The following dealings for value in Energy Group Securities by the
directors of The Energy Group and members of their immediate families
have taken place during the disclosure period:
<TABLE>
<S> <C> <C> <C> <C> <C>
DIRECTOR NATURE OF DATE NUMBER OF TYPE OF PRICE PER
TRANSACTION ENERGY GROUP ENERGY GROUP SECURITY
SECURITIES SECURITIES
John F. Devaney Purchase 26.02.97 5,000 Ordinary 541p
Irl F. Engelhardt Purchase 11.03.97 1,875 ADSs $34.00
Eric E. Anstee Purchase 26.02.97 5,000 Ordinary 539p
David P. Nash Purchase 09.04.97 2,000 Ordinary 501p
</TABLE>
V-7
<PAGE>
(ee) Save as disclosed above:
(1) neither PacifiCorp Acquisitions, nor any director of PacifiCorp
Acquisitions or any member of his immediate family or his related
trusts, nor any person acting in concert with PacifiCorp
Acquisitions, nor any person who prior to the publication of this
document committed himself to accept the Offer, owns or controls or
(in the case of a director of PacifiCorp Acquisitions) is interested
in any relevant securities, nor has any such person dealt for value
in such securities during the disclosure period;
(2) neither The Energy Group, nor any director of The Energy Group or any
member of his immediate family or his related trusts, owns or
controls or (in the case of a director of The Energy Group) is
interested in any relevant securities, nor has any such person dealt
for value in such securities during the disclosure period;
(3) neither any subsidiary of The Energy Group, nor any pension fund of
any member of the TEG Group, nor any bank, financial or other
professional adviser to The Energy Group (including stockbrokers but
excluding exempt market-makers), including any person controlling,
controlled by or under the same control as any such bank, financial
or other professional adviser nor any person whose investments are
managed on a discretionary basis by a fund manager (other than an
exempt fund manager) connected with The Energy Group owns or controls
any relevant securities, nor has any such person dealt for value
therein during the Offer period;
(4) neither PacifiCorp Acquisitions nor any person acting in concert with
PacifiCorp Acquisitions has any arrangement with any person in
relation to relevant securities; and
(5) neither The Energy Group nor any associate of The Energy Group has
any arrangement with any person in relation to relevant securities.
5 IRREVOCABLE UNDERTAKINGS
Certain of the directors of The Energy Group have given irrevocable
undertakings to accept or procure acceptance of the Offer in respect of their
personal holdings of Energy Group Securities. Details of Energy Group Securities
subject to those undertakings are as follows:
<TABLE>
<S> <C> <C>
DIRECTOR ENERGY GROUP SHARES ENERGY GROUP ADSS
Derek C. Bonham 84,000 --
John F. Devaney 5,000 --
Irl F. Engelhardt -- 1,550
Eric E. Anstee 5,000 --
David P. Nash 2,000 --
</TABLE>
Pursuant to the undertakings, the directors have covenanted, subject to
their fiduciary duties as directors, (i) in the announcement of the Offer and in
this document, to recommend all shareholders of The Energy Group to accept the
Offer, (ii) to co-operate with The Energy Group in the production of this
document and, among other things, the information required by Rules 24 and 25 of
the City Code and to take responsibility for the information in this document
relating to The Energy Group, its directors, their close families and any
related companies and trusts in the terms required or permitted by Rule 19.2 of
the City Code, and (iii) not to solicit any general offer for Energy Group
Shares or any other class of its shares from any third party or any proposal for
a merger of The Energy Group with any other entity.
6 SERVICE AGREEMENTS OF THE DIRECTORS OF THE ENERGY GROUP AND RELATED MATTERS
All executive directors of The Energy Group (other than Mr Engelhardt)
entered into service agreements with The Energy Group at the time of its
demerger from Hanson. Mr Engelhardt's service
V-8
<PAGE>
agreement is with Peabody Holding. Mr Engelhardt's contract was entered into in
1987, and was amended on 27 January 1997 with effect from 24 February 1997 in
the context of the Demerger. Details of the service agreements of the directors
of The Energy Group are as follows:
<TABLE>
<S> <C> <C>
DIRECTOR DATE BASIC ANNUAL SALARY
Derek C. Bonham 27 January 1997 L450,000
John F. Devaney 27 January 1997 L350,000
Irl F. Engelhardt 16 September 1987 $550,000
Eric E. Anstee 27 January 1997 L250,000
</TABLE>
Each of the executive directors' service agreements (other than that of Mr
Engelhardt, who is resident and works in the US) is terminable either by The
Energy Group giving 52 weeks' notice or the executive director giving 26 weeks'
notice, unless there is a change of control in The Energy Group within two years
after 24 February 1997, in which case the period of notice required to be given
by The Energy Group increases to 104 weeks until 12 months after the date of the
relevant change of control when that notice period reverts to 52 weeks. Mr
Bonham's service agreement expires on his 60th birthday, those of Messrs Devaney
and Anstee on their respective 63rd birthdays and that of Mr Engelhardt on his
65th birthday.
On a change of control of The Energy Group and if (a) either The Energy
Group summarily terminates the employment of any of the executive directors
(other than Mr. Engelhardt) (other than for cause), directly or indirectly in
connection with that change of control, within 12 months or (b) any such
executive director terminates his employment within 12 months of a change of
control by giving The Energy Group 28 days' notice, then that director is
entitled to:
(a) payment of a sum equivalent to gross salary for a period equal to the
notice period required to be given by The Energy Group;
(b) cash compensation in respect of contractual benefits (or, at The Energy
Group's option, a continuation of those contractual benefits) for such
period;
(c) (save in the case of Mr Bonham) cash compensation (or at The Energy
Group's option, augmentation) in respect of loss of pension entitlement
(including unfunded retirement benefits) for a two year period; and
(d) compensation for loss of expectation of annual bonuses calculated over
the applicable notice period by reference to salary at that time.
Peabody Holding may terminate Mr Engelhardt's service agreement without
cause, by giving 90 days' notice. In such event, Mr Engelhardt would be entitled
to:
(a) a payment of a sum equivalent to gross salary for a 30 month period
(either in a lump sum or on a semi-monthly basis at Mr Engelhardt's
option);
(b) the provision of contractual benefits and executive perquisites for a 30
month period;
(c) pension entitlement for a 30 month period;
(d) the matching amount under the Peabody savings plans for a 30 month
period; and
(e) annual cash payments by way of compensation for loss of expectation of
annual bonus, equivalent to three payments of 75 per cent. of base salary
in the immediately preceding year on each 1 March in the three years
following the termination date.
In the event of termination of Mr Engelhardt's service agreement, Peabody
Holding will also provide an office and executive secretarial support during the
30 month period. In lieu of providing 90 days' notice, Peabody Holding may
provide compensation, pension and all other benefits for such 90 day period.
V-9
<PAGE>
Each of the executive directors is entitled to participate in the LTIP and
the Energy Group Sharesave Scheme, except that Mr Engelhardt is entitled to
participate in a Peabody Savings Plan and an unfunded supplemental savings plan
and is not entitled to participate in the Energy Group Sharesave Scheme. Details
of the directors' interests in Energy Group Securities under each of these
arrangements are set out in paragraph 4.1 above. In addition, each of the
executive directors is entitled to certain other benefits in kind, including the
provision of a fully expensed motor car and medical insurance.
In recognition of the fact that the first awards under the LTIP were not
scheduled to vest (in the absence of a change of control) until after the
expiration of the applicable three-year performance period, each of the
executive directors is eligible to participate in a special additional bonus
scheme. Under this arrangement, if the earnings of the TEG Group increase by a
factor equal to or exceeding RPI plus 6 per cent. in the years ending 31 March
1998 and 31 March 1999 respectively, compared to the preceding year,
participants will be entitled to receive an amount of Energy Group Shares valued
as at the beginning of that year equal to 25 per cent. of their base salary in
respect of each such year. Details of the executive directors' interests in
Energy Group Shares under this arrangement are set out in paragraph 4(b)(ii)
above.
In the event of a change of control of The Energy Group and a continuation
of their service agreements until The Energy Group's accounting reference date
in 1999, each of the executive directors is entitled to payment under the
special additional bonus scheme referred to above in respect of each year in
cash. In the event of a change of control of The Energy Group and the
termination of their service agreements prior to The Energy Group's accounting
reference date in 1999, each of the executive directors is entitled to payment
under the special additional bonus scheme referred to above in respect of each
year in cash, calculated by reference to their base salary on termination.
Each of the executive directors is entitled to participate in an annual
bonus scheme based upon the achievement of annual profit targets prescribed by
the remuneration committee of The Energy Group. These targets relate to:
(a) in the case of Messrs Bonham and Anstee, the profits of the TEG Group
taken as a whole;
(b) in the case of Mr Devaney, 50 per cent. of the profits of the TEG Group
taken as a whole and 50 per cent. of the profits of Eastern;
(c) in the case of Mr Engelhardt, 50 per cent. of the profits of the TEG
Group taken as a whole and 50 per cent. of the profits of Peabody.
Payments under the annual bonus scheme are capped at 50 per cent. of the
base salary for each of Messrs Bonham, Anstee and Devaney and 75 per cent. of
base salary in the case of Mr. Engelhardt. However, each of Messrs Bonham,
Anstee and Devaney may elect to take their bonus in whole or in part on a
deferred basis in Energy Group Shares in lieu of cash, and if they do so and
remain in employment with the TEG Group for a further three years, they would
receive, three years after the cash bonus would otherwise be payable, Energy
Group Shares equal to a maximum of 66.7 per cent. of base salary (the number of
such shares being calculated at the date when the cash bonus would otherwise
have been paid). Share elections were made by each of Messrs Bonham, Anstee and
Devaney in relation to their bonuses for the year ending 31 March 1998. Such
elections will, however, cease to have effect upon a change of control of The
Energy Group and payments will be made (without enhancement) in cash.
Save as set out in this paragraph 6, there are no service agreements between
any of the directors of The Energy Group and any member of the TEG Group which
have unexpired terms exceeding one year and save as aforesaid, no such service
agreements have been entered into or amended since 27 January 1997 (the date on
which the current arrangements were put in place).
V-10
<PAGE>
7 OTHER INFORMATION
(a) PacifiCorp Acquisitions has given assurances to the board of The Energy
Group that the existing employment rights, including pension rights, of all
directors, management and employees of the TEG Group, will be fully
safeguarded. PacifiCorp looks forward to working with employees of the TEG
Group.
PacifiCorp has stated that, subject to the Offer becoming or being declared
unconditional in all respects, it intends to invite Mr Derek Bonham and Mr
John Devaney to join the board of directors of PacifiCorp. Mr Frederick
Buckman will remain as a director and President and Chief Executive Officer
of the Combined Group.
In addition, PacifiCorp intends, subject to approval of the PacifiCorp board
of directors, to invite Mr Bonham, Mr Devaney, Mr Eric Anstee and Mr Irl
Engelhardt to joint PacifiCorp senior executives, Mr Buckman, Mr Verl
Topham, Mr Dennis Steinberg and Mr Richard O'Brien to form part of a
management committee to co-ordinate the activities of the Combined Group
and, except in the case of Mr Bonham, to take up certain executive positions
within the Combined Group.
Although these intentions have been discussed in general terms, no specific
terms or conditions have yet been agreed. None of Messrs Bonham, Devaney,
Anstee or Engelhardt will enter into any further discussions with PacifiCorp
(or any person acting in concert with it) concerning their personal
positions unless and until, at the earliest, the Offer becomes or is
declared unconditional in all respects.
Save as disclosed in this document there is no agreement, arrangement or
understanding (including any compensation arrangement) between PacifiCorp
Acquisitions or any person acting in concert with it for the purposes of the
Offer and any of the directors, recent directors, shareholders or recent
shareholders of The Energy Group having any connection with or dependence
upon, or which is conditional on, the outcome of the Offer.
(b) No proposal exists in connection with the Offer for any payment or other
benefit to be made or given by PacifiCorp Acquisitions or any person acting
in concert with it for the purpose of the Offer to any director of The
Energy Group as compensation for loss of office or as consideration for or
in connection with his retirement from office.
(c) There is no agreement, arrangement or understanding whereby the beneficial
ownership of any of the Energy Group Securities to be acquired pursuant to
the Offer will be transferred to any other person.
(d) Goldman Sachs International, Lazard and Morgan Stanley have given and not
withdrawn their respective written consents to the issue of this document
with the references to their names, including, in the case of Goldman Sachs
International, the reference to its valuation of the Loan Notes, in the form
and context in which they appear. Goldman Sachs International, Lazard and
Morgan Stanley are regulated in the United Kingdom by The Securities and
Futures Authority Limited.
(e) Save as disclosed in this document, there has been no material change in the
financial or trading position of PacifiCorp since 31 December 1996 or the
financial or trading position of The Energy Group since 31 March 1997.
(f) Goldman Sachs International is satisfied that the financial resources
necessary to implement the Offer in full are available to PacifiCorp
Acquisitions.
V-11
<PAGE>
8 MATERIAL CONTRACTS
(a) In addition to the financing arrangements referred to in paragraph 10 below,
the following contracts, not being contracts entered into in the ordinary
course of business, have been entered into by PacifiCorp and its
subsidiaries, including PacifiCorp Acquisitions, since 26 January 1996
(being two years prior to the commencement of the Offer period) and are or
may be material:
(i) an agreement, dated 11 June 1997, by and between PacifiCorp Group
Holdings Company, Pacific Telecom, Inc. (a wholly-owned subsidiary of
PacifiCorp Group Holdings Company), Century Telephone Enterprises, Inc.,
and Century Cellunet, Inc. (a wholly-owned subsidiary of Century
Telephone Enterprises, Inc.), pursuant to which Century Cellunet, Inc.
purchased from Pacific Telecom, Inc. the stock of Pacific Telecom
Cellular, Inc. and of Pacific Telecom Cellular of Alaska, Inc.
(collectively, the "Cellular Stock"), and Century Telephone Enterprises,
Inc. purchased the stock of Pacific Telecom, Inc. PacifiCorp Group
Holdings Company received $1.523 billion in cash (including the $240
million paid by Century Cellunet, Inc. for the Cellular Stock, which
amount was distributed to PacifiCorp Group Holdings Company in the form
of a dividend immediately prior to the closing of the sale of stock of
Pacific Telecom, Inc.);
(ii) an agreement and plan of merger dated as of 11 March 1997 by and among
TPC Corporation, PacifiCorp Group Holdings Company and Power Acquisition
Company, entered into in connection with the cash tender offer by Power
Acquisition Company for all the outstanding shares of capital stock of
TPC Corporation at a purchase price of $13.41 per share; and
(iii) an agreement, dated 10 October 1997, by and between NRG Energy, Inc.
and PacifiCorp Group Holdings Company, pursuant to which PacifiCorp Group
Holdings Company sold its independent power subsidiary, Pacific
Generation Company, to NRG Energy, Inc. for cash consideration of
approximately $133 million.
(b) The following contracts, not being contracts entered into in the ordinary
course of business, have been entered into by The Energy Group or its
subsidiaries since 26 January 1996 (being two years prior to the
commencement of the Offer period) and are or may be material:
(i) an agreement dated 27 January 1997 between (1) Hanson and (2) The
Energy Group (the "Demerger Agreement") pursuant to which the parties
agreed the terms on which The Energy Group would be demerged from Hanson.
The Demerger Agreement provided for the repayment of certain
inter-company debt prior to the Demerger and contains certain provisions
under which each of the parties agreed after the Demerger to transfer or
assign its interest (if any) in any assets belonging to the other party
for no consideration. Each of Hanson and The Energy Group also agreed
that it would use all reasonable endeavours after the Demerger to obtain
a full and effective release of each member of the other's group from any
guarantees, indemnities, counter-indemnities and letters of comfort (if
any) which the other's group may have given in respect of its group.
Hanson and The Energy Group have also agreed under the terms of the
Demerger Agreement to enter into various ancillary arrangements including
arrangements relating to indemnification against certain tax liabilities;
(ii) an indemnification agreement under the terms of which the TEG Group
agreed to indemnify Hanson against all "TEG Liabilities" as therein
defined, being, broadly, all liabilities (other than tax, which was dealt
with in other documents and liabilities arising from transactions in the
ordinary course of business) past, present or future of any of the
businesses or assets acquired by the TEG Group pursuant to the Demerger
including (except as expressly otherwise provided) any former businesses
or assets of any companies within the TEG Group. Hanson likewise agrees
to indemnify the TEG Group against all "Hanson Liabilities" as therein
defined being, broadly, all liabilities (other than tax, which was dealt
with in other documents and liabilities arising from transaction in the
ordinary course of business) past, present or future of
V-12
<PAGE>
Hanson and any subsidiary past, present or future of Hanson other than
the "TEG Parties" (as therein defined);
(iii) a stock purchase agreement dated as of 24 February 1997 between (1)
Peabody US Holdings Inc. ("PUSH"), (2) GFAC International Holdings Inc.
("GFAC"), (3) Hanson and (4) The Energy Group pursuant to which PUSH sold
and GFAC purchased the entire issued share capital of Peabody Holding for
a cash consideration of $1,637.5 million;
(iv) an agreement dated 5 August 1996 between (1) The Energy Group, (2)
Citibank International plc (as Agent), (3) Barclays Bank PLC and Midland
Bank plc (as Arrangers) and (4) the Banks named therein relating to
L1,000 million revolving credit facilities for the purposes of repaying
certain outstanding indebtedness to Hanson and certain of its
subsidiaries and for the general corporate purposes of The Energy Group
and its subsidiaries;
(v) (a) a deed of assignment of rents dated 28 October 1996 between Eastern
Merchant Properties Limited ("EMPL"), Eastern Group Finance Limited and
Barclays Bank PLC for itself and as agent for others by which for a
period of five years the rights of EMPL to receive the rental income for
those years in relation to the leased power station facilities at
Drakelow C, High Marnham, Ironbridge, Rugeley B and West Burton were
assigned for a capital payment equal to the discounted aggregate value of
the rental stream (approximately L1,097 million) and, in certain
tax-related or default-related events, assignee banks have the right to
sell (and at any time EMPL has the right to require the banks to sell)
their participations in the rental receivables then outstanding to a
buyer recommended by the Guarantors (as defined therein); and (b) a deed
of guarantee and indemnity dated 28 October 1996 by which Eastern Group
plc and Eastern Generation Limited provided a guarantee and indemnities
and certain undertakings and other provisions containing protections in
favour of the assignee banks and their sub-participants in respect of
certain claims, liabilities and losses;
(vi) a standby facility agreement dated 28 October 1996 between Eastern
Group plc and Eastern Generation Limited as guarantors, EMPL and Eastern
Merchant Generation Limited ("EMGL") as obligors, The Industrial Bank of
Japan, Limited ("IBJ") as arranger and as agent for the financial
institutions listed therein as lenders, and such lenders, whereby the
lenders have agreed to make available committed funds for general
corporate purposes subject to a maximum availability of L1,050 million,
less amounts advanced by the lenders under certain participation
agreements in respect of the participation by the lenders in the rights
and obligations of the assigned banks under the documentation described
in (v) above; and
(vii) agreements relating to the securing of EMPL's obligations for the
payment by it under an irrevocable payment direction deed of part of
certain deferred lease premiums payable under EMPL's lease of three of
the properties referred to in (v) above and the variation of the terms of
a facility agreement dated 1 July 1996, as amended and restated on 8
August 1996, between EMGL, EMPL, Eastern Electricity plc, IBJ (as
arranger and as agent for the banks and participants listed therein), and
such banks and participants, by the cash-collateralisation of such
deferred lease premiums and accrued interest, in the aggregate amount of
L408 million, and the variation of the guarantee thereof, such agreements
comprising: (i) three charges on cash dated 28 October 1996 from EMPL in
favour of IBJ, The Bank of Nova Scotia and Societe Generale; and (ii) a
deferred premium settlement deed dated 28 October 1996 between EMPL,
EMGL, Eastern Electricity plc, IBJ for itself and as agent and arranger,
and the banks and the participants named therein, containing the terms on
which the irrevocable payment direction deed and the facility agreement
referred to above were agreed to be varied.
V-13
<PAGE>
9 BACKGROUND TO THE OFFER
In January 1996, Hanson announced its intention to demerge its respective
chemical, tobacco and energy interests. Beginning in the last quarter of 1996,
as part of its ongoing strategic review, PGHC began to focus increasingly on the
possibility of a combination with or acquisition of the energy businesses of
Hanson as one of the more promising of the various possible transactions it was
considering. In January 1997, the PacifiCorp Group engaged Goldman, Sachs & Co.
as its financial adviser with respect to evaluating any potential transaction
involving the energy businesses of Hanson. Shortly thereafter, PGHC, together
with the legal and financial advisers and consultants to the PacifiCorp Group
began its due diligence review of publicly available information with respect to
The Energy Group, including a review of the Energy Group Listing Particulars.
Previously, at a meeting in December 1996 between Frederick W. Buckman,
President and Chief Executive Officer of PacifiCorp, and Irl F. Engelhardt,
Chief Executive Officer of Peabody, who have known each other and have met from
time to time since 1994, Mr Buckman expressed a general desire to pursue
opportunities with Hanson. Mr Engelhardt informed Mr Buckman that Hanson was
committed to the proposed demerger of The Energy Group and had no intention of
entering into discussions with any party in relation to the possible disposal of
the energy businesses of Hanson.
On 24 February 1997, Hanson demerged The Energy Group, a newly-formed public
limited company incorporated under the laws of England and Wales to hold the
international energy businesses of Hanson.
On 3 April 1997, Mr Buckman contacted Derek Bonham, Chairman of The Energy
Group, suggesting that they meet to discuss items of mutual interest to their
respective companies, and they agreed to meet in New York on 17 April 1997. On 9
April 1997, while touring the United States in order to introduce John F.
Devaney, Chief Executive of Eastern, to a number of utility chief executive
officers, Mr Devaney and Mr Engelhardt met with Mr Buckman and other senior
executives of PacifiCorp, but did not have any substantive discussions relating
to any proposed transaction, although the scheduled meeting with Mr Bonham was
noted.
On 17 April 1997, a meeting was held, attended by Mr Buckman and Richard T.
O'Brien, Senior Vice President and Chief Financial Officer of PacifiCorp, and Mr
Bonham and Eric E. Anstee, Finance Director of The Energy Group. Mr Buckman
proposed that the companies examine ways that they might combine, including a
merger or an acquisition of one party by the other, and the parties agreed to
speak further at a later date.
On 29 April 1997, Mr Buckman and Mr Bonham met again and discussed the
possibility of a recommended offer by PGHC for The Energy Group, but failed to
agree on valuation.
On 8 and 9 May 1997, senior executives of PGHC, together with
representatives of the PacifiCorp Group's financial adviser, Goldman, Sachs &
Co., and The Energy Group, together with representatives of Morgan Stanley, met
to discuss a possible offer for The Energy Group, again failing to reach an
agreement, but narrowing the difference on price between them. The parties
concluded that further discussions would be worthwhile, and PacifiCorp and The
Energy Group executed a confidentiality and mutual standstill agreement on 9 May
1997. That agreement provided that PacifiCorp and The Energy Group would deal
with each other exclusively for a period of 28 days, subject to the fiduciary
duties of each company's directors.
V-14
<PAGE>
Over the course of the subsequent weeks, PGHC proceeded to complete its due
diligence review and to resolve with The Energy Group substantially all the
outstanding issues in relation to a possible offer, other than price.
On 6 June 1997, Mr Buckman proposed a price per share of 690 pence (without
provision for a dividend). Mr Bonham agreed to put the matter to his board. On 9
June 1997, the board of directors of The Energy Group met to consider the
discussions that had taken place with PacifiCorp.
On 10 June 1997, the boards of directors of PacifiCorp and PGHC met to
consider making an offer for all the outstanding Energy Group Securities upon
terms presented to the boards of directors by senior executives of PGHC and its
legal and financial advisers. Senior executives of PGHC reviewed the terms of
the proposed offer with the respective boards of directors and reported on the
due diligence examination of the TEG Group conducted by the counsel, consultants
and advisers of PGHC. Subject to agreement as to price and the finalisation of
banking facilities, the board of directors of PacifiCorp approved a resolution
supporting the making of the Previous Offer and the board of directors of PGHC
approved the making of the Previous Offer.
On 10 June 1997, following discussion with the Panel, The Energy Group
issued a press release announcing that it was in talks with PacifiCorp which
might lead to a recommended cash offer for The Energy Group and that, if such an
offer were to be made, it would be expected to be at a premium of about 20 per
cent. to that day's Closing Price of 580 pence per Energy Group Share.
On 11 June 1997, subject to agreement as to the offer price and the
finalisation of banking facilities, the board of directors of PacifiCorp
Acquisitions approved the Previous Offer.
On the same day, Mr O'Brien sent a letter to The Energy Group containing an
offer at a price of 690 pence per Energy Group Share, plus a dividend of 5.5
pence (net) per Energy Group Share, subject to (i) the board of directors of The
Energy Group unanimously recommending such offer, (ii) PacifiCorp Acquisitions
finalising its banking facilities and (iii) those directors of The Energy Group
who had personal holdings of Energy Group Securities irrevocably undertaking to
accept such offer. Later that day, PGHC was informed that the board of directors
of The Energy Group, having been so advised by Lazard and Morgan Stanley, its
financial advisers, had unanimously concluded that the terms of the Previous
Offer were fair and reasonable and had decided to recommend that all holders of
Energy Group Shares and Energy Group ADSs accept the Previous Offer. In
providing advice to the board of The Energy Group, Lazard and Morgan Stanley
took account of the board's commercial assessment of the Previous Offer. In
addition, those directors of The Energy Group who had personal holdings of
Energy Group Securities agreed to enter into irrevocable undertakings to accept
the Previous Offer in respect of those holdings of 116,385 Energy Group Shares
and 1,550 Energy Group ADSs.
Following finalisation of the financing arrangements and execution of the
irrevocable undertakings referred to above, the parties issued a press release
publicly announcing the Previous Offer on 13 June 1997.
Following the June announcement of the Previous Offer and up to the
announcement of the Offer, the respective executives and legal and financial
advisers of The Energy Group and PacifiCorp worked together in connection with
the preparation of the offer documentation and the making of the requisite
regulatory submissions and applications, including submissions and applications
to the DGES, the Office of Fair Trading, FERC, the Foreign Investment Review
Board of Australia, the United States Federal Trade Commission and the United
States Department of Justice. In addition, the respective executives and legal
and financial advisers of The Energy Group and PacifiCorp worked jointly to
respond to the inquiries of the regulators reviewing the proposed offer,
including OFFER, the Office of Fair Trading and the United States Federal Trade
Commission. In addition, the executive and legal advisers of The Energy Group
provided responses to additional due diligence requests of PacifiCorp and its
lenders submitted in connection with the arrangement of the financing described
in paragraph 10 below.
V-15
<PAGE>
On 1 August 1997, the Previous Offer lapsed, in accordance with its terms,
when it was referred to the Monopolies and Mergers Commission by the President
of the Board of Trade in the United Kingdom.
On 19 December 1997, the President of the Board of Trade granted
unconditional approval allowing PacifiCorp to make a new bid for The Energy
Group.
On 13 and 14 January 1998, the senior executives of PacifiCorp and The
Energy Group met in London to discuss the possibility of PacifiCorp making a new
bid for The Energy Group. In that context, the corporate strategy of the
Enlarged Group and the roles and duties of the respective senior executives in
the management of the Enlarged Group were also discussed.
On 28 January 1998, Mr. Buckman and Mr. Bonham, initially meeting alone, and
then later joined by Mr. O'Brien and Mr. Anstee, met in New York City to discuss
valuation of the Offer. Proposed valuations of the Offer discussed at the
meeting ranged from a price of 740 pence to 775 pence per Energy Group Share,
but no agreement on valuation was reached. On 29 January 1998, Mr. Buckman and
Mr. Bonham met again to discuss valuation and Mr. Buckman proposed a price of
765 pence per Energy Group Share, subject to (i) the board of directors of
PacifiCorp approving the proposed terms of the Offer, (ii) the board of
directors of The Energy Group unanimously recommending the Offer, (iii)
finalisation of the financing arrangements described in paragraph 10 below and
(iv) those directors of The Energy Group who had personal holdings of Energy
Group Securities irrevocably undertaking to accept the Offer. Mr Bonham agreed
to put the matter to the board of directors of The Energy Group.
On 29 January 1998, the board of directors of PacifiCorp Acquisitions
approved the Offer subject to agreement as to the offer price, approval by the
board of PGHC of the making of the Offer and the finalisation of banking
facilities.
On 30 January 1998, the boards of directors of PacifiCorp and PGHC met to
consider making an offer for all the outstanding Energy Group Securities upon
terms presented to the boards of directors by senior executives of PGHC and its
legal and financial advisers. Senior executives of PGHC reviewed the terms of
the proposed offer with the respective boards of directors and reported on the
due diligence examination of the TEG Group conducted by the counsel, consultants
and advisers of PGHC. Subject to agreement as to price and the finalisation of
banking facilities, the board of directors of PacifiCorp approved a resolution
supporting the making of the Offer and the board of directors of PGHC approved
the making of the Offer.
Late on 2 February 1998, PGHC was informed that the board of directors of
The Energy Group, having been so advised by Lazard and Morgan Stanley, its
financial advisers, considered the terms of the Offer to be fair and reasonable
and had decided to recommend that all holders of Energy Group Shares and Energy
Group ADSs accept the Offer. In providing advice to the board of The Energy
Group, Lazard and Morgan Stanley took account of the board's commercial
assessment. In addition, those directors of The Energy Group who had personal
holdings of Energy Group Securities agreed to enter into irrevocable
undertakings to accept the Offer in respect of their personal holdings totalling
96,000 Energy Group Shares and 1,550 Energy Group ADSs.
Following finalisation of the financing arrangements and execution of the
irrevocable undertakings referred to above, the parties issued a press release
publicly announcing the Offer on 3 February 1998.
10 FINANCING ARRANGEMENTS
(A) GENERAL
PacifiCorp Acquisitions estimates that the total amount of funds necessary
to purchase pursuant to the Offer all Energy Group Securities that are
outstanding, and to pay estimated fees and expenses of the Offer including the
costs of any proposals made to participants in the Energy Group Share Schemes,
will be approximately L4,142 million. The funds needed for these purposes will
principally come from existing cash balances of PGHC and from the proceeds of
borrowings under three bank credit facilities described below, namely, the
PacifiCorp Acquisitions Facility, the Powercoal Facility and the EnergyCo
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Facility (collectively, the "Facilities"). Payments of interest and principal on
the Facilities will be funded partly out of income received by the PacifiCorp
Group from its investment in the TEG Group and partly from sources within the
PacifiCorp Group. To the extent that the loans under the Facilities are made to
PacifiCorp EnergyCo ("EnergyCo") and/or to PacifiCorp Powercoal LLC
("Powercoal"), those companies will assist PacifiCorp Acquisitions in funding
the Offer by making available to PacifiCorp Acquisitions, directly or
indirectly, the requisite part of such proceeds, net of expenses. This will be
done by a combination of capital contributions to PacifiCorp Acquisitions and
its intermediate holding companies, and inter-company loans directly or
indirectly to PacifiCorp Acquisitions from its direct and indirect holding
companies, and from Powercoal.
Each of the Facilities contains conditions, representations and warranties,
undertakings and financial covenants and events of default and other provisions
customarily required for similar financings. Such covenants include, among other
things, (i) agreements not to alter certain terms of the Offer including,
without limitation, agreement not to reduce the Acceptance Condition without
lender consent, (ii) agreements to cause the entities (other than Lee Ranch Coal
Company) holding Peabody's US coal operations (the "Peabody Subsidiaries"), as
well as PacifiCorp Power Marketing, Inc. ("PPM") and Citizens Power LLC, to be
transferred to Powercoal within 270 days of the initial borrowing under the
Facilities, (iii) agreements to repay certain indebtedness of certain members of
the PacifiCorp Group and the TEG Group within specified time periods, (iv)
negative pledges, (v) restrictions on sales of assets and incurrence of debt,
(vi) restrictions on payments of dividends and intercompany and subordinated
debt and (vii) restrictions on mergers. Such events of default include, among
other things, (a) failure to make payments under other indebtedness, (b)
defaults under other material indebtedness which permit acceleration of such
other material indebtedness and (c) changes of control of certain members of the
PacifiCorp Group. A breach of any such condition, representation, warranty,
undertaking or covenant or the occurrence of an event of default may, amongst
other things, result in the commitments under the relevant Facilities being
terminated and/or the amounts then outstanding under the relevant Facility
becoming or being declared immediately due and payable in whole or in part
(except, generally, during an initial period when only the breach of limited
conditions and representations or the occurrence of certain insolvency related
events of default will result in such commitments being terminated or not
funded).
The Powercoal Facility and the EnergyCo Facility provide for a commitment
denominated in US dollars. To ensure that PacifiCorp Acquisitions will have
sufficient pounds sterling available to purchase all outstanding Energy Group
Securities and to satisfy other obligations denominated in pounds sterling in
case of a change in the dollar/pound exchange rate, the PacifiCorp Group has
entered, and will enter, into option contracts which give the PacifiCorp Group
the right to purchase pounds sterling at fixed prices.
(B) PACIFICORP ACQUISITIONS FACILITY
A facility agreement dated 3 February 1998 (the "PacifiCorp Acquisitions
Facility Agreement") has been entered into by (i) PacifiCorp Services Limited,
PacifiCorp Finance (UK) Limited and PacifiCorp Acquisitions as guarantors, (ii)
PacifiCorp Acquisitions as borrower, (iii) Citibank, N.A., Goldman Sachs
International and J.P. Morgan Securities Ltd. as arrangers, (iv) Citibank, N.A.,
Goldman Sachs Credit Partners L.P. and Morgan Guaranty Trust Company of New York
as original lenders, (v) Citibank International plc as facility agent and (vi)
Citibank, N.A., as security agent and LC Bank, relating to a L2,275 million term
loan facility (the "PacifiCorp Acquisitions Term Loan Facility") and a L450
million revolving credit facility (the "PacifiCorp Acquisitions Revolving Loan
Facility") (together, the "PacifiCorp Acquisitions Facility"). The PacifiCorp
Acquisitions Term Loan Facility is available for, INTER ALIA, (a) acquiring
Energy Group Securities, (b) refinancing certain outstanding indebtedness of the
TEG Group and (c) payment of costs incurred in connection with the Offer,
provided that the maximum amount of such facility that may be used to acquire
Energy Group Securities is L1,820 million. The PacifiCorp Acquisitions Revolving
Loan Facility is available for, INTER ALIA, (a) refinancing certain outstanding
indebtedness of the TEG Group and (b) the general corporate purposes of
PacifiCorp Acquisitions and its subsidiaries.
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The PacifiCorp Acquisitions Term Loan Facility consists of a two tranche
sterling term loan facility. The PacifiCorp Acquisitions Revolving Loan Facility
consists of a multicurrency advance and letter of credit facility. The final
maturity date of the PacifiCorp Acquisitions Facility is 3 February 2003.
Interest is calculated by reference to the London Inter-Bank offered rate
("LIBOR"), plus an applicable margin ranging from 0.50 per cent. to 1.30 per
cent. (depending on the level of gearing), and certain mandatory liquid asset
costs.
A debenture (the "Debenture") dated 3 February 1998 between PacifiCorp
Services Limited, PacifiCorp Finance (UK) Limited, PacifiCorp Acquisitions (the
"Chargors") and Citibank, N.A. as security agent provides that borrowings under
the PacifiCorp Acquisitions Facility Agreement (i) are secured by way of a
charge on the shares of PacifiCorp Finance (UK) Limited and PacifiCorp
Acquisitions and (ii) once members of the TEG Group are able to provide
financial assistance (as discussed in paragraph 10(e) below under "Proposed
reorganisation of coal operations"), will be guaranteed by The Energy Group,
Rollalong Limited, Rollalong Hire Limited, Eastern Group PLC and Peabody
Investments Inc. (the "Additional Chargors") and secured by way of a charge on
the shares of their directly-held subsidiaries. The Debenture also creates a
first floating charge on all the undertakings and assets of the Chargors and
Additional Chargors, with certain initial exceptions. The PacifiCorp
Acquisitions Facility Agreement also provides that, under certain circumstances,
The Energy Group and its subsidiaries may become direct borrowers thereunder.
(C) POWERCOAL FACILITY
A credit agreement dated as of 3 February 1998 (the "Powercoal Agreement")
has been entered into by (i) Powercoal as borrower, (ii) Citibank, N.A., Goldman
Sachs Credit Partners, L.P. and Morgan Guaranty Trust Company of New York, as
initial lenders, (iii) Citibank, N.A., as paying agent, swingline lender and
issuing bank, and (iv) Citicorp USA, Inc., as collateral agent, relating to a
$1,286 million two-tranche term loan facility (the "Powercoal Term Loan
Facility") and a $800 million revolving credit facility (the "Powercoal
Revolving Credit Facility") (together, the "Powercoal Facility") with a
sub-limit of $300 million for loans outstanding thereunder and a sub-limit of
$650 million for letters of credit issued thereunder . The Powercoal Term Loan
Facility, together with the proceeds of an equity contribution received by
Powercoal from PGHC, is available to fund loans (the "Powercoal/PA Loans") by
Powercoal to PacifiCorp Acquisitions and to pay fees and expenses related to the
Offer. The Powercoal/PA Loans will be evidenced by a loan note issued by
PacifiCorp Acquisitions in favour of Powercoal. The proceeds of the Powercoal/PA
Loans will be used by PacifiCorp Acquisitions to finance the Offer and to
refinance certain indebtedness of TEG and its subsidiaries. The Powercoal
Revolving Credit Facility is available to (i) refinance certain existing
indebtedness of the TEG Group and (ii) fund the general corporate purposes of
Powercoal and its subsidiaries.
Loans incurred under the Powercoal Term Loan Facility are to be repaid in
quarterly instalments over approximately six years in the case of borrowings
under one tranche of the Powercoal Term Loan Facility ("Tranche A Loans") and
seven years and six months, in the case of borrowings under the second tranche
("Tranche B Loans"). The final maturity date of the revolving credit facility is
3 February 2004. Interest on Tranche A Loans and loans under the Powercoal
Revolving Credit Facility is calculated, at the option of Powercoal, by
reference to (i) LIBOR plus an applicable margin ranging from 0.75 per cent. to
2.75 per cent., depending on the leverage ratio of Powercoal and its
consolidated subsidiaries as at the end of its most recent fiscal quarter (the
"Applicable Leverage Ratio") or (ii) a Base Rate (which is the greatest of an
announced Prime Rate and certain customary market rates) plus an applicable
margin ranging from zero to 1.75 per cent., depending on the Applicable Leverage
Ratio. Interest on Tranche B Loans is calculated by reference to (i) LIBOR plus
an applicable margin ranging from 2.00 per cent. to 3.25 per cent., depending on
the Applicable Leverage Ratio or (ii) the Base Rate plus an applicable margin
ranging from 1.00 per cent. to 2.25 per cent., depending on the Applicable
Leverage Ratio.
As a condition to the funding of the Powercoal Facility, PGHC will cause to
be transferred to Powercoal all of the stock of TPC Corporation ("TPC"), PGHC's
natural gas marketing subsidiary, and
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will make a cash equity contribution to Powercoal of not less than $373 million.
The Powercoal Facility initially will be guaranteed by TPC, and secured by (i)
all of the outstanding stock of each direct and indirect subsidiary of
Powercoal, including TPC, and certain of their subsidiaries, if any, and (ii)
the note evidencing the Powercoal/PA Loan. Additionally, following the transfer
of the Peabody Subsidiaries to Powercoal as described in paragraph 10(e) below
under "Proposed reorganisation of coal operations", the Powercoal Facility will
be secured by the stock of Peabody Holding and certain of its subsidiaries and
Peabody Holding and certain of its subsidiaries will guarantee Powercoal's
obligations under the Powercoal Facility.
(D) ENERGYCO FACILITY
A credit agreement dated as of 3 February 1998 (the "EnergyCo Agreement")
has been entered into by (i) PGHC as guarantor, (ii) PacifiCorp EnergyCo
("EnergyCo") as borrower, (iii) Citibank, N.A., Goldman Sachs Credit Partners,
L.P. and Morgan Guaranty Trust Company of New York, as initial lenders, (iv)
Citibank, N.A., as paying agent and as issuing bank, and (v) Citicorp USA, Inc.,
as collateral agent, relating to a $1,500 million (or the sterling equivalent)
term loan facility (the "EnergyCo Term Loan Facility") and a $400 million (or
the sterling equivalent) revolving credit facility (the "EnergyCo Revolving
Credit Facility") (together, the "EnergyCo Facility"). The proceeds of the
EnergyCo Term Loan Facility is available to provide PacifiCorp Acquisitions,
through certain of EnergyCo's subsidiaries, with funds to finance, in part, the
Offer and to pay fees and expenses related to the Offer. The EnergyCo Revolving
Credit Facility also is available for the ordinary working capital needs of
EnergyCo, PGHC and their respective subsidiaries.
The final maturity date of the EnergyCo Facility is 18 months after the date
of the initial borrowing under the facility. Interest on loans under the
EnergyCo Facility is calculated, at the option of EnergyCo, by reference to (i)
LIBOR plus an applicable margin of either 2.25 per cent. or 2.75 per cent.,
depending on the credit ratings of the EnergyCo Facility on the date of the
initial borrowing under the facility (the "Applicable Rating") or (ii) a Base
Rate (which is the greatest of an announced Prime Rate and certain customary
market rates) plus an applicable margin of either 1.25 per cent. or 1.75 per
cent., depending on the Applicable Rating.
As a condition to the funding of the EnergyCo Facility, PGHC will make a
cash equity contribution to EnergyCo of approximately $606 million. EnergyCo's
obligations under the EnergyCo Facility will be guaranteed by PGHC. If PGHC
transfers the capital stock of EnergyCo to a newly formed subsidiary, such
subsidiary will also guarantee EnergyCo's obligations under the EnergyCo
Facility. The EnergyCo Facility will be secured by (i) the pledge of (a) all of
the outstanding stock of EnergyCo and any other subsidiary of PGHC that may in
the future own capital stock of EnergyCo, (b) all of PGHC's member interests in
Powercoal, (c) PGHC's participation interest in a certain note (the "Spring
Creek Note") in the principal amount of $225 million from Spring Creek Coal
Company, and (d) certain other assets, and (ii) the pledge by two subsidiaries
of PGHC of all of the membership interests in the subsidiary that holds PGHC's
Australian operations.
(E) PROPOSED REORGANISATION OF COAL OPERATIONS
Following the purchase of Energy Group Securities in the Offer, PacifiCorp
Acquisitions has agreed to procure the transfer of the Peabody Subsidiaries to
Powercoal. The transfer of the Peabody Subsidiaries is intended primarily to
segregate the Enlarged Group's coal interests from its interests in electricity
generation and distribution, and, in so doing, achieve a more efficient
financing and operating structure. Such transfer is required by the terms of the
PacifiCorp Acquisitions Facility, the EnergyCo Facility and the Powercoal
Facility to take place within 270 days of the initial borrowing under either of
those facilities. To effect the transfer, PacifiCorp Acquisitions will first
acquire the Peabody Subsidiaries from another TEG Group subsidiary in exchange
for an unsecured subordinated interest bearing five-year note containing
commercially reasonable terms and valued at an amount not materially less than
the then fair market value of the Peabody Subsidiaries. PacifiCorp Acquisitions
will then transfer the Peabody Subsidiaries to Powercoal in exchange for the
cancellation of the Powercoal/PA Loan.
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Following the purchase of Energy Group Securities in the Offer, Peabody
Investments, Inc. may sell or transfer Citizens Power to PGHC or a subsidiary
thereof. It will also form a new US subsidiary, to which it will contribute Gold
Fields Mining Company (which owns Lee Ranch Coal Company) in return for equity.
Each of the PacifiCorp Acquisitions Facility, the EnergyCo Facility and the
Powercoal Facility includes a condition that PacifiCorp Acquisitions may not
reduce the percentage of Energy Group Securities required to satisfy the
Acceptance Condition without the consent of a majority of the lending banks in
each such Facility (including the 3 original lenders), which consent may not be
unreasonably withheld or delayed if it is shown to the reasonable satisfaction
of such lenders that PacifiCorp Acquisitions will achieve acceptances sufficient
to enable it to give notice under section 429 of the Companies Act (the
"Compulsory Acquisition Procedure") in relation to the Energy Group Securities
to which the Offer relates. See paragraph 11 of this Appendix V ("Compulsory
acquisition") below.
If all Conditions are satisfied, fulfilled or, where permitted, waived and
PacifiCorp Acquisitions effects the Compulsory Acquisition Procedure in respect
of all outstanding Energy Group Securities in accordance with the relevant
procedures and time limits described in sections 428 to 430F of the Companies
Act (thereby causing The Energy Group to become a wholly-owned subsidiary of
PacifiCorp Acquisitions), PacifiCorp Acquisitions will be required to procure
the transfer of the Peabody Subsidiaries to Powercoal, on the basis indicated
above, and to procure that certain other steps are taken which may involve the
provision of financial assistance by members of the TEG Group to members of the
PacifiCorp Group (subject to compliance, where necessary, with the procedures
set out in sections 155 to 158 of the Companies Act (the so-called "whitewash"
procedures, which are referred to in more detail below)).
If all Conditions are satisfied, fulfilled or, where permitted, waived and
PacifiCorp Acquisitions acquires or contracts to acquire, pursuant to the Offer
or otherwise, Energy Group Securities giving it more than 75 per cent. of voting
rights at general meetings of The Energy Group, but PacifiCorp Acquisitions is
not in a position to effect the Compulsory Acquisition Procedure in respect of
all outstanding Energy Group Securities in accordance with the relevant
procedures and time limits of the Companies Act referred to above, PacifiCorp
Acquisitions intends to seek to procure the making of an application by The
Energy Group to the London Stock Exchange for the Energy Group Shares to be
delisted and the making of an application by The Energy Group to the New York
Stock Exchange for Energy Group ADSs to be delisted. PacifiCorp Acquisitions
further intends that, subject to the London Stock Exchange delisting taking
place, it will procure the transfer of the Peabody Subsidiaries to Powercoal and
the provision of financial assistance by members of the TEG Group, as described
in the previous paragraph, subject to compliance, where necessary, with the
whitewash procedures.
In order to operate the whitewash procedures, it would be necessary to
procure the passing of special resolutions of The Energy Group and, depending on
the circumstances, of appropriate subsidiaries, and to satisfy certain other
requirements set out in the Companies Act. Such requirements are designed to
protect creditors and shareholders of the TEG Group. If PacifiCorp Acquisitions
acquires Energy Group Securities giving it 75 per cent. or more of the voting
rights at general meetings of The Energy Group, it will have sufficient votes to
approve such special resolutions. PacifiCorp Acquisitions also expects to be
able to satisfy the other statutory requirements. The Companies Act gives
dissenting shareholders (constituting specified minimum numbers or proportions
of shareholders) the right to apply to court for cancellation of the special
resolution required by the whitewash procedures.
11 COMPULSORY ACQUISITION
If, within four months after the date of this document, as a result of the
Offer or otherwise, PacifiCorp Acquisitions acquires or contracts to acquire
Energy Group Shares representing at least 90 per cent. in value of Energy Group
Shares to which the Offer relates, then (a) PacifiCorp Acquisitions will be
entitled and intends to effect the compulsory acquisition procedures provided
for in sections 428 to 430F of the Companies Act to compel the purchase of any
outstanding Energy Group Shares on the same terms as provided in the Offer in
accordance with the relevant procedures and time limits described in such Act,
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and (b) a holder of Energy Group Shares may require PacifiCorp Acquisitions to
purchase his Energy Group Shares on the same terms as provided in the Offer in
accordance with the relevant procedures and time limits described in section
430A of the Companies Act.
If for any reason the above-mentioned compulsory acquisition procedures are
not invoked, PacifiCorp Acquisitions will evaluate other alternatives to obtain
the remaining Energy Group Shares not purchased pursuant to the Offer or
otherwise. Such alternatives could include acquiring additional Energy Group
Securities in the open market, in privately negotiated transactions, through
another offer to purchase, by means of a scheme of arrangement under the
Companies Act or otherwise. Any such additional acquisitions could be for a
consideration greater or less than, or equal to, the consideration for Energy
Group Securities under the Offer. However, under the City Code, except with the
consent of the Panel, PacifiCorp Acquisitions may not acquire any Energy Group
Securities on better terms than those of the Offer within six months of the
termination of the Offer if PacifiCorp Acquisitions, together with any persons
acting in concert with it (as defined by the City Code), holds shares carrying
more than 50 per cent. of the voting rights normally exercisable at general
meetings of The Energy Group.
Holders of Energy Group Securities do not have appraisal rights as a result
of the Offer. However, in the event that the compulsory acquisition procedures
referred to above are available to PacifiCorp Acquisitions, holders of Energy
Group Securities whose Energy Group Securities have not been purchased pursuant
to the Offer will have certain rights to object under section 430C of the
Companies Act.
12 CERTAIN CONSEQUENCES OF THE OFFER
(A) MARKET EFFECT
The purchase of Energy Group Securities pursuant to the Offer will reduce
the number of holders of Energy Group Securities and the number of the Energy
Group Securities that might otherwise trade publicly and, depending upon the
number of Energy Group Securities so purchased, could adversely affect the
liquidity and market value of the remaining Energy Group Securities held by the
public. In addition, Energy Group Shares will cease to be listed on the London
Stock Exchange and Energy Group ADSs will cease to be listed on the New York
Stock Exchange if PacifiCorp Acquisitions completes the compulsory acquisition
procedures referred to in paragraph 11 above. Moreover, in the circumstances
referred to in paragraph 10(e) ("Proposed reorganisation of coal operations")
above, PacifiCorp Acquisitions intends to seek the delisting of the Energy Group
Shares from the London Stock Exchange and intends to seek the delisting of the
Energy Group ADSs from the New York Stock Exchange. If PacifiCorp Acquisitions
does not seek such delistings in those circumstances, the Energy Group
Securities may nevertheless no longer be eligible for continued listing on such
exchanges.
(B) PUBLIC AVAILABILITY OF INFORMATION
In the event that Energy Group Shares continue to be listed on the London
Stock Exchange following the purchase of Energy Group Securities pursuant to the
Offer, holders of Energy Group Shares who have not tendered their Energy Group
Shares pursuant to the Offer will continue to receive the same financial and
other information from The Energy Group that The Energy Group presently is
required by the rules of the London Stock Exchange to send to such holders. If
Energy Group Shares are no longer listed on the London Stock Exchange following
the Offer, The Energy Group would no longer be required by those rules to make
publicly available such financial and other information.
Energy Group ADSs currently are registered under the Exchange Act.
Registration of such Energy Group ADSs may be terminated upon application of The
Energy Group to the SEC if Energy Group ADSs are neither listed on a national
securities exchange nor held by 300 or more beneficial owners in the US.
Termination of registration of Energy Group ADSs under the Exchange Act would
substantially reduce the information required to be furnished by The Energy
Group to holders of Energy Group ADSs and to the SEC and would make certain
provisions of the Exchange Act, such as the requirements of Rule 13e-3
thereunder with respect to "going private" transactions, no longer applicable to
The Energy Group. Furthermore, "affiliates" of The Energy Group and persons
holding "restricted securities" of The Energy
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Group may be deprived of the ability to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act. If, as a result of the purchase
of Energy Group ADSs pursuant to the Offer and prior to completing the
compulsory acquisition procedures referred to in paragraph 9 above, The Energy
Group is not required to maintain registration of Energy Group ADSs under the
Exchange Act, PacifiCorp Acquisitions intends to cause The Energy Group to apply
for termination of such registration. If registration of Energy Group ADSs is
not terminated prior to completion of the aforementioned compulsory acquisition
procedures, then Energy Group ADSs will cease trading on the New York Stock
Exchange and the registration of Energy Group ADSs under the Exchange Act would
be terminated following completion of the aforementioned compulsory acquisition
procedures.
(C) MARGIN SECURITIES
Energy Group ADSs currently are "margin securities" under the regulations of
the Board of Governors of the US Federal Reserve System, which status has the
effect, among other things, of allowing US brokers to extend credit on the
collateral of Energy Group ADSs for purposes of buying, carrying and trading in
securities ("Purpose Loans"). Depending on factors such as the number of holders
of record of Energy Group ADSs and the number and market value of publicly held
Energy Group ADSs following the purchase of Energy Group Securities pursuant to
the Offer, it is possible that Energy Group ADSs would no longer be eligible for
listing on the New York Stock Exchange. As a result, Energy Group ADSs might no
longer constitute margin securities and, therefore, could no longer be used as
collateral for Purpose Loans made by US brokers.
13 LEGAL AND REGULATORY MATTERS
(A) GENERAL
Except as set out herein and other than the requirement to comply with the
Panel's requirements in relation to the City Code and with US securities laws,
PacifiCorp Acquisitions is not aware of (i) any licence or regulatory permit
that appears to be material to the business of the TEG Group taken as a whole,
which might be adversely affected by PacifiCorp Acquisitions' acquisition of
Energy Group Securities as contemplated herein, or (ii) any approval or other
action by any domestic or foreign governmental, administrative or regulatory
agency or authority that appears to be material to the TEG Group taken as a
whole, and required for the acquisition or ownership of Energy Group Securities
by PacifiCorp Acquisitions as contemplated herein. Should any such approval or
other action be required, PacifiCorp Acquisitions currently contemplates that
such approval or other action would be sought. There can be no assurance that
any such approval or other action, if needed, would be obtained without
substantial conditions being attached thereto or that failure to obtain any such
approval or other action might not result in consequences adverse to The Energy
Group's business.
(B) UK REGULATION
The Offer gives rise to a merger situation qualifying for investigation
under section 75 of the Fair Trading Act 1973. Eastern and its subsidiary
companies hold licences issued under the Electricity Act 1989 and are regulated
by OFFER. The Previous Offer made by PacifiCorp Acquisitions for The Energy
Group on 30 June 1997 was subject to an investigation by the Monopolies and
Mergers Commission. The Monopolies and Mergers Commission found that the
Previous Offer was expected not to operate against the public interest in the
light of certain assurances agreed with the DGES. The President of the Board of
Trade confirmed on 19 December 1997 that in an offer for The Energy Group, she
would expect PacifiCorp to honour the assurances it had agreed. PacifiCorp has
agreed to do so.
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(C) US ANTITRUST LAWS
The Offer is subject to the US HSR Act, which provides that certain
acquisition transactions may not be consummated until certain information has
been furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the Federal Trade Commission (the "FTC"). Pursuant to
the US HSR Act, PacifiCorp filed a Notification and Report Form relating to the
Previous Offer with the Antitrust Division and the FTC on 1 July 1997. No
additional filing is required under the US HSR Act with respect to the Offer. On
16 July 1997, the FTC requested additional information from PacifiCorp which had
the effect of extending the waiting period under the US HSR Act until ten
calendar days after the date of substantial compliance with such request.
PacifiCorp certified that it substantially complied with the request for
information on December 19, 1997. The FTC staff has advised PacifiCorp that it
does not intend to contest that certification. However, PacifiCorp has agreed
with the FTC that it will not consummate the Offer until the earlier of 20
February 1998 and acceptance by the FTC of the Consent Order described in the
following paragraph, thereby effectively extending the waiting period under the
US HSR Act. On 30 January 1998, PacifiCorp provided the FTC with the notice
required to commence this final 20-day waiting period.
The FTC and the Antitrust Division frequently scrutinise the legality under
the US antitrust laws of transactions such as the proposed acquisition of Energy
Group Securities by PacifiCorp Acquisitions. Following its review of information
submitted under the US HSR Act, the FTC requested that PacifiCorp and The Energy
Group take certain actions to comply with US antitrust laws. PacifiCorp and The
Energy Group have agreed to the issuance of a consent order (the "Consent
Order") by the FTC which will, among other things, require PacifiCorp, if it
acquires control of The Energy Group, to divest Peabody Western Coal Company, a
subsidiary of The Energy Group that owns two coal mines in Arizona, no later
than nine months after the date (the "Acquisition Date") the PacifiCorp Group
acquires more than five per cent. of the Energy Group Securities, subject to
certain extensions. The Consent Order will also preclude Peabody from sharing
any non-public information obtained in its capacity as coal supplier to four
power plants with other entities in the Enlarged Group. If the Acquisition Date
does not occur within six months of the date the Consent Order becomes final,
PacifiCorp has agreed with the FTC to divest within one year of the date the
Consent Order becomes final all Energy Group Securities the PacifiCorp Group may
own in excess of $15 million. Whether or not the Acquisition Date occurs, the
Consent Order will expire thirty days after PacifiCorp notifies the FTC of the
abandonment of the Acquisition and sells all Energy Group Securities it may own
in excess of $15 million. If the Offer lapses, is withdrawn, or terminates,
PacifiCorp has agreed with The Energy Group to take the actions necessary to
cause the expiration of the Consent Order within 90 days thereafter.
The form of the Consent Order has been agreed with the staff of the FTC and
is awaiting acceptance by the FTC. If the Consent Order is accepted by the FTC
(expected to occur by 19 February 1998), the waiting period under the US HSR Act
will immediately expire and the Consent Order will be published for public
comment. Furthermore, PacificCorp has agreed that it will not invoke either
Condition (d) or (e) even if the FTC amends the terms of the form of the Consent
Order agreed with FTC staff. Following the required 60-day comment period, the
Consent Order will be served upon the parties unless the FTC determines
otherwise. The Consent Order will become final upon service.
Notwithstanding the agreement of PacifiCorp and The Energy Group to the
Consent Order, at any time before or after the purchase of Energy Group
Securities, the FTC or the Antitrust Division could take such action under the
US antitrust laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the purchase of Energy Group Securities pursuant to
the Offer, or seeking divestiture of Energy Group Securities purchased by
PacifiCorp Acquisitions or the divestiture of substantial assets of PacifiCorp,
The Energy Group or their respective subsidiaries. Private parties may also
bring legal action under the US antitrust laws in certain circumstances. There
can be no assurance that a challenge to the Offer on US antitrust grounds will
not be made or, if such a challenge is made, of the result.
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(D) US POWER MARKETING REGULATION
Certain subsidiaries (the "Power Subsidiaries") of Citizens Power, an
indirect wholly-owned subsidiary of The Energy Group, are engaged in market-rate
based electric power marketing in the US or otherwise hold public utility assets
that are subject to the jurisdiction of the FERC. In a number of similar recent
situations, including the acquisition of Citizens Power by The Energy Group,
FERC has asserted that a transfer of control of a licensed power marketer
requires FERC approval under section 203 of the US Federal Power Act.
Accordingly, the FERC could assert that any transfer of control of the Power
Subsidiaries resulting from completion of the Offer requires FERC approval.
However, PacifiCorp and PacifiCorp Acquisitions have indicated to The Energy
Group that they do not desire to acquire control of the Power Subsidiaries. As a
result, Citizens Power has entered into a Memorandum of Understanding with
Lehman Brothers Holdings, Inc. ("Lehman") to sell the Power Subsidiaries to
Lehman, with such sale conditional only upon the completion of the Offer and
FERC approval. Application for approval of the sale of the Power Subsidiaries to
Lehman has been made to the FERC, and the Offer is conditional upon FERC
approval of such sale. In the event that all the Conditions are not satisfied,
fulfilled or, where permitted, waived, Citizens Power will retain the Power
Subsidiaries.
(E) AUSTRALIAN FOREIGN INVESTMENT REVIEW
The acquisition by PacifiCorp Acquisitions pursuant to the Offer of indirect
ownership of Peabody Australia's coal operations is subject to the Foreign
Acquisitions and Takeovers Act 1975 of Australia. Under that Act, the Treasurer
of Australia has broad powers to prohibit or place conditions on the acquisition
of interests in Australian business operations by foreign investors if such
acquisitions are found to be contrary to the national interest. If a
notification of a proposed acquisition is made to the Australian Foreign
Investment Review Board, the Treasurer is precluded from taking any action with
respect to the acquisition after the expiration of a 40-day review period,
although this period may be extended for up to 90 additional days. PacifiCorp
Acquisitions has notified the Foreign Investment Review Board of the proposed
acquisition.
(F) US COAL LEASING REQUIREMENTS
Both PacifiCorp and Peabody hold coal leases on properties owned by the
United States. The US Coal Leasing Act imposes limitations on the acreage that
any one affiliated group can lease from the United States. Upon consummation of
the Offer, the Enlarged Group's US coal lease holdings will exceed those acreage
limitations. Although PacifiCorp and Peabody have not yet identified the
specific leases to be relinquished or disposed of, PacifiCorp Acquisitions
believes the Enlarged Group will be able to relinquish or dispose of sufficient
leases to reduce its holdings below the applicable acreage limitations without
materially interfering with planned operations.
(G) US STATE TAKEOVER LAWS
A number of states of the US have adopted takeover laws and regulations
which purport, in varying degrees, to be applicable to attempts to acquire
securities of corporations which have substantial assets, shareholders,
principal executive offices or principal places of business in such states.
PacifiCorp Acquisitions believes that no such US state takeover statutes apply
to the Offer and PacifiCorp Acquisitions has not attempted to comply with any
such US state takeover statutes in connection with the Offer. PacifiCorp
Acquisitions reserves the right to challenge the validity or applicability of
any US state law allegedly applicable to the Offer and nothing in this document
nor any action taken in connection herewith is intended as a waiver of that
right. In the event that any US state takeover statute is asserted to be
applicable to the Offer and an appropriate court does not determine that such
law or regulation is not applicable to the Offer, PacifiCorp Acquisitions might
be required to file certain information with, or to receive approvals from, the
relevant US state authorities and might be unable to purchase Energy Group
Securities pursuant to the Offer or be delayed in continuing or consummating
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the Offer. In such case, PacifiCorp Acquisitions may not be obliged to purchase
such Energy Group Securities.
(H) LAWS OF OTHER JURISDICTIONS
The Energy Group and certain of its subsidiaries conduct business in certain
countries in addition to the UK and the US where regulatory filings or approvals
may be required in connection with the Offer. Certain of such filings or
approvals, if required, may not be made or obtained prior to the expiry of the
Offer. There is no assurance that any such approvals would be obtained or that
adverse consequences to PacifiCorp's or The Energy Group's business might not
result from a failure to obtain such approvals or from conditions that might be
imposed in connection therewith.
14 UNITED KINGDOM TAXATION
THE FOLLOWING PARAGRAPHS, WHICH ARE INTENDED AS A GENERAL GUIDE ONLY, ARE
BASED ON CURRENT UK LEGISLATION AND INLAND REVENUE PRACTICE. THEY SUMMARISE
CERTAIN LIMITED ASPECTS OF THE UK TAXATION TREATMENT OF ACCEPTANCE OF THE OFFER
AND THE ELECTION FOR THE LOAN NOTE ALTERNATIVE, AND THEY RELATE ONLY TO THE
POSITION OF HOLDERS OF ENERGY GROUP SHARES WHO ARE THE BENEFICIAL OWNERS OF
THEIR ENERGY GROUP SHARES, WHO HOLD THEIR ENERGY GROUP SHARES AS AN INVESTMENT
(OTHERWISE THAN UNDER A PERSONAL EQUITY PLAN), AND (EXCEPT INSOFAR AS EXPRESS
REFERENCE IS MADE TO THE TREATMENT OF NON-UK RESIDENTS) WHO ARE RESIDENT OR
ORDINARILY RESIDENT IN THE UK FOR TAX PURPOSES. SHAREHOLDERS WHO ARE IN ANY
DOUBT AS TO THEIR TAXATION POSITION OR WHO ARE SUBJECT TO TAXATION IN ANY
JURISDICTION OTHER THAN THE UK, SHOULD CONSULT AN APPROPRIATE PROFESSIONAL
ADVISER.
(A) TAXATION OF CHARGEABLE GAINS
Liability to UK taxation on chargeable gains ("CGT") will depend on the
particular circumstances of holders of Energy Group Shares and on the form of
consideration received.
(I) CASH
To the extent that a holder of Energy Group Shares receives cash under the
Offer, this will constitute a disposal, or part disposal, of his Energy Group
Shares for CGT purposes. Such a disposal, or part disposal, may, depending on
that shareholder's individual circumstances, give rise to a liability to CGT.
(II) LOAN NOTES
A holder of Energy Group Shares who, together with persons connected with
him, holds not more than five per cent. of the issued share capital of The
Energy Group, will not be treated as making a disposal to the extent he elects
for and receives Loan Notes by way of consideration. In the case of a
shareholder who is an individual, the Loan Notes should not constitute
"qualifying corporate bonds" for tax purposes. Accordingly, any gain or loss
which would otherwise have arisen on a disposal of his Energy Group Shares will
be "rolled over" into the Loan Notes and the Loan Notes will be treated as the
same asset as his Energy Group Shares acquired at the same time and price as his
Energy Group Shares. Indexation relief will continue to accrue during the period
of ownership of the Loan Notes. In the case of a shareholder within the charge
to UK corporation tax, the Loan Notes will constitute "qualifying corporate
bonds" so that any gain or loss which would otherwise have arisen on a disposal
of its Energy Group Shares will be calculated and "held over" until it
subsequently disposes of the Loan Notes and indexation relief will not accrue on
the Loan Notes.
A holder of Energy Group Shares who, together with persons connected with
him, holds more than five per cent. of the issued share capital of The Energy
Group is advised that an application has been made for clearance under section
138 of the Taxation of Chargeable Gains Act 1992, but the Inland
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Revenue has not yet formally replied. Subject to the granting of this clearance,
any such holder of Energy Group Shares will be treated in the manner described
in the previous paragraph.
A subsequent disposal of Loan Notes (including their redemption or
repayment) may give rise to a chargeable event for CGT purposes.
(III) NON-UK RESIDENT HOLDERS OF ENERGY GROUP SECURITIES
Holders of Energy Group Securities who are not resident or ordinarily
resident for tax purposes in the UK may be liable to CGT on capital gains
realised on the disposal of their Energy Group Shares or Energy Group ADSs if
such shares or ADSs are used, held or acquired for the purposes of a trade,
profession or vocation carried on in the UK through a branch or agency or for
the purposes of such branch or agency. Such holders may be subject to foreign
taxation on any gain under local law.
(B) TAXATION OF LOAN NOTES--INCOME
(I) WITHHOLDING TAX
Payments of interest on the Loan Notes will be made subject to the deduction
of UK income tax at the lower rate (currently 20 per cent.) unless PacifiCorp
Acquisitions has been directed by the Inland Revenue, in respect of a particular
holding of Loan Notes, to make the payment free from deduction or subject to a
reduced rate of deduction (by virtue of relief under the terms of an applicable
double taxation agreement). Such a direction will only be made following an
application in the appropriate manner to the relevant tax authorities by the
holder of the relevant Loan Notes. Payments of interest may also be subject to
withholding of US federal income tax in certain circumstances. Please refer to
paragraph 15(b) below.
(II) INDIVIDUALS
Subject to the above, the gross amount of such interest will form part of
the recipient's income for the purposes of UK income tax, credit being allowed
for the tax withheld. Individuals who are taxable only at the lower or basic
rate will have no further tax to pay in respect of the interest. In certain
cases, holders of Loan Notes may be able to recover an amount in respect of the
credit from the Inland Revenue.
Under the "accrued income scheme" a transfer of Loan Notes may also give
rise to a charge to UK income tax in respect of an amount representing interest
on the Loan Notes which has accrued since the preceding interest payment date.
(III) CORPORATES
Holders of Loan Notes within the charge to UK corporation tax in respect of
the Loan Notes will generally bring into the charge to tax as income, interest
on, profits and gains arising from and fluctuations in the value of, the Loan
Notes in each accounting period broadly in accordance with the accounting
treatment of such holders authorised for this purpose.
(C) GENERAL
Special tax provisions may apply to holders of Energy Group Shares who have
acquired or acquire their Energy Group Shares by exercising options under the
Energy Group Share Schemes, including provisions imposing a charge to income
tax.
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(D) STAMP DUTY AND STAMP DUTY RESERVE TAX ("SDRT")
These comments are intended as a guide to the general position and do not
relate to persons such as intermediaries and persons connected with depositary
arrangements or clearance services, to whom special rules apply.
(I) ACCEPTANCE OF THE OFFER
No stamp duty or SDRT will be payable by holders of Energy Group Shares as a
result of accepting the Offer.
(II) LOAN NOTES
Under current Inland Revenue practice, no stamp duty or SDRT will be payable
on a transfer or sale of (or an agreement to transfer or sell) Loan Notes.
15 UNITED STATES FEDERAL INCOME TAXATION
(A) UNITED STATES RESIDENTS
The following paragraphs address certain United States federal income tax
consequences applicable to holders of Energy Group Securities that are citizens
or residents of the United States, United States domestic corporations or
otherwise taxable as United States residents. This summary is based on the
Internal Revenue Code of 1986, as amended (the "Code"), administrative
pronouncements, judicial decisions and existing and proposed Treasury
Regulations, changes to any of which (which may be retroactive) may affect the
tax consequences described herein. This summary assumes that the Energy Group
Securities have been held as capital assets. It does not address the tax
treatment of individuals who have received Energy Group Securities in connection
with employment, such as by the exercise of options granted to employees. This
summary also assumes that The Energy Group is not and has never been either a
passive foreign investment company or a controlled foreign corporation for US
federal income tax purposes. This summary does not discuss all tax consequences
that may be relevant to a holder of Energy Group Securities in the light of such
holder's particular circumstances or to holders subject to special rules, such
as certain financial institutions, regulated investment companies, insurance
companies, dealers in securities, exempt organisations, persons holding Energy
Group Securities as part of a hedge, straddle or conversion transaction and
holders that are residents of countries other than the United States or whose
functional currency is not the United States dollar.
In general, a holder of Energy Group Securities that sells such securities
pursuant to the Offer will, for United States federal income tax purposes,
recognise gain or loss equal to the difference between such holder's adjusted
tax basis in the Energy Group Securities transferred and the amount realized in
exchange therefor. Such gain or loss generally will be capital gain or loss.
Under the US Taxpayer Relief Act of 1997, an individual taxpayer who has held a
capital asset for more than 18 months generally will be taxed on gain from the
sale of that asset at a maximum rate of 20 per cent. A 28 per cent. maximum rate
generally applies to the sale of a capital asset held more than one year but not
more than 18 months. In addition, an accrual basis holder of Energy Group
Securities that sells such securities pursuant to the Offer and does not elect
to be treated as a cash basis taxpayer pursuant to the foreign currency exchange
regulations may have a foreign currency exchange gain or loss for United States
federal income tax purposes because of differences between the US dollars/pounds
sterling exchange rates prevailing on the date of sale and on the date of
payment. Any such currency gain or loss would be treated as ordinary income or
loss and would be in addition to gain or loss realised by the holder on the
disposition of Energy Group Securities pursuant to the Offer.
A holder of Energy Group Securities may be subject to US back-up federal
income tax withholding with respect to the cash payment if (i) the holder fails
to furnish a taxpayer identification number ("TIN")
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to the payer or establish an exemption from back-up withholding, (ii) the US
Internal Revenue Service notifies the payer that the TIN furnished by the holder
is incorrect, (iii) there has been a notified payee underreporting with respect
to interest or dividends described in section 3406(c) of the Code, or (iv) there
is a failure of the holder to certify under the penalty of perjury that the
holder is not subject to withholding as described in section 3406 of the Code.
To prevent back-up withholding on any cash payment delivered pursuant to the
Offer, each holder of Energy Group ADSs that accepts the Offer by means of the
Letter of Transmittal and each holder of Energy Group Shares that accepts the
Offer by sending the Form of Acceptance to the US Depositary must provide the US
Depositary with that holder's correct taxpayer identification number and certify
that the holder is not subject to US back-up federal income tax withholding by
completing the Substitute Form W-9 included in the Letter of Transmittal or Form
of Acceptance, or, if the holder is a non-resident alien or foreign entity for
US federal income tax purposes, establish an exemption from US back-up federal
income tax withholding by completing a Form W-8, Certificate of Foreign Status,
a copy of which is available, upon request, from either the US Depositary or the
US Internal Revenue Service.
THE FOREGOING DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS INTENDED TO
BE ONLY A SUMMARY OF THE PRINCIPAL UNITED STATES FEDERAL INCOME TAX
CONSIDERATIONS OF THE OFFER. EACH HOLDER OF ENERGY GROUP SECURITIES SHOULD
CONSULT THE HOLDER'S OWN TAX ADVISER CONCERNING THE UNITED STATES FEDERAL AND
APPLICABLE STATE, LOCAL, FOREIGN AND OTHER TAX CONSEQUENCES OF THE OFFER.
(B) UNITED STATES TAX TREATMENT OF LOAN NOTES
For United States federal income tax purposes, PacifiCorp Acquisitions is
treated as part of a US domestic corporation. To prevent United States
withholding tax on interest payments on the Loan Notes, holders of Energy Group
Shares that elect for the Loan Note Alternative may be required to certify that
they are not US persons, on a US Internal Revenue Service Form W-8 or other
statement meeting the requirements of section 871(h) of the Code. Persons
holding beneficial interests in Loan Notes indirectly through other holders
(e.g., partners in a UK partnership) may be required to provide such
certification in order to prevent withholding on interest paid to the holder.
For holders of Energy Group Shares that elect for the Loan Note Alternative, but
that do not provide the appropriate certification, the gross amount of payments
of interest on Loan Notes will be subject to withholding of US federal income
tax at the rate of 30 per cent. for non-US holders. A US income tax treaty may
apply to reduce or eliminate withholding. To claim the benefit of a tax treaty,
the holder must provide certification as required by US Internal Revenue Service
regulations.
16 FEES AND EXPENSES
Pursuant to a letter from Goldman, Sachs & Co. dated 26 March 1997 and
addressed to PacifiCorp, as amended by the letter agreement, dated 23 January
1998 between them (together the "Engagement Letter"), Goldman, Sachs & Co. is
acting as financial adviser to PacifiCorp in connection with the Offer. Pursuant
to the terms of the Engagement Letter, Goldman, Sachs & Co. will receive
$13,320,000 as compensation for its services as financial adviser to PacifiCorp
together with reimbursement for its reasonable out of pocket expenses, assuming
that PacifiCorp acquires at least 50 per cent. of the Energy Group Securities or
50 per cent. of the assets of The Energy Group. In addition, PacifiCorp has
agreed to indemnify Goldman, Sachs & Co. and its affiliates including Goldman
Sachs International and certain others against, inter alia, certain losses and
expenses arising out of the engagement or performance by Goldman, Sachs & Co. of
its duties to advise and assist PacifiCorp in connection with the Offer,
including liabilities under the US federal securities laws.
The various capacities in which Goldman, Sachs & Co. and its affiliates have
acted in connection with the Offer and the transactions contemplated thereby
include arranger in connection with the bank facilities described in paragraph
10 of this Appendix V. Pursuant to the terms of the Engagement Letter,
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PacifiCorp shall offer Goldman, Sachs & Co. (i) the right to participate in and
be considered for the position of lead manager or lead placement agent on any
public or private offerings of debt securities relating to the Offer and the
transactions contemplated thereby which are rated less than investment grade and
occur within one year of the consummation of the Offer; (ii) the right to
participate in and be considered for the position of lead manager or lead
placement agent in any public or private offerings of debt securities of Eastern
within one year of the consummation of the Offer; and (iii) the right to act as
lead manager or lead placement agent in any public or private offerings of
common equity by PacifiCorp occurring within one year after the Offer and the
transactions contemplated thereby. In connection with the foregoing, if Goldman,
Sachs & Co. agrees to act in such capacity, it will enter into an appropriate
form of underwriting, placement agency, engagement or other agreement relating
to the type of transaction involved and containing customary terms and
conditions, including customary fee provisions and provisions relating to
indemnity.
Pursuant to a letter dated 3 February 1998 (the "US Dealer Manager
Agreement"), PacifiCorp Acquisitions and PGHC, have retained Goldman, Sachs &
Co., as US Dealer Manager for the Offer in the United States to perform those
services in connection with the Offer as are customarily performed in the United
States by investment banking concerns acting as dealer manager in connection
with offers of a like nature. Goldman, Sachs & Co. will not receive additional
compensation for acting in this capacity. Under the terms of the US Dealer
Manager Agreement, PGHC has agreed to indemnify Goldman, Sachs & Co. and certain
other persons against certain liabilities and expenses which may be incurred in
connection with the Offer including liabilities under the US federal securities
laws.
PacifiCorp Acquisitions has retained IRG plc as the UK Receiving Agent,
Continental Stock Transfer & Trust Company as the US Depositary, and Shareholder
Communications Corporation as the Information Agent. PacifiCorp Acquisitions
will pay the UK Receiving Agent, the US Depositary and the Information Agent
reasonable and customary compensation for their services in connection with the
Offer, together with reimbursement of out of pocket expenses. PacifiCorp will
indemnify the US Depositary and the Information Agent against certain
liabilities and expenses in connection therewith, including liabilities under
the US federal securities laws. Brokers, dealers, commercial banks and trust
companies will be reimbursed by PacifiCorp for customary mailing and handling
expenses incurred by them in forwarding material to their customers.
PacifiCorp and PacifiCorp Acquisitions will not pay any fees or commissions
to any broker or dealer or any other person for soliciting acceptances of the
Offer (other than to Goldman Sachs International, Goldman, Sachs & Co., and the
Information Agent, as described above).
Lazard and Morgan Stanley are acting as The Energy Group's financial
advisers in connection with the Offer. Pursuant to a letter agreement dated 5
June 1997 between The Energy Group and Lazard, The Energy Group made an initial
payment to Lazard of L1.5 million upon announcement of the Previous Offer, a
further fee of L1.0 million upon announcement of this Offer and has agreed to
pay an additional fee of L5.8 million upon the Offer becoming wholly
unconditional. Pursuant to a letter agreement dated 27 May 1997 between The
Energy Group and Morgan Stanley, The Energy Group made initial payments to
Morgan Stanley totalling L3.4 million relating to the Previous Offer and has
agreed to pay an additional fee of L7.6 million upon the Offer becoming wholly
unconditional. Each letter agreement further provides that The Energy Group will
reimburse Lazard and Morgan Stanley for their respective out-of-pocket expenses,
and indemnify Lazard and Morgan Stanley, respectively, against certain expenses
and liabilities in connection with their engagement.
17 SOURCES OF INFORMATION AND BASES OF CALCULATION
(a) The value of the fully diluted share capital of The Energy Group is based
upon 520,857,817 Energy Group Shares in issue on 2 February 1998 and
9,228,858 Energy Group Shares which could fall to
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be issued on exercise in full of options and vesting of all outstanding
awards granted under the Energy Group Share Schemes.
(b) The pro forma financial information in respect of The Energy Group for the
year ended 31 March 1996 is taken from the unaudited pro forma profit and
loss accounts set out in The Energy Group's report and accounts for the six
months ended 31 March 1997.
(c) References in this document to "tons" are to short tons equal to 2,000
pounds.
18 DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the documents listed below may be inspected at the offices of
Linklaters & Paines, One Silk Street, London EC2Y 8HQ (such address also being
the registered office of PacifiCorp Acquisitions) during usual business hours on
any weekday (Saturdays, Sundays and public holidays excepted) whilst the Offer
remains open for acceptance:
(a) the Memorandum and Articles of Association of PacifiCorp Acquisitions;
(b) the Memorandum and Articles of Association of The Energy Group;
(c) the audited financial statements of PacifiCorp for the three years ended
31 December 1996, together with the notes thereto;
(d) the Energy Group Listing Particulars, the audited consolidated accounts
of The Energy Group for the six months ended 31 March 1997 and The Energy
Group's third quarter results for the nine months ended 31 December 1997;
(e) the irrevocable undertakings referred to in paragraph 5 above;
(f) the service agreements referred to in paragraph 6 above;
(g) the consents referred to in paragraph 7(d) above;
(h) the material contracts referred to in paragraph 8 above;
(i) documentation relating to the financing arrangements detailed in
paragraph 10 above; and
(j) the Loan Note Instrument in substantially final form.
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APPENDIX VI
DEFINITIONS
The following definitions apply throughout this document, unless the context
otherwise requires:
<TABLE>
<S> <C>
"ACCEPTANCE CONDITION" the Condition as to acceptances set out in paragraph (a)
of Part A of Appendix I
"ACCEPTANCE FORM" the Form of Acceptance and, with respect to holders of
Energy Group ADSs only, the Letter of Transmittal and
Notice of Guaranteed Delivery accompanying this document
"ACQUISITION" the proposed acquisition of The Energy Group pursuant to
the Offer
"BOARD" OR "DIRECTORS" the directors of PacifiCorp Acquisitions
"BOOK-ENTRY CONFIRMATION" the confirmation of a book-entry transfer of Energy Group
ADSs into the US Depositary's account at a Book-Entry
Transfer Facility
"BOOK-ENTRY TRANSFER each of The Depository Trust Company and the Philadelphia
FACILITY" Depository Trust Company, together the "Book-Entry
Transfer Facilities"
"BUSINESS DAY" has the meaning given to it in Rule 14d-1 under the
Exchange Act
"CANADA" Canada, its provinces, territories and all areas subject
to its jurisdiction and any political sub-division thereof
"CERTIFICATED" OR "IN a share or other security which is not in uncertificated
CERTIFICATED FORM" form
"CITIZENS POWER" Citizens Power LLC, previously named Citizens Lehman Power
L.L.C.
"CITY CODE" The City Code on Takeovers and Mergers of the UK
"CLOSING PRICE" the mid-price quotation of an Energy Group Share as
derived from the London Stock Exchange Daily Official List
"COMPANIES ACT" the Companies Act 1985 (as amended) of England and Wales
"CONDITIONS" the conditions of the Offer described in Part A of
Appendix I and "Condition" means any one of them
"CREST" the relevant system (as defined in the Regulations) in
respect of which by CRESTCo is the Operator (as defined in
the Regulations)
"CRESTCO" CRESTCo Limited
"CREST MEMBER" a person who has been admitted by CRESTCo as a system-
member (as defined in the Regulations)
"CREST PARTICIPANT" a person who is, in relation to CREST, a
system-participant (as defined in the Regulations)
</TABLE>
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<TABLE>
<S> <C>
"CREST SPONSOR" a CREST participant admitted to CREST as a sponsored
member
"CREST SPONSORED MEMBER" a CREST member admitted to CREST as a sponsored member
"DEALER MANAGER" Goldman, Sachs & Co., in its capacity as dealer manager
for the Offer in the US
"DEMERGER" the demerger by Hanson of The Energy Group
"DEMERGER AGREEMENT" the agreement dated 27 January 1997 between Hanson and The
Energy Group relating to the Demerger
"DEMERGER DATE" 24 February 1997
"DEMERGER TRANSACTIONS" the transactions described in the Demerger Agreement,
pursuant to which The Energy Group became the holding
company of the TEG Group, as then constituted, and the
Peabody Holding Transaction
"DEPOSIT AGREEMENT" the deposit agreement between The Energy Group, Citibank,
N.A. and the holders, from time to time, of Energy Group
ADSs
"DGES" The Director General of Electricity Supply of the UK
"EASTERN" Eastern Group plc and/or its subsidiaries or any of them
from time to time as the context may require
"ELECTRICITY POOL" the electricity trading market in England and Wales
"ELIGIBLE INSTITUTION" a financial institution (including most banks, savings and
loan associations and brokerage houses) which is a
participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program, or
the Stock Exchange Medallion Program
"ENERGY GROUP ADRS" American Depositary Receipts evidencing Energy Group ADSs
"ENERGY GROUP ADSS" American Depositary Shares issued in respect of Energy
Group Shares, each representing four Energy Group Shares,
as evidenced by Energy Group ADRs
"ENERGY GROUP LISTING the listing particulars relating to The Energy Group dated
PARTICULARS" OR "LISTING 27 January 1997, published in accordance with the Listing
PARTICULARS" Rules
"ENERGY GROUP SECURITIES" Energy Group Shares and Energy Group ADSs
"ENERGY GROUP SHARES" shares of 10p each in the share capital of The Energy
Group
"ENERGY GROUP SHARE SCHEMES" the Energy Group Executive Share Option Scheme, the Energy
Group Sharesave Scheme, the Energy Group Long-term
Incentive Plan and the Energy Group Special Additional
Bonus Scheme
"ENLARGED GROUP" the PacifiCorp Group as enlarged by the acquisition of The
Energy Group
</TABLE>
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<TABLE>
<S> <C>
"EXCHANGE ACT" the US Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder
"FERC" the US Federal Energy Regulatory Commission
"FIRST HYDRO" the pumped storage business of National Grid Group
"FORM OF ACCEPTANCE" the form of acceptance, election and authority relating to
the Offer accompanying this document for use by holders of
Energy Group Shares (but not by holders of Energy Group
ADSs)
"GUARANTEED DELIVERY the guaranteed delivery procedures for Energy Group ADSs
PROCEDURES" set out in paragraph 9 of Part B of Appendix I
"HANSON" Hanson PLC
"HANSON GROUP" Hanson and its subsidiary undertakings from time to time
"INFORMATION AGENT" Shareholder Communications Corporation, in its capacity as
information agent for the Offer
"INITIAL CLOSING DATE" 10.00 p.m. (London time), 5.00 p.m. (New York City time)
on 9 March 1998, unless and until PacifiCorp Acquisitions,
in its discretion, shall have extended the Offer, in which
case the term "Initial Closing Date" shall mean the latest
time and date at which the Offer, as so extended by
PacifiCorp Acquisitions, will expire or, if earlier, the
time at which the Offer becomes or is declared wholly
unconditional
"INITIAL OFFER PERIOD" the period from the date of this document to and including
the Initial Closing Date
"LAZARD" Lazard Brothers & Co., Limited and Lazard Freres & Co.
Limited
"LETTER OF TRANSMITTAL" the letter of transmittal relating to the Offer
accompanying this document for use by holders of Energy
Group ADSs
"LIBOR" the London Inter-Bank Offered Rate, determined in
accordance with the terms of the Loan Notes, a summary of
which is set out in Appendix II
"LISTING RULES" the Listing Rules of the London Stock Exchange
"LOAN NOTE ALTERNATIVE" the alternative under which holders of Energy Group Shares
who validly accept the Offer will be entitled to elect to
receive Loan Notes instead of the cash consideration
otherwise payable to them
"LOAN NOTES" the Floating Rate Unsecured Loan Notes 2004 of PacifiCorp
Acquisitions, to be issued pursuant to the Loan Note
Alternative
"LONDON STOCK EXCHANGE" London Stock Exchange Limited
"MEMBER ACCOUNT ID" the identification code or number attached to any member
account in CREST
"MORGAN STANLEY" Morgan Stanley & Co. Limited
</TABLE>
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<TABLE>
<S> <C>
"NATIONAL GRID GROUP" The National Grid Group plc
"NATIONAL POWER" National Power plc
"OFFER" the Office of Electricity Regulation of the UK
"OFFER" the renewed offer made by Goldman Sachs International on
behalf of PacifiCorp Acquisitions to acquire the Energy
Group Securities as set out in this document including,
where the context permits and/or requires, the Loan Note
Alternative and any subsequent revision, variation,
extension or renewal of such offer or such alternative
"PACIFICORP GROUP" PacifiCorp and its subsidiaries and subsidiary
undertakings and, where the context permits, each of them
"PANEL" The Panel on Takeovers and Mergers of the UK
"PARTICIPANT ID" the identification code or membership number used in CREST
to identify a particular CREST member or other CREST
participant
"PEABODY" Peabody Holding, Lee Ranch Coal Company and Peabody
Australia
"PEABODY AUSTRALIA" Peabody Resources Limited and its subsidiaries, the
Australian operations of Peabody
"PEABODY HOLDING" Peabody Holding Company, Inc. and its subsidiaries
"PEABODY HOLDING TRANSACTION" the transaction whereby Peabody US Holding Inc., a
subsidiary of Hanson, transferred to GFAC International
Holdings Inc. the entire issued share capital of Peabody
Holding for a cash sum of US$1,637.5 million
"PGHC" PacifiCorp Group Holdings Company (formerly PacifiCorp
Holdings, Inc.)
"POWERCOAL" PacifiCorp Powercoal, LLC, a wholly-owned subsidiary of
PGHC
"POWERGEN" PowerGen plc
"PREVIOUS OFFER" the offer made by Goldman Sachs International on behalf of
PacifiCorp Acquisitions to acquire The Energy Group as
announced on 13 June 1997 and set out in the Previous
Offer document dated 30 June 1997
"REGULATIONS" the Uncertificated Securities Regulations 1995 (SI 1995
No. 95/3272)
"ROLLALONG" Rollalong Limited and, where the context permits, its
subsidiary, Rollalong Hire Limited
"SEC" the US Securities and Exchange Commission
"SECURITIES ACT" the US Securities Act of 1933, as amended, and the rules
and regulations promulgated thereunder
</TABLE>
VI-4
<PAGE>
<TABLE>
<S> <C>
"SUBSEQUENT OFFER PERIOD" the period following the Initial Closing Date during which
the Offer remains open for acceptance
"TEG GROUP" The Energy Group and its subsidiaries and subsidiary
undertakings and, where the context permits, each of them
"TFE INSTRUCTION" a Transfer from Escrow instruction (as defined by the
CREST Manual issued by CRESTCo)
"THE ENERGY GROUP" The Energy Group PLC
"TTE INSTRUCTION" a Transfer to Escrow instruction (as defined by the CREST
Manual issued by CRESTCo)
"UK" OR "UNITED KINGDOM" the United Kingdom of Great Britain and Northern Ireland
"UK GAAP" UK generally accepted accounting principles
"UK RECEIVING AGENT" IRG plc, in its capacity as UK receiving agent to the
Offer
"UNCERTIFICATED" OR "IN recorded on the relevant register of the share or security
UNCERTIFICATED FORM" concerned as being held in uncertificated form in CREST,
and title to which, by virtue of the Regulations, may be
transferred by means of CREST
"UNITED STATES" OR "US" the United States of America, its territories and
possessions, any State of the United States and the
District of Columbia, and all other areas subject to its
jurisdiction
"US DEPOSITARY" Continental Stock Transfer & Trust Company, in its
capacity as US depositary
"US GAAP" US generally accepted accounting principles
"US HSR ACT" the US Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations
promulgated thereunder
"L", OR "POUNDS STERLING" OR the lawful currency of the United Kingdom
"PENCE"
"$" OR "US DOLLAR" the lawful currency of the United States
</TABLE>
VI-5
<PAGE>
ACCEPTANCES IN RESPECT OF ENERGY GROUP SHARES
Duly completed Forms of Acceptance, accompanied by certificates in respect
of Energy Group Shares and/or other documents of title, should be delivered to
the UK Receiving Agent or the US Depositary at one of the addresses set out
below.
The UK Receiving Agent for the Offer is:
New Issues Department,
IRG plc
For Information Call:
0181 639 2166
<TABLE>
<S> <C>
By Mail: By Hand:
PO Box 166, 23 Ironmonger Lane,
Bourne House, London EC2
34 Beckenham Road,
Beckenham
Kent BR3 4TH
</TABLE>
ACCEPTANCES IN RESPECT OF ENERGY GROUP ADSS
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. The Letter of Transmittal, Energy Group ADRs and any other required
documents should be sent or delivered by each holder of Energy Group ADSs or his
broker, dealer, commercial bank, trust company or other nominee to the US
Depositary at one of its addresses set out below.
The US Depositary for the Offer is:
Continental Stock Transfer & Trust Company
For Information Call:
1-800 733 8481 ext. 475
Facsimile Transmission:
(for Eligible Institutions Only)
(212) 248-8495
<TABLE>
<S> <C>
By Mail By Hand or Overnight Courier:
Continental Stock Transfer & Continental Stock Transfer &
Trust Company Trust Company
c/o Shareholder Communications c/o Shareholder Communications
Corporation Corporation
17 State Street, 24th Floor 17 State Street, 24th Floor
New York, NY 10004 New York, NY 10004
Attn: Tenders & Exchanges Attn: Tenders & Exchanges
</TABLE>
ADDITIONAL INFORMATION
Any questions or requests for assistance or additional copies of the Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery or
the Form of Acceptance may be directed to Goldman Sachs International, the
Dealer Manager or the Information Agent at their respective addresses and
telephone numbers listed below, or to the US Depositary or the UK Receiving
Agent at their respective addresses and telephone numbers mentioned above. You
may also contact your local broker, dealer, commercial bank or trust company or
other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
Shareholder Communications Corporation
17 State Street
27th Floor
New York, New York 10004
Call Toll Free: 1-800-733-8481, ext. 475
The Offer is being made on behalf of PacifiCorp Acquisitions by:
Goldman Sachs International
Peterborough Court
133 Fleet Street
London EC4A 2BB
0171 774 1000
The Dealer Manager for the Offer is:
Goldman, Sachs & Co.
85 Broad Street
New York
New York 10004
(212) 902 1000 within New York City
1-800-323-5678 (Toll Free) outside New York City
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. In considering
what action you should take, you are recommended immediately to seek your own
financial advice from your stockbroker, bank manager, solicitor, accountant or
other independent financial advisor.
If you have sold or otherwise transferred all your American Depositary Shares
("Energy Group ADSs") of The Energy Group PLC ("The Energy Group"), please pass
this document and all accompanying documents as soon as possible to the
purchaser or transferee, or to the bank, stockbroker or other agent through whom
the sale or transfer was effected for transmission to the purchaser or
transferee. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE DISTRIBUTED, FORWARDED OR
TRANSMITTED IN OR INTO AUSTRALIA, CANADA OR JAPAN.
Goldman Sachs International is acting for PacifiCorp Acquisitions and PacifiCorp
in relation to the Offer and no one else, and will not be responsible to anyone
other than PacifiCorp Acquisitions and PacifiCorp for providing the protections
afforded to customers of Goldman Sachs International nor for providing advice in
relation to the Offer. Goldman Sachs International is acting through Goldman,
Sachs & Co. for the purpose of making the Offer in the United States.
- --------------------------------------------------------------------------------
LETTER OF TRANSMITTAL
TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
THE ENERGY GROUP PLC
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 6, 1998
BY
GOLDMAN SACHS INTERNATIONAL
ON BEHALF OF
PACIFICORP ACQUISITIONS
(A WHOLLY OWNED SUBSIDIARY OF PACIFICORP)
<TABLE>
<S> <C> <C> <C>
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 PM (LONDON TIME), 5:00 PM (NEW YORK CITY
TIME) ON MARCH 9, 1998, UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED,
WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF
ENERGY GROUP SECURITIES WILL HAVE THE RIGHT TO WITHDRAW THEIR ACCEPTANCES OF THE OFFER DURING THE INITIAL
OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
DESCRIPTION OF ENERGY GROUP ADSS TENDERED
<CAPTION>
NAME(S) & ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) ADS(S) TENDERED (ATTACH
ON ADR(S)) ADDITIONAL LIST IF NECESSARY)
<S> <C> <C> <C>
<CAPTION>
TOTAL NUMBER
ADR OF ADSS NUMBER
SERIAL REPRESENTED BY OF ADSS
NUMBER(S)* ADR(S)* TENDERED**
<S> <C> <C> <C>
*Need not be completed for book-entry transfers.
**Unless otherwise indicated, it will be assumed that all Energy Group ADSs delivered to the US
Depositary are being tendered. See Instruction 4.
</TABLE>
<PAGE>
THE U.S. DEPOSITARY FOR THE OFFER IS:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
BY MAIL:
Continental Stock Transfer &
Trust Company
c/o Shareholder Communications
Corporation
17 State Street, 24th Floor
New York, NY 10004
Attn: Tenders & Exchanges
BY FACSIMILE TRANSMISSION:
(FOR ELIGIBLE INSTITUTIONS ONLY)
(212) 248-8495
FOR INFORMATION CALL:
(800) 733-8481, ext. 475
BY HAND OR OVERNIGHT COURIER:
Continental Stock Transfer &
Trust Company
c/o Shareholder Communications
Corporation
17 State Street, 24th Floor
New York, NY 10004
Attn: Tenders & Exchanges
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE, DOES NOT
CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
ACCEPTING HOLDERS OF ENERGY GROUP ADSs EVIDENCED BY ENERGY GROUP ADRs WILL
RECEIVE PAYMENT IN DOLLARS INSTEAD OF POUNDS STERLING UNLESS THEY ELECT
OTHERWISE HEREIN TO RECEIVE PAYMENT IN POUNDS STERLING. IF YOU WISH TO RECEIVE
POUNDS STERLING INSTEAD OF DOLLARS, YOU MUST PLACE AN "X" IN THE BOX ENTITLED
"POUNDS STERLING PAYMENT ELECTION".
ACCEPTANCE OF THE OFFER IN RESPECT OF ENERGY GROUP SHARES (EXCEPT INSOFAR AS
THEY ARE REPRESENTED BY ENERGY GROUP ADSs EVIDENCED BY ENERGY GROUP ADRs) CANNOT
BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold Energy Group Shares
that are not represented by Energy Group ADSs, you can obtain a Form of
Acceptance for accepting the Offer in respect of those Energy Group Shares from
the Information Agent, the US Depositary or the UK Receiving Agent. See
Instruction 13 of this Letter of Transmittal.
Delivery of a Letter of Transmittal, American Depositary Receipts evidencing
Energy Group ADSs ("Energy Group ADRs") (or book-entry transfer of such Energy
Group ADSs evidenced by Energy Group ADRs) and any other required documents to
the US Depositary by Energy Group ADS holders will be deemed (without any
further action by the US Depositary) to constitute an acceptance of the Offer by
such holder with respect to such Energy Group ADSs evidenced by Energy Group
ADRs subject to the terms and Conditions set out in the Offer to Purchase dated
February 6, 1998 (the "Offer to Purchase") and this Letter of Transmittal.
Capitalized terms and certain other terms used in this Letter of Transmittal and
not otherwise defined herein shall have the respective meanings assigned to them
in the Offer to Purchase.
This Letter of Transmittal is to be used either if Energy Group ADRs
evidencing Energy Group ADSs are to be forwarded herewith or if delivery of
Energy Group ADSs is to be made by book-entry transfer to an account maintained
by the US Depositary at a Book-Entry Transfer Facility as defined in and
pursuant to the procedures for book-entry transfer set forth in "Procedures for
Tendering Energy Group ADSs--Book-Entry Transfer" in Part B of Appendix I to the
Offer to Purchase.
2
<PAGE>
/ / CHECK BOX IF ENERGY GROUP ADSs IN RESPECT OF WHICH THE OFFER IS BEING
ACCEPTED ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE US DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY
MAY DELIVER ENERGY GROUP ADSs EVIDENCED BY ENERGY GROUP ADRs BY BOOK-ENTRY
TRANSFER):
Name of Delivering Institution _________________________________________________
Check box opposite name of relevant Book-Entry Transfer Facility:
/ / The Depository Trust Company / / Philadelphia Depository Trust
Company
Account Number __________ Transaction Code Number __________
If a holder of Energy Group ADSs wishes to accept the Offer and Energy Group
ADRs evidencing such Energy Group ADSs are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis, or if
time will not permit all required documents to reach the US Depositary prior to
the expiry of the Subsequent Offer Period, such holder's acceptance of the Offer
may nevertheless be effected using the guaranteed delivery procedure set out
under "Procedures for Tendering Energy Group ADSs--Guaranteed Delivery" in Part
B of Appendix I to the Offer to Purchase. See Instruction 2 of this Letter of
Transmittal. HOWEVER, RECEIPT OF A NOTICE OF GUARANTEED DELIVERY WILL NOT BE
TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE
CONDITION.
/ / CHECK BOX ONLY IF ENERGY GROUP ADSs IN RESPECT OF WHICH THE OFFER IS BEING
ACCEPTED ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY
PREVIOUSLY SENT TO THE US DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of registered owner(s)_____________________________________________
Date of execution of Notice of Guaranteed Delivery_________________________
Name of Institution that guaranteed delivery_______________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby instructs the US Depositary to accept the Offer on
behalf of the undersigned with respect to the Energy Group ADSs evidenced by
Energy Group ADRs (which expression in this Letter of Transmittal shall, except
where the context otherwise requires, be deemed to include, without limitation,
the Energy Group Shares represented thereby) specified in the box entitled
"Description of Energy Group ADSs Tendered" subject to the terms and Conditions
set forth in the Offer to Purchase and this Letter of Transmittal, by informing
PacifiCorp Acquisitions in writing that the Offer has been so accepted. The
undersigned hereby acknowledges that delivery of this Letter of Transmittal, the
Energy Group ADRs evidencing tendered Energy Group ADSs (or book-entry transfer
of such Energy Group ADSs evidenced by Energy Group ADRs) and any other required
documents to the US Depositary by a holder of Energy Group ADSs will be deemed
(without any further action by the US Depositary) to constitute acceptance of
the Offer by such holder in respect of such holder's Energy Group ADSs, subject
to the terms and Conditions set out in the Offer to Purchase and this Letter of
Transmittal.
The undersigned understands that acceptance of the Offer by the undersigned
pursuant to the procedures described herein and in the instructions hereto,
subject to the withdrawal rights described in the Offer to Purchase, will
constitute a binding agreement between the undersigned and PacifiCorp
Acquisitions upon the terms and subject to the Conditions of the Offer. IF
ACCEPTANCE HAS BEEN MADE IN RESPECT OF THE ENERGY GROUP ADSs THEN A SEPARATE
ACCEPTANCE IN RESPECT OF THE ENERGY GROUP SHARES REPRESENTED BY SUCH ENERGY
GROUP ADSs MAY NOT BE MADE.
The undersigned hereby delivers to the US Depositary the above-described
Energy Group ADSs evidenced by Energy Group ADRs for which the Offer is being
accepted, in accordance with the terms and Conditions of the Offer to Purchase
and this Letter of Transmittal, receipt of which is hereby acknowledged.
3
<PAGE>
Upon the terms of the Offer (including, if the Offer is extended, revised or
amended, the terms or conditions of any such extension, revision or amendment),
and effective at the time that all Conditions to the Offer have been satisfied,
fulfilled or, where permitted, waived (at which time PacifiCorp Acquisitions
will give notice thereof to the US Depositary), and if he or she has not validly
withdrawn his or her acceptance, the undersigned hereby sells, assigns and
transfers to, or upon the order of, PacifiCorp Acquisitions all right, title and
interest in and to all Energy Group ADSs evidenced by Energy Group ADRs with
respect to which the Offer is being accepted (and any and all Energy Group ADSs
or other securities or rights issuable in respect of such Energy Group ADSs) and
irrevocably constitutes and appoints the US Depositary the true and lawful agent
and attorney-in-fact of the undersigned with respect to such Energy Group ADSs
(and any such other Energy Group ADSs, securities or rights), with full power of
substitution (such power of attorney being deemed to be an irrevocable power
coupled with an interest), to (a) deliver Energy Group ADRs for such Energy
Group ADSs (and any such other Energy Group ADSs, securities or rights) or
accept transfer of ownership of such Energy Group ADSs (and any such other
Energy Group ADSs, securities or rights) on the account books maintained by a
Book-Entry Transfer Facility together, in any such case, with all accompanying
evidences of transfer and authenticity to, or upon the order of, PacifiCorp
Acquisitions, (b) present such Energy Group ADRs for such Energy Group ADSs (and
any other Energy Group ADSs, securities or rights) for transfer, and (c) receive
all benefits and otherwise exercise all rights of beneficial ownership of such
Energy Group ADSs (and any such other Energy Group ADSs, securities or rights),
all in accordance with the terms of the Offer.
The undersigned agrees that its execution hereof (together with any
signature guarantees) and its delivery to the US Depositary shall constitute an
authority to any director of PacifiCorp Acquisitions or Goldman Sachs
International in accordance with the terms of paragraph 6 of Part B of Appendix
I to the Offer to Purchase.
The undersigned agrees that effective from and after the date hereof or, if
later, the date on which all Conditions to the Offer are satisfied, fulfilled
or, where permitted, waived: (a) PacifiCorp Acquisitions or its agents shall be
entitled to direct the exercise of any votes attaching to the Energy Group
Shares represented by any Energy Group ADSs evidenced by Energy Group ADRs in
respect of which the Offer has been accepted or is deemed to have been accepted
(the "Accepted ADSs") and any other rights and privileges attaching to such
Energy Group Shares, including any right to requisition a general meeting of The
Energy Group or of any class of its shareholders, and (b) the execution of this
Letter of Transmittal by a holder of Energy Group ADSs (together with any
signature guarantees) and its delivery to the US Depositary shall constitute in
respect of Accepted ADSs (i) an authority to The Energy Group or its agents from
the undersigned to send any notice, circular, warrant, document or other
communications that may be required to be sent to him or her as an Energy Group
ADS holder to PacifiCorp Acquisitions at its registered office, (ii) an
authority to PacifiCorp Acquisitions or its agent to sign any consent to short
notice of a general meeting or separate class meeting on behalf of the holder of
Accepted ADSs and/or to execute a form of proxy in respect of the Accepted ADSs
appointing any person nominated by PacifiCorp Acquisitions to attend general
meetings and separate class meetings of The Energy Group or its members (or any
of them) (or any adjournments thereof) and to exercise the votes attaching to
the Energy Group Shares represented by such Accepted ADSs on his or her behalf,
and (iii) the agreement of the undersigned not to exercise any such rights
without the consent of PacifiCorp Acquisitions and the irrevocable undertaking
of the undersigned not to appoint a proxy for or to attend general meetings or
separate class meetings of The Energy Group in respect of such Accepted ADSs.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to accept the Offer and to sell, assign and transfer the
Energy Group ADSs evidenced by Energy Group ADRs (and the Energy Group Shares
represented by such Energy Group ADSs) in respect of which the Offer is being
accepted or deemed to be accepted (and any and all other Energy Group ADSs,
securities or rights issued or issuable in respect of such Energy Group ADSs)
and, when the same are purchased by PacifiCorp Acquisitions, PacifiCorp
Acquisitions will acquire good title thereto, free from all liens, equitable
interests, charges, encumbrances and together with all rights attaching thereto,
including voting rights and the right to receive all dividends and other
distributions declared, made or paid on or after February 3, 1998 with respect
to the Energy Group Shares represented by the Energy Group ADSs. The undersigned
will, upon request, execute any additional documents deemed by the US Depositary
or PacifiCorp Acquisitions to be necessary or desirable to complete the sale,
assignment and transfer of the Energy Group ADSs evidenced by Energy Group ADRs
in respect of which the Offer is being accepted (and any and all other Energy
Group ADSs, securities or rights).
4
<PAGE>
The undersigned irrevocably undertakes, represents, and warrants to and
agrees with PacifiCorp Acquisitions (so as to bind him or her, his or her
personal representatives, heirs, successors and assigns) to the effect that the
undersigned: (i) has not received or sent copies of this document or any
Acceptance Form or any related documents in, into or from Canada, Japan or
Australia and has not otherwise utilized in connection with the Offer, directly
or indirectly, the Canadian, Australian or Japanese mails or any means or
instrumentality (including, without limitation, facsimile transmission, telex
and telephone) of interstate or foreign commerce, or any facilities of a
national securities exchange, of Canada, Australia or Japan, (ii) is accepting
the Offer from outside Canada, Japan and Australia and (iii) is not an agent or
fiduciary acting on a nondiscretionary basis for a principal, unless such agent
or fiduciary is an authorized employee of such principal or such principal has
given any instructions with respect to the Offer from outside Canada, Japan and
Australia.
All authority herein conferred or agreed to be conferred pursuant to this
Letter of Transmittal shall be binding upon the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and shall
not be affected by, and shall survive, the death or incapacity of the
undersigned. Except as stated in the Offer to Purchase, this acceptance is
irrevocable.
Unless otherwise indicated herein under "Special Payment Instructions", the
undersigned hereby instructs the US Depositary to issue, or cause to be issued,
the check for the purchase price in the name(s) of the registered holder(s)
appearing under "Description of Energy Group ADSs Tendered". Similarly, unless
otherwise indicated under "Special Delivery Instructions", the undersigned
hereby instructs the US Depositary to mail, or cause to be mailed, the check for
the purchase price and/or return, or cause to be returned, any Energy Group ADRs
evidencing Energy Group ADSs in respect of which the Offer is not being accepted
or which are not purchased (and accompanying documents, as appropriate) to the
address(es) of the registered holder(s) appearing under "Description of Energy
Group ADSs Tendered". In the event that the "Special Payment Instructions"
and/or the "Special Delivery Instructions" are completed, the undersigned hereby
instructs the US Depositary to (i) issue and/or mail, or cause to be issued
and/or mailed, the check for the purchase price, if any, in the name of, and/or
to the address of, the person or persons so indicated, and/or (ii) return, or
cause to be returned, any Energy Group ADRs evidencing Energy Group ADSs in
respect of which the Offer is not being accepted or which are not purchased, if
any, to the person at the address so indicated. In the case of a book-entry
delivery of Energy Group ADSs evidenced by Energy Group ADRs, the undersigned
hereby instructs the US Depositary to credit the account maintained at the
Book-Entry Transfer Facility indicated above with any Energy Group ADSs in
respect of which the Offer is not being accepted or which are not purchased. The
undersigned recognizes that the US Depositary will not transfer any Energy Group
ADSs which are not purchased pursuant to the Offer from the name of the
registered holder thereof to any other person.
If the box headed "Pounds Sterling Payment Election" is not checked, the
undersigned hereby instructs the relevant payment agent (either the US
Depositary or the UK Receiving Agent) to convert all amounts payable pursuant to
the Offer from pounds sterling to US dollars at the exchange rate obtainable by
the relevant payment agent on the spot market in London at approximately noon
(London time) on the date the cash consideration is made available by PacifiCorp
Acquisitions to the relevant payment agent for delivery to holders of Energy
Group ADSs and to pay such amounts by check payable in US dollars. The actual
amount of US dollars received will depend upon the exchange rate prevailing on
the day funds are made available to the relevant payment agent by PacifiCorp
Acquisitions. Energy Group ADS holders should also be aware that the US
dollar/pound sterling exchange rate which is prevailing at the date on which the
undersigned executes this Letter of Transmittal and on the date of dispatch of
payment may be different from that prevailing on the day funds are made
available to the relevant payment agent by PacifiCorp Acquisitions. In all
cases, fluctuations in the US dollar/pounds sterling exchange rate are at the
risk of accepting Energy Group ADS holders who do not elect to receive their
consideration in pounds sterling. Such currency exchange will be effected by the
relevant payment agent on behalf of the requesting Energy Group ADS holder and
PacifiCorp Acquisitions shall have no responsibility or obligation with respect
thereto.
SUBJECT TO THE TERMS OF THE OFFER TO PURCHASE, THIS LETTER OF TRANSMITTAL
SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND PAYMENT OF CONSIDERATION
PURSUANT TO THE OFFER SHALL NOT BE MADE, UNTIL THE ENERGY GROUP ADRs EVIDENCING
THE ENERGY GROUP ADSs IN RESPECT OF WHICH THE OFFER IS BEING ACCEPTED AND ALL
OTHER REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US DEPOSITARY AS PROVIDED
IN THE OFFER TO PURCHASE AND THIS LETTER OF TRANSMITTAL.
5
<PAGE>
/ / CHECK HERE IF ANY OF THE ENERGY GROUP ADRs REPRESENTING ENERGY GROUP ADSs
THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION 12.
Number of Energy Group ADSs represented by the lost, stolen or destroyed
Energy Group ADRs: _______
<TABLE>
<S> <C>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
/ / Check box ONLY if the check for the purchase price with / / Check box ONLY if the check for the purchase price with
respect to Energy Group ADSs purchased is to be issued in respect to Energy Group ADSs purchased and/or Energy Group ADRs
the name of someone other than the undersigned. evidencing Energy Group ADSs in respect of which the Offer
is not accepted or which are not purchased are to be
mailed to someone other than the undersigned, or to the
undersigned at an address other than that shown above.
Issue to:
Name
(PLEASE PRINT)
Address Mail / / Check / / ADR certificates to:
(INCLUDE ZIP CODE) Name
(PLEASE PRINT)
(TAX IDENTIFICATION OR SOCIAL SECURITY NO.) Address
(SEE SUBSTITUTE FORM W-9 INCLUDED HEREIN)
(INCLUDE ZIP CODE)
</TABLE>
POUNDS STERLING PAYMENT ELECTION
/ / Check box ONLY if you wish to receive all (but not part) of the amount of
cash consideration to be paid by a check in pounds sterling. If you do
not check this box you will receive payment by a check in US dollars and
the relevant payment agent (either the US Depositary or the UK Receiving
Agent) will arrange for the conversion of the pound sterling amounts
payable to you to US dollars at the exchange rate obtainable by the
relevant payment agent on the spot market in London at approximately noon
(London time) on the date the cash consideration is made available by
PacifiCorp Acquisitions to the relevant payment agent for delivery to
holders of Energy Group ADSs.
6
<PAGE>
- --------------------------------------------------------------------------------
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
____________________________________________________________________________
____________________________________________________________________________
(SIGNATURE(S) OF OWNER(S))
Dated: ________________________________________________________________ 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Energy Group ADR(s) evidencing the Energy Group ADS(s) or by person(s) to
whom Energy Group ADR(s) surrendered have been assigned and transferred, as
evidenced by endorsement, stock powers and other documents transmitted
herewith. If signature is by any trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or others acting in a fiduciary
or representative capacity, please set forth the following and see
Instruction 5.)
Name(s) ____________________________________________________________________
______________________________________
(PLEASE TYPE OR PRINT)
Capacity (full title) ______________________________________________________
Address ____________________________________________________________________
______________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone Number _____________________________________________
Tax Identification or
Social Security No. ________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature _______________________________________________________
Name _______________________________________________________________________
(PLEASE TYPE OR PRINT)
Title ______________________________________________________________________
Name of Firm _______________________________________________________________
Address ____________________________________________________________________
Area Code and Telephone No. ________________________________________________
Dated: _____________________________________________________________________
- --------------------------------------------------------------------------------
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on the Letter
of Transmittal if (a) the Letter of Transmittal is signed by the registered
holder(s) of the Energy Group ADSs evidenced by Energy Group ADRs in respect of
which the Offer is being accepted herewith and such holder(s) have not completed
either the box entitled "Special Payment Instructions" or the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (b) the Offer
is being accepted in respect of such Energy Group ADSs for the account of an
Eligible Institution. In all other cases, all signatures on this Letter of
Transmittal must be guaranteed by a financial institution (including most banks,
savings and loan associations and brokerage houses) which is a participant in
the Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Program, or the Stock Exchange Medallion Program (an "Eligible
Institution"). See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND ADSS. This Letter of Transmittal is
to be completed either if Energy Group ADRs evidencing Energy Group ADSs are to
be forwarded herewith or if delivery is to be made by book-entry transfer to an
account maintained by the US Depositary at a Book-Entry Transfer Facility
pursuant to the procedures for book-entry transfer set out in "Procedures for
Tendering Energy Group ADSs--Book-Entry Transfer" in Part B of Appendix I to the
Offer to Purchase. Energy Group ADRs evidencing Energy Group ADSs or
confirmation of a book-entry transfer of such Energy Group ADSs into the US
Depositary's account at a Book-Entry Transfer Facility, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees and any other documents required
by this Letter of Transmittal, must be delivered to the US Depositary at one of
its addresses set forth herein.
Energy Group ADS holders whose Energy Group ADRs are not immediately
available or who cannot deliver their Energy Group ADRs and all other required
documents to the US Depositary or complete the procedures for book-entry
transfer prior to the expiration of the Subsequent Offer Period may accept the
Offer with respect to their Energy Group ADSs by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery
procedures set out in "Procedures for Tendering Energy Group ADSs--Guaranteed
Delivery" in Part B of Appendix I to the Offer to Purchase. Pursuant to the
guaranteed delivery procedures: (a) acceptance must be made by or through an
Eligible Institution; (b) a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by PacifiCorp
Acquisitions must be received by the US Depositary prior to the expiration of
the Subsequent Offer Period; and (c) the Energy Group ADRs evidencing the Energy
Group ADSs in respect of which the Offer is being accepted (or, in the case of
Energy Group ADSs held in book-entry form, timely confirmation of the book-entry
transfer of such Energy Group ADSs into the US Depositary's account at a
Book-Entry Transfer Facility as described in the Offer to Purchase) together
with a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees and any other documents required
by this Letter of Transmittal, are received by the US Depositary within three
business days after the date of execution of such Notice of Guaranteed Delivery.
For these purposes, a "business day" is any day on which the New York Stock
Exchange is open for business.
THE METHOD OF DELIVERY OF ENERGY GROUP ADSS EVIDENCED BY ENERGY GROUP ADRS
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF
ENERGY GROUP ADSS ACCEPTING THE OFFER. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent acceptance will be accepted and no
fractional Energy Group ADSs will be purchased. All accepting Energy Group ADS
holders, by execution of this Letter of Transmittal (or facsimile thereof),
waive any right to receive any notice of the acceptance of their Energy Group
ADSs for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the serial
numbers of the certificates and/or the number of Energy Group ADSs should be
listed on a separate schedule attached hereto.
4. PARTIAL ACCEPTANCES (NOT APPLICABLE TO BOOK-ENTRY TRANSFERS). If the
Offer is to be accepted in respect of less than all of the Energy Group ADSs
evidenced by any Energy Group ADRs delivered to the US Depositary herewith, fill
in the number of Energy Group ADSs in respect of which the Offer is being
accepted in the box entitled "Number of ADSs Tendered". In such case, a new
Energy Group ADR for the remainder of the Energy Group ADSs (in respect of which
the Offer is not being accepted) represented by the old Energy Group ADR will be
sent to the registered holder as promptly as practicable following the date on
which the Energy Group ADSs in respect of which the Offer has been accepted are
purchased.
8
<PAGE>
The Offer will be deemed to have been accepted in respect of all Energy
Group ADSs evidenced by Energy Group ADRs delivered to the US Depositary unless
otherwise indicated. In the case of partial acceptances, Energy Group ADSs in
respect of which the Offer was not accepted will not be reissued to a person
other than the registered holder.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the Energy
Group ADSs in respect of which the Offer is being accepted hereby, the
signature(s) must correspond with the name(s) as written on the face of the
certificates without any change whatsoever.
If any of the Energy Group ADSs evidenced by Energy Group ADRs in respect of
which the Offer is being accepted hereby are owned of record by two or more
owners, all such owners must sign this Letter of Transmittal.
If any of the Energy Group ADSs in respect of which the Offer is being
accepted are registered in different names on different Energy Group ADRs, it
will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of Energy Group ADRs.
If this Letter of Transmittal or any Energy Group ADRs or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to PacifiCorp Acquisitions of their authority so to act must be
submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
Energy Group ADSs listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless payment of the purchase price is to
be issued to a person other than the registered holder(s). Signatures on such
Energy Group ADRs or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Energy Group ADSs listed, the Energy Group ADRs must
be endorsed or accompanied by appropriate stock powers signed exactly as the
names(s) of the registered holder(s) appear(s) on the Energy Group ADRs
evidencing such Energy Group ADSs. Signatures on such Energy Group ADRs or stock
powers must be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. PacifiCorp Acquisitions will pay or cause to be
paid any stock transfer taxes with respect to the transfer and sale to it or its
order of Energy Group ADSs evidenced by Energy Group ADRs pursuant to the Offer.
If, however, payment of the purchase price is to be made to any persons other
than the registered holder(s), or if Energy Group ADSs in respect of which the
Offer is being accepted are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock transfer
taxes (whether imposed on the registered holder(s) or such person(s) payment on
account of the transfer to such person) will be deducted from the purchase price
unless satisfactory evidence of the payment of such taxes or exemption therefrom
is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Energy Group ADRs listed in this Letter
of Transmittal.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for the purchase
price is to be issued in the name of a person other than the signer of this
Letter of Transmittal or if the check for the purchase price is to be sent
and/or any Energy Group ADRs evidencing Energy Group ADSs in respect of which
the Offer is not being accepted or which are not purchased are to be returned to
a person other than the signer of this Letter of Transmittal or to an address
other than that shown on the reverse, the boxes labeled "Special Payment
Instructions" and/or "Special Delivery Instructions" on this Letter of
Transmittal should be completed.
8. POUNDS STERLING PAYMENT ELECTION. If the check for the purchase price is
to be issued in pounds sterling, please check the box marked "Pounds Sterling
Payment Election". If you do not check such box all pound sterling amounts
payable pursuant to the Offer will be converted by the relevant payment agent
(either the US Depositary or the UK Receiving Agent) into US dollars at the
exchange rate obtainable by the relevant payment agent on the spot market in
London at approximately noon (London time) on the date the cash consideration is
made available by PacifiCorp Acquisitions to the relevant payment agent for
delivery to holders of Energy Group ADSs.
9. WAIVER OF CONDITIONS. PacifiCorp Acquisitions reserves the absolute right
in its sole discretion to waive any of the specified conditions of the Offer, in
whole or in part, to the extent permitted by applicable law and the rules of the
City Code.
9
<PAGE>
10. 31% U.S. BACKUP WITHHOLDING. In order to avoid "backup withholding" of
US federal income tax on any cash payment received upon the surrender of Energy
Group ADSs pursuant to the Offer, an Energy Group ADS holder must, unless an
exemption applies, provide the US Depositary with his or her correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9 on this Letter of
Transmittal and certify, under penalties of perjury, that such number is correct
and that he or she is not subject to backup withholding. If the correct TIN is
not provided, a $50 penalty may be imposed by the Internal Revenue Service and
cash payments made in exchange for the surrendered Energy Group ADSs may be
subject to backup withholding. If backup withholding applies, the US Depositary
is required to withhold 31% of any payment made pursuant to the Offer.
Backup withholding is not an additional US federal income tax. Rather, the
US federal income tax liability of persons subject to back-up withholding will
be reduced by the amount of such tax withheld. If backup withholding results in
an overpayment of taxes, a refund may be applied for from the Internal Revenue
Service.
The TIN that is to be provided on the Substitute Form W-9 is that of the
registered holder(s) of the Energy Group ADSs or of the last transferee
appearing on the transfers attached to, or endorsed on, the Energy Group ADSs.
The TIN for an individual is his or her social security number. Each tendering
Energy Group ADS holder generally is required to notify the US Depositary of his
or her correct TIN by completing the Substitute Form W-9 contained herein,
certifying that the TIN provided on Substitute Form W-9 is correct (or that such
holder is awaiting a TIN), and that (1) such holder has not been notified by the
Internal Revenue Service that such holder is subject to backup withholding as a
result of a failure to report all interest or dividends, or (2) the Internal
Revenue Service has notified such holder that such holder is no longer subject
to backup withholding (see Part III of Substitute Form W-9). Notwithstanding
that the "TIN Applied For" box is checked (and the Certification is completed),
the US Depositary will withhold 31% on any cash payment of the purchase price
for the Energy Group ADSs made prior to the time it is provided with a properly
certified TIN.
Exempt persons (including among others, corporations) are not subject to
back-up withholding. A foreign individual or foreign entity may qualify as an
exempt person by submitting a statement (on Form W-8), signed under penalties of
perjury, certifying such person's foreign status. Form W-8 can be obtained from
the US Depositary. An Energy Group ADS holder should consult his or her tax
advisor as to his or her qualification for an exemption from backup withholding
and the procedure for obtaining such exemption.
For additional guidance, see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the US Depositary at the address and telephone number set forth
above, to the Information Agent or the Dealer Manager at the addresses and
telephone numbers set forth below, or to the UK Receiving Agent at the
appropriate address and telephone number set forth in the Offer to Purchase.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Energy Group ADR
evidencing Energy Group ADSs has been lost, destroyed or stolen, the holder
thereof should promptly notify the US Depositary by checking the box immediately
preceding the special payment/special delivery instructions boxes and indicating
the number of Energy Group ADSs evidenced by such lost, destroyed or stolen
Energy Group ADRs. The holder thereof will then be instructed as to the steps
that must be taken in order to replace such Energy Group ADRs. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost, destroyed or stolen Energy Group ADRs have been followed.
13. HOLDERS OF ENERGY GROUP SHARES NOT REPRESENTED BY ENERGY GROUP ADSS.
Holders of Energy Group Shares have been sent a Form of Acceptance with the
Offer to Purchase and may not accept the Offer in respect of Energy Group Shares
pursuant to this Letter of Transmittal except insofar as those shares are
represented by Energy Group ADSs. If any holder of Energy Group Shares which are
not represented by Energy Group ADSs needs to obtain a copy of a Form of
Acceptance, such holder should contact the UK Receiving Agent at the appropriate
address and telephone number set forth in the Offer to Purchase or the US
Depositary.
10
<PAGE>
PAYER'S NAME: CONTINENTAL STOCK TRANSFER & TRUST COMPANY, AS DEPOSITARY AGENT
<TABLE>
<CAPTION>
<S> <C>
SUBSTITUTE PART I--Taxpayer Identification Number (TIN)
FORM W-9 Please enter your correct number in the appropriate box below. NOTE: If the account is
DEPARTMENT OF THE TREASURY more than one name, see the chart on the enclosed form, Guidelines for Certification
INTERNAL REVENUE SERVICE of Taxpayer Identification Number on Substitute Form W-9, for guidance on which number
to enter.
PAYER'S REQUEST FOR Social Security Number Or Employer Identification Number
TAXPAYER IDENTIFICATION ---------------------------- ----------------------------
NUMBER AND CERTIFICATION If you do not have a TIN, see the instructions "How to Get a TIN" and check the box
below.
TIN Applied For / /
PART II--For Payees Exempt from Backup Withholding (see instructions)
PART III CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me),
and
(2) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the
Internal Revenue Service (IRS) that I am subject to backup withholding as a result of a failure to report all interest and
dividends, or (c) IRS has notified me that I am no longer subject to backup withholding, and
(3) All other information provided on this form is true, correct and complete.
Certification Instructions. You must cross out Item (2) above if you have been notified by IRS that you are currently subject to
backup withholding because you have failed to report all interest and dividends on your tax return. Please indicate the taxpayer's
name associated with the TIN if other than the first name appearing in the registration:
(X) ----------------------------
(Please Print)
Please Sign (X) Signature(s) -------------------------------------- Date -------------------
</TABLE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF
ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE>
THE INFORMATION AGENT FOR THE OFFER IS:
SHAREHOLDER COMMUNICATIONS CORPORATION
17 State Street, 27th Floor
New York, New York 10004
Call: (800) 733-8481, ext. 475 (Toll Free)
THE DEALER MANAGER FOR THE OFFER IS:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(212) 902-1000 within New York City
(800) 323-5678 (Toll Free) outside New York City
12
<PAGE>
Exhibit 99(a)(3)
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THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. When
considering the action you should take, you are recommended immediately to seek
your own financial advice from your stockbroker, bank manager, solicitor,
accountant or other independent financial adviser authorised under the Financial
Services Act 1986.
This document should be read in conjunction with the accompanying Offer
Document dated 6 February 1998 from Goldman Sachs International (the Offer
Document).
If you have sold or otherwise transferred all your Energy Group Shares,
please send this Form of Acceptance (but NOT if it is personalised), together
with the accompanying Offer Document and reply-paid envelope, as soon as
possible, to the purchaser or transferee, or to the stockbroker, bank or other
agent through whom the sale or transfer was effected for onward transmission to
the purchaser or transferee. However, such documents should not be forwarded or
transmitted in or into Canada, Australia or Japan.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan and neither this Form of Acceptance nor the accompanying
Offer Document is being mailed or otherwise distributed or sent in or into
Canada, Australia or Japan. All persons (including nominees, trustees and
custodians) who would, or otherwise intend to, forward this Form of Acceptance
and the accompanying Offer Document must not distribute or send them in, into or
from Canada, Australia or Japan, and doing so may render invalid any related
purported acceptance of the Offer. Further details in this regard are set out in
paragraph 8 of Part B of Appendix I to the accompanying Offer Document. To
accept the Offer, holders of Energy Group ADSs must complete the Letter of
Transmittal (rather than the Form of Acceptance) in accordance with the
instructions printed on it.
The Loan Notes to be issued pursuant to the Offer have not been, and will
not be, registered under the United States Securities Act of 1933, as amended,
or under any relevant securities laws of any state or district of the United
States, will not be the subject of a prospectus under the securities laws of any
province of Canada and will not be registered under any relevant securities laws
of any other country. The Loan Notes are not being offered, sold or delivered,
directly or indirectly, in or into the United States, Canada, Australia or
Japan.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before completing this Form.
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FORM OF ACCEPTANCE, AUTHORITY AND ELECTION
PACIFICORP LOGO
RENEWED RECOMMENDED CASH OFFER
by
GOLDMAN SACHS INTERNATIONAL
on behalf of
PACIFICORP ACQUISITIONS
a wholly-owned subsidiary of PacifiCorp
for
THE ENERGY GROUP PLC
- ------------------------------------------------------------------------------
Unless the context otherwise requires, the definitions contained in the
Offer Document also apply in this Form of Acceptance (the Form).
ACTION TO BE TAKEN
-- To accept the Offer, complete page 3 of this Form, following the
instructions and notes for guidance set out on pages 2 and 4.
-- Return this Form, duly completed and signed and, if your Energy Group
Shares are in certificated form, accompanied by your share
certificate(s) and/or other document(s) of title, by hand or by post
to New Issues Department, IRG plc, PO Box 166, Bourne House, 34
Beckenham Road, Beckenham, Kent BR3 4TH or by hand (during normal
business hours only) to IRG plc, 23 Ironmonger Lane, London EC2, as
soon as possible but, in any event, so as to be received by no later
than 10.00 p.m. (London time), 5.00 p.m. (New York City time) on 9
March 1998. A reply-paid envelope is enclosed (for use within the
United Kingdom and the United States only) for you to lodge documents
by post.
-- If your Energy Group Shares are in uncertificated form (that is, if
you do not have a paper share certificate because your shares are
held in CREST), you should return this Form and take the action
described in Part B (in particular, paragraphs 10(d)-10(l)) of
Appendix I to the Offer Document to transfer your Energy Group Shares
to an escrow balance. For this purpose, the participant ID of the
Escrow Agent, IRG plc, in its capacity as a CREST receiving agent, is
RA10, the member account ID of the Escrow Agent is ENERGY and the
Form of Acceptance Reference Number of this Form (for insertion in
the first eight characters of the shared note field on the TTE
instruction) is shown next to Box 5 on page 3 of this Form. You
should ensure that the transfer to escrow settles not later than
10.00 p.m. (London time), 5.00 p.m. (New York City time) on 9 March
1998. If you are a CREST sponsored member, you should refer to your
CREST sponsor before completing this Form.
-- If you hold Energy Group Shares in both certificated and
uncertificated form (that is, in CREST), you should complete a
separate Form for each holding. If you hold Energy Group Shares in
uncertificated form, but under different member account IDs, you
should complete a separate Form in respect of each member account ID.
Similarly, if you hold Energy Group Shares in certificated form, but
under different designations, you should complete a separate Form in
respect of each designation. You can obtain further Forms by
contacting IRG plc on telephone number 0181 639 2166.
-- If your Energy Group Shares are in certificated form and your share
certificate(s) and/or other document(s) of title are with your bank,
stockbroker or other agent and your share certificate(s) and/ or
other document(s) of title are readily available, you should complete
and sign this Form and arrange for it to be lodged by such agent with
the relevant document(s). If your share certificate(s) and/or other
document(s) of title is/are not readily available, please read Note 6
on page 4 of this Form.
-- If you hold Energy Group Shares jointly with others, you must arrange
for all your co-holders to sign this Form.
-- Any Form which is received in an envelope postmarked in, or which
appears to PacificCorp Acquisitions or its agents to have been sent
from Canada, Australia or Japan may be treated as invalid.
-- Please read Part B of Appendix I to the Offer Document, the
provisions of which form part of this Form.
-- If you require assistance on how to complete this Form, please
contact New Issues Department, IRG plc on telephone number 0181 639
2166.
-- If, however, you have any general queries about the Offer,
please contact the PacifiCorp Helpline on telephone number 0845 603
9218.
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<PAGE>
Page 2
Instructions for completing page 3 of this Form
The provisions of Part B of Appendix I to the Offer Document
form part of this Form
- ------------------------------------------------------------------------------
1. TO ACCEPT THE OFFER
To accept the Offer for your Energy Group Shares, insert in Box 1 the total
number of Energy Group Shares for which you wish to accept the Offer,
including any Energy Group Shares in respect of which you wish to make an
election for the Loan Note Alternative set out in Box 2.
You must sign Box 6 in the presence of a witness in accordance with the
instructions set out below, which will constitute your acceptance of the
Offer. If no number, or a number greater than your entire holding of
Energy Group Shares, is inserted in Box 1 and you have signed Box 6, you
will be deemed to have accepted the Offer in respect of your entire
holding of Energy Group Shares (being your entire holding, if your Energy
Group Shares are in certificated form, under the name(s) and address(es)
specified in Box 3 (or, if applicable, Box 4) or, if your Energy Group
Shares are in CREST, under the participant ID and member account ID
specified in Box 5). By accepting the Offer, you will be deemed (unless you
insert YES in Box 6) to give the warranties in paragraph 11(l) of Part B of
Appendix I to the Offer Document.
PLEASE ENSURE YOUR SHARE CERTIFICATE(S) AND/OR OTHER DOCUMENT(S) OF TITLE
ARE ENCLOSED.
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2. TO ELECT FOR THE LOAN NOTE ALTERNATIVE
If, but only if, you wish to elect for the Loan Note Alternative, you must
complete Box 2. When you have completed Box 1, insert in Box 2 the number
of Energy Group Shares in respect of which you wish to elect for the Loan
Note Alternative. If you insert a number in Box 2 which is greater than
the number inserted (or deemed to be inserted) in Box 1, you will be deemed
to have elected for the Loan Note Alternative in respect of the number
inserted (or deemed to be inserted) in Box 1. The Loan Note Alternative is
not available to persons entitled to participate in the Offer who are
citizens or residents of the United States. Please note that in order for
PacifiCorp Acquisitions to pay interest on the Loan Notes without the
United States withholding tax of 30 per cent., PacifiCorp Acquisitions may
need to receive a statement certifying that the beneficial owner of the
Loan Notes is not a United States person or, in the case of an individual,
not a citizen or resident of the United States. If you elect for the Loan
Note Alternative, you will be furnished with a United States Internal
Revenue Service Form W-8, if necessary, to enable you to make that
certification.
- ------------------------------------------------------------------------------
3.
- ------------------------------------------------------------------------------
4. Full name(s) and address(es) of registered shareholder(s)
If the details shown in Box 3 are not correct in all respects, please
complete Box 4 with the full name(s) and address of the first registered
holder and the name(s) of any joint holders in BLOCK CAPITALS. Please do
not complete Box 4 if details shown in Box 3 are correct in all respects.
Unless you complete Box 7, the address of the first-named holder shown in
Box 3 (or, if applicable, Box 4) is the address to which the payment of
the cash consideration and/or Loan Notes becoming due to you will be sent.
If you insert in Box 4 an address in Canada, Australia or Japan, you must
insert in Box 7 an alternative address outside Canada, Australia and Japan.
TELEPHONE NUMBER FOR QUERIES
Please enter a day-time telephone number (including STD code) where you can
be contacted in the event of any query arising from completion of this
Form. You must not insert a telephone number in Canada, Australia or Japan.
- ------------------------------------------------------------------------------
5. PARTICIPANT ID AND MEMBER ACCOUNT ID
If your Energy Group Shares are in CREST, you must insert in Box 5 the
participant ID and the member account ID under which such Shares are held
by you in CREST. You must also transfer (or procure the transfer of) the
Energy Group Shares concerned to an escrow balance, specifying in the TTE
instruction the participant ID and member account ID inserted in Box 5 and
the Form of Acceptance Reference Number of this Form and the other
information referred to in paragraph 10(f) of Part B of Appendix I to the
Offer Document. The Form of Acceptance Reference Number appears next to
Box 5 on page 3 of this Form.
- ------------------------------------------------------------------------------
6. SIGNATURES
To accept the Offer for your Energy Group Shares, you MUST SIGN Box ,
regardless of which other boxes you complete. In the case of joint
holders, ALL joint holders must sign Box . Each holder must sign in the
presence of a witness. The witness must be over 18 years of age and must
not be one of the registered joint holders. The same witness may witness
each signature of the registered joint holders. If the acceptance is not
made by the registered joint holder(s), insert the name(s) and
capacity(ies) (eg. executor) of the person(s) making the acceptance. A
company may either execute under seal, the seal being affixed and
witnessed in accordance with its Articles of Association or other
regulations or, if applicable, in accordance with section 36A of the
Companies Act 1985.
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7. ALTERNATIVE ADDRESS
If you want payment of the cash consideration, Loan Notes and/or other
documents to be sent to an address other than the address of the
first-named registered holder in Box 3 (or, if applicable, Box 4) (e.g.
the address of your bank manager or stockbroker), you should complete
Box 7 in BLOCK CAPITALS with the name of such person and the address (but
not in Canada, Australia or Japan). Box 7 must be completed by holders who
have completed Box 4 with an address in Canada, Australia or Japan.
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8. OVERSEAS PERSONS
If you are, or hold Energy Group Shares for, a citizen, resident or
national of a country other than the United Kingdom or United States,
please refer to paragraph 8 of Part B of Appendix I to the Offer
Document. If you are unable to give the warranties required by paragraph
11(l) of Part B of Appendix I to the Offer Document, you must put YES in
Box . If you do not put YES in Box 8, you will be deemed to have given
such warranties.
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9. US DOLLAR PAYMENT ELECTION
If, but only if, you want payment of the cash consideration in US dollars
(rather than in pounds sterling), you must put YES in Box 9. You may not
elect to receive payment of the cash consideration in US dollars and
pounds sterling. If you put YES in Box 9, you will receive the whole of
your cash consideration in US dollars. Details of the basis of payment in
US dollars is set out in paragraph 15(f) of the letter from Goldman Sachs
International in the Offer Document. Please note that any fluctuation in
the US dollar/pound sterling exchange rate will be at your risk.
Helplines:
If you require further assistance on completing this Form, please contact
New Issues Department, IRG plc on telephone number 0181 639 2166. If, however,
you have any general queries about the Offer, please contact the PacifiCorp
Helpline on telephone number 0845 603 9218.
<PAGE>
Page 3
Please complete in accordance with the instructions on page 2.
The notes on page 4 may assist you.
1. To accept the Offer for your Energy Group Shares, complete Box 1 and sign
Box 6 in the presence of a witness.
Please ensure that your share certificate(s) and/or other document(s) of
title are enclosed to cover the above number of shares.
Box 1
- ----------------------------------------------------------------------------
Total number of Energy Group Shares for which you wish to accept the Offer
- ----------------------------------------------------------------------------
2. To elect the Loan Note Alternative, complete Box 1 and Box 2 and sign
Box 6.
Box 2
- ----------------------------------------------------------------------------
Number of Energy Group Shares for which you
wish to elect the Loan Note Alternative
- ----------------------------------------------------------------------------
3.
4. Full name(s) and address(es) of registered shareholder(s) (only if the
details in Box 3 are not correct in all respects)
Box 4
First Registered Holder
1. Forename(s) ___________________________________________
Surname __________________________________________________
Address __________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
__________________________________________________________
Postcode _________________________________________________
Second Registered Holder
2. Forename(s) ___________________________________________
Surname __________________________________________________
Third Registered Holder
3. Forename(s) ___________________________________________
Surname __________________________________________________
Fourth Registered Holder
4. Forename(s) ___________________________________________
Surname __________________________________________________
In case of query, please state your day-time telephone number
(including STD code) _________________________________________
5. Participant ID and Member Account ID
Box 5
Complete this Box only if your Energy Group Shares are in CREST.
The Form of Acceptance Reference Number of this form is
Participant ID ____________________________________________
Member Account ID _________________________________________
6. Sign Here to Accept the Offer
Box 6
Signed and delivered as a deed by:
_______________________________________
1. First Registered Holder
_______________________________________
2. Second Registered Holder
_______________________________________
3. Third Registered Holder
_______________________________________
4. Fourth Registered Holder
Witnessed by:
_______________________________________
1. Name
_______________________________________
Signature
_______________________________________
2. Name
_______________________________________
Signature
_______________________________________
3. Name
_______________________________________
Signature
_______________________________________
4. Name
_______________________________________
Signature
_______________________________________
Address
_______________________________________
Address
_______________________________________
Address
_______________________________________
Address
IMPORTANT: Each registered holder who is an individual must SIGN in the
presence of a WITNESS (not being one of the registered joint holders) who
must be over 18 years of age and who must also SIGN and print his name and
address where indicated.
7. Address (outside Canada, Australia and Japan) to which payment of the
cash consideration, Loan Notes and/or other documents are to be sent (if
different to the address of the first-named holder in Box 3
(or, if applicable, Box 4).
(Complete in BLOCK CAPITALS)
Box 7
- --------------------------------------------------------------------------------
Name ___________________________________________________________________________
Address ________________________________________________________________________
__________________________________________ Postcode ____________________________
- --------------------------------------------------------------------------------
8. Overseas Person: Please put "YES" in Box 8 if you are UNABLE to give the
warranties set out in paragraph 11(l) of Part B of Appendix I to the Offer
Document.
Box 8 / /
9. US dollar payment election: Please put "YES" in Box 9 if, but only if, you
want to receive the whole of the payment of the cash consideration in
US dollars (rather than pounds sterling).
Box 9 / /
<PAGE>
Page 4
NOTES REGARDING THE COMPLETION AND LODGING OF THIS FORM
In order to avoid inconvenience to you and delay, the following points may
assist you.
1. If your name and/or other details are shown incorrectly in Box 3:
(a) If your name and/or other details as shown in Box 3 are incorrect, you
should write the correct details in Box 4 and lodge this Form with your
share certificate(s).
(b) If you have changed your name, lodge your marriage certificate or the
deed poll with this Form for noting.
(c) If you have changed your address, write the correct address in Box 4.
2. If you have sold or otherwise transferred all, or wish to sell part, of
your holding of Energy Group Shares:
If you have sold or otherwise transferred all your holding of Energy
Group Shares, you should at once send the accompanying Offer Document and
reply-paid envelope (but NOT this Form if it is personalised) to the
purchaser or transferee or to the stockbroker, bank or other agent
through whom you made the sale or transfer for delivery to the purchaser
or transferee. If your Energy Group Shares are in certificated form, and
you wish to sell or otherwise transfer part of your holding of Energy
Group Shares and wish to accept the Offer in respect of the balance but
are unable to obtain the balance certificate by 9 March 1998, you should
ensure that the stockbroker or other agent through whom you make the sale
or transfer obtains the appropriate endorsement or indication, signed on
behalf of Lloyds Bank Registrars, in respect of the balance of your
holding of Energy Group Shares.
3. If a holder is away from home (e.g. abroad or on holiday):
Send this Form by the quickest means (e.g. airmail), but not in or
into Canada, Australia or Japan, to the holder for execution or, if he
has executed a power of attorney, lodge this Form with IRG plc, at one of
the addresses given on page 1 of this Form, after it has been signed by
the attorney. In the latter case, the attorney should sign in the
presence of a witness who should also sign this Form and the original
power of attorney (or a copy thereof duly certified in accordance with
the Powers of Attorney Act 1971) must be lodged with this Form for
noting. No other signatures are acceptable. The power of attorney will be
returned as directed.
4. If the sole holder has died:
A grant of probate or letters of administration must be taken out in
respect of the relevant Energy Group Shares. If the grant of probate or
letters of administration has/have been registered with Lloyds Bank
Registrars, this Form must be signed by the personal representative(s) of
the deceased holder, each in the presence of a witness who must also sign
this Form. This Form should then be lodged with IRG plc, at one of the
addresses given on page 1 of this Form, together with the relevant share
certificate(s) and/or other document(s) of title. If the grant of probate
or letters of administration has/have not been registered with Lloyds
Bank Registrars, the personal representative(s) or the prospective
personal representative(s) should sign this Form, each in the presence of
a witness who must also sign this Form and forward it to IRG plc with the
relevant share certificate(s) and/or other document(s) of title. However,
the grant of probate or letters of administration must be lodged with IRG
plc at one of the addresses given on page 1 of this Form, before the
consideration due under the Offer can be forwarded to the personal
representative(s).
5. If one of the joint holders has died:
This completed Form should be signed by all the surviving holders, each
in the presence of a witness, who must also sign this Form. This Form
should then be lodged with IRG plc, at one of the addresses given on page
1 of this Form, with the relevant share certificate(s) and/or other
documents(s) of title and accompanied by the death certificate or the
grant of probate or letters of administration in respect of the deceased
joint holder. These documents will be noted by IRG plc and returned as
directed.
6. If your Energy Group Shares are in certificated form and the
certificate(s) are held by your stockbroker, bank or other agent:
If your share certificate(s) and/or other document(s) of title is/are
with your stockbroker, bank or other agent, you should complete this Form
and, if the certificate(s) and/or other document(s) of title is/ are
readily available, arrange for this Form to be lodged by such agent with
IRG plc at one of the addresses given on page 1 of this Form, accompanied
by the share certificate(s) and/or other document(s) of title.
If your share certificate(s) and/or other documents of title is/are not
readily available, complete, sign and lodge this Form with IRG plc at one
of the addresses given on page 1 of this Form, together with a letter
stating that the balance will follow and any available share
certificate(s) and/or other document(s) of title, and then arrange for
the outstanding share certificate(s) and/or other document(s) of title to
be forwarded as soon as possible thereafter. (It will be helpful for your
agent to be informed of the full terms of the Offer.) No acknowledgement
of receipt of documents will be given.
7. If your Energy Group Shares are in certificated form and any share
certificate has been lost:
This completed Form, together with any share certificate(s) and/or other
document(s) of title which may be available, should be lodged with IRG
plc, at one of the addresses given on page 1 of this Form, accompanied by
a letter stating that you have lost one or more of your share
certificate(s) and/or other document(s) of title, no later than 10.00
p.m. (London time), 5.00 p.m. (New York City time) on 9 March 1998. You
should write as soon as possible to Lloyds Bank Registrars at The
Causeway, Goring-by-Sea, Worthing, West Sussex BN99 6DA, for a letter of
indemnity which, when completed in accordance with the instructions
given, should be returned to IRG plc, at one of the addresses given on
page 1 of this Form. No acknowledgement of receipt of documents will be
given.
8. If your Energy Group Shares are in CREST:
You should take the action described in Part B (in particular, paragraphs
10(d)-10(l)) of Appendix I to the Offer Document to transfer your Energy
Group Shares to an escrow balance. You are reminded to keep a record of
the Form of Acceptance Reference Number (which appears next to Box 5 on
page 3 of this Form) so that such Number can be inserted in the TTE
instruction.
If you are a CREST sponsored member, you should refer to your CREST
sponsor before completing this Form, as only your CREST sponsor will be
able to send the necessary TTE instruction to CRESTCo.
9. If you are not resident in the United Kingdom or the United States:
The attention of Energy Group shareholders not resident in the United
Kingdom or the United States is drawn to paragraph 8 of Part B of
Appendix I to the Offer Document.
Subject to the City Code, PacifiCorp Acquisitions reserves the right to
treat as valid, in whole or in part, any acceptance of the Offer which is
not entirely in order or which is not accompanied by (as applicable) the
relevant transfer to escrow or the relevant share certificate(s) and/or
other document(s) of title, or which is received by it at a place or
places other than set out on this Form. In that event, no payment of cash
or issue of Loan Notes under the Offer will be made until after (as
applicable) the relevant transfer to escrow has settled or the relevant
share certificate(s) and/or other document(s) of title or indemnities
satisfactory to PacifiCorp Acquisitions have been received.
HELPLINES
If you require further assistance on completing this Form, please contact
New Issues Department, IRG plc on telephone number 0181 639 2166. If, however,
you have any general queries about the Offer, please contact the PacifiCorp
Helpline on telephone number 0845 603 9218.
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. In considering
what action you should take, you are recommended immediately to seek your own
financial advice from your stockbroker, bank manager, solicitor, accountant or
other independent financial advisor.
If you have sold or otherwise transferred all your American Depositary Shares
("Energy Group ADSs") of The Energy Group PLC ("The Energy Group"), please pass
this document and all accompanying documents as soon as possible to the
purchaser or transferee, or to the bank, stockbroker or other agent through whom
the sale or transfer was effected for transmission to the purchaser or
transferee. HOWEVER, SUCH DOCUMENTS SHOULD NOT BE DISTRIBUTED, FORWARDED OR
TRANSMITTED IN OR INTO AUSTRALIA, CANADA OR JAPAN.
Goldman Sachs International is acting for PacifiCorp Acquisitions and PacifiCorp
in relation to the Offer and no one else, and will not be responsible to anyone
other than PacifiCorp Acquisitions and PacifiCorp for providing the protections
afforded to customers of Goldman Sachs International nor for providing advice in
relation to the Offer. Goldman Sachs International is acting through Goldman,
Sachs & Co. for the purpose of making the Offer in the United States.
- --------------------------------------------------------------------------------
NOTICE OF GUARANTEED DELIVERY
TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
THE ENERGY GROUP PLC
PURSUANT TO THE OFFER TO PURCHASE DATED FEBRUARY 6, 1998
BY
GOLDMAN SACHS INTERNATIONAL
ON BEHALF OF
PACIFICORP ACQUISITIONS
(A WHOLLY OWNED SUBSIDIARY OF PACIFICORP)
- --------------------------------------------------------------------------------
As set forth in "Procedures for Tendering Energy Group ADSs" in Part B of
Appendix I to the Offer to Purchase, this form or one substantially equivalent
hereto must be used for acceptance of the Offer in respect of Energy Group ADSs,
if American Depositary Receipts evidencing Energy Group ADSs ("Energy Group
ADRs") are not immediately available or the procedures for book-entry transfer
cannot be completed on a timely basis or if time will not permit all required
documents to reach the US Depositary prior to the expiration of the Subsequent
Offer Period (as defined in the Offer to Purchase). Such form may be delivered
by hand or mailed to the US Depositary and must include a signature guarantee by
an Eligible Institution in the form set out herein. See "Procedures for
Tendering Energy Group ADSs--Guaranteed Delivery" in Part B of Appendix I to the
Offer to Purchase.
- --------------------------------------------------------------------------------
TO: CONTINENTAL STOCK TRANSFER & TRUST COMPANY, US DEPOSITARY
<TABLE>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
(FOR ELIGIBLE INSTITUTIONS ONLY) COURIER:
Continental Stock Transfer & (212) 248-8495 Continental Stock Transfer &
Trust Company Trust Company
c/o Shareholder Communications FOR INFORMATION TELEPHONE: c/o Shareholder
Corporation (800) 733-8481, ext. 475 Communications
Corporation
17 State Street, 24th Floor 17 State Street, 24th Floor
New York, NY 10004 New York, NY 10004
Attn: Tenders & Exchanges Attn: Tenders & Exchanges
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE DOES NOT
CONSTITUTE A VALID DELIVERY.
<PAGE>
This form is not to be used to guarantee signatures. If a signature or a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
ACCEPTANCE OF THE OFFER IN RESPECT OF ENERGY GROUP SHARES (EXCEPT INSOFAR AS
THEY ARE REPRESENTED BY ENERGY GROUP ADSS) MAY NOT BE MADE WITH THIS FORM AND
PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES.
Ladies and Gentlemen:
The undersigned hereby accepts the Offer in respect of Energy Group ADSs
upon the terms and subject to the conditions set forth below pursuant to the
guaranteed delivery procedure set out in "Procedures for Tendering Energy Group
ADSs--Guaranteed Delivery" in Part B of Appendix I to the Offer to Purchase.
THE UNDERSIGNED UNDERSTANDS THAT THE ACCEPTANCE OF THE OFFER IN RESPECT OF
ENERGY GROUP ADSS PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES WILL NOT BE
TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE
CONDITION. SEE "PROCEDURES FOR TENDERING ENERGY GROUP ADSS--GUARANTEED DELIVERY"
IN PART B OF APPENDIX I TO THE OFFER TO PURCHASE. TO BE COUNTED TOWARDS
SATISFACTION OF THE ACCEPTANCE CONDITION, THE ENERGY GROUP ADRS EVIDENCING SUCH
ENERGY GROUP ADSS MUST, PRIOR TO THE INITIAL CLOSING DATE, BE RECEIVED BY THE US
DEPOSITARY OR, IF APPLICABLE, TIMELY CONFIRMATION OF A BOOK-ENTRY TRANSFER OF
SUCH ENERGY GROUP ADSS INTO THE US DEPOSITARY'S ACCOUNT AT A BOOK-ENTRY TRANSFER
FACILITY PURSUANT TO THE PROCEDURES SET OUT IN "PROCEDURES FOR TENDERING ENERGY
GROUP ADSS--BOOK-ENTRY TRANSFER" IN PART B OF APPENDIX I TO THE OFFER TO
PURCHASE MUST BE RECEIVED BY THE US DEPOSITARY, TOGETHER WITH A DULY EXECUTED
LETTER OF TRANSMITTAL OR FACSIMILE THEREOF WITH ANY REQUIRED SIGNATURE
GUARANTEES AND ANY OTHER REQUIRED DOCUMENTS.
<TABLE>
<S> <C>
Signature(s): Address(es):
(Include Zip Code)
Name of Record Holder(s): Area Code(s) and Tel. No(s).:
If Energy Group ADSs will be tendered by
book-entry transfer, check one box:
(Please Type or Print) / / The Depository Trust Company
Number of Energy Group ADSs: / / Philadelphia Depository Trust Co.
Energy Group ADR No.(s) (if available): Account Number:
Dated:
</TABLE>
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock Exchanges
Medallion Program, hereby guarantees that the undersigned will deliver to the US
Depositary either the Energy Group ADRs representing the Energy Group ADSs with
respect to which the Offer is being accepted hereby, in proper form for
transfer, or confirmation of the book-entry transfer of such Energy Group ADSs
into the US Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company, in any such case together with a properly
completed and duly executed Letter of Transmittal (or manually signed facsimile
thereof), with any required signature guarantees and any other required
documents, all within three New York Stock Exchange trading days after the date
hereof.
<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Name of Firm, Agent or Trustee (Authorized Signature)
- -------------------------------------------- Name:
Address (Please type or print)
- -------------------------------------------- Title:
(Zip Code)
Area Code and Tel. No.: Date:
</TABLE>
NOTE: DO NOT SEND ENERGY GROUP ADRS WITH THIS FORM; ENERGY GROUP ADRS SHOULD BE
SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO AUSTRALIA,
CANADA OR JAPAN.
RECOMMENDED CASH OFFER FOR
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
THE ENERGY GROUP PLC
BY
GOLDMAN SACHS INTERNATIONAL
ON BEHALF OF
PACIFICORP ACQUISITIONS
(A WHOLLY OWNED SUBSIDIARY OF PACIFICORP)
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 PM (LONDON
TIME), 5:00 PM (NEW YORK CITY TIME) ON MARCH 9, 1998, UNLESS EXTENDED. AT THE
CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL
CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED,
WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14
CALENDAR DAYS. HOLDERS OF ENERGY GROUP SECURITIES WILL HAVE WITHDRAWAL RIGHTS
DURING THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING
THE SUBSEQUENT OFFER PERIOD.
February 6, 1998
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Goldman, Sachs & Co. has been appointed by PacifiCorp Acquisitions to act as
dealer manager in the United States (the "Dealer Manager") in connection with an
offer by Goldman Sachs International, on behalf of PacifiCorp Acquisitions, to
purchase, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated February 6, 1998 (the "Offer to Purchase") and the accompanying
Acceptance Forms (collectively, the "Offer"), all outstanding ordinary shares of
10p each ("Energy Group Shares") of The Energy Group PLC ("The Energy Group")
for L7.65 in cash per Energy Group Share, including all American Depositary
Shares ("Energy Group ADSs") of The Energy Group, each representing four Energy
Group Shares and evidenced by American Depositary Receipts ("Energy Group
ADRs"), for L30.60 in cash per Energy Group ADS.
THE BOARD OF THE ENERGY GROUP, WHICH HAS BEEN SO ADVISED BY LAZARD BROTHERS
& CO., LIMITED, LAZARD FRERES & CO. LIMITED (TOGETHER "LAZARD") AND MORGAN
STANLEY & CO. LIMITED ("MORGAN STANLEY"), ITS FINANCIAL ADVISERS, CONSIDERS THE
TERMS OF THE OFFER TO BE FAIR AND REASONABLE. IN PROVIDING ADVICE TO THE BOARD
OF THE ENERGY GROUP, LAZARD AND MORGAN STANLEY HAVE TAKEN ACCOUNT OF THE BOARD'S
COMMERCIAL ASSESSMENT OF THE OFFER. ACCORDINGLY, THE DIRECTORS OF THE ENERGY
GROUP UNANIMOUSLY RECOMMEND ALL HOLDERS OF ENERGY GROUP SECURITIES TO ACCEPT THE
OFFER, AS THEY HAVE IRREVOCABLY UNDERTAKEN TO DO IN RESPECT OF THEIR PERSONAL
HOLDINGS OF ENERGY GROUP SECURITIES.
<PAGE>
For your information and for forwarding to those of your clients for whom
you hold Energy Group ADSs registered in your name or in the name of your
nominee, we are enclosing the following documents:
1. The Offer to Purchase;
2. A printed form of letter that may be sent to your clients for whose
account you hold Energy Group ADSs registered in your name or in the name
of a nominee, with space provided for obtaining such clients'
instructions with regard to the Offer;
3. The Letter of Transmittal to be used by holders of Energy Group ADSs to
accept the Offer;
4. The Notice of Guaranteed Delivery;
5. Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9; and
6. The return envelope addressed to the US Depositary.
THE OFFER CANNOT BE ACCEPTED IN RESPECT OF ENERGY GROUP SHARES BY MEANS OF A
LETTER OF TRANSMITTAL. A FORM OF ACCEPTANCE FOR ACCEPTING THE OFFER IN RESPECT
OF ENERGY GROUP SHARES CAN BE OBTAINED FROM THE US DEPOSITARY OR THE UK
RECEIVING AGENT (AS EACH SUCH TERM IS DEFINED IN THE OFFER TO PURCHASE).
In all cases, payment for Energy Group ADSs purchased pursuant to the Offer
will be made only after timely receipt by the US Depositary of Energy Group ADRs
evidencing such Energy Group ADSs or a confirmation of book-entry transfer,
together with the Letter of Transmittal (or a facsimile copy thereof) properly
completed and duly executed, and any other documents required by the Letter of
Transmittal.
PacifiCorp Acquisitions will not pay any fees or commissions to any broker,
dealer, or other person (other than Goldman Sachs International, the Dealer
Manager, the US Depositary and the UK Receiving Agent and the Information Agent
as described in the Offer to Purchase) in connection with the solicitation of
acceptances of the Offer with respect to Energy Group ADSs evidenced by Energy
Group ADRs. You will, however, be reimbursed for customary mailing and handling
expenses incurred by you in forwarding the enclosed materials to your client.
Additional copies of the enclosed materials may be obtained from the Dealer
Manager or the Information Agent at their respective addresses and telephone
numbers set forth in the Offer to Purchase.
Terms defined in the Offer to Purchase shall have the same meanings in this
letter.
Very truly yours,
Goldman, Sachs & Co.
85 Broad Street
New York, NY 10004
(212) 902-1000 within New York City
(800) 323-5678 (Toll Free) outside New York City
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF GOLDMAN SACHS INTERNATIONAL, PACIFICORP
ACQUISITIONS, PACIFICORP, THE US DEPOSITARY, THE DEALER MANAGER, OR THE UK
RECEIVING AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR
MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT
CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
2
<PAGE>
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO AUSTRALIA,
CANADA OR JAPAN.
RECOMMENDED CASH OFFER FOR
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
THE ENERGY GROUP PLC
BY
GOLDMAN SACHS INTERNATIONAL
ON BEHALF OF
PACIFICORP ACQUISITIONS
(A WHOLLY OWNED SUBSIDIARY OF PACIFICORP)
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 PM (LONDON
TIME), 5:00 PM (NEW YORK CITY TIME) ON MARCH 9, 1998, UNLESS EXTENDED. AT THE
CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY EXTENSION THEREOF, IF ALL
CONDITIONS OF THE OFFER HAVE BEEN SATISFIED, FULFILLED OR, WHERE PERMITTED,
WAIVED, THE OFFER WILL BE EXTENDED FOR A SUBSEQUENT OFFER PERIOD OF AT LEAST 14
CALENDAR DAYS. HOLDERS OF ENERGY GROUP SECURITIES WILL HAVE THE RIGHT TO
WITHDRAW THEIR ACCEPTANCES OF THE OFFER DURING THE INITIAL OFFER PERIOD,
INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
February 6, 1998
To Our Clients:
Enclosed for your consideration is the Offer to Purchase dated February 6,
1998 (the "Offer to Purchase"), the Letter of Transmittal and Notice of
Guaranteed Delivery relating to an offer by Goldman Sachs International, acting
in the United States through Goldman, Sachs & Co., and on behalf of PacifiCorp
Acquisitions, to purchase, upon the terms and subject to the conditions set
forth in the Offer to Purchase and the accompanying Acceptance Forms (as defined
in the Offer to Purchase) (collectively, the "Offer"), all outstanding ordinary
shares of 10p each ("Energy Group Shares") of The Energy Group PLC ("The Energy
Group") for L7.65 in cash per Energy Group Share, including all Energy Group
Shares represented by American Depositary Shares ("Energy Group ADSs") of The
Energy Group, each representing four Energy Group Shares and evidenced by
American Depositary Receipts ("Energy Group ADRs"), for L30.60 in cash per
Energy Group ADS.
We are the holder of record of Energy Group ADSs evidenced by Energy Group
ADRs held by us for your account. An acceptance of the Offer in respect of such
Energy Group ADSs can be made only by us as the holder of record and pursuant to
your instructions. Accordingly, we request instructions as to
<PAGE>
whether you wish to have us accept the Offer on your behalf in respect of any or
all Energy Group ADSs held by us for your account pursuant to the terms and
subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The Offer is being made for all Energy Group Shares and Energy Group
ADSs evidenced by Energy Group ADRs and has been recommended by the board
of directors of The Energy Group.
2. The Offer is on the terms and subject to the Conditions set forth in
Appendix I to the Offer to Purchase.
3. The Initial Offer Period of the Offer will expire at 10:00 p.m. (London
time), 5:00 p.m. (New York City time) on March 9, 1998, unless extended
(in accordance with the terms thereof).
4. At the conclusion of the Initial Offer Period, including any extension
thereof, if all conditions of the Offer have been satisfied, fulfilled
or, where permitted, waived, the Offer will be extended for a Subsequent
Offer Period of at least 14 calendar days.
5. Energy Group ADS holders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes applicable to a sale of
Energy Group ADSs evidenced by Energy Group ADRs to PacifiCorp
Acquisitions.
If you wish to have us accept the Offer in respect of any or all of the
Energy Group ADSs evidenced by Energy Group ADRs held by us for your account,
please so instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize us to accept the
Offer in respect of your Energy Group ADSs evidenced by Energy Group ADRs, the
Offer will be accepted in respect of all such Energy Group ADSs unless otherwise
indicated in such instruction form. Please forward your instruction form to us
in ample time to permit us to accept the Offer on your behalf prior to the
expiration of the Offer. The specimen Letter of Transmittal is furnished to you
for your information only and cannot be used by you to accept the Offer in
respect of Energy Group ADSs evidenced by Energy Group ADRs held by us for your
account.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER FOR
ALL ENERGY GROUP SHARES AND ENERGY GROUP ADSS EVIDENCED BY ENERGY GROUP ADRS
The undersigned acknowledge(s) receipt of your letter and the Offer to
Purchase dated February 6, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal relating to an offer by Goldman Sachs International,
acting in the United States through Goldman, Sachs & Co., and on behalf of
PacifiCorp Acquisitions to purchase, upon the terms and subject to the
conditions set forth in the Offer to Purchase and the accompanying Letter of
Transmittal (collectively, the "Offer") all outstanding ordinary shares of 10p
each ("Energy Group Shares") of The Energy Group PLC ("The Energy Group") for
L7.65 in cash per Energy Group Share, including all Energy Group Shares
represented by American Depositary Shares ("Energy Group ADSs") of The Energy
Group, each representing four Energy Group Shares and evidenced by American
Depositary Receipts, for L30.60 in cash per Energy Group ADS.
This will instruct you to accept the Offer in respect of the number of
Energy Group ADSs indicated below (or, if no number is indicated below, all
Energy Group ADSs) held by you for the account of the undersigned, upon the
terms and subject to the conditions set forth in the Offer.
Dated , 1998
<TABLE>
<S> <C>
Number of Energy Group ADSs to be tendered(1)
Energy Group ADSs
Signature(s)
Please print name(s)
Address(es)
Area Code and Tel. No.
Employer Identification or Social Security No.
</TABLE>
- ------------------------
(1) Unless otherwise indicated, it will be assumed that the Offer is to be
accepted in respect of all Energy Group ADSs held by us for your account.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
NAME. If you are an individual, you must generally enter the name shown on your
social security card. However, if you have changed your last name, for instance,
due to marriage, without informing the Social Security Administration of the
name change please enter your first name, the last name shown on your social
security card, and your new last name.
<TABLE>
<CAPTION>
- ------------------------------------------------------------
<C> <S> <C>
GIVE THE NAME AND
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<CAPTION>
- ------------------------------------------------------------
- ------------------------------------------------------------
GIVE THE NAME AND
EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, the first
individual on the
account(1)
3. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
4. a The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b So-called trust account The actual owner(1)
that is not a legal or
valid trust under state
law
5. Sole proprietorship The owner(3)
account
6. Sole Proprietorship The owner (3)
7. A valid trust, estate, or Legal entity (4)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state or
local government, school
district, or prison) that
receives agricultural
program payments
- ------------------------------------------------------------
</TABLE>
<TABLE>
<C> <S> <C>
- ------------------------------------------------------------
</TABLE>
(1) List above the signature line first and circle the name of the person whose
number you furnish.
(2) List first and circle minor's name and furnish the minor's social security
number.
(3) You must show your individual name, but you may also enter your business or
"doing business as" name. You may use your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
(Do not furnish the TIN of the personal representative or trustee unless the
legal entity itself is not designated in the account title).
NOTE: If no name above the signature line is listed when more than one name
appears in the registration, the number will be considered to be that of
the first name appearing in the registration.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
Section references are to the Internal Revenue Code.
PURPOSE OF FORM.--A person who is required to file an information return with
the IRS must get your correct TIN to report, for example, income paid to you,
real estate transactions, mortgage interest you paid, the acquisition or
abandonment of secured property, cancellation of debt, or contributions you made
to an IRA. Use Form W-9 to give your correct TIN to the requester (the person
requesting your TIN) and, when applicable, (1) to certify the TIN you are giving
is correct (or you are waiting for a number to be issued), (2) to certify you
are not subject to backup withholding, or (3) to claim exemption from backup
withholding if you are an exempt payee.
NOTE: If a requester gives you a form other than a W-9 to request your TIN, you
must use the requester's form if it is substantially similar to Form W-9.
WHAT IS BACKUP WITHHOLDING?--Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions. This
is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications,
and report all your taxable interest and dividends on your tax return, payments
you receive will not be subject to backup withholding. Payments you receive WILL
be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts opened
after 1983 only), or
5. You do not certify your TIN.
Certain payees and payments are exempt from backup withholding and
information reporting. See below.
HOW TO GET A TIN: If you do not have a TIN, apply for one immediately. To apply
for an SSN, get Form SS-5 from your local Social Security Administration office.
Get Form W-7 to apply for an Individual TIN or Form SS-4 to apply for an EIN.
You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM
(1-800-829-3676).
If you do not have a TIN, check the box titled "Applied For" in the space
for the TIN, sign and date the form, and give it to the requester. Generally,
you will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
NOTE: CHECKING THE BOX TITLED "APPLIED FOR" ON THE FORM MEANS THAT YOU HAVE
ALREADY APPLIED FOR A TIN OR THAT YOU INTEND TO APPLY FOR ONE SOON.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Individuals (including sole proprietors) are NOT exempt from backup withholding.
Corporations are exempt from backup withholding for certain payments, such as
interest and dividends.
If you are exempt from backup withholding, you should still complete Form
W-9 to avoid possible erroneous backup withholding. Enter your correct TIN in
Part I, write "Exempt" in Part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed FORM W-8, Certificate of Foreign Status.
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees listed
in (1) through (13) and a person registered under the Investment Advisers Act of
1940 who regularly acts as a broker are exempt. Payments subject to reporting
under sections 6041 and 6041A are generally exempt from backup withholding only
if made to payees described in items (1) through (7), except a corporation that
provides medical and health care services or bills and collects payments for
such services is not exempt from backup withholding or information reporting.
Only payees described in items (2) through (6) are exempt from backup
withholding for barter exchange transactions and patronage dividends.
(1) A corporation. (2) An organization exempt from tax under section 501(a),
or an IRA, or a custodial account under section 403(b)(7) if the account
satisfies the requirements of section 401(f)(2). (3) The United States or any of
its agencies or instrumentalities. (4) A state, the District of Columbia, a
possession of the United States, or any of their political subdivisions or
instrumentalities. (5) A foreign government or any of its political
subdivisions, agencies, or instrumentalities. (6) An international organization
or any of its agencies or instrumentalities. (7) A foreign central bank of
issue. (8) A dealer in securities or commodities required to register in the
United States or a possession of the United States. (9) A futures commission
merchant registered with the Commodity Futures Trading Commission. (10) A real
estate investment trust. (11) An entity registered at all times during the tax
year under the Investment Company Act of 1940. (12) A common trust fund operated
by a bank under section 584(a). (13) A financial institution. (14) A middleman
known in the investment community as a nominee or listed in the most recent
publication of the American Society of Corporate Secretaries, Inc., Nominee
List. (15) A trust exempt from tax under section 664 or described in section
4947.
Payments of dividends and patronage dividends that are generally exempt from
backup withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
- Payments of patronage dividends not paid in money.
- Payments made by certain foreign organizations.
- Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding include
the following:
- Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Mortgage interest paid to you.
Payments that are not subject to information reporting are also not subject to
backup withholding. For details, see sections 6041, 6041A, 6042, 6044, 6045,
6049, 6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE.--Section 6109 requires you to give your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid, the
acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. The IRS may also
provide this information to the Department of Justice for civil and criminal
litigation and to cities, states, and the District of Columbia to carry out
their tax laws.
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividends, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN.--If you fail to furnish your TIN to a requester, you
are subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully falsifying
certifications or affirmations may subject you to criminal penalties including
fines and/or imprisonment.
(4) MISUSE OF TINS.--If the requester discloses or uses TINs in violation of
federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
[LOGO]
[LOGO]
FOR IMMEDIATE RELEASE 3 February 1998
RENEWED RECOMMENDED CASH OFFER BY PACIFICORP
FOR THE ENERGY GROUP PLC
- - PacifiCorp and The Energy Group announce the terms of a renewed recommended
cash offer for The Energy Group to be made by Goldman Sachs International on
behalf of PacifiCorp Acquisitions, a wholly owned subsidiary of PacifiCorp.
- - The Offer values each Energy Group Share at 765 pence, and includes a Loan
Note Alternative.
- - The Offer values the fully diluted share capital of The Energy Group at
approximately L4,055 million.
- - The Offer represents a premium of approximately 17 per cent. to the Closing
Price of 652 pence per Energy Group Share on 18 December 1997 (the day
immediately prior to the clearance of the Original Offer by the President of
the Board of Trade) and a premium of approximately 36 per cent. to the Closing
Price of 561.5 pence per Energy Group Share on 9 June 1997, the day before the
announcement by The Energy Group that it was involved in talks with PacifiCorp
in relation to the Original Offer.
- - The board of The Energy Group, which has been so advised by Lazard and Morgan
Stanley, its financial advisers, considers the terms of the Offer to be fair
and reasonable. In providing advice to the board of The Energy Group, Lazard
and Morgan Stanley have taken account of the directors of The Energy Group's
commercial assessment of the Offer. Accordingly, the directors of The Energy
Group will unanimously recommend all holders of Energy Group Shares and Energy
Group ADSs to accept the Offer, as they have irrevocably undertaken to do in
respect of their personal holdings of 96,000 Energy Group Shares and 1,550
Energy Group ADSs (each Energy Group ADS representing four Energy Group
Shares).
- - The Combined Group's strategy is to be an international vertically integrated
energy business. It intends to capitalise on the on-going liberalisation of
the world-wide energy industry by providing customers with a wide array of
energy products and services, at the same time reducing costs and increasing
efficiency in its core markets. It intends to build strong positions in power
generation, energy marketing and distribution, including by expanding into
high growth international markets.
- - The Combined Group will be an international low cost provider with over 5
million energy customers across the United States, the United Kingdom and
Australia; 17,000 megawatts of generation capacity; and over 10 billion tons
of proven and probable coal reserves, of which half are low sulphur.
1
<PAGE>
- - The Original Offer, announced jointly by PacifiCorp and The Energy Group on 13
June 1997, valued each Energy Group Share at 695.5 pence (including a dividend
per share of 5.5 pence (net) paid on 4 July 1997). The Original Offer lapsed
when it was referred to the Monopolies and Mergers Commission on 1 August
1997. The acquisition of The Energy Group by PacifiCorp was subsequently
cleared by the President of the Board of Trade on 19 December 1997.
- - PacifiCorp has stated that, subject to all Conditions having become or been
declared satisfied, fulfilled, or where applicable waived, it intends to
invite Mr Derek Bonham and Mr John Devaney to join the board of directors of
PacifiCorp. Mr Frederick Buckman will remain as a director and President and
Chief Executive Officer of the Combined Group.
- - In addition, PacificCorp intends, subject to approval of the PacificCorp board
of directors, to invite Mr Bonham, Mr Devaney, Mr Eric Anstee and Mr Irl
Engelhardt to join PacifiCorp senior executives, Mr Frederick Buckman, Mr Verl
Topham, Mr Dennis Steinberg and Mr Richard O'Brien to form part of a
management committee to coordinate the activities of the Combined Group and,
except in the case of Mr Bonham, to take up certain executive positions within
the Combined Group.
Commenting on the Offer, Mr Frederick Buckman, President and Chief Executive
Officer of PacifiCorp, said:
"We are delighted to announce a new agreed offer for The Energy Group. The
Acquisition represents a landmark step in achieving our strategy. The
combination of PacifiCorp and The Energy Group will create a premier global
energy company, poised to compete effectively on three continents, as the energy
markets across the world are being restructured."
Mr Derek Bonham, Chairman of The Energy Group, said:
"We have continued to demonstrate the soundness of our businesses since the
Board recommended the first offer by PacifiCorp. We have successfully taken
further steps to implement our strategy. PacifiCorp recognises the benefits of
this strategy and has again offered a price that represents excellent value for
our shareholders and the board of The Energy Group has no hesitation in
recommending it."
2
<PAGE>
This summary should be read in conjunction with the attached announcement.
The Conditions of the Offer are set out in Appendix I of the attached
announcement and definitions of certain expressions used in this announcement
are set out in Appendix IV of the attached announcement.
ENQUIRIES
<TABLE>
<S> <C> <C>
PACIFICORP Scott Hibbs (investors) 1 503 731 2123
Angela Hult (investors) 1 503 731 2192
Dave Kvamme (press) 1 503 464 6272
Anita Marks (press) 1 503 464 6268
GOLDMAN SACHS INTERNATIONAL Richard Sapp 44 171 774 1000
Meyrick Cox 44 171 774 1000
GAVIN ANDERSON Howard Lee 44 171 457 2345
Marc Popiolek 44 171 457 2345
THE ENERGY GROUP Aviva Gershuny-Roth 44 171 647 3200
LAZARD David Anderson 44 171 588 2721
John Wilford 44 171 588 2721
MORGAN STANLEY Piers de Montfort 44 171 513 5007
BRUNSWICK Louise Charlton 44 171 404 5959
</TABLE>
The Offer will not be made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, copies of this announcement are not being, and
must not be, mailed or otherwise distributed or sent in or into Canada,
Australia or Japan.
Goldman Sachs International, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for PacifiCorp Acquisitions
and PacifiCorp and for no one else in connection with the Offer and will not be
responsible to anyone other than PacifiCorp Acquisitions and PacifiCorp for
providing the protections afforded to its customers or for giving advice in
relation to the Offer. Goldman Sachs International will be acting through
Goldman, Sachs & Co. for the purposes of making the Offer in and into the United
States.
Lazard and Morgan Stanley & Co. Limited, which are regulated in the United
Kingdom by The Securities and Futures Authority Limited, are acting for The
Energy Group and for no one else in connection with the Offer and will not be
responsible to anyone other than The Energy Group for providing the protections
afforded to their customers or for giving advice in relation to the Offer.
3
<PAGE>
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
[LOGO]
[LOGO]
FOR IMMEDIATE RELEASE 3 February 1998
RENEWED RECOMMENDED CASH OFFER BY PACIFICORP
FOR THE ENERGY GROUP PLC
1 INTRODUCTION
On 13 June 1997, the boards of PacifiCorp and The Energy Group announced the
terms of a recommended cash offer for the whole of the share capital of The
Energy Group. The Original Offer was referred to the Monopolies and Mergers
Commission on 1 August 1997. The acquisition of The Energy Group by PacifiCorp
was subsequently cleared by the President of the Board of Trade on 19 December
1997. Following further discussions, the boards of PacifiCorp and The Energy
Group announce the terms of a renewed recommended cash offer to be made by
Goldman Sachs International on behalf of PacifiCorp Acquisitions, a wholly owned
subsidiary of PacifiCorp, for the whole of the issued and to be issued share
capital of The Energy Group.
The board of The Energy Group, which has been so advised by Lazard and
Morgan Stanley, its financial advisers, considers the terms of the Offer to be
fair and reasonable. In providing advice to the board of The Energy Group,
Lazard and Morgan Stanley have taken account of the directors of The Energy
Group's commercial assessment of the Offer. Accordingly, the directors of The
Energy Group will unanimously recommend all holders of Energy Group Shares and
Energy Group ADSs to accept the Offer, as they have irrevocably undertaken to do
in respect of their personal holdings of 96,000 Energy Group Shares and 1,550
Energy Group ADSs.
As previously announced, the board of The Energy Group has received
approaches from each of Nomura International plc and Texas Utilities Co.
expressing an interest in acquiring The Energy Group. Both parties have had
access to management and have been provided with certain information about the
TEG Group. No offer has been received from either party and it is uncertain
whether an offer will be received from either party.
The definitions of certain expressions used in this announcement are
contained in Appendix IV.
2 THE OFFER
The Offer will be subject to the Conditions set out in Appendix I which
will, together with the further terms of the Offer, appear in the Offer Document
and will be made by Goldman Sachs International, on behalf of PacifiCorp
Acquisitions, on the following basis:
<TABLE>
<S> <C>
FOR EACH ENERGY GROUP SHARE 765 PENCE; AND
FOR EACH ENERGY GROUP ADS L30.60
</TABLE>
The Offer values The Energy Group at approximately L4,055 million (assuming
the exercise in full of all outstanding options and the vesting of all
outstanding awards under the Energy Group Share
4
<PAGE>
Schemes). The Offer represents a premium of approximately 17 per cent. to the
Closing Price of 652 pence per Energy Group Share on 18 December 1997 (the day
immediately prior to the clearance of the Original Offer by the President of the
Board of Trade) and represents a premium of approximately 36 per cent. to the
Closing Price of 561.5 pence per Energy Group Share on 9 June 1997, the day
before the announcement by The Energy Group that it was involved in talks with
PacifiCorp in relation to the Original Offer.
The Offer will be subject to the applicable requirements of both the City
Code in the United Kingdom and United States federal securities laws.
3 LOAN NOTE ALTERNATIVE
A Loan Note Alternative will be available to holders of Energy Group Shares
(other than persons who are citizens or residents of the United States and
certain other overseas shareholders) who validly accept the Offer on the basis
of, for every L1 of cash under the Offer, L1 nominal of Loan Notes, subject to
aggregate valid elections being received on or before the date on which all the
Conditions are waived, fulfilled or satisfied as applicable, for in excess of L1
million nominal value of Loan Notes. If insufficient elections are received,
holders of Energy Group Shares who elect for the Loan Note Alternative will
instead receive cash in accordance with the terms of the Offer. Subject as
aforesaid, the Loan Note Alternative will remain open as long as the Offer is
open for acceptance. The Loan Notes will bear interest at a rate per annum of
0.5 per cent. below LIBOR.
Goldman Sachs International has advised that, based on market conditions on
30 January 1998 (the latest practicable date prior to the publication of this
announcement), in its opinion, if the Loan Notes had then been in issue, the
value of each L1 nominal would have been approximately 98 pence.
In considering the Loan Note Alternative, holders of Energy Group Shares
should note that the obligations of the issuer of the Loan Notes are not
guaranteed or secured.
A summary of the terms of the Loan Notes is set out in Appendix II to this
announcement.
4 INFORMATION ON THE PACIFICORP GROUP
PacifiCorp, one of the lowest-cost electricity producers in the United
States, is a multinational energy company based in Portland, Oregon. PacifiCorp
serves approximately 1.4 million retail customers in Oregon, Washington,
California, Montana, Idaho, Utah and Wyoming. PacifiCorp is the largest
investor-owned bulk power marketer in the western United States and is an active
electrical and gas marketer in the eastern United States.
PacifiCorp operates one of the largest open-access transmission systems in
the United States with over 150 access points across 15,000 circuit miles and,
together with its affiliates, has generating capacity of over 10,000 megawatts.
It is the twelfth largest coal producer in the United States, producing 22.6
million tonnes in 1996. In 1996, the average electricity production costs at its
coal-fired plants were 25 per cent. lower than the national average.
PacifiCorp also has substantial operations in Australia through Powercor,
the largest electricity distribution business in Victoria and its 19.9 per cent.
partnership interest in the Hazelwood power generating station and associated
mine.
PacifiCorp is listed on the New York and Pacific Stock Exchanges under the
symbol "PPW". For the year ended 31 December 1997, PacifiCorp reported earnings
on common stock of $451 million, or $1.52 per share, excluding asset sale gains
and a series of special charges and other adjustments recorded in 1997. As at
the close of trading on the New York Stock Exchange on 30 January 1998,
PacifiCorp had an equity market capitalisation of approximately $6.9 billion.
5
<PAGE>
PacifiCorp Acquisitions, a wholly owned subsidiary of PacifiCorp, is an
unlimited company incorporated in England and Wales on 9 June 1997 for the
purpose of making the Original Offer.
5 INFORMATION ON THE ENERGY GROUP
The Energy Group is a diversified international energy group which includes
Peabody, the world's largest private producer of coal, and Eastern, one of the
leading integrated electricity and gas groups in the United Kingdom.
Peabody, the largest producer of coal in the United States, operates 25
underground surface mines in the United States and three surface mines in
Australia.
- As at 31 March 1997, Peabody owned or controlled 9.5 billion tons of
proven and probable coal reserves;
- in the six months ended 31 March 1997, Peabody sold 81.4 million tons of
coal world-wide and had an estimated 14.4 per cent. of the US market; and
- Peabody Australia, one of the 10 largest coal producers in Australia, has
interests in four surface mines in New South Wales, three of which are
currently in operation. Peabody's equity share of the coal sales of these
mines amounted to 3.5 million tons in the six months ended 31 March 1997
and its equity share of the proven and probable reserves associated with
these mines as at 31 March 1997 amounted to 466 million tons.
Through Eastern, The Energy Group is one of the leading integrated
electricity and gas groups in the United Kingdom and is involved in a wide range
of operations:
- Eastern Generation, the fourth largest generator of electricity in Great
Britain, currently owns, operates or has an interest in eight power
stations, representing approximately 10 per cent. of the United Kingdom's
total registered generating capacity as at 31 March 1997.
- Eastern Power & Energy Trading manages for the TEG Group the price and
volume risks associated with the generation, wholesaling and sale to end
users of electricity. These exposures are managed by trading its contract
portfolio and by bidding Eastern's generation output into the Electricity
Pool. It also has small equity interests in three natural gas producing
fields in the North Sea.
- Eastern Natural Gas is one of the largest suppliers of natural gas in the
United Kingdom after Centrica plc.
- Eastern Electricity is the largest supplier and distributor of electricity
in England and Wales, with over three million customers and an authorised
area covering approximately 20,300 sq. km. in the east of England and
parts of north London.
The TEG Group also includes Citizens Power, one of the leading US power
marketing firms which was acquired by The Energy Group in May 1997. Its
headquarters are in Boston and it has field offices in Milwaukee, Denver and
Toronto.
On a pro forma basis for the year ended 31 March 1997, The Energy Group
reported consolidated turnover of L4,460 million and consolidated net income of
L286 million. The Energy Group's results for the nine months ended 31 December
1997 will be announced shortly.
6 REASONS FOR THE OFFER
A number of trends in the world energy industry are influencing PacifiCorp
and The Energy Group. Energy providers have been required to provide better
service, lower prices and more choice to their customers in the United States,
the United Kingdom, Europe and Australia. The deregulation of electricity
markets has led to increased customer choice and competition among suppliers.
Industry participants have reacted to this by restructuring their businesses and
diversifying their activities.
6
<PAGE>
The Combined Group will be an international low-cost power provider, with:
- over five million retail electricity customers across the United States,
the United Kingdom and Australia;
- 17,000 megawatts of generation capacity; and
- over 10 billion tons of proven and probable coal reserves, of which half
are low sulphur.
The Combined Group's strategy is to be an international vertically
integrated energy business. It intends to capitalise on the on-going
liberalisation of the world-wide energy industry by providing customers with a
wide array of energy products and services, at the same time reducing costs and
increasing efficiency in its core markets. It intends to build strong positions
in power generation, energy marketing and distribution, including by expanding
into high growth international markets.
The combination of PacifiCorp and The Energy Group will create a premier
energy provider able to:
- continue both companies' proven ability in providing value added services
to customers at competitive prices;
- capitalise on deregulation in markets both at home and abroad and further
enhance competition;
- integrate fuel management, power generation, energy marketing and
distribution to customers on three continents;
- build on existing skills and adopt best practices in mining, energy
marketing, trading and risk management and information technology; and
- increase the efficient utilisation of generation resources through
effective fuel management and plant optimisation.
PacifiCorp believes that the transaction will be accretive to earnings in
the first year following the completion of the Acquisition and thereafter,
without considering the benefits of synergies resulting from potential cost
reductions and revenue enhancement. This statement should not be interpreted to
mean that PacifiCorp's total reported earnings per share will necessarily be
greater than those for the year ended 31 December 1997.
7 REGULATION
Prior to the referral of the Original Offer to the Monopolies and Mergers
Commission, PacifiCorp agreed to give certain assurances in respect of Eastern
Electricity plc to the DGES and the Monopolies and Mergers Commission, in
clearing the Original Offer, assumed that these would still apply if PacifiCorp
renewed its Original Offer. PacifiCorp confirms that these assurances will be
formally given by PacifiCorp to the DGES to take effect from completion of the
Acquisition.
In the course of complying with the US Hart-Scott-Rodino Antitrust
Improvements Act in connection with the Original Offer, the US Federal Trade
Commission (the "FTC") requested additional information from PacifiCorp.
Following receipt of such information, FTC staff requested that PacifiCorp and
The Energy Group take certain actions. PacifiCorp and The Energy Group have
agreed with FTC staff on the form of a consent order by the FTC that would,
among other things, require divestiture of two mines in Arizona owned by a
subsidiary of The Energy Group. The consent order is awaiting acceptance by the
FTC. Following such acceptance, the consent order will be subjected to a 60-day
public comment period after which the consent order will become final unless the
FTC determines otherwise.
Following the acceptance of the consent order for public comment by the FTC
(expected to occur by 19 February 1998), the Offer will cease to be subject to
the United States Hart-Scott-Rodino Antitrust
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Improvements Act. Furthermore, PacifiCorp confirms that it will not invoke
either Condition (d) or (e) even if the FTC amends the terms of the form of the
consent order agreed with FTC Staff.
The Offer is, however, subject to certain other regulatory consents and
confirmations which PacifiCorp is confident will be obtained. The full text of
the Conditions of the Offer is set out in Appendix I.
8 THE ENERGY GROUP SHARE SCHEMES
The Offer will extend to any fully paid Energy Group Shares which are
unconditionally allotted or issued while the Offer is open for acceptance,
including those unconditionally allotted or issued pursuant to the exercise of
options under the Energy Group Share Schemes.
Appropriate proposals will be made to the participants in the Energy Group
Share Schemes.
In relation to the Energy Group Sharesave Scheme, it is anticipated that, as
an additional alternative to the rights provided under the rules of that scheme,
participants will be offered an opportunity to surrender their existing options
in consideration for a cash sum, calculated by reference to the difference
between 765 pence and the exercise price of their options multiplied by the
number of Energy Group Shares that they could have acquired with their total
savings contributions (together with any interest payable thereon) under the
Energy Group Sharesave Scheme up to the date the Offer becomes or is declared
unconditional in all respects plus a further six months' savings contributions.
9 DIRECTORS, MANAGEMENT AND EMPLOYEES
PacifiCorp Acquisitions has given assurances to the board of The Energy
Group that the existing employment rights, including pension rights, of all
Energy Group directors, management and employees will be fully safeguarded.
PacifiCorp looks forward to working with Energy Group employees.
PacificCorp has stated that, subject to the Offer becoming or being declared
unconditional in all respects, it intends to invite Mr Derek Bonham and Mr John
Devaney to join the board of directors of PacifiCorp. Mr Frederick Buckman will
remain as a director and President and Chief Executive Officer of the Combined
Group.
In addition, PacifiCorp intends, subject to approval of the PacifiCorp board
of directors, to invite Mr Bonham, Mr Devaney, Mr Eric Anstee and Mr Irl
Engelhardt to join PacifiCorp senior executives, Mr Frederick Buckman, Mr Verl
Topham, Mr Dennis Steinberg and Mr Richard O'Brien to form part of a management
committee to coordinate the activities of the Combined Group and, except in the
case of Mr Bonham, to take up certain executive positions within the Combined
Group.
Although these intentions have been discussed in general terms, no specific
terms or conditions have yet been agreed and no understanding exists between
PacificCorp (or any person acting in concert with it) and any of the directors
of The Energy Group in relation to any such position or otherwise having any
connection with or dependence upon the Offer. None of Messrs Bonham, Devaney,
Anstee or Engelhardt will enter into any further discussions with PacifiCorp (or
any person acting in concert with it) concerning their personal positions unless
and until, at the earliest, the Offer becomes or is declared unconditional in
all respects.
10 HOLDINGS IN THE ENERGY GROUP
Neither PacifiCorp Acquisitions, nor any of the directors of PacifiCorp
Acquisitions, nor, so far as PacifiCorp Acquisitions is aware, any party acting
in concert with PacifiCorp Acquisitions, owns or controls any Energy Group
Securities or holds any options to purchase Energy Group Shares or holds any
derivatives referenced to Energy Group Securities, other than as set out below:
(A) PacifiCorp Master Retirement Trust, an independently managed pension
fund of the PacifiCorp Group, beneficially owns 241,589 Energy Group
Shares;
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(B) CIN Management, a subsidiary of Goldman Sachs International owns
6,517,433 Energy Group Shares;
(C) Goldman Sachs & Co. Discretionary Customer accounts hold 72,000 Energy
Group Shares; and
(D) Goldman Sachs International Discretionary Customer accounts hold
175,581 Energy Group ADSs.
11 FINANCING
PacifiCorp Acquisitions has arranged appropriate financing in connection
with the Offer. Other wholly-owned subsidiaries of PacifiCorp Group Holdings
Company have arranged their own funding to assist in PacifiCorp Acquisitions'
financing of the Offer.
12 GENERAL
(a) Goldman Sachs International, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, is acting for PacifiCorp
Acquisitions and PacifiCorp and for no one else in connection with the Offer
and will not be responsible to anyone other than PacifiCorp Acquisitions and
PacifiCorp for providing the protections afforded to its customers or for
giving advice in relation to the Offer. Goldman Sachs International will be
acting through Goldman, Sachs & Co. for the purposes of making the Offer in
and into the United States.
(b) Lazard and Morgan Stanley & Co. Limited, which are regulated in the United
Kingdom by The Securities and Futures Authority Limited, are acting for The
Energy Group and for no one else in connection with the Offer and will not
be responsible to anyone other than The Energy Group for providing the
protections afforded to their customers or for giving advice in relation to
the Offer.
(c) The Offer Document will be posted shortly and will be available for
inspection at the offices of Linklaters & Paines, One Silk Street, London
EC2Y 8HQ. The Conditions are set out in Appendix I to this announcement.
(d) Energy Group Securities will be acquired by PacifiCorp Acquisitions fully
paid and free from all liens, equities, charges, encumbrances and other
interests and, together with all rights now or hereafter attaching thereto,
including without limitation the right to receive and retain all dividends
and other distributions declared, made or paid hereafter.
(e) The Initial Offer Period is expected to expire at 10.00 p.m. (London time),
5.00 p.m. (New York City time) on the 20th Business Day after the date of
the Offer Document, unless extended. At the conclusion of the Initial Offer
Period, including any extension thereof, the Offer, if wholly unconditional,
will be extended for a Subsequent Offer Period of at least 14 calendar days.
Holders of Energy Group Securities will have withdrawal rights during the
Initial Offer Period, including any extension thereof, but not during the
Subsequent Offer Period, including any extension thereof.
(f) THE OFFER WILL NOT BE MADE, DIRECTLY OR INDIRECTLY, IN OR INTO CANADA,
AUSTRALIA OR JAPAN. ACCORDINGLY, COPIES OF THIS ANNOUNCEMENT ARE NOT BEING,
AND MUST NOT BE, MAILED OR OTHERWISE DISTRIBUTED OR SENT IN OR INTO CANADA,
AUSTRALIA OR JAPAN.
(g) The Loan Notes to be issued pursuant to the Offer have not been, nor will
be, registered under the United States Securities Act of 1933, as amended,
or under any relevant securities laws of any states or district of the
United States, will not be the subject of a prospectus under the securities
laws of any province of Canada and will not be registered under any relevant
securities laws of any other country. The Loan Notes are not being offered,
sold or delivered, directly or indirectly, in or into the United States,
Canada, Australia or Japan.
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APPENDIX I
CONDITIONS OF THE OFFER
CONDITIONS OF THE OFFER
The Offer, which will be made by Goldman Sachs International on behalf of
PacifiCorp Acquisitions, will comply with the rules and regulations of the City
Code and with US federal securities laws (except to the extent that exemptive
relief has been granted by the SEC) and the rules and regulations made
thereunder, will be governed by English law and be subject to the jurisdiction
of the courts of England and the following Conditions:
(a)
(i) valid acceptances being received (and not, where permitted, withdrawn)
by not later than 10.00 p.m. (London time), 5.00 p.m. (New York City
time) on the 20th Business Day following the date of the Offer Document
(or such later time(s) and/or date(s) as PacifiCorp Acquisitions may,
subject to the rules and regulations of the City Code, decide) in respect
of not less than 90 per cent. in nominal value of Energy Group Securities
to which the Offer relates (the "90 per cent. threshold"), or such lesser
percentage as PacifiCorp Acquisitions may decide, provided that this
Condition shall not be satisfied unless PacifiCorp Acquisitions and its
wholly-owned subsidiaries shall have acquired or agreed to acquire,
whether pursuant to the Offer or otherwise, Energy Group Securities
carrying in aggregate more than 50 per cent. of the voting rights then
exercisable at general meetings of The Energy Group. For the purposes of
this Condition: (i) any Energy Group Securities which have been
unconditionally allotted shall be deemed to carry the voting rights they
will carry upon being entered in the register of members of The Energy
Group; (ii) the expression "Energy Group Securities to which the Offer
relates" shall be construed in accordance with sections 428 to 430F of
the Companies Act; and (iii) valid acceptances shall be treated as having
been received in respect of any Energy Group Shares which PacifiCorp
Acquisitions shall, pursuant to section 429(8) of the Companies Act, be
treated as having acquired or contracted to acquire by virtue of
acceptances of the Offer; and
(ii) if the 90 per cent. threshold shall have been satisfied before the
Offer becomes or is declared unconditional in all respects, Condition
(a)(i) remaining satisfied as at the time when the Offer becomes or is
declared unconditional in all other respects, by reference to the facts
then subsisting;
(b) PacifiCorp Acquisitions being reasonably satisfied that the acquisition of
Energy Group Securities pursuant to the Offer will not subject PacifiCorp
Acquisitions to regulation, or PacifiCorp Acquisitions will be exempt from
regulation, under the US Public Utility Holding Company Act of 1935;
(c) FERC shall have issued an order on terms reasonably acceptable to PacifiCorp
Acquisitions approving the sale of the FERC-jurisdictional assets of
Citizens Power and Peabody Investments, Inc. to a third party;
(d) no relevant authority having intervened in a way which would be likely, or
having failed to institute or implement any action the failure of which
would be likely (to an extent which is, in the case of (i) to (iv) below,
material in the context of the PacifiCorp Acquisitions Group or of the TEG
Group or of the financing of the Offer):
(i) to require, prevent or delay the divestiture or materially alter the
terms of any proposed divestiture by PacifiCorp Acquisitions or The
Energy Group or any member of the PacifiCorp Acquisitions Group or the
wider TEG Group of all or any portion of their respective businesses,
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assets or properties or impose any limitation on the ability of any of
them to conduct any of their respective businesses or to own any of their
respective assets or property or any part thereof;
(ii) to impose any limitation on the ability of any member of the PacifiCorp
Acquisitions Group or the wider TEG Group to acquire, or to hold or to
exercise effectively, directly or indirectly, any rights of ownership in
respect of shares in, or management control over, any member of the wider
TEG Group;
(iii) otherwise adversely to affect the financial or trading position of any
member of the PacifiCorp Acquisitions Group or the wider TEG Group;
(iv) to make the Offer or its implementation or the acquisition or the
proposed acquisition of any Energy Group Shares or Energy Group ADSs or
control of The Energy Group by any member of the PacifiCorp Acquisitions
Group void, illegal and/or unenforceable, or otherwise, directly or
indirectly, to restrain, restrict, prohibit, delay or otherwise interfere
with the implementation thereof, or impose additional conditions or
obligations with respect thereto, or otherwise challenge or hinder any
thereof;
(v) to result in a delay in the ability of any member of the PacifiCorp
Acquisitions Group, or render any such person unable, to acquire some or
all of the Energy Group Shares or Energy Group ADSs or require or prevent
or materially delay divestiture by any such person of any such
securities; or
(vi) to require any member of the PacifiCorp Acquisitions Group or the wider
TEG Group to offer to acquire any shares or other securities (or the
equivalent) in any member of the wider TEG Group owned by any third
party;
and all applicable waiting and other time periods during which any relevant
authority could, in respect of the Offer or the acquisition or proposed
acquisition of any Energy Group Shares or Energy Group ADSs or control of
The Energy Group by PacifiCorp Acquisitions, intervene having expired,
lapsed or terminated;
(e) all necessary filings having been made, all regulatory and statutory
obligations having been complied with, all appropriate waiting periods under
any applicable legislation or regulations of any jurisdiction having
expired, lapsed or terminated in each case in respect of the Offer or the
acquisition of any shares or other securities in, or control of, The Energy
Group by any member of the PacifiCorp Acquisitions Group and all
authorisations and determinations necessary or appropriate in any
jurisdiction for or in respect of the Offer (including, without limitation,
its implementation and financing) or proposed acquisition of any shares or
other securities in, or control of, The Energy Group by any member of the
PacifiCorp Acquisitions Group or in relation to the affairs of any member of
the PacifiCorp Acquisitions Group or the wider TEG Group having been
obtained in terms and in a form reasonably satisfactory to PacifiCorp
Acquisitions from all relevant authorities or (without prejudice to the
generality of the foregoing) from any persons or bodies with whom any member
of the PacifiCorp Acquisitions Group or the wider TEG Group, as the case may
be, has entered into contractual arrangements and such authorisations and
determinations together with all material authorisations and determinations
necessary or appropriate for any member of the PacifiCorp Acquisitions Group
or the wider TEG Group to carry on a business which is material in the
context of the PacifiCorp Acquisitions Group or the TEG Group as a whole or
of the financing of the Offer remaining in full force and effect and all
filings necessary for such purpose having been made and there being no
notice or intimation of any intention to revoke or not to renew any of the
same and all necessary statutory or regulatory obligations in all relevant
jurisdictions having been complied with;
(f) PacifiCorp Acquisitions not having discovered (other than by virtue of the
same having been disclosed to it prior to the date of this announcement by
any member of the TEG Group) any
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provision of any agreement, arrangement, licence or other instrument to
which any member of the wider TEG Group is a party or by or to which any
member of the wider TEG Group or any part of its assets may be bound,
entitled or subject which would be likely, as a result of the Offer, the
proposed acquisition by PacifiCorp Acquisitions of any shares in, or change
in the control or management of, The Energy Group or otherwise, to result in
(to an extent which is material in the context of the PacifiCorp
Acquisitions Group or the wider TEG Group as a whole or of the financing of
the Offer):
(i) any moneys borrowed by or any other indebtedness, actual or contingent,
of any member of the wider TEG Group being or becoming repayable or
capable of being declared repayable immediately or prior to its stated
maturity, or the ability of any such member to borrow moneys or incur any
indebtedness being withdrawn or inhibited;
(ii) any such agreement, arrangement, licence or instrument being terminated
or adversely modified or any obligation or liability arising or any
action being taken or arising thereunder;
(iii) the rights, liabilities, obligations or interests of any member of the
wider TEG Group under any such arrangement, agreement, licence or
instrument or the interests or business of any such member in or with any
other person, firm, company or body (or any arrangements relating to any
such interests or business) being terminated or adversely modified or
affected;
(iv) any assets or interests of any such member being or becoming liable to
be disposed of or charged, or any right arising under which any such
asset or interest is required or is likely to be required to be disposed
of or charged, in each case other than in the ordinary course of
business;
(v) the creation of any mortgage, charge or other security interest over the
whole or any part of the business, property or assets of any member of
the wider TEG Group or any such security interest, whenever arising or
having arisen, becoming enforceable;
(vi) the creation of liabilities for any member of the wider TEG Group other
than in the ordinary course of business; or
(vii) the financial or trading position of any member of the wider TEG Group
being prejudiced or adversely affected;
(g) PacifiCorp Acquisitions not having discovered, save as publicly announced in
accordance with the Listing Rules prior to the date of this announcement or
as otherwise disclosed to it prior to that date by any member of the TEG
Group, that any member of the wider TEG Group has, since 30 September 1997
to an extent which is material in the context of the TEG Group as a whole or
of the financing of the Offer:
(i) save to any member of the TEG Group and, save for the issue of Energy
Group Securities on the exercise of options granted under any of the
Energy Group Share Schemes prior to the date of this announcement, issued
or agreed to issue or authorised or proposed the issue of additional
shares of any class, or of securities convertible into, or rights,
warrants or options to subscribe for or acquire, any such shares or
convertible securities or redeemed, purchased or reduced any part of its
share capital;
(ii) recommended, declared, paid or made or proposed to recommend, declare,
pay or make any bonus, dividend or other distribution in respect of the
share capital of The Energy Group;
(iii) merged with any body corporate or acquired or disposed of or
transferred, mortgaged or charged or created any security interest over
any assets or any right, title or interest in any assets (including
shares and trade investments) or authorised or proposed or announced any
intention to propose a merger, demerger, acquisition, disposal, transfer,
mortgage, charge or security interest (in each case, other than in the
ordinary course of business);
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(iv) made or authorised or proposed or announced an intention to propose any
change in its share or loan capital save for options granted under any of
the Energy Group Share Schemes prior to the date of this announcement and
for any Energy Group Securities allotted upon exercise of such options;
(v) issued, authorised or proposed or announced an intention to propose the
issue of any debentures or (save in the ordinary course of business)
incurred or increased any indebtedness or contingent liability;
(vi) otherwise than in the ordinary course of business, entered into any
contract, reconstruction, amalgamation, commitment or other transaction
or arrangement or (save for changes in remuneration notified to
PacifiCorp Acquisitions prior to the date of this announcement) changed
the terms of any contract with any director of The Energy Group;
(vii) save in the ordinary course of business, entered into or varied any
contract, transaction or commitment (whether in respect of capital
expenditure or otherwise) which is of a long-term, onerous or unusual
nature or magnitude or which involves or could involve an obligation of
such a nature or magnitude;
(viii) waived or compromised any claim otherwise than in the ordinary course
of business;
(ix) taken any corporate action or had any order made for its winding-up,
dissolution or reorganisation or for the appointment of a receiver,
administrator, administrative receiver, trustee or similar officer of all
or any of its assets or revenues; or
(x) entered into any contract, commitment, agreement or arrangement or
passed any resolution with respect to, or announced an intention to, or
to propose to effect, any of the transactions, matters or events referred
to in this Condition;
(h) since 30 September 1997, save as publicly announced in accordance with the
Listing Rules prior to the date of this announcement or as otherwise
disclosed to PacifiCorp Acquisitions prior to that date by any member of the
TEG Group, none of the following having occurred to an extent which is
material in the context of the wider TEG Group as a whole or of the
financing of the Offer:
(i) adverse change or deterioration in the business, assets, financial or
trading position of any member of the wider TEG Group;
(ii) litigation or arbitration proceedings, prosecution or other legal
proceedings having been instituted or threatened in writing by or against
or remaining outstanding against any member of the wider TEG Group or to
which any member of the wider TEG Group is a party (whether as plaintiff,
defendant or otherwise) and any investigation by any relevant authority
against, or in respect of any member of the wider TEG Group having been
threatened in writing, announced or instituted or remaining outstanding
by, against or in respect of any member of the wider TEG Group; and
(iii) a contingent or other liability of any member of the wider TEG Group
having arisen which would be likely adversely to affect any member of the
wider TEG Group;
(i) PacifiCorp Acquisitions not having discovered:
(i) that any financial, business or other information which has been
publicly disclosed at any time by or on behalf of any member of the wider
TEG Group is materially misleading, contains a material misrepresentation
of fact or omits to state a fact necessary to make the information
contained therein not misleading and which in any such case is material
in the context of the wider TEG Group taken as a whole or of the
financing of the Offer; or
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(ii) that any member of the wider TEG Group was, at the date of the Energy
Group Listing Particulars, or has, outside the ordinary course of
business since that date, become subject to any liability (contingent or
otherwise) which is not disclosed or referred to in the Energy Group
Listing Particulars and which is material in the context of the wider TEG
Group taken as a whole or of the financing of the Offer; and
(j) save as publicly announced in accordance with the Listing Rules prior to
the date of this announcement or as otherwise disclosed to it prior to that
date by any member of the TEG Group, PacifiCorp Acquisitions not having
discovered:
(i) that any past or present member of the wider TEG Group has not complied
with all applicable legislation or regulations of any jurisdiction with
regard to the disposal, discharge, spillage, leak or emission of any
waste or hazardous substance or any substance likely to impair the
environment or harm human health, which non-compliance or any other
disposal, discharge, spillage, leak or emission which has occurred would
be likely to give rise to any liability (whether actual or contingent) on
the part of any member of the wider TEG Group and which is material in
the context of the wider TEG Group taken as a whole or of the financing
of the Offer; or
(ii) that there is, or is likely to be, any liability (whether actual or
contingent) to make good, repair, reclaim, remediate, reinstate or clean
up property now or previously owned, occupied or made use of by any past
or present member of the wider TEG Group under any legislation,
regulation, notice, circular or order of any relevant authority relating
to the protection of or enhancement of the environment and which is
material in the context of the wider TEG Group taken as a whole or of the
financing of the Offer.
For the purposes of these Conditions: (a) "relevant authority" means any
government, government department or governmental, quasi-governmental,
supranational, statutory or regulatory body, court, trade agency, professional
association or institution or environmental body in any jurisdiction; (b) a
relevant authority shall be regarded as having "intervened" if it has
instituted, implemented or threatened to take any action, proceedings, suit,
investigation or enquiry or reference, or made, enacted or proposed any statute,
regulation, decision or order and "intervene" shall be construed accordingly;
(c) "authorisations" means authorisations, orders, grants, recognitions,
certifications, confirmations, consents, licences, clearances, permissions and
approvals; (d) the "wider TEG Group" means The Energy Group and its subsidiary
undertakings, associated undertakings and any other undertakings in which The
Energy Group and such undertakings (aggregating their interests) have a
substantial interest; and (e) the "PacifiCorp Acquisitions Group" means
PacifiCorp Group Holdings Company and its subsidiary undertakings, associated
undertakings and any other undertaking in which PacifiCorp Group Holdings
Company and such undertakings (aggregating their interests) have a substantial
interest and, for these purposes, "subsidiary undertaking", "associated
undertaking", "holding company" and "undertaking" have the meanings given by the
Companies Act (but for this purpose ignoring paragraph 20(1)(b) of Schedule 4A
of the Companies Act) and "substantial interest" means a direct or indirect
interest in 20 per cent. or more of the equity capital of an undertaking.
PacifiCorp Acquisitions will not invoke either of Conditions (d) or (e) in
respect of:
(a) the DGES seeking or indicating that it is his intention to seek:
(i) modifications to any of Eastern's licences under the Electricity Act
1989; or
(ii) undertakings or assurances from any member of the PacifiCorp
Acquisitions Group or the TEG Group,
in either case provided that such modifications, undertakings or assurances
substantially reflect the assurances proposed by the DGES to PacifiCorp
Acquisitions in connection with the referral of the
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Original Offer to the Monopolies and Mergers Commission (as the same are
described in the Monopolies and Mergers Commission Report relating to the
Original Offer published on 19 December 1997) or are otherwise reasonably
satisfactory to PacifiCorp Acquisitions; or
(b) any action taken or order made by the FTC or the failure to obtain any
approval or order from the FTC.
PacifiCorp Acquisitions reserves the right to waive all or any of the above
Conditions, in whole or in part, except Condition (a). Conditions (b) to (j)
inclusive, if not, where applicable, waived, must be fulfilled or satisfied by
the Initial Closing Date. Subject thereto, if Condition (a)(i) is satisfied
prior to the Initial Closing Date, Conditions (b) to (j) inclusive if not, where
applicable, waived, must be fulfilled or satisfied, (i) if Condition (a)(i) is
satisfied at a level below the 90 per cent. threshold described in Condition
(a)(i), by the date on which Condition (a)(i) is so satisfied, or (ii) if
Condition (a)(i) is satisfied at a level at or above such 90 per cent.
threshold, by the end of the twenty-first day (or such later day as the Panel
may agree) after whichever is the later of the time of satisfaction of Condition
(a)(i) and the 20th Business Day following the date of the Offer Document, but,
subject thereto, PacifiCorp Acquisitions shall be under no obligation to waive
or treat as satisfied any Condition by a date earlier than the latest date for
the satisfaction thereof, notwithstanding that the other Conditions may at such
earlier date have been waived or fulfilled and that there are at such earlier
date no circumstances indicating that any of such Conditions may not be capable
of fulfilment.
If PacifiCorp Acquisitions is required by the Panel to make an offer for
Energy Group Securities under the provisions of Rule 9 of the City Code,
PacifiCorp Acquisitions may make such alterations to the above Conditions,
including Condition (a), as are necessary to comply with the provisions of Rule
9.
The Offer will lapse if the Acquisition is referred to the Monopolies and
Mergers Commission before the Initial Closing Date.
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APPENDIX II
SUMMARY OF THE TERMS OF THE LOAN NOTES
The Floating Rate Unsecured Loan Notes 2004 of PacifiCorp Acquisitions will
be created by a resolution of the Board or a duly authorised committee thereof
and will be constituted by a Loan Note Instrument (the "Loan Note Instrument")
executed as a deed by PacifiCorp Acquisitions. The Loan Notes will not be
guaranteed. The issue of the Loan Notes is conditional on all Conditions being,
where applicable, waived, fulfilled or satisfied. Loan Notes will be issued only
if the aggregate valid elections for the Loan Note Alternative received on or
before the date on which all Conditions are so waived, fulfilled or satisfied,
as applicable, will result in PacifiCorp Acquisitions issuing in excess of L1
million nominal value of Loan Notes. The Loan Note Alternative is not available
to any person who is a citizen or resident of the United States and certain
other jurisdictions. The Loan Note Instrument will contain provisions, INTER
ALIA, substantially to the effect set out below.
1 The Loan Notes will be issued by PacifiCorp Acquisitions in amounts and
integral multiples of L1 in nominal amount only and will constitute
unsecured obligations of PacifiCorp Acquisitions. No payment will be made in
respect of any amount payable of less than L1. The Loan Note Instrument will
not contain any restrictions on borrowing, disposals or charging of assets
by PacifiCorp Acquisitions.
2 Interest on the Loan Notes will be payable (subject to any requirement to
deduct income tax therefrom) semi-annually in arrear on 30 June and 31
December in each year or, if such a day is not a Business Day, on the
immediately preceding Business Day ("interest payment dates") except that
the first payment of interest on the Loan Notes will be made on 31 December
1998 in respect of the period from and including the date of issue of the
relevant Loan Note up to but excluding 31 December 1998. The period from and
including the date of issue of the relevant Loan Note up to but excluding 31
December 1998 and the period from and including that date or any subsequent
interest payment date up to but excluding the next following interest
payment date is herein called an "interest period".
3(A) The rate of interest on the Loan Notes for each interest period will be the
rate per annum which is 0.5 per cent. below LIBOR. "LIBOR" means the
arithmetic mean (rounded down, if necessary, to four decimal places) of the
respective rates which are quoted as of 11.00 a.m. (London time) on the
first Business Day of the interest period on the "LIBP" page on the Reuter
Monitor Money Rate Service (or such other page or service as may replace it
for the purpose of displaying London inter-bank sterling offered rates of
leading reference banks) as being the interest rates offered in the London
inter-bank market for six month sterling deposits but:
(i) if only two or three such offered quotations appear, the relevant
arithmetic mean (rounded as mentioned above) shall be determined on the
bases of those offered quotations; and
(ii) if no, or only one, such offered quotation appears, the relevant
arithmetic mean (rounded as mentioned above) shall be determined instead
on the basis of the respective rates (as quoted to PacifiCorp
Acquisitions at its request) at which each of Barclays Bank PLC and
National Westminster Bank plc is offering six month sterling deposits to
prime banks in the London inter-bank market at or about 11.00 a.m.
(London time) on the first Business Day of the relevant interest period.
(B) If LIBOR cannot be established in accordance with the provisions of
paragraph 3(a) above for any interest period, the rate of interest on the
Loan Notes for such interest period shall be the same as that applicable to
the Loan Notes during the previous interest period, unless in such case such
other prime bank in the London inter-bank market as PacifiCorp Acquisitions
shall reasonably select for
16
<PAGE>
the purpose shall have been prepared to offer a rate as aforesaid, in which
case the rate of interest in respect of the relevant interest period shall
be the rate so offered.
(C) Each instalment of interest shall be calculated on the basis of a 365 day
year (or a 366 day year in the case of a leap year) and the number of days
elapsed in the relevant interest period.
4 A holder of Loan Notes (a "Noteholder") shall be entitled to require
PacifiCorp Acquisitions to repay the whole (whatever the amount) or any part
(being any integral amount of L1) of the principal amount of his holding of
Loan Notes at par, together with accrued interest (subject to any
requirement to deduct income tax therefrom) up to but excluding the date of
repayment, on any interest payment date, from and including 31 December 1998
and thereafter on any interest payment date falling prior to 31 December
2004 by giving not less than 30 days' prior notice in writing to the
registrars of PacifiCorp Acquisitions accompanied by the certificate(s) for
all the Loan Notes to be repaid and notice of redemption (duly completed) in
the prescribed form on the Loan Notes to be repaid.
5 If at any time the principal amount of all Loan Notes outstanding is 20 per
cent. or less of the total nominal amount of Loan Notes issued in connection
with the Offer, PacifiCorp Acquisitions shall have the right, on giving the
remaining Noteholders not less than 30 days' notice in writing expiring on
31 December 1998 or any subsequent interest payment date, to redeem all (but
not some only) of the outstanding Loan Notes at par together with accrued
interest thereon (subject to any requirement to deduct income tax therefrom)
up to but excluding the date of redemption.
6 Any Loan Notes not previously repaid, redeemed or purchased will be repaid in
full at par on 31 December 2004, together with accrued interest thereon
(subject to any requirement to deduct income tax therefrom) up to and
excluding that date.
7 Any Loan Notes repaid, purchased or redeemed will be cancelled and shall not
be available for re-issue.
8 The Noteholders will have power by extraordinary resolution of the
Noteholders passed in accordance with the provisions of the Loan Note
Instrument or by resolution in writing signed by holders of not less than 75
per cent. of the outstanding Loan Notes, INTER ALIA, to sanction any
modification, abrogation or compromise of or arrangement in respect of their
rights against PacifiCorp Acquisitions and to assent to any amendment in
respect of their rights against PacifiCorp Acquisitions and to assent to any
amendment of the provisions of the Loan Note Instrument (but in each case
subject to the consent of PacifiCorp Acquisitions). PacifiCorp Acquisitions
may, with the consent of its financial advisers, amend the provisions of the
Loan Note Instrument, without such sanction or consent, if such amendment is
of a formal, minor or technical nature or to correct a manifest error.
9 Each Noteholder will have the right to acquire (by subscription at a nominal
value of an amount up to or equal to such Noteholder's holding of Notes)
additional loan notes to be issued by a subsidiary of PacifiCorp
Acquisitions (the "Additional Notes") on terms and conditions substantially
the same as those applicable to the Loan Notes, except as follows:
(A) the Additional Notes will not be issued before 31 December 2003;
(B) the rate of interest on the Additional Notes will be 1.5 per cent. below the
rate per annum described in paragraph 3(a) above; and
(C) the Additional Notes will not carry any right to acquire any additional
securities.
10 Each Noteholder shall be entitled to require all or part (being L1 nominal
amount or any integral multiple thereof) of the Loan Notes held by him to be
repaid at par together with accrued interest (subject to any requirement to
deduct any income tax therefrom) if:
17
<PAGE>
(A) any principal or interest on any of the Loan Notes held by that Noteholder
shall fail to be paid in full within 30 days after the due date for payment
thereof; or
(B) an order is made or an effective resolution is passed for the winding-up or
dissolution of PacifiCorp Acquisitions (other than for the purposes of a
solvent reconstruction or a solvent amalgamation or a members' voluntary
winding-up on terms previously approved by extraordinary resolution of the
Noteholders); or
(C) an encumbrancer takes possession of, or a trustee, receiver, administrator
or similar officer is appointed or an administration order is made in
respect of, the whole or substantially the whole of the undertaking of
PacifiCorp Acquisitions and such person has not been paid out or discharged
within 30 days.
11 PacifiCorp Acquisitions shall be entitled at any time to purchase any Loan
Notes at any price by tender (available to all Noteholders alike), private
treaty or otherwise by agreement with the relevant Noteholder(s).
12 The Loan Notes will contain provisions entitling PacifiCorp Acquisitions,
without the consent of Noteholders, to substitute any of its subsidiaries or
any holding company or subsidiaries of such holding company resident in the
UK for tax purposes (other than Eastern or any of its subsidiaries) as the
principal debtor under the Loan Note Instrument and the Loan Notes or to
require all or any of the Noteholders to exchange their Loan Notes for loan
notes issued on the same terms MUTATIS MUTANDIS by any such company provided
that (a) PacifiCorp Acquisitions guarantees such company's obligations
thereunder; and (b) following such substitution or exchange, the Loan Notes
or (as the case may be) such loan notes shall not contain a provision
equivalent to this paragraph 12. References to PacifiCorp Acquisitions in
this summary shall be construed accordingly. PacifiCorp Acquisitions' right
to require substitution of such company as principal debtor (but not the
right to require exchange of the Loan Notes) will be exercisable only if
prior clearance has been obtained from the Inland Revenue to the effect that
the substitution will not be treated as a disposal of the Loan Notes for the
purposes of United Kingdom taxation of chargeable gains and PacifiCorp
Acquisitions' right to require such an exchange will be exercisable only if
the exchange will fall within section 135 of the Taxation of Chargeable
Gains Act 1992, and to the extent relevant, clearance has been received from
the Inland Revenue under section 138 of that Act in respect of the exchange.
13 The Loan Notes will be evidenced by certificates, will be registered and will
be transferable in integral multiples of L1 in excess of that amount,
provided that transfers of Loan Notes will not be registered while the
register of Noteholders is closed.
14 No application has been made or is intended to be made to any stock exchange
or other dealing service for the Loan Notes to be listed or otherwise
traded.
15 The Loan Notes and the Loan Note Instrument will be governed by and construed
in accordance with English law.
18
<PAGE>
APPENDIX III
SOURCES AND BASES
1. The value of the fully diluted share capital of The Energy Group is
based upon 520,857,817 Energy Group Shares in issue on 2 February 1998 and
9,228,858 Energy Group Shares which could fall to be issued on exercise in full
of options and vesting of all outstanding awards granted under the Energy Group
Share Schemes.
2. The pro forma financial information in respect of The Energy Group for
the year ended 31 March 1997 is taken from the unaudited pro forma combined
financial information set out in The Energy Group's report and accounts for the
six months ended 31 March 1997.
3. References in this announcement to "tons" are to short tons equal to
2,000 pounds.
19
<PAGE>
APPENDIX IV
DEFINITIONS
<TABLE>
<S> <C>
"Acquisition" the proposed acquisition of The Energy Group
pursuant to the Offer
"Board" or "Directors" the directors of PacifiCorp Acquisitions
"Business Day" has the meaning given to it in Rule 14d-1
under the US Securities Exchange Act of 1934
"Canada" Canada, its provinces, territories and all
areas subject to its jurisdiction and any
political sub-division thereof
"City Code" the City Code on Takeovers and Mergers of the
UK
"Closing Price" the mid-price quotation of an Energy Group
Share as derived from the London Stock
Exchange Daily Official List
"Combined Group" PacifiCorp and its subsidiaries, as enlarged
by the acquisition of The Energy Group
"Companies Act" the Companies Act 1985 (as amended) of
England and Wales
"Conditions" the conditions of the Offer described in
Appendix I and "Condition" means any one of
them
"DGES" The Director General of Electricity Supply of
the UK
"Energy Group ADRs" American Depositary Receipts evidencing
Energy Group ADSs
"Energy Group ADSs" American Depositary Shares issued in respect
of Energy Group Shares, each representing
four Energy Group Shares
"Energy Group Listing Particulars" the listing particulars relating to Energy
Group dated 27 January 1997 published in
accordance with the Listing Rules
"Energy Group Securities" Energy Group Shares and Energy Group ADSs
"Energy Group Share Schemes" The Energy Group Executive Share Option
Scheme, The Energy Group Sharesave Scheme,
The Energy Group Long-term Incentive Plan and
The Energy Group Special Bonus Scheme
"Energy Group Shares" shares of 10p each in the share capital of
The Energy Group in issue or allotted or
issued prior to the date on which the Offer
closes (or such earlier date, not being
earlier than the Initial Closing Date (as it
may be extended), as PacifiCorp Acquisitions
may determine)
</TABLE>
20
<PAGE>
<TABLE>
<S> <C>
"FERC" the US Federal Energy Regulatory Commission
"Initial Closing Date" 10.00 p.m. (London time), 5.00 p.m. (New York
City time) 20 Business Days after the date of
the Offer Document, unless and until
PacifiCorp Acquisitions, in its discretion,
shall have extended the Offer, in which case
the term "Initial Closing Date" shall mean
the latest time and date at which the Offer,
as so extended by PacifiCorp Acquisitions,
will expire or, if earlier, the date on which
the Offer becomes or is declared wholly
unconditional
"Initial Offer Period" the period from the date of the Offer
Document to and including the Initial Closing
Date
"Lazard" Lazard Brothers & Co., Limited and Lazard
Freres & Co. Limited
"LIBOR" the London Inter-Bank Offered Rate,
determined in accordance with the Terms of
the Loan Notes, a summary of which is set out
in Appendix II
"Listing Rules" the Listing Rules of the London Stock
Exchange
"Loan Note Alternative" the alternative under which holders of Energy
Group Shares who validly accept the Offer
will be entitled to elect to receive Loan
Notes instead of cash consideration otherwise
payable to them
"Loan Notes" the Floating Rate Unsecured Loan Notes 2004
of PacifiCorp Acquisitions to be issued
pursuant to the Loan Note Alternative
"London Stock Exchange" London Stock Exchange Limited
"Morgan Stanley" Morgan Stanley & Co. Limited
"NYSE" the New York Stock Exchange
"Offer" the offer to be made by Goldman Sachs
International on behalf of PacifiCorp
Acquisitions to acquire the Energy Group
Shares (including those represented by Energy
Group ADSs) and Energy Group ADSs as
described in this document including, where
the context permits and/or requires, the Loan
Note Alternative and any subsequent revision,
variation, extension, or renewal of such
offer or the Loan Note Alternative
"Offer Document" the document containing the Offer to be sent
to holders of Energy Group Shares and Energy
Group ADSs
"Original Offer" the offer made by Goldman Sachs International
on behalf of PacifiCorp Acquisitions to
acquire all the issued and to be issued
Energy Group shares as announced on 13 June
1997
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
"Panel" the Panel on Takeovers and Mergers of the UK
"SEC" the US Securities and Exchange Commission
"Subsequent Offer Period" the period following the Initial Closing Date
during which the Offer remains open for
acceptance
"TEG Group" The Energy Group and its subsidiaries and
subsidiary undertakings and, where the
context permits, each of them
"The Energy Group" The Energy Group PLC
"UK" or "United Kingdom" the United Kingdom of Great Britain and
Northern Ireland
"United States" or "US" the United States of America, its territories
and possessions, any State of the United
States and the District of Columbia, and all
other areas subject to its jurisdiction
"L" pound sterling, the lawful currency of the
United Kingdom
"$" United States dollar, the lawful currency of
the United States
</TABLE>
22
<PAGE>
Exhibit 99(a)(9)
Scott Hibbs, for investors, (503) 731-2123
Angela Hult, for investors (503) 731-2192
Dave Kvamme, for media (503) 464-6272
Jan Johnson, for media (503) 464-6268
February 3, 1998
PacifiCorp Makes New Agreed Bid for The Energy Group
PORTLAND, Oregon - PacifiCorp (NYSE: PPW), a diversified energy company
in the United States and Australia, announced today a new cash tender offer
of 7.65 pounds ($12.62) per ordinary share for The Energy Group PLC
(LSE/NYSE: TEG), a diversified energy company in the United Kingdom, the U.S.
and Australia.
The boards of directors of both companies unanimously approved the
transaction. The 7.65 pound offer, made by PacifiCorp Group Holdings Company, a
wholly owned subsidiary of PacifiCorp, is 10 percent higher than the original
bid made June 13, 1997.
The transaction is valued at $10.7 billion, including the purchase of
521 million shares of equity and the assumption of $4.1 billion of The Energy
Group's gross debt. Proceeds for the acquisition will come from $1.8 billion
in cash, raised through sales of non-core assets which have been occurring
since the time of PacifiCorp's original bid for The Energy Group, and $4.8
billion in borrowings.
"The merger of PacifiCorp and The Energy Group will create a premier
global energy company, poised to compete effectively on three continents as
the energy markets across the world are being restructured," said Fred
Buckman, President and Chief Executive Officer of PacifiCorp. "The
acquisition represents a landmark step in achieving our strategy."
Derek Bonham, chairman of The Energy Group, said, "We have continued to
demonstrate the soundness of our business. PacifiCorp recognizes the
benefits of this strategy and has again offered a price that represents
excellent value for our shareholders and the Board of The Energy Group has no
hesitation in recommending it."
The original bid lapsed after the president of the Board of Trade,
Margaret Beckett, referred the transaction to the Monopolies and Mergers
Commission. Because the UK government cleared the transaction in December,
the transaction is not conditional upon further regulatory approvals in the
UK.
(more)
<PAGE>
With respect to U.S. regulatory approvals, PacifiCorp and The Energy
Group have agreed with the staff of the Federal Trade Commission on the form
of a consent decree that will require divestiture of two mines owned by
Peabody, a subsidiary of The Energy Group. The consent order is awaiting
approval by the FTC.
Peabody and Eastern Electricity in the UK are TEG's main business units.
The Energy Group is awaiting approval from the Federal Energy Regulatory
Commission on the sale of certain assets of Citizens Power. FERC approval is
a condition of the offer made today and is expected in the near future.
PacifiCorp is mailing formal tender offer documents to The Energy Group
shareholders starting Thursday and expects to close the transaction this
Spring.
Upon completion of the transaction, the combined company will have 5
million customers, 17,000 megawatts of generation and more than 10 billion
tons of coal reserves in the United States, the United Kingdom and Australia.
The combination is expected to be accretive to PacifiCorp's earnings in
the first year following completion of the transaction and thereafter, even
without considering the benefits of synergy resulting from cost reductions
and revenue enhancements. This statement should not be interpreted to mean
that PacifiCorp's total reported earnings per share will necessarily be
greater than those for the year ended December 31, 1997.
The debt financing will be provided through multiple debt facilities
arranged by Citibank; Goldman, Sachs & Co.; and J.P. Morgan. Goldman, Sachs
& Co. is PacifiCorp's financial adviser for the transaction. The Energy
Group is represented by Lazard and Morgan Stanley & Co. Limited.
The Energy Group owns Eastern, the largest British regional electric
company (REC) with 3.1 million retail electric and gas customers. PacifiCorp
has 1.4 million retail electric customers in the western U.S. and 550,000 in
the State of Victoria, Australia.
Eastern, one of the lowest-cost electricity suppliers in the UK, is
well positioned to prosper when the UK market becomes fully competitive later
this year. UK electricity customers with demand for more than 100 kilowatts
already can choose their supplier.
The Energy Group also owns the world's largest private coal company,
Peabody, which is a low-cost, low-sulfur coal producer with more than 9
billion tons of reserves in the U.S. and 466 million tons of reserves in
Australia. Peabody provides fuel to more than 150 power plants in the U.S.
PacifiCorp is also a major coal operator in the U.S. where it has 421
million tons of reserves and in Australia with 450 million tons.
(more)
<PAGE>
PacifiCorp and The Energy Group both have natural gas marketing skills
and assets. Last year, PacifiCorp purchased TPC Corporation, a Houston-based
natural gas storage and marketing company. The Energy Group is one of the
largest natural gas suppliers in the UK.
PacifiCorp owns or controls 10,000 megawatts of generation in the U.S.,
while TEG has 6,700 megawatts of generation in the UK. PacifiCorp is one of
the lowest cost providers of electricity in the U.S., with average production
costs 25% less than the national average.
The combined company is positioned to be the premier power sales,
marketing and trading company in the U.S. It joins PacifiCorp's significant
western U.S. power marketing business, its expanding eastern U.S. energy
marketing business, Citizens Power's energy marketing and contract
restructuring expertise and Peabody's presence as one of the largest
suppliers of fuel to the U.S. electricity industry.
PacifiCorp intends to invite Bonham and John Devaney, Chief Executive of
Eastern, to join the Board of Directors of PacifiCorp following the
acquisition.
In addition, PacifiCorp intends that a management committee will be
formed consisting of Bonham and Devaney, as well as Eric Anstee, Finance
Director of The Energy Group, Irl Englehardt, Chief Executive of Peabody, and
Fred Buckman, Richard O'Brien, Verl Topham and Dennis Steinberg from
PacifiCorp.
Fred Buckman will remain as President and Chief Executive Officer of the
combined group.
###
<PAGE>
Exhibit 99.(a)(10)
This announcement is neither an offer to purchase nor a solicitation of
an offer to sell securities. The Offer is made in the United States solely
by the Offer to Purchase dated February 6, 1998, the Letter of Transmittal,
the Form of Acceptance and related materials and is not being made to, nor
will acceptances be accepted from or on behalf of, holders of Energy Group
Shares or Energy Group ADSs evidenced by Energy Group ADRs in any
jurisdiction in which the making of the Offer or acceptance thereof would not
be in compliance with the laws of such jurisdiction. In those US
jurisdictions whose securities laws or blue sky laws require the Offer to be
made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of PacifiCorp Acquisitions by Goldman, Sachs & Co. or one or more
registered brokers or dealers which are licensed under the laws of those
jurisdictions. The Offer to Purchase, the Letter of Transmittal, the Form of
Acceptance and related materials should not be forwarded or transmitted in or
into Australia, Canada or Japan.
Notice of Recommended Cash Offer by
Goldman Sachs International
on behalf of
PacifiCorp Acquisitions
a wholly owned subsidiary of
PacifiCorp
to acquire
all Ordinary Shares and American Depositary Shares
evidenced by American Depositary Receipts
of
The Energy Group PLC
Goldman Sachs International, acting in the United States through
Goldman, Sachs & Co., on behalf of PacifiCorp Acquisitions, is offering to
purchase, upon the terms and subject to the conditions set forth in the Offer
to Purchase dated February 6, 1998 (the "Offer to Purchase"), the related
Letter of Transmittal and the related Form of Acceptance (collectively, the
"Offer"), (i) all outstanding ordinary shares of 10p each ("Energy Group
Shares") of The Energy Group PLC ("The Energy Group") for L7.65 per Energy
Group Share in cash and (ii) all outstanding American Depositary Shares of
The Energy Group, each representing four Energy Group Shares ("Energy Group
ADSs") and evidenced by American Depositary Receipts ("Energy Group ADRs"),
for L30.60 per Energy Group ADS in cash. Energy Group Shares and Energy
Group ADSs evidenced by Energy Group ADRs are referred to collectively as
"Energy Group Securities".
<PAGE>
THE INITIAL OFFER PERIOD WILL EXPIRE AT 10:00 P.M. (LONDON TIME), 5:00
P.M. (NEW YORK CITY TIME), ON MARCH 9, 1998, UNLESS EXTENDED (THE "INITIAL
OFFER PERIOD"). AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFER HAVE BEEN SATISFIED,
FULFILLED OR, WHERE PERMITTED, WAIVED, THE OFFER WILL BE EXTENDED FOR A
SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS (THE "SUBSEQUENT OFFER
PERIOD"). HOLDERS OF ENERGY GROUP SECURITIES WILL HAVE THE RIGHT TO WITHDRAW
THEIR ACCEPTANCES OF THE OFFER DURING THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD.
The board of The Energy Group, which has been so advised by Lazard
Brothers & Co., Limited, Lazard Freres & Co. Limited (together, "Lazard") and
Morgan Stanley & Co. Limited ("Morgan Stanley"), its financial advisers,
considers the terms of the Offer to be fair and reasonable. In providing
advice to the board of The Energy Group, Lazard and Morgan Stanley have taken
account of the board's commercial assessment of the Offer. Accordingly, the
directors of The Energy Group unanimously recommend all holders of Energy
Group Securities to accept the Offer, as they have irrevocably undertaken to
do in respect of their personal holdings of Energy Group Securities.
The Offer is conditional on, among other things, valid acceptances being
received (and not, where permitted, withdrawn) by the expiration of the
Initial Offer Period in respect of not less than 90 per cent. in nominal
value of Energy Group Securities to which the Offer relates, or such lesser
percentage as PacifiCorp Acquisitions may decide, provided that such
condition (the "Acceptance Condition") shall not be satisfied unless
PacifiCorp Acquisitions and its wholly owned subsidiaries shall have acquired
or agreed to acquire, whether pursuant to the Offer or otherwise, Energy
Group Securities carrying in the aggregate more than 50 per cent. of the
voting rights then exercisable at general meetings of The Energy Group.
PacifiCorp Acquisitions expects that it will reduce the percentage of Energy
Group Securities required to satisfy the Acceptance Condition at some time
prior to all of the conditions being satisfied, fulfilled or, where
permitted, waived. At least five Business Days prior to any such reduction,
PacifiCorp Acquisitions will announce that it has reserved the right to so
reduce the Acceptance Condition. PacifiCorp Acquisitions will not make such
an announcement unless PacifiCorp Acquisitions believes there is a
significant possibility that sufficient Energy Group Securities will be
tendered to permit the Acceptance Condition to be satisfied at such reduced
level. Holders of Energy Group Securities who are not willing to accept the
Offer if the Acceptance Condition is reduced to the minimum permitted level
should either not accept the Offer until the Subsequent Offer Period or be
prepared to withdraw their acceptances promptly following an announcement by
PacifiCorp Acquisitions of its reservation of the right to reduce the
Acceptance Condition. Other conditions of the Offer are set out in Part A of
Appendix I of the Offer to Purchase.
2
<PAGE>
PacifiCorp Acquisitions reserves the right (but will not be obliged) at
any time to extend the Initial Offer Period, provided that PacifiCorp
Acquisitions may not extend the Initial Offer Period beyond April 7, 1998
without the consent of the Panel on Takeovers and Mergers of the UK (the
"Panel"). PacifiCorp Acquisitions reserves the right, if appropriate, to
secure the Panel's approval to extend the final date for expiration of the
Initial Offer Period to April 28, 1998, or such later date as the Panel may
agree. A public announcement of any such extension will be made no later
than 8:30 a.m. (London time) in the UK and by 8:30 a.m. (New York City time)
in the US on the next business day after the previously scheduled expiration
of the Initial Offer Period. PacifiCorp Acquisitions may terminate any
extension of the Initial Offer Period (other than an extension required by
the City Code on Takeovers and Mergers of the UK (the "City Code") or US
federal securities laws) prior to its scheduled expiration if the Acceptance
Condition and all other conditions to the Offer have been satisfied,
fulfilled or, where permitted, waived. In that case, the Initial Offer
Period and, consequently, withdrawal rights, except in certain limited
circumstances, will terminate immediately.
If all of the conditions are satisfied, fulfilled or, where permitted,
waived at the expiration of the Initial Offer Period, the consideration for
Energy Group Securities purchased pursuant to the Offer will be paid within
14 calendar days after the later of the expiration of the Initial Offer
Period or the receipt of a complete and valid acceptance of the Offer. In
all cases, payment for Energy Group Securities purchased pursuant to the
Offer will be made only after timely receipt by either the US Depositary or
the UK Receiving Agent, as the case may be, of (i) certificates representing
the Energy Group Shares. Energy Group ADRs representing the Energy Group
ADSs, or (only in the case of Energy Group ADSs) timely confirmation of a
book-entry transfer of such Energy Group ADSs evidenced by Energy Group ADRs
into the US Depositary's account at The Depository Trust Company or the
Philadelphia Depository Trust Company (each a "Book-Entry Transfer Facility")
pursuant to the procedures set forth in the Offer to Purchase, (ii) the
Letter of Transmittal (in the case of acceptances relating to Energy Group
ADSs) or Form of Acceptance (in the case of acceptances relating to Energy
Group Shares), properly completed and duly executed, with any required
signature guarantees, and (iii) any other documents required by the Letter of
Transmittal or Form of Acceptance. Although the Offer price is denominated
in pounds sterling, accepting holders of Energy Group Shares will be entitled
to have their cash consideration converted into US dollars at the exchange
rate obtainable by the relevant payment agent (either the US Depositary or
the UK Receiving Agent) on the spot market in London at approximately noon
(London time) on the date the cash consideration is made available by
PacifiCorp Acquisitions to the relevant payment agent for delivery to holders
of Energy Group Shares. Unless they elect to receive pounds sterling, Energy
Group ADS holders will receive consideration converted into dollars as
described above, as if such holders of Energy Group ADSs had elected to
receive dollars.
If, as a result of the Offer and subject to certain conditions,
PacifiCorp Acquisitions receives acceptances of the Offer in respect of
Energy Group Securities representing at least 90 per cent. in value of the
Energy Group Securities to which the Offer relates, then
3
<PAGE>
provided such requirement is achieved within four months of February 6, 1998,
PacifiCorp Acquisitions will be entitled and intends to effect the compulsory
acquisition procedures provided for in Sections 428 to 430F of the Companies
Act 1985 (as amended) of England and Wales to compel the purchase of any
outstanding Energy Group Securities on the same terms as provided in the
Offer, in accordance with the relevant procedures and time limits described
in such Act.
If a holder of Energy Group ADSs wishes to accept the Offer in respect
of Energy Group ADSs and the Energy Group ADRs evidencing such Energy Group
ADSs are not immediately available or the procedures for book-entry transfer
cannot be completed on a timely basis, or if time will not permit all
required documents to reach the US Depositary prior to the expiration of the
Subsequent Offer Period, such holder's acceptance of the Offer in respect of
Energy Group ADSs may nevertheless be effected by following the guaranteed
delivery procedures set forth in the Offer to Purchase.
Except as described below and in the Offer to Purchase, acceptances of
the Offer for Energy Group Securities are irrevocable. Acceptances of the
Offer may be withdrawn pursuant to the procedures set out below at any time
during the Initial Offer Period, including any extension thereof, but not
during the Subsequent Offer Period. To be effective, a written notice of
withdrawal must be timely received by the party (either the UK Receiving
Agent or the US Depositary) to whom the acceptance was originally sent at one
of the addresses set forth in the Offer to Purchase and must specify the name
of the person whose acceptance is to be withdrawn, the number of Energy Group
Securities to be withdrawn and (if an Energy Group Share certificate or
Energy Group ADR has been delivered) the name of the registered holder of the
Energy Group Securities, if different from the name of the person whose
acceptance is to be withdrawn. In respect of Energy Group ADSs, if Energy
Group ADRs have been delivered or otherwise identified to the US Depositary
then, prior to the physical release of such Energy Group ADRs, the serial
numbers shown on such Energy Group ADRs must be submitted and, unless the
Energy Group ADSs evidenced by such Energy Group ADRs have been delivered by
an Eligible Institution (as defined in Section 1 of the Letter of
Transmittal) or the Offer accepted by means of a Letter of Transmittal, the
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Energy Group ADSs evidenced by Energy Group ADRs have been
delivered pursuant to the procedures for book-entry transfer set forth in the
Offer to Purchase, any notice of withdrawal must also specify the name and
number of account at the appropriate Book-Entry Transfer Facility to be
credited with the withdrawn Energy Group ADSs and must otherwise comply with
such Book-Entry Transfer Facility's procedures. All questions as to the
validity (including time of receipt) of any notice of withdrawal will be
determined by PacifiCorp Acquisitions, whose determination (except as
required by the Panel) shall be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the US Securities Exchange Act of 1934,
as amended, is contained in the Offer to Purchase and incorporated herein by
reference.
4
<PAGE>
The Offer to Purchase, the Letter of Transmittal and the Form of
Acceptance are being mailed to holders of record of Energy Group Securities
and are being furnished to brokers, dealers, commercial banks, trust
companies and similar persons, whose names or the names of whose nominees
appear as holders of record for subsequent transmittal to beneficial owners
of Energy Group Securities.
The Offer to Purchase and related materials contain important
information which should be read carefully before any decisions are made with
respect to the Offer.
Requests for assistance or copies of the Offer to Purchase, the Letter
of Transmittal, the Form of Acceptance and all other Offer materials may be
directed to the Dealer Manager or the Information Agent as set forth below,
and copies will be furnished promptly at PacifiCorp Acquisitions' expense.
The Information Agent for the Offer is:
--SHC logo--
SHAREHOLDER COMMUNICATIONS CORPORATION
17 State Street, 27th Floor
New York, New York 10004
Call Toll Free: (800) 733-8481, ext. 475
The Dealer Manager for the Offer is:
--GS logo--
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(212) 902-1000 within New York City
(800) 323-5678 (Toll Free) outside New York City
February 6, 1998
5
<PAGE>
[LOGO]
Renewed Recommended Cash Offer
by
GOLDMAN SACHS INTERNATIONAL
on behalf of
PACIFICORP ACQUISITIONS
a wholly-owned subsidiary of PacifiCorp
for
The Energy Group PLC
Goldman Sachs International announces on behalf of PacifiCorp Acquisitions, a
wholly-owned subsidiary of PacifiCorp, that, by means of an offer document dated
and posted on 6 February 1998 ("the Offer Document") and by means of this
advertisement, Goldman Sachs International is making a recommended cash offer
("the Offer") on behalf of PacifiCorp Acquisitions to acquire all of the issued
and to be issued shares and American Depositary Shares (as evidenced by American
Depositary Receipts) of The Energy Group PLC (The Energy Group). Terms defined
in the Offer Document have the same meanings in this advertisement.
Subject to the Offer becoming or being declared wholly unconditional, an Energy
Group shareholder who validly accepts the Offer will receive 765 pence in cash
for every Energy Group Share. An Energy Group ADS holder who validly accepts the
Offer will receive L30.60 in cash for every Energy Group ADS.
As an alternative to some or all of the cash consideration receivable under the
Offer, Energy Group shareholders (other than citizens or residents of the United
States and certain other overseas shareholders) who validly accept the Offer may
elect to receive Loan Notes instead of cash, on the basis of L1 nominal of Loan
Notes for every L1 of cash otherwise available under the Offer. The Loan Notes
will, subject to certain conditions, be transferable, but no application is
intended to be made for them to be listed or dealt in on any stock exchange. The
obligations of PacifiCorp Acquisitions under the Loan Notes are not guaranteed
or secured.
The full terms and conditions of the Offer and the Loan Note Alternative
(including details of how the Offer may be accepted) are set out in the Offer
Document and the Acceptance Form accompanying the Offer Document.
Energy Group shareholders and Energy Group ADS holders who accept the Offer may
rely only on the Offer Document and the Acceptance Form for all the terms and
conditions of the Offer (including the Loan Note Alternative).
The Offer is, by means of this advertisement, being extended to all persons to
whom the Offer Document may not be despatched who hold, or who are entitled to
have allotted or issued to them, Energy Group Shares and/or Energy Group ADSs.
Such persons are informed that copies of the Offer Document and Acceptance Form
are available for collection from New Issues Department, IRG plc, at 23
Ironmonger Lane, London EC2 or at Bourne House, 34 Beckenham Road, Beckenham,
Kent BR3 4TH.
The Offer, which is being made by means of the Offer Document and this
advertisement, will be open for acceptance until 10.00 p.m. (London time), 5.00
p.m. (New York City time) on 9 March 1998 (or such later time(s) and/or date(s)
as PacifiCorp Acquisitions, subject to the rules of the City Code, may decide).
The board of The Energy Group, which has been so advised by Lazard Brothers &
Co., Limited and Lazard Fr_res & Co. Limited (together Lazard) and Morgan
Stanley & Co. Limited, its financial advisers, has stated that it considers the
terms of the Offer to be fair and reasonable. In providing advice to the board
of The Energy Group, Lazard and Morgan Stanley & Co. Limited have taken account
of the board's commercial assessment. Accordingly, the directors of The Energy
Group have unanimously recommended all holders of Energy Group Shares and Energy
Group ADSs to accept the Offer, as they have irrevocably undertaken to do in
respect of their personal holdings of 96,000 Energy Group Shares and 1,550
Energy Group ADSs.
As previously announced, the board of The Energy Group has received approaches
from each of Nomura International plc and Texas Utilities Co. expressing an
interest in acquiring The Energy Group. Both parties have had access to
management and have been provided with certain information about the TEG Group.
No offer has been received from either party and it is uncertain whether an
offer will be received from either party.
The Loan Notes to be issued pursuant to the Offer have not been, nor will be,
registered under the United States Securities Act of 1933, as amended, or under
any relevant securities laws of any state or district of the United States, will
not be the subject of a prospectus under the securities laws of any province of
Canada and will not be registered under any relevant securities laws of any
other country. The Loan Notes are not being offered, sold or delivered, directly
or indirectly, in or into the United States, Canada, Australia or Japan.
This advertisement is not being published or otherwise distributed or sent to,
into or from Canada, Australia or Japan and persons reading this advertisement
(including nominees, trustees and custodians) must not distribute or send this
advertisement, the Offer Document or the Acceptance Form (or any related
offering document(s)), in, into or from Canada, Australia or Japan nor use
Canadian, Australian or Japanese mails or any such means or instrumentality for
any purpose, directly or indirectly, in connection with the Offer and doing so
may invalidate any related purported acceptance of the Offer.
Goldman Sachs International, which is regulated in the UK by The Securities and
Futures Authority Limited, is acting for PacifiCorp Acquisitions and PacifiCorp
and no one else in connection with the Offer and will not be responsible to
anyone other than PacifiCorp Acquisitions and PacifiCorp for providing the
protections afforded to its customers or for giving advice in relation to the
Offer. Goldman Sachs International is acting through Goldman, Sachs & Co. for
the purposes of making the Offer in and into the United States.
Lazard and Morgan Stanley & Co. Limited, which are regulated in the UK by The
Securities and Futures Authority Limited, are acting for The Energy Group and no
one else in connection with the Offer and will not be responsible to anyone
other than The Energy Group for providing the protections afforded to their
customers or for giving advice in relation to the Offer.
6 February 1998
<PAGE>
EXHIBIT 99(a)(12)
Dave Kvamme, media inquires, (503) 464-6272
Scott Hibbs, investor inquires, (503) 731-2123
February 5, 1998
FERC REMOVES CONDITION TO PACIFICORP ACQUISITION OF THE ENERGY GROUP
Portland, OR - PacifiCorp (NYSE: PPW) noted today that the Federal Energy
Regulatory Commission (FERC) has issued an order approving the sale of the FERC
jurisdictional assets of Citizens Power to Lehman Brothers Holdings, Inc.
The approval of the sale of these assets by FERC was a condition of the
acquisition of The Energy Group PLC (TEG) (LSE/NYSE: TEG), which owns Citizens
Power, by PacifiCorp. The assets being sold include FERC tariffs, contracts and
associated records. Under the terms of the sale, TEG retains the Citizens Power
name and employees. Citizens Power specializes in energy marketing and Non-
Utility Generator contract restructuring.
On February 3, 1998, PacifiCorp announced a new cash tender offer of 7.65 pounds
($12.62) per share for TEG and both companies' boards of directors have
unanimously approved the transaction.
FERC's approval was the only specific regulatory condition of the offer.
The UK government cleared the acquisition in December.
###
<PAGE>
Exhibit 99(b)(1)
CONFORMED COPY
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
CREDIT AGREEMENT
Dated as of February 3, 1998
among
PACIFICORP POWERCOAL LLC,
THE LENDERS NAMED HEREIN,
CITIBANK, N.A.,
as Paying Agent, Swingline Lender and Issuing Bank
and
CITICORP USA, INC.,
as Collateral Agent
------------------------------------
CITICORP SECURITIES, INC.,
GOLDMAN SACHS CREDIT PARTNERS L.P.
and
J.P. MORGAN SECURITIES INC.,
as Arrangers
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
[CS&M Ref. No. 6558-145]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
ARTICLE I
Definitions
SECTION 1.01. Defined Terms................................................................................ 2
SECTION 1.02. Terms Generally.............................................................................. 30
ARTICLE II
The Credits
SECTION 2.01. Commitments.................................................................................. 31
SECTION 2.02. Loans........................................................................................ 31
SECTION 2.03. Borrowing Procedure.......................................................................... 33
SECTION 2.04. Evidence of Debt; Repayment of Loans......................................................... 34
SECTION 2.05. Fees......................................................................................... 35
SECTION 2.06. Interest on Loans............................................................................ 35
SECTION 2.07. Default Interest............................................................................. 36
SECTION 2.08. Alternate Rate of Interest................................................................... 36
SECTION 2.09. Termination and Reduction of Commitments..................................................... 36
SECTION 2.10. Conversion and Continuation of Borrowings.................................................... 37
SECTION 2.11. Repayment of Term Borrowings................................................................. 38
SECTION 2.12. Optional Prepayments......................................................................... 41
SECTION 2.13. Mandatory Prepayments........................................................................ 41
SECTION 2.14. Reserve Requirements; Change in Circumstances................................................ 44
SECTION 2.15. Change in Legality........................................................................... 45
SECTION 2.16. Indemnity.................................................................................... 46
SECTION 2.17. Pro Rata Treatment........................................................................... 46
SECTION 2.18. Sharing of Setoffs........................................................................... 46
SECTION 2.19. Payments..................................................................................... 47
SECTION 2.20. Taxes........................................................................................ 47
SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty to Mitigate...................... 49
SECTION 2.22. Swingline Loans.............................................................................. 50
SECTION 2.23. Letters of Credit............................................................................ 52
</TABLE>
<PAGE>
Contents, p.2
<TABLE>
<CAPTION>
<S> <C>
ARTICLE III
Representations and Warranties
SECTION 3.01. Organization................................................................................. 56
SECTION 3.02. Corporate and Governmental Authorization; No Contravention................................... 56
SECTION 3.03. Enforceability............................................................................... 56
SECTION 3.04. Financial Statements......................................................................... 56
SECTION 3.05. No Material Adverse Change................................................................... 57
SECTION 3.06. Title to Properties; Possession Under Leases................................................. 57
SECTION 3.07. Subsidiaries................................................................................. 58
SECTION 3.08. Litigation; Compliance with Laws; Reserves................................................... 58
SECTION 3.09. Agreements................................................................................... 59
SECTION 3.10. Federal Reserve Regulations.................................................................. 59
SECTION 3.11. Investment Company Act; Public Utility Holding Company Act................................... 59
SECTION 3.12. Tax Returns.................................................................................. 59
SECTION 3.13. No Material Misstatements.................................................................... 59
SECTION 3.14. Employee Benefit Plans....................................................................... 59
SECTION 3.15. Environmental Matters........................................................................ 60
SECTION 3.16. Insurance.................................................................................... 61
SECTION 3.17. Security Documents........................................................................... 61
SECTION 3.18. Labor Matters................................................................................ 61
SECTION 3.19. Solvency..................................................................................... 61
ARTICLE IV
Conditions
SECTION 4.01. Effective Date............................................................................... 62
SECTION 4.02. Borrowings................................................................................... 63
ARTICLE V
Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties......................................................... 65
SECTION 5.02. Insurance.................................................................................... 65
SECTION 5.03. Obligations and Taxes........................................................................ 65
SECTION 5.04. Financial Statements, Reports, etc........................................................... 65
SECTION 5.05. Litigation and Other Notices................................................................. 67
SECTION 5.06. Maintaining Records; Access to Properties and Inspections.................................... 67
SECTION 5.07. Use of Proceeds.............................................................................. 67
SECTION 5.08. Compliance with Laws......................................................................... 68
SECTION 5.09. Preparation of Environmental Reports......................................................... 68
</TABLE>
<PAGE>
Contents, p.3
<TABLE>
<CAPTION>
<S> <C>
SECTION 5.10. Further Assurances........................................................................... 68
SECTION 5.11. Interest Rate Protection Agreements.......................................................... 68
SECTION 5.12. Peabody Transfer; Citizens Transfer; PPM Contribution........................................ 68
ARTICLE VI
Negative Covenants
SECTION 6.01. Indebtedness................................................................................. 69
SECTION 6.02. Liens........................................................................................ 71
SECTION 6.03. Sale and Lease-Back Transactions............................................................. 73
SECTION 6.04. Investments, Loans and Advances.............................................................. 73
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.................................... 74
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of Subsidiaries to Pay Dividends........ 75
SECTION 6.07. Transactions with Affiliates................................................................. 76
SECTION 6.08. Business of Borrower and Subsidiaries........................................................ 76
SECTION 6.09. Other Indebtedness and Agreements............................................................ 76
SECTION 6.10. Capital Expenditures......................................................................... 77
SECTION 6.11. Leverage Ratio............................................................................... 77
SECTION 6.12. Interest Expense Coverage Ratio.............................................................. 78
SECTION 6.13. Net Worth.................................................................................... 78
SECTION 6.14. Current Ratio................................................................................ 78
SECTION 6.15. Fiscal Year.................................................................................. 78
ARTICLE VII
Events of Default
ARTICLE VIII
The Paying Agent and the Collateral Agent
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices...................................................................................... 84
SECTION 9.02. Survival of Agreement........................................................................ 85
</TABLE>
<PAGE>
Contents, p.4
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
SECTION 9.03. Binding Effect............................................................................... 85
SECTION 9.04. Successors and Assigns....................................................................... 85
SECTION 9.05. Expenses; Indemnity.......................................................................... 89
SECTION 9.06. Right of Setoff.............................................................................. 89
SECTION 9.07. APPLICABLE LAW............................................................................... 90
SECTION 9.08. Waivers; Amendment........................................................................... 90
SECTION 9.09. Interest Rate Limitation..................................................................... 91
SECTION 9.10. Entire Agreement............................................................................. 91
SECTION 9.11. WAIVER OF JURY TRIAL......................................................................... 91
SECTION 9.12. Severability................................................................................. 91
SECTION 9.13. Counterparts................................................................................. 92
SECTION 9.14. Headings..................................................................................... 92
SECTION 9.15. Jurisdiction; Consent to Service of Process.................................................. 92
SECTION 9.16. Judgment Currency............................................................................ 92
SECTION 9.17. Confidentiality.............................................................................. 93
SECTION 9.18. Intercreditor Agreement...................................................................... 94
SECTION 9.19. Additional Borrowers......................................................................... 94
SECTION 9.20. Margin Regulations........................................................................... 94
</TABLE>
<TABLE>
<CAPTION>
EXHIBITS AND SCHEDULES
<S> <C>
Exhibit A Administrative Questionnaire
Exhibit B Assignment and Acceptance
Exhibit C Borrowing Request
Exhibit D Collateral Assignment
Exhibit E Guarantee Agreement
Exhibit F Indemnity, Subrogation and Contribution Agreement
Exhibit G Intercreditor Agreement
Exhibit H PA Note
Exhibit I Pledge Agreement
Exhibit J U.S. Tax Sharing Policy
Exhibit K-1 Opinion of Stoel Rives LLP
Exhibit K-2 Opinion of Davis Polk & Wardwell
Schedule 1.01(a) Offer Conditions Precedent
Schedule 1.01(b) Peabody Indebtedness
Schedule 1.01(c) Peabody Subsidiaries
Schedule 2.01 Commitments
Schedule 3.06(b) Leases
Schedule 3.07(a) Subsidiaries
Schedule 3.08 Litigation
Schedule 3.15 Environmental Matters
Schedule 3.16 Insurance
Schedule 6.01(a) Indebtedness
Schedule 6.04(c) Investments, Loans and Advances
Schedule 6.05(a) Certain Subsidiaries
</TABLE>
<PAGE>
CREDIT AGREEMENT dated as of February 3, 1998, among PACIFICORP
POWERCOAL LLC, an Oregon limited liability company (the "Borrower"), the
Lenders (as defined in Article I), CITIBANK, N.A., a national banking
association ("Citibank"), as paying agent (in such capacity, the "Paying
Agent") for the Lenders, and as swingline lender (in such capacity, the
"Swingline Lender") and issuing bank (in such capacity, the "Issuing
Bank"), and CITICORP USA, INC., a Delaware corporation ("Citicorp USA"),
as collateral agent (in such capacity, the "Collateral Agent") for the
Lenders.
Pursuant to the Offer (such term and each other capitalized term used but
not defined herein having the meaning given to it in Article I), PA has offered
or will offer to purchase each outstanding Share (including Shares represented
by Depositary Shares) at a purchase price of pence net per share in cash to
the holder thereof. In connection therewith and to provide a portion of the
financing therefor, (a) PA has entered into the PA Facility Agreement and (b)
EnergyCo has entered into the EnergyCo Credit Agreement.
The Borrower has requested the Lenders to extend credit in the form of (a)
Tranche A Term Loans at any time during the Term Loan Availability Period, in an
aggregate principal amount not in excess of $636,000,000, (b) Tranche B Term
Loans at any time during the Term Loan Availability Period, in an aggregate
principal amount not in excess of $650,000,000, and (c) Revolving Loans at any
time and from time to time prior to the Revolving Credit Maturity Date, in an
aggregate principal amount at any time outstanding not in excess of
$300,000,000. The Borrower has requested the Swingline Lender to extend
credit, at any time and from time to time prior to the Revolving Credit Maturity
Date, in the form of Swingline Loans. The Borrower has requested the Issuing
Bank to issue letters of credit, in an aggregate face amount at any time
outstanding not in excess of $650,000,000, to support payment obligations
incurred in the ordinary course of business by the Borrower and the Subsidiaries
(including PPM and Citizens before they become Subsidiaries).
The proceeds of the Term Loans, together with not less than $373,000,000 in
net cash proceeds of the equity contribution received by Powercoal from PGH (the
"PGH Equity Contribution"), are to be used solely to fund loans (the
"Powercoal/PA Loans") to PA in exchange for the PA Note, and to pay fees and
expenses related to the Offer. The proceeds of the Revolving Loans and the
Swingline Loans are to be used (a) to refinance the Peabody Refinanced
Indebtedness and (b) for general corporate purposes of the Borrower and the
Subsidiaries (including PPM and Citizens before they become Subsidiaries). PA
will use (a) the proceeds of the Powercoal/PA Loans, (b) certain proceeds from
borrowings under the PA Facility Agreement and (c) certain proceeds that PA will
receive as a result of borrowings by EnergyCo under the EnergyCo Credit
Agreement, to (i) finance the Offer and for the other purposes specified in
Clause 3.1(a)(i) of the PA Facility Agreement, and (ii) refinance certain
existing Indebtedness of TEG and its subsidiaries.
The Lenders are willing to extend such credit to the Borrower and the
Issuing Bank is willing to issue letters of credit for the account of the
Borrower, on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
<PAGE>
2
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following terms
shall have the meanings specified below:
"Acquisition Borrowing" shall mean any Term Borrowing, the proceeds of which
are loaned to PA and used by PA to finance a portion of the Offer and/or for the
other purposes specified in Clause 3.1(a)(i) of the PA Facility Agreement.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, an interest rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the product of (a) the LIBO Rate in
effect for such Interest Period and (b) Statutory Reserves.
"Adjustment Amount" shall mean the cumulative amount (during the period from
April 1, 1998, to the end of the period relating to the relevant determination)
by which the cash expenditures of the Borrower and its subsidiaries (after
giving effect to the Peabody Transfer) for reclamation and related liabilities,
workers compensation liabilities, postretirement benefit costs, industry fund
obligations and similar items exceed the sum of: (a) the cumulative expense
during such period recognized in Consolidated Net Income of the Borrower and its
subsidiaries (after giving effect to the Peabody Transfer) for reclamation and
related liabilities, workers compensation liabilities, postretirement benefit
costs, industry fund obligations and similar items and (b) $50,000,000.
"Administrative Questionnaire" shall mean an Administrative Questionnaire in
the form of Exhibit A or such other form as shall be approved by the Paying
Agent.
"Affiliate" shall mean, when used with respect to a specified person, any
other person that directly or indirectly, through one or more intermediaries,
Controls or is Controlled by or is under direct or indirect common Control with
such specified person; provided that, for purposes of Section 6.07 only,
beneficial ownership of 10% or more of the voting securities of a person shall
be deemed to be Control for purposes of the definition of "Affiliate". Neither
the Lenders nor any of their Affiliates will be treated as an Affiliate of the
Borrower or any of its Subsidiaries for purposes of this Agreement.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of the
Lenders' Revolving Credit Exposures.
"Announcement Date" shall mean the date on which the Press Release is
issued.
"Applicable Percentage" shall mean, for any day, with respect to any
Eurodollar Loan or Base Rate Loan that is a Tranche A Term Loan, Tranche B Term
Loan or a Revolving Loan, or with respect to the Commitment Fees, as the case
may be, the applicable percentage set forth below under the caption "Tranche
A/Revolver Eurodollar Spread", "Tranche A/Revolver Base Rate Spread", "Tranche B
Eurodollar Spread", "Tranche B Base Rate Spread" or "Fee Percentage", as the
case may be, based upon the Leverage Ratio as of the relevant date of
determination:
<PAGE>
3
<TABLE>
<CAPTION>
TRANCHE A/ TRANCHE A/
REVOLVER REVOLVER TRANCHE B
EURODOLLAR BASE RATE EURODOLLAR TRANCHE B BASE FEE
LEVERAGE RATIO SPREAD SPREAD SPREAD RATE SPREAD PERCENTAGE
- ------------------------------------------------ ------------- ------------- ------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Category 1
Greater than or equal to 5.00 to 1.00........... 2.75% 1.75% 3.25% 2.25% 0.500%
Category 2
Less than 5.00 to 1.00 but greater than or equal
to 4.50 to 1.00............................... 2.50% 1.50% 3.00% 2.00% 0.500%
Category 3
Less than 4.50 to 1.00 but greater than or equal
to 4.00 to 1.00............................... 2.00% 1.00% 2.50% 1.50% 0.500%
Category 4
Less than 4.00 to 1.00 but greater than or equal
to 3.50 to 1.00............................... 1.50% 0.50% 2.50% 1.50% 0.450%
Category 5
Less than 3.50 to 1.00 but greater than or equal
to 3.00 to 1.00............................... 1.25% 0.25% 2.50% 1.50% 0.375%
Category 6
Less than 3.00 to 1.00 but greater than or equal
to 2.50 to 1.00............................... 1.00% 0.00% 2.50% 1.50% 0.300%
Category 7
Less than 2.50 to 1.00.......................... 0.75% 0.00% 2.00% 1.00% 0.250%
</TABLE>
Notwithstanding the foregoing, until the Borrower has delivered the
financial statements for the fiscal quarter ending September 30, 1998, in
accordance with Section 5.04(b), the Leverage Ratio shall be deemed to be not
less than 4.00 to 1.00 for purposes of determining the Applicable
<PAGE>
4
Percentage. Each change in the Applicable Percentage resulting from a change
in the Leverage Ratio shall be effective with respect to all Loans,
Commitments and Letters of Credit outstanding on and after the date of
delivery to the Paying Agent of the financial statements and certificates
required by Section 5.04(a) or (b) indicating such change until the date
immediately preceding the next date of delivery of such financial statements
and certificates indicating another such change. Notwithstanding the
foregoing, (i) at any time during which the Borrower has failed to deliver
the financial statements and certificates required by Section 5.04(a) or (b),
or (ii) at any time after the occurrence and during the continuance of an
Event of Default, the Leverage Ratio shall be deemed to be in Category 1 for
purposes of determining the Applicable Percentage.
"Assessment Rate" shall mean for any date the annual rate (rounded upwards,
if necessary, to the next 1/100 of 1%) most recently estimated by the Paying
Agent as the then current net annual assessment rate that will be employed in
determining amounts payable by the Paying Agent to the Federal Deposit Insurance
Corporation (or any successor thereto) for insurance by such Corporation (or
such successor) of time deposits made in dollars at the Paying Agent's domestic
offices.
"Asset Sale" shall mean the sale, lease, transfer or other disposition (by
way of merger or otherwise, including as a result of a Condemnation Event or a
Casualty Event) by the Borrower or any of the Subsidiaries to any person other
than the Borrower or any wholly owned Subsidiary of (a) any capital stock of any
of the Subsidiaries or (b) any other assets of the Borrower or any of the
Subsidiaries (other than inventory, obsolete or worn-out assets, scrap and
Permitted Investments, in each case disposed of in the ordinary course of
business), except for (i) any sale, lease, transfer or other disposition in one
transaction or a series of related transactions having a value of $25,000,000 or
less, (ii) any sale of accounts receivable (or any related assets) under any
Permitted Receivables Financing, (iii) transfers of assets permitted by Section
6.05(a)(i), (iv) transfers of assets as part of a sale and lease-back
transaction permitted by Section 6.03, (v) payment of a cash dividend permitted
by Section 6.06(a), (vi) any disposition or cancelation of the PA Note in
connection with the Peabody Transfer and (vii) any substantially contemporaneous
exchange (including by way of a substantially contemporaneous purchase and sale)
of discrete energy-related assets of the Borrower or any Subsidiary for one or
more other energy-related assets used for similar purposes, in each case to the
extent that no net cash proceeds are received by the Borrower or any Subsidiary
as consideration in connection with such exchange (the cash portion of such
transaction, if any, being subject to clause (i) above), provided that the
Borrower or such Subsidiary complies with Section 5.10 with respect to the
property received by the Borrower or such Subsidiary pursuant to such exchange.
Notwithstanding anything to the contrary with respect to the foregoing, all
arrangements or transactions resulting in the prepayment in respect of a coal
supply contract of $25,000,000 or more in any fiscal year (excluding, to the
extent included in Consolidated Net Income, the portion due to be paid within
one year of any such arrangement or transaction in accordance with the terms of
such coal supply contract prior to any amendment thereof relating to such
transaction or arrangement) shall be deemed an Asset Sale for purposes of
Section 2.13(b).
"Assignment and Acceptance" shall mean an assignment and acceptance entered
into by a Lender and an assignee, and accepted by the Paying Agent, in the form
of Exhibit B or such other form as shall be approved by the Paying Agent.
"Base CD Rate" shall mean the sum of (a) the product of (i) the Three-Month
Secondary CD Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
<PAGE>
5
"Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime Rate
in effect on such day, (b) the Base CD Rate in effect on such day plus 1% and
(c) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. If
for any reason the Paying Agent shall have determined (which determination shall
be conclusive absent manifest error) that it is unable to ascertain the Base CD
Rate or the Federal Funds Effective Rate or both for any reason, including the
inability or failure of the Paying Agent to obtain sufficient quotations in
accordance with the terms of the definition thereof, the Base Rate shall be
determined without regard to clause (b) or (c), or both, of the preceding
sentence, as appropriate, until the circumstances giving rise to such inability
no longer exist. Any change in the Base Rate due to a change in the Prime Rate,
the Base CD Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD Rate or the Federal
Funds Effective Rate, respectively.
"Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate Loans.
"Base Rate Loan" shall mean any Base Rate Term Loan or Base Rate Revolving
Loan.
"Base Rate Revolving Loan" shall mean any Revolving Loan bearing interest at
a rate determined by reference to the Base Rate in accordance with the
provisions of Article II.
"Base Rate Term Borrowing" shall mean a Borrowing comprised of Base Rate
Term Loans.
"Base Rate Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Base Rate in accordance with the provisions of
Article II.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrowing" shall mean a group of Loans of a single Type made by the Lenders
on a single date and as to which a single Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance with
the terms of Section 2.03 and substantially in the form of Exhibit C or such
other form as shall be approved by the Paying Agent.
"Business Day" shall mean any day that is not a Saturday, Sunday or other
day on which banks in New York City are authorized or required by law to remain
closed; provided, however, that when used in connection with a Eurodollar Loan,
the term "Business Day" shall also exclude any day on which banks are not open
for dealings in dollar deposits in the London interbank market.
"Capital Expenditures" shall mean, for any period, the sum of the aggregate
of all expenditures (whether paid in cash or other consideration or accrued as a
liability) by the Borrower and the Subsidiaries during such period that, in
accordance with GAAP, are or should be included in additions to property, plant
or equipment or similar items reflected in the consolidated statement of cash
flows of the Borrower and the Subsidiaries for such period, except that
(notwithstanding GAAP) bonuses relating to Federal coal leases contemplated in
the Confidential Information Memorandum and the information previously provided
the Initial Lenders prior to the Closing Date
<PAGE>
6
shall be deemed "Capital Expenditures" only to the extent cash payments are
made; provided, however, that "Capital Expenditures" shall not include (a)
acquisitions of property that are investments permitted by Section 6.04
(other than investments permitted by Section 6.04(d)) and (b) any acquisition
of or investment in property in connection with an exchange contemplated by
clause (vii) of the definition of "Asset Sale" or in connection with a
reinvestment contemplated by clause (y) of the proviso to the definition of
"Net Cash Proceeds".
"Capital Lease Obligations" of any person shall mean the obligations of such
person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Casualty Event" shall mean an event pursuant to which the Borrower or any
of the Subsidiaries has the right to collect insurance proceeds under any
insurance policies with respect to any insured casualty or other insured damage
to any property of the Borrower or any of the Subsidiaries.
A "Change in Control" shall be deemed to have occurred if (a) any person
or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of
1934 as in effect on the Closing Date) shall own, directly or indirectly,
beneficially or of record, shares representing more than 35% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of PacifiCorp; (b) a majority of the seats (other than vacant seats) on the
board of directors of PacifiCorp shall at any time be occupied by persons who
were neither (i) nominated by the board of directors of PacifiCorp, nor (ii)
appointed by directors so nominated; (c) any change in control (or similar
event, however denominated) with respect to PacifiCorp shall occur under and
as defined in any indenture or agreement in respect of Indebtedness to which
the Borrower, any person directly or indirectly Controlling the Borrower or
any Subsidiary is a party; (d) PacifiCorp consolidates with, or merges with
or into, any person, or any person consolidates with or merges with or into
PacifiCorp in any such event pursuant to a transaction in which any of the
issued and outstanding capital stock of PacifiCorp is converted into or
exchanged for cash, securities or other property, other than any such
transaction where the capital stock of PacifiCorp outstanding immediately
prior to such transaction is converted into or exchanged for capital stock of
the surviving or transferee person constituting a majority of the issued and
outstanding shares of such capital stock of such surviving or transferee
person (immediately after giving effect to such conversion or exchange); (e)
PacifiCorp shall own, directly or indirectly, beneficially and of record,
less than 80% of the outstanding capital stock of PGH, free and clear of all
Liens (other than Liens permitted under the Transaction Documents); or (f)
PGH shall cease to own, directly or indirectly, beneficially and of record,
100% of the outstanding capital stock of the Borrower, free and clear of all
Liens (other than Liens permitted under the Transaction Documents).
"Citibank" shall have the meaning assigned to such term in the preamble to
this Agreement.
"Citicorp USA" shall have the meaning assigned to such term in the preamble
to this Agreement.
<PAGE>
7
"Citizens" shall mean Citizens Power LLC, a limited liability company
organized under the laws of the State of Delaware, all the limited liability
company interests of which on the date hereof are directly owned by Peabody
Investments.
"Citizens Transfer" shall mean the direct or indirect transfer by PA or any
of its subsidiaries of all the issued and outstanding limited liability company
interests of Citizens to the Borrower or any of its subsidiaries.
"Clean-up Period" shall mean the period commencing on the Closing Date and
ending on the date that is 180 (or, in the case of Citizens, 270) days after the
date of the initial Borrowing hereunder.
"Closing Date" shall mean February 3, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral" shall mean all the "Collateral" as defined in any Security
Document.
"Collateral Assignment" shall mean the Collateral Assignment, substantially
in the form of Exhibit D, made by the Borrower in favor of the Collateral Agent
for the benefit of the Secured Parties.
"Collateral Sharing Requirements" shall mean (a) the Borrower shall have
issued Powercoal Refinancing Indebtedness in an amount sufficient to raise Net
Cash Proceeds equal to at least 50% of the aggregate principal amount of the
Loans outstanding immediately prior to the issuance of such Powercoal
Refinancing Indebtedness and such Net Cash Proceeds shall be used to prepay Term
Loans as required by Section 2.13(e), (b) the Borrower shall have Investment
Grade Ratings and (c) no Default or Event of Default shall have occurred and be
continuing.
"Collateral Trust and Intercreditor Agreement" shall mean an agreement
entered at the time of or prior to the satisfaction of the Collateral Sharing
Requirements and in form and substance satisfactory to the Collateral Agent and
the Initial Lenders pursuant to which the Collateral Agent will agree, on behalf
of the Secured Parties, with the trustee or representative of the holders from
time to time of Powercoal Refinancing Indebtedness that such holders may be
secured equally and ratably with the Secured Parties by the Collateral;
provided, however, that such Collateral Trust and Intercreditor Agreement shall
provide (and the indenture or other agreement governing any Powercoal
Refinancing Indebtedness must provide in order to be so equally and ratably
secured) that (a) the Collateral Agent shall have the absolute discretion as to
the timing and manner of any enforcement against, or disposition of, the
Collateral and (b) upon any release of all or any portion of the Collateral by
the Secured Parties, the liens thereon in favor of the holders of Powercoal
Refinancing Indebtedness shall be automatically released.
"Commitment" shall mean, with respect to any Lender, such Lender's Revolving
Credit Commitment, Term Loan Commitment and Swingline Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
<PAGE>
8
"Condemnation Event" shall mean an event pursuant to which the Borrower or
any of the Subsidiaries has the right to collect and receive proceeds as a
result of any action or proceeding for the taking of any property of the
Borrower or any Subsidiary, or any part thereof or interest therein, for public
or quasi-public use under the power of eminent domain, by reason of any public
improvement or condemnation proceeding, or in any other manner.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower to be used by the Initial Lenders and
their Affiliates in connection with the syndication of the Commitments.
"Consolidated Cash Interest Expense" shall mean, for any period, the
interest expense (including the interest component in respect of Capital Lease
Obligations) of the Borrower and its subsidiaries paid in cash during such
period, as determined on a consolidated basis in accordance with GAAP.
"Consolidated Current Assets" shall mean, at any date of determination and
subject to adjustment as may be required by Section 6.02(o), the sum of (a) all
assets (other than cash and cash-equivalents) that would, in accordance with
GAAP, be classified on a consolidated balance sheet of the Borrower and its
subsidiaries as current assets at such date of determination plus (b) the
aggregate book value of all receivables that would have on such date constituted
current assets of the Borrower and its consolidated subsidiaries sold as part of
a Permitted Receivables Financing from the Closing Date to such date of
determination.
"Consolidated Current Liabilities" shall mean, at any date of determination,
all liabilities (other than, without duplication (x) the current portion of
long-term Indebtedness and (y) outstanding Swingline Loans and Revolving Loans)
that would, in accordance with GAAP, be classified on a consolidated balance
sheet of the Borrower and its subsidiaries as current liabilities at such date
of determination.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Interest Expense for such period, (b) the aggregate
amount of income tax expense for such period, (c) all amounts attributable to
depreciation, depletion and amortization for such period and (d) all noncash
nonrecurring charges during such period, and minus, without duplication, (i) to
the extent included in determining Consolidated Net Income, all nonrecurring
gains during such period (including any gains attributable to commodities to be
delivered in subsequent periods under Prepaid Forward Sales Agreements) and (ii)
the Net Adjustment Amount, all as determined on a consolidated basis with
respect to the Borrower or its subsidiaries in accordance with GAAP. For
purposes of determining the Leverage Ratio and the Interest Expense Coverage
Ratio for any period ending on or prior to December 31, 1998, Consolidated
EBITDA shall be deemed to equal $80,000,000 for each of the fiscal quarters of
the Borrower ending March 31, 1997, June 30, 1997, September 30, 1997, December
31, 1997, and March 31, 1998.
"Consolidated Interest Expense" shall mean, for any period, the interest
expense (including the interest component in respect of Capital Lease
Obligations) of the Borrower and its subsidiaries during such period, minus any
interest income of the Borrower and its subsidiaries during such
<PAGE>
9
period, in each case, as determined on a consolidated basis in accordance
with GAAP, plus, without duplication, interest-equivalent costs associated
with any Permitted Receivables Financing, whether accounted for as an
interest expense or loss on the sale of receivables. For purposes of the
foregoing, interest expense shall be determined after giving effect to any
net payments accrued by the Borrower or its subsidiaries with respect to the
Interest Rate Protection Agreements.
"Consolidated Net Income" shall mean, for any period, net income or loss of
the Borrower and its subsidiaries for such period determined on a consolidated
basis in accordance with GAAP, provided that there shall be excluded (a) the
income (or loss) of any person (other than the Peabody Group) accrued prior to
the date it becomes a subsidiary or is merged into or consolidated with the
Borrower or any of its subsidiaries or the date that such person's assets are
acquired by the Borrower or any of its subsidiaries and (b) the income of any
subsidiary of the Borrower (other than, until March 31, 2000, Peabody Western
Coal Company) to the extent that the declaration or payment of dividends or
similar distributions by such subsidiary of that income is not at the time
permitted by operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation applicable to
the Borrower or such subsidiary.
"Consolidated Net Worth" shall mean, as at any date of determination and
subject to adjustment as may be required by Section 6.02(o), the consolidated
stockholders' equity of the Borrower and its consolidated subsidiaries, as
determined on a consolidated basis in accordance with GAAP plus Qualified Junior
Indebtedness; provided, however, that, for purposes of this definition, Hybrid
Preferred Securities (and any related Qualified Junior Indebtedness) shall not
be included in Consolidated Net Worth to the extent that they would exceed 10%
of Consolidated Net Worth.
"Consolidated Total Debt" shall mean, as of any date of determination,
without duplication, the aggregate principal amount of Indebtedness of the
Borrower and the Subsidiaries (after giving effect to the Peabody Transfer)
outstanding as of such date, determined on a consolidated basis (other than (a)
Indebtedness of the type referred to in clause (h) of the definition of the term
"Indebtedness", except to the extent of any unreimbursed drawings thereunder,
and (b) Qualified Junior Indebtedness), minus (to the extent the Indebtedness so
secured would otherwise constitute Consolidated Total Debt) the amount of cash
or cash equivalents pledged to a holder or holders thereof (or a trustee or
representative of any such holder or holders) to secure Indebtedness owing to
the same.
"Consolidated Working Capital" shall mean, at any date of determination,
Consolidated Current Assets at such date of determination minus Consolidated
Current Liabilities at such date of determination.
"Control" shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a person, whether
through the ownership of voting securities, by contract or otherwise, and the
terms "Controlling" and "Controlled" shall have meanings correlative thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.02(a).
"Credit Facilities" shall mean the PA Facility Agreement, the EnergyCo
Credit Agreement and the Eastern Facility Agreement.
<PAGE>
10
"Default" shall mean any event or condition which upon notice, lapse of time
or both would constitute an Event of Default.
"Depositary Shares" shall mean the American Depositary Shares, evidenced by
American Depositary Receipts, each such American Depositary Share representing
four Shares.
"dollars" or "$" shall mean lawful money of the United States of
America.
"Domestic Subsidiaries" shall mean all Subsidiaries incorporated or
organized under the laws of the United States of America, any state thereof or
the District of Columbia.
"Eastern" shall mean Eastern Electricity plc, which is on the date hereof a
public limited company incorporated in England and Wales.
"Eastern Facility Agreement" shall mean the multicurrency revolving loan
agreement, among Eastern, the Arranger, the Agent and the Banks named therein,
in the form attached to the Eastern Facility Letter.
"Eastern Facility Letter" shall mean the letter dated the date hereof from
the Initial Lenders to PA pursuant to which, among other things, the Initial
Lenders agree to provide or cause to be provided to Eastern the facilities
described in the Eastern Facility Agreement.
"EnergyCo" shall mean PacifiCorp EnergyCo, an unlimited company incorporated
in England and Wales, all the outstanding share capital of which on the date
hereof is beneficially owned by PGH.
"EnergyCo Credit Agreement" shall mean the credit agreement dated as of the
Closing Date, among EnergyCo, PGH, the lenders from time to time party thereto,
Citibank, as paying agent and issuing bank, and Citicorp USA, as collateral
agent.
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation, notice
of violation, claim, demand, order, directive, cost recovery action or other
cause of action by, or on behalf of, any Governmental Authority or any person
for damages, injunctive or equitable relief, personal injury (including
sickness, disease or death), Remedial Action costs, tangible or intangible
property damage, natural resource damages, nuisance, pollution, any adverse
effect on the environment caused by any Hazardous Material, or for fines,
penalties or restrictions, resulting from or based upon (a) the existence, or
the continuation of the existence, of a Release (including sudden or non-sudden,
accidental or non-accidental Releases), (b) exposure to any Hazardous Material,
(c) the presence, use, handling, transportation, storage, treatment or disposal
of any Hazardous Material or (d) the violation or alleged violation of any
Environmental Law or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding
<PAGE>
11
agreements issued, promulgated or entered into by any Governmental Authority,
relating in any way to the environment, preservation or reclamation of
natural resources, the management, Release or threatened Release of any
Hazardous Material or to health and safety matters.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equity Issuance" shall mean any issuance or sale by the Borrower or any
Subsidiary of any shares of capital stock or other equity securities of the
Borrower or any Subsidiary or any obligations convertible into or exchangeable
for, or giving any person a right, option or warrant to acquire such securities
or such convertible or exchangeable obligations, except in each case for (a) any
issuance or sale to PacifiCorp, PGH, the Borrower or any wholly owned
Subsidiary, (b) any issuance of directors' qualifying shares, (c) any issuance
or sale to officers and employees under employee benefit or compensation plans,
and (d) any issuance or sale of an interest in a Single Purpose Entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single employer
under Section 414(b) or (c) of the Code, or solely for purposes of Section 302
of ERISA and Section 412 of the Code, is treated as a single employer under
Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan,
except a reportable event for which the requirement of notice to the PBGC has
been waived; (b) the adoption of any amendment to a Plan that would require
the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (e) the
incurrence of any liability in excess of $1,000,000 under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of the Borrower or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; (f) the receipt by the Borrower or any ERISA Affiliate
from the PBGC or a plan administrator of a Multiemployer Plan of any notice
relating to the intention to terminate any Plan or Plans or to appoint a
trustee to administer any Plan; (g) the receipt by the Borrower or any ERISA
Affiliate of any notice concerning the imposition of Withdrawal Liability in
excess of $1,000,000 or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title
IV of ERISA; (h) the occurrence of a "prohibited transaction" with respect to
which the Borrower or any of its Subsidiaries is a party to the prohibited
transaction and is a "disqualified person" (within the meaning of Section
4975 of the Code) or with respect to which the Borrower or any such
Subsidiary could otherwise be liable; and (i) any other event or condition
with respect to a Plan or Multiemployer Plan that could reasonably be
expected to result in liability of the Borrower in excess of $1,000,000.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar Loans.
<PAGE>
12
"Eurodollar Loan" shall mean any Eurodollar Revolving Loan or Eurodollar
Term Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Term Borrowing" shall mean a Borrowing comprised of Eurodollar
Term Loans.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Excess Cash Flow" shall mean, for any fiscal year, the excess of (a) the
sum, without duplication, of (i) Consolidated EBITDA, (ii) the Net Cash
Proceeds received by the Borrower and its consolidated subsidiaries in
connection with the issuance of debt or equity securities, the sale or other
disposition of assets or Casualty or Condemnation Events to the extent not
included in Consolidated EBITDA and to the extent used for mandatory
prepayments of the principal of the Loans in accordance with Section 2.13
(other than Section 2.13(d)), (iii) extraordinary cash gains of the Borrower
and its subsidiaries to the extent not included in Consolidated EBITDA, (iv)
interest income of the Borrower and its subsidiaries to the extent not
included in Consolidated EBITDA, (v) an amount equal to any decrease in
Consolidated Working Capital during such fiscal year and (vi) an amount equal
to any increase in provisions for reclamation and related liabilities,
workers compensation liabilities, postretirement benefit costs, industry fund
obligations and similar items during such fiscal year over (b) the sum,
without duplication, of (i) taxes paid or payable (including payments in
respect of taxes under the U.S. Tax Sharing Policy) in cash by the Borrower
and its subsidiaries on a consolidated basis during such fiscal year, (ii)
Consolidated Interest Expense paid in cash by the Borrower and its
subsidiaries during such fiscal year, (iii) Capital Expenditures made in cash
(excluding any Capital Expenditures made from amounts that are
carried-forward from the prior year) and in accordance with Section 6.10
during such fiscal year and carry-forwards to the following year of Capital
Expenditures permitted by the proviso to Section 6.10, (iv) scheduled and
mandatory principal repayments of Indebtedness made by the Borrower and its
subsidiaries during such fiscal year but only to the extent that such
prepayments cannot by their terms be reborrowed or redrawn and do not occur
in connection with a refinancing of all or any portion of such Indebtedness,
(v) optional and mandatory prepayments of the principal of Loans (other than
mandatory prepayments pursuant to Section 2.13(d)) during such fiscal year,
but only to the extent that such prepayments cannot by their terms be
reborrowed or redrawn , (vi) an amount equal to any increase in Consolidated
Working Capital during such fiscal year, (vii) dividends or other
distributions made by the Borrower in cash that are permitted by Section
6.06(a)(ii), (viii) extraordinary cash expenses paid, if any, by the Borrower
and its subsidiaries and not included in Consolidated EBITDA, (ix) an amount
equal to any decrease in provisions for reclamation and related liabilities,
workers compensation liabilities, postretirement benefit costs, industry fund
obligations and similar items during such fiscal year and (x) noncash
revenues used in determining Consolidated EBITDA.
"Exchange Rate Protection Agreement" shall mean any Hedging Agreement that
is designed to protect the Borrower against fluctuations in currency exchange
rates and not for speculation.
<PAGE>
13
"Federal Funds Effective Rate" shall mean, for any day, the weighted average
of the rates on overnight Federal funds transactions with members of the Federal
Reserve System arranged by Federal funds brokers, as published on the next
succeeding Business Day by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for the day for such transactions received by the Paying Agent from
three Federal funds brokers of recognized standing selected by it.
"Fees" shall mean the Commitment Fees, the L/C Participation Fees and the
Issuing Bank Fees.
"Finance" shall mean PacifiCorp Finance (UK) Limited, a limited company
incorporated in England and Wales, all the outstanding share capital of which on
the date hereof is beneficially owned by Services.
"Financial Officer" of any person shall mean the chief financial officer,
principal accounting officer, Treasurer or Controller of such person.
"Foreign Subsidiary" shall mean any Subsidiary that is not a Domestic
Subsidiary.
"Funding Exchange Rate Protection Agreement" shall mean any Exchange Rate
Protection Agreement that is designed to ensure that the applicable borrowings
under this Agreement and the EnergyCo Credit Agreement will provide a sufficient
amount in Sterling (together with borrowings under the PA Facility Agreement and
certain other sources of funds) to pay for the Shares and for the other purposes
specified in Clause 3.1(a)(i) of the PA Facility Agreement.
"GAAP" shall mean generally accepted accounting principles in the United
States applied on a consistent basis.
"Goldman" shall mean Goldman Sachs Credit Partners L.P., a Bermuda limited
partnership.
"Governmental Authority" shall mean any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory body.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness or (c) to maintain working capital, equity capital or any other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness; provided, however, that the
term "Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business.
<PAGE>
14
"Guarantee Agreement" shall mean the Guarantee Agreement, substantially in
the form of Exhibit E, made by the Guarantors in favor of the Collateral Agent
for the benefit of the Secured Parties.
"Guarantors" shall mean each person that becomes party to a Guarantee
Agreement as a Guarantor, and the permitted successors and assigns of each such
person.
"Hazardous Materials" shall mean all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid
or gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical
wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.
"Hedging Agreement" shall mean any rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of the foregoing transactions and any transaction that involves
physical delivery of any commodity in connection with an energy or
energy-related trading business (other than coal)) or any combination of the
foregoing transactions.
"Hybrid Preferred Securities" shall mean any securities, permanent debt
obligations or similar instruments or arrangements (each in this definition
referred to as "preferred securities") issued by a Hybrid Preferred Securities
Subsidiary, where such preferred securities have the following characteristics:
(a) such Hybrid Preferred Securities Subsidiary lends substantially all of the
proceeds from the issuance of such preferred securities to the Borrower or any
of its Subsidiaries in exchange for the applicable Qualified Junior Indebtedness
issued by the Borrower or any of its Subsidiaries; (b) such preferred securities
contain terms providing for the deferral of interest payments on such Qualified
Junior Indebtedness; and (c) the Borrower or any such Subsidiary makes periodic
interest payments on such Qualified Junior Indebtedness, which interest payments
are in turn used by the Hybrid Preferred Securities Subsidiary to make
corresponding payments to the holders of the preferred securities.
"Hybrid Preferred Securities Subsidiary" shall mean any person (a) all of
the common equity interest of which is owned (either directly or indirectly)
through one or more wholly owned Subsidiaries at all times, (b) that has been
formed for the purpose of issuing Hybrid Preferred Securities and (c)
substantially all of the assets of which consist at all times of Qualified
Junior Indebtedness issued by the Borrower or any of its Subsidiaries and
payments made from time to time on such Qualified Junior Indebtedness.
"Inactive Subsidiary" shall mean any subsidiary of the Borrower that (a) has
total assets not in excess of $10,000, (b) has not in the last six months
conducted any business activity and (c) is not the obligor (whether primary or
by virtue of any Guarantee) in respect of any Indebtedness other than
Indebtedness held by the Borrower or any Guarantor.
<PAGE>
15
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments (other
than surety and appeal bonds, performance bonds, reclamation bonds and other
obligations of a like nature incurred in the ordinary course of business and
not in respect of borrowed money), (c) all obligations of such person (other
than in the nature of trade accounts payable) under conditional sale or other
title retention agreements relating to property or assets purchased by such
person, (d) all obligations of such person issued or assumed as the deferred
purchase price of property or services (excluding trade accounts payable and
accrued obligations incurred in the ordinary course of business), (e) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed (provided that, for purposes
hereof, the amount of such Indebtedness shall be limited to the lesser of (x)
the principal amount thereof and (y) the fair market value of such property),
(f) all Guarantees by such person of Indebtedness of others, (g) all Capital
Lease Obligations of such person, (h) all obligations of such person as an
account party in respect of letters of credit and bankers' acceptances and
(i) all obligations of such person for Production Payments from property
operated by or on behalf of such person; provided that, for purposes of the
definition of "Consolidated Total Debt" as used in Section 6.11,
"Indebtedness" shall also include all obligations of such person in respect
of Hedging Agreements (other than any Interest Rate Protection Agreement and
any Exchange Rate Protection Agreement) to the extent the Net Termination
Value of such Hedging Agreements at any time exceeds $100,000,000. For
purposes of this Agreement, the amount of Non-Recourse Indebtedness of the
Borrower and its subsidiaries included in the calculation of Indebtedness of
the Borrower and its subsidiaries at any time shall equal the lesser of (i)
the aggregate principal amount of such Indebtedness and (ii) the equity of
the Borrower and its subsidiaries in the asset or Single Purpose Entity, as
the case may be, relating to such Non-Recourse Indebtedness. For the purposes
of this Agreement, the amount of Indebtedness (other than Non-Recourse
Indebtedness) of any partnership, limited liability company or similar
pass-through entity (as used in this definition, a "partnership") in which
the Borrower or a subsidiary is a general partner or other member or equity
holder with unlimited liability (as used on this definition, a "general
partner") and in which there are one or more Qualified General Partners shall
only be included in the calculation of Indebtedness of the Borrower and its
subsidiaries at any time (a) to the extent of the Borrower's or such
subsidiary's pro rata share of the interest of the general partners in the
partnership at such time, or (b) if the applicable governing or other
relevant agreement specifies that the Borrower or any of its subsidiaries is
liable to the partnership or its creditors for a specific percentage of such
partnership's liabilities, to the extent of such specified percentage. For
purposes hereof, "Qualified General Partner" shall mean a general partner of
a partnership that (a) is a person that was not created solely for the
purpose of investing in such partnership, and (b) at the time of the
investment in such partnership, the Borrower reasonably believes that (i)
such person has a credit quality (or credit support) approximately equal to
that of the Borrower or the applicable Subsidiary, and (ii) such person will
be able to perform its share of the obligations under such Indebtedness when
due.
"Indemnity, Subrogation and Contribution Agreement" shall mean the
Indemnity, Subrogation and Contribution Agreement, substantially in the form of
Exhibit F, among the Borrower, the Guarantors and the Collateral Agent.
"Initial Lenders" shall mean Citibank, Goldman and Morgan.
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16
"Intercreditor Agreement" shall mean the Intercreditor Agreement dated 3
February, 1998, among the Borrower, PA, the Paying Agent on behalf of itself and
the Lenders and the PA Agent on behalf of itself and the PA Lenders,
substantially in the form of Exhibit G.
"Interest Expense Coverage Ratio" shall mean, as of the last day of any
fiscal quarter, the ratio of (a) Consolidated EBITDA for the period of four
consecutive fiscal quarters ended on such date to (b) Consolidated Cash Interest
Expense for the period of four consecutive fiscal quarters ended on such date,
with the pro forma results as set forth on the Pro Forma Financial Statements,
or the pro forma financial statements provided by the Borrower pursuant to
Section 5.04(c), used to determine Consolidated Cash Interest Expense for the
periods prior to the date of the initial Acquisition Borrowing.
"Interest Payment Date" shall mean, with respect to any Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest Period of more than
three months' duration, each day that would have been an Interest Payment Date
had successive Interest Periods of three months' duration been applicable to
such Borrowing, and, in addition, the date of any prepayment of such Borrowing
or conversion of such Borrowing to a Borrowing of a different Type.
"Interest Period" shall mean (a) with respect to any Eurodollar Borrowing,
the period commencing on the date of such Borrowing and ending on the
numerically corresponding day (or, if there is no numerically corresponding
day, on the last day) in the calendar month that is 1, 2, 3 or 6 months
thereafter (and, in the case of a Borrowing made or outstanding prior to the
Syndication Date, such shorter period as may be agreed by the Borrower and
the Paying Agent in order to facilitate the syndication of the Loans), as the
Borrower may elect and (b) with respect to any Base Rate Borrowing, the
period commencing on the date of such Borrowing and ending on the earliest of
(i) the next succeeding March 31, June 30, September 30 or December 31, (ii)
the Revolving Credit Maturity Date, the Tranche A Maturity Date or the
Tranche B Maturity Date, as applicable, and (iii) the date such Borrowing is
converted to a Borrowing of a different Type in accordance with Section 2.10
or repaid or prepaid in accordance with Section 2.11, 2.12 or 2.13; provided,
however, that if any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next succeeding Business
Day unless, in the case of a Eurodollar Borrowing only, such next succeeding
Business Day would fall in the next calendar month, in which case such
Interest Period shall end on the next preceding Business Day. Interest shall
accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any Hedging Agreement that
is designed to protect the Borrower against fluctuations in interest rates and
not for speculation.
"Investment Grade Ratings" shall mean that the credit rating of the
Borrower's senior unsecured, non-credit-enhanced long-term debt (the "Senior
Unsecured Debt") is (a) BBB- or higher, as determined by S&P, and (b) Baa3 or
higher, as determined by Moody's. The Borrower shall be deemed to have obtained
Investment Grade Ratings if it shall deliver to the Paying Agent letters from
S&P and Moody's to the effect that the Senior Unsecured Debt would be so rated
assuming that the Secured Parties had released their liens in the Collateral.
"Issuing Bank Fees" shall have the meaning assigned to such term in Section
2.05(b).
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17
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.23.
"L/C Disbursement" shall mean a payment or disbursement made by the Issuing
Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit at such time plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been reimbursed at
such time. The L/C Exposure of any Revolving Credit Lender at any time shall
mean its Pro Rata Percentage of the aggregate L/C Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(b).
"Lee Ranch" shall mean Lee Ranch Coal Company, all the outstanding ownership
interests of which are on the date hereof owned, directly or indirectly, by Gold
Fields Mining Corporation.
"Lenders" shall mean (a) the Initial Lenders (other than any such Initial
Lender that has ceased to be a party hereto pursuant to an Assignment and
Acceptance) and (b) any financial institution that has become a party hereto
pursuant to an Assignment and Acceptance. Unless the context clearly indicates
otherwise, the term "Lenders" shall include the Swingline Lender.
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.23.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter, the
ratio of (a) Consolidated Total Debt as of such date to (b) Consolidated EBITDA
for the period of four consecutive fiscal quarters ended on such date; provided,
however, that, prior to the Separation Date, the amount of Consolidated Total
Debt for purposes of this definition shall be deemed reduced by the $336,000,000
installment of the Tranche A Term Loans payable on September 15, 1999, but only
to the extent (i) not previously paid and (ii) of the amount of unpledged cash
and cash equivalents on the balance sheet of Peabody Holding and its
subsidiaries at any time of determination.
"LIBO Rate" shall mean, with respect to any Eurodollar Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Service (or
on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Paying
Agent from time to time for purposes of providing quotations of interest
rates applicable to dollar deposits in the London interbank market) at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is
not available at such time for any reason, then the "LIBO Rate" with respect
to such Eurodollar Borrowing for such Interest Period shall be the rate at
which dollar deposits of $5,000,000 and for a maturity comparable to such
Interest Period are offered by the principal London office of the Paying
Agent in immediately available funds in the London interbank market at
approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period.
<PAGE>
18
"Lien" shall mean, with respect to any asset (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) any other preferential arrangement that has substantially the same practical
effect as a security interest.
"Loan Documents" shall mean this Agreement, the Guarantee Agreement, the
Security Documents, the Intercreditor Agreement and the Indemnity, Subrogation
and Contribution Agreement.
"Loan Parties" shall mean the Borrower and the Guarantors.
"Loans" shall mean the Revolving Loans, the Term Loans and the Swingline
Loans.
"Margin Stock" shall have the meaning assigned to such term in Regulation U.
"Matching Amount" shall have the meaning assigned to such term in the PA
Facility Agreement.
"Material Adverse Effect" shall mean (a) a material adverse effect on the
business, assets, liabilities, operations or condition (financial or otherwise),
of the Borrower and the Subsidiaries, taken as a whole, (b) material impairment
of the ability of the Borrower to consummate the Transactions or of either Loan
Party to perform its obligations under the Loan Documents to which it is or will
be a party or (c) material impairment of the rights of or benefits available to
the Lenders under the Loan Documents.
"Material Hedging Obligations" shall mean payment obligations in respect of
one or more Hedging Agreements with a single counterparty (or its Affiliates)
that have Negative Termination Values exceeding $50,000,000 in aggregate amount.
"Moody's" shall mean Moody's Investors Service, Inc.
"Morgan" shall mean Morgan Guaranty Trust Company of New York, a New York
banking corporation.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Negative Termination Value" shall mean, with respect to any Hedging
Agreement, the amount (if any) that would be required to be paid by the
Borrower or any Subsidiary if such Hedging Agreement were terminated by
reason of a default by it or other termination event relating to the Borrower
or any Subsidiary. The Negative Termination Value of any Hedging Agreement at
any date shall be determined (a) as of the end of the most recent fiscal
quarter ended on or prior to such date if such Hedging Agreement was then
outstanding or (b) as of the date such Hedging Agreement is entered into if
it is entered into after the end of such fiscal quarter; provided, however,
that if an agreement between the Borrower or such Subsidiary and the relevant
counterparty provides that, upon any such termination by such counterparty,
one or more other Hedging Agreements (if any then
<PAGE>
19
exist) between the Borrower or such Subsidiary and such counterparty would
also terminate and the amount (if any) payable by the Borrower or such
Subsidiary would be a net amount reflecting the termination of all Hedging
Agreements so terminated, then the Negative Termination Value of all the
Hedging Agreements subject to such netting shall be, at any date, a single
amount equal to such net amount (if any) payable by the Borrower or any
Subsidiary determined as of the later of (a) the end of the most recently
ended fiscal quarter and (b) the date on which the most recent Hedging
Agreement subject to such netting was entered into.
"Net Adjustment Amount" shall mean, for any period, the Adjustment Amount
less the aggregate Adjustment Amounts applied to reduce Consolidated EBITDA in
prior periods.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale, the cash
proceeds thereof received by the Borrower or the Subsidiaries (including cash
and cash equivalents and cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received), net of (i) costs of sale (including payment of the
outstanding principal amount of, premium or penalty, if any, interest and other
amounts on any Indebtedness (other than Loans) (x) secured by a Lien permitted
pursuant to Section 6.02 on such assets and required to be repaid under the
terms thereof as a result of such Asset Sale or (y) of a Single Purpose Entity
owning such assets), (ii) taxes paid or payable as a result thereof, (iii)
amounts provided as a reserve against any liabilities under any indemnification
obligations associated with such Asset Sale (except that, to the extent and at
the time any such amounts are released from such reserve, such amounts shall
constitute Net Cash Proceeds) and (iv) amounts required to be paid under
applicable law, the constitutive documents of any Subsidiary or any agreement
entered into prior to such Asset Sale to holders of a minority interest in the
Subsidiary that receives such cash proceeds or any direct or indirect parent
thereof; provided, however, that (x) in the event the Asset Sale is a result of
a Casualty Event or Condemnation Event, the cash proceeds thereof for purposes
of this definition shall not include proceeds thereof to the extent they are
used (or committed to be used) to replace or repair the damaged or condemned
property, as applicable, within 180 days of receipt of such proceeds, in each
case so long as no Default or Event of Default shall have occurred and be
continuing, and (y) with respect to any Asset Sale of energy-related assets, if
the Borrower shall deliver a certificate of a Financial Officer to the Paying
Agent at the time of any Asset Sale setting forth the Borrower's intent to
reinvest (or commit to reinvest) the proceeds of such Asset Sale in other
energy-related assets within 180 days of receipt of such proceeds and no Default
shall have occurred and shall be continuing at the time of such certificate or
at the proposed time of the application of such proceeds, such proceeds shall
not constitute Net Cash Proceeds, except to the extent not so used or committed
within such 180-day period (or if committed within such 180 days, not used
within 300 days of the receipt thereof), at which time such proceeds shall be
deemed Net Cash Proceeds, and (b) with respect to any Equity Issuance, any
issuance or other disposition of Indebtedness for borrowed money or any
Permitted Receivables Financing, the cash proceeds thereof net of underwriting
commissions or placement fees and expenses directly incurred in connection
therewith.
"Net Termination Value" shall mean (a) with respect to all Hedging
Agreements (other than any Interest Rate Protection Agreement and any
Exchange Rate Protection Agreement), the difference between (i) the aggregate
amounts (if any) that would be required to be paid by the Borrower or any
subsidiary if such Hedging Agreements were terminated by reason of a default
relating to the Borrower or any subsidiary, and (ii) the aggregate amounts
(if any) that the Borrower
<PAGE>
20
or any subsidiary would be entitled to receive if such Hedging Agreements
were terminated by reason of a default relating to the Borrower or any
subsidiary and (b) the NUG Contract Termination Value. The Net Termination
Value shall be determined (a) as of the end of the most recent fiscal quarter
ended on or prior to such date if such Hedging Agreement (or NUG Contract)
was then outstanding or (b) as of the date such Hedging Agreement (or NUG
Contract) is entered into if it is entered into after the end of such fiscal
quarter.
"Non-Recourse Indebtedness" of any person shall mean at any time
Indebtedness secured by a Lien in or upon one or more assets of such person
where the rights and remedies of the holder of such Indebtedness in respect
of such Indebtedness do not extend to any other assets of such person.
Notwithstanding the foregoing, Indebtedness of any person shall not fail to
constitute Non-Recourse Indebtedness by reason of the inclusion in any
document evidencing, governing, securing or otherwise relating to such
Indebtedness of provisions to the effect that such person shall be liable,
beyond the assets securing such Indebtedness, for (a) misapplied moneys,
including insurance and condemnation proceeds and security deposits, (b)
indemnification by such person in favor of holders of such Indebtedness and
their affiliates in respect of liabilities to third parties, including
environmental liabilities, (c) breaches of customary representations and
warranties given to the holders of such Indebtedness and (d) such other
similar obligations as are customarily excluded from the provisions that
otherwise limit the recourse of commercial lenders making so-called
"non-recourse" loans to institutional borrowers. Indebtedness of a Single
Purpose Entity shall constitute Non-Recourse Indebtedness of such Single
Purpose Entity.
"NUG Contract" shall mean a contract of the Borrower or any Subsidiary to
supply power or energy to a Single Purpose Entity in connection with a NUG
Transaction, or otherwise to support the performance of a Single Purpose Entity
in a NUG Transaction.
"NUG Contract Termination Value" shall mean, with respect to all NUG
Contracts, (a) the net amount, if any, that would be required to be paid by the
Borrower or any Subsidiary (other than a Single Purpose Entity) if such NUG
Contracts (to the extent not covered by Qualified NUG Hedging Agreements) were
terminated by reason of a default relating to the Borrower or any Subsidiary in
excess of (b) the net amount, if any, that the Borrower or any Subsidiary would
be entitled to receive if such NUG Contracts (to the extent not covered by
Qualified NUG Hedging Agreements) were terminated by reason of a default
relating to the Borrower or any Subsidiary; provided, however, that for purposes
of determining coverage by a Qualified NUG Hedging Agreement, if the
counterparty does not have Investment Grade Ratings (or provide a guarantee from
an entity with Investment Grade Ratings), the Qualified NUG Hedging Agreement
shall be deemed to provide one-half of the coverage it nominally provides.
"NUG Transaction" shall mean a transaction entered into by a Single Purpose
Entity, the principal purpose of which is to restructure the contracts relating
to, or financing of, an existing independent power project, excluding any such
transactions that were consummated prior to December 31, 1997.
"Obligation Currency" shall have the meaning assigned to such term in
Section 9.16.
"Obligations" shall have the meaning assigned to such term in the Guarantee
Agreement and the Security Documents.
<PAGE>
21
"Offer" shall mean the offer by Goldman Sachs International on behalf of
PA to acquire all the outstanding Shares (including the Shares represented by
Depositary Shares), substantially on the terms and conditions referred to in
the Press Release, as amended, supplemented or otherwise modified.
"Offer Account" shall mean the account in the name of PA opened with the
PA Agent on or before the Unconditional Date for the purposes of effecting
the acquisition of the Shares.
"Offer Conditions Precedent" shall mean the conditions precedent set forth
on Schedule 1.01(a).
"Offer Document" shall mean the document to be delivered to the
shareholders of TEG containing the formal Offer.
"Offer Termination Date" shall mean the earliest date (as notified by the
Borrower to the Paying Agent in writing) on which all of the following have
occurred: (a) all payments in respect of acceptances of the cash alternative
in the Offer have been made in full; (b) no further such acceptances are
possible; and (c) all procedures pursuant to Section 428 et seq. of the U.K.
Companies Act 1985 that are capable of being implemented have been completed
and all payments pursuant thereto to shareholders in TEG have been made in
full.
"PA" shall mean PacifiCorp Acquisitions, an unlimited company incorporated
in England and Wales, all the outstanding share capital of which on the date
hereof is beneficially owned by Finance.
"PA Agent" shall mean Citibank International plc, in its capacity as
facility agent for the PA Lenders under the PA Facility Agreement, and any
successor or assign in such capacity.
"PA Facility Agreement" shall mean the facility agreement dated 3
February, 1998, among PA, Services, Finance, the PA Lenders, the PA Agent and
the Arrangers, the Security Agent and the L/C Bank named therein.
"PA Lenders" shall mean the financial institutions that are parties from
time to time to the PA Facility Agreement as lenders thereunder.
"PA Note" shall mean the note in the form of Exhibit H, which shall be
issued by PA to the Borrower to evidence the Powercoal/PA Loans.
"PA Note Payment Default" shall mean the failure by PA to pay any amount
that it is obligated to pay under the PA Note to the Borrower at the time
such amount is due in accordance with the terms of the PA Note.
"PacifiCorp" shall mean PacifiCorp, a corporation organized under the laws
of Oregon.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
<PAGE>
22
"Peabody Group" shall mean Peabody Holding and the Peabody Subsidiaries.
"Peabody Holding" shall mean Peabody Holding Company Inc., a corporation
organized under the laws of New York, all the outstanding capital stock of
which on the date hereof is directly owned by Peabody Investments.
"Peabody Indebtedness" shall mean the Indebtedness of the Peabody Group
set forth on Schedule 1.01(b).
"Peabody Investments" shall mean Peabody Investments, Inc., a corporation
organized under the laws of Delaware, all the outstanding capital stock of
which on the date hereof is indirectly owned by TEG.
"Peabody Refinanced Indebtedness" shall mean the Peabody Indebtedness
designated as "Peabody Refinanced Indebtedness" on Schedule 1.01(b).
"Peabody Subsidiaries" shall mean the persons set forth on Schedule 1.01(c).
"Peabody Transfer" shall mean the direct or indirect transfer by PA or any
of its subsidiaries to the Borrower of all the issued and outstanding capital
stock of Peabody Holding.
"Permitted Capital Expenditures" shall mean Capital Expenditures not in
excess of:
(a) for the fiscal year ending December 31, 1999, $175,000,000; and
(b) for each fiscal year thereafter, the greater of (i) $150,000,000
and (ii) the amount equal to 50% of Consolidated EBITDA for the fiscal year
immediately preceding such fiscal year.
"Permitted Dividend Amount" shall mean (a) with respect to the period
commencing on the Closing Date and ending on December 31, 1998, $18,750,000,
and (b) with respect to any fiscal year ending after December 31, 1998, the
greater of (i) $25,000,000 and (ii) the Permitted Percentage of cumulative
Consolidated Net Income (x) measured from the Closing Date through and
including the last day of the fiscal quarter for which financial statements
have been delivered to the Paying Agent immediately prior to the date of the
applicable dividend and (y) less cumulative dividend payments made during
such period. The "Permitted Percentage" shall be (a) 100%, if the senior
unsecured, non-credit-enhanced long-term credit ratings of the Borrower by
S&P and Moody's are BBB+ or higher and Baa1 or higher, respectively, (b) 50%,
if such credit ratings are BBB- or higher and Baa3 or higher, respectively,
and (c) 40% of the lesser of (i) cumulative Consolidated Net Income and (ii)
cumulative Excess Cash Flow, if such credit ratings are BB+ or lower or Ba1
or lower, respectively.
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and interest
on which are unconditionally guaranteed by, the United States of America
(or by any agency thereof to the extent such obligations are backed by
the full faith and credit of the United States of
<PAGE>
23
America), in each case maturing within one year from the date of
acquisition thereof;
(b) investments in commercial paper (or money market funds substantially
all the assets of which are invested in such commercial paper) maturing
within 270 days from the date of acquisition thereof and having, at such
date of acquisition, one of the two highest credit ratings obtainable from
S&P or from Moody's;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within one year from the date of acquisition thereof
issued or guaranteed by or placed with, and money market deposit accounts
issued or offered by, any domestic office of any commercial bank organized
under the laws of the United States of America or any State thereof that has
a combined capital and surplus and undivided profits of not less than
$250,000,000;
(d) obligations issued by any state or political subdivision thereof,
having a rating of A or better by S&P or a similar rating by any other
nationally recognized rating agency with maturities of not more than one
year;
(e) investments in "money market funds" within the meaning of Rule 2a-7
of the Investment Company Act of 1940, as amended (the "1940 Act");
provided, however, that neither the Borrower nor any of its subsidiaries
shall invest in any money market fund that invests in "Second Tier
Securities" and "Second Tier Conduit Securities" within the meaning of Rule
2a-7(a)(20) of the 1940 Act; provided further, that investments of the
Borrower and its subsidiaries in any particular money market fund shall not
exceed 5% of the net assets of such fund; and
(f) repurchase agreements for securities of the types described above;
provided that such repurchase agreements are collateralized by securities of
the type referred to above.
"Permitted Junior Indebtedness" shall mean subordinated Indebtedness of
the Borrower that has (a) no principal payments due on a date that is earlier
than 12 months after the Tranche B Maturity Date, (b) subordination and
intercreditor provisions that are reasonably satisfactory to the Initial
Lenders and (c) a fixed interest rate, which rate shall be, in the good faith
judgment of a Financial Officer of the Borrower, consistent with the market
at the time of issuance for similar subordinated Indebtedness.
"Permitted Receivables Financing" shall mean the sale, nonrecourse
borrowing against or similar financing (a "Sale") of receivables (and related
assets) originated by the Borrower or any Subsidiary; provided that (a) Sales
of receivables are made at fair market value for the Sales of receivables in
comparable receivables financings, (b) the interest rate applicable to such
receivables financing shall be a market interest rate (as determined in good
faith by a Financial Officer of the Borrower) as of the time such financing
is entered into, (c) such financing is non-recourse to the Borrower and the
Subsidiaries (other than a Receivables Subsidiary), except to a limited
extent customary for such financings, and (d) the covenants, events of
default and other provisions thereof, collectively, shall be market terms (as
determined in good faith by a Financial Officer of the Borrower).
<PAGE>
24
"person" shall mean any natural person, corporation, limited liability
company, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"PGH" shall mean PacifiCorp Group Holdings Company, a corporation
organized under the laws of Delaware, all the capital stock of which is
directly owned by PacifiCorp.
"PGH Equity Contribution" shall have the meaning assigned to such term in
the preamble to this Agreement.
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit I, among the Borrower, the Subsidiaries party thereto and the
Collateral Agent for the benefit of the Secured Parties.
"Powercoal/PA Loans" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Powercoal Refinancing Indebtedness" shall have the meaning assigned to
such term in Section 6.01(k).
"PPM" shall mean PacifiCorp Power Marketing, Inc., a corporation organized
under the laws of Oregon.
"PPM Contribution" shall mean the direct or indirect contribution of all
the capital stock of PPM by PGH to the Borrower.
"Preferred Stock" shall mean, with respect to the capital stock of any
person, capital stock of any class or classes (however designated) which is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such person,
over shares of capital stock of any other class of such person.
"Prepaid Forward Sales Agreements" shall mean physical delivery contracts
for which the Borrower or any Subsidiary has received or has the right to
receive a cash payment in advance of physical delivery of the applicable
commodity and that would be reflected as a liability or a contingent
liability in the financial statements or notes thereto of such person in
accordance with GAAP.
"Prepayment Account" shall have the meaning assigned to such term in
Section 2.13(k).
"Press Release" shall mean the agreed form of press release issued on the
Closing Date by which the Offer is announced.
<PAGE>
25
"Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Paying Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective.
"Production Payments", with respect to any person, shall mean all
production payment obligations and other similar obligations with respect to
natural resources of such person that are recorded as a liability or deferred
revenue on the financial statements of such person in accordance with GAAP.
"Pro Forma Financial Statements" shall have the meaning assigned to such
term in Section 3.04(b).
"Pro Rata Percentage" shall mean, with respect to any Revolving Credit
Lender, the percentage of the Total Revolving Credit Commitments represented
by such Lender's Revolving Credit Commitment. If the Revolving Credit
Commitments have terminated or expired, the Pro Rata Percentage shall be
determined based upon the Revolving Credit Commitments most recently in
effect, giving effect to any assignments.
"Properties" shall have the meaning assigned to such term in Section 3.15.
"Qualified Junior Indebtedness" shall mean (a) without duplication, any
Hybrid Preferred Securities (and any guarantee by the Borrower or any of the
Subsidiaries of any Hybrid Preferred Securities) and any unsecured
subordinated debt issued by the Borrower or any of its Subsidiaries to a
Hybrid Preferred Securities Subsidiary in connection with the issuance of
Hybrid Preferred Securities; provided that the terms of such subordinated
debt (i) require no principal payments due on a date that is earlier than 12
months after the Tranche B Maturity Date; (ii) contain provisions permitting
the borrower thereof to defer the payment of interest in certain
circumstances; (iii) provide for a fixed interest rate which, in the good
faith judgment of a Financial Officer of the Borrower, is consistent with the
market at the time of issuance for similar loans; and (iv) contain
subordination provisions that are reasonably satisfactory to the Initial
Lenders; and (b) loans made to the Borrower by an Affiliate of the Borrower
(other than a Subsidiary); provided that (i) such loans do not require any
payment in cash (whether of principal, interest or otherwise) on a date that
is earlier than 12 months after the Tranche B Maturity Date and (ii) such
loans are subordinated to the prior payment in full of the Obligations
pursuant to subordination provisions reasonably acceptable to the Initial
Lenders.
"Qualified NUG Hedging Agreement" shall mean a contract entered into by a
Subsidiary to obtain power or energy, to assure such Subsidiary's ability to
perform a NUG Contract which contract is with (a) a counterparty with an
Investment Grade Rating (or guaranteed by an entity with an Investment Grade
Rating), or (b) an entity which (i) owns facilities adequate to generate and
supply the power or energy, (ii) has a minimum consolidated net worth of at
least $200,000,000 and a maximum debt to capitalization of 70% and (iii)
either (x) has a credit rating of BB or Ba2 or higher and posts partial
security for its counterparty obligations under such Qualified NUG Hedging
Agreement or (y) posts 100% security for its counterparty obligations under
such Qualified NUG Hedging Agreement.
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26
"Receivables Subsidiary" shall mean a bankruptcy-remote, special-purpose
wholly owned Subsidiary formed solely for purposes of engaging in any
Permitted Receivables Financing.
"Refinancing Indebtedness" shall have the meaning assigned to such term in
Section 6.01(j).
"Register" shall have the meaning given to such term in Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), or (b) all other actions required by
any Governmental Authority or voluntarily undertaken to: (i) cleanup, remove,
treat, abate or in any other way address any Hazardous Material in the
environment; (ii) prevent the Release or threat of Release, or minimize the
further Release of any Hazardous Material so it does not migrate or endanger
or threaten to endanger public health, welfare or the environment; or (iii)
perform studies and investigations in connection with, or as a precondition
to, clause (i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Loans
(excluding Swingline Loans), L/C Exposure, Swingline Exposure and unused
Revolving Credit and Term Loan Commitments representing at least a majority
of the sum of all Loans outstanding (excluding Swingline Loans), L/C
Exposure, Swingline Exposure and unused Revolving Credit and Term Loan
Commitments at such time; provided, however, with respect to any waivers of
the conditions set forth in Section 4.02(a)(iv), the term "Required Lenders"
shall also include each Initial Lender.
"Responsible Officer" of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person
in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans and to participate in
Letters of Credit and Swingline Loans hereunder as set forth on Schedule
2.01, or in the Assignment and Acceptance pursuant to which
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27
such Lender assumed its Revolving Credit Commitment, as applicable, as the
same may be (a) reduced from time to time pursuant to Section 2.09 and (b)
reduced or increased from time to time pursuant to assignments by or to such
Lender pursuant to Section 9.04.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any
time, the aggregate principal amount at such time of all outstanding
Revolving Loans of such Lender, plus the aggregate amount at such time of
such Lender's L/C Exposure, plus the aggregate amount at such time of such
Lender's Swingline Exposure.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean February 3, 2004.
"Revolving Loans" shall mean the revolving loans made by the Lenders to
the Borrower pursuant to Section 2.01(c). Each Revolving Loan shall be a
Eurodollar Revolving Loan or a Base Rate Revolving Loan.
"Secured Parties" shall have the meaning assigned to such term in the
Pledge Agreement.
"Security Documents" shall mean the Pledge Agreement and the Collateral
Assignment and each of the documents executed and delivered pursuant to any
of the foregoing or pursuant to Section 5.10.
"Separation Date" shall mean the first date upon which each Peabody
Subsidiary is a wholly owned Subsidiary of the Borrower.
"Services" shall mean PacifiCorp Services Limited, a limited company
incorporated in England and Wales, all the outstanding share capital of which
on the date hereof is directly owned by EnergyCo.
"Shares" shall mean the ordinary shares of TEG (par value 10 pence per
share).
"Significant Subsidiary" shall mean, on any date, any Subsidiary (other
than a Single Purpose Entity) that (a) has total assets, determined on a
consolidated basis with its subsidiaries, as of the end of the fiscal quarter
preceding such date equal to or greater than 2.5% of the total assets of the
Borrower and its Subsidiaries on a consolidated basis as of the end of such
fiscal quarter or (b) has income from continuing operations before income
taxes, extraordinary items and the cumulative effect of a change in
accounting principles ("Adjusted Income"), determined on a consolidated basis
with its subsidiaries, for the four fiscal quarter period preceding such date
equal to or greater than 2.5% of the Adjusted Income of the Borrower and its
Subsidiaries on a consolidated basis for such period, in all cases as
determined in accordance with GAAP.
"Single Purpose Entity" shall mean a person, other than an individual,
that (a) is organized solely for the purpose of holding, directly or
indirectly, an ownership interest in one entity or property or in a group of
related properties (real or personal, tangible or intangible) used for a
single project, that is acquired, purchased or constructed, or in the case of
previously undeveloped, non-income generating property of the Borrower or a
Subsidiary, developed by the Borrower or its
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28
Subsidiaries, (b) does not engage in any business unrelated to such entity or
property or the financing thereof and (c) does not have any assets or
Indebtedness other than those related to its interest in such entity or
property or the financing thereof and shall include any Receivables
Subsidiary and Hybrid Preferred Securities Subsidiary.
"S&P" shall mean Standard & Poor's Ratings Services.
"Statutory Reserves" shall mean a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including
any marginal, special, emergency or supplemental reserves) expressed as a
decimal established by the Board (a) with respect to the Base CD Rate, for
new negotiable nonpersonal time deposits in dollars of over $100,000 with
maturities approximately equal to three months, and (b) with respect to the
Adjusted LIBO Rate, for Eurocurrency Liabilities (as defined in Regulation D
of the Board). Such reserve percentages shall include those imposed pursuant
to such Regulation D. Eurodollar Loans shall be deemed to constitute
Eurocurrency Liabilities and to be subject to such reserve requirements
without benefit of or credit for proration, exemptions or offsets that may be
available from time to time to any Lender under such Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.
"Sterling" or "pence" shall mean the lawful currency for the time being of
the United Kingdom. "subsidiary" shall mean, with respect to any person
(herein referred to as the "parent"), any corporation, partnership,
association or other business entity of which securities or other ownership
interests representing more than 50% of the equity or more than 50% of the
ordinary voting power or more than 50% of the general partnership interests
are, at the time any determination is being made, owned, controlled or held
by the parent.
"Subsidiary" shall mean any subsidiary of the Borrower, other than any
Inactive Subsidiary.
"Swingline Commitment" shall mean the commitment of the Swingline Lender
to make loans pursuant to Section 2.22, as the same may be reduced from time
to time pursuant to Section 2.09.
"Swingline Exposure" shall mean at any time the aggregate principal amount
at such time of all outstanding Swingline Loans. The Swingline Exposure of
any Revolving Credit Lender at any time shall equal its Pro Rata Percentage
of the aggregate Swingline Exposure at such time.
"Swingline Loan" shall mean any loan made by the Swingline Lender pursuant
to Section 2.22.
"Syndication Date" shall mean the earlier of (a) the date specified by the
Paying Agent as the date on which primary syndication of the Commitments and
the outstanding Loans is completed and (b) the date that is six months after
the Unconditional Date.
"TEG" shall mean The Energy Group PLC, which is on the date hereof a
public limited company incorporated in England and Wales.
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29
"Term Borrowing" shall mean a Borrowing comprised of Tranche A Term Loans
or Tranche B Term Loans.
"Term Loan Availability Period" shall mean the period from and including
the Closing Date to and including the Termination Date.
"Term Loan Commitments" shall mean the Tranche A Commitments and the
Tranche B Commitments.
"Term Loan Repayment Dates" shall mean the Tranche A Term Loan Repayment
Dates and the Tranche B Term Loan Repayment Dates.
"Term Loans" shall mean the Tranche A Term Loans and the Tranche B Term
Loans.
"Termination Date" shall mean the earliest of (a) the date that is 200
days after the Announcement Date, (b) the later of (i) the date that is three
months after the Unconditional Date and (ii) the date that is 49 days after
the first date on which PA acquires 90% of the outstanding Shares to which
the Offer relates and (c) the date that is 200 days after the date hereof.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such rate shall
not be so reported on such day or such next preceding Business Day, the
average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at
approximately 10:00 a.m., New York City time, on such day (or, if such day
shall not be a Business Day, on the next preceding Business Day) by the
Paying Agent from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time. The
Total Revolving Credit Commitment as of the Closing Date is $800,000,000.
"TPC" shall mean TPC Corporation, a corporation organized under the laws
of Delaware.
"TPC Contribution" shall mean the direct or indirect contribution of all
the capital stock of TPC by PGH to the Borrower.
"Tranche A Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Tranche A Term Loans hereunder as set forth
on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such
Lender assumed its Term Loan Commitment, as applicable, as the same may be
(a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04
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"Tranche A Maturity Date" shall mean February 3, 2004.
"Tranche A Term Borrowing" shall mean a Borrowing comprised of Tranche A
Term Loans.
"Tranche A Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(i).
"Tranche A Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01(a). Each Tranche A Term Loan shall be
either a Eurodollar Term Loan or a Base Rate Term Loan.
"Tranche B Commitment" shall mean with respect to each Lender, the
commitment of such Lender to make Tranche B Term Loans hereunder as set forth
on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such
Lender assumed its Term Loan Commitment, as applicable, as the same may be
(a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04
"Tranche B Maturity Date" shall mean June 30, 2005.
"Tranche B Term Borrowing" shall mean a Borrowing comprised of Tranche B
Term Loans.
"Tranche B Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11(a)(ii).
"Tranche B Term Loans" shall mean the term loans made by the Lenders to
the Borrower pursuant to Section 2.01(b). Each Tranche B Term Loan shall be
either a Eurodollar Term Loan or a Base Rate Term Loan.
"Transaction Documents" shall mean (a) the Offer Document, (b) the Loan
Documents, (c) the PA Facility Agreement, (d) the EnergyCo Credit Agreement
and (e) the Eastern Facility Agreement and, in each case, the agreements,
documents and instruments to be executed and delivered in connection
therewith.
"Transactions" shall mean the Offer, the transactions contemplated in
connection therewith and the transactions contemplated by the Transaction
Documents, including the TPC Contribution, the PPM Contribution, the Peabody
Transfer and the Citizens Transfer.
"Type", when used in respect of any Loan or Borrowing, shall refer to the
Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, the term "Rate" shall
include the Adjusted LIBO Rate and the Base Rate.
"U.S. Tax Sharing Policy" shall mean the Income Tax Allocation Policy of
PacifiCorp and its subsidiaries attached as Exhibit J hereto, as in effect
from time to time.
"Unconditional Date" shall have the meaning assigned to such term in the
PA Facility Agreement.
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31
"wholly owned Subsidiary" of any person shall mean a subsidiary of such
person of which securities (except for directors' qualifying shares) or other
ownership interests representing 100% of the equity or 100% of the ordinary
voting power (other than directors' qualifying shares) or 100% of the general
partnership interests are, at the time any determination is being made,
owned, controlled or held by such person or one or more wholly owned
subsidiaries of such person or by such person and one or more wholly owned
subsidiaries of such person.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply
equally to both the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, (a) any reference in
this Agreement to (i) the Offer Document or any Loan Document shall mean such
document as amended, restated, supplemented or otherwise modified from time
to time, and (ii) any Credit Facility shall mean such Credit Facility as in
effect on the date hereof (or, in the case of the Eastern Facility Agreement,
in the form attached to the Eastern Facility Letter) and (b) all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as
in effect from time to time; provided, however, that if the Borrower notifies
the Paying Agent that the Borrower wishes to amend any covenant in Article VI
or any related definition (including as such definitions relate to the
definition of "Excess Cash Flow") to eliminate the effect of any change in
GAAP occurring after the date of this Agreement on the operation of such
covenant (or if the Paying Agent notifies the Borrower that the Required
Lenders wish to amend Article VI or any related definition for such purpose),
then the Borrower's compliance with such covenant shall be determined on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant or
definition is amended in a manner satisfactory to the Borrower and the
Required Lenders. Notwithstanding anything to the contrary, for all purposes
in this Agreement, with respect to the period from the Unconditional Date to
the Separation Date, each reference to subsidiaries of the Borrower shall
include the Peabody Group as if the members of the Peabody Group were in fact
subsidiaries of the Borrower and the PA Note had been satisfied.
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments. Subject to the terms and conditions and relying
upon the representations and warranties herein set forth, each Lender agrees,
severally and not jointly, (a) to make Tranche A Term Loans to the Borrower
at any time and from time to time on or after the Closing Date and until the
earlier of the expiration of the Term Loan Availability Period and the
termination of the Tranche A Commitment of such Lender in accordance with the
terms hereof, in a principal amount not to exceed its Tranche A Commitment,
(b) to make Tranche B Term Loans
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32
to the Borrower at any time and from time to time on or after the Closing
Date and until the earlier of the expiration of the Term Loan Availability
Period and the termination of the Tranche B Commitment of such Lender in
accordance with the terms hereof, in a principal amount not to exceed its
Tranche B Commitment, and (c) to make Revolving Loans to the Borrower, at any
time and from time to time on or after the Closing Date, and until the
earlier of the Revolving Credit Maturity Date and the termination of the
Revolving Credit Commitment of such Lender in accordance with the terms
hereof, in an aggregate principal amount at any time outstanding that will
not result in (i) such Lender's Revolving Credit Exposure exceeding such
Lender's Revolving Credit Commitment or (ii) the aggregate principal amount
of all outstanding Revolving Loans and Swingline Loans exceeding
$300,000,000. Within the limits set forth in clause (c) of the preceding
sentence and subject to the terms, conditions and limitations set forth
herein, the Borrower may borrow, pay or prepay and reborrow Revolving Loans.
Amounts paid or prepaid in respect of Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan (other than Swingline Loans) shall be
made as part of a Borrowing consisting of Loans made by the Lenders ratably
in accordance with their Tranche A Commitments, Tranche B Commitments or
Revolving Credit Commitments, as applicable; provided, however, that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however,
that no Lender shall be responsible for the failure of any other Lender to
make any Loan required to be made by such other Lender). Except for Loans
deemed made pursuant to Section 2.02(f) and except as provided in the
immediately succeeding sentence, the Loans comprising any Borrowing shall be
in an aggregate principal amount that is (i) an integral multiple of
$1,000,000 (except in the case of Acquisition Borrowings) and not less than
$10,000,000 or (ii) equal to the remaining available balance of the
applicable Commitments. Subject to the other terms and conditions provided
for herein, the aggregate principal amount of the Loans comprising each
Acquisition Borrowing shall be an amount sufficient, when added to the amount
of the PGH Equity Contribution as yet unused for such purpose, to enable the
Borrower to fund to PA under the PA Note the relevant Matching Amount (it
being understood and agreed that substantially the entire PGH Equity
Contribution shall be used for such purpose prior to or simultaneously with
the making of any Loan for such purpose or the payment of fees and expenses
related to the Offer).
(b) Subject to Sections 2.08 and 2.15, each Borrowing shall be comprised
entirely of Base Rate Loans or Eurodollar Loans as the Borrower may request
pursuant to Section 2.03. Each Lender may at its option make any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option shall not (i)
affect the obligation of the Borrower to repay such Loan or (ii) increase the
costs of the Borrower that would otherwise be payable under Section 2.14 or
2.20 with respect thereto, in each case in accordance with the terms of this
Agreement. Borrowings of more than one Type may be outstanding at the same
time; provided, however, that the Borrower shall not be entitled to request
any Borrowing that, if made, would result in more than 15 Eurodollar
Borrowings outstanding hereunder at any time. For purposes of the foregoing,
Borrowings having different Interest Periods, regardless of whether they
commence on the same date, shall be considered separate Borrowings.
(c) Except with respect to Loans made or deemed made pursuant to Section
2.02(f), each Lender shall make each Loan to be made by it hereunder on the
proposed date thereof by wire transfer of immediately available funds to such
account in New York City as the Paying Agent may
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33
designate not later than 11:00 a.m., New York City time, and the Paying Agent
shall by 12:00 (noon), New York City time, credit the amounts so received (i)
with respect to any Acquisition Borrowing, to the Offer Account, and (ii)
with respect to any other Borrowing, to an account in the name of the
Borrower, maintained with the Paying Agent and designated by the Borrower in
the applicable Borrowing Request or, if a Borrowing shall not occur on such
date because any condition precedent herein specified shall not have been
met, return the amounts so received to the respective Lenders.
(d) Unless the Paying Agent shall have received notice from a Lender prior
to the date of any Borrowing that such Lender will not make available to the
Paying Agent such Lender's portion of such Borrowing, the Paying Agent may
assume that such Lender has made such portion available to the Paying Agent
on the date of such Borrowing in accordance with paragraph (c) above and the
Paying Agent may, in reliance upon such assumption, make available to the
Borrower on such date a corresponding amount. If the Paying Agent shall have
so made funds available then, to the extent that such Lender shall not have
made such portion available to the Paying Agent, such Lender and the Borrower
severally agree to repay to the Paying Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the
date such amount is made available to the Borrower until the date such amount
is repaid to the Paying Agent at (i) in the case of the Borrower, the
interest rate applicable at the time to the Loans comprising such Borrowing
and (ii) in the case of such Lender, a rate determined by the Paying Agent to
represent its cost of overnight or short-term funds (which determination
shall be conclusive absent manifest error). If such Lender shall repay to the
Paying Agent such corresponding amount, such amount shall constitute such
Lender's Loan as part of such Borrowing for purposes of this Agreement.
(e) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Interest Period with respect to a
Revolving Credit Borrowing, Tranche A Term Borrowing or Tranche B Term
Borrowing that would end after the Revolving Credit Maturity Date, the
Tranche A Maturity Date or the Tranche B Maturity Date, respectively. In
addition, until the Syndication Date, the Borrower shall not be entitled to
request any Interest Period in respect of any Eurodollar Borrowing in excess
of one month.
(f) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.23(e) within the time specified in
such Section, the Issuing Bank will promptly notify the Paying Agent of the
L/C Disbursement and the Paying Agent will promptly notify each Revolving
Credit Lender of such L/C Disbursement and its Pro Rata Percentage thereof.
Each Revolving Credit Lender shall pay by wire transfer of immediately
available funds to the Paying Agent not later than 2:00 p.m., New York City
time, on such date (or, if such Revolving Credit Lender shall have received
such notice later than 12:00 (noon), New York City time, on any day, not
later than 10:00 a.m., New York City time, on the immediately following
Business Day), an amount equal to such Lender's Pro Rata Percentage of such
L/C Disbursement (it being understood that, to the extent such amount would
not cause the aggregate principal amount of outstanding Revolving Loans and
Swingline Loans to exceed $300,000,000, such amount shall be deemed to
constitute a Base Rate Revolving Loan of such Lender and shall be deemed to
have reduced the L/C Exposure), and the Paying Agent will promptly pay to the
Issuing Bank amounts so received by it from the Revolving Credit Lenders. The
Paying Agent will promptly pay to the Issuing Bank any amounts received by it
from the Borrower pursuant to Section 2.23(e) prior to the time that any
Revolving Credit Lender makes any payment pursuant to this paragraph (f); any
such amounts received by the
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34
Paying Agent thereafter will be promptly remitted by the Paying Agent to the
Revolving Credit Lenders that shall have made such payments and to the
Issuing Bank, as their interests may appear. If any Revolving Credit Lender
shall not have made its Pro Rata Percentage of such L/C Disbursement
available to the Paying Agent as provided above, such Lender and the Borrower
severally agree to pay interest on such amount, for each day from and
including the date such amount is required to be paid in accordance with this
paragraph to but excluding the date such amount is paid, to the Paying Agent
for the account of the Issuing Bank at (i) in the case of the Borrower, a
rate per annum equal to the interest rate applicable to Revolving Loans
pursuant to Section 2.06(a), and (ii) in the case of such Lender, for the
first such day, the Federal Funds Effective Rate, and for each day
thereafter, the Base Rate.
SECTION 2.03. Borrowing Procedure. In order to request a Borrowing (other
than a Swingline Loan or a deemed Borrowing pursuant to Section 2.02(f), as
to which this Section 2.03 shall not apply), the Borrower shall hand deliver
or telecopy to the Paying Agent a duly completed Borrowing Request (a) in the
case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City
time, three Business Days before a proposed Borrowing, and (b) in the case of
a Base Rate Borrowing, not later than 11:00 a.m., New York City time, on the
Business Day of a proposed Borrowing. Each Borrowing Request shall be
irrevocable, shall be signed by or on behalf of the Borrower and shall
specify the following information: (i) whether the Borrowing then being
requested is to be a Term Borrowing or a Revolving Credit Borrowing, whether
such Borrowing is to be a Eurodollar Borrowing or a Base Rate Borrowing and
whether such Borrowing is to be an Acquisition Borrowing; (ii) the date of
such Borrowing (which shall be a Business Day), (iii) the number and location
of the account to which funds are to be disbursed (which shall be an account
that complies with the requirements of Section 2.02(c)); (iv) the amount of
such Borrowing; and (v) if such Borrowing is to be a Eurodollar Borrowing,
the Interest Period with respect thereto; provided, however, that,
notwithstanding any contrary specification in any Borrowing Request, each
requested Borrowing shall comply with the requirements set forth in Section
2.02. Any request for a Term Borrowing by the Borrower shall be allocated
between the Tranche A Commitments and the Tranche B Commitments pro rata in
accordance with the aggregate unused amounts of such Commitments. If no
election as to the Type of Borrowing is specified in any such notice, then
the requested Borrowing shall be a Base Rate Borrowing. If no Interest Period
with respect to any Eurodollar Borrowing is specified in any such notice,
then the Borrower shall be deemed to have selected an Interest Period of one
month's duration. The Paying Agent shall promptly advise the applicable
Lenders of any notice given pursuant to this Section 2.03 (and the contents
thereof), and of each Lender's portion of the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Paying Agent for the account of
each Lender the then unpaid principal amount of each Swingline Loan, on the
last day of the Interest Period applicable to such Loan or, if earlier, on
the Revolving Credit Maturity Date, the principal amount of each Term Loan of
such Lender as provided in Section 2.11 and the then unpaid principal amount
of each Revolving Loan on the Revolving Credit Maturity Date.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender from time to time,
including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
<PAGE>
35
(c) The Paying Agent shall maintain accounts in which it will record (i)
the amount of each Loan made hereunder, the Type thereof and the Interest
Period applicable thereto, (ii) the amount of any principal or interest due
and payable or to become due and payable from the Borrower to each Lender
hereunder and (iii) the amount of any sum received by the Paying Agent
hereunder from the Borrower or the Guarantor and each Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraphs (b)
and (c) above shall be prima facie evidence of the existence and amounts of
the obligations therein recorded; provided, however, that the failure of any
Lender or the Paying Agent to maintain such accounts or any error therein
shall not in any manner affect the obligations of the Borrower to repay the
Loans in accordance with their terms.
(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at
all times (including after any assignment of all or part of such interests
pursuant to Section 9.04) be represented by one or more promissory notes
payable to the payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender, through
the Paying Agent, on the last day of March, June, September and December in
each year and on each date on which any Commitment of such Lender shall
expire or be terminated as provided herein, a commitment fee (a "Commitment
Fee") equal to the Applicable Percentage per annum in effect from time to
time on the average daily unused amount of the Commitments of such Lender
(other than the Swingline Commitment) during the preceding quarter (or other
period commencing with the Closing Date or ending with the Revolving Credit
Maturity Date or the date on which the Commitments of such Lender shall
expire or be terminated). All Commitment Fees shall be computed on the basis
of the actual number of days elapsed in a year of 360 days. The Commitment
Fee due to each Lender shall commence to accrue on the Closing Date and shall
cease to accrue on the date on which the Commitment of such Lender shall
expire or be terminated as provided herein. For purposes of calculating
Commitment Fees only, no portion of the Revolving Credit Commitments shall be
deemed utilized under Section 2.17 as a result of outstanding Swingline Loans.
(b) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Paying Agent, on the last day of March, June, September and
December of each year and on the date on which the Revolving Credit
Commitment of such Lender shall be terminated as provided herein, a fee (an
"L/C Participation Fee") calculated on such Lender's Pro Rata Percentage of
the average daily aggregate L/C Exposure (excluding the portion thereof
attributable to unreimbursed L/C Disbursements) during the preceding quarter
(or shorter period commencing with the date hereof or ending with the
Revolving Credit Maturity Date or the date on which all Letters of Credit
have been canceled or have expired and the Revolving Credit Commitments of
all Lenders shall have been terminated) at a rate equal to the Applicable
Percentage from time to time used to determine the interest rate on Revolving
Credit Borrowings comprised of Eurodollar Loans pursuant to Section 2.06, and
(ii) to the Issuing Bank with respect to each Letter of Credit the standard
fronting, issuance and drawing fees specified from time to time by the
Issuing Bank (the "Issuing Bank Fees"). All L/C Participation Fees and
Issuing Bank Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days.
<PAGE>
36
(c) All Fees shall be paid on the dates due, in immediately available funds,
to the Paying Agent for distribution, if and as appropriate, among the Lenders,
except that the Issuing Bank Fees shall be paid directly to the Issuing Bank.
Once paid, none of the Fees shall be refundable under any circumstances, absent
manifest error.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of Section
2.07, the Loans comprising each Base Rate Borrowing, including each Swingline
Loan, shall bear interest (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be, when the Base Rate
is determined by reference to the Prime Rate and over a year of 360 days at all
other times) at a rate per annum equal to the Base Rate plus the Applicable
Percentage in effect from time to time.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to the
Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the
Applicable Percentage in effect from time to time.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Base Rate or Adjusted LIBO Rate for each Interest Period or day
within an Interest Period, as the case may be, shall be determined by the Paying
Agent, and such determination shall be conclusive absent manifest error.
SECTION 2.07. Default Interest. If the Borrower shall default in the payment
of the principal of or interest on any Loan or any other amount becoming due
hereunder, by acceleration or otherwise, or under any other Loan Document, the
Borrower shall on demand from time to time pay interest, to the extent permitted
by law, on such defaulted amount to but excluding the date of actual payment
(after as well as before judgment) (a) in the case of overdue principal, at the
rate otherwise applicable to such Loan pursuant to Section 2.06 plus 2.00% per
annum and (b) in all other cases, at a rate per annum (computed on the basis of
the actual number of days elapsed over a year of 365 or 366 days, as the case
may be, when determined by reference to the Prime Rate and over a year of 360
days at all other times) equal to the sum of the Base Rate plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Paying Agent shall have
determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the London interbank
market, or that the rates at which such dollar deposits are being offered
will not adequately and fairly reflect the cost to the Lender or Lenders
holding a majority of the Eurodollar Loans comprising such Eurodollar
Borrowing of making or maintaining such Eurodollar Loans during such Interest
Period, or that reasonable means do not exist for ascertaining the Adjusted
LIBO Rate, the Paying Agent shall, as soon as practicable thereafter, give
written or telecopy notice of such determination to the Borrower and the
Lenders. In the event of any such determination, until the Paying Agent shall
have advised the Borrower and the Lenders that the circumstances giving rise
to such notice no longer exist, any request by the Borrower for a Eurodollar
Borrowing pursuant to Section 2.03 or 2.10 shall be deemed to be a request
for a Base Rate Borrowing. Each determination by the Paying Agent hereunder
shall be conclusive absent manifest error.
<PAGE>
37
SECTION 2.09. Termination and Reduction of Commitments. (a) The Term Loan
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
the Termination Date. The Revolving Credit Commitments, the Swingline Commitment
and the L/C Commitment shall automatically terminate on the Revolving Credit
Maturity Date. Notwithstanding the foregoing, (i) the Revolving Credit
Commitment, the Swingline Commitment and the L/C Commitment shall automatically
terminate at 5:00 p.m., New York City time, on the Termination Date if the
initial Borrowing hereunder shall not have occurred by such time and (ii) the
Commitments shall automatically terminate if the Offer lapses or is withdrawn.
(b) Upon at least three Business Days' prior (or, with respect to the period
commencing on the Closing Date and ending on the date of the initial Acquisition
Borrowing hereunder, same day) irrevocable written or telecopy notice to the
Paying Agent, the Borrower may at any time in whole permanently terminate, or
from time to time in part permanently reduce, the Term Loan Commitments or the
Revolving Credit Commitments; provided, however, that (i) each partial reduction
of the Term Loan Commitments or the Revolving Credit Commitments shall be in an
integral multiple of $1,000,000 and in a minimum amount of $10,000,000 and (ii)
the Total Revolving Credit Commitment shall not be reduced to an amount that is
less than the Aggregate Revolving Credit Exposure at the time.
(c) Each reduction in the Term Loan Commitments or the Revolving Credit
Commitments hereunder shall be made ratably among the Lenders in accordance with
their respective applicable Commitments. The Borrower shall pay to the Paying
Agent for the account of the applicable Lenders, on the date of each termination
or reduction, the Commitment Fees on the amount of the Commitments so terminated
or reduced accrued to but excluding the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower shall
have the right at any time upon prior irrevocable notice to the Paying Agent (a)
not later than 12:00 (noon), New York City time, one Business Day prior to
conversion, to convert any Eurodollar Borrowing into a Base Rate Borrowing, (b)
not later than 11:00 a.m., New York City time, three Business Days prior to
conversion or continuation, to convert any Base Rate Borrowing into a Eurodollar
Borrowing or to continue any Eurodollar Borrowing as a Eurodollar Borrowing for
an additional Interest Period, and (c) not later than 11:00 a.m., New York City
time, three Business Days prior to conversion, to convert the Interest Period
with respect to any Eurodollar Borrowing to another permissible Interest Period,
subject in each case to the following:
(i) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any Borrowing
shall be converted or continued, then each resulting Borrowing shall satisfy
the limitations specified in Sections 2.02(a) and 2.02(b) regarding the
principal amount and maximum number of Borrowings of the relevant Type;
(iii) each conversion shall be effected by each Lender and the Paying
Agent by recording for the account of such Lender the new Loan of such
Lender resulting from such
<PAGE>
38
conversion and reducing the Loan (or portion thereof) of such Lender
being converted by an equivalent principal amount; accrued interest on
any Eurodollar Loan (or portion thereof) being converted shall be paid by
the Borrower at the time of conversion;
(iv) if any Eurodollar Borrowing is converted at a time other than the
end of the Interest Period applicable thereto, the Borrower shall pay, upon
demand, any amounts due to the Lenders pursuant to Section 2.16;
(v) any portion of a Borrowing maturing or required to be repaid in less
than one month may not be converted into or continued as a Eurodollar
Borrowing;
(vi) any portion of a Eurodollar Borrowing that cannot be converted into
or continued as a Eurodollar Borrowing by reason of the immediately
preceding clause shall be automatically converted at the end of the Interest
Period in effect for such Borrowing into a Base Rate Borrowing;
(vii) no Interest Period may be selected for any Eurodollar Term
Borrowing that would end later than a Term Loan Repayment Date occurring on
or after the first day of such Interest Period if, after giving effect to
such selection, the aggregate outstanding amount of (A) the Eurodollar Term
Borrowings with Interest Periods ending on or prior to such Term Loan
Repayment Date and (B) the Base Rate Term Borrowings would not be at least
equal to the principal amount of Term Borrowings to be paid on such Term
Loan Repayment Date; and
(viii) upon notice to the Borrower from the Paying Agent given at the
request of the Required Lenders, after the occurrence and during the
continuance of a Default or Event of Default, no outstanding Loan may be
converted into, or continued as, a Eurodollar Loan.
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the Borrowing
that the Borrower requests be converted or continued, (ii) whether such
Borrowing is to be converted to or continued as a Eurodollar Borrowing or a Base
Rate Borrowing, (iii) if such notice requests a conversion, the date of such
conversion (which shall be a Business Day) and (iv) if such Borrowing is to be
converted to or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Borrowing, the
Borrower shall be deemed to have selected an Interest Period of one month's
duration. The Paying Agent shall advise the Lenders of any notice given pursuant
to this Section 2.10 and of each Lender's portion of any converted or continued
Borrowing. If the Borrower shall not have given notice in accordance with this
Section 2.10 to continue any Borrowing into a subsequent Interest Period (and
shall not otherwise have given notice in accordance with this Section 2.10 to
convert such Borrowing), such Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into a new Interest Period as a Base Rate Borrowing.
SECTION 2.11. Repayment of Term Borrowings. (a) (i) The Borrower shall pay
to the Paying Agent, for the account of the Lenders, on the dates set forth
below under Category 1 if the initial Tranche A Term Borrowing hereunder occurs
on or after June 30, 1998, or under Category 2
<PAGE>
39
if the initial Tranche A Term Borrowing hereunder occurs prior to June 30,
1998, or if any such applicable date is not a Business Day, on the next
succeeding Business Day (each such applicable date being a "Tranche A Term
Loan Repayment Date"), a principal amount of the Tranche A Term Loans (as
adjusted from time to time pursuant to Sections 2.11(b), 2.12 and 2.13(i))
equal to the amount set forth below for such applicable date, together in
each case with accrued and unpaid interest on the principal amount to be paid
to but excluding the applicable date of such payment:
<TABLE>
<CAPTION>
CATEGORY 1
- -------------------------------------------
DATE AMOUNT
- ------------------------------- ----------
<S> <C>
December 31, 1998.............. $13,700,000
March 31, 1999................. 13,700,000
June 30, 1999.................. 13,700,000
September 15, 1999............. 336,000,000
September 30, 1999............. 13,700,000
December 31, 1999.............. 13,700,000
March 31, 2000................. 13,700,000
June 30, 2000.................. 13,700,000
September 30, 2000............. 13,700,000
December 31, 2000.............. 13,700,000
March 31, 2001................. 13,700,000
June 30, 2001.................. 13,700,000
September 30, 2001............. 13,700,000
December 31, 2001.............. 13,700,000
March 31, 2002................. 13,700,000
June 30, 2002.................. 13,700,000
September 30, 2002............. 13,700,000
December 31, 2002.............. 13,700,000
March 31, 2003................. 13,700,000
June 30, 2003.................. 13,700,000
September 30, 2003............. 13,700,000
December 31, 2003.............. 13,700,000
Tranche A Maturity............. 12,300,000
Date
<CAPTION>
CATEGORY 2
- -------------------------------------------
DATE AMOUNT
- ------------------------------- ----------
<S> <C>
September 30, 1998............. $13,100,000
December 31, 1998.............. 13,100,000
March 31, 1999................. 13,100,000
June 30, 1999.................. 13,100,000
September 15, 1999............. 336,000,000
September 30, 1999............. 13,100,000
December 31, 1999.............. 13,100,000
March 31, 2000................. 13,100,000
June 30, 2000.................. 13,100,000
September 30, 2000............. 13,100,000
December 31, 2000.............. 13,100,000
March 31, 2001................. 13,100,000
June 30, 2001.................. 13,100,000
September 30, 2001............. 13,100,000
December 31, 2001.............. 13,100,000
March 31, 2002................. 13,100,000
June 30, 2002.................. 13,100,000
September 30, 2002............. 13,100,000
December 31, 2002.............. 13,100,000
March 31, 2003................. 13,100,000
June 30, 2003.................. 13,100,000
September 30, 2003............. 13,100,000
December 31, 2003.............. 13,100,000
Tranche A Maturity............. 11,800,000
Date
</TABLE>
(ii) The Borrower shall pay to the Paying Agent, for the account of the
Lenders, on the dates set forth below under Category 1 if the initial Tranche
B Term Borrowing hereunder occurs on or after June 30, 1998, or under
Category 2 if the initial Tranche B Term Borrowing hereunder occurs prior to
June 30, 1998, or if any such applicable date is not a Business Day, on the
next succeeding Business Day (each such applicable date being a "Tranche B
Term Loan Repayment Date"), a
<PAGE>
40
principal amount of the Tranche B Term Loans (as adjusted from time to time
pursuant to Sections 2.11(b), 2.12 and 2.13(i)) equal to the amount set forth
below for such applicable date, together in each case with accrued and unpaid
interest on the principal amount to be paid to but excluding the date of such
payment:
<TABLE>
<CAPTION>
CATEGORY 1
- -------------------------------------------
DATE AMOUNT
- ------------------------------- ----------
<S> <C>
December 31, 1998.............. $1,625,000
March 31, 1999................. 1,625,000
June 30, 1999.................. 1,625,000
September 30, 1999............. 1,625,000
December 31, 1999.............. 1,625,000
March 31, 2000................. 1,625,000
June 30, 2000.................. 1,625,000
September 30, 2000............. 1,625,000
December 31, 2000.............. 1,625,000
March 31, 2001................. 1,625,000
June 30, 2001.................. 1,625,000
September 30, 2001............. 1,625,000
December 31, 2001.............. 1,625,000
March 31, 2002................. 1,625,000
June 30, 2002.................. 1,625,000
September 30, 2002............. 1,625,000
December 31, 2002.............. 1,625,000
March 31, 2003................. 1,625,000
June 30, 2003.................. 1,625,000
September 30, 2003............. 1,625,000
December 31, 2003.............. 1,625,000
March 31, 2004................. 26,625,000
June 30, 2004.................. 26,625,000
September 30, 2004............. 26,625,000
December 31, 2004.............. 26,625,000
March 31, 2005................. 254,687,500
Tranche B Maturity............. 254,687,500
Date
<CAPTION>
CATEGORY 2
- -------------------------------------------
DATE AMOUNT
- ------------------------------- ----------
<S> <C>
September 30, 1998............. $1,625,000
December 31 , 1998............. 1,625,000
March 31, 1999................. 1,625,000
June 30, 1999.................. 1,625,000
September 30, 1999............. 1,625,000
December 31, 1999.............. 1,625,000
March 31, 2000................. 1,625,000
June 30, 2000.................. 1,625,000
September 30, 2000............. 1,625,000
December 31, 2000.............. 1,625,000
March 31, 2001................. 1,625,000
June 30, 2001.................. 1,625,000
September 30, 2001............. 1,625,000
December 31, 2001.............. 1,625,000
March 31, 2002................. 1,625,000
June 30, 2002.................. 1,625,000
September 30, 2002............. 1,625,000
December 31, 2002.............. 1,625,000
March 31, 2003................. 1,625,000
June 30, 2003.................. 1,625,000
September 30, 2003............. 1,625,000
December 31, 2003.............. 1,625,000
March 31, 2004................. 26,625,000
June 30, 2004.................. 26,625,000
September 30, 2004............. 26,625,000
December 31, 2004.............. 26,625,000
March 31, 2005................. 253,875,000
Tranche B Maturity............. 253,875,000
Date
</TABLE>
(b) In the event and on each occasion that any Term Loan Commitments shall
be reduced or shall expire or terminate other than as a result of the making of
a Term Loan, the installments
<PAGE>
41
payable on each Term Loan Repayment Date shall be reduced pro rata by an
aggregate amount equal to the amount of such reduction, expiration or
termination.
(c) To the extent not previously paid, all Tranche A Term Loans and Tranche
B Term Loans shall be due and payable on the Tranche A Maturity Date and Tranche
B Maturity Date, respectively, together with accrued and unpaid interest on the
principal amount to be paid to but excluding the date of payment.
(d) All repayments pursuant to this Section 2.11 shall be subject to Section
2.16, but shall otherwise be without premium or penalty.
SECTION 2.12. Optional Prepayments. (a) The Borrower shall have the right at
any time and from time to time to prepay any Borrowing, in whole or in part,
upon at least three Business Days' prior written or telecopy notice (or
telephone notice promptly confirmed by written or telecopy notice) to the Paying
Agent before 11:00 a.m., New York City time; provided, however, that each
partial prepayment shall be in an amount that is an integral multiple of
$1,000,000 and not less than $10,000,000.
(b) Optional prepayments of Term Loans shall be allocated pro rata
between the then-outstanding Tranche A Term Loans and Tranche B Term Loans
and applied pro rata against the remaining scheduled installments of
principal due in respect of the Tranche A Term Loans and Tranche B Term Loans
under Sections 2.11(a)(i) and (ii), respectively; provided, however, that the
Borrower shall have the right under this Section and under Section 2.13 to
prepay up to $336,000,000 in principal amount of the installment of Tranche A
Term Loans due on September 15, 1999, without allocating any portion of such
prepayment to the Tranche B Term Loans or any other installment of Tranche A
Term Loans.
(c) Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower to prepay such Borrowing by the amount
stated therein on the date stated therein. All prepayments under this Section
2.12 shall be subject to Section 2.16 but otherwise without premium or penalty.
All prepayments under this Section 2.12 shall be accompanied by accrued interest
on the principal amount being prepaid to the date of payment.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any termination of
all the Revolving Credit Commitments, the Borrower shall repay or prepay all its
outstanding Revolving Credit Borrowings and all outstanding Swingline Loans on
the date of such termination. In the event of any partial reduction of the
Revolving Credit Commitments, then (i) at or prior to the effective date of such
reduction, the Paying Agent shall notify the Borrower and the Revolving Credit
Lenders of the Aggregate Revolving Credit Exposure after giving effect thereto
and (ii) if the Aggregate Revolving Credit Exposure would exceed the Total
Revolving Credit Commitment after giving effect to such reduction or
termination, then the Borrower shall, on the date of such reduction or
termination, repay or prepay Revolving Credit Borrowings or Swingline Loans (or
a combination thereof) in an amount sufficient to eliminate such excess.
(b) Subject to paragraph (h) below, not later than the fourth Business Day
following the receipt of Net Cash Proceeds from any Asset Sale (except to the
extent the Borrower has notified the
<PAGE>
42
Paying Agent of its intention to reinvest the proceeds thereof in accordance
with the definition of the term "Net Cash Proceeds" and such proceeds are in
fact so reinvested or committed to be reinvested within the 180-day or
300-day period referred to in such definition), the Borrower shall apply 100%
of such Net Cash Proceeds received with respect thereto to prepay outstanding
Term Loans in accordance with Section 2.13(i).
(c) Subject to paragraph (h) below, in the event and on each occasion that
an Equity Issuance occurs, the Borrower shall, substantially simultaneously with
(and in any event not later than the fourth Business Day next following) the
receipt of Net Cash Proceeds from any such Equity Issuance, apply 100% of such
Net Cash Proceeds to prepay outstanding Term Loans in accordance with Section
2.13(i).
(d) Subject to paragraph (h) below, no later than (i) in the case of the
fiscal year ending December 31, 1998, the later of (x) 15 days after the
Separation Date and (y) April 30, 1999, and (ii) in the case of each fiscal year
thereafter, 120 days after the end of such fiscal year, the Borrower shall
prepay outstanding Term Loans in accordance with Section 2.13(i) in an aggregate
principal amount equal to 50% of Excess Cash Flow for the fiscal year then
ended.
(e) Subject to paragraph (h) below, in the event that any Loan Party or any
subsidiary of a Loan Party shall receive Net Cash Proceeds from the issuance or
other disposition of Indebtedness for money borrowed of any Loan Party or any
subsidiary of a Loan Party (other than Indebtedness permitted by Section 6.01
(other than subparagraph (i) thereof)), the Borrower shall, substantially
simultaneously with (and in any event not later than the fourth Business Day
next following) the receipt of such Net Cash Proceeds by such Loan Party or such
subsidiary, apply an amount equal to 100% of such Net Cash Proceeds to prepay
outstanding Term Loans in accordance with Section 2.13(i).
(f) Subject to paragraph (h) below, not later than the fourth Business Day
following the completion of a Permitted Receivables Financing, the Borrower or
the applicable Subsidiary shall apply 100% of the Net Cash Proceeds therefrom to
prepay outstanding Term Loans in accordance with Section 2.13(i).
(g) Subject to paragraph (h) below, not later than the fourth Business Day
following the receipt of any net cash proceeds attributable to any Prepaid
Forward Sales Agreement, the Borrower or the applicable Subsidiary shall apply
100% of such net cash proceeds to prepay outstanding Term Loans in accordance
with Section 2.13(i).
(h) The provisions of paragraphs (b), (c), (d), (e), (f) and (g) of this
Section 2.13 shall cease to be effective upon the Borrower's satisfaction of the
Collateral Sharing Requirements or, with respect to paragraph (d) only of this
Section 2.13, upon the Borrower's obtaining Investment Grade Ratings.
(i) Mandatory prepayments of outstanding Term Loans under this Agreement
(other than under Section 2.13(j)) shall be allocated pro rata between the
then-outstanding Tranche A Term Loans and Tranche B Term Loans, and applied pro
rata against the remaining scheduled installments of principal due in respect of
Tranche A Term Loans and Tranche B Term Loans under Sections 2.11(a)(i) and
(ii), respectively; provided, however, that the Borrower shall have the right
<PAGE>
43
under this Section and under Section 2.12 to prepay up to $336,000,000 in
principal amount of the installment of Tranche A Term Loans due on September 15,
1999, without allocating any portion of such prepayment to the Tranche B Term
Loans or any other installment of Tranche A Term Loans.
(j) Not later than five Business Days after the Separation Date, the
Borrower shall apply to the installment of principal of the Tranche A Term Loans
due on September 15, 1999, an amount equal to the excess of (i) $336,000,000
over (ii) the amount, if any, of prepayments of the Tranche A Term Loans made
prior to such date under Section 2.12 or 2.13 and applied only to the
installment of principal of the Tranche A Term Loans due on September 15, 1999.
(k) The Borrower shall deliver to the Paying Agent, at the time of each
prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent practicable,
at least four days' prior written notice of such prepayment. Each notice of
prepayment shall specify the prepayment date, the Type of each Loan being
prepaid and the principal amount of each Loan (or portion thereof) to be
prepaid. All prepayments of Borrowings under this Section 2.13 shall be subject
to Section 2.16, but shall otherwise be without premium or penalty.
(l) Amounts to be applied pursuant to this Section 2.13 to the prepayment
of Term Loans and Revolving Loans shall be applied, as applicable, first to
reduce outstanding Base Rate Term Loans and Base Rate Revolving Loans. Any
amounts remaining after each such application shall, at the option of the
Borrower, be applied to prepay Eurodollar Term Loans or Eurodollar Revolving
Loans, as the case may be, immediately and/or shall be deposited in the
Prepayment Account (as defined below). The Paying Agent shall apply any cash
deposited in the Prepayment Account (i) allocable to Term Loans to prepay
Eurodollar Term Loans and (ii) allocable to Revolving Loans to prepay
Eurodollar Revolving Loans, in each case on the last day of their respective
Interest Periods (or, at the direction of the Borrower, on any earlier date)
until all outstanding Term Loans or Revolving Loans, as the case may be, have
been prepaid or until all the allocable cash on deposit with respect to such
Loans has been exhausted. For purposes of this Agreement, the term
"Prepayment Account" shall mean an account established by the Borrower with
the Paying Agent and over which the Paying Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal for
application in accordance with this paragraph (l). The Paying Agent will, at
the request of the Borrower, invest amounts on deposit in the Prepayment
Account in Permitted Investments that mature prior to the last day of the
applicable Interest Periods of the Eurodollar Term Borrowings or Eurodollar
Revolving Borrowings to be prepaid, as the case may be; provided, however,
that (i) the Paying Agent shall not be required to make any investment that,
in its sole judgment, would require or cause the Paying Agent to be in, or
would result in any, violation of any law, statute, rule or regulation and
(ii) the Paying Agent shall have no obligation to invest amounts on deposit
in the Prepayment Account if an Event of Default shall have occurred and be
continuing. The Borrower shall indemnify the Paying Agent for any losses
relating to the investments so that the amount available to prepay Eurodollar
Borrowings on the last day of the applicable Interest Period is not less than
the amount that would have been available had no investments been made
pursuant thereto. Other than any interest earned on such investments, the
Prepayment Account shall not bear interest. Interest or profits, if any, on
such investments shall be deposited in the Prepayment Account and reinvested
and disbursed as specified above. If the maturity of the Loans has been
accelerated pursuant to Article VII, the Paying Agent may, in its sole
discretion, apply all amounts on deposit in the Prepayment Account to satisfy
any of the Obligations. The Borrower hereby grants to the
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44
Paying Agent, for its benefit and the benefit of the Issuing Bank, the
Swingline Lender and the Lenders, a security interest in the Prepayment
Account to secure the Obligations.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of this
Agreement any change in applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall impose, modify or deem applicable any reserve, special deposit or
similar requirement against assets of, deposits with or for the account of or
credit extended by any Lender or the Issuing Bank (except any such requirement
which is reflected in the Adjusted LIBO Rate) or shall impose on such Lender or
the Issuing Bank or the London interbank market any other condition affecting
this Agreement or Eurodollar Loans made by such Lender or any Letter of Credit
or participation therein, and the result of any of the foregoing shall be to
increase the cost to such Lender or the Issuing Bank of making or maintaining
any Eurodollar Loan or increase the cost to any Lender of issuing or maintaining
any Letter of Credit or purchasing or maintaining a participation therein or to
reduce the amount of any sum received or receivable by such Lender or the
Issuing Bank hereunder (whether of principal, interest or otherwise) by an
amount deemed by such Lender or the Issuing Bank to be material, then the
Borrower will pay to such Lender or the Issuing Bank, as the case may be, upon
demand such additional amount or amounts as will compensate such Lender or the
Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the Closing Date of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the Closing Date in
any such law, rule, regulation, agreement or guideline (whether or not having
the force of law) or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or any lending office of such Lender) or
the Issuing Bank or any Lender's or the Issuing Bank's holding company with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any Governmental Authority made or issued after the Closing Date has
or would have the effect of reducing the rate of return on such Lender's or the
Issuing Bank's capital or on the capital of such Lender's or the Issuing Bank's
holding company, if any, as a consequence of this Agreement or the Loans made or
participations in Letters of Credit purchased by such Lender pursuant hereto or
the Letters of Credit issued by the Issuing Bank pursuant hereto to a level
below that which such Lender or the Issuing Bank or such Lender's or the Issuing
Bank's holding company could have achieved but for such applicability, adoption,
change or compliance (taking into consideration such Lender's or the Issuing
Bank's policies and the policies of such Lender's or the Issuing Bank's holding
company with respect to capital adequacy) by an amount deemed by such Lender or
the Issuing Bank to be material, then from time to time the Borrower shall pay
to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender's
or the Issuing Bank's holding company for any such reduction suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the amount
or amounts necessary to compensate such Lender or the Issuing Bank or its
respective holding company, as applicable, as specified in paragraph (a) or (b)
above shall be delivered to the Borrower and shall be conclusive absent manifest
error. The Borrower shall pay such Lender or the Issuing Bank the
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45
amount shown as due on any such certificate delivered by it within 10 days
after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to demand
compensation for any increased costs or reduction in amounts received or
receivable or reduction in return on capital shall not constitute a waiver of
such Lender's or the Issuing Bank's right to demand such compensation; provided
that neither any Lender nor the Issuing Bank shall be entitled to compensation
under this Section 2.14 for any increased costs or reductions incurred or
suffered with respect to any date unless such Lender or the Issuing Bank, as the
case may be, shall have notified the Borrower under paragraph (c) above, not
more than 90 days after the later of (i) such date and (ii) the date on which
such Lender or Issuing Bank, as applicable, shall have become aware of such
costs or reductions. The protection of this Section shall be available to each
Lender and the Issuing Bank regardless of any possible contention of the
invalidity or inapplicability of the law, rule, regulation, agreement, guideline
or other change or condition that shall have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other provision of
this Agreement, if, after the Closing Date, any change in any law or regulation
or in the interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrower and to the Paying Agent:
(i) such Lender may declare that Eurodollar Loans will not thereafter
(for the duration of such unlawfulness) be made by such Lender hereunder (or
be continued for additional Interest Periods and Base Rate Loans will not
thereafter (for such duration) be converted into Eurodollar Loans),
whereupon any request for a Eurodollar Borrowing (or to convert a Base Rate
Borrowing to a Eurodollar Borrowing or to continue a Eurodollar Borrowing
for an additional Interest Period) shall, as to such Lender only, be deemed
a request for a Base Rate Loan (or a request to continue a Base Rate Loan as
such for an additional Interest Period or to convert a Eurodollar Loan into
a Base Rate Loan, as the case may be), unless such declaration shall be
subsequently withdrawn; and
(ii) such Lender may require that all outstanding Eurodollar Loans made
by it be converted to Base Rate Loans, in which event all such Eurodollar
Loans shall be automatically converted to Base Rate Loans as of the
effective date of such notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above,
all payments and prepayments of principal that would otherwise have been applied
to repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
Base Rate Loans made by such Lender in lieu of, or resulting from the conversion
of, such Eurodollar Loans.
(b) For purposes of this Section 2.15, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan made by such Lender, if
lawful, on the last day of the Interest
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46
Period currently applicable to such Eurodollar Loan; in all other cases such
notice shall be effective on the date of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each Lender against
any loss or expense that such Lender may sustain or incur as a consequence of
any event, other than a default by such Lender in the performance of its
obligations hereunder, which results in (a) such Lender receiving or being
deemed to receive any amount on account of the principal of any Eurodollar
Loan prior to the end of the Interest Period in effect therefor, (b) the
conversion of any Eurodollar Loan to a Base Rate Loan, or the conversion of
the Interest Period with respect to any Eurodollar Loan, in each case other
than on the last day of the Interest Period in effect therefor, or (c) any
Eurodollar Loan to be made by such Lender (including any Eurodollar Loan to
be made pursuant to a conversion or continuation under Section 2.10) not
being made after notice of such Loan shall have been given by the Borrower
hereunder (any of the events referred to in this sentence being called a
"Breakage Event"). In the case of any Breakage Event, such loss shall include
an amount equal to the excess, as reasonably determined by such Lender, of
(i) its cost of obtaining funds for the Eurodollar Loan (excluding loss of
margin) that is the subject of such Breakage Event for the period from the
date of such Breakage Event to the last day of the Interest Period in effect
(or that would have been in effect) for such Loan over (ii) the amount of
interest likely to be realized by such Lender in redeploying the funds
released or not utilized by reason of such Breakage Event for such period. A
certificate of any Lender setting forth any amount or amounts which such
Lender is entitled to receive pursuant to this Section 2.16 shall be
delivered to the Borrower and shall be conclusive absent manifest error.
SECTION 2.17. Pro Rata Treatment. Except as provided below in this Section
2.17 with respect to Swingline Loans and as provided in Sections 2.12(b),
2.13(i), 2.13(j) and 2.15, each Borrowing, each payment or prepayment of
principal of any Borrowing, each payment of interest on the Loans, each payment
of the Commitment Fees, each reduction of the Term Loan Commitments or the
Revolving Credit Commitments and each conversion of any Borrowing to or
continuation of any Borrowing as a Borrowing of any Type shall be allocated pro
rata among the Lenders in accordance with their respective applicable
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Loans).
For purposes of determining the available Revolving Credit Commitments of the
Lenders at any time, each outstanding Swingline Loan shall be deemed to have
utilized the Revolving Credit Commitments of the Lenders (including those
Lenders which shall not have made Swingline Loans) pro rata in accordance with
such respective Revolving Credit Commitments. Each Lender agrees that in
computing such Lender's portion of any Borrowing to be made hereunder, the
Paying Agent may, in its discretion, round each Lender's percentage of such
Borrowing to the next higher or lower whole dollar amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
any Loan Party, or pursuant to a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loan or Loans or L/C
Disbursement as a result of which the unpaid principal portion of its Tranche A
Term Loans, Tranche B Term Loans and Revolving Loans and participations in L/C
Disbursements shall be proportionately less than the unpaid principal portion
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47
of the Tranche A Term Loans, Tranche B Term Loans and Revolving Loans and
participations in L/C Disbursements of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and
shall promptly pay to such other Lender the purchase price for, a
participation in the Tranche A Term Loans, Tranche B Term Loans and Revolving
Loans and L/C Exposure, as the case may be, of such other Lender, so that the
aggregate unpaid principal amount of the Tranche A Term Loans, Tranche B Term
Loans and Revolving Loans and L/C Exposure and participations in Tranche A
Term Loans, Tranche B Term Loans and Revolving Loans and L/C Exposure held by
each Lender shall be in the same proportion to the aggregate unpaid principal
amount of all Tranche A Term Loans, Tranche B Term Loans and Revolving Loans
and L/ C Exposure then outstanding as the principal amount of its Tranche A
Term Loans, Tranche B Term Loans and Revolving Loans and L/C Exposure prior
to such exercise of banker's lien, setoff or counterclaim or other event was
to the principal amount of all Tranche A Term Loans, Tranche B Term Loans and
Revolving Loans and L/C Exposure outstanding prior to such exercise of
banker's lien, setoff or counterclaim or other event; provided, however, that
if any such purchase or purchases or adjustments shall be made pursuant to
this Section 2.18 and the payment giving rise thereto shall thereafter be
recovered, such purchase or purchases or adjustments shall be rescinded to
the extent of such recovery and the purchase price or prices or adjustment
restored without interest. The Borrower expressly consents to the foregoing
arrangements and agrees that any Lender holding a participation in a Term
Loan or Revolving Loan or L/ C Disbursement deemed to have been so purchased
may exercise any and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such Lender by reason
thereof as fully as if such Lender had made a Loan directly to the Borrower
in the amount of such participation.
SECTION 2.19. Payments. (a) The Borrower shall make each payment (including
principal of or interest on any Borrowing or any L/C Disbursement or any Fees or
other amounts) hereunder and under any other Loan Document not later than 12:00
(noon), New York City time, on the date when due in immediately available
dollars, without setoff, defense or counterclaim. Each such payment (other than
(i) Issuing Bank Fees, which shall be paid directly to the Issuing Bank, and
(ii) principal of and interest on Swingline Loans, which shall be paid directly
to the Swingline Lender except as otherwise provided in Section 2.21(e)) shall
be made to the Paying Agent at its offices at 399 Park Avenue, New York, New
York.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day, and
such extension of time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments by or on behalf of any Loan
Party hereunder and under any other Loan Document shall be made, in accordance
with Section 2.19, free and clear of and without deduction for any and all
current or future taxes, levies, imposts, deductions, charges or withholdings
imposed by the United Kingdom, the United States or any political subdivision
thereof, and all liabilities with respect thereto, excluding all taxes, levies,
imposts, deductions, charges or withholdings imposed by reason of the Paying
Agent or Lender or Issuing Bank (or any transferee or assignee thereof including
a participation holder (any such entity, a "Transferee")), as the case may be,
doing business or being regulated, organized, managed, controlled or having a
lending office in the jurisdiction imposing such tax, other than solely as
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48
a result of this Agreement or any other Loan Document or any transaction
contemplated hereby (all such nonexcluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities, collectively or individually, being
called "Taxes"). If any Loan Party shall be required to deduct any Taxes from
or in respect of any sum payable hereunder or under any other Loan Document
to the Paying Agent, any Lender or the Issuing Bank (or any Transferee), (i)
the sum payable shall be increased by the amount (an "additional amount")
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.20) the Paying
Agent, such Lender or the Issuing Bank (or Transferee), as the case may be,
shall receive an amount equal to the sum it would have received had no such
deductions been made, (ii) such Loan Party shall make such deductions and
(iii) such Loan Party shall pay the full amount deducted to the relevant
Governmental Authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay to the relevant Governmental
Authority of the United Kingdom, the United States or any political subdivision
thereof in accordance with applicable law any current or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies (including, without limitation, mortgage recording taxes and similar
fees) that arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document ("Other Taxes").
(c) The Borrower will indemnify the Paying Agent, each Lender and the
Issuing Bank (or Transferee) for the full amount of Taxes and Other Taxes paid
by the Paying Agent, such Lender or the Issuing Bank (or Transferee), as the
case may be, and any liability (including penalties, interest and expenses
(including reasonable attorney's fees and expenses)) arising therefrom or with
respect thereto, whether or not such Taxes or Other Taxes were correctly or
legally asserted by the relevant Governmental Authority. A certificate as to the
amount of such payment or liability prepared by the Paying Agent, a Lender or
the Issuing Bank (or Transferee), or the Paying Agent on its behalf, absent
manifest error, shall be final, conclusive and binding for all purposes. Such
indemnification shall be made within 30 days after the date the Paying Agent,
any Lender or the Issuing Bank (or Transferee), as the case may be, makes
written demand therefor.
(d) As soon as practicable after the date of any payment of Taxes or
Other Taxes by any Loan Party to the relevant Governmental Authority, such
Loan Party will deliver to the Paying Agent, at its address referred to in
Section 9.01 to the extent legally available, the original or a certified
copy of a receipt issued by such Governmental Authority evidencing payment
thereof.
(e) Each Lender (or Transferee) that is organized under the laws of a
jurisdiction other than the United States, any State thereof or the District of
Columbia (a "Non-U.S. Lender") shall deliver to the Borrower and the Paying
Agent two copies of either United States Internal Revenue Service Form 1001 or
Form 4224, or any subsequent versions thereof or successors thereto, or, in the
case of a Non-U.S. Lender claiming exemption from U.S. Federal withholding tax
under Section 871(h) or 881(c) of the Code with respect to payments of
"portfolio interest", a Form W-8, or any subsequent versions thereof or
successors thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank for purposes of
Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Code) of the Borrower and is not a controlled
foreign corporation related to the Borrower (within the meaning of Section
864(d)(4) of the Code)), properly completed and duly
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49
executed by such Non-U.S. Lender claiming complete exemption from, or reduced
rate of, U.S. Federal withholding tax on payments by the Borrower under this
Agreement and the other Loan Documents. Such forms shall be delivered by each
Non-U.S. Lender on or before the date it becomes a party to this Agreement
(or, in the case of a Transferee that is a participation holder, on or before
the date such participation holder becomes a Transferee hereunder) and on or
before the date, if any, such Non-U.S. Lender changes its applicable lending
office by designating a different lending office (a "New Lending Office"). In
addition, each Non-U.S. Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by such Non-U.S.
Lender. Notwithstanding any other provision of this Section 2.20(e), a
Non-U.S. Lender shall not be required to deliver any form pursuant to this
Section 2.20(e) that such Non-U.S. Lender is not legally able to deliver.
(f) The Borrower shall not be required to indemnify any Non-U.S. Lender or
to pay any additional amounts to any Non-U.S. Lender, in respect of United
States Federal withholding tax pursuant to paragraph (a) or (c) above to the
extent that (i) the obligation to withhold amounts with respect to United States
Federal withholding tax existed on the date such Non-U.S. Lender became a party
to this Agreement (or, in the case of a Transferee that is a participation
holder, on the date such participation holder became a Transferee hereunder) or,
with respect to payments to a New Lending Office, the date such Non-U.S. Lender
designated such New Lending Office with respect to a Loan; provided, however,
that this paragraph (f) shall not apply (x) to any Transferee or New Lending
Office that becomes a Transferee or New Lending Office as a result of an
assignment, participation, transfer or designation made at the request of the
Borrower and (y) to the extent the indemnity payment or additional amounts any
Transferee, or any Lender (or Transferee), acting through a New Lending Office,
would be entitled to receive (without regard to this paragraph (f)) do not
exceed the indemnity payment or additional amounts that the person making the
assignment, participation or transfer to such Transferee, or Lender (or
Transferee) making the designation of such New Lending Office, would have been
entitled to receive in the absence of such assignment, participation, transfer
or designation or (ii) the obligation to pay such additional amounts would not
have arisen but for a failure by such Non-U.S. Lender to comply with the
provisions of paragraph (e) above.
(g) Nothing contained in this Section 2.20 shall require any Lender or the
Issuing Bank (or any Transferee) or the Paying Agent to make available any of
its tax returns (or any other information that it deems to be confidential or
proprietary).
(h) If any Lender, the Issuing Bank (or any Transferee) or the Paying
Agent receives a refund solely in respect of Taxes or Other Taxes, it shall
pay over such refund to the Loan Party to the extent it has received
indemnity payments or additional amounts pursuant to this Section 2.20 with
respect to such Taxes or Other Taxes giving rise to the refund, net of all
out-of-pocket expenses and without interest (other than interest paid by the
relevant Governmental Authority with respect to such refund); provided,
however, that the Loan Party shall, upon request of any Lender, the Issuing
Bank (or any Transferee) or the Paying Agent, repay such refund (plus
penalties, interest or other charges imposed by the relevant Governmental
Authority) to such Lender, the Issuing Bank (or any Transferee) or the Paying
Agent if such Lender, the Issuing Bank (or any Transferee) or the Paying
Agent is required to repay such refund to such Governmental Authority.
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SECTION 2.21. Assignment of Commitments Under Certain Circumstances; Duty
to Mitigate. (a) In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.14, (ii) any Lender or
the Issuing Bank delivers a notice described in Section 2.15 or (iii) the
Borrower is required to pay any additional amount to any Lender or the Issuing
Bank or any Governmental Authority on account of any Lender or the Issuing Bank
pursuant to Section 2.20, the Borrower may, at its sole expense and effort
(including with respect to the processing and recordation fee referred to in
Section 9.04(b)), upon notice to such Lender or the Issuing Bank and the Paying
Agent, require such Lender or the Issuing Bank to transfer and assign, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all of its interests, rights and obligations under this Agreement
to an assignee that shall assume such assigned obligations (which assignee may
be another Lender, if a Lender accepts such assignment); provided that (x) such
assignment shall not conflict with any law, rule or regulation or order of any
court or other Governmental Authority having jurisdiction, (y) the Borrower
shall have received the prior written consent of the Paying Agent (and, if a
Revolving Credit Commitment is being assigned, of the Issuing Bank and the
Swingline Lender), which consent shall not unreasonably be withheld, and (z) the
Borrower or such assignee shall have paid to the affected Lender or the Issuing
Bank in immediately available funds an amount equal to the sum of the principal
of and interest accrued to the date of such payment on the outstanding Loans or
L/C Disbursements of such Lender or the Issuing Bank, respectively, plus all
Fees and other amounts accrued for the account of such Lender or the Issuing
Bank hereunder (including any amounts under Section 2.14 and Section 2.16);
provided further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or the Issuing Bank's
claim for compensation under Section 2.14 or notice under Section 2.15 or the
amounts paid pursuant to Section 2.20, as the case may be, cease to cause such
Lender or the Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or cease to have the
consequences specified in Section 2.15, or cease to result in amounts being
payable under Section 2.20, as the case may be (including as a result of any
action taken by such Lender or the Issuing Bank pursuant to paragraph (b)
below), or if such Lender or the Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such circumstances or
event or shall withdraw its notice under Section 2.15 or shall waive its right
to further payments under Section 2.20 in respect of such circumstances or
event, as the case may be, then such Lender or the Issuing Bank shall not
thereafter be required to make any such transfer and assignment hereunder.
(b) If (i) any Lender or the Issuing Bank shall request compensation under
Section 2.14, (ii) any Lender or the Issuing Bank delivers a notice described in
Section 2.15 or (iii) the Borrower is required to pay any additional amount to
any Lender or the Issuing Bank or any Governmental Authority on account of any
Lender or the Issuing Bank, pursuant to Section 2.20, then such Lender or the
Issuing Bank shall use reasonable efforts (which shall not require such Lender
or the Issuing Bank to incur an unreimbursed loss or unreimbursed cost or
expense or otherwise take any action inconsistent with its internal policies or
legal or regulatory restrictions or suffer any disadvantage or burden deemed by
it to be significant) (x) to file any certificate or document reasonably
requested in writing by the Borrower or (y) to assign its rights and delegate
and transfer its obligations hereunder to another of its offices, branches or
affiliates, if such filing or assignment would reduce its claims for
compensation under Section 2.14 or enable it to withdraw its notice pursuant to
Section 2.15 or would reduce amounts payable pursuant to Section 2.20, as the
case may be, in the future. The Borrower hereby agrees to pay all reasonable
costs and expenses incurred by any Lender or the Issuing Bank in connection with
any such filing or assignment, delegation and transfer.
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SECTION 2.22. Swingline Loans. (a) Swingline Commitment. Subject to the
terms and conditions and relying upon the representations and warranties herein
set forth, the Swingline Lender agrees to make loans to the Borrower at any time
and from time to time on and after the Closing Date and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitments in accordance with the terms hereof, in an aggregate principal
amount at any time outstanding that will not result in (i) the aggregate
principal amount of all Swingline Loans exceeding $50,000,000 in the aggregate,
(ii) the Aggregate Revolving Credit Exposure, after giving effect to any
Swingline Loan, exceeding the Total Revolving Credit Commitment or (iii) the
aggregate principal amount of all outstanding Revolving Loans and Swingline
Loans exceeding $300,000,000. Each Swingline Loan shall be in a principal
amount that is an integral multiple of $250,000. The Swingline Commitment may
be terminated or reduced from time to time as provided herein. Within the
foregoing limits, the Borrower may borrow, pay or prepay and reborrow Swingline
Loans hereunder, subject to the terms, conditions and limitations set forth
herein.
(b) Swingline Loans. The Borrower shall notify the Paying Agent by
telecopy, or by telephone (confirmed by telecopy), not later than 11:00 a.m.,
New York City time, on the day of a proposed Swingline Loan. Such notice shall
be delivered on a Business Day, shall be irrevocable and shall refer to this
Agreement and shall specify the requested date (which shall be a Business Day)
and amount of such Swingline Loan. The Paying Agent will promptly advise the
Swingline Lender of any notice received from the Borrower pursuant to this
paragraph (b). The Swingline Lender shall make each Swingline Loan available to
the Borrower by means of a credit to the general deposit account of the Borrower
with the Swingline Lender by 3:00 p.m. on the date such Swingline Loan is so
requested.
(c) Prepayment. The Borrower shall have the right at any time and from
time to time to prepay any Swingline Loan, in whole or in part, upon giving
written or telecopy notice (or telephone notice promptly confirmed by written,
or telecopy notice) to the Swingline Lender and to the Paying Agent before
12:00 (noon), New York City time on the date of prepayment at the Swingline
Lender's address for notices specified on Schedule 2.01. All principal payments
of Swingline Loans shall be accompanied by accrued interest on the principal
amount being repaid to the date of payment.
(d) Interest. Each Swingline Loan shall be a Base Rate Loan and, subject
to the provisions of Section 2.07, shall bear interest as provided in
Section 2.06(a).
(e) Participations. The Swingline Lender may by written notice given to
the Paying Agent not later than 10:00 a.m., New York City time, on any Business
Day require the Revolving Credit Lenders to acquire participations on such
Business Day in all or a portion of the Swingline Loans outstanding. Such
notice shall specify the aggregate amount of Swingline Loans in which Revolving
Credit Lenders will participate. The Paying Agent will, promptly upon receipt
of such notice, give notice to each Revolving Credit Lender, specifying in such
notice such Lender's Pro Rata Percentage of such Swingline Loan or Loans. In
furtherance of the foregoing, each Revolving Credit Lender hereby absolutely and
unconditionally agrees, upon receipt of notice as provided above, to pay to the
Paying Agent, for the account of the Swingline Lender, such Revolving Credit
Lender's Pro Rata Percentage of such Swingline Loan or Loans. Each Lender
acknowledges and agrees that its obligation to acquire participations in
Swingline Loans pursuant to this paragraph is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including the occurrence
and continuance of a Default or an Event of Default, and that each such payment
shall be made
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without any offset, abatement, withholding or reduction whatsoever. Each Lender
shall comply with its obligation under this paragraph by wire transfer of
immediately available funds, in the same manner as provided in Section 2.02(c)
with respect to Loans made by such Lender (and Section 2.02(c) shall apply,
mutatis mutandis, to the payment obligations of the Lenders) and the Paying
Agent shall promptly pay to the Swingline Lender the amounts so received by it
from the Lenders. The Paying Agent shall notify the Borrower of any
participations in any Swingline Loan acquired pursuant to this paragraph and
thereafter payments in respect of such Swingline Loan shall be made to the
Paying Agent and not to the Swingline Lender. Any amounts received by the
Swingline Lender from the Borrower (or other party on behalf of the Borrower) in
respect of a Swingline Loan after receipt by the Swingline Lender of the
proceeds of a sale of participations therein shall be promptly remitted to the
Paying Agent; any such amounts received by the Paying Agent shall be promptly
remitted by the Paying Agent to the Lenders that shall have made their payments
pursuant to this paragraph and to the Swingline Lender, as their interests may
appear. The purchase of participations in a Swingline Loan pursuant to this
paragraph shall not relieve the Borrower (or other party liable for obligations
of the Borrower) of any default in the payment thereof.
SECTION 2.23. Letters of Credit. (a) General. The Borrower may request
the issuance of a Letter of Credit for its own account or the account of any
Subsidiary (including PPM and Citizens before they become Subsidiaries)
(provided that the Borrower shall be a co-applicant and co-obligor with respect
to each Letter of Credit issued for the account of or in favor of any such
Subsidiary, PPM or Citizens, as the case may be) , in a form reasonably
acceptable to the Paying Agent and the Issuing Bank, at any time and from time
to time while the Revolving Credit Commitments remain in effect. This Section
shall not be construed to impose an obligation upon the Issuing Bank to issue
any Letter of Credit that is inconsistent with the terms and conditions of this
Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension; Certain Conditions.
In order to request the issuance of a Letter of Credit (or to amend, renew or
extend an existing Letter of Credit), the Borrower shall hand deliver or
telecopy to the Issuing Bank and the Paying Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a notice requesting
the issuance of a Letter of Credit, or identifying the Letter of Credit to be
amended, renewed or extended, the date of issuance, amendment, renewal or
extension, the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) below), the amount of such Letter of Credit, the name
and address of the beneficiary thereof and such other information as shall be
necessary to prepare such Letter of Credit. A Letter of Credit shall be issued,
amended, renewed or extended only if, and upon issuance, amendment, renewal or
extension of each Letter of Credit the Borrower shall be deemed to represent and
warrant that, after giving effect to such issuance, amendment, renewal or
extension (A) the L/C Exposure shall not exceed $650,000,000 and (B) the
Aggregate Revolving Credit Exposure shall not exceed the Total Revolving Credit
Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at the close of
business on the earlier of the date one year after the date of the issuance,
renewal or extension, as applicable, of such Letter of Credit and the date that
is five Business Days prior to the Revolving Credit Maturity Date, unless such
Letter of Credit expires by its terms on an earlier date. Each Letter of Credit
may, upon the request of the Borrower, include a provision whereby such Letter
of Credit shall be renewed automatically for additional consecutive periods of
12 months or less (but not beyond the date that is five Business Days prior to
the Revolving Credit Maturity Date) unless the Issuing Bank notifies
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53
the beneficiary thereof at least 30 days prior to the then-applicable expiration
date that such Letter of Credit will not be renewed.
(d) Participations. By the issuance of a Letter of Credit and without any
further action on the part of the Issuing Bank or the Lenders, the Issuing Bank
hereby grants to each Revolving Credit Lender, and each such Lender hereby
acquires from the applicable Issuing Bank, a participation in such Letter of
Credit equal to such Lender's Pro Rata Percentage of the aggregate amount
available to be drawn under such Letter of Credit, effective upon the issuance
of such Letter of Credit. In consideration and in furtherance of the foregoing,
each Revolving Credit Lender hereby absolutely and unconditionally agrees to pay
to the Paying Agent, for the account of the Issuing Bank, such Lender's Pro Rata
Percentage of each L/C Disbursement made by the Issuing Bank and not reimbursed
by the Borrower (or, if applicable, another party pursuant to its obligations
under any other Loan Document) forthwith on the date due as provided in
Section 2.02(f). Each Revolving Credit Lender acknowledges and agrees that its
obligation to acquire participations pursuant to this paragraph in respect of
Letters of Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of a Default
or an Event of Default, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C Disbursement in
respect of a Letter of Credit, the Borrower shall pay to the Paying Agent an
amount equal to such L/C Disbursement not later than 2:00 p.m. on the day that
the Borrower shall have received notice from the Issuing Bank of such L/C
Disbursement, or, if the Borrower shall have received such notice later than
10:00 a.m., New York City time, on any Business Day, not later than 10:00 a.m.,
New York City time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit or
any Loan Document, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from all
or any of the provisions of any Letter of Credit or any Loan Document;
(iii) the existence of any claim, setoff, defense or other right that
the Borrower, any other party guaranteeing, or otherwise obligated with,
the Borrower, any Subsidiary or other Affiliate thereof or any other person
may at any time have against the beneficiary under any Letter of Credit,
the Issuing Bank, the Paying Agent or any Lender or any other person,
whether in connection with this Agreement, any other Loan Document or any
other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a 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;
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54
(v) payment by the Issuing Bank under a Letter of Credit against
presentation of a draft or other document that does not comply with the
terms of such Letter of Credit; and
(vi) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Paying Agent or any other person or any
other event or circumstance whatsoever, whether or not similar to any of
the foregoing, that might, but for the provisions of this Section,
constitute a legal or equitable discharge of the Borrower's obligations
hereunder.
Without limiting the generality of the foregoing, it is expressly
understood and agreed that the absolute and unconditional obligation of the
Borrower hereunder to reimburse L/C Disbursements will not be excused by the
gross negligence or wilful misconduct of the Issuing Bank. However, the
foregoing shall not be construed to excuse the Issuing Bank from liability to
the Borrower to the extent of any direct damages (as opposed to consequential
damages, claims in respect of which are hereby waived by the Borrower to the
extent permitted by applicable law) suffered by the Borrower that are caused by
the Issuing Bank's gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof; it is understood that the Issuing Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) the Issuing Bank's exclusive
reliance on the documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the amount of any draft
presented under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and whether or not any
document presented pursuant to such Letter of Credit proves to be insufficient
in any respect, if such document on its face appears to be in order, and whether
or not any other statement or any other document presented pursuant to such
Letter of Credit proves to be forged or invalid or any statement therein proves
to be inaccurate or untrue in any respect whatsoever and (ii) any noncompliance
in any immaterial respect of the documents presented under such Letter of Credit
with the terms thereof shall, in each case, be deemed not to constitute wilful
misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall, promptly following
its receipt thereof, examine all documents purporting to represent a demand for
payment under a Letter of Credit. The Issuing Bank shall as promptly as
possible give telephonic notification, confirmed by telecopy, to the Paying
Agent and the Borrower of such demand for payment and whether the Issuing Bank
has made or will make an L/C Disbursement thereunder; provided that any failure
to give or delay in giving such notice shall not relieve the Borrower of its
obligation to reimburse the Issuing Bank and the Revolving Credit Lenders with
respect to any such L/C Disbursement in accordance with paragraph (e) above.
The Paying Agent shall promptly give each Revolving Credit Lender notice
thereof.
(h) Interim Interest. If the Issuing Bank shall make any L/C Disbursement
in respect of a Letter of Credit, then, unless the Borrower shall reimburse such
L/C Disbursement in full on such date, the unpaid amount thereof shall bear
interest for the account of the Issuing Bank, for each day from and including
the date of such L/C Disbursement, to but excluding the earlier of the date of
payment by the Borrower or the date on which interest shall commence to accrue
thereon as provided
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55
in Section 2.02(f), at the rate per annum that would apply to such amount if
such amount were a Base Rate Loan.
(i) Resignation or Removal of the Issuing Bank. The Issuing Bank may
resign at any time by giving 180 days' prior written notice to the Paying Agent,
the Lenders and the Borrower, and may be removed at any time by the Borrower by
notice to the Issuing Bank, the Paying Agent and the Lenders. Upon the
acceptance of any appointment as the Issuing Bank hereunder by a Lender that
shall agree to serve as successor Issuing Bank, such successor shall succeed to
and become vested with all the interests, rights and obligations of the retiring
Issuing Bank and the retiring Issuing Bank shall be discharged from its
obligations to issue additional Letters of Credit hereunder. At the time such
removal or resignation shall become effective, the Borrower shall pay all
accrued and unpaid fees pursuant to Section 2.05(b)(ii). The acceptance of any
appointment as the Issuing Bank hereunder by a successor Lender shall be
evidenced by an agreement entered into by such successor, in a form satisfactory
to the Borrower and the Paying Agent, and, from and after the effective date of
such agreement, (i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and the other Loan
Documents and (ii) references herein and in the other Loan Documents to the term
"Issuing Bank" shall be deemed to refer to such successor or to any previous
Issuing Bank, or to such successor and all previous Issuing Banks, as the
context shall require. After the resignation or removal of the Issuing Bank
hereunder, the retiring Issuing Bank shall remain a party hereto and shall
continue to have all the rights and obligations of an Issuing Bank under this
Agreement and the other Loan Documents with respect to Letters of Credit issued
by it prior to such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(j) Cash Collateralization. If (i) any Event of Default shall occur and
be continuing or (ii) to the extent and so long as the L/C Exposure exceeds the
Total Revolving Credit Commitment, the Borrower shall, on the Business Day it
receives notice from the Paying Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit) thereof and
of the amount to be deposited, deposit in an account with the Collateral Agent,
for the benefit of the Revolving Credit Lenders, an amount in cash equal to the
L/C Exposure (or in the case of clause (ii) of this sentence, the excess of the
L/C Exposure over the Total Revolving Credit Commitment) as of such date. Such
deposit shall be held by the Collateral Agent as collateral for the payment and
performance of the Obligations. The Collateral Agent shall have exclusive
dominion and control, including the exclusive right of withdrawal, over such
account. Other than any interest earned on the investment of such deposits in
Permitted Investments, which investments shall be made as selected by the
Collateral Agent, such deposits shall not bear interest. Interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall (i) automatically be applied by the Paying Agent to reimburse the
Issuing Bank for L/C Disbursements for which it has not been reimbursed, (ii) be
held for the satisfaction of the reimbursement obligations of the Borrower for
the L/C Exposure at such time and (iii) if the maturity of the Loans has been
accelerated (but subject to the consent of Revolving Credit Lenders holding
participations in outstanding Letters of Credit representing greater than 50% of
the aggregate undrawn amount of all outstanding Letters of Credit), be applied
to satisfy the Obligations. If the Borrower is required to provide an amount of
cash collateral pursuant to clause (i) of the first sentence of this paragraph
(j), such amount (to the extent not applied as aforesaid) shall be returned to
the Borrower within three Business Days after all
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56
Events of Default have been cured or waived. If the Borrower is required to
provide an amount of cash collateral pursuant to clause (ii) of the first
sentence of this paragraph (j), such amount shall be returned to the Borrower
from time to time to the extent that the amount of such cash collateral held by
the Collateral Agent exceeds the excess, if any, of the L/C Exposure over the
Total Revolving Credit Commitment so long as no Event of Default shall have
occurred and be continuing.
ARTICLE III
Representations and Warranties
The Borrower represents and warrants to the Paying Agent, the Collateral
Agent, the Issuing Bank and each of the Lenders that:
SECTION 3.01. Organization. Each of the Borrower and the Subsidiaries is
duly incorporated or organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, as the case may be,
and has all organizational powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted, except, in each case, where the failure to satisfy any of the above
could not be reasonably expected to result in a Material Adverse Effect.
SECTION 3.02. Corporate and Governmental Authorization; No Contravention.
The execution and delivery by the Borrower of this Agreement and by each Loan
Party of the other Loan Documents to which it is or will be a party and the
performance by each Loan Party of its obligations under each Loan Document to
which it is or will be a party are within such Loan Party's organizational
powers and have been duly authorized by all necessary organizational action.
This Agreement has been duly executed and delivered by the Borrower, and each
other Loan Document has (as of the date of execution thereof by the relevant
Loan Party) been duly executed and delivered by the Loan Parties party thereto.
No registration, recordation or filing with or consent, approval or other action
by any regulatory or other governmental body, agency or official is required in
connection with the execution or delivery of this Agreement and the other Loan
Documents by the Loan Parties party thereto, except where the failure to
register, record or file could not reasonably be expected to result in a
Material Adverse Effect, or is necessary for the validity or enforceability
hereof or thereof, and the execution, delivery, performance and enforcement of
this Agreement and the other Loan Documents do not and will not contravene, or
constitute a default under, any provision of applicable law or regulation, or of
the certificate of incorporation or by-laws of the Borrower or any of the
Subsidiaries, except where such contravention or default could not be reasonably
expected to result in a Material Adverse Effect, or of any agreement, judgment,
injunction, order, decree or other instrument binding upon the Borrower or
result in the creation or imposition of any material Lien upon any asset of the
Borrower or any of the Subsidiaries (other than any Lien created under the Loan
Documents).
SECTION 3.03. Enforceability. This Agreement constitutes (and, upon
execution and delivery thereof as contemplated thereby, the other Loan Documents
will constitute) a valid and binding agreement of each Loan Party thereto, in
each case enforceable in accordance with its terms, except as the foregoing may
be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, or other similar laws affecting the rights of creditors generally
and by
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general principles of equity, including those limiting the availability of
specific performance, injunctive relief, and other equitable remedies and those
providing for defenses based on fairness and reasonableness, regardless of
whether considered in a proceeding in equity or at law.
SECTION 3.04. Financial Statements. (a) The Borrower has heretofore
furnished to the Lenders the consolidated balance sheet and statements of income
and retained earnings and cash flows of (i) the Peabody Group, (ii) TPC and its
subsidiaries and (iii) Citizens and its subsidiaries, in each case as of the end
of and for the fiscal year most recently ended, as applicable. With respect to
the financial statements of the Peabody Group and Citizens and its subsidiaries,
to the knowledge of the Borrower, such financial statements present fairly the
financial position and results of operations and cash flows of (A) the Peabody
Group and (B) Citizens and its subsidiaries as of such dates and for such
periods. With respect to the financial statements of TPC and its subsidiaries,
such financial statements present fairly the financial position and results of
operations and cash flows of TPC and its subsidiaries as of and for the fiscal
period most recently ended. The Borrower has also heretofore delivered to the
Lenders an unaudited balance sheet for PPM. The balance sheets (and, in the
case of the Peabody Group, TPC and Citizens, the notes thereto) disclose (or, in
the case of the Peabody Group and Citizens and its subsidiaries, to the
knowledge of the Borrower disclose) all material liabilities, direct or
contingent, of (w) the Peabody Group, (x) TPC and its subsidiaries, (y) Citizens
and its subsidiaries and (z) PPM as of the dates thereof. Such financial
statements (a) in the case of the Peabody Group and Citizens and its
subsidiaries, were, to the knowledge of the Borrower, prepared and (b) in the
case of TPC and its subsidiaries and PPM were prepared, in all material
respects, in accordance with GAAP applied on a consistent basis (except for the
absence of footnote disclosure).
(b) The Borrower has heretofore delivered to the Lenders its unaudited pro
forma consolidating balance sheets as of December 31, 1996 and September 30,
1997 (the "Pro Forma Financial Statements"), prepared giving effect to the
Transactions (including Peabody Transfer) as if they had occurred on such date
and consolidating income statements for the year ended December 31, 1996 and for
the twelve months ended September 30, 1997, assuming the Transactions (including
the Peabody Transfer) had actually occurred on January 1, 1996 and October 1,
1996, respectively. Such pro forma balance sheet and income statement have been
prepared in good faith by the Borrower based on reasonable assumptions, are
based on the best information available to the Borrower as of the date of
delivery thereof, accurately reflect all material adjustments required to be
made to give effect to the Transactions (including the Peabody Transfer) and
present fairly on a pro forma basis the estimated consolidated financial
position of the Borrower as of December 31, 1996 and September 30, 1997,
assuming that the Transactions (including the Peabody Transfer) had actually
occurred at December 31, 1996, and present fairly on a pro forma basis the
estimated consolidated results of operations of the Borrower for the fiscal year
ended December 31, 1996 and the twelve months ended September 30, 1997, assuming
that the Transactions (including the Peabody Transfer) had actually occurred on
January 1, 1996 and October 1, 1996, respectively.
SECTION 3.05. No Material Adverse Change. (a) Prior to the Separation
Date, there has been no material adverse change in the business, assets,
operations, condition, financial or otherwise, or material agreements of the
Borrower and the Peabody Group, taken as a whole, from the position reflected in
the Pro Forma Financial Statements.
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(b) On and after the Separation Date, there has been no material adverse
change in the business, assets, operations, condition, financial or otherwise,
or material agreements of the Borrower and the Subsidiaries, taken as a whole,
from the position reflected in the Pro Forma Financial Statements.
SECTION 3.06. Title to Properties; Possession Under Leases. (a) Each of
the Borrower and the Subsidiaries has good and marketable title to, or valid
leasehold interests in, all its material properties and assets, except for
defects that could not reasonably be expected to result in a Material Adverse
Effect. All such material properties and assets are free and clear of Liens,
other than Liens permitted by Section 6.02.
(b) Except as set forth in Schedule 3.06(b), each of the Borrower and the
Subsidiaries has complied with all obligations under all material leases to
which it is a party and all such leases are in full force and effect, except
where such noncompliance or failure to be in full force and effect, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect. Each of the Borrower and the Subsidiaries enjoys peaceful and
undisturbed possession under all such leases, other than Liens permitted by
Section 6.02.
SECTION 3.07. Subsidiaries. (a) Schedule 3.07(a) sets forth as of the
Closing Date a list of all Subsidiaries and the percentage ownership interest of
the Borrower therein. The shares of capital stock or other ownership interests
so indicated in Schedule 3.07(a) are fully paid and non-assessable and are owned
by the Borrower, directly or indirectly, free and clear of all Liens, except for
Liens permitted by Section 6.02.
(b) Schedule 1.01(c) sets forth as of the Closing Date a list of all
Peabody Subsidiaries and the percentage ownership interest of the Borrower
therein, after giving effect to the Peabody Transfer. On and after the
Separation Date, the shares of capital stock or other ownership interests so
indicated in Schedule 1.01(c) of the Peabody Subsidiaries will be fully paid and
non-assessable and will be owned by the Borrower, directly or indirectly, free
and clear of all Liens, except for Liens permitted by Section 6.02.
SECTION 3.08. Litigation; Compliance with Laws; Reserves. (a) Except as
set forth in Schedule 3.08, there are not any actions, suits or proceedings at
law or in equity or by or before any Governmental Authority now pending or, to
the knowledge of the Borrower, threatened against or affecting the Borrower or
any Subsidiary (after giving effect to the Peabody Transfer) or any business,
property or rights of any such person (i) that expressly involve any Loan
Document or the Transactions or (ii) as to which there is a reasonable
possibility of an adverse determination and that, in either case could
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect.
(b) The Borrower and the Subsidiaries (after giving effect to the Peabody
Transfer) maintain adequate reserves for (i) future costs associated with any
lung disease claim alleging pneumococcosis or silicosis or arising out of
exposure or alleged exposure to coal dust or the coal mining environment and
(ii) future costs associated with reclamation costs of disturbed acreage,
removal of facilities and other closing costs in connection with its mining
operations. Such reserves are not materially less than is required by GAAP.
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(c) None of the Borrower or any of the Subsidiaries (after giving effect
the Peabody Transfer and taking into account reserves reflected in the Pro Forma
Financial Statements or the financial statements delivered by the Borrower and
its Subsidiaries pursuant to Section 5.04) or any of its respective material
properties or assets is in violation of, nor will the continued operation of its
material properties and assets as currently conducted violate, any law, rule or
regulation (including any zoning, building, Environmental Law, ordinance, code
or approval or any building permits), or is in default with respect to any
judgment, writ, injunction, decree or order of any Governmental Authority, where
such violation or default could reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.09. Agreements. (a) Neither the Borrower nor any of the
Subsidiaries is a party to any agreement or instrument or subject to any
corporate or other organizational restriction that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(b) Neither the Borrower nor any of the Subsidiaries (after giving effect
to the Peabody Transfer) is in default in any manner under any provision of any
indenture or other agreement or instrument evidencing Indebtedness, or any other
material agreement or instrument to which it is a party or by which it or any of
its properties or assets are or may be bound, where such default could
reasonably be expected to result in a Material Adverse Effect.
SECTION 3.10. Federal Reserve Regulations. No part of the proceeds of any
Loan or any Letter of Credit will be used, whether directly or indirectly, and
whether immediately, incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the Regulations of
the Board, including Regulation G, T, U or X.
SECTION 3.11. Investment Company Act; Public Utility Holding Company Act.
Neither the Borrower nor any Subsidiary (after giving effect to the Peabody
Transfer) is (a) an "investment company" as defined in, or subject to regulation
under, the Investment Company Act of 1940 or (b) a "holding company" as defined
in, or subject to regulation under, the Public Utility Holding Company Act of
1935.
SECTION 3.12. Tax Returns. Each of the Borrower and the Subsidiaries, and
any other affiliate with joint and several liability for taxes (after giving
effect to the Peabody Transfer), has filed or caused to be filed all Federal,
state, local and other material tax returns or materials required to have been
filed by it and has paid or caused to be paid all taxes due and payable by it
pursuant thereto and all assessments received by it, except where the failure to
do any of the foregoing could not reasonably be expected to result in a Material
Adverse Effect.
SECTION 3.13. No Material Misstatements. None of (a) the Confidential
Information Memorandum or (b) any other information, report, financial statement
(including forecasts and projections), exhibit or schedule furnished by or on
behalf of the Borrower to the Paying Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto, when taken as a whole, contained, contains or will contain any material
misstatement of fact or omitted, omits or will omit to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were, are or will be made, not misleading; provided that to the
extent any such information, report, financial statement, exhibit or schedule
was based upon or constitutes a forecast or projection, the Borrower represents
only that
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it acted in good faith and utilized reasonable assumptions and due care in the
preparation of such information, report, financial statement, exhibit or
schedule.
SECTION 3.14. Employee Benefit Plans. Each of the Borrower and its ERISA
Affiliates is in compliance in all material respects with the applicable
provisions of ERISA and the Code and the regulations and published
interpretations thereunder, except where the failure to comply could not be
reasonably expected to result in a Material Adverse Effect. None of the
Borrower or any ERISA Affiliate has (a) sought a waiver of the minimum funding
standard under Section 412 of the Code in respect of any Plan, (b) failed to
make any contribution or payment to any Plan or Multiemployer Plan or made any
amendment to any Plan which has resulted or could result in the imposition of a
Lien or the posting of a bond or other security under ERISA or the Code or
(c) incurred any material liability under Title IV of ERISA other than a
liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 3.15. Environmental Matters. Except as set forth on Schedule 3.15:
(a) The properties (the "Properties") owned, leased or operated by the
Borrower and the Subsidiaries (after giving effect to the Peabody Transfer) do
not contain any Hazardous Materials in amounts or concentrations which
(i) constitute a violation of, (ii) require Remedial Action under, or (iii)
could give rise to liability under, Environmental Laws, which violations,
Remedial Actions and liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect;
(b) The Properties and all operations of the Borrower and the Subsidiaries
(after giving effect to the Peabody Transfer) are in compliance with all
Environmental Laws and all necessary Environmental Permits have been obtained
and are in effect, except to the extent that such non-compliance or failure to
obtain any necessary permits, in the aggregate, could not reasonably be expected
to result in a Material Adverse Effect;
(c) There have been no Releases or threatened Releases at, from, or under
the Properties or otherwise in connection with the operations of the Borrower or
the Subsidiaries (after giving effect to the Peabody Transfer), which Releases
or threatened Releases, in the aggregate, could reasonably be expected to result
in a Material Adverse Effect;
(d) There are no existing or enacted but not yet effective Environmental
Laws that require expenditures in connection with the Properties or operations
of the Borrower or the Subsidiaries which, in the aggregate, could reasonably be
expected to result in a Material Adverse Effect;
(e) Neither the Borrower nor any of the Subsidiaries (after giving effect
to the Peabody Transfer) has received any notice of an Environmental Claim in
connection with the Properties or the operations of the Borrower or such
Subsidiaries or with regard to any person whose liabilities for environmental
matters the Borrower or such Subsidiaries has retained or assumed, in whole or
in part, contractually, by operation of law or otherwise, which, in the
aggregate, could reasonably be expected to result in a Material Adverse Effect,
nor do the Borrower or such Subsidiaries have reason to believe that any such
notice will be received or is being threatened; and
(f) Hazardous Materials have not been transported from the Properties, nor
have Hazardous Materials been generated, treated, stored or disposed of at, on
or under any of the Properties in a
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manner that could give rise to liability under any Environmental Law, nor have
the Borrower or the Subsidiaries (after giving effect to the Peabody Transfer)
retained or assumed any liability, contractually, by operation of law or
otherwise, with respect to the generation, treatment, storage or disposal of
Hazardous Materials, which transportation, generation, treatment, storage or
disposal, or retained or assumed liabilities, in the aggregate, could reasonably
be expected to result in a Material Adverse Effect.
SECTION 3.16. Insurance. Schedule 3.16 sets forth a true, complete and
correct description of all material insurance maintained by the Borrower or by
the Borrower for its Subsidiaries as of the Closing Date and the Separation
Date. As of each such date, such insurance is in full force and effect and all
premiums have been duly paid. The Borrower and its Subsidiaries (after giving
effect to the Peabody Transfer) have (or will have, as the case may be)
insurance in such amounts and covering such risks and liabilities as are in
accordance with normal industry practice.
SECTION 3.17. Security Documents. (a) The Pledge Agreement is effective
to create in favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest in the
Collateral (as defined in the Pledge Agreement) and, when the Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall constitute a duly
perfected first priority Lien on, and security interest in, all right, title and
interest of the pledgors thereunder in such Collateral, in each case prior and
superior in right to any other person, except as expressly provided in
Section 6.02(p).
(b) The Collateral Assignment is effective to create in favor of the
Collateral Agent, for the ratable benefit of the Secured Parties, a legal, valid
and enforceable security interest in the Collateral (as defined in the
Collateral Assignment) and, when the PA Note is delivered to the Collateral
Agent and financing statements in appropriate form are filed in appropriate
filing offices, the Collateral Assignment shall constitute (to the extent such
security interest can be perfected by filing under applicable uniform commercial
codes) a duly perfected Lien on, and security interest in, all right, title and
interest of the Borrower in such Collateral, in each case prior and superior in
right to any other person, other than with respect to Liens expressly permitted
by Section 6.02.
SECTION 3.18. Labor Matters. As of the Closing Date, there are no
strikes, lockouts or slowdowns against the Borrower or any Subsidiary (after
giving effect to the Peabody Transfer) pending or, to the knowledge of the
Borrower, threatened, except where any such strike, lockout or slowdown could
not reasonably be expected to result in a Material Adverse Effect. The hours
worked by and payments made to employees of the Borrower and such Subsidiaries
have not been in material violation of the Fair Labor Standards Act or any other
applicable Federal, state, local or foreign law dealing with such matters. All
payments due from the Borrower or any such Subsidiary, or for which any claim
may be made against the Borrower or any such Subsidiary, on account of wages and
employee health and welfare insurance and other benefits, have been paid or
accrued as a liability on the books of the Borrower or such Subsidiary. The
consummation of the Transactions will not give rise to any right of termination
or right of renegotiation on the part of any union under any collective
bargaining agreement to which the Borrower or any such Subsidiary is bound.
SECTION 3.19. Solvency. Immediately after the consummation of the
Transactions and immediately following the making of each Loan and after giving
effect to the application of the proceeds of such Loans, and taking into account
all rights of indemnity, subrogation and contribution
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of the Loan Parties under applicable law and the Indemnity, Subrogation and
Contribution Agreement, (a) the fair value of the assets of each Loan Party, at
a fair valuation, will exceed its debts and liabilities, subordinated,
contingent or otherwise; (b) the present fair saleable value of the property of
each Loan Party will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities, subordinated, contingent
or otherwise, as such debts and other liabilities become absolute and matured;
(c) each Loan Party will be able to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become absolute and
matured; and (d) each Loan Party will not have unreasonably small capital with
which to conduct the business in which it is engaged as such business is now
conducted and is proposed to be conducted following the Closing Date.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The effectiveness of this Agreement shall
be subject to the satisfaction of each of the following conditions:
(a) The Paying Agent shall have received, on behalf of itself, the
Lenders and the Issuing Bank, a favorable written opinion of Stoel Rives
LLP, counsel for the Borrower, substantially to the effect set forth in
Exhibit K-1, and a favorable written opinion of Davis Polk & Wardwell,
special counsel for the Borrower, substantially to the effect set forth in
Exhibit K-2.
(b) The Paying Agent shall have received (i) a copy of the
certificate or articles of organization, including all amendments thereto,
of the Borrower, certified as of a recent date by the Secretary of State of
the state of its organization, and a certificate as to the good standing of
the Borrower, as of a recent date, from such Secretary of State; (ii) a
certificate of the Secretary or Assistant Secretary of the Borrower, dated
the Closing Date and certifying (A) that attached thereto is a true and
complete copy of the operating agreement of the Borrower, as in effect on
the Closing Date and at all times since a date prior to the date of the
resolutions described in clause (B) below, (B) that attached thereto is a
true and complete copy of resolutions duly adopted by the Board of
Directors of the Borrower authorizing the execution, delivery and
performance of the Loan Documents and the borrowings hereunder, and that
such resolutions have not been modified, rescinded or amended and are in
full force and effect, (C) that the certificate or articles of organization
of the Borrower have not been amended since the date of the last amendment
thereto shown on the certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen signature of
each officer executing any Loan Document or any other document delivered in
connection herewith on behalf of the Borrower; and (iii) a certificate of
another officer as to the incumbency and specimen signature of the
Secretary or Assistant Secretary executing the certificate pursuant to
clause (ii) above.
(c) The Paying Agent shall have received a certificate, signed by a
Financial Officer of the Borrower, dated the Closing Date and confirming
that the representations and
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warranties set forth in Article III hereof are true and correct in all
material respects, except to the extent any such representation and
warranty relates to an earlier or later date.
(d) The Pledge Agreement and the Intercreditor Agreement shall have
been duly executed by the parties thereto and delivered to the Collateral
Agent and shall be in full force and effect.
SECTION 4.02. Borrowings. (a) The obligation of any Lender to make a Loan
or of the Issuing Bank to issue a Letter of Credit (each, a "Credit Event") on
the occasion of any Credit Event, the proceeds of which are to be used, directly
or indirectly (i) in the case of a Loan, to finance the Offer or to pay costs
and expenses related thereto or for any other purpose set forth in
Clause 3.1(a)(i) of the PA Facility Agreement or (ii) in the case of a Letter of
Credit, to replace a letter of credit issued for the account of a member of the
Peabody Group and included as Peabody Refinanced Indebtedness, is subject to the
satisfaction of the following conditions:
(i) The Paying Agent shall have received a notice of such Credit
Event as required by Section 2.03 or, in the case of the issuance of a
Letter of Credit, the Issuing Bank and the Paying Agent shall have received
a notice requesting the issuance of such Letter of Credit as required by
Section 2.23(b).
(ii) At the time of and immediately after such Credit Event, no Event
of Default described in clause (g) or (h) of Article VII shall have
occurred and be continuing with respect to the Borrower.
(iii) The representations and warranties set forth in Sections 3.01,
3.02 and 3.03, as they relate to the Borrower, shall be true and correct in
all material respects on the date of any such Credit Event with the same
effect as though made on such date.
(iv) Each of the Offer Conditions Precedent, unless waived in writing
by the Required Lenders (such waiver being conclusively evidenced by
written notice from the Paying Agent to the Borrower and, in the case of
paragraph 1 of such Offer Conditions Precedent, not to be unreasonably
withheld or delayed), shall have been satisfied.
(v) Each of the TPC Contribution and the PGH Equity Contribution shall
have been completed.
(vi) Each of the applicable conditions precedent with respect to a
borrowing to finance the Offer set forth in the EnergyCo Credit Agreement
and the PA Facility Agreement (other than any condition in any such
agreement requiring that borrowings shall have been made under this or any
other such agreement and/or the proceeds of such borrowings have been made
available directly or indirectly to PA) shall have been satisfied or waived
in accordance with the terms thereof, and each such agreement and the
Eastern Facility Letter shall be in full force and effect.
Each Credit Event hereunder of the type described in this Section 4.02(a) shall
be deemed to be a representation and warranty by the Borrower on the date of
such Credit Event as to the facts specified in clauses (ii), (iii), (iv), (v)
and (vi) of this Section 4.02(a).
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(b) The obligation of any Lender or of the Issuing Bank on the occasion of
any Credit Event other than (i) a Credit Event of the type described in Section
4.02(a) or (ii) a continuation or conversion of a Borrowing of the type
described in Section 2.10 is subject to the satisfaction of the following
conditions:
(i) The Paying Agent shall have received a notice of such Credit
Event as required by Section 2.03 (or such notice shall have been deemed
given in accordance with Section 2.03) or, in the case of the issuance of a
Letter of Credit, the Issuing Bank and the Paying Agent shall have received
a notice requesting the issuance of such Letter of Credit as required by
Section 2.23(b) or, in the case of the Borrowing of a Swingline Loan, the
Swingline Lender and the Paying Agent shall have received a notice
requesting such Swingline Loan as required by Section 2.22(b).
(ii) The representations and warranties set forth in Article III
hereof shall be true and correct in all material respects on and as of the
date of such Credit Event with the same effect as though made on and as of
such date, except to the extent such representations and warranties
expressly relate to an earlier or later date.
(iii) At the time of and immediately after such Credit Event, no
Event of Default or Default shall have occurred and be continuing.
Each Credit Event hereunder of the type described in this Section 4.02(b) shall
be deemed to constitute a representation and warranty by the Borrower on the
date of such Credit Event as to the matters specified in paragraphs (i) and (ii)
of this Section 4.02(b).
ARTICLE V
Affirmative Covenants
The Borrower covenants and agrees with each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts then due and payable under any Loan Document shall have been paid in
full and all Letters of Credit have been canceled or have expired and all
amounts drawn thereunder have been reimbursed in full, unless the Required
Lenders shall otherwise consent in writing, the Borrower will, and will cause
each of the Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to be
done all things necessary to preserve, renew and keep in full force and effect
the legal existence of each Loan Party, except as otherwise expressly permitted
under Section 6.05.
(b) (i) In the case of each Significant Subsidiary, do, or cause to be
done all things necessary to preserve, renew and keep in full force and effect
its legal existence, except as otherwise expressly permitted under Section 6.05,
and (ii) in the case of each Loan Party and each Significant Subsidiary, do or
cause to be done all things necessary to obtain, preserve, renew, extend and
keep in full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names material to the
conduct of its business; except as contemplated by this
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Agreement, maintain and operate such business in substantially the manner in
which it is presently conducted and operated; at all times maintain and preserve
all property material to the conduct of such business and keep such property in
good repair, working order and condition and from time to time make, or cause to
be made, all needful and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted in all material respects at all
times, in each case, where the failure to do so could reasonably be expected to
have a Material Adverse Effect.
(c) Without limiting the generality of the foregoing, operate in all
material respects, and cause each of its Subsidiaries to operate in all material
respects, its mines in accordance with sound coal mining practices and all
applicable Federal, state and local laws, rules and regulations, including,
without limitation, laws and regulations relating to land reclamation, pollution
control and mine safety.
SECTION 5.02. Insurance. Keep its insurable properties adequately insured
at all times by financially sound and reputable insurers; maintain such other
insurance (including self insurance), to such extent and against such risks,
including fire and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses operating in the same
or similar locations, including public liability insurance against claims for
personal injury or death or property damage occurring upon, in, about or in
connection with the use of any properties owned, occupied or controlled by it;
and maintain such other insurance as may be required by law.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness and other
material obligations promptly and in accordance with their terms and pay and
discharge promptly when due all material taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or in respect of
its property, before the same shall become delinquent or in default, as well as
all material lawful claims for labor, materials and supplies or otherwise that,
if unpaid, might give rise to a Lien upon such properties or any part thereof;
provided, however, that such payment and discharge shall not be required with
respect to any such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by appropriate
proceedings and the Borrower shall have set aside on its books adequate reserves
with respect thereto in accordance with GAAP and such contest operates to
suspend collection of the contested obligation, tax, assessment or charge and
enforcement of a Lien.
SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Borrower, furnish to the Paying Agent and each Lender:
(a) within 120 days after the end of each fiscal year, consolidated
balance sheets and related statements of income and retained earnings and
cash flows showing the financial position of (i) the Borrower and its
consolidated subsidiaries, (ii) prior to the Peabody Transfer, the Peabody
Group, and (iii) prior to the Citizens Transfer, Citizens and its
subsidiaries as of the close of such fiscal year and the results of its
operations and the operations of such subsidiaries during such year, in
each case audited by independent public accountants of recognized national
standing and accompanied by an opinion of such accountants (which shall not
be qualified in any material respect) to the effect that such consolidated
financial statements fairly present the financial position and results of
operations of (A) the Borrower and its consolidated subsidiaries, (B) the
Peabody Group and
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(C) Citizens and its subsidiaries, as applicable, on a consolidated basis
in accordance with GAAP consistently applied (except as otherwise disclosed
in the notes thereto);
(b) within 75 days after the end of the first fiscal quarter ending
after the initial Acquisition Borrowing and within 60 days after the end of
each of the first three fiscal quarters of each fiscal year thereafter
(provided that prior to such date, the Borrower shall furnish to the Paying
Agent and each Lender any information made publicly available relating
thereto), consolidated balance sheets and related statements of income and
retained earnings and cash flows showing the financial position of (i) the
Borrower and its consolidated subsidiaries, (ii) prior to the Peabody
Transfer, the Peabody Group and (iii) prior to the Citizens Transfer,
Citizens and its subsidiaries as of the close of such fiscal quarter and
the results of its operations and the operations of such subsidiaries
during such fiscal quarter and the then elapsed portion of the fiscal year,
in each case certified by a Financial Officer or independent public
accountant as fairly presenting the financial position and results of
operations of (A) the Borrower and its consolidated subsidiaries, (B) the
Peabody Group and (C) Citizens and its subsidiaries, as applicable, on a
consolidated basis in accordance with GAAP consistently applied (except for
the absence of footnote disclosure), subject to normal year-end audit
adjustments;
(c) within 60 days after the end of each of the first three fiscal
quarters of each fiscal year beginning with the date of the Initial
Acquisition Borrowing and ending on the Separation Date, its unaudited pro
forma consolidating balance sheet as of the close of such fiscal quarter,
and as of December 31, 1997, as the case may be, prepared giving effect to
the Transactions (including the Peabody Transfer) as if they had occurred
on such date, and consolidating income statement for the applicable period,
assuming the Transactions (including the Peabody Transfer) had actually
occurred at the beginning of each such period. Such pro forma balance
sheets and income statements will be prepared in good faith by the Borrower
based on reasonable assumptions, will be based on the best information
available to the Borrower as of the date of delivery thereof, will
accurately reflect all material adjustments required to be made to give
effect to the Transactions (including the Peabody Transfer) and will
present fairly on a pro forma basis the estimated consolidated financial
position of the Borrower as of the end of the applicable period, assuming
that the Transactions (including the Peabody Transfer) had actually
occurred at such date, and will present fairly on a pro forma basis the
estimated consolidated results of operations of the Borrower for such
period, assuming that the Transactions (including the Peabody Transfer) had
actually occurred on the first day of such period;
(d) concurrently with any delivery of financial statements under
paragraph (a) or (b) above, (i) a certificate of the Financial Officer
certifying such statements to the effect that no Event of Default has
occurred and that no Default has occurred and is continuing or, if such an
Event of Default has occurred or Default has occurred and is continuing,
specifying the nature and extent thereof and any corrective action taken or
proposed to be taken with respect thereto and (ii) a certificate of a
Financial Officer of the Borrower setting forth the Net Termination Value
as of the date of such financial statements; provided that, in addition to
the certificate required by clause (i) above, concurrently with the
delivery of financial statements under paragraph (a) above, the applicable
accounting firm will deliver a certificate (which certificate may be
limited to accounting matters and disclaim
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responsibility for legal interpretations) to the effect that no Event of
Default has occurred and that no Default has occurred and is continuing,
unless at such time it is the practice and policy of such accounting firm
not to deliver such certificates;
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
the Borrower or any Subsidiary with the Securities and Exchange Commission,
or any Governmental Authority succeeding to any or all of the functions of
said Commission, or with any national securities exchange, or distributed
to public shareholders, as the case may be;
(f) promptly, from time to time, such other information regarding the
operations, business affairs and financial position of the Borrower or any
Subsidiary, or compliance with the terms of any Loan Document, as the
Paying Agent or any Lender may reasonably request;
(g) as soon as available but in any event no later than 60 days after
the beginning of each fiscal year, a copy of forecasts (prepared by
management of the Borrower) of the Borrower's consolidated balance sheets
and related statements of operations and cash flows on a monthly basis for
such fiscal year and on an annual basis for each of the following four
fiscal years; and
(h) promptly after receiving notice of the same, any public or any of
its private credit ratings (or changes thereto) issued or delivered by S&P
or Moody's in respect of indebtedness of the Borrower or any of its
subsidiaries.
SECTION 5.05. Litigation and Other Notices. Furnish to the Paying Agent,
the Issuing Bank and each Lender prompt written notice of the following:
(a) any Event of Default or Default of which a Responsible Officer of
such Loan Party is aware, specifying the nature and extent thereof and the
corrective action (if any) taken or proposed to be taken with respect
thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against the Borrower or any Affiliate thereof that could
reasonably be expected to result in a Material Adverse Effect; and
(c) any development of which a Responsible Officer is aware that has
resulted in, or which such Responsible Officer has reasonably concluded
will result in, a Material Adverse Effect.
SECTION 5.06. Maintaining Records; Access to Properties and Inspections.
Keep proper books of record and account in which full, true and correct entries
in conformity with GAAP and all requirements of law are made of all dealings and
transactions in relation to its business and activities. Each Loan Party will,
and will cause each of its Subsidiaries to, permit any representatives
designated by the Paying Agent or any Lender to visit and inspect (at such
Lender's expense, except in the case of visits and inspections made by the
Paying Agent) the financial records and the
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properties of the Borrower or any Subsidiary at reasonable times and as often as
reasonably requested and to make extracts from and copies of such financial
records, and permit any representatives designated by the Paying Agent or any
Lender to discuss (in the presence of the Borrower, unless a Default or Event of
Default shall have occurred and is continuing) the affairs, finances and
condition of the Borrower or any Subsidiary with the officers thereof and
independent accountants therefor.
SECTION 5.07. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.08. Compliance with Laws. Comply in all respects with all
applicable laws, ordinances, rules, regulations and requirements of Governmental
Authorities (including Environmental Laws and ERISA and the rules and
regulations thereunder), except where the necessity of compliance therewith is
contested in good faith by appropriate proceedings or where noncompliance
therewith could not reasonably be expected to have a Material Adverse Effect.
SECTION 5.09. Preparation of Environmental Reports. If a Default caused by
reason of a breach of Section 3.15 or 5.08 (with respect to compliance with
Environmental Laws) shall have occurred and be continuing, at the request of the
Required Lenders through the Paying Agent, provide to the Lenders within 45 days
after such request, at the expense of the Borrower, an environmental site
assessment report for the Properties which are the subject of such default
prepared by an environmental consulting firm reasonably acceptable to the Paying
Agent and indicating the presence or absence of Hazardous Materials and the
estimated cost of any compliance or Remedial Action in connection with such
Properties.
SECTION 5.10. Further Assurances. Upon the reasonable request of the
Required Lenders or the Paying Agent, from time to time, execute any and all
further documents, financing statements, agreements and instruments, and take
all further action (including filing Uniform Commercial Code and other financing
statements), in order to effectuate the transactions contemplated by the Loan
Documents and in order to grant, preserve, protect and perfect the validity and
priority of the security interests created or intended to be created by the
Security Documents. Prior to the satisfaction of the Collateral Sharing
Requirements, the Borrower will (a) cause any subsequently acquired or organized
Domestic Subsidiary (including the Peabody Subsidiaries, but excluding any
Single Purpose Entity) to execute a Guarantee Agreement, Indemnity, Subrogation
and Contribution Agreement and each applicable Security Document in favor of the
Collateral Agent and (b) upon the reasonable request of the Required Lenders or
the Paying Agent, from time to time, at the Borrower's cost and expense,
promptly secure the Obligations by pledging or causing to be pledged, 100% of
the capital stock or other equity interests of its Subsidiaries held by it or
its Subsidiaries as the Paying Agent or the Required Lenders shall designate;
provided, however, that with respect to the voting stock or other voting equity
interests of any Foreign Subsidiary, such pledge may be limited to 65% of such
voting capital stock or other voting equity interests.
SECTION 5.11. Interest Rate Protection Agreements. As promptly as
practicable after the Unconditional Date and in any event within 180 days after
the date of the initial Borrowing hereunder, enter into, and thereafter maintain
in full force and effect through the third anniversary of the date of such
initial Borrowing, one or more Interest Rate Protection Agreements in form
reasonably satisfactory to the Paying Agent, the effect of which shall be to
limit or cap the interest
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cost to the Borrower and its Subsidiaries with respect to a notional amount at
least equal to 50% of the Consolidated Total Debt of the Borrower and the
Subsidiaries and deliver evidence of the execution and delivery thereof to the
Paying Agent.
SECTION 5.12. Peabody Transfer; Citizens Transfer; PPM Contribution. As
soon as practicable, but in any event not later than 270 days after the initial
Acquisition Borrowing, use its best efforts to cause (a) the completion of the
Peabody Transfer, (b) the completion of the Citizens Transfer and (c) the PPM
Contribution to be effected.
ARTICLE VI
Negative Covenants
The Borrower covenants and agrees with each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest on each Loan, all Fees and all other expenses
or amounts due and payable under any Loan Document have been paid in full and
all Letters of Credit have been canceled or have expired and all amounts drawn
thereunder have been reimbursed in full, unless the Required Lenders shall
otherwise consent in writing, the Borrower will not, and will not cause or
permit any of the Subsidiaries (other than any Receivables Subsidiary, except in
the case of Sections 6.01, 6.02 and 6.07) to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness or Preferred Stock, except:
(a) Indebtedness outstanding on the Closing Date, or available under
debt instruments or other agreements existing on the Closing Date, and set
forth on Schedule 6.01(a);
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) the Peabody Indebtedness;
(d) Guarantees in respect of Indebtedness permitted pursuant to this
Section 6.01; (provided that any Guarantees in respect of Indebtedness that
is subordinated to the Obligations shall be subordinated to the Obligations
to the same extent as such Indebtedness is subordinated to the
Obligations);
(e) Indebtedness or Preferred Stock of the Borrower or any wholly
owned Subsidiary to any other wholly owned Subsidiary or the Borrower, so
long as, with respect to any Indebtedness or Preferred Stock, the obligee
of which is not a Loan Party and such Indebtedness or Preferred Stock is
subordinated to all Indebtedness incurred pursuant hereto and pursuant to
the Guarantee Agreement;
(f) Indebtedness of the Borrower or the Subsidiaries (including tax
exempt financings and Capital Lease Obligations) to purchase, construct,
develop or improve assets in the ordinary course of business after the
Closing Date or incurred in the ordinary course
<PAGE>
70
of business after the Closing Date to finance Capital Expenditures
permitted under Section 6.10;
(g) Indebtedness of any Receivables Subsidiary incurred pursuant to
any Permitted Receivables Financing;
(h) Permitted Junior Indebtedness and Qualified Junior Indebtedness;
(i) Indebtedness of a Subsidiary (other than any Peabody Subsidiary)
acquired after the Closing Date and Indebtedness of a corporation (other
than any Peabody Subsidiary) merged or consolidated with or into a
Subsidiary after the Closing Date, which Indebtedness in each case exists
at the time of such acquisition, merger, consolidation or conversion into a
Subsidiary and is not created in contemplation of such event and where such
acquisition, merger or consolidation is permitted by this Agreement;
provided that the Borrower and the Subsidiaries shall comply with the
provisions of Section 5.10 with respect to such acquired or newly formed
Subsidiary;
(j) extensions, renewals or refinancings of Indebtedness under
paragraphs (a), (c), (d), (f), (g), (h) and (i) so long as (i) such
Indebtedness (the "Refinancing Indebtedness") is in an aggregate principal
amount not greater than the aggregate principal amount of the Indebtedness
being extended, renewed or refinanced plus the amount of any interest or
premiums required to be paid thereon and fees and expenses associated
therewith, (ii) such Refinancing Indebtedness has a later or equal final
maturity and a longer or equal weighted average life than the Indebtedness
being extended, renewed or refinanced, (iii) the interest rate applicable
to such Refinancing Indebtedness shall be a market interest rate (as
determined in good faith by the Board of Directors of the Borrower) as of
the time of such extension, renewal or refinancing, (iv) if the
Indebtedness being extended, renewed or refinanced is subordinated to the
Obligations, such Refinancing Indebtedness is subordinated to the
Obligations to the extent of the Indebtedness being extended, renewed or
refinanced, (v) the covenants, events of default and other provisions
thereof (including any Guarantees thereof), taken as a whole, shall be no
less favorable to the Lenders than those contained in the Indebtedness
being refinanced and (vi) at the time and after giving effect to such
extension, renewal or refinancing, no Default or Event of Default shall
have occurred and be continuing;
(k) extensions, renewals or refinancings of Indebtedness under
paragraph (b) so long as (i) such Indebtedness (the "Powercoal Refinancing
Indebtedness") is in an aggregate principal amount not greater than the
aggregate principal amount of the Indebtedness being extended, renewed or
refinanced plus the amount of any interest required to be paid thereon and
fees and expenses associated therewith, (ii) such Powercoal Refinancing
Indebtedness has a later maturity than the Tranche B Maturity Date,
(iii) the interest rate applicable to such Powercoal Refinancing
Indebtedness shall be a market interest rate (as determined in good faith
by the Board of Directors of the Borrower) as of the time of such
extension, renewal or refinancing, (iv) such Powercoal Refinancing
Indebtedness shall be either (x) unsecured or (y) secured by all or any
portion of the Collateral pursuant to the Collateral Trust and
Intercreditor Agreement, (v) such Powercoal Refinancing Indebtedness shall
not require any scheduled payments of principal prior to the maturity
thereof, (vi) the
<PAGE>
71
agreements governing such Powercoal Refinancing Indebtedness shall not
require the Loan Parties or their respective subsidiaries to maintain any
specified financial condition (other than as a condition to the taking of
specified actions by the Loan Parties or their respective subsidiaries),
(vii) such Powercoal Refinancing Indebtedness shall not be Guaranteed by
any Subsidiary that does not also Guarantee the Obligations and (viii) at
the time of and after giving effect to such extension, renewal or
refinancing, no Default or Event of Default shall have occurred and be
continuing;
(l) Non-Recourse Indebtedness of any Single Purpose Entity; and
(m) unsecured Indebtedness in addition to that permitted by
paragraphs (a) through (l) above in an aggregate principal amount
outstanding not to exceed at any time $50,000,000.
Notwithstanding the foregoing, upon satisfaction of the Collateral Sharing
Requirements, the foregoing restrictions in this Section 6.01 shall not apply to
Indebtedness of the Borrower (but shall continue to apply to Indebtedness of the
Subsidiaries).
SECTION 6.02. Liens. Create, incur, assume or permit to exist any Lien on
any property or assets (including stock or other securities of any person,
including any Subsidiary) now owned or hereafter acquired by it or on any income
or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Borrower and its Subsidiaries
existing on the Closing Date; provided that such Liens shall secure only
those obligations which they secure on the Closing Date;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by the Borrower or any Subsidiary; provided that
(i) such Lien is not created in contemplation of or in connection with such
acquisition and (ii) such Lien does not apply to any other property or
assets of the Borrower or any Subsidiary;
(d) Liens for taxes not yet due or which are being contested in
compliance with Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's or other like Liens arising in the ordinary course of business
and securing obligations that are not due and payable or which are being
contested in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(g) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety
<PAGE>
72
and appeal bonds, performance bonds, reclamation bonds and other
obligations of a like nature incurred in the ordinary course of business;
(h) Liens created by or relating to any legal proceeding which at the
time is being contested in good faith by appropriate proceedings; provided
that, in the case of a Lien consisting of an attachment or judgment Lien,
the judgment it secures shall, within 60 days of entry thereof, have been
discharged or execution thereof stayed pending appeal, or discharged within
60 days after the expiration of any such stay;
(i) zoning restrictions, easements, rights-of-way, restrictions on use
of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount
and do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of the
Borrower or any of its Subsidiaries;
(j) purchase money security interests in real property, improvements
thereto, equipment or other fixed assets hereafter acquired (or, in the
case of improvements, equipment or other fixed assets, constructed) by the
Borrower or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by Section 6.01, (ii) such security interests
are incurred, and the Indebtedness secured thereby is created, no later
than 90 days after such acquisition (or completion of such construction),
(iii) the Indebtedness secured thereby does not exceed the cost of such
real property, improvements or equipment at the time of such acquisition
(or construction) and (iv) such security interests do not apply to any
other property or assets of the Borrower or any Subsidiary (other than the
proceeds of the real property, improvements, equipment or other fixed
assets subject to such Lien);
(k) Liens securing Refinancing Indebtedness or extensions, renewals
and replacements of Liens referred to in Section 6.02(a), to the extent
that the Indebtedness being refinanced was originally secured in accordance
with this Section 6.02; provided that such Lien does not apply to any
additional property or assets of the Borrower or any Subsidiary (other than
the proceeds of the property or asset subject to such Lien);
(l) Liens on accounts receivable and related assets financed in
connection with any Permitted Receivables Financing;
(m) Liens arising out of Indebtedness permitted under Section 6.01(f),
so long as such Liens (i) attach only to the property financed by such
Indebtedness and related real property and (ii) do not interfere with the
business of the Borrower or any of the Subsidiaries in any material
respect;
(n) Production Payments, royalties, dedication of reserves under
supply agreements or similar rights or interests granted, taken subject to,
or otherwise imposed on properties consistent with normal practices in the
mining industry;
(o) Liens on cash and cash equivalents securing obligations under
Hedging Agreements; provided that the aggregate amount of cash and cash
equivalents subject to such Liens shall not exceed at any time the amount
that is the greater of (i) $10,000,000 and
<PAGE>
73
(ii) 5% of Consolidated Net Worth at such time; provided, however, that, if
on any date of determination the amount of cash and cash equivalents
securing obligations under Hedging Agreements exceeds 2% of Consolidated
Net Worth, then for purposes of Sections 6.13 and 6.14 the amount of
"Consolidated Current Assets" and "Consolidated Net Worth" shall be reduced
by an amount equal to such excess;
(p) upon satisfaction of the Collateral Sharing Requirements, Liens in
the Collateral securing Powercoal Refinancing Indebtedness, subject to the
terms of the Collateral Trust and Intercreditor Agreement; and
(q) Liens in addition to those permitted by paragraphs (a) through
(p); provided that the aggregate principal amount of the Indebtedness and
amount of other liabilities that is secured by such Liens do not exceed at
any time $50,000,000.
Notwithstanding the foregoing, upon satisfaction of the Collateral Sharing
Requirements, the foregoing restrictions in this Section 6.02 shall not apply to
restrict the ability of Subsidiaries (other than Peabody Holding) to grant Liens
in their assets so long as the Indebtedness secured thereby is permitted by
Section 6.01.
SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred; provided that the Borrower
and the Subsidiaries may enter into any such transaction to the extent that
(a) the Capital Lease Obligation and Liens associated therewith would be
permitted by Sections 6.01(f) and 6.02(m), respectively, or (b) the fair market
value of all the assets sold or transferred pursuant to sale and lease-back
transactions permitted under this clause (b) shall not exceed at any time
$50,000,000.
SECTION 6.04. Investments, Loans and Advances. Until the Collateral
Sharing Requirements have been satisfied, purchase, hold or acquire any capital
stock, evidences of indebtedness or other securities of, make or permit to exist
any loans or advances from the Borrower or any Subsidiary to, or make or permit
to exist any investment or any other interest in, any other person, except:
(a) investments by the Borrower and the Subsidiaries in the capital
stock of the Subsidiaries (including after the Separation Date, the Peabody
Subsidiaries);
(b) Permitted Investments;
(c) investments existing on the Closing Date and set forth on
Schedule 6.04(c) or pursuant to commitments set forth in Schedule 6.04(c);
(d) investments constituting Capital Expenditures permitted under
Section 6.10;
(e) investments constituting non-cash consideration received in
connection with a sale of assets not prohibited by Section 6.05;
<PAGE>
74
(f) loans or advances by the Borrower or any wholly owned Subsidiary
to the Borrower or any wholly owned Subsidiary that are permitted under
Section 6.01(e);
(g) investments in Qualified NUG Hedging Agreements and Hedging
Agreements that are permitted under this Agreement, including Funding
Exchange Rate Protection Agreements;
(h) investments resulting from the transfer by the Borrower or any
Subsidiary of accounts receivable and related assets to a Receivables
Subsidiary and the sale thereof by such Receivables Subsidiary, in each
case pursuant to any Permitted Receivables Financing;
(i) investments that are sale and lease-back transactions permitted by
Section 6.03;
(j) investments, loans or advances made from the proceeds of equity
contributions to the Borrower from its parents;
(k) investments of the type contemplated in clause (vii) of the
definition of "Asset Sale";
(l) the Powercoal/PA Loans;
(m) investments in the nature of production payments, royalties,
dedications of reserves under supply agreements or similar rights or
interests granted, taken subject to, or otherwise imposed on properties
consistent with normal practices in the mining industry;
(n) investments, loans or advances in an amount not to exceed the
portion of Excess Cash Flow from the preceding fiscal year not required to
be used to prepay Term Loans in accordance with Section 2.13(d);
(o) investments that are made in connection with the purchase,
construction, development or improvement of assets in the ordinary course
of business after the Closing Date;
(p) investments resulting from acquisitions permitted by
Section 6.05(a)(ii); and
(q) investments, loans or advances in addition to those permitted by
paragraphs (a) through (p) not exceeding in the aggregate $50,000,000 at
any time outstanding.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
(a) Merge into or consolidate with any other person, or permit any other
person to merge into or consolidate with it, or sell, transfer, lease or
otherwise dispose of (in one transaction or in a series of related
transactions) all or any substantial part of the assets of the Borrower and
its Subsidiaries (taken as a whole) (whether now owned or hereafter acquired)
or any capital stock of any Subsidiary, or sell, transfer, lease or otherwise
dispose of (in one transaction or a series of related transactions) all or
substantially all of the assets or capital stock of any Subsidiary set forth
on Schedule 6.05(a), or
<PAGE>
75
purchase, lease or otherwise acquire (in one transaction or a series of
transactions) all or any substantial part of the assets of any other person,
except:
(i) if at the time thereof and immediately after giving effect thereto
no Event of Default or Default shall have occurred and be continuing
(A) any wholly owned Subsidiary may merge into or consolidate with, or sell
or transfer all or substantially all its assets to, the Borrower in a
transaction in which, in the case of a merger or consolidation, the
Borrower is the surviving corporation and (B) any wholly owned Subsidiary
may merge into or consolidate with, or sell or transfer all or
substantially all its assets to, any other wholly owned Subsidiary in a
transaction in which, in the case of a merger or consolidation, the
surviving entity is a wholly owned Subsidiary and no person other than the
Borrower or a wholly owned Subsidiary receives any consideration;
(ii) the Borrower may acquire the Peabody Group, TPC, PPM, Lee Ranch
and Citizens;
(iii) acquisitions constituting Capital Expenditures permitted by
Section 6.10; and
(iv) acquisitions constituting investments permitted by Section 6.04.
(b) Notwithstanding Section 6.05(a), no Asset Sale shall be permitted
under this Agreement unless (i) the consideration received in connection
therewith is at least equal to the fair market value of the assets or
property sold, transferred or otherwise disposed of (as determined in good
faith by a Financial Officer of the Borrower), which fair market value, in
the context of any disposition of Peabody Western Coal Company or any of its
assets, may be determined after giving effect to any consent decree related
thereto entered into with the Federal Trade Commission, (ii) except with
respect to any Asset Sale that results in an investment permitted by Section
6.04(q), in the case of an Asset Sale of property having a value of (x) more
than $25,000,000 but less than $100,000,000, such Asset Sale shall be for
consideration at least 50% of which is cash and (y) $100,000,000 or more,
such Asset Sale shall be for consideration at least 80% of which is cash, and
(iii) to the extent required, the Net Cash Proceeds thereof are applied in
accordance with Section 2.13(b); provided, however, that for purposes of this
Section 6.05(b), the right to receive Production Payments, royalty payments
and other similar rights that are contingent on the performance of the assets
sold in such Asset Sale shall be deemed not to be consideration for such
Asset Sale.
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly,
any dividend or make any other distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value (or permit any
Subsidiary to purchase or acquire) any shares of any class of its capital
stock or set aside any amount for any such purpose; provided, however, that
(i) any Subsidiary (including any Hybrid Preferred Securities Subsidiary) may
declare and pay dividends or make other distributions ratably to its
shareholders or redeem, purchase, retire or otherwise acquire for value any
shares of any class of its capital stock (including Hybrid Preferred
Securities) or set aside any amount for any such purpose and (ii) if no Event
of Default shall have occurred and be continuing or would occur as a
consequence thereof, (A) the Borrower and its Subsidiaries may make payments
required to be made under the U.S. Tax Sharing Policy so long as the payment
<PAGE>
76
thereunder by the Borrower and its Subsidiaries shall not exceed the amount
the Borrower and its Subsidiaries would be required to pay under such
arrangement as in effect on the Closing Date and (B) the Borrower may pay
dividends to PGH not in excess of the Permitted Dividend Amount.
(b) Permit its subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any such subsidiary to (i) pay any dividends or
make any other distributions on its capital stock or any other interest or (ii)
make or repay any loans or advances to the Borrower or the parent of such
subsidiary (subclauses (i) and (ii) are collectively referred to as an "Upstream
Payment"); provided, however, that the foregoing shall not restrict any
encumbrances or restrictions:
(i) existing on the Closing Date under Indebtedness set forth on
Schedule 6.01(a);
(ii) contained in any debt instrument relating to a person (including the
Peabody Group) acquired after the Closing Date; provided that (A) such
encumbrances and restrictions are not applicable to any person other than such
person or property or assets acquired, (B) such instrument was in existence at
the time of such acquisition and was not created in contemplation of or in
connection with such acquisition, and (C) the Borrower reasonably believes at
the time of such acquisition that the terms of such instrument will not encumber
or restrict the ability of such acquired person to make an Upstream Payment in a
manner that would adversely affect the Borrower's ability to perform its
obligations under the Loan Documents when due;
(iii) incurred in connection with any Indebtedness or Preferred Stock
permitted pursuant to Section 6.01 (including any extension, refinancing,
renewal or replacement of Indebtedness or Preferred Stock contemplated by
clauses (i) and (ii) above); provided that, (A) the Borrower reasonably believes
at the time such Indebtedness or Preferred Stock is incurred that the terms of
such Indebtedness or Preferred Stock will not restrict the ability of the person
incurring such Indebtedness or Preferred Stock to make an Upstream Payment in a
manner that would adversely affect the Borrower's ability to perform its
obligations under the Loan Documents when due and (B) such Indebtedness or
Preferred Stock contains no express encumbrances or restrictions on the ability
of such person to make an Upstream Payment; provided that any Indebtedness that
extends, refinances, renews or replaces Indebtedness permitted hereunder may
contain express encumbrances or restrictions on Upstream Payments that are not
materially more onerous than those contained in the Indebtedness being extended,
refinanced, renewed or replaced;
(iv) imposed on any Receivables Subsidiary or Single Purpose Entity;
(v) existing under, or by reason of, applicable law or as required by or
pursuant to agreements with any Governmental Authority; and
(vi) any encumbrance or restriction on the transfer of any property or
asset in an agreement relating to the acquisition or creation or disposition of
such property or asset or any Lien on such property or asset that is otherwise
permitted by the terms of this Agreement.
SECTION 6.07. Transactions with Affiliates. Make any material payment to,
or sell, lease, transfer or otherwise dispose of any material properties or
assets to, or purchase any material property or assets from, or enter into or
make or amend any material transaction, contract, agreement,
<PAGE>
77
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless such
Affiliate Transaction is on terms that are not less favorable to the Borrower or
the relevant Subsidiary than those that would have been obtained in a comparable
transaction by the Borrower or such Subsidiary with an unrelated person;
provided, however, that (a) payments or transfers that are permitted by Section
6.01, 6.04, 6.05(a)(ii) or 6.06(a) shall not be deemed to be Affiliate
Transactions and (b) the foregoing restriction shall not apply to (i) any
Permitted Receivables Financing and (ii) transactions between or among the
Borrower and its wholly owned Subsidiaries.
SECTION 6.08. Business of Borrower and Subsidiaries. (a) In the case of
the Borrower and the Subsidiaries (other than any Receivables Subsidiary),
engage to any material extent in any business or business activity other than
the mining or energy business and business activities reasonably incidental or
related thereto and (b) in the case of each Receivables Subsidiary, engage to
any material extent in any business or business activity other than the purpose
for which such Subsidiary was formed and business activities reasonably
incidental or related thereto.
SECTION 6.09. Other Indebtedness and Agreements. Until the Collateral
Sharing Requirements are satisfied: (a) Permit any waiver, supplement,
modification, amendment, termination or release of any indenture, instrument or
agreement pursuant to which any Indebtedness or preferred stock of the Borrower
or any Subsidiary is outstanding or any other agreement (including the Tax
Sharing Arrangement) that is material to the conduct and operations of the
Borrower or any Subsidiary, or modify its charter or by-laws, in each case to
the extent that any such waiver, supplement, modification, amendment,
termination or release would be adverse to the Lenders in any material respect.
(b) Make any payment, whether in cash, property, securities or a
combination thereof, other than scheduled (or with respect to senior
indebtedness held by a person that is not an Affiliate of the obligor,
mandatory) payments of principal and interest as and when due (to the extent not
prohibited by applicable subordination provisions), in respect of, or pay, or
offer or commit to pay, or directly or indirectly redeem, repurchase, retire or
otherwise acquire for consideration, or set apart any sum for the aforesaid
purposes, any Indebtedness for borrowed money of the Borrower or any Subsidiary,
except for (i) the Loans; (ii) the Peabody Refinanced Indebtedness;
(iii) Indebtedness that is refinanced by Refinancing Indebtedness; and (iv) any
other Indebtedness that is not subordinated to the Obligations, provided that
the amount that may be prepaid in respect of such other senior Indebtedness
shall not exceed $25,000,000 in any fiscal year.
SECTION 6.10. Capital Expenditures. Until the Borrower has obtained
Investment Grade Ratings, incur or make Capital Expenditures (a) during the
period from the date of the initial Borrowing hereunder through December 31,
1998, in excess of $135,000,000 and (b) during any fiscal year thereafter in
excess of the amount of Permitted Capital Expenditures for such fiscal year;
provided, however, that the amount of Permitted Capital Expenditures in any
fiscal year ending after December 31, 1998, shall be increased by the total
amount of unused Permitted Capital Expenditures for the immediately preceding
year (less an amount equal to any unused Permitted Capital Expenditures carried
forward to such preceding year pursuant to this proviso) (it being understood
that such increased amount that is carried forward shall be deemed to be
expended for purposes of this Agreement only after the amount of Permitted
Capital Expenditures, without giving effect such increase, are expended).
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78
SECTION 6.11. Leverage Ratio. Permit the Leverage Ratio as of the end of
any fiscal quarter ending on the date set forth, or ending in any period set
forth, below to be in excess of the ratio set forth below for such quarter or
period.
<TABLE>
Quarter or Period Ratio
----------------- -----
<S> <C>
From and including the Unconditional Date 5.50 to 1.00
through and including June 29, 1999
June 30, 1999 5.25 to 1.00
September 30, 1999 5.00 to 1.00
December 31, 1999 4.75 to 1.00
March 31, 2000 4.50 to 1.00
June 30, 2000 4.25 to 1.00
September 30, 2000 4.00 to 1.00
December 31, 2000 and thereafter 3.75 to 1.00
</TABLE>
SECTION 6.12. Interest Expense Coverage Ratio. Permit the Interest
Expense Coverage Ratio as of the end of any fiscal quarter ending in any period
set forth below to be less than the ratio set forth below for such quarter.
<TABLE>
Period Ratio
------ -----
<S> <C>
From and including the Unconditional Date 2.75 to 1.00
through and including June 29, 1999
From and including June 30, 1999 through 3.00 to 1.00
and including June 29, 2000
From and including June 30, 2000 through 3.25 to 1.00
and including June 29, 2001
From and including June 30, 2001 through 3.25 to 1.00
and including June 29, 2002
From and including June 30, 2002 through 3.50 to 1.00
and including June 29, 2003
Thereafter 3.75 to 1.00
</TABLE>
SECTION 6.13. Net Worth. Permit Consolidated Net Worth at any date
following the date of initial Borrowing hereunder to be less than the sum of
(a) $500,000,000, plus (b) 50% of Consolidated Net Income for each fiscal
quarter with positive Consolidated Net Income ending on or after the Closing
Date and on or prior to the date as to which compliance with this Section 6.13
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79
is being determined, plus (c) 75% of Net Cash Proceeds in respect of Equity
Issuances received on or after the Unconditional Date and on or prior to the
date as to which compliance with this Section 6.13 is being determined.
SECTION 6.14. Current Ratio. At any time that the Borrower does not
maintain Investment Grade Ratings, permit the ratio of (a) Consolidated Current
Assets to (b) Consolidated Current Liabilities as of the end of any fiscal
quarter to be less than 1.00 to 1.00; provided, however, that for purposes of
this Section 6.14, Consolidated Current Assets shall include cash and cash
equivalents and the unused remaining available balance of the Total Revolving
Credit Commitment as of the end of such fiscal quarter.
SECTION 6.15. Fiscal Year. In the case of the Borrower, until it shall
have obtained Investment Grade Ratings, change the end of its fiscal year from
December 31 to any other date.
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings or issuances of Letters
of Credit hereunder, or any representation, warranty, statement or
information contained in any report, certificate, financial statement or
other instrument furnished in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or any other amount (other than an amount referred to in
(b) above) due under any Loan Document, when and as the same shall become
due and payable, and such default shall continue unremedied for a period of
three Business Days;
(d) default shall be made in the due observance or performance by the
Borrower or any Subsidiary (to the extent applicable) of any covenant,
condition or agreement contained in Section 5.01(a), 5.05(a) or 5.07 or in
Article VI;
(e) default shall be made in the due observance or performance by the
Borrower or any Subsidiary of any covenant, condition or agreement
contained in any Loan Document (other than those specified in (b), (c) or
(d) above) and such default shall continue unremedied for a period of
30 days after notice thereof from the Paying Agent or any Lender to the
Borrower;
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(f) the Borrower or any Subsidiary shall (i) fail to pay any principal
or interest, regardless of amount, due in respect of any Indebtedness
(other than Non-Recourse Indebtedness) in a principal amount in excess of
$50,000,000, when and as the same shall become due and payable, (ii) fail
to observe or perform any other term, covenant, condition or agreement
contained in any agreement or instrument evidencing or governing any such
Indebtedness if the effect of any failure referred to in this clause (ii)
is to cause, or to permit the holder or holders of such Indebtedness or a
trustee on its or their behalf to cause, such Indebtedness to become due
prior to its stated maturity, (iii) fail to make any payment in respect of
any Material Hedging Obligations when due or (iv) fail to observe or
perform any term, covenant, condition or agreement contained in any
agreement or instrument evidencing or governing any operating lease if the
effect of any failure referred to in this clause (iv) is to cause the
termination of, or to permit the lessor under such operating lease to
terminate, the lease and require the Borrower or any Subsidiary (other than
a Single Purpose Entity) to pay liquidated damages, rentals, termination
values or similar amounts in excess of $50,000,000;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of the Borrower or any Significant Subsidiary (or any
group of subsidiaries of the Borrower which, if considered in the aggregate
as a single subsidiary, would constitute a Significant Subsidiary), or of a
substantial part of the property or assets of the Borrower, such
Significant Subsidiary or such group of subsidiaries of the Borrower, under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower
or any Significant Subsidiary (or any group of subsidiaries of the Borrower
which, if considered in the aggregate as a single subsidiary, would
constitute a Significant Subsidiary) or for a substantial part of the
property or assets of the Borrower a Significant Subsidiary or such group
of subsidiaries of the Borrower or (iii) the winding-up or liquidation of
the Borrower or any Significant Subsidiary (or any group of subsidiaries of
the Borrower which, if considered in the aggregate as a single subsidiary,
would constitute a Significant Subsidiary); and such proceeding or petition
shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) the Borrower or any Significant Subsidiary (or any group of
subsidiaries of the Borrower which, if considered in the aggregate as a
single subsidiary, would constitute a Significant Subsidiary) shall
(i) voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding or the filing of
any petition described in (g) above, (iii) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Borrower or any Significant Subsidiary (or any
group of subsidiaries of the Borrower which, if considered in the aggregate
as a single subsidiary, would constitute a Significant Subsidiary) or for a
substantial part of the property or assets of the Borrower, any Significant
Subsidiary or any such group of subsidiaries of the Borrower, (iv) file an
answer admitting the material allegations of a petition filed against it in
any such
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proceeding, (v) make a general assignment for the benefit of creditors,
(vi) become unable, admit in writing its inability or fail generally to pay
its debts as they become due or (vii) take any action for the purpose of
effecting any of the foregoing;
(i) a PA Note Payment Default shall have occurred;
(j) one or more judgments for the payment of money in an aggregate
amount in excess of $50,000,000 shall be rendered against the Borrower, any
Subsidiary (other than a Single Purpose Entity) or any combination thereof
and the same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties
of the Borrower or any Subsidiary to enforce any such judgment;
(k) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other such ERISA Events,
could reasonably be expected to have a Material Adverse Effect;
(l) any security interest purported to be created by any Security
Document shall cease to be, or shall be asserted by any Loan Party not to
be, a valid, perfected, first priority (except as otherwise expressly
provided in this Agreement or such Security Document) security interest in
the securities, assets or properties covered thereby, except to the extent
that any such loss of perfection or priority results from the failure of
the Collateral Agent to maintain possession of certificates representing
securities pledged under the Pledge Agreement;
(m) any Loan Document shall not for any reason, or shall be asserted
by any Loan Party not to be, in full force and effect and enforceable in
accordance with its terms;
(n) the Peabody Transfer shall not have been completed on or prior to
the 270th day following the date of the initial Acquisition Borrowing; or
(o) there shall have occurred a Change in Control;
then, at any time during the continuance of such event (other than an event
with respect to the Borrower described in paragraph (g) or (h) above), the
Paying Agent may, and at the request of the Required Lenders shall, by notice
to the Borrower, take either or both of the following actions, at the same or
different times: (i) terminate forthwith the Commitments and (ii) declare
the Loans then outstanding to be forthwith due and payable in whole or in
part, whereupon the principal of the Loans so declared to be due and payable,
together with accrued interest thereon and any unpaid accrued Fees and all
other liabilities of the Borrower accrued hereunder and under any other Loan
Document, shall become forthwith due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are hereby
expressly waived by the Borrower, anything contained herein or in any other
Loan Document to the contrary notwithstanding; provided that, (A) in any
event with respect to the Borrower described in paragraph (g) or (h) above,
the Commitments shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrower accrued hereunder and
under any other Loan Document, shall automatically become due and payable,
without
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presentment, demand, protest or any other notice of any kind, all of which
are hereby expressly waived by the Borrower, anything contained herein or in
any other Loan Document to the contrary notwithstanding and (B) except as
described in the immediately preceding clause (A), during the period
commencing with the Closing Date and ending on the Offer Termination Date the
Paying Agent and the Lenders shall not be entitled to terminate the
Commitments, rescind this Agreement or prevent any funding of the Offer nor
to declare the Loans due and payable in whole or in part or exercise any
other right or remedy under any Loan Document or exercise any set off or
similar right arising on the basis of misrepresentation or Event of Default
or otherwise if to do so would prevent the funding of the Offer in
accordance with Section 4.02(a) unless (i) an Event of Default described in
clause (g) or (h) of Article VII shall have occurred and be continuing; (ii)
any of the representations and warranties set forth in Section 3.01, 3.02 and
3.03, as they relate to the Borrower, shall not be true and correct in all
material respects on the date of any Credit Event of the type described in
Section 4.02 with the same effect as though made on such date or (iii) any of
the Offer Conditions Precedent, unless waived in writing by the Required
Lenders (such waiver being conclusively evidenced by written notice from the
Paying Agent to the Borrower and, in the case of paragraph 1 of such Offer
Conditions Precedent, not to be unreasonably withheld or delayed) shall not
have been satisfied on the date of any such Credit Event.
Notwithstanding anything to the contrary in the preceding paragraph, during
the Clean-up Period, none of the Paying Agent, the Collateral Agent or any
Lender may declare that an Event of Default has occurred, or terminate the
Commitments or declare the Loans to be due and payable as a result solely of one
or more Defaults described in paragraph (a), (d) (except for a Default in
respect of Section 5.07, 6.10, 6.11, 6.12, 6.13 or 6.14) or (e) of this Article
VII, or paragraph (f)(ii) of this Article VII insofar as it involves
Indebtedness of the Peabody Subsidiaries to the extent such Indebtedness is
repaid or refinanced before the end of the Clean-up Period and the lenders
thereunder have not accelerated the obligations thereunder and commenced
proceedings to enforce the same; provided that the event or circumstance giving
rise to such Default, or the result of such Default, (i) directly relates to the
Peabody Subsidiaries (or any of their businesses, assets or liabilities), (ii)
is capable of being cured or remedied during the Clean-up Period and
(iii) except to the extent it involves Indebtedness of the Peabody Subsidiaries
that is repaid or refinanced before the end of the Clean-up Period, was not
known by a Responsible Officer of PGH or the Borrower prior to the Closing Date;
provided, further, that the Paying Agent, the Collateral Agent and the Lenders
shall be entitled to exercise any and all rights and remedies granted to them
hereunder and under the Loan Documents with respect to an occurrence or
continuation of any such Default or Event of Default after the expiration of the
Clean-up Period.
ARTICLE VIII
The Paying Agent and the Collateral Agent
In order to expedite the transactions contemplated by this Agreement,
Citibank is hereby appointed to act as Paying Agent on behalf of the Lenders and
as the Issuing Bank, and Citibank USA is hereby appointed to act as Collateral
Agent on behalf of the Lenders (for purposes of this Article VIII, the Paying
Agent and the Collateral Agent are referred to collectively as the "Agents").
Each of the Lenders and each assignee of any such Lender, hereby irrevocably
authorizes the Agents to take such actions on behalf of such Lender or assignee
or the Issuing Bank and to exercise such
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powers as are specifically delegated to the Agents by the terms and provisions
hereof and of the other Loan Documents, together with such actions and powers as
are reasonably incidental thereto. The Paying Agent is hereby expressly
authorized by the Lenders and the Issuing Bank, without hereby limiting any
implied authority, (a) to receive on behalf of the Lenders and the Issuing Bank
all payments of principal of and interest on the Loans, all payments in respect
of L/C Disbursements and all other amounts due to the Lenders hereunder, and
promptly to distribute to each Lender or the Issuing Bank its proper share of
each payment so received; (b) to give notice on behalf of each of the Lenders to
the Borrower of any Event of Default specified in this Agreement of which the
Paying Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender copies of all notices, financial
statements and other materials delivered by the Borrower or Peabody Holding
pursuant to this Agreement or the other Loan Documents as received by the Paying
Agent. Without limiting the generality of the foregoing, the Agents are hereby
expressly authorized (a) to execute any and all documents (including releases)
with respect to the Collateral and the rights of the Secured Parties with
respect thereto, as contemplated by and in accordance with the provisions of
this Agreement and the Security Documents and (b) to execute the Intercreditor
Agreement on behalf of the Lenders and the Issuing Bank, and each of the Lenders
and the Issuing Bank agrees to be bound thereby as if it were a signatory
thereto. Without limiting the foregoing, the Agents are hereby expressly
authorized to execute any and all documents (including the Collateral Trust and
Intercreditor Agreement and any releases) with respect to the Collateral and the
rights of the Secured Parties with respect thereto, as contemplated by and in
accordance with the provisions of this Agreement and the Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by any
Loan Party of any of the terms, conditions, covenants or agreements contained in
any Loan Document. The Agents shall not be responsible to the Lenders for the
due execution, genuineness, validity, enforceability or effectiveness of this
Agreement or any other Loan Documents, instruments or agreements. The Agents
shall in all cases be fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required Lenders and, except
as otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders. Each Agent
shall, in the absence of knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper person or persons. Neither the
Agents nor any of their respective directors, officers, employees or agents
shall have any responsibility to any Loan Party on account of the failure of or
delay in performance or breach by any Lender or the Issuing Bank of any of its
obligations hereunder or to any Lender or the Issuing Bank on account of the
failure of or delay in performance or breach by any other Lender or the Issuing
Bank or any Loan Party of any of its obligations hereunder or under any other
Loan Document or in connection herewith or therewith. Each of the Agents may
execute any and all duties hereunder by or through agents or employees and shall
be entitled to rely upon the advice of legal counsel selected by it with respect
to all matters arising hereunder and shall not be liable for any action taken or
suffered in good faith by it in accordance with the advice of such counsel.
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The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor, subject to the prior consent of the Borrower (not to be
unreasonably withheld). If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent, subject to the prior
consent of the Borrower (not to be unreasonably withheld), which shall be a bank
with an office in New York, New York, having a combined capital and surplus of
at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of
any appointment as Agent hereunder by a successor bank, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its duties
and obligations hereunder. After the Agent's resignation hereunder, the
provisions of this Article VIII and Section 9.05 shall continue in effect for
its benefit in respect of any actions taken or omitted to be taken by it while
it was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with the Borrower or any Subsidiary or
other Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of
its pro rata share (based on its Commitments hereunder) of any expenses incurred
for the benefit of the Lenders by the Agents, including counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders, that shall not have been reimbursed by the Borrower and (b) to
indemnify and hold harmless each Agent and any of its directors, officers,
employees or agents, on demand, in the amount of such pro rata share, from and
against any and all liabilities, taxes, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against it in
its capacity as Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or omitted by it
or any of them under this Agreement or any other Loan Document, to the extent
the same shall not have been reimbursed by any Loan Party, provided that no
Lender shall be liable to an Agent or any such other indemnified person for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Agent or any of its directors,
officers, employees or agents. Each Revolving Credit Lender agrees to
reimburse the Issuing Bank and its directors, employees and agents, in each
case, to the same extent and subject to the same limitations as provided above
for the Agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate,
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made its own credit analysis and decision to enter into this Agreement and the
Intercreditor Agreement. Each Lender also acknowledges that it will,
independently and without reliance upon the Agents or any other Lender and based
on such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking action
under or based upon this Agreement or any other Loan Document, any related
agreement or any document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to the Borrower, to it at 700 NE Multnomah, Suite 1600,
Portland, Oregon 97232, Attention of William E. Peressini--Vice President
and Treasurer (Telecopy No. (503) 731-2017), with a copy to Stoel Rives LLP
at 700 NE Multnomah, Suite 950, Portland, Oregon 97232, Attention of
John M. Schweitzer, Esq. (Telecopy No. (503) 230-1907);
(b) if to the Paying Agent or the Issuing Bank, to Citibank, N.A.,
399 Park Avenue, New York, New York 10043, Attention of Sandip Sen
(Telecopy No. (212) 793-6130); and
(c) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05
shall remain operative and in full force and effect regardless of the expiration
of the term of this Agreement, the consummation of the
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transactions contemplated hereby, the repayment of any of the Loans, the
expiration of the Commitments, the expiration of any Letter of Credit, the
invalidity or unenforceability of any term or provision of this Agreement or any
other Loan Document, or any investigation made by or on behalf of the Paying
Agent, the Collateral Agent, any Lender or the Issuing Bank.
SECTION 9.03. Binding Effect. This Agreement shall become effective
(a) when it shall have been executed by the Borrower and the Paying Agent and
when the Paying Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and (b) when
each of the conditions set forth in Section 4.01 shall have been satisfied or
waived in writing, and thereafter shall be binding upon and inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrower, the Paying Agent, the Issuing
Bank or the Lenders that are contained in this Agreement shall bind and inure to
the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate of such Lender, (x) the Borrower (unless an Event of Default shall
have occurred and is continuing) and the Paying Agent (and, in the case of any
assignment of a Revolving Credit Commitment, the Issuing Bank and the Swingline
Lender) must give their prior written consent to such assignment (which consent
shall not be unreasonably withheld and, in the case of the Borrower, the Issuing
Bank and the Swingline Lender, shall be deemed given by such person if the
assigning Lender does not receive notice to the contrary within five Business
Days after receipt by such person of an executed Assignment and Acceptance) and
(y) the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Paying Agent) shall not be less than
$5,000,000 (or, if less, the entire remaining amount of such Lender's
Commitment), (ii) the parties to each such assignment shall execute and deliver
to the Paying Agent an Assignment and Acceptance, together with a processing and
recordation fee of $3,500 (except for assignments by any Initial Lender or as
otherwise agreed to by the Paying Agent) and (iii) the assignee, if it shall not
be a Lender, shall deliver to the Paying Agent an Administrative Questionnaire.
Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the execution
thereof, (A) the assignee thereunder shall be a party hereto and, to the extent
of the interest assigned by such Assignment and Acceptance, have the rights and
obligations of a Lender under this Agreement and (B) the assigning Lender
thereunder shall, to the extent of the interest assigned by such Assignment and
Acceptance, be released from its obligations under this Agreement (and, in the
case of an Assignment and Acceptance covering all or the remaining portion of an
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued
for its account and not yet paid).
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(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as
follows: (i) such assigning Lender warrants that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse claim
and that its Term Loan Commitment and Revolving Credit Commitment, and the
outstanding balances of its Term Loans and Revolving Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance; (ii) except as set forth in (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of the Borrower or any Subsidiary or the
performance or observance by the Borrower or any Subsidiary of any of its
obligations under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such assignee represents
and warrants that it is legally authorized to enter into such Assignment and
Acceptance; (iv) such assignee confirms that it has received a copy of this
Agreement and the Intercreditor Agreement (unless the Intercreditor Agreement is
no longer in effect), together with copies of the most recent financial
statements delivered pursuant to Section 5.04 and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (v) such assignee will
independently and without reliance upon the Paying Agent, the Collateral Agent,
such assigning Lender or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement; (vi) such
assignee appoints and authorizes the Paying Agent and the Collateral Agent to
take such action as agent on its behalf and to exercise such powers under this
Agreement as are delegated to the Paying Agent and the Collateral Agent,
respectively, by the terms hereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Paying Agent, acting for this purpose as an agent of the Borrower,
shall maintain at one of its offices in The City of New York a copy of each
Assignment and Acceptance delivered to it and a register for the recordation of
the names and addresses of the Lenders, and the Commitment of, and principal
amount of the Loans owing to, each Lender pursuant to the terms hereof from time
to time (the "Register"). The entries in the Register shall be conclusive and
the Borrower, the Paying Agent, the Issuing Bank, the Collateral Agent and the
Lenders may treat each person whose name is recorded in the Register pursuant to
the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. The Register shall be available for
inspection by the Borrower, the Issuing Bank, the Collateral Agent and any
Lender, at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
paragraph (b) above and, if required, the written consent of the Borrower, the
Swingline Lender, the Issuing Bank and the Paying Agent to such assignment, the
Paying Agent shall (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the
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Register and (iii) give prompt notice thereof to the Lenders, the Issuing Bank
and the Swingline Lender. No assignment shall be effective unless it has been
recorded in the Register as provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Swingline
Lender, the Issuing Bank or the Paying Agent sell participations to one or more
banks or other entities in all or a portion of its rights and obligations under
this Agreement (including all or a portion of its Commitment and the Loans owing
to it); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) the participating banks or other entities shall be entitled to the benefit
of the cost protection provisions contained in Sections 2.14, 2.16 and 2.20 to
the same extent as if they were Lenders (provided that a participant shall not
be entitled to receive any greater payment under Sections 2.14, 2.16 and 2.20
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such participant, unless the sale of such
participation is made with the Borrower's prior written consent) and (iv) the
Borrower, the Paying Agent, the Issuing Bank and the Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement, and such Lender shall retain the
sole right to enforce the obligations of the Borrower relating to the Loans or
L/C Disbursements and to approve any amendment, modification or waiver of any
provision of this Agreement (other than amendments, modifications or waivers
decreasing any fees payable hereunder or the amount of principal of or the rate
at which interest is payable on the Loans, extending any scheduled principal
payment date or date fixed for the payment of interest on the Loans or
increasing or extending the Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to the Borrower furnished to such Lender by
or on behalf of the Borrower; provided that, prior to any such disclosure of
information designated by the Borrower as confidential, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.17.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to a Federal Reserve Bank, the Borrower shall, at the request of the
assigning Lender, duly execute and deliver to the assigning Lender a promissory
note or notes evidencing the Loans made to the Borrower by the assigning Lender
hereunder.
(i) The Borrower shall not assign or delegate any of its rights or duties
hereunder without the prior written consent of the Paying Agent, the Issuing
Bank and each Lender, and any attempted assignment without such consent shall be
null and void.
(j) In the event that S&P, Moody s and Thompson s BankWatch (or
InsuranceWatch Ratings Service, in the case of Lenders that are insurance
companies (or Best's Insurance Reports, if such
<PAGE>
89
insurance company is not rated by Insurance Watch Ratings Service)) shall, after
the date that any Lender becomes a Revolving Credit Lender, downgrade the
long-term certificate deposit ratings of such Lender, and the resulting ratings
shall be equal to or below BBB-, Baa3 or C (or BB, in the case of a Lender that
is an insurance company (or B, in the case of an insurance company not rated by
InsuranceWatch Ratings Service)), then the Issuing Bank shall have the right
(subject to the Borrower's consent not to be unreasonably withheld), but not the
obligation, at its own expense, upon notice to such Lender and the Paying Agent,
to replace (or to request the Borrower to use its reasonable efforts to replace)
such Lender with an assignee (in accordance with and subject to the restrictions
contained in paragraph (b) above), and such Lender hereby agrees to transfer and
assign without recourse (in accordance with and subject to the restrictions
contained in paragraph (b) above) all its interests, rights and obligations in
respect of its Revolving Credit Commitment to such assignee; provided, however,
that (i) no such assignment shall conflict with any law, rule and regulation or
order of any Governmental Authority and (ii) the Issuing Bank or such assignee,
as the case may be, shall pay to such Lender in immediately available funds on
the date of such assignment the principal of and interest accrued to the date of
payment on the Loans made by such Lender hereunder and all other amounts accrued
for such Lender's account or owed to it hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
out-of-pocket expenses incurred by the Initial Lenders, the Paying Agent, the
Collateral Agent, the Issuing Bank and the Swingline Lender in connection with
the arrangement of the credit facilities provided for herein and the preparation
and administration of this Agreement and the other Loan Documents or in
connection with any amendments, modifications or waivers of the provisions
hereof or thereof (whether or not the transactions hereby or thereby
contemplated shall be consummated) or incurred by the Initial Lenders, the
Paying Agent, the Collateral Agent or (after the occurrence and during the
continuance of an Event of Default) any other Lender in connection with the
enforcement or protection of its rights in connection with this Agreement and
the other Loan Documents or in connection with the Loans made or Letters of
Credit issued hereunder, including the reasonable fees, charges and
disbursements of Cravath, Swaine & Moore, counsel for the Paying Agent and the
Collateral Agent, and, in connection with any such enforcement, the reasonable
fees, charges and disbursements of any other counsel for the Paying Agent, the
Collateral Agent or any Lender.
(b) The Borrower agrees to indemnify the Initial Lenders, the Paying
Agent, the Collateral Agent, each other Lender and the Issuing Bank, each
Affiliate of any of the foregoing persons and each of their respective
directors, partners, officers, employees and agents (each such person being
called an "Indemnitee") against, and to hold each Indemnitee harmless from, any
and all losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or asserted
against any Indemnitee arising out of, in any way connected with, or as a result
of any claim, litigation, investigation or proceeding (whether or not an
Indemnitee is a party thereto) relating to (i) the execution or delivery of this
Agreement or any other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their respective obligations
thereunder or the consummation of the Transactions and the other transactions
contemplated thereby, the use of the proceeds of the Loans or issuance of
Letters of Credit, whether or not any Indemnitee is a party thereto, or (ii) any
actual or alleged presence or Release of Hazardous Materials on any property
owned or operated by the Borrower or any of the Subsidiaries, or any
Environmental Claim related in any way to the Borrower or the Subsidiaries;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
are determined by a court of competent
<PAGE>
90
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee.
(c) The provisions of this Section 9.05 shall remain operative and in full
force and effect regardless of the expiration of the term of this Agreement, the
consummation of the transactions contemplated hereby, the repayment of any of
the Loans, the expiration of the Commitments, the expiration of any Letter of
Credit, the invalidity or unenforceability of any term or provision of this
Agreement or any other Loan Document, or any investigation made by or on behalf
of the Paying Agent, the Collateral Agent, any Lender or the Issuing Bank. All
amounts due under this Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, except to the extent prohibited by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower against any of and all the obligations of
the Borrower now or hereafter existing under this Agreement and other Loan
Documents held by such Lender, irrespective of whether or not such Lender shall
have made any demand under this Agreement or such other Loan Document and
although such obligations may be unmatured. Promptly after exercising its rights
under this Section 9.06, the applicable Lender shall notify the Paying Agent and
the Borrower of the exercise of such rights. The rights of each Lender under
this Section 9.06 are in addition to other rights and remedies (including other
rights of setoff) which such Lender may have.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Paying
Agent, the Collateral Agent, any Lender or the Issuing Bank in exercising any
power or right hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Paying Agent, the
Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by any Loan Party therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No
<PAGE>
91
notice or demand on the Borrower in any case shall entitle the Borrower to any
other or further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived, amended
or modified except pursuant to an agreement or agreements in writing entered
into by the Borrower and the Required Lenders; provided, however, that no such
agreement shall (i) decrease the principal amount of, or extend the maturity of
or any scheduled principal payment date or date for the payment of any interest
on any Loan or any date for reimbursement of an L/C Disbursement, or waive or
excuse any such payment or any part thereof, or decrease the rate of interest on
any Loan or L/C Disbursement, without the prior written consent of each Lender
affected thereby, (ii) change or extend the Commitment or decrease or extend the
date for payment of the Commitment Fees of any Lender without the prior written
consent of such Lender, (iii) amend or modify the pro rata requirements of the
provisions of Section 2.17, amend or modify the provisions of Section 9.04(i),
the provisions of this Section 9.08, the definition of the term "Required
Lenders" or release the Guarantor or all or any substantial part of the
Collateral (except for any release expressly permitted by the Loan Documents,
including Article VIII of this Agreement), without the prior written consent of
each Lender or (iv) change the allocation between Tranche A Term Loans and
Tranche B Term Loans of any prepayment pursuant to Section 2.12 or 2.13 without
the prior written consent of (A) Lenders holding a majority of the aggregate
outstanding principal amount of the Tranche A Term Loans and (B) Lenders holding
a majority of the aggregate outstanding principal amount of the Tranche B Term
Loans; provided further that no such agreement shall amend, modify or otherwise
affect the rights or duties of the Paying Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender hereunder or under any other Loan Document
without the prior written consent of the Paying Agent, the Collateral Agent, the
Issuing Bank or the Swingline Lender, as the case may be.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein to
the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan or participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan or
participation but were not payable as a result of the operation of this
Section 9.09 shall be cumulated and the interest and Charges payable to such
Lender in respect of other Loans or participations or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
<PAGE>
92
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby (it being understood that the
invalidity of a particular provision in a particular jurisdiction shall not in
and of itself affect the validity of such provision in any other jurisdiction).
The parties shall endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the economic effect of
which comes as close as possible to that of the invalid, illegal or
unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in counterparts
(and by different parties hereto on different counterparts), each of which shall
constitute an original but all of which when taken together shall constitute a
single contract, and shall become effective as provided in Section 9.03.
Delivery of an executed signature page to this Agreement by facsimile
transmission shall be as effective as delivery of a manually signed counterpart
of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) The
Borrower hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any right that the
Paying Agent, the Collateral Agent, the Issuing Bank or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Borrower or its properties in the courts of any
jurisdiction.
<PAGE>
93
(b) The Borrower hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Judgment Currency. (a) The obligations of the Loan Parties
hereunder and under the other Loan Documents to make payments in dollars (the
"Obligation Currency") shall not be discharged or satisfied by any tender or
recovery pursuant to any judgment expressed in or converted into any currency
other than the Obligation Currency, except to the extent that such tender or
recovery results in the effective receipt by the Paying Agent or a Lender or the
Issuing Bank of the full amount of the Obligation Currency expressed to be
payable to the Paying Agent or such Lender or the Issuing Bank under this
Agreement or the other Loan Documents. If, for the purpose of obtaining or
enforcing judgment against any Loan Party or in any court or in any
jurisdiction, it becomes necessary to convert into or from any currency other
than the Obligation Currency (such other currency being hereinafter referred to
as the "Judgment Currency") an amount due in the Obligation Currency, the
conversion shall be made at the rate of exchange (as quoted by the Paying Agent
or if the Paying Agent does not quote a rate of exchange on such currency, by a
known dealer in such currency designated by the Paying Agent) determined, in
each case, as of the date immediately preceding the day on which the judgment is
given (such Business Day being hereinafter referred to as the "Judgment Currency
Conversion Date").
(b) If there is a change in the rate of exchange prevailing between the
Judgment Currency Conversion Date and the date of actual payment of the amount
due, the Borrower covenants and agrees to pay, or cause to be paid, as a
separate obligation and notwithstanding any judgment, such additional amounts,
if any (but in any event not a lesser amount), as may be necessary to ensure
that the amount paid in the Judgment Currency, when converted at the rate of
exchange prevailing on the date of payment, will produce the amount of the
Obligation Currency which could have been purchased with the amount of Judgment
Currency stipulated in the judgment or judicial award at the rate of exchange
prevailing on the Judgment Currency Conversion Date.
(c) For purposes of determining the rate of exchange for this Section
9.16, such amounts shall include any premium and costs payable in connection
with the purchase of the Obligation Currency.
SECTION 9.17. Confidentiality. The Paying Agent, the Collateral Agent,
the Issuing Bank and each of the Lenders agree to keep confidential (and to use
its best efforts to cause its respective agents and representatives to keep
confidential) the Information (as defined below) and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Paying Agent, the Collateral Agent, the Issuing Bank or any Lender shall be
permitted to disclose Information (a) to such of its respective officers,
directors, employees, agents, affiliates and representatives as need to know
such Information, (b) to the extent requested by any regulatory
<PAGE>
94
authority, (c) to the extent otherwise required by applicable laws and
regulations or by any subpoena or similar legal process (and, in the case of any
such subpoena or legal process after notice to the Borrower, if permitted by
applicable law or process), (d) in connection with any suit, action or
proceeding relating to the enforcement of its rights hereunder or under the
other Loan Documents or (e) to the extent such Information (i) becomes publicly
available other than as a result of a breach of this Section 9.17 or
(ii) becomes available to the Paying Agent, the Issuing Bank, any Lender or the
Collateral Agent on a nonconfidential basis from a source other than the
Borrower. For the purposes of this Section, "Information" shall mean all
financial statements, certificates, reports, agreements and information
(including all analyses, compilations and studies prepared by the Paying Agent,
the Collateral Agent, the Issuing Bank or any Lender based on any of the
foregoing) that are received from the Borrower and related to the Borrower, any
shareholder of the Borrower or any employee, customer or supplier of the
Borrower, other than any of the foregoing that were available to the Paying
Agent, the Collateral Agent, the Issuing Bank or any Lender on a nonconfidential
basis prior to its disclosure thereto by the Borrower, and which are in the case
of Information provided after the Closing Date, clearly identified at the time
of delivery as confidential. The provisions of this Section 9.17 shall remain
operative and in full force and effect regardless of the expiration of this
Agreement.
SECTION 9.18. Intercreditor Agreement. Notwithstanding anything to the
contrary contained in this Agreement or any other Loan Document, prior to the
Separation Date, to the extent the terms of this Agreement conflict with the
terms of the Intercreditor Agreement, the terms of the Intercreditor Agreement
shall be controlling as if such terms of the Intercreditor Agreement replaced
the conflicting terms of this Agreement mutatis mutandis.
SECTION 9.19. Additional Borrowers. The Borrower may designate any member
of the Peabody Group reasonably satisfactory to the Initial Lenders as an
additional borrower (each an "Additional Borrower") under this Agreement by
delivering a written notice to the Initial Lenders to such effect; provided that
on or prior to the initial borrowing by such Additional Borrower, such
Additional Borrower will enter into an agreement in writing in form and
substance satisfactory to the Initial Lenders pursuant to which it will agree to
be bound by (and will be entitled to the benefits of) this Agreement. The
parties hereto agree that upon such designation, this Agreement shall be
modified as appropriate to account for such designation in a manner to be agreed
upon by the Initial Lenders and the Borrower. Notwithstanding anything to the
contrary, this Section 9.19 shall not, nor shall it be construed as providing
for any, increase in the Total Commitments.
SECTION 9.20. Margin Regulations. Notwithstanding any other provision
contained in this Agreement or the other Loan Documents, including
Section 2.13(b), Section 6.02 and Section 6.05, the pledge or sale of the Shares
by PA shall be permitted hereunder until the Depositary Shares have been
delisted from the New York Stock Exchange (and the Shares shall not otherwise be
Margin Stock); provided that until such time the Borrower shall use its
reasonable efforts to cause PA not to:
(i) incur any Indebtedness other than (A) its obligations under the
Offer, (B) its obligations under the Powercoal/PA Loans and (C) its
obligations under or permitted under the PA Facility Agreement;
<PAGE>
95
(ii) engage in any business other than (A) acquiring and holding the
Shares and (B) engaging in activities reasonably related to the Offer; or
(iii) sell or otherwise dispose of the Shares, unless (A) such Shares
are sold for cash, (B) fair value is received for such Shares and (C) the
proceeds of such sale are either held as cash or invested in certificates
of deposit, U.S. government securities, commercial paper, other money
market instruments that are exempted securities under the United States
federal securities laws or Cash Equivalent Investments (as defined in the
PA Facility Agreement).
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PACIFICORP POWERCOAL LLC,
by PacifiCorp Group Holdings Company,
its Member,
by
/s/ William E. Peressini
-------------------------------
Name: William E. Peressini
Title: Treasurer
CITIBANK N.A., individually as an
Initial Lender and as Paying Agent,
Swingline Lender and Issuing Bank
by
/s/ David B. Gorte
-------------------------------
Name: David B. Gorte
Title: Attorney-in-fact
CITICORP USA, INC., as Collateral Agent,
by
/s/ Thomas W. Ng
-------------------------------
Name: Thomas W. Ng
Title: Attorney-in-fact
<PAGE>
96
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually as an Initial Lender,
by
/s/ John Winkelried
-------------------------------
Name: John Winkelried
Title: Authorized Signatory
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, individually as an Initial
Lender,
by
/s/ Kathryn Sayko-Yanes
-------------------------------
Name: Kathryn Sayko-Yanes
Title: Vice President
<PAGE>
Exhibit 99(b)(2)
CONFORMED COPY
===============================================================================
CREDIT AGREEMENT
Dated as of February 3, 1998,
among
PACIFICORP GROUP HOLDINGS COMPANY,
PACIFICORP ENERGYCO,
THE LENDERS NAMED HEREIN,
CITIBANK, N.A.,
as Paying Agent and Issuing Bank
and
CITICORP USA, INC.,
as Collateral Agent
--------------------------
CITICORP SECURITIES, INC.,
GOLDMAN SACHS CREDIT PARTNERS L.P.
and
J.P. MORGAN SECURITIES INC.,
as Arrangers
===============================================================================
<PAGE>
[CS&M Ref. No. 6558-145]
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I Definitions
Section 1.01. Defined Terms. . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Terms Generally . . . . . . . . . . . . . . . . 31
SECTION 1.03. Exchange Rates. . . . . . . . . . . . . . . . . 31
ARTICLE II The Credits
SECTION 2.01. Commitments . . . . . . . . . . . . . . . . . . 32
SECTION 2.02. Loans . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.03. Borrowing Procedure . . . . . . . . . . . . . . 34
SECTION 2.04. Evidence of Debt; Repayment of Loans. . . . . . 35
SECTION 2.05. Fees. . . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.06. Interest on Loans . . . . . . . . . . . . . . . 36
SECTION 2.07. Default Interest. . . . . . . . . . . . . . . . 36
SECTION 2.08. Alternate Rate of Interest. . . . . . . . . . . 37
SECTION 2.09. Termination and Reduction of Commitments. . . . 37
SECTION 2.10. Conversion and Continuation of Borrowings . . . 38
SECTION 2.11. [Intentionally Omitted] . . . . . . . . . . . . 39
SECTION 2.12. Optional Prepayments. . . . . . . . . . . . . . 39
SECTION 2.13. Mandatory Prepayments . . . . . . . . . . . . . 40
SECTION 2.14. Reserve Requirements; Change in Circumstances . 41
SECTION 2.15. Change in Legality. . . . . . . . . . . . . . . 43
SECTION 2.16. Indemnity . . . . . . . . . . . . . . . . . . . 43
SECTION 2.17. Pro Rata Treatment. . . . . . . . . . . . . . . 44
SECTION 2.18. Sharing of Setoffs. . . . . . . . . . . . . . . 44
SECTION 2.19. Payments. . . . . . . . . . . . . . . . . . . . 45
SECTION 2.20. Taxes . . . . . . . . . . . . . . . . . . . . . 45
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty
to Mitigate . . . . . . . . . . . . . . . . . . 47
SECTION 2.22. Letters of Credit . . . . . . . . . . . . . . . 48
SECTION 2.23. Extension of Revolving Credit Commitments . . . 52
ARTICLE III Representations and Warranties
SECTION 3.01. Organization. . . . . . . . . . . . . . . . . . 53
SECTION 3.02. Corporate and Governmental Authorization; No
Contravention . . . . . . . . . . . . . . . . . 53
<PAGE>
SECTION 3.03. Enforceability. . . . . . . . . . . . . . . . . 53
SECTION 3.04. Financial Statements. . . . . . . . . . . . . . 54
SECTION 3.05. No Material Adverse Change. . . . . . . . . . . 55
SECTION 3.06. Title to Properties; Possession Under Leases. . 55
SECTION 3.07. Subsidiaries. . . . . . . . . . . . . . . . . . 55
SECTION 3.08. Litigation; Compliance with Laws. . . . . . . . 55
SECTION 3.09. Agreements. . . . . . . . . . . . . . . . . . . 56
SECTION 3.10. Federal Reserve Regulations . . . . . . . . . . 56
SECTION 3.11. Investment Company Act; Public Utility Holding
Company Act . . . . . . . . . . . . . . . . . . 56
SECTION 3.12. Tax Matters . . . . . . . . . . . . . . . . . . 56
SECTION 3.13. No Material Misstatements . . . . . . . . . . . 56
SECTION 3.14. Employee Benefit Plans. . . . . . . . . . . . . 57
SECTION 3.15. Environmental Matters . . . . . . . . . . . . . 57
SECTION 3.16. Insurance . . . . . . . . . . . . . . . . . . . 58
SECTION 3.17. Security Documents. . . . . . . . . . . . . . . 58
SECTION 3.18. Solvency. . . . . . . . . . . . . . . . . . . . 59
SECTION 3.19. Labor Matters . . . . . . . . . . . . . . . . . 59
ARTICLE IV Conditions
SECTION 4.01. Effective Date. . . . . . . . . . . . . . . . . 59
SECTION 4.02. Borrowings. . . . . . . . . . . . . . . . . . . 60
ARTICLE V Affirmative Covenants
SECTION 5.01. Existence; Businesses and Properties. . . . . . 62
SECTION 5.02. Insurance . . . . . . . . . . . . . . . . . . . 62
SECTION 5.03. Obligations and Taxes . . . . . . . . . . . . . 62
SECTION 5.04. Financial Statements, Reports, etc. . . . . . . 63
SECTION 5.05. Litigation and Other Notices. . . . . . . . . . 64
SECTION 5.06. Maintaining Records; Access to Properties and
Inspections . . . . . . . . . . . . . . . . . . 64
SECTION 5.07. Use of Proceeds . . . . . . . . . . . . . . . . 65
SECTION 5.08. Compliance with Laws. . . . . . . . . . . . . . 65
SECTION 5.09. Further Assurances. . . . . . . . . . . . . . . 65
SECTION 5.10. Interest Rate Protection Agreements . . . . . . 65
SECTION 5.11. Tax Sharing Accounts. . . . . . . . . . . . . . 65
SECTION 5.12. Tax Sharing Agreements. . . . . . . . . . . . . 66
SECTION 5.13. Peabody Transfer; PPM Contribution; Citizens
Transfer. . . . . . . . . . . . . . . . . . . . 66
SECTION 5.14. Open Market Shares. . . . . . . . . . . . . . . 66
ARTICLE VI Negative Covenants
<PAGE>
SECTION 6.01. Indebtedness. . . . . . . . . . . . . . . . . . 66
SECTION 6.02. Liens . . . . . . . . . . . . . . . . . . . . . 68
SECTION 6.03. Sale and Lease-Back Transactions. . . . . . . . 70
SECTION 6.04. Investments, Loans and Advances . . . . . . . . 70
SECTION 6.05. Mergers, Consolidations, Sales of Assets and
Acquisitions. . . . . . . . . . . . . . . . . . 71
SECTION 6.06. Dividends and Distributions; Restrictions on
Ability of
Subsidiaries to Pay Dividends . . . . . . . . . 72
SECTION 6.07. Transactions with Affiliates. . . . . . . . . . 73
SECTION 6.08. Business of PGH and Subsidiaries. . . . . . . . 73
SECTION 6.09. Other Indebtedness and Agreements . . . . . . . 73
SECTION 6.10. Fixed Charge Coverage Ratio . . . . . . . . . . 74
SECTION 6.11. Leverage Ratio. . . . . . . . . . . . . . . . . 74
SECTION 6.12. Consolidated EBITDA . . . . . . . . . . . . . . 75
SECTION 6.13. Fiscal Year . . . . . . . . . . . . . . . . . . 75
ARTICLE VII Events of Default
ARTICLE VIII The Paying Agent and the Collateral Agent
ARTICLE IX Miscellaneous
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . 81
SECTION 9.02. Survival of Agreement . . . . . . . . . . . . . 82
SECTION 9.03. Binding Effect. . . . . . . . . . . . . . . . . 82
SECTION 9.04. Successors and Assigns. . . . . . . . . . . . . 82
SECTION 9.05. Expenses; Indemnity . . . . . . . . . . . . . . 85
SECTION 9.06. Right of Setoff . . . . . . . . . . . . . . . . 86
SECTION 9.07. APPLICABLE LAW. . . . . . . . . . . . . . . . . 86
SECTION 9.08. Waivers; Amendment. . . . . . . . . . . . . . . 86
SECTION 9.09. Interest Rate Limitation. . . . . . . . . . . . 87
SECTION 9.10. Entire Agreement. . . . . . . . . . . . . . . . 87
SECTION 9.11. WAIVER OF JURY TRIAL. . . . . . . . . . . . . . 88
SECTION 9.12. Severability. . . . . . . . . . . . . . . . . . 88
SECTION 9.13. Counterparts. . . . . . . . . . . . . . . . . . 88
SECTION 9.14. Headings. . . . . . . . . . . . . . . . . . . . 88
SECTION 9.15. Jurisdiction; Consent to Service of Process . . 88
SECTION 9.16. Conversion of Currencies. . . . . . . . . . . . 89
SECTION 9.17. Confidentiality . . . . . . . . . . . . . . . . 89
SECTION 9.18. Margin Regulations . . . . . . . . . . . . . . . 90
SECTION 9.19. European Monetary Union . . . . . . . . . . . . 90
<PAGE>
Contents, p.5
Page
<PAGE>
Contents, p.6
Page
Exhibits and Schedules
EXHIBIT A Administrative Questionnaire
EXHIBIT B Assignment and Acceptance
EXHIBIT C Borrowing Request
EXHIBIT D Collateral Assignment
EXHIBIT E Guarantee Agreement
EXHIBIT F Pledge Agreement
EXHIBIT G U.K. Tax Sharing Agreement
EXHIBIT H U.S. Tax Sharing Policy
EXHIBIT I-1 Opinion of Stoel Rives LLP
EXHIBIT I-2 Opinion of Davis Polk & Wardwell
EXHIBIT I-3 Opinion of Linklaters & Paines
EXHIBIT I-4 Opinion of Clifford Chance
SCHEDULE 1.01(a) Additional Cost
SCHEDULE 1.01(b) Excluded Assets
SCHEDULE 1.01(c) Offer Conditions Precedent
SCHEDULE 1.01(d) Refinanced Indebtedness
SCHEDULE 2.01 Commitments
SCHEDULE 3.06 (b) Leases
SCHEDULE 3.07 (a) Closing Date Subsidiaries
SCHEDULE 3.07(b) Funding Date Subsidiaries
SCHEDULE 3.08 Litigation
SCHEDULE 3.15 Environmental Matters
SCHEDULE 3.16 Insurance
SCHEDULE 6.01(a) Indebtedness
SCHEDULE 6.02(a) Liens
SCHEDULE 6.04(b) Commitments for Investments, Loans and
Advances of PGH and its Subsidiaries
<PAGE>
CREDIT AGREEMENT dated as of February 3,
1998, among PACIFICORP GROUP HOLDINGS COMPANY
(formerly known as PacifiCorp Holdings, Inc.), a
Delaware corporation ("PGH" or the "Guarantor"),
PACIFICORP ENERGYCO, an unlimited company
incorporated in England and Wales (the
"Borrower"), the Lenders (as defined in
Article I), CITIBANK, N.A., a national banking
association ("Citibank"), as paying agent (in such
capacity, the "Paying Agent") for the Lenders, and
as issuing bank (in such capacity, the "Issuing
Bank"), and CITICORP USA, INC., a Delaware
corporation ("Citicorp USA"), as collateral agent
(in such capacity, the "Collateral Agent") for the
Lenders.
Pursuant to the Offer (such term and each other capitalized term used but
not defined herein having the meaning given to it in Article I), PA has
offered or will offer to purchase each outstanding Share (including Shares
represented by Depositary Shares) at a purchase price of pence net
per share in cash to the holder thereof. In connection therewith and to
provide a portion of the financing therefor, (a) PA has entered into the PA
Facility Agreement and (b) Powercoal has entered into the Powercoal Credit
Agreement.
The Borrower has requested the Lenders to extend credit in the form of (a)
Term Loans at any time during the Term Loan Availability Period, in an
aggregate principal amount not in excess of $1,500,000,000 (or the Sterling
Equivalent thereof) and (b) Revolving Loans at any time and from time to time
prior to the Revolving Credit Maturity Date, in an aggregate principal amount
at any time outstanding not in excess of $400,000,000 (or the Sterling
Equivalent thereof). The Borrower has requested the Issuing Bank to issue
letters of credit, in an aggregate face amount at any time outstanding not in
excess of $350,000,000 (or the Sterling Equivalent thereof) to support
payment obligations incurred in the ordinary course of business by the
Borrower, PGH or any of their respective subsidiaries.
The proceeds of the Term Loans, together with approximately $606,000,000
in net cash proceeds of an equity contribution (the "PGH Equity
Contribution") to be made by PGH to the Borrower, are to be used solely (a)
to distribute to PA through certain of the Borrower's direct and indirect
subsidiaries a portion of the funds necessary to finance the Offer and for
the other purposes specified in Clause 3.1(a)(i) of the PA Facility Agreement
and (b) for the payment of fees and expenses in connection with the Offer.
The proceeds of the Revolving Loans (other than the Revolving Loans used for
the purposes specified in the immediately preceding sentence) are to be used
solely for the ordinary working capital needs of the Borrower, PGH and their
respective subsidiaries. PA will use (a) the proceeds from each Acquisition
Borrowing, (b) the proceeds of the Powercoal/PA Loans and (c) certain
proceeds from borrowings by PA under the PA Facility Agreement to finance the
Offer and for the other purposes specified in Clause 3.1(a)(i) of the PA
Facility Agreement.
<PAGE>
2
The Lenders are willing to extend such credit to the Borrower and the
Issuing Bank is willing to issue letters of credit for the account of the
Borrower on the terms and subject to the conditions set forth herein.
Accordingly, the parties hereto agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
"Acquisition Borrowing" shall mean any Borrowing, the proceeds of which
are distributed to PA through certain of the Borrower's direct and indirect
subsidiaries to be used by PA to finance a portion of the Offer and/or for
the other purposes specified in Clause 3.1(a)(i) of the PA Facility Agreement.
"Additional Cost" shall mean, in relation to any Sterling Borrowing for
any Interest Period, the cost as calculated by the Paying Agent in accordance
with Schedule 1.01(a) imputed to each Lender participating in such Sterling
Borrowing of compliance with the mandatory liquid assets requirements of the
Bank of England during that Interest Period, expressed as a percentage.
"Adjusted LIBO Rate" shall mean, with respect to any Eurocurrency
Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to (a) if such
Eurocurrency Borrowing is a Dollar Borrowing, the LIBO Rate in effect for
such Interest Period multiplied by Statutory Reserves and (b) if such
Eurocurrency Borrowing is a Sterling Borrowing, the LIBO Rate in effect for
such Interest Period plus Additional Cost.
"Adjustment Amount" shall mean the cumulative amount (during the period
from April 1, 1998, hereunder to the end of the period relating to the
relevant determination) by which the cash expenditures of Powercoal and its
subsidiaries (after giving effect to the Peabody Transfer) for reclamation
and related liabilities, workers compensation liabilities, postretirement
benefit costs, industry fund obligations and similar items exceed the sum of:
(a) the cumulative expense during such period recognized in Consolidated Net
Income of Powercoal and its subsidiaries (after giving effect to the Peabody
Transfer) for reclamation and related liabilities, workers compensation
liabilities, postretirement benefit costs, industry fund obligations and
similar items and (b) $50,000,000.
"Administrative Questionnaire" shall mean an Administrative Questionnaire
in the form of Exhibit A or such other form as shall be approved by the
Paying Agent.
"Affiliate" shall mean, when used with respect to a specified person, any
other person that directly or indirectly, through one or more intermediaries,
Controls or is Controlled by or is under direct or indirect common Control
with such specified person; provided that, for purposes of Section 6.07 only,
beneficial ownership of 10% or more of the voting securities of a person
shall be deemed to be Control for purposes of the definition of "Affiliate".
Neither the Lenders nor any of
<PAGE>
3
their Affiliates will be treated as an Affiliate of the Borrower or any of
its subsidiaries for purposes of this Agreement.
"Aggregate Revolving Credit Exposure" shall mean the aggregate amount of
the Lenders' Revolving Credit Exposures.
"Agreement Currency" shall have the meaning assigned to such term in
Section 9.16.
"Announcement Date" shall mean the date on which the Press Release is
issued.
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by
the Paying Agent as the then current net annual assessment rate that will be
employed in determining amounts payable by the Paying Agent to the Federal
Deposit Insurance Corporation (or any successor thereto) for insurance by
such Corporation (or such successor) of time deposits made in Dollars at the
Paying Agent's domestic offices.
"Asset Sale" shall mean the sale, lease, transfer or other disposition (by
way of merger or otherwise, including as a result of a Condemnation Event or
a Casualty Event) by PGH, the Borrower or any of their respective
subsidiaries to any person other than PGH, the Borrower or any of their
respective subsidiaries of (a) any capital stock or other equity interests of
the Borrower or any of the subsidiaries of PGH or the Borrower or (b) any
other assets of PGH, the Borrower or any of their respective subsidiaries
(other than inventory, obsolete or worn-out assets, scrap and Permitted
Investments, in each case disposed of in the ordinary course of business),
except for (i) any sale, lease, transfer or other disposition in one
transaction or a series of related transactions having a value of $25,000,000
(or the Dollar Equivalent thereof in another currency) or less and (ii)
payment of a cash dividend permitted by Section 6.06(a). Notwithstanding the
foregoing, the term "Asset Sale" shall not include (a) the transfer of Open
Market Shares in accordance with Section 5.15, (b) transfers of assets as
part of a sale and leaseback transaction permitted by Section 6.03 and (c)
the transfer to PacifiCorp or a subsidiary of PacifiCorp of any of the
Excluded Assets.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the Paying Agent,
in the form of Exhibit B or such other form as shall be approved by the
Paying Agent.
"Base CD Rate" shall mean the sum of (a) the product of (i) the
Three-Month Secondary CD Rate and (ii) Statutory Reserves and (b) the
Assessment Rate.
"Base Rate" shall mean, for any day, a rate per annum (rounded upwards, if
necessary, to the next 1/16 of 1%) equal to the greatest of (a) the Prime
Rate in effect on such day, (b) the Base CD Rate in effect on such day plus
1% and (c) the Federal Funds Effective Rate in effect on such day plus 1/2 of
1%. If for any reason the Paying Agent shall have determined (which
determination shall be conclusive absent manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate or both for
any reason, including the inability or failure of the Paying Agent to obtain
sufficient quotations in accordance with the terms of the definition thereof,
the Base Rate shall be determined without regard to clause (b) or (c), or
both, of the preceding sentence, as appropriate, until the circumstances
giving rise to such inability no longer exist. Any change in the Base Rate
due to a change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate
<PAGE>
4
shall be effective on the effective date of such change in the Prime Rate,
the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate Loans.
"Base Rate Loan" shall mean any Base Rate Term Loan or Base Rate Revolving
Loan.
"Base Rate Revolving Loan" shall mean any Revolving Loan bearing interest
at a rate determined by reference to the Base Rate in accordance with the
provisions of Article II.
"Base Rate Spread" shall mean 1.75%; provided, however, that (a) the Base
Rate Spread shall be 1.25% if within 10 Business Days of the initial
Acquisition Borrowing the credit facilities under this Agreement shall have
received credit ratings from Standard & Poor's Ratings Services and Moody's
Investors Service, Inc. of BB+ and Ba1 or higher, respectively, and (b) the
Base Rate Spread shall be increased by 0.75% during the Extension Period.
"Base Rate Term Borrowing" shall mean a Borrowing comprised of Base Rate
Term Loans.
"Base Rate Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Base Rate in accordance with the provisions of
Article II.
"Board" shall mean the Board of Governors of the Federal Reserve System of
the United States of America.
"Borrowing" shall mean (a) Revolving Loans or (b) Term Loans, in each
case, of the same Type, Class and currency, made, converted or continued on
the same date and, in the case of Eurocurrency Loans, as to which a single
Interest Period is in effect.
"Borrowing Request" shall mean a request by the Borrower in accordance
with the terms of Section 2.03 and substantially in the form of Exhibit C or
such other form as shall be approved by the Paying Agent.
"Business Day" shall mean any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by
law to remain closed; provided that, when used in connection with a
Eurocurrency Loan, the term "Business Day" shall also exclude any day on
which banks are not open for dealings in deposits in the London interbank
market.
"Calculation Date" shall mean (a) the last Business Day of each calendar
month, (b) if at any time the Aggregate Revolving Credit Exposure exceeds 75%
of the Total Revolving Credit Commitments, the last Business Day of each week
and (c) if a Default or an Event of Default shall have occurred and be
continuing, such additional dates as the Paying Agent or the Required Lenders
shall specify.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
<PAGE>
5
accounted for as capital leases on a balance sheet of such person under GAAP,
and the amount of such obligations shall be the capitalized amount thereof
determined in accordance with GAAP.
"Cash Available for Fixed Charges" shall mean, for any period, without
duplication, the excess of (a) the sum of (i) the aggregate amount of cash
dividends or distributions actually received by the Loan Parties during such
period in respect of the common stock of, or other ownership interests in,
their respective subsidiaries; (ii) the aggregate amount of payments actually
received by PGH during such period with respect to PGH's interest in the
Spring Creek Obligations; (iii) the aggregate amount of any interest payments
actually received by PGH during such period with respect to Indebtedness due
to PGH under the Intercompany Loan Agreements and with respect to any other
intercompany loans or advances; (iv) the aggregate amount of cash equity
investments made by PacifiCorp in PGH during such period; and (v) the
aggregate amount of payments received by the Loan Parties under or in respect
of the Tax Sharing Agreements, net of any tax payments made by the Loan
Parties under or in respect of the Tax Sharing Agreements or in respect of
taxes over (b) cash expenses (other than Cash Interest Expense) paid by the
Loan Parties during such period. For purposes of clause (d) of this
definition, a cash equity investment made by PacifiCorp in PGH within 45 days
after the end of any fiscal quarter shall be deemed to have been made during
such fiscal quarter (and not during the following fiscal quarter) if PGH so
elects by giving written notice of such election to the Paying Agent within
such 45-day period.
"Cash Interest Expense" shall mean, for any period, the interest expense
of any Loan Party (including related commitment fees, facilities fees and
similar fees, and the interest component in respect of Capital Lease
Obligations but excluding fees and expenses paid in connection with the
closing of the Transactions) paid in cash during such period, as determined
in accordance with GAAP.
"Casualty Event" shall mean an event pursuant to which PGH or any of its
subsidiaries has the right to collect insurance proceeds under any insurance
policies with respect to any insured casualty or other insured damage to any
property of PGH or any of its subsidiaries.
A "Change in Control" shall be deemed to have occurred if (a) any person
or group (within the meaning of Rule 13d-5 of the Securities Exchange Act of
1934 as in effect on the Closing Date) shall own, directly or indirectly,
beneficially or of record, shares representing more than 35% of the aggregate
ordinary voting power represented by the issued and outstanding capital stock
of PacifiCorp; (b) a majority of the seats (other than vacant seats) on the
board of directors of PacifiCorp, PGH or the Borrower shall at any time be
occupied by persons who were neither (i) nominated by the board of directors
of PacifiCorp, nor (ii) appointed by directors so nominated; (c) any change
in control (or similar event, however denominated) with respect to PacifiCorp
shall occur under and as defined in any indenture or agreement in respect of
Indebtedness to which PGH, any person directly or indirectly Controlling the
Borrower or any subsidiary of PGH is a party; (d) PacifiCorp consolidates
with, or merges with or into, any person, or any person consolidates with, or
merges with or into, PacifiCorp in any such event pursuant to a transaction
in which any of the issued and outstanding capital stock of PacifiCorp is
converted into or exchanged for cash, securities or other property, other
than any such transaction where the capital stock of PacifiCorp outstanding
immediately prior to such transaction is converted into or exchanged for
capital stock of the surviving or transferee person constituting a majority
of the issued and outstanding shares of such capital stock of such surviving
or transferee person (immediately after giving effect to such
<PAGE>
6
conversion or exchange); (e) PacifiCorp shall own, directly or indirectly,
beneficially and of record, less than 80% of the outstanding capital stock of
PGH, free and clear of all Liens (other than Liens permitted under the
Transaction Documents); or (f) PGH shall cease to own, directly or
indirectly, beneficially and of record, 100% of the outstanding capital stock
of the Borrower, free and clear of all Liens (other than Liens permitted
under the Transaction Documents).
"Citibank" shall have the meaning assigned to such term in the preamble to
this Agreement.
"Citicorp USA" shall have the meaning assigned to such term in the
preamble to this Agreement.
"Citizens" shall mean Citizens Power LLC, a limited liability company
organized under the laws of the State of Delaware, all the limited liability
company interests of which on the date hereof are directly owned by Peabody
Investments.
"Citizens Transfer" shall mean the direct or indirect transfer by PA or
any of its subsidiaries of all the issued and outstanding limited liability
company interests of Citizens to Powercoal or any of its subsidiaries.
"Class", when used in reference to any Loan or Borrowing, shall refer to
whether such Loan, or the Loans comprising such Borrowing, are Revolving
Loans or Term Loans and, when used in reference to any Commitment, refers to
whether such Commitment is a Revolving Commitment or a Term Loan Commitment.
"Clean-up Period" shall mean the period commencing on the Closing Date and
ending on the date that is 180 (or, in the case of Citizens, 270) days after
the date of the initial Borrowing hereunder.
"Closing Date" shall mean February 3, 1998.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Collateral" shall mean all the "Collateral", as defined in any Security
Document.
"Collateral Assignment" shall mean the Collateral Assignment,
substantially in the form of Exhibit D, made by the Loan Parties in favor of
the Collateral Agent for the benefit of the Secured Parties.
"Collateral Trust and Intercreditor Agreement" shall mean an agreement
entered into after the Closing Date and in form and substance satisfactory to
the Collateral Agent and the Initial Lenders pursuant to which the Collateral
Agent will agree, on behalf of the Secured Parties, with the trustee or
representative of the holders from time to time of FRNs and/or EnergyCo
Refinancing Indebtedness that such holders may be secured equally and ratably
with the Secured Parties by the Collateral; provided, however, that such
Collateral Trust and Intercreditor Agreement shall provide (and the indenture
or other agreement governing any EnergyCo Refinancing Indebtedness must
provide (and, in the case of clause (c) below, must permit the continuing
lien in the Collateral in favor of the Revolving Credit Lenders or any
replacement revolving credit facility in an aggregate
<PAGE>
7
principal amount not less than the then current Total Revolving Credit
Commitment) in order to be so equally and ratably secured) that (a) the
Collateral Agent shall have the absolute discretion as to the timing and
manner of any enforcement against, or disposition of, the Collateral (subject
to the direction of a majority in interest of the Secured Parties and the
holders of FRNs), (b) upon any release of all or any portion of the
Collateral by the Secured Parties and the holders of the FRNs, the liens
thereon in favor of the holders of EnergyCo Refinancing Indebtedness shall be
automatically released and (c) upon the repayment or prepayment in full of
the Term Loans and the FRNs, the liens in favor of the holders of the
EnergyCo Refinancing Indebtedness shall be automatically released,
notwithstanding that the liens in favor of the Revolving Credit Lenders or
any replacement revolving credit facility may continue.
"Commitment" shall mean, with respect to each Lender, such Lender's
Revolving Credit Commitment and Term Loan Commitment.
"Commitment Fee" shall have the meaning assigned to such term in Section
2.05(a).
"Condemnation Event" shall mean an event pursuant to which PGH or any of
its subsidiaries has the right to collect and receive proceeds as a result of
any action or proceeding for the taking of any property of PGH or any of its
subsidiaries, or any part thereof or interest therein, for public or
quasi-public use under the power of eminent domain, by reason of any public
improvement or condemnation proceeding, or in any other manner.
"Confidential Information Memorandum" shall mean the Confidential
Information Memorandum of the Borrower to be used by the Initial Lenders and
their Affiliates in connection with the syndication of the Commitments.
"Consolidated EBITDA" shall mean, for any period, Consolidated Net Income
for such period, plus, without duplication and to the extent deducted from
revenues in determining Consolidated Net Income, the sum of (a) the aggregate
amount of Consolidated Interest Expense for such period, (b) the aggregate
amount of income tax expense for such period (including payments in respect
of income taxes under the Tax Sharing Agreements), (c) all amounts
attributable to depreciation, depletion and amortization for such period
(including, without limitation, amortization of any prepayment made of lease
rentals arising pursuant to the generation lease arrangements in force as of
the date hereof between National Power plc and a member of the TEG Group and
between Powergen Plc and a member of the TEG Group), (d) all noncash
nonrecurring charges during such period, and (e) expenses incurred by PGH and
its subsidiaries in connection with Funding Exchange Rate Protection
Agreements, and minus, without duplication, (i) to the extent included in
determining Consolidated Net Income, all nonrecurring gains during such
period and (ii) the Net Adjustment Amount, all as determined on a
consolidated basis for PGH and its subsidiaries in accordance with GAAP. For
the purposes of determining the Leverage Ratio at December 31, 1998,
Consolidated EBITDA for the period of four fiscal quarters ending December
31, 1998, shall be determined to be the amount of annualized Consolidated
EBITDA for the period from the Unconditional Date to and including December
31, 1998.
"Consolidated Interest Expense" shall mean, for any period, the interest
expense (including the interest component in respect of Capital Lease
Obligations), of PGH and its subsidiaries during such period, minus any
interest income of PGH and its subsidiaries during such period, in each case,
<PAGE>
8
as determined on a consolidated basis in accordance with GAAP. For purposes
of the foregoing, interest expense shall be determined after giving effect to
any net payments accrued by PGH or its subsidiaries with respect to the
interest rate protection agreements relating to PGH and its subsidiaries.
"Consolidated Net Income" shall mean, for any period, net income or loss
of PGH and its consolidated subsidiaries for such period determined on a
consolidated basis in accordance with GAAP; provided that there shall be
excluded (a) the income (or loss) of any person accrued prior to the date it
becomes a subsidiary of PGH or is merged into or consolidated with PGH or any
of its subsidiaries or the date that such person's assets are acquired by PGH
or any of its subsidiaries and (b) the income of any subsidiary of PGH to the
extent that the declaration or payment of dividends or similar distributions
by such subsidiary of that income is not at the time permitted by operation
of the terms of its charter or any agreement (other than a Credit Facility or
any facility refinancing a Credit Facility in accordance with Section 6.06),
instrument, judgment, decree, order, statute, rule or governmental regulation
applicable to PGH or such subsidiary.
"Consolidated Net Worth" shall mean, as at any date of determination, the
consolidated stockholders' equity of PGH and its subsidiaries, as determined
on a consolidated basis in accordance with GAAP plus Qualified Junior
Indebtedness; provided, however, that, for purposes of this definition,
Hybrid Preferred Securities (and any related Qualified Junior Indebtedness)
shall not be included in Consolidated Net Worth to the extent that they would
exceed 10% of Consolidated Net Worth.
"Consolidated Total Debt" shall mean, as of any date of determination,
without duplication, the aggregate principal amount of Indebtedness of PGH
and its subsidiaries outstanding as of such date, determined on a
consolidated basis (other than (a) Indebtedness of the type referred to in
clause (h) of the definition of the term "Indebtedness", except to the extent
of any unreimbursed drawings thereunder and (b) Qualified Junior Indebtedness
(except to the extent that such Qualified Junior Indebtedness exceeds 10% of
Consolidated Net Worth), minus (to the extent the Indebtedness so secured
would otherwise constitute Consolidated Total Debt) the amount of cash or
cash equivalents pledged to a holder or holders thereof (or a trustee or
representative of any such holder or holders) to secure Indebtedness owing to
the same.
"Control" shall mean the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a person,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "Controlling" and "Controlled" shall have meanings correlative
thereto.
"Credit Event" shall have the meaning assigned to such term in Section
4.02(a).
"Credit Facilities" shall mean the PA Facility Agreement, the PALLC Credit
Facility, the Powercoal Credit Agreement and the Eastern Facility Agreement.
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
<PAGE>
9
"Depositary Shares" shall mean the American Depositary Shares, evidenced
by American Depositary Receipts, each such American Depositary Share
representing four Shares.
"Director General" shall mean the person appointed from time to time by
the Secretary of State to hold office as the Director General of Electricity
Supply in the United Kingdom for the purpose of the Electricity Act.
"Dollar Borrowing" shall mean a Borrowing comprised of Dollar Loans.
"Dollar Equivalent" shall mean, on any date of determination, with
respect to any amount denominated in any currency other than Dollars, the
equivalent in Dollars of such amount, determined by the Paying Agent pursuant
to Section 1.03(a) using the applicable Exchange Rate with respect to such
currency at the time in effect.
"Dollar Loan" shall mean a Dollar Revolving Loan or a Dollar Term Loan.
"Dollar Revolving Loan" shall mean a Revolving Loan denominated in Dollars
and made pursuant to Section 2.01.
"Dollar Term Loan" shall mean a Term Loan denominated in Dollars. Each
Dollar Term Loan shall be either a Eurocurrency Term Loan or a Base Rate Term
Loan.
"Dollars" or "$" shall mean lawful money of the United States of America.
"Eastern" shall mean Eastern Electricity plc, which is on the date hereof
a public limited company incorporated in England and Wales.
"Eastern Facility Agreement" shall mean the multicurrency revolving loan
agreement, among Eastern, the Arranger, the Agent and the Banks named
therein, in the form attached to the Eastern Facility Letter.
"Eastern Facility Letter" shall mean the letter dated the date hereof from
the Initial Lenders to PA pursuant to which, among other things, the Initial
Lenders agree to provide or cause to be provided to Eastern the facilities
described in the Eastern Facility Agreement.
"Electricity Act" shall mean the United Kingdom Electricity Act 1989 and,
unless the context otherwise requires, all subordinate legislation made
pursuant thereto.
"EnergyCo Refinancing Indebtedness" shall have the meaning assigned to
such term in Section 6.01(h).
"environment" shall mean ambient air, surface water and groundwater
(including potable water, navigable water and wetlands), the land surface or
subsurface strata, the workplace or as otherwise defined in any Environmental
Law.
"Environmental Claim" shall mean any written accusation, allegation,
notice of violation, claim, demand, order, directive, cost recovery action or
other cause of action by, or on behalf of, any
<PAGE>
10
Governmental Authority or any person for damages, injunctive or equitable
relief, personal injury (including sickness, disease or death), Remedial
Action costs, tangible or intangible property damage, natural resource
damages, nuisance, pollution, any adverse effect on the environment caused by
any Hazardous Material, or for fines, penalties or restrictions, resulting
from or based upon (a) the existence, or the continuation of the existence,
of a Release (including sudden or non-sudden, accidental or non-accidental
Releases), (b) exposure to any Hazardous Material, (c) the presence, use,
handling, transportation, storage, treatment or disposal of any Hazardous
Material or (d) the violation or alleged violation of any Environmental Law
or Environmental Permit.
"Environmental Law" shall mean any and all applicable present and future
treaties, laws, rules, regulations, codes, ordinances, orders, decrees,
judgments, injunctions, notices or binding agreements issued, promulgated or
entered into by any Governmental Authority, relating in any way to the
environment, preservation or reclamation of natural resources, the
management, Release or threatened Release of any Hazardous Material or to
health and safety matters.
"Environmental Permit" shall mean any permit, approval, authorization,
certificate, license, variance, filing or permission required by or from any
Governmental Authority pursuant to any Environmental Law.
"Equity Issuance" shall mean any issuance or sale by a Loan Party of any
shares of capital stock or other equity securities of a Loan Party or any
obligations convertible into or exchangeable for, or giving any person a
right, option or warrant to acquire such securities or such convertible or
exchangeable obligations, except in each case for (a) any issuance or sale to
PacifiCorp or PGH or any of their respective wholly owned subsidiaries, (b)
any issuance of directors' qualifying shares, (c) any issuance or sale to
officers and employees under employee benefit or compensation plans and (d)
any issuance or sale of an interest in a Single Purpose Entity.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
the same may be amended from time to time.
"ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with the Borrower, is treated as a single
employer under Section 414(b) or (c) of the Code, or solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414 of the Code.
"ERISA Event" shall mean (a) any "reportable event", as defined in Section
4043 of ERISA or the regulations issued thereunder, with respect to a Plan,
except a reportable event for which the requirement of notice to the PBGC has
been waived; (b) the adoption of any amendment to a Plan that would require
the provision of security pursuant to Section 401(a)(29) of the Code or
Section 307 of ERISA; (c) the existence with respect to any Plan of an
"accumulated funding deficiency" (as defined in Section 412 of the Code or
Section 302 of ERISA), whether or not waived; (d) the filing pursuant to
Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (e) the
incurrence of any liability in excess of $1,000,000 under Title IV of ERISA
with respect to the termination of any Plan or the withdrawal or partial
withdrawal of PGH or any of its ERISA Affiliates from any Plan or
Multiemployer Plan; (f) the receipt by PGH or any ERISA Affiliate from the
PBGC or a plan administrator of a Multiemployer Plan of any notice relating
to the intention to terminate any Plan
<PAGE>
11
or Plans or to appoint a trustee to administer any Plan; (g) the receipt by
PGH or any ERISA Affiliate of any notice concerning the imposition of
Withdrawal Liability in excess of $1,000,000 or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA; (h) the occurrence of a "prohibited
transaction" with respect to which PGH or any of its subsidiaries is a party
to the prohibited transaction and is a "disqualified person" (within the
meaning of Section 4975 of the Code) or with respect to which PGH or any such
subsidiary could otherwise be liable; (i) any other event or condition with
respect to a Plan or Multiemployer Plan that could reasonably be expected to
result in liability of PGH in excess of $1,000,000; and (j) any Foreign
Benefit Event.
"Eurocurrency Borrowing" shall mean a Borrowing comprised of Eurocurrency
Loans.
"Eurocurrency Loan" shall mean any Eurocurrency Revolving Loan or
Eurocurrency Term Loan.
"Eurocurrency Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurocurrency Spread" shall mean 2.75%; provided, however, that (a) the
Eurocurrency Spread shall be 2.25% if within 10 Business Days of the initial
Acquisition Borrowing the credit facilities under this Agreement shall have
received credit ratings from Standard & Poor's Ratings Services and Moody's
Investors Service, Inc. of BB+ and Ba1 or higher, respectively and (b) the
Eurocurrency Spread shall be increased by 0.75% during the Extension Period.
"Eurocurrency Term Borrowing" shall mean a Borrowing comprised of
Eurocurrency Term Loans.
"Eurocurrency Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Adjusted LIBO Rate in accordance with the
provisions of Article II.
"Event of Default" shall have the meaning assigned to such term in Article
VII.
"Exchange Rate" shall mean, on any day, with respect to any currency other
than Dollars (for purposes of determining the Dollar Equivalent) or Sterling
(for purposes of determining the Sterling Equivalent), the rate at which such
currency may be exchanged into Dollars or Sterling, as the case may be, as
set forth at approximately 11:00 a.m., London time, on such date on the
applicable Reuters World Currency Page. In the event that any such rate does
not appear on any Reuters World Currency Page, the Exchange Rate shall be
determined by reference to such other publicly available service for
displaying exchange rates as may be agreed upon by the Paying Agent and the
Borrower, or, in the absence of such agreement, such Exchange Rate shall
instead be the arithmetic average of the spot rates of exchange of the Paying
Agent in the market where its foreign currency exchange operations in respect
of such currency are then being conducted, at or about 10:00 a.m., local
time, on such date for the purchase of Dollars or Sterling, as the case may
be, for delivery two Business Days later; provided that, if at the time of
any such determination, for any reason, no such spot rate is being quoted,
the Paying Agent may use any reasonable method it deems appropriate to
determine such rate, and such determination shall be presumed correct absent
manifest error.
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12
"Exchange Rate Protection Agreement" shall mean any Hedging Agreement that
is designed to protect the Borrower against fluctuations in currency exchange
rates and not for speculation.
"Excluded Assets" shall mean the assets set forth on Schedule 1.01(b).
"Excluded Taxes" shall mean, with respect to the Paying Agent, any Lender,
the Issuing Bank or any other recipient of any payment to be made by or on
account of any obligation of a Loan Party hereunder, (a) income, corporation
or franchise Taxes imposed on (or measured by) such recipient's net income
(including branch profits or similar taxes) imposed as a result of a present
or former connection between such recipient and the jurisdiction of the
Governmental Authority imposing such tax (other than any such connection
arising solely from such recipient having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement) and
(b) any withholding Tax other than U.S. withholding Tax that is imposed on
amounts payable to such Lender (i) to the extent it is in effect and would
apply as of the date such Lender becomes a party to this Agreement or (ii) to
the extent it relates to payments received by a new lending office designated
by such Lender (or its assignee) and is in effect and would apply at the time
such lending office is designated, except to the extent that such Lender (or
its assignor, if any) was entitled, at the time of designation of a new
lending office (or assignment), to receive additional amounts from the Loan
Party with respect to such withholding tax pursuant to Section 2.20(a) or
(iii) that is attributable to a Lender's failure to comply with Section
2.20(e).
"Extension Fees" shall have the meaning assigned to such term in Section
2.23.
"Extension Period" shall mean the period commencing on but excluding the
day that is 18 months after the date of the initial Acquisition Borrowing and
ending on and including the date that is 30 months after the date of the
initial Acquisition Borrowing.
"Federal Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions with members of
the Federal Reserve System arranged by Federal funds brokers, as published on
the next succeeding Business Day by the Federal Reserve Bank of New York, or,
if such rate is not so published for any day that is a Business Day, the
average of the quotations for the day for such transactions received by the
Paying Agent from three Federal funds brokers of recognized standing selected
by it.
"Fees" shall mean the Commitment Fees, the L/C Participation Fees, the
Issuing Bank Fees and the Extension Fees.
"Finance" shall mean PacifiCorp Finance (UK) Limited, a limited company
incorporated in England and Wales, all the outstanding share capital of which
on the date hereof is beneficially owned by Services.
"Financial Officer" of any person shall mean the chief financial officer,
principal accounting officer, Treasurer or Controller of such person.
"Fixed Charges" shall mean, for any period, the sum of (a) Cash Interest
Expense for such period, (b) scheduled principal payments of Indebtedness
made by the Loan Parties to any person
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13
other than the Loan Parties during such period and (c) the amount of cash
dividends paid by PGH during such period.
"Foreign Benefit Event" shall mean, with respect to any Foreign Pension
Plan, (a) the existence of unfunded liabilities in excess of the amount
permitted under any applicable law, or in excess of the amount that would be
permitted absent a waiver from a Governmental Authority, (b) the failure to
make the required contributions or payments, under any applicable law, on or
before the due date for such contributions or payments, (c) the receipt of a
notice by a Governmental Authority relating to the intention to terminate any
such Foreign Pension Plan or to appoint a trustee or similar official to
administer any such Foreign Pension Plan, or alleging the insolvency of any
such Foreign Pension Plan and (d) the incurrence of any liability in excess
of $50,000,000 (or the Dollar Equivalent thereof in another currency) by PGH
or any subsidiary under applicable law on account of the complete or partial
termination of such Foreign Pension Plan or the complete or partial
withdrawal of any participating employer therein, (e) the occurrence of any
transaction that is prohibited under any applicable law and could result in
the incurrence of any liability by PGH or any subsidiary, or the imposition
on PGH or any subsidiary of any fine, excise tax or penalty resulting from
any noncompliance with any applicable law, in each case in excess of
$50,000,000 (or the Dollar Equivalent thereof in another currency) and (f)
any other event or condition that would reasonably be expected to result in
liability in excess of $50,000,000 (or the Dollar Equivalent thereof in
another currency) of PGH or any subsidiary.
"Foreign Pension Plan" shall mean any benefit plan which under applicable
law is required to be funded through a trust or other funding vehicle other
than a trust or funding vehicle maintained exclusively by a Governmental
Authority.
"FRNs" shall have the meaning assigned to such term in Section 6.01(i).
"FRN Purchase Agreement" shall mean a note purchase agreement governing
the terms of the FRNs and entered into by the Borrower, the Guarantor and one
or more purchasers of FRNs, which note purchase agreement, on the effective
date thereof, shall contain covenants and events of default substantially
identical to the covenants and events of default set forth in this Agreement
on such date.
"Funding Exchange Rate Protection Agreement" shall mean any Exchange Rate
Protection Agreement that is designed to ensure that the applicable
borrowings under this Agreement and the Powercoal Credit Agreement will
provide a sufficient amount in Sterling (together with borrowings under the
PA Facility Agreement and certain other sources of funds) to pay for the
Shares and for the other purposes specified in Clause 3.1(a)(i) of the PA
Facility Agreement.
"GAAP" shall mean (a) with respect to a person organized under the laws of
the United States or any state or political subdivision thereof, generally
accepted accounting principles in the United States, (b) with respect to a
person organized under the laws of any part of the United Kingdom, generally
accepted accounting principles in the United Kingdom and (c) with respect to
a person organized under the laws of, or treated for accounting purposes as a
resident of, Australia or any state or political subdivision thereof,
generally accepted accounting principles in Australia.
"Goldman" shall mean Goldman Sachs Credit Partners L.P., a Bermuda
limited partnership.
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14
"Governmental Authority" shall mean the government of the United States of
America, the United Kingdom, any other nation or any political subdivision
thereof, whether state or local, and any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
"Guarantee" of or by any person shall mean any obligation, contingent or
otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in
any manner, whether directly or indirectly, and including any obligation of
such person, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Indebtedness or to purchase (or to
advance or supply funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase or lease property, securities or services
for the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness or (c) to maintain working capital, equity capital or any
other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay such Indebtedness; provided, however,
that the term "Guarantee" shall not include endorsements for collection or
deposit in the ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement, substantially in
the form of Exhibit E, made by the Guarantor in favor of the Collateral Agent
for the benefit of the Secured Parties.
"Guarantor" shall mean PGH as a party to the Guarantee Agreement.
"Hazardous Materials" shall mean all explosive or radioactive substances
or wastes, hazardous or toxic substances or wastes, pollutants, solid, liquid
or gaseous wastes, including petroleum or petroleum distillates, asbestos or
asbestos containing materials, polychlorinated biphenyls ("PCBs") or
PCB-containing materials or equipment, radon gas, infectious or medical
wastes and all other substances or wastes of any nature regulated pursuant to
any Environmental Law.
"Hedging Agreement" shall mean any rate swap transaction, basis swap,
forward rate transaction, commodity swap, commodity option, equity or equity
index swap, equity or equity index option, bond option, interest rate option,
foreign exchange transaction, cap transaction, floor transaction, collar
transaction, currency swap transaction, cross-currency rate swap transaction,
currency option or any other similar transaction (including any option with
respect to any of the foregoing transactions and any transaction that
involves physical delivery of any commodity in connection with an energy or
energy-related trading business (other than coal)) or any combination of the
foregoing transactions.
"Hybrid Preferred Securities" shall mean any securities, permanent debt
obligations or similar instruments or arrangements (each in this definition
referred to as "preferred securities") issued by a Hybrid Preferred
Securities Subsidiary, where such preferred securities have the following
characteristics: (a) such Hybrid Preferred Securities Subsidiary lends
substantially all of the proceeds from the issuance of such preferred
securities to PGH or any of its subsidiaries in exchange for the applicable
Qualified Junior Indebtedness issued by PGH or any of its subsidiaries;
<PAGE>
15
(b) such preferred securities contain terms providing for the deferral of
interest payments on such Qualified Junior Indebtedness; and (c) PGH or any
such subsidiary makes periodic interest payments on such Qualified Junior
Indebtedness, which interest payments are in turn used by the Hybrid
Preferred Securities Subsidiary to make corresponding payments to the holders
of the preferred securities.
"Hybrid Preferred Securities Subsidiary" shall mean any person (a) all of
the common equity interest of which is owned (either directly or indirectly)
through one or more wholly owned Subsidiaries at all times, (b) that has been
formed for the purpose of issuing Hybrid Preferred Securities and (c)
substantially all of the assets of which consist at all times of Qualified
Junior Indebtedness issued by PGH or any of its subsidiaries and payments
made from time to time on such Qualified Junior Indebtedness.
"Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money, (b) all obligations of such
person evidenced by bonds, debentures, notes or similar instruments (other
than surety and appeal bonds, performance bonds, reclamation bonds and other
obligations of a like nature incurred in the ordinary course of business and
not in respect of borrowed money), (c) all obligations of such person (other
than in the nature of trade accounts payable) under conditional sale or other
title retention agreements relating to property or assets purchased by such
person, (d) all obligations of such person issued or assumed as the deferred
purchase price of property or services (excluding trade accounts payable and
accrued obligations incurred in the ordinary course of business), (e) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed (provided that, for purposes
hereof, the amount of such Indebtedness shall be limited to the lesser of (x)
the principal amount thereof and (y) the fair market value of such property),
(f) all Guarantees by such person of Indebtedness of others, (g) all Capital
Lease Obligations of such person, (h) all obligations of such person as an
account party in respect of letters of credit and bankers' acceptances and
(i) all obligations of such person for Production Payments from property
operated by or on behalf of such person; provided that, for purposes of the
definition of "Consolidated Total Debt" as used in Section 6.11,
"Indebtedness" shall also include all obligations of such person in respect
of Hedging Agreements (other than any Interest Rate Protection Agreement and
any Exchange Rate Protection Agreement) to the extent the Net Termination
Value of such Hedging Agreements at any time exceeds $275,000,000. For
purposes of this Agreement, the amount of Non-Recourse Indebtedness of PGH
and its subsidiaries included in the calculation of consolidated Indebtedness
of PGH and its subsidiaries at any time shall equal the lesser of (a) the
aggregate principal amount of such Indebtedness and (b) the equity of PGH and
its subsidiaries in the asset or Single Purpose Entity, as the case may be,
relating to such Non-Recourse Indebtedness. For purposes of this Agreement,
the amount of Indebtedness (other than Non-Recourse Indebtedness) of any
partnership, limited liability company or similar pass-through entity (as
used in this definition, a "partnership") in which PGH or a subsidiary is a
general partner or other member or equity holder with unlimited liability (as
used in this definition, a "general partner") and in which there are one or
more Qualified General Partners shall only be included in the calculation of
Indebtedness of PGH and its subsidiaries at any time (a) to the extent of
PGH's or such subsidiary's pro rata share of the interest of the general
partners in the partnership at such time, or (b) if the applicable governing
or other relevant agreement specifies that PGH or any of its subsidiaries is
liable to the partnership or its creditors for a specific percentage of such
partnership's liabilities, to
<PAGE>
16
the extent of such specified percentage. For purposes hereof, "Qualified
General Partner" shall mean a general partner of a partnership that (a) is a
person that was not created solely for the purpose of investing in such
partnership and (b) at the time of the investment in such partnership, PGH
reasonably believes that (i) such person has a credit quality (or credit
support) approximately equal to that of PGH or the applicable subsidiary and
(ii) such person will be able to perform its share of the obligations under
such Indebtedness when due.
"Indemnified Taxes" shall mean Taxes other than Excluded Taxes.
"Initial Lenders" shall mean Citibank, Goldman and Morgan.
"Intercompany Loan Agreements" shall mean (a) the Umbrella Loan Agreement
dated as of April 4, 1983, between PacifiCorp and certain of its
subsidiaries, as in effect on the Closing Date, (b) the Intercompany
Borrowing Agreement dated as of April 1, 1991, between PGH and certain of its
subsidiaries and affiliates, as in effect on the Closing Date, and (c) any
additional or substitute intercompany lending agreement, or amendment
thereto, among substantially the same parties and on substantially the same
terms and conditions (other than rates of interest) as any agreement
described in clause (a) or (b) above.
"Interco Transactions" shall mean (a) the creation of a wholly owned
subsidiary of PGH which shall be incorporated under the laws of a state of
the United States ("Interco") and (b) the contribution to Interco by PGH of
PGH's interest in the Borrower and the corporations that are members of PALLC.
"Interest Payment Date" shall mean, with respect to any Loan, the last day
of the Interest Period applicable to the Borrowing of which such Loan is a
part and, in the case of a Eurocurrency Borrowing with an Interest Period of
more than three months' duration, each day that would have been an Interest
Payment Date had successive Interest Periods of three months' duration been
applicable to such Borrowing, and, in addition, the date of any prepayment of
such Borrowing or conversion of such Borrowing to a Borrowing of a different
Type.
"Interest Period" shall mean (a) with respect to any Eurocurrency
Borrowing, the period commencing on the date of such Borrowing and ending on
the numerically corresponding day (or, if there is no numerically
corresponding day, on the last day) in the calendar month that is 1, 2, 3 or
6 months thereafter (and, in the case of (i) a Sterling Revolving Borrowing
made pursuant to Section 2.02(g) three Business Days thereafter, (ii) a
Sterling Borrowing referred to in clause (vi) of Section 2.10, the date
thereafter requested by the Borrower and agreed to by the Paying Agent or
(iii) a Borrowing made or outstanding prior to the Syndication Date, such
shorter period as may be agreed by the Borrower and the Paying Agent in order
to facilitate the syndication of the Loans), as the Borrower may elect and
(b) with respect to any Base Rate Borrowing, the period commencing on the
date of such Borrowing and ending on the earliest of (i) the next succeeding
March 31, June 30, September 30 or December 31, (ii) the Revolving Credit
Maturity Date or the Term Loan Maturity Date, as applicable, and (iii) the
date such Borrowing is converted to a Borrowing of a different Type in
accordance with Section 2.10 or repaid or prepaid in accordance with Section
2.12 or 2.13; provided, however, that if any Interest Period would end on a
day other than a Business Day, such Interest Period shall be extended to the
next succeeding Business Day unless, in the case of a Eurocurrency Borrowing
only, such next succeeding Business Day would fall in the next calendar
month, in which case such Interest Period shall end on the next preceding
Business Day. Interest
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17
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.
"Interest Rate Protection Agreement" shall mean any Hedging Agreement that
is designed to protect the Borrower against fluctuations in interest rates
and not for speculation.
"Investment Grade Rating" shall mean that the credit rating of a person's
senior unsecured, non-credit-enhanced long-term debt is (a) BBB- or higher,
as determined by Standard & Poor's Ratings Services and (b) Baa3 or higher,
as determined by Moody's Investors Service, Inc.
"Issuing Bank Fees" shall have the meaning assigned to such term in
Section 2.05(b).
"Judgment Currency" shall have the meaning assigned to such term in
Section 9.16.
"L/C Commitment" shall mean the commitment of the Issuing Bank to issue
Letters of Credit pursuant to Section 2.22.
"L/C Disbursement" shall mean a payment or disbursement made by the
Issuing Bank pursuant to a Letter of Credit.
"L/C Exposure" shall mean at any time the sum of (a) the aggregate undrawn
amount of all outstanding Letters of Credit denominated in Dollars at such
time, (b) the Dollar Equivalent of the aggregate undrawn amount of all
outstanding Letters of Credit denominated in Sterling at such time, (c) the
aggregate principal amount of all L/C Disbursements in respect of Letters of
Credit denominated in Dollars that have not yet been reimbursed at such time
and (d) the Dollar Equivalent of the aggregate principal amount of all L/C
Disbursements in respect of Letters of Credit denominated in Sterling that
have not yet been reimbursed at such time. The L/C Exposure of any Revolving
Credit Lender at any time shall mean its Pro Rata Percentage of the total L/C
Exposure at such time.
"L/C Participation Fee" shall have the meaning assigned to such term in
Section 2.05(b).
"Lee Ranch Transfer" shall mean the transfer, directly or indirectly, to
Powercoal (or a subsidiary thereof) of all the equity ownership interests in
Lee Ranch Coal Company or Gold Fields Mining Corporation or any of its
subsidiaries.
"Lenders" shall mean the Initial Lenders and any other financial
institution that has become a party hereto pursuant to an Assignment and
Acceptance (other than any such person that has ceased to be a party hereto
pursuant to an Assignment and Acceptance).
"Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.22. Letters of Credit may be denominated in Dollars or Sterling.
"Leverage Ratio" shall mean, as of the last day of any fiscal quarter, the
ratio of (a) Consolidated Total Debt as of such date to (b) Consolidated
EBITDA for the period of four consecutive fiscal quarters ended on such date.
<PAGE>
18
"LIBO Rate" shall mean, with respect to any Eurocurrency Borrowing for any
Interest Period, the rate appearing on Page 3750 of the Dow Jones Service (or
on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the Paying
Agent from time to time for purposes of providing quotations of interest
rates applicable to Dollar or Sterling deposits, as applicable, in the London
interbank market) at approximately 11:00 a.m., London time, two Business Days
prior to (in the case of a Eurocurrency Loan denominated in Dollars) or on
the day of (in the case of a Eurocurrency Loan denominated in Sterling) the
commencement of such Interest Period, as the rate for Dollar or Sterling
deposits, as applicable, with a maturity comparable to such Interest Period.
In the event that such rate is not available at such time for any reason,
then the "LIBO Rate" with respect to such Eurocurrency Borrowing for such
Interest Period shall be the rate at which Dollar or Sterling deposits, as
applicable, of $5,000,000 or L5,000,000, respectively, and for a maturity
comparable to such Interest Period are offered by the principal London office
of the Paying Agent in immediately available funds in the London interbank
market at approximately 11:00 a.m., London time, two Business Days prior to
(in the case of a Eurocurrency Loan denominated in Dollars) or on the day of
(in the case of a Eurocurrency Loan denominated in Sterling) the commencement
of such Interest Period.
"License" shall mean any Public Electricity Supply License and Electricity
Generation License issued pursuant to Section 6(l) of the Electricity Act, to
Services or any of its subsidiaries, as modified or supplemented from time to
time, and if any such License is split by or with the consent of the Director
General into more than one new license, each of such new licenses.
"Licenseholder" shall mean at any time Services or any of its subsidiaries
which then holds a License.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset
and (c) any other preferential arrangement that has substantially the same
practical effect as a security interest.
"Loan Documents" shall mean this Agreement, the Guarantee Agreement and
the Security Documents.
"Loan Parties" shall mean the Borrower and the Guarantor.
"Loans" shall mean the Revolving Loans and the Term Loans.
"Margin Stock" shall have the meaning assigned to such term in Regulation
U.
"Material Adverse Effect" shall mean (a) a material adverse effect on the
business, assets, liabilities, operations or condition (financial or
otherwise) of the Loan Parties and their subsidiaries, taken as a whole, (b)
material impairment of the ability of either Loan Party to consummate the
Transactions or to perform its obligations under the Loan
<PAGE>
19
Documents to which it is or will be a party or (c) material impairment of the
rights of or benefits available to the Lenders under the Loan Documents,
excluding, in each case, as a direct result of changes of price levels or
pricing in respect of the supply and/or distribution of electricity pursuant
to the terms of any of the Licenses.
"Material Hedging Obligations" shall mean payment obligations in respect
of one or more Hedging Agreements with a single counterparty (or its
Affiliates) that have Negative Termination Values exceeding $50,000,000 in
aggregate amount.
"Morgan" shall mean Morgan Guaranty Trust Company of New York, a New York
banking corporation.
"Multiemployer Plan" shall mean a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Negative Termination Value" shall mean, with respect to any Hedging
Agreement, the amount (if any) that would be required to be paid by PGH or
any subsidiary if such Hedging Agreement were terminated by reason of a
default by it or other termination event relating to PGH or any subsidiary.
The Negative Termination Value of any Hedging Agreement at any date shall be
determined (a) as of the end of the most recent fiscal quarter ended on or
prior to such date if such Hedging Agreement was then outstanding or (b) as
of the date such Hedging Agreement is entered into if it is entered into
after the end of such fiscal quarter; provided, however, that if an agreement
between PGH or any subsidiary and the relevant counterparty provides that,
upon any such termination by such counterparty, one or more other Hedging
Agreements (if any then exist) between PGH or any subsidiary and such
counterparty would also terminate and the amount (if any) payable by PGH or
any subsidiary would be a net amount reflecting the termination of all
Hedging Agreements so terminated, then the Negative Termination Value of all
the Hedging Agreements subject to such netting shall be, at any date, a
single amount equal to such net amount (if any) payable by PGH or any
subsidiary determined as of the later of (a) the end of the most recently
ended fiscal quarter or (b) the date on which the most recent Hedging
Agreement subject to such netting was entered into.
"Net Adjustment Amount" shall mean, for any period, the Adjustment Amount
less the aggregate Adjustment Amounts applied to reduce Consolidated EBITDA
in prior periods.
"Net Cash Proceeds" shall mean (a) with respect to any Asset Sale or a
sale permitted by Section 6.05(a)(D), the cash proceeds thereof received by
PGH, the Borrower or any of their respective subsidiaries (including cash and
cash equivalents and cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only
as and when received), net of (i) costs of sale (including payment of the
outstanding principal amount of, premium or penalty, if any, interest and
other amounts on any Indebtedness (other than Loans) (x) secured by a Lien
permitted pursuant to Section 6.02 on such assets and required to be repaid
under the terms thereof as a result of such Asset Sale or (y) of a Single
Purpose Entity owning such assets), (ii) taxes paid or payable as a result
thereof, (iii) amounts provided as a reserve against any liabilities under
any indemnification obligations associated with such Asset Sale (except that,
to the extent and at the time any such amounts are released from such
reserve, such amounts shall constitute Net Cash Proceeds), (iv) amounts used
by subsidiaries of the Borrower to prepay Indebtedness under the applicable
Credit Facility or reinvested by subsidiaries of the Borrower as permitted or
not prohibited by the terms of the applicable Credit Facility and (v) amounts
required to be paid under applicable law, the constitutive documents of any
subsidiary of the Borrower or any agreement
<PAGE>
20
entered into prior to such Asset Sale to holders of a minority interest in
the subsidiary that receives such cash proceeds or any direct or indirect
parent thereof; provided, however, that, in the event the Asset Sale is a
result of a Casualty Event or Condemnation Event, the cash proceeds thereof
for purposes of this definition shall not include proceeds thereof to the
extent they are used (or committed to be used) to replace or repair the
damaged or condemned property, as applicable, within 180 days of receipt of
such proceeds, in each case so long as no Default or Event of Default shall
have occurred and be continuing and (b) with respect to any Equity Issuance
or any issuance or other disposition of Indebtedness for borrowed money, the
cash proceeds thereof net of underwriting commissions or placement fees and
expenses directly incurred in connection therewith.
"Net Termination Value" shall mean (a) with respect to all Hedging
Agreements (other than any Interest Rate Protection Agreement and any
Exchange Rate Protection Agreement), the difference between (a) the aggregate
amounts (if any) that would be required to be paid by PGH or any of its
subsidiaries if such Hedging Agreements were terminated by reason of a
default relating to PGH or any subsidiary, and (b) the aggregate amounts (if
any) that PGH or any subsidiary would be entitled to receive if such Hedging
Agreements were terminated by reason of a default relating to PGH or any
subsidiary and (b) the NUG Contract Termination Value. The Net Termination
Value shall be determined (a) as of the end of the most recent fiscal quarter
ended on or prior to such date if such Hedging Agreement (or NUG Contract)
was then outstanding or (b) as of the date such Hedging Agreement (or NUG
Contract) is entered into if it is entered into after the end of such fiscal
quarter.
"Non-Recourse Indebtedness" of any person shall mean at any time
Indebtedness secured by a Lien in or upon one or more assets of such person
where the rights and remedies of the holder of such Indebtedness in respect
of such Indebtedness do not extend to any other assets of such person.
Notwithstanding the foregoing, Indebtedness of any person shall not fail to
constitute Non-Recourse Indebtedness by reason of the inclusion in any
document evidencing, governing, securing or otherwise relating to such
Indebtedness of provisions to the effect that such person shall be liable,
beyond the assets securing such Indebtedness, for (a) misapplied moneys,
including insurance and condemnation proceeds and security deposits, (b)
indemnification by such person in favor of holders of such Indebtedness and
their affiliates in respect of liabilities to third parties, including
environmental liabilities, (c) breaches of customary representations and
warranties given to the holders of such Indebtedness and (d) such other
similar obligations as are customarily excluded from the provisions that
otherwise limit the recourse of commercial lenders making so-called
"nonrecourse" loans to institutional borrowers. Indebtedness of a Single
Purpose Entity shall constitute Non-Recourse Indebtedness of such Single
Purpose Entity.
"NUG Contract" shall mean a contract of PGH or any of its subsidiaries to
supply power or energy to a Single Purpose Entity in connection with a NUG
Transaction, or otherwise to support the performance of a Single Purpose
Entity in a NUG Transaction.
"NUG Contract Termination Value" shall mean , with respect to all NUG
Contracts, (a) the net amount, if any, that would be required to be paid by
PGH or any of its subsidiaries (other than a Single Purpose Entity) if such
NUG Contracts (to the extent not covered by Qualified NUG Hedging Agreements)
<PAGE>
21
were terminated by reason of a default relating to PGH or any of its
subsidiaries in excess of (b) the amount, if any, that PGH or any of its
subsidiaries would be entitled to receive if such NUG Contracts (to the
extent not covered by Qualified NUG Hedging Agreements) were terminated by
reason of a default relating to PGH or any of its subsidiaries; provided,
however, that for purposes of determining coverage by a Qualified NUG Hedging
Agreement, if the counterparty does not have Investment Grade Ratings (or
does not provide a guarantee from an entity with Investment Grade Ratings),
the Qualified NUG Hedging Agreement shall be deemed to provide one-half of
the coverage it nominally provides.
"NUG Transaction" shall mean a transaction entered into by a Single
Purpose Entity, the principal purpose of which is to restructure the
contracts relating to, or financing of, an existing independent power
project, excluding any such transactions that were consummated prior to
December 31, 1997.
"Obligations" shall mean all obligations defined as "Obligations" in the
Guarantee Agreement and the Security Documents.
"Offer" shall mean the offer by Goldman Sachs International on behalf of
PA to acquire all of the outstanding Shares (including the Shares represented
by Depositary Shares), substantially on the terms and conditions referred to
in the Press Release, as amended, supplemented or otherwise modified.
"Offer Account" shall mean the account in the name of PA opened with
Citibank, N.A. on or before the Unconditional Date for the purposes of
effecting the acquisition of the Shares.
"Offer Conditions Precedent" shall mean the conditions precedent set forth
on Schedule 1.01(c).
"Offer Document" shall mean the document to be delivered to the
shareholders of TEG containing the formal Offer.
"Offer Termination Date" shall mean the earliest date (as notified by the
Borrower to the Paying Agent in writing) on which all of the following have
occurred: (a) all payments in respect of acceptances of the cash alternative
in the Offer have been made in full; (b) no further such acceptances are
possible; and (c) all procedures pursuant to Section 428 et seq. of the U.K.
Companies Act 1985 that are capable of being implemented have been completed
and all payments pursuant thereto to shareholders in TEG have been made in
full.
"Open Market Shares" shall mean the Shares (including any such Shares
represented by Depositary Shares) purchased by PGH (or any Affiliate thereof)
in the open market prior to the Unconditional Date.
"Other Taxes" shall mean any and all present or future stamp or
documentary taxes arising from any payment made under any Loan Document or
from the execution, delivery or enforcement of, or otherwise with respect to,
any Loan Document imposed by any Governmental Authority in the United States,
the United Kingdom or the jurisdiction of any Payment Location.
"PA" shall mean PacifiCorp Acquisitions, an unlimited company incorporated
in England and Wales, all the outstanding share capital of which on the date
hereof is beneficially owned by Finance.
<PAGE>
22
"PA Agent" shall mean Citibank International plc, in its capacity as
facility agent for the PA Lenders under the PA Facility Agreement, and any
successor or assign in such capacity.
"PA Facility Agreement" shall mean the facility agreement dated 3
February, 1998, among PA, Services, Finance, the PA Lenders, the PA Agent and
the Arrangers, the Security Agent and the L/C Bank named therein.
"PA Lenders" shall mean the financial institutions that are parties from
time to time to the PA Facility Agreement as lenders thereunder.
"PacifiCorp" shall mean PacifiCorp, a corporation organized under the laws
of Oregon.
"PALLC" shall mean PacifiCorp Australia L.L.C., an Oregon limited
liability company.
"PALLC Credit Facility" shall mean the Credit Facility dated as of
December 11, 1995, as amended by the First Amending Agreement dated as of
December 16, 1996, and as further amended by the Deed of Amendment and
Release dated on or about September 5, 1997, in each case, by and among
PALLC, as borrower, the lenders referred to therein and Citibank, as
administrative agent, as the same may be amended, extended, renewed,
restated, supplemented or otherwise modified, refinanced, refunded, replaced
or substituted (in each case, in whole or in part, and without limitation as
to amount, terms, conditions, covenants and other provisions) from time to
time. The term "PALLC Credit Facility" shall include all related or
ancillary documents, including, without limitation, any guarantee agreements
and security documents.
"Payment Location" shall mean an office, branch or other place of business
of the Borrower.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"PCI" shall mean PacifiCorp Credit, Inc., a corporation organized under
the laws of Oregon, all the outstanding capital stock of which on the date
hereof is beneficially owned by PacifiCorp.
"Peabody Holding" shall mean Peabody Holding Company Inc., a corporation
organized under the laws of New York, all the outstanding capital stock of
which on the date hereof is directly owned by Peabody Investments.
"Peabody Investments" shall mean Peabody Investments, Inc., a corporation
organized under the laws of Delaware, all the outstanding capital stock of
which on the date hereof is indirectly owned by TEG.
"Peabody Transfer" shall mean the direct or indirect transfer by PA or any
of its subsidiaries to Powercoal of all the issued and outstanding capital
stock of Peabody Holding.
<PAGE>
23
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States
of America or the United Kingdom (or by any agency thereof to the extent
such obligations are backed by the full faith and credit of the United
States of America or the United Kingdom), in each case maturing within
one year from the date of acquisition thereof;
(b) investments in commercial paper (or money market funds
substantially all the assets of which are invested in such commercial
paper) maturing within 270 days from the date of acquisition thereof and
having, at such date of acquisition, one of the two highest credit
ratings obtainable from Standard & Poor's Ratings Services or from
Moody's Investors Service, Inc.;
(c) investments in certificates of deposit, banker's acceptances and
time deposits maturing within one year from the date of acquisition
thereof issued or guaranteed by or placed with, and money market deposit
accounts issued or offered by, any United States or United Kingdom
office of any commercial bank organized under the laws of the United
States of America or any State thereof or the United Kingdom that has a
combined capital and surplus and undivided profits of not less than
$250,000,000;
(d) obligations issued by any state or political subdivision thereof,
having a rating of A or better by Standard & Poor's Ratings Services, or
a similar rating by any other nationally recognized rating agency with
maturities of not more than one year;
(e) investments in "money market funds" within the meaning of Rule
2a-7 of the Investment Company Act of 1940, as amended (the "1940 Act");
provided, however, that neither PGH nor any of its subsidiaries shall
invest in any money market fund that invests in "Second Tier Securities"
and "Second Tier Conduit Securities" within the meaning of Rule
2a-7(a)(20) of the 1940 Act; provided, further, that investments of PGH
and its subsidiaries in any particular money market fund shall not
exceed 5% of the net assets of such fund; and
(f) repurchase agreements for securities of the types described above;
provided that such repurchase agreements are collateralized by
securities of the type referred to above.
"person" shall mean any natural person, corporation, limited liability
company, business trust, joint venture, association, company, partnership or
government, or any agency or political subdivision thereof.
"PFS" shall mean PacifiCorp Financial Services, Inc., a corporation
organized under the laws of Oregon.
"PGH Equity Contribution" shall have the meaning assigned to such term in
the preamble to this Agreement.
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24
"Plan" shall mean any employee pension benefit plan (other than a
Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section
412 of the Code or Section 307 of ERISA, and in respect of which the Borrower
or any ERISA Affiliate is (or, if such plan were terminated, would under
Section 4069 of ERISA be deemed to be) an "employer" as defined in Section
3(5) of ERISA.
"Pledge Agreement" shall mean the Pledge Agreement, substantially in the
form of Exhibit F, among the Loan Parties, Pan-Pacific Global Corporation,
Eastern Investment Company and the Collateral Agent for the benefit of the
Secured Parties.
"Powercoal" shall mean PacifiCorp Powercoal LLC, an Oregon limited
liability company, all the membership interests of which on the date hereof
are directly owned by PGH.
"Powercoal Credit Agreement" shall mean the credit agreement dated as of
the Closing Date, among Powercoal, the lenders from time to time party
thereto and Citibank, as paying agent, collateral agent, issuing bank and
swingline lender. The term "Powercoal Credit Agreement" shall include all
related or ancillary documents, including, without limitation, any guarantee
agreements and security documents.
"Powercoal/PA Loans" shall have the meaning assigned to such term in the
Powercoal Credit Agreement.
"PPM" shall mean PacifiCorp Power Marketing, Inc., a corporation organized
under the laws of Oregon.
"PPM Contribution" shall mean the direct or indirect contribution of all
the capital stock of PPM by PGH to Powercoal.
"Prepayment Account" shall have the meaning assigned to such term in
Section 2.13(g).
"Press Release" shall mean the agreed form of press release issued on the
Closing Date by which the Offer is announced.
"Prime Rate" shall mean the rate of interest per annum publicly announced
from time to time by the Paying Agent as its prime rate in effect at its
principal office in New York City; each change in the Prime Rate shall be
effective on the date such change is publicly announced as being effective.
"Pro Rata Percentage" shall mean, with respect to any Revolving Credit
Lender, the percentage of the Total Revolving Credit Commitments represented
by such Lender's Revolving Credit Commitment. If the Revolving Credit
Commitments have terminated or expired, the Pro Rata Percentages shall be
determined based upon the Revolving Credit Commitments most recently in
effect, giving effect to any assignments.
"Production Payments", with respect to any person, shall mean all
production payment obligations and other similar obligations with respect to
natural resources of such person that are recorded as a liability or deferred
revenue on the financial statements of such person in accordance with GAAP.
<PAGE>
25
"Qualified Junior Indebtedness" shall mean (a) without duplication, any
Hybrid Preferred Securities (and any guarantee by PGH or any of its
subsidiaries of any Hybrid Preferred Securities) and any unsecured
subordinated debt issued by PGH or any of its subsidiaries to a Hybrid
Preferred Securities Subsidiary in connection with the issuance of Hybrid
Preferred Securities; provided that the terms of such subordinated debt (i)
require no principal payments due on a date that is earlier than 12 months
after the Term Loan Maturity Date; (ii) contain provisions permitting the
borrower thereof to defer the payment of interest in certain circumstances;
(iii) provide for a fixed interest rate which, in the good faith judgment of
a Financial Officer of PGH or such subsidiary, is consistent with the market
at the time of issuance for similar loans; and (iv) contain subordination
provisions that are reasonably satisfactory to the Initial Lenders; and (b)
loans made to any Loan Party by an Affiliate of such Loan Party (other than a
subsidiary); provided that (i) such loans do not require any payment in cash
(whether of principal, interest or otherwise) prior to a date that is earlier
than 12 months after the Term Loan Maturity Date and (ii) such loans are
subordinated to the prior payment in full of the Obligations pursuant to
subordination provisions reasonably acceptable to the Initial Lenders.
"Qualified NUG Hedging Agreement" shall mean a contract entered into by a
subsidiary of PGH to obtain power or energy to assure such Subsidiary's
ability to perform a NUG Contract which contract is with (a) a counterparty
with an Investment Grade Rating (or guaranteed by an entity with an
Investment Grade Rating), or (b) an entity which (i) owns facilities adequate
to generate and supply the power or energy, (ii) has a minimum consolidated
net worth of at least $200,000,000 and a maximum ratio of debt to
capitalization of 70%, and (iii) either (x) has a credit rating of BB/Ba2 or
higher and posts partial security for its counterparty obligations under such
Qualified NUG Hedging Agreement or (y) posts 100% security for its
counterparty obligations under such Qualified NUG Hedging Agreement.
"Refinanced Indebtedness" shall mean the Indebtedness of PGH listed on
Schedule 1.01(d).
"Refinancing Indebtedness" shall have the meaning assigned to such term in
Section 6.01(g).
"Register" shall have the meaning given to such term in Section 9.04(d).
"Regulation G" shall mean Regulation G of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation U" shall mean Regulation U of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as from time to time
in effect and all official rulings and interpretations thereunder or thereof.
"Release" shall mean any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, disposing,
depositing, dispersing, emanating or migrating of any Hazardous Material in,
into, onto or through the environment.
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26
"Remedial Action" shall mean (a) "remedial action" as such term is defined
in CERCLA, 42 U.S.C. Section 9601(24), or (b) all other actions required by
any Governmental Authority or voluntarily undertaken to: (i) cleanup,
remove, treat, abate or in any other way address any Hazardous Material in
the environment; (ii) prevent the Release or threat of Release or minimize
the further Release of any Hazardous Material so it does not migrate or
endanger or threaten to endanger public health, welfare or the environment;
or (iii) perform studies and investigations in connection with, or as a
precondition to, clause (i) or (ii) above.
"Required Lenders" shall mean, at any time, Lenders having Loans, L/C
Exposure and unused Revolving Credit and Term Loan Commitments representing
at least a majority of the sum of all Loans outstanding, L/C Exposure and
unused Revolving Credit and Term Loan Commitments at such time; provided,
however, that, with respect to any waivers of the conditions set forth in
Section 4.02(a)(v), the term "Required Lenders" shall also include each
Initial Lender.
"Reset Date" shall have the meaning set forth in Section 1.03(a).
"Responsible Officer" of any person shall mean any executive officer or
Financial Officer of such person and any other officer or similar official
thereof responsible for the administration of the obligations of such person
in respect of this Agreement.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of Revolving
Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Revolving Loans, as such commitment may be
(a) reduced from time to time pursuant to Section 2.09 and (b) reduced or
increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender's Revolving
Credit Commitment is set forth on Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Revolving
Credit Commitment, as applicable.
"Revolving Credit Exposure" shall mean, with respect to any Lender at any
time, the sum of (a) the aggregate principal amount of all outstanding Dollar
Revolving Loans of such Lender at such time, (b) the Dollar Equivalent of the
aggregate principal amount of all outstanding Sterling Revolving Loans of
such Lender at such time and (c) the aggregate amount of such Lender's L/C
Exposure at such time.
"Revolving Credit Lender" shall mean a Lender with a Revolving Credit
Commitment.
"Revolving Credit Maturity Date" shall mean the date that is 18 months
after the date of the initial Acquisition Borrowing, unless the Borrower
elects to extend such date in accordance with Section 2.23, in which case the
term "Revolving Credit Maturity Date" shall mean the date that is 30 months
after the date of the initial Acquisition Borrowing.
"Revolving Loans" shall mean the revolving loans made by the Lenders to
the Borrower pursuant to Section 2.01(b). Each Revolving Loan shall be a
Eurocurrency Revolving Loan or a Base Rate Revolving Loan and shall be a
Dollar Revolving Loan or a Sterling Revolving Loan.
"Secretary of State" shall mean the Secretary of State as referred to in
the Electricity Act.
<PAGE>
27
"Secured Parties" shall have the meaning assigned to such term in the
Pledge Agreement.
"Security Documents" shall mean the Pledge Agreement, the Collateral
Assignment and each of the security agreements and other instruments and
documents executed and delivered pursuant to any of the foregoing or pursuant
to Section 5.09.
"Services" shall mean PacifiCorp Services Limited, a limited company
incorporated in England and Wales, all of the outstanding share capital of
which on the date hereof is directly owned by the Borrower.
"Shares" shall mean the ordinary shares of TEG (par value 10 pence per
share).
"Significant Subsidiary" shall mean, on any date, any subsidiary (other
than a Single Purpose Entity) that (a) has total assets, determined on a
consolidated basis with its subsidiaries, as of the end of the fiscal quarter
preceding such date equal to or greater than 2.5% of the total assets of the
Borrower and its subsidiaries on a consolidated basis as of the end of such
fiscal quarter, (b) has income from continuing operations before income
taxes, extraordinary items and the cumulative effect of a change in
accounting principles ("Adjusted Income"), determined on a consolidated basis
with its subsidiaries, for the four fiscal quarter period preceding such date
equal to or greater than 2.5% of the Adjusted Income of the Borrower and its
subsidiaries on a consolidated basis for such period, in all cases as
determined in accordance with GAAP or (c) is a "Significant Subsidiary" under
and as defined in any other Credit Facility.
"Single Purpose Entity" shall mean a person, other than an individual,
that (a) is organized solely for the purpose of holding, directly or
indirectly, an ownership interest in one entity or property or in a group of
related properties (real or personal, tangible or intangible) used for a
single project, that is acquired, purchased or constructed or in the case of
previously undeveloped, non-income generating property of the applicable Loan
Party or any of its subsidiaries, developed by the applicable Loan Party or
any of its subsidiaries, (b) does not engage in any business unrelated to
such entity or property or the financing thereof and (c) does not have any
assets or Indebtedness other than those related to its interest in such
entity or property or the financing thereof. For purposes of this Agreement,
the term "Single Purpose Entity" shall be deemed to include a Hybrid
Preferred Securities Subsidiary, any Receivables Subsidiary (as defined in
the Powercoal Facility) or a Subsidiary of PA that is a "Project Finance
Subsidiary" (as defined in the PA Facility Agreement).
"Spring Creek" shall mean Spring Creek Coal Company, a corporation
organized under the laws of Montana.
"Spring Creek Coal Supply Contract" shall mean the Coal Supply Agreement
dated June 2, 1978, between Spring Creek and Utility Fuels, Inc., as such
agreement may be amended from time to time.
"Spring Creek Loan Agreement" shall mean the Loan Commitment and Agreement
dated as of June 2, 1993, between Spring Creek and PGH (under which PGH
designated PCI as the affiliate to make the initial loan of $225,000,000 to
Spring Creek), as such agreement may be amended from time to time.
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28
"Spring Creek Loan Documents" shall mean the "Loan Documents" (as such
term is defined in Section 1.1 of the Spring Creek Loan Agreement as in
effect on the Closing Date), as such Loan Documents may be amended from time
to time.
"Spring Creek Note" shall mean the promissory note issued by Spring Creek
to PCI pursuant to the Spring Creek Loan Agreement, as such note may be
amended from time to time.
"Spring Creek Obligations" shall mean the obligations under the Spring
Creek Loan Documents of Spring Creek, Spring Creek's affiliates and each
issuer of a Letter of Credit (as defined in Section 1.1 of the Spring Creek
Loan Agreement as in effect on the Closing Date), in each case whether now
existing or hereafter issued or arising.
"Spring Creek Participation Agreement" shall mean the Amended and Restated
Participation Agreement dated as of June 2, 1993, between PCI and PGH (under
which PGH purchased its interest in the Spring Creek Obligations from PCI),
as such agreement may be amended from time to time.
"Statutory Reserves" shall mean, with respect to Dollars, a fraction
(expressed as a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of the maximum
reserve, liquid asset or similar percentages (including any marginal,
special, emergency or supplemental reserves) expressed as a decimal
established by any Governmental Authority of the United States to which banks
are subject for any category of deposits or liabilities customarily used to
fund loans in Dollars or by reference to which interest rates applicable to
Loans in Dollars are determined. Such reserve, liquid asset or similar
percentages shall include those imposed pursuant to Regulation D of the Board
(and for purposes of Regulation D, Eurocurrency Loans denominated in Dollars
shall be deemed to constitute Eurocurrency Liabilities) and, with respect to
the Base CD Rate, shall be the percentages applicable to new, negotiable
nonpersonal time deposits in Dollars of over $100,000 with maturities
approximately equal to three months. Loans shall be deemed to be subject to
such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under Regulation D or any other applicable law, rule or regulation. Statutory
Reserves shall be adjusted automatically on and as of the effective date of
any change in any reserve percentage.
"Sterling", "L" or "pence" shall mean the lawful currency for the time
being of the United Kingdom.
"Sterling Borrowing" shall mean a Borrowing comprised of Sterling Loans.
"Sterling Equivalent" shall mean, on any date of determination, with
respect to any amount denominated in Dollars, the equivalent in Sterling of
such amount, determined by the Paying Agent pursuant to Section 1.03(a) using
the applicable Exchange Rate then in effect.
"Sterling Loan" shall mean a Sterling Revolving Loan or a Sterling Term
Loan.
"Sterling Revolving Loan" shall mean a Revolving Loan denominated in
Sterling.
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29
"Sterling Term Loan" shall mean a Term Loan denominated in Sterling. Each
Sterling Term Loan shall be a Eurocurrency Term Loan.
"subsidiary" shall mean, with respect to any person (herein referred to as
the "parent"), any corporation, partnership, association or other business
entity of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power or more
than 50% of the general partnership interests are, at the time any
determination is being made, owned, controlled or held by the parent.
"Syndication Date" shall mean the earlier of (a) the date specified by the
Paying Agent as the date on which primary syndication of the Commitments and
the outstanding Loans is completed and (b) the date that is six months after
the Unconditional Date.
"Tax Sharing Agreements" shall mean the U.K. Tax Sharing Agreement and the
U.S. Tax Sharing Policy.
"Tax Sharing Payment" shall mean any payment made pursuant any Tax Sharing
Agreement.
"Tax" or "Taxes" shall mean any and all present or future taxes, levies,
imposts, duties, deductions, charges or withholdings imposed by any
Governmental Authority in the United States, the United Kingdom or the
jurisdiction of any Payment Location.
"TEG" shall mean The Energy Group PLC, which is on the date hereof a
public limited company incorporated in England and Wales.
"TEG Group" shall mean TEG and its subsidiaries.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Availability Period" shall mean the period from and including
the Closing Date to and including the Termination Date.
"Term Loan Commitment" shall mean, with respect to each Lender, the
commitment of such Lender to make Term Loans hereunder, as such commitment
may be (a) reduced from time to time pursuant to Section 2.09 and (b) reduced
or increased from time to time pursuant to assignments by or to such Lender
pursuant to Section 9.04. The initial amount of each Lender's Term Loan
Commitment is set forth on Schedule 2.01 or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Term Loan Commitment, as
applicable.
"Term Loan Maturity Date" shall mean the date that is 18 months after the
initial Acquisition Borrowing.
"Term Loans" shall mean the term loans made by the Lenders to the Borrower
pursuant to Section 2.01(a). Each Term Loan shall be a Dollar Term Loan or a
Sterling Term Loan.
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"Termination Date" shall mean the earliest of (a) the date that is 200
days after the Announcement Date, (b) the later of (i) the date that is three
months after the Unconditional Date and (ii) the date that is 49 days after
the first date on which PA acquires 90% of the outstanding Shares to which
the Offer relates and (c) the date that is 200 days after the date hereof.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information telephone
line of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve Statistical
Release H.15(519) during the week following such day), or, if such rate shall
not be so reported on such day or such next preceding Business Day, the
average of the secondary market quotations for three-month certificates of
deposit of major money center banks in New York City received at
approximately 10:00 a.m., New York City time, on such day (or, if such day
shall not be a Business Day, on the next preceding Business Day) by the
Paying Agent from three New York City negotiable certificate of deposit
dealers of recognized standing selected by it.
"Total Revolving Credit Commitment" shall mean, at any time, the aggregate
amount of the Revolving Credit Commitments, as in effect at such time.
"TPC" shall mean TPC Corporation, a corporation organized under the laws
of Delaware.
"TPC Contribution" shall mean the direct or indirect contribution of all
the capital stock of TPC by PGH to Powercoal.
"Transaction Documents" shall mean (a) the Offer Document, (b) the Loan
Documents, (c) the PA Facility Agreement, (d) the Powercoal Credit Agreement,
(e) the PALLC Credit Facility and (f) the Eastern Facility Agreement and, in
each case, the agreements, documents and instruments to be executed and
delivered in connection therewith.
"Transactions" shall mean the Offer, the transactions contemplated in
connection therewith and the transactions contemplated by the Transaction
Documents, including the TPC Contribution, the PPM Contribution, the Peabody
Transfer and the Citizens Transfer.
"Type", when used in reference to any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan, or on the Loans
comprising such Borrowing, is determined. For purposes hereof, the term
"Rate" shall include the Adjusted LIBO Rate and the Base Rate.
"U.K. Tax Sharing Agreement" shall mean the agreement to be entered into,
among the Borrower and certain of its subsidiaries (including TEG and certain
of its subsidiaries which are, directly or indirectly, at least 75% owned by
TEG), substantially in the form set forth as Exhibit G hereto.
"U.S. Tax Sharing Policy" shall mean the Income Tax Allocation Policy of
PacifiCorp and its subsidiaries attached as Exhibit H hereto, as in effect
from time to time.
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"Unconditional Date" shall have the meaning assigned to such term in the
PA Facility Agreement.
"wholly owned subsidiary" shall mean, with respect to any person (herein
referred to as the "parent"), a subsidiary which securities (except for
directors' qualifying shares) or other ownership interests representing 100%
of the equity or 100% of the ordinary voting power (other than directors'
qualifying shares) or 100% of the general partnership interests are, at the
time any determination is being made, owned, controlled or held by the parent
or one or more wholly owned subsidiaries of the parent or by the parent and
one or more wholly owned subsidiaries of the parent.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as a
result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Exhibits and
Schedules shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context shall otherwise
require. Except as otherwise expressly provided herein, (a) any reference in
this Agreement to (i) the Offer Document or any Loan Document shall mean such
document as amended, restated, supplemented or otherwise modified from time
to time, and (ii) any Credit Facility shall mean such Credit Facility as in
effect on the date hereof (or, in the case of the Eastern Facility Agreement,
in the form attached to the Eastern Facility Letter) and (b) all terms of an
accounting or financial nature shall be construed in accordance with GAAP, as
in effect from time to time; provided, however, that if the Loan Parties
notify the Paying Agent that they wish to amend any covenant in Article VI or
any related definition to eliminate the effect of any change in GAAP
occurring after the date of this Agreement on the operation of such covenant
(or if the Paying Agent notifies the Loan Parties that the Required Lenders
wish to amend Article VI or any related definition for such purpose), then
the Loan Parties' compliance with such covenant shall be determined on the
basis of GAAP in effect immediately before the relevant change in GAAP became
effective, until either such notice is withdrawn or such covenant or
definition is amended in a manner satisfactory to the Loan Parties and the
Required Lenders. For purposes of determining compliance under Sections
6.01, 6.02, 6.04, 6.05, 6.10, 6.11 and 6.12 with respect to any amount in a
currency other than Dollars, such amount shall be deemed to equal the Dollar
Equivalent thereof at the time such amount was incurred or expended, as the
case may be.
SECTION 1.03. Exchange Rates. (a) Not later than 1:00 p.m., New York
City time, on each Calculation Date, the Paying Agent shall (i) determine the
Exchange Rate as of such Calculation Date to be used for calculating relevant
Dollar Equivalent and Sterling Equivalent amounts and (ii) give notice
thereof to the Lenders and the Borrower. The Exchange Rates so determined
shall become effective on the first Business Day immediately following the
relevant Calculation Date (a "Reset Date"), shall remain effective until the
next succeeding Reset Date and shall for all purposes of this Agreement
(other than any provision expressly requiring the use of a current Exchange
Rate) be the Exchange Rates employed in converting any amounts between the
applicable currencies.
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(b) Not later than 5:00 p.m., New York City time, on each Reset Date and
the date of any Borrowing of Sterling Revolving Loans or Sterling Term Loans
or the issuance, extension or renewal of any Letter of Credit denominated in
Sterling, the Paying Agent shall (i) determine the Dollar Equivalent of the
aggregate principal amount of the Sterling Revolving Loans or Sterling Term
Loans and the L/C Exposure then outstanding (after giving effect to any
Sterling Revolving Loans made or repaid on such date) and (ii) notify the
Lenders and the Borrower of the results of such determination and of the
aggregate remaining Term Loan Commitments, if any, and the Aggregate
Revolving Credit Exposure.
ARTICLE II
The Credits
SECTION 2.01. Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, (a) each
Lender agrees, severally and not jointly, to make Term Loans to the Borrower
at any time and from time to time on or after the Closing Date and until the
earlier of the expiration of the Term Loan Availability Period and the
termination of the Term Loan Commitment of such Lender in accordance with the
terms hereof, in an aggregate principal amount not to exceed its Term Loan
Commitment and (b) each Revolving Credit Lender agrees, severally and not
jointly, to make Revolving Loans to the Borrower, at any time and from time
to time on or after the Closing Date, and until the earlier of the Revolving
Credit Maturity Date and the termination of the Revolving Credit Commitment
of such Revolving Credit Lender in accordance with the terms hereof, in an
aggregate principal amount at any time outstanding that will not result in
such Revolving Credit Lender's Revolving Credit Exposure exceeding such
Revolving Credit Lender's Revolving Credit Commitment. Within the limits set
forth in clause (b) of the preceding sentence and subject to the terms,
conditions and limitations set forth herein, the Borrower may borrow, pay or
prepay and reborrow Revolving Loans. Amounts paid or prepaid in respect of
Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the applicable Lenders ratably in accordance with
their Term Loan Commitments or Revolving Credit Commitments, as applicable;
provided, however, that the failure of any Lender to make any Loan required
to be made by it shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however, that no Lender
shall be responsible for the failure of any other Lender to make any Loan
required to be made by such other Lender). As provided in Section 2.03, each
request for a Borrowing shall state the amount requested in Dollars, even if
the Loans requested are to be Sterling Loans. To the extent any Term Loans
are made as Sterling Loans, such Loans shall continue to be Sterling Loans
for as long as they are outstanding under this Agreement and the amount of
the remaining Term Loan Commitments shall be reduced by the Dollar
Equivalent of the requested Term Borrowing.
(b) Subject to Sections 2.08 and 2.15, (i) each Dollar Borrowing shall
be comprised entirely of Eurocurrency Loans or Base Rate Loans as the
Borrower may request pursuant to Section 2.03 and (ii) each Sterling
Borrowing shall be comprised entirely of Eurocurrency Loans. Each Lender may
at its option make any Eurocurrency Loan by causing any domestic or foreign
branch or Affiliate of such Lender to make such Loan; provided that any
exercise of such option shall not
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(i) affect the obligation of the Borrower to repay such Loan or (ii) increase
the costs of the Borrower that would otherwise be payable under Section 2.14
or 2.20 with respect thereto, in each case in accordance with the terms of
this Agreement. Borrowings of more than one Type and Class may be
outstanding at the same time; provided, however, that the Borrower shall not
be entitled to request any Borrowing that, if made, would result in more than
15 Eurocurrency Borrowings outstanding hereunder at any time. For purposes of
the foregoing, Borrowings in different currencies or having different
Interest Periods, regardless of whether they commence on the same date, shall
be considered separate Borrowings.
(c) At the commencement of each Interest Period for any Borrowing, such
Borrowing shall be in an aggregate amount which is at least $5,000,000 (or
the Sterling Equivalent thereof) and (except in the case of an Acquisition
Borrowing) an integral multiple of $1,000,000 (or the Sterling Equivalent
thereof); provided that a Revolving Borrowing may be in an aggregate amount
that is equal to the entire unused balance of the Total Revolving Credit
Commitments or that is required to finance the reimbursement of an LC
Disbursement as contemplated by Section 2.22(e).
(d) Except with respect to Loans made or deemed made pursuant to Section
2.02(g), each Lender shall make each Dollar Loan to be made by it hereunder
on the proposed date thereof by wire transfer of immediately available funds
to such account in New York City as the Paying Agent may designate not later
than 11:00 a.m., New York City time, and the Paying Agent shall by 12:00
(noon), New York City time, credit the amounts so received (i) with respect
to any Acquisition Borrowing, to the Offer Account and (ii) with respect to
any other Borrowing, to an account in the name of the Borrower, maintained
with the Paying Agent and designated by the Borrower in the applicable
Borrowing Request or, if a Borrowing shall not occur on such date because any
condition precedent herein specified shall not have been met, return the
amounts so received to the respective Lenders. Each Lender shall make each
Sterling Loan to be made by it hereunder on the proposed date thereof by wire
transfer of immediately available funds to such account in London as the
Paying Agent may designate for such purposes not later than 11:00 a.m.,
London time, and the Paying Agent shall by 12:00 (noon), London time, credit
the amounts so received (i) with respect to any Acquisition Borrowing, to the
Offer Account and (ii) with respect to any other Borrowing, to an account in
the name of the Borrower, maintained with the Paying Agent in London and
designated by the Borrower in the applicable Borrowing Request or, if a
Borrowing shall not occur on such date because any condition precedent herein
specified shall not have been met, return the amounts so received to the
respective Lenders.
(e) Unless the Paying Agent shall have received notice from a Lender
prior to the date of any Borrowing that such Lender will not make available
to the Paying Agent such Lender's portion of such Borrowing, the Paying Agent
may assume that such Lender has made such portion available to the Paying
Agent on the date of such Borrowing in accordance with paragraph (d) above
and the Paying Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount. If the Paying Agent shall
have so made funds available then, to the extent that such Lender shall not
have made such portion available to the Paying Agent, such Lender and the
Borrower severally agree to repay to the Paying Agent forthwith on demand
such corresponding amount together with interest thereon, for each day from
and including the date such amount is made available to the Borrower to but
excluding the date such amount is repaid to the Paying Agent at (i) in the
case of the Borrower, the interest rate applicable at the time to the Loans
comprising such Borrowing and (ii) in the case of such Lender, a rate
determined by the Paying Agent to represent
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its cost of overnight or short-term funds in the applicable currency (which
determination shall be conclusive absent manifest error). If such Lender
shall repay to the Paying Agent such corresponding amount, such amount shall
constitute such Lender's Loan as part of such Borrowing for purposes of this
Agreement.
(f) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Interest Period with respect to a
Eurocurrency Borrowing that would end after the Revolving Credit Maturity
Date or the Term Loan Maturity Date, as the case may be. In addition, until
the Syndication Date, the Borrower shall not be entitled to request any
Interest Period in respect of a Eurocurrency Borrowing in excess of one month.
(g) If the Issuing Bank shall not have received from the Borrower the
payment required to be made by Section 2.22(e) within the time specified in
such Section, the Issuing Bank will promptly notify the Paying Agent of the
L/C Disbursement and the Paying Agent will promptly notify each Revolving
Credit Lender of such L/C Disbursement and its Pro Rata Percentage thereof.
In the case of Letters of Credit denominated in Dollars, each Revolving
Credit Lender shall pay by wire transfer of immediately available funds to
the Paying Agent not later than 2:00 p.m., New York City time, on such date
(or, if such Revolving Credit Lender shall have received such notice later
than 12:00 (noon), New York City time, on any day, not later than 10:00 a.m.,
New York City time, on the immediately following Business Day), an amount in
Dollars equal to such Lender's Pro Rata Percentage of such L/C Disbursement
(it being understood that such amount shall be deemed to constitute a Base
Rate Revolving Loan of such Lender and such payment shall be deemed to have
reduced the L/C Exposure), and the Paying Agent will promptly pay to the
Issuing Bank amounts so received by it from the Revolving Credit Lenders. In
the case of Letters of Credit denominated in Sterling, each Revolving Credit
Lender shall pay by wire transfer of immediately available funds to the
Paying Agent not later than 2:00 p.m., London time, on such date (or, if such
Revolving Credit Lender shall have received such notice later than 12:00
(noon), London time, on any day, not later than 10:00 a.m., London time, on
the immediately following Business Day), an amount in Sterling equal to such
Lender's Pro Rata Percentage of such L/C Disbursement (it being understood
that such amount shall be deemed to constitute a Sterling Revolving Loan of
such Lender and such payment shall be deemed to have reduced the L/C
Exposure), and the Paying Agent will promptly pay to the Issuing Bank amounts
so received by it from the Revolving Credit Lenders. The Paying Agent will
promptly pay to the Issuing Bank any amounts received by it from the Borrower
pursuant to Section 2.22(e) prior to the time that any Revolving Credit
Lender makes any payment pursuant to this paragraph (g); any such amounts
received by the Paying Agent thereafter will be promptly remitted by the
Paying Agent to the Revolving Credit Lenders that shall have made such
payments and to the Issuing Bank, as their interests may appear. If any
Revolving Credit Lender shall not have made its Pro Rata Percentage of such
L/C Disbursement available to the Paying Agent as provided above, such Lender
and the Borrower severally agree to pay interest on such amount, for each day
from and including the date such amount is required to be paid in accordance
with this paragraph to but excluding the date such amount is paid, to the
Paying Agent for the account of the Issuing Bank at (i) in the case of the
Borrower, a rate per annum equal to the interest rate applicable to Revolving
Loans of such type pursuant to Section 2.06(a), and (ii) in the case of such
Lender, for the first such day, a rate determined by the Paying Agent to
represent its cost of overnight funds in the applicable currency, and for
each day thereafter, the Base Rate.
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SECTION 2.03. Borrowing Procedure. In order to request a Borrowing, the
Borrower shall hand deliver or telecopy to the Paying Agent a duly completed
Borrowing Request (a) in the case of a Eurocurrency Borrowing (other than a
Sterling Borrowing), not later than 11:00 a.m., New York City time, three
Business Days before the date of the proposed Borrowing, (b) in the case of a
Sterling Borrowing, not later than 10:00 a.m., London time, one Business Day
before the date of the proposed Borrowing and (c) in the case of a Base Rate
Borrowing, not later than 11:00 a.m., New York City time, on the Business Day
of the proposed Borrowing. Each Borrowing Request shall be irrevocable,
shall be signed by or on behalf of the Borrower and shall specify the
following information: (i) whether such Borrowing is to be a Dollar Borrowing
or a Sterling Borrowing; (ii) whether the Borrowing then being requested is
to be a Term Borrowing or a Revolving Credit Borrowing; (iii) if such
Borrowing is to be denominated in Dollars, whether it is to be a Eurocurrency
Borrowing or a Base Rate Borrowing; (iv) the date of such Borrowing (which
shall be a Business Day); (v) the number and location of the account to which
funds are to be disbursed (which shall be an account that complies with the
requirements of Section 2.02(d)); (vi) the aggregate amount of such Borrowing
(which, in the case of a Sterling Borrowing, shall be stated in Dollars);
(vii) whether such Borrowing is to be an Acquisition Borrowing; and (viii) if
such Borrowing is to be a Eurocurrency Borrowing, the initial Interest Period
with respect thereto; provided, however, that, notwithstanding any contrary
specification in any Borrowing Request, each requested Borrowing shall comply
with the requirements set forth in Section 2.02. If no Type is specified
with respect to any Borrowing selected, then the Borrower shall be deemed to
have selected a Base Rate Borrowing. If no Interest Period is specified with
respect to any requested Eurocurrency Borrowing, then the Borrower shall be
deemed to have selected an Interest Period of one month's duration. The
Paying Agent shall promptly advise the applicable Lenders of any notice given
pursuant to this Section 2.03 (and the contents thereof), and of each
Lender's portion of the requested Borrowing.
SECTION 2.04. Evidence of Debt; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Paying Agent for the account of
each Lender the then unpaid principal amount of each Loan of such Lender on
the Revolving Credit Maturity Date or the Term Loan Maturity Date, as the
case may be.
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing the indebtedness of the Borrower to such
Lender resulting from each Loan made by such Lender from time to time,
including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(c) The Paying Agent shall maintain accounts in which it will record (i)
the amount of each Loan made hereunder, the Class and Type thereof and the
Interest Periods applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to
each Lender hereunder and (iii) the amount of any sum received by the Paying
Agent hereunder from the Borrower for the account of the Lenders and each
Lender's share thereof.
(d) The entries made in the accounts maintained pursuant to paragraph (b)
or (c) above shall be prima facie evidence of the existence and amounts of
the obligations recorded therein; provided, however, that the failure of any
Lender or the Paying Agent to maintain such accounts or any error therein
shall not in any manner affect the obligation of the Borrower to repay the
Loans in accordance with the terms of this Agreement.
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(e) Notwithstanding any other provision of this Agreement, in the event
any Lender shall request and receive a promissory note payable to such Lender
and its registered assigns, the interests represented by such note shall at
all times (including after any assignment of all or part of such interests
pursuant to Section 9.04) be represented by one or more promissory notes
payable to the payee named therein or its registered assigns.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Paying Agent, on the last day of March, June, September and
December in each year and on each date on which any Commitment of such Lender
shall expire or be terminated as provided herein, a commitment fee (a
"Commitment Fee") of 0.50% per annum on the average daily unused amount of
the Commitments of such Lender during the preceding quarter (or other period
commencing with the Closing Date or ending with the Revolving Credit Maturity
Date or the date on which the Commitments of such Lender shall expire or be
terminated. All Commitment Fees shall be computed on the basis of the actual
number of days elapsed in a year of 360 days. The Commitment Fee due to each
Lender shall commence to accrue on the Closing Date and shall cease to accrue
on the date on which the Commitment of such Lender shall expire or be
terminated as provided herein. All Commitment Fees shall be payable in
Dollars.
(b) The Borrower agrees to pay (i) to each Revolving Credit Lender,
through the Paying Agent, on the last day of March, June, September and
December of each year and on the date on which the Revolving Credit
Commitment of such Lender shall be terminated as provided herein, a fee (an
"L/C Participation Fee") calculated on the average daily aggregate amount of
such Lender's L/C Exposure (excluding the portion thereof attributable to
unreimbursed L/C Disbursements) during the preceding quarter (or shorter
period commencing with the Closing Date or ending with the Revolving Credit
Maturity Date or the date on which all Letters of Credit have been canceled
or have expired and the Revolving Credit Commitments of all Lenders shall
have been terminated) at a per annum rate equal to the Eurocurrency Spread
and (ii) to the Issuing Bank with respect to each Letter of Credit the
standard fronting, issuance and drawing fees specified from time to time by
the Issuing Bank (the "Issuing Bank Fees"). All L/C Participation Fees and
Issuing Bank Fees shall be computed on the basis of the actual number of days
elapsed in a year of 360 days and shall be payable in Dollars (in the case
of Letters of Credit denominated in Dollars) or Sterling (in the case of
Letters of Credit denominated in Sterling).
(c) All Fees shall be paid on the dates due, in immediately available
funds, to the Paying Agent for distribution, if and as appropriate, among the
Lenders, except that the Issuing Bank Fees shall be paid directly to the
Issuing Bank. Once paid, none of the Fees shall be refundable under any
circumstances, absent manifest error.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each Base Rate Borrowing shall bear
interest (computed on the basis of the actual number of days elapsed over a
year of 365 or 366 days, as the case may be, when the Base Rate is determined
by reference to the Prime Rate and over a year of 360 days at all other
times) at a rate per annum equal to the Base Rate plus the Base Rate Spread.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurocurrency Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 360 days or, in the case of
Sterling Borrowings, 365 or 366 days, as applicable) at a rate per
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37
annum equal to the Adjusted LIBO Rate for the Interest Period in effect for
such Borrowing plus the Eurocurrency Spread.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan except as otherwise provided in this Agreement. The
applicable Base Rate or Adjusted LIBO Rate for each Interest Period or day
within an Interest Period, as the case may be, shall be determined by the
Paying Agent, and such determination shall be conclusive absent manifest
error.
SECTION 2.07. Default Interest. If the Borrower shall default in the
payment of the principal of or interest on any Loan or any other amount
becoming due hereunder, by acceleration or otherwise, or under any other Loan
Document, the Borrower shall on demand from time to time pay interest, to the
extent permitted by law, on such defaulted amount to but excluding the date
of actual payment (after as well as before judgment) (a) in the case of
overdue principal, at the rate otherwise applicable to such Loan pursuant to
Section 2.06 plus 2.00% per annum and (b) in all other cases, (i) if such
amount is denominated in Dollars at a rate per annum (computed on the basis
of the actual number of days elapsed over a year of 365 or 366 days, as the
case may be, when determined by reference to the Prime Rate and over a year
of 360 days at all other times) equal to the sum of the Base Rate plus 2.00%
and (ii) if such amount is denominated in Sterling, a rate per annum
(computed on the basis of the actual number of days elapsed over a year of
365 or 366 days, as the case may be, equal to the Adjusted LIBO Rate for an
Interest Period of one month plus 2.00%.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurocurrency Borrowing denominated in Dollars, the
Paying Agent shall have determined that (a) deposits in the principal amounts
of the Loans comprising such Borrowing in Dollars are not generally available
in the relevant market, (b) the rates at which such deposits are being
offered will not adequately and fairly reflect the cost to the Lender or
Lenders holding a majority of the Eurocurrency Loans comprising such
Eurocurrency Borrowing of making or maintaining such Eurocurrency Loans
during such Interest Period, or (c) reasonable means do not exist for
ascertaining the Adjusted LIBO Rate, the Paying Agent shall, as soon as
practicable thereafter, give written or telecopy notice of such determination
to the Borrower and the Lenders. In the event of any such determination,
until the Paying Agent shall have advised the Borrower and the Lenders that
the circumstances giving rise to such notice no longer exist, any request by
the Borrower for a Eurocurrency Borrowing denominated in Dollars pursuant to
Section 2.03 or 2.10 shall be deemed to be a request for a Base Rate
Borrowing. Each determination by the Paying Agent hereunder shall be
conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) The Term
Loan Commitments shall automatically terminate at 5:00 p.m., London time, on
the Termination Date. The Revolving Credit Commitments and the L/C
Commitment shall automatically terminate on the Revolving Credit Maturity
Date. Notwithstanding the foregoing, (i) the Revolving Credit Commitments
and the L/C Commitment shall automatically terminate at 5:00 p.m., London
time, on the Termination Date if the initial Borrowing hereunder shall not
have occurred by such time and (ii) the Commitments shall automatically
terminate if the Offer lapses or is withdrawn.
(b) Upon at least three Business Days' prior (or, with respect to the
period commencing on the Closing Date and ending on the date of the initial
Acquisition Borrowing hereunder, same day)
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38
irrevocable written or telecopy notice to the Paying Agent, the Borrower may
at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Commitments of any Class; provided, however, that (i)
each partial reduction of the Term Loan Commitments or the Revolving Credit
Commitments shall be in an integral multiple of $5,000,000, and (ii) the
Total Revolving Credit Commitment shall not be reduced to an amount that is
less than the Aggregate Revolving Credit Exposure at the time.
(c) The Borrower shall notify the Paying Agent of any election to
terminate or reduce the Term Loan Commitments or the Revolving Credit
Commitments under paragraph (b) of this Section at least three Business Days
(or, with respect to the period commencing on the Closing Date and ending on
the date of the initial Acquisition Borrowing hereunder, at least one
Business Day) prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly following
receipt of any such notice, the Paying Agent shall advise the Lenders of the
contents thereof. Each notice delivered by the Borrower pursuant to this
Section shall be irrevocable. Each reduction of the Term Loan Commitments or
the Revolving Credit Commitments shall be made ratably among the Lenders in
accordance with their respective Term Loan Commitments and Revolving Credit
Commitments. The Borrower shall pay to the Paying Agent for the account of
the applicable Lenders, on the date of each termination or reduction, the
Commitment Fees on the amount of the Commitments so terminated or reduced
accrued to but excluding the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Borrowings. The Borrower
shall have the right at any time upon prior irrevocable notice to the Paying
Agent (a) not later than 12:00 (noon), New York City time, one Business Day
prior to conversion, to convert any Eurocurrency Borrowing denominated in
Dollars into a Base Rate Borrowing, (b) not later than 11:00 a.m., New York
City time, three Business Days prior to conversion or continuation, to
convert any Base Rate Borrowing into a Eurocurrency Borrowing denominated in
Dollars or to continue any Eurocurrency Borrowing as a Eurocurrency Borrowing
in the same currency for an additional Interest Period, and (c) not later
than 11:00 a.m., New York City time, three Business Days prior to conversion,
to convert the Interest Period with respect to any Eurocurrency Borrowing to
another permissible Interest Period, subject in each case to the following:
(i) each conversion or continuation shall be made pro rata among the
Lenders in accordance with the respective principal amounts of the Loans
comprising the converted or continued Borrowing;
(ii) if less than all the outstanding principal amount of any Borrowing
shall be converted or continued, then each resulting Borrowing shall
satisfy the limitations specified in Sections 2.02(a) and 2.02(b)
regarding the principal amount and maximum number of Borrowings of the
relevant Type;
(iii) each conversion shall be effected by each Lender and the Paying
Agent by recording for the account of such Lender the new Loan of such
Lender resulting from such conversion and reducing the Loan (or portion
thereof) of such Lender being converted by an equivalent principal
amount; accrued interest on any Eurocurrency Loan (or portion thereof)
being converted shall be paid by the Borrower at the time of conversion;
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39
(iv) if any Eurocurrency Borrowing is converted at a time other than
the end of the Interest Period applicable thereto, the Borrower shall
pay, upon demand, any amounts due to the Lenders pursuant to Section
2.16;
(v) any portion of a Borrowing (other than a Sterling Borrowing)
maturing or required to be repaid in less than one month may not be
converted into or continued as a Eurocurrency Borrowing;
(vi) any portion of a Eurocurrency Borrowing denominated in Dollars
that cannot be converted into or continued as a Eurocurrency Borrowing
by reason of the immediately preceding clause shall be automatically
converted at the end of the Interest Period in effect for such Borrowing
into a Base Rate Borrowing, and any portion of a Sterling Borrowing
required to be repaid in less than one month may be converted, with the
consent of the Paying Agent (which shall not be unreasonably withheld),
to an Interest Period ending on the date that such Borrowing is required
to be repaid; and
(vii) upon notice to the Borrower from the Paying Agent given at the
request of the Required Lenders, after the occurrence and during the
continuance of a Default or an Event of Default, (A) no outstanding
Dollar Borrowing may be converted into, or continued as, a Eurocurrency
Borrowing, and (B) unless repaid, each Eurocurrency Borrowing
denominated in Dollars shall be converted to a Base Rate Borrowing at
the end of the Interest Period applicable thereto, and (C) no Interest
Period in excess of one month may be selected for any Sterling Borrowing.
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity, amount and currency of
the Borrowing that the Borrower requests be converted or continued, (ii)
whether such Borrowing is to be converted to or continued as a Eurocurrency
Borrowing or a Base Rate Borrowing, (iii) if such notice requests a
conversion, the date of such conversion (which shall be a Business Day) and
(iv) if such Borrowing is to be converted to or continued as a Eurocurrency
Borrowing, the Interest Period with respect thereto. If no Interest Period
is specified in any such notice with respect to any conversion to or
continuation as a Eurocurrency Borrowing, the Borrower shall be deemed to
have selected an Interest Period of one month's duration. The Paying Agent
shall advise the Lenders of any notice given pursuant to this Section 2.10
and of each Lender's portion of any converted or continued Borrowing. If the
Borrower shall not have given notice in accordance with this Section 2.10 to
continue any Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.10 to convert
such Borrowing), such Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), (i) in the
case of a Dollar Borrowing, automatically be continued into a new Interest
Period as a Base Rate Borrowing, and (ii) in the case of a Sterling
Borrowing, automatically be converted into a new Interest Period of one
month. Notwithstanding any contrary provisions herein, the currency of an
outstanding Borrowing may not be changed in connection with any conversion or
continuation of such Borrowing.
SECTION 2.11. [Intentionally Omitted]
SECTION 2.12. Optional Prepayments. (a) The Borrower shall have the
right at any time and from time to time to prepay any Borrowing, in whole or
in part, subject to prior notice in
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40
accordance with paragraph (b) of this Section; provided, however, that each
partial prepayment shall be in an amount that is (i) in the case of Dollar
Loans, an integral multiple of $1,000,000 and not less than $5,000,000, and
(ii) in the case of Sterling Loans, an integral multiple of L1,000,000 and
not less than L5,000,000.
(b) The Borrower shall notify the Paying Agent by telecopy or telephone
(promptly confirmed by telecopy) of any prepayment hereunder (i) in the case
of prepayment of a Eurocurrency Borrowing (denominated in Dollars), not later
than 11:00 a.m. , New York City time, three Business Days before the date of
prepayment, (ii) in the case of prepayment of a Sterling Borrowing, not later
than 11:00 a.m., London time, one Business Day before the date of prepayment,
or (iii) in the case of prepayment of a Base Rate Borrowing, not later than
11:00 a.m., New York City time, on the date of prepayment. Each such notice
shall be irrevocable and shall specify the prepayment date and the principal
amount of each Borrowing or portion thereof to be prepaid. Promptly
following receipt of any such notice relating to a Borrowing, the Paying
Agent shall advise the Lenders of the contents thereof. All prepayments
under this Section 2.12 shall be subject to Section 2.16 but otherwise
without premium or penalty. All prepayments under this Section 2.12 shall be
accompanied by accrued interest on the principal amount being prepaid to the
date of payment to the extent required by Section 2.06.
SECTION 2.13. Mandatory Prepayments. (a) In the event of any
termination of all the Revolving Credit Commitments, the Borrower shall repay
or prepay all its outstanding Revolving Credit Borrowings on the date of such
termination. In the event of any partial reduction of the Revolving Credit
Commitments, then at or prior to the effective date of such reduction, the
Paying Agent shall notify the Borrower and the Revolving Credit Lenders of
the Aggregate Revolving Credit Exposure after giving effect thereto. If at
any time, as a result of such a partial reduction or termination, as a result
of fluctuations in exchange rates or otherwise, the Aggregate Revolving
Credit Exposure would exceed the Total Revolving Credit Commitments, then the
Borrower shall (i) on the date of any such reduction or termination of
Revolving Credit Commitments or (ii) on the Business Day following any such
fluctuation in exchange rate or otherwise, repay or prepay Revolving Credit
Borrowings in an amount sufficient to eliminate such excess.
(b) Not later than the fourth Business Day following the receipt by any
Loan Party of Net Cash Proceeds from any Asset Sale, the Borrower shall apply
100% of such Net Cash Proceeds received by such Loan Party with respect
thereto to prepay outstanding Term Loans and FRNs in accordance with Section
2.13(e).
(c) In the event and on each occasion that an Equity Issuance occurs, the
Borrower shall, substantially simultaneously with (and in any event not later
than the fourth Business Day next following) the receipt of Net Cash Proceeds
by such Loan Party from any such Equity Issuance, apply 100% of such Net Cash
Proceeds to prepay outstanding Term Loans and FRNs in accordance with Section
2.13(e).
(d) In the event that any Loan Party shall receive Net Cash Proceeds from
the issuance or other disposition of Indebtedness for money borrowed (other
than Indebtedness permitted by Section 6.01 (other than Section 6.01(g) or
(h))), the Borrower shall, substantially simultaneously with (and in any
event not later than the fourth Business Day next following) the receipt of
such Net
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41
Cash Proceeds by such Loan Party, apply an amount equal to 100% of such Net
Cash Proceeds to prepay outstanding Term Loans and FRNs in accordance with
Section 2.13(e).
(e) Mandatory prepayments of outstanding Term Loans and FRNs required
under this Agreement and any FRN Purchase Agreement shall be allocated pro
rata to the then outstanding Term Loans and FRNs based upon the then
outstanding aggregate principal amounts of the Term Loans and the FRNs;
provided, however, that (i) prepayments out of the proceeds of FRNs shall be
applied pro rata to the Term Loans of the Initial Lenders and (ii) if any
holder of an FRN declines to accept all or any portion of such prepayment in
accordance with the terms of its FRN Purchase Agreement, then the amount of a
rejected prepayment shall be allocated pro rata to the then outstanding Term
Loans.
(f) The Borrower shall deliver to the Paying Agent, at the time of each
prepayment required under this Section 2.13, (i) a certificate signed by a
Financial Officer of the Borrower setting forth in reasonable detail the
calculation of the amount of such prepayment and (ii) to the extent
practicable, at least four days' prior written notice of such prepayment.
Each notice of prepayment shall specify the prepayment date, the Type and
Class of each Loan being prepaid and the principal amount of each Loan (or
portion thereof) to be prepaid. All prepayments of Borrowings under this
Section 2.13 shall be subject to Section 2.16, but shall otherwise be without
premium or penalty.
(g) Amounts to be applied pursuant to this Section 2.13 to the prepayment
of Term Loans and Revolving Loans shall be applied, as applicable, first to
reduce outstanding Base Rate Term Loans and Base Rate Revolving Loans. Any
amounts remaining after each such application shall, at the option of the
Borrower, be applied to prepay Eurocurrency Term Loans or Eurocurrency
Revolving Loans, as the case may be, immediately and/or shall be deposited in
the Prepayment Account (as defined below). The Paying Agent shall apply any
cash deposited in the Prepayment Account (i) allocable to Term Loans to
prepay Eurocurrency Term Loans and (ii) allocable to Revolving Loans to
prepay Eurocurrency Revolving Loans, in each case on the last day of their
respective Interest Periods (or, at the direction of the Borrower, on any
earlier date) until all outstanding Term Loans or Revolving Loans, as the
case may be, have been prepaid or until all the allocable cash on deposit
with respect to such Loans has been exhausted. For purposes of this
Agreement, the term "Prepayment Account" shall mean an account established by
the Borrower with the Paying Agent and over which the Paying Agent shall have
exclusive dominion and control, including the exclusive right of withdrawal
for application in accordance with this paragraph (g). The Paying Agent
will, at the request of the Borrower, invest amounts on deposit in the
Prepayment Account in Permitted Investments that mature prior to the last day
of the applicable Interest Periods of the Eurocurrency Term Borrowings or
Eurocurrency Revolving Borrowings to be prepaid, as the case may be;
provided, however, that (i) the Paying Agent shall not be required to make
any investment that, in its sole judgment, would require or cause the Paying
Agent to be in, or would result in any, violation of any law, statute, rule
or regulation and (ii) the Paying Agent shall have no obligation to invest
amounts on deposit in the Prepayment Account if an Event of Default shall
have occurred and be continuing. The Borrower shall indemnify the Paying
Agent for any losses relating to the investments so that the amount available
to prepay Eurocurrency Borrowings on the last day of the applicable Interest
Period is not less than the amount that would have been available had no
investments been made pursuant thereto. Other than any interest earned on
such investments, the Prepayment Account shall not bear interest. Interest or
profits, if any, on such investments shall be deposited in the Prepayment
Account and reinvested and disbursed as specified above. If the
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42
maturity of the Loans has been accelerated pursuant to Article VII, the
Paying Agent may, in its sole discretion, apply all amounts on deposit in the
Prepayment Account to satisfy any of the Obligations. The Borrower hereby
grants to the Paying Agent, for its benefit and the benefit of the Issuing
Bank and the Lenders, a security interest in the Prepayment Account to secure
the Obligations.
SECTION 2.14. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision of this Agreement, if after the date of
this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any Governmental Authority
charged with the interpretation or administration thereof (whether or not
having the force of law) shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or
for the account of or credit extended by any Lender or the Issuing Bank
(except any such requirement which is reflected in the Adjusted LIBO Rate) or
shall impose on such Lender or the Issuing Bank or the London interbank
market any other condition affecting this Agreement or Eurocurrency Loans
made by such Lender or any Letter of Credit or participation therein, and the
result of any of the foregoing shall be to increase the cost to such Lender
or the Issuing Bank of making or maintaining any Eurocurrency Loan or
increase the cost to any Lender of issuing or maintaining any Letter of
Credit or purchasing or maintaining a participation therein or to reduce the
amount of any sum received or receivable by such Lender or the Issuing Bank
hereunder (whether of principal, interest or otherwise) by an amount deemed
by such Lender or the Issuing Bank to be material, then the Borrower will pay
to such Lender or the Issuing Bank, as the case may be, upon demand, such
additional amount or amounts as will compensate such Lender or the Issuing
Bank, as the case may be, for such additional costs incurred or reduction
suffered.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption after the Closing Date of any law, rule, regulation, agreement or
guideline regarding capital adequacy, or any change after the Closing Date in
any such law, rule, regulation, agreement or guideline (whether or not having
the force of law) or in the interpretation or administration thereof by any
Governmental Authority charged with the interpretation or administration
thereof, or compliance by any Lender (or any lending office of such Lender)
or the Issuing Bank or any Lender's or the Issuing Bank's holding company
with any request or directive regarding capital adequacy (whether or not
having the force of law) of any Governmental Authority made or issued after
the Closing Date has or would have the effect of reducing the rate of return
on such Lender's or the Issuing Bank's capital or on the capital of such
Lender's or the Issuing Bank's holding company, if any, as a consequence of
this Agreement or the Loans made or participations in Letters of Credit
purchased by such Lender pursuant hereto or the Letters of Credit issued by
the Issuing Bank pursuant hereto to a level below that which such Lender or
the Issuing Bank or such Lender's or the Issuing Bank's holding company could
have achieved but for such applicability, adoption, change or compliance
(taking into consideration such Lender's or the Issuing Bank's policies and
the policies of such Lender's or the Issuing Bank's holding company with
respect to capital adequacy) by an amount deemed by such Lender or the
Issuing Bank to be material, then from time to time the Borrower shall pay to
such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such
Lender's or the Issuing Bank's holding company for any such reduction
suffered.
(c) A certificate of a Lender or the Issuing Bank setting forth the
amount or amounts necessary to compensate such Lender or the Issuing Bank or
its respective holding company, as applicable, as specified in paragraph (a)
or (b) above shall be delivered to the Borrower and shall be
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43
conclusive absent manifest error. The Borrower shall pay such Lender or the
Issuing Bank the amount shown as due on any such certificate delivered by it
within 10 days after its receipt of the same.
(d) Failure or delay on the part of any Lender or the Issuing Bank to
demand compensation for any increased costs or reduction in amounts received
or receivable or reduction in return on capital shall not constitute a waiver
of such Lender's or the Issuing Bank's right to demand such compensation;
provided that neither any Lender nor the Issuing Bank shall be entitled to
compensation under this Section 2.14 for any increased costs or reductions
incurred or suffered with respect to any date unless such Lender or the
Issuing Bank, as the case may be, shall have notified the Borrower under
paragraph (c) above, not more than 90 days after the later of (i) such date
and (ii) the date on which such Lender or Issuing Bank, as applicable, shall
have become aware of such costs or reductions. The protection of this
Section shall be available to each Lender and the Issuing Bank regardless of
any possible contention of the invalidity or inapplicability of the law,
rule, regulation, agreement, guideline or other change or condition that
shall have occurred or been imposed.
SECTION 2.15. Change in Legality. (a) Notwithstanding any other
provision of this Agreement, if, after the Closing Date, any change in any
law or regulation or in the interpretation thereof by any Governmental
Authority charged with the administration or interpretation thereof shall
make it unlawful for any Lender to make or maintain any Eurocurrency Loan
denominated in Dollars or to give effect to its obligations as contemplated
hereby with respect to any such Eurocurrency Loan, then, by written notice to
the Borrower and to the Paying Agent:
(i) such Lender may declare that Eurocurrency Loans denominated in
Dollars will not thereafter (for the duration of such unlawfulness) be
made by such Lender hereunder (or be continued for additional Interest
Periods and Base Rate Loans will not thereafter (for such duration) be
converted into Eurocurrency Loans), whereupon any request for a
Eurocurrency Borrowing denominated in Dollars (or to convert a Base Rate
Borrowing to a Eurocurrency Borrowing or to continue a Eurocurrency
Borrowing denominated in Dollars for an additional Interest Period)
shall, as to such Lender only, be deemed a request for a Base Rate Loan
(or a request to continue a Base Rate Loan as such for an additional
Interest Period or to convert a Eurocurrency Loan into a Base Rate Loan,
as the case may be) unless such declaration shall be subsequently
withdrawn; and
(ii) such Lender may require that all outstanding Eurocurrency Loans
denominated in Dollars made by it be converted to Base Rate Loans, in
which event all such Eurocurrency Loans shall be automatically converted
to Base Rate Loans as of the effective date of such notice as provided
in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above,
all payments and prepayments of principal that would otherwise have been
applied to repay the Eurocurrency Loans that would have been made by such
Lender or the converted Eurocurrency Loans of such Lender shall instead be
applied to repay the Base Rate Loans made by such Lender in lieu of, or
resulting from the conversion of, such Eurocurrency Loans.
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44
(b) For purposes of this Section 2.15, a notice to the
Borrower by any Lender shall be effective as to each affected
Eurocurrency Loan made by such Lender, if lawful, on the last day
of the Interest Period currently applicable to such Eurocurrency
Loan; in all other cases such notice shall be effective on the
date of receipt by the Borrower.
SECTION 2.16. Indemnity. The Borrower shall indemnify each
Lender against any loss or expense, including any break-funding
cost or any loss sustained in converting between Sterling and
Dollars, as the case may be, that such Lender may sustain or
incur as a consequence of any event, other than a default by such
Lender in the performance of its obligations hereunder, which
results in (a) such Lender receiving or being deemed to receive
any amount on account of the principal of any Eurocurrency Loan
prior to the end of the Interest Period in effect therefor,
(b) the conversion of any Eurocurrency Loan to a Base Rate Loan,
or the conversion of the Interest Period with respect to any
Eurocurrency Loan, in each case other than on the last day of the
Interest Period in effect therefor, or (c) any Eurocurrency Loan
to be made by such Lender (including any Eurocurrency Loan to be
made pursuant to a conversion or continuation under Section 2.10)
not being made after notice of such Loan shall have been given by
the Borrower hereunder (any of the events referred to in this
sentence being called a "Breakage Event"). In the case of any
Breakage Event, such loss or expense shall include an amount
equal to the excess, if any, as reasonably determined by such
Lender, of (i) its cost of obtaining funds for the Eurocurrency
Loan (excluding loss of margin) that is the subject of such
Breakage Event for the period from the date of such Breakage
Event to the last day of the Interest Period in effect (or that
would have been in effect) for such Loan over (ii) the amount of
interest likely to be realized by such Lender in redeploying the
funds released or not utilized by reason of such Breakage Event
for such period. A certificate of any Lender setting forth any
amount or amounts which such Lender is entitled to receive
pursuant to this Section 2.16 shall be delivered to the Borrower
and shall be conclusive absent manifest error.
SECTION 2.17. Pro Rata Treatment. Except as required under
Sections 2.13(e) and 2.15, each Borrowing, each payment or
prepayment of principal of any Borrowing, each payment of
interest on the Loans, each payment of the Commitment Fees, each
reduction of the Term Loan Commitments or the Revolving Credit
Commitments and each conversion of any Borrowing to or
continuation of any Borrowing as a Borrowing of any Type shall be
allocated pro rata among the Lenders in accordance with their
respective applicable Commitments (or, if such Commitments shall
have expired or been terminated, in accordance with the
respective principal amounts of their outstanding Loans). Each
Lender agrees that in computing such Lender's portion of any
Borrowing to be made hereunder, the Paying Agent may, in its
discretion, round each Lender's percentage of such Borrowing to
the next higher or lower whole Dollar or Sterling amount.
SECTION 2.18. Sharing of Setoffs. Each Lender agrees that
if it shall, through the exercise of a right of banker's lien,
setoff or counterclaim against the Borrower, or pursuant to a
secured claim under Section 506 of Title 11 of the United States
Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable
bankruptcy, insolvency or other similar law or otherwise, or by
any other means, obtain payment (voluntary or involuntary) in
respect of any Loan or Loans or L/C Disbursement as a result of
which the unpaid principal portion of its Term Loans and
Revolving Loans and participations in L/C Disbursements shall be
proportionately less than the unpaid principal portion of the
Term Loans and Revolving Loans and participations in L/C
Disbursements of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face
value, and shall promptly pay to
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45
such other Lender the purchase price for, a participation in the
Term Loans and Revolving Loans and L/C Exposure, as the case may
be, of such other Lender, so that the aggregate unpaid principal
amount of the Term Loans and Revolving Loans and L/C Exposure and
participations in Term Loans and Revolving Loans and L/C Exposure
held by each Lender shall be in the same proportion to the
aggregate unpaid principal amount of all Term Loans and Revolving
Loans and L/C Exposure then outstanding as the principal amount
of its Term Loans and Revolving Loans and L/C Exposure prior to
such exercise of banker's lien, setoff or counterclaim or other
event was to the principal amount of all Term Loans and Revolving
Loans and L/C Exposure outstanding prior to such exercise of
banker's lien, setoff or counterclaim or other event; provided,
however, that if any such purchase or purchases or adjustments
shall be made pursuant to this Section 2.18 and the payment
giving rise thereto shall thereafter be recovered, such purchase
or purchases or adjustments shall be rescinded to the extent of
such recovery and the purchase price or prices or adjustment
restored without interest. The Borrower expressly consents to
the foregoing arrangements and agrees that any Lender holding a
participation in a Term Loan or Revolving Loan or L/C
Disbursement deemed to have been so purchased may exercise any
and all rights of banker's lien, setoff or counterclaim with
respect to any and all moneys owing by the Borrower to such
Lender by reason thereof as fully as if such Lender had made a
Loan directly to the Borrower in the amount of such
participation.
SECTION 2.19. Payments. (a) Each Loan Party shall make
each payment (including principal of or interest on any Borrowing
or any L/C Disbursement or any Fees or other amounts) hereunder
and under any other Loan Document from a Payment Location in the
United States or the United Kingdom prior to (i) 12:00 (noon),
New York City time on the date when due, in the case of any
amount payable in Dollars, and (ii) 11:00 a.m., London time, on
the date when due, in the case of any amount payable in Sterling,
in each case, in immediately available funds, without setoff,
defense or counterclaim. All such payments shall be made to the
Paying Agent at its offices at (i) 399 Park Avenue, New York,
New York, in the case of any amount payable in Dollars, and
(ii) [ ], London, in the case of any amount payable in
Sterling, except payments to be made directly to the Issuing Bank
as expressly provided herein and except that payments pursuant to
Sections 2.15, 2.16, 2.20 and 9.05 shall be made directly to the
persons entitled thereto. All Sterling Loans hereunder shall be
denominated and made, and all payments hereunder or under any
other Loan Document in respect thereof (whether of principal,
interest, fees or otherwise) shall be made, in Sterling. All
Dollar Loans hereunder shall be denominated and made, and all
payments of principal and interest, Fees or otherwise hereunder
or under any other Loan Document in respect thereof shall be
made, in Dollars, except as otherwise expressly provided herein.
(b) Whenever any payment (including principal of or
interest on any Borrowing or any Fees or other amounts) hereunder
or under any other Loan Document shall become due, or otherwise
would occur, on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day, and such
extension of time shall in such case be included in the
computation of interest or Fees, if applicable.
SECTION 2.20. Taxes. (a) Any and all payments hereunder
and under any other Loan Document shall be made, in accordance
with Section 2.19, free and clear of and without deduction for
any Indemnified Taxes or Other Taxes; provided that if any Loan
Party shall be required to deduct any Indemnified Taxes or Other
Taxes from or in respect of any such payments, then (i) the sum
payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Section 2.20(a)) the Paying
Agent,
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Lender or the Issuing Bank as the case may be, shall receive an
amount equal to the sum it would have received had no such
deductions been made, (ii) the applicable Loan Party shall make
such deductions and (iii) such Loan Party shall pay the full
amount deducted to the relevant Governmental Authority in
accordance with applicable law.
(b) In addition, the Loan Parties shall pay any Other Taxes
(other than stamp or other documentary taxes in connection with
any Assignment and Acceptance) to the relevant Governmental
Authority in accordance with applicable law.
(c) The applicable Loan Party will indemnify the Paying
Agent, each Lender and the Issuing Bank for the full amount of
any Indemnified Taxes and Other Taxes paid by the Paying Agent,
such Lender or the Issuing Bank as the case may be, on or with
respect to any payment or on account of any obligation of such
Loan Party and any penalties, interest and expenses (including
reasonable attorney's fees and expenses) arising therefrom or
with respect thereto, whether or not such Indemnified Taxes or
Other Taxes were correctly or legally imposed or asserted by the
relevant Governmental Authority. A certificate as to the amount
of such payment or liability prepared by the Paying Agent, a
Lender or the Issuing Bank or the Paying Agent on its behalf,
absent manifest error, shall be final, conclusive and binding for
all purposes. Such indemnification shall be made within 10 days
after the date the Paying Agent or any Lender or the Issuing Bank
(or Transferee), as the case may be, makes written demand
therefor.
(d) As soon as practicable after any payment of Indemnified
Taxes or Other Taxes by any Loan Party to a Governmental
Authority, such Loan Party will deliver to the Paying Agent, at
its address referred to in Section 9.01 to the extent legally
available, the original or a certified copy of a receipt issued
by such Governmental Authority evidencing such payment, a copy of
the return reporting such payment or other evidence of such
payment reasonably satisfactory to the Paying Agent.
(e) Withholding. (i) General. Any Lender that is entitled
to an exemption from or reduction of withholding tax with respect
to payments under this Agreement pursuant to the laws of the
United States of America or the United Kingdom or any treaty
(including any protocol thereto or official exchange of notes by
applicable governmental authorities with respect thereto) to
which the United States or the United Kingdom is a party shall
deliver to the applicable Loan Party (with a copy to the Paying
Agent), an Internal Revenue Form W-9 or such other properly
completed and executed documentation reasonably requested by the
applicable Loan Party at the time or times reasonably requested
by such Loan Party as will permit such payments to be made
without withholding or with a reduced rate of withholding.
(ii) Non-U.S. Lenders. Without limiting the
generality of clause (i) above, each Lender that is organized
under the laws of a jurisdiction other than the United States,
any State thereof or the District of Columbia (a "Non-U.S.
Lender") that is legally entitled to do so shall deliver to the
applicable Loan Party and the Paying Agent two copies of either
United States Internal Revenue Service Form 1001 or Form 4224 (or
any subsequent versions thereof or successors thereto), or, in
the case of a Non-U.S. Lender claiming exemption from U.S.
Federal withholding tax under Section 871(h) or 881(c) of the
Code with respect to such payments of "portfolio interest", a
Form W-8, or any subsequent versions thereof or successors
thereto (and, if such Non-U.S. Lender delivers a Form W-8, a
certificate representing that such Non-U.S. Lender is not a bank
for purposes
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47
of Section 881(c) of the Code, is not a 10-percent shareholder
(within the meaning of Section 871(h)(3) of the Code) of the
applicable Loan Party and is not a controlled foreign corporation
(within the meaning of Section 864(d)(4) of the Code)), properly
completed and duly executed by such Non-U.S. Lender claiming
complete exemption from, or a reduced rate of, U.S. Federal
withholding tax on payments by the applicable Loan Party under
this Agreement.
(iii)Time for Submitting Documentation. Each Lender
shall deliver to the applicable Loan Party the documentation
required to be provided under clause (ii) above on or before the
date such Lender becomes a party to this Agreement and on or
before the date, if any, such Lender changes its applicable
lending office by designating a different lending office. In
addition, each Lender shall deliver such forms promptly upon the
obsolescence or invalidity of any form previously delivered by
such Lender. Notwithstanding any other provision of this
Section, a Lender shall not be required to deliver any form
pursuant to this Section 2.20(e) that such Lender is not legally
able to deliver.
(iv) Notice of Change in Documentation. If any Lender
determines that it is unable to submit any documentation that it
is obligated to submit pursuant to this Section 2.20(e), or that
such Lender is required to withdraw or cancel any form or
certificate it previously submitted, the Lender shall promptly
notify the applicable Loan Party of that fact.
(f) Nothing contained in this Section 2.20 shall require
any Lender or the Issuing Bank or the Paying Agent to make
available any of its tax returns (or any other information that
it deems to be confidential or proprietary).
(g) Tax Saving. (i) If any Lender, the Issuing Bank or
the Paying Agent (each, a "Finance Party") receives a refund,
repayment, credit or relief in respect of Indemnified Taxes or
Other Taxes in respect of which it has received indemnity
payments or additional amounts pursuant to this Section 2.20 and,
in the case of a credit or relief, such credit or relief reduces
the Tax liability of the Finance Party in the jurisdiction in
which the Indemnified Taxes or Other Taxes were imposed (a "Tax
Saving") and such Tax Saving is, in the good faith opinion of the
relevant Finance Party, both identifiable and quantifiable by it
without requiring such Finance Party or its professional advisers
to expend a material amount of time or incur a material cost in
so identifying or quantifying, the Finance Party will pay over
the amount of such Tax Saving to the applicable Loan Party to the
extent it has received indemnity payments or additional amounts
pursuant to this Section 2.20, net of all out-of-pocket expenses
and without interest (other than interest paid by the relevant
Governmental Authority with respect to such refund); provided,
however, that the applicable Loan Party shall, upon request of
the Finance Party, repay such refund (plus penalties, interest or
other charges imposed by the relevant Governmental Authority) to
such Finance Party if the Tax Saving is subsequently disallowed
or cancelled.
(ii) Nothing contained in this Agreement shall
interfere with the rights of any Finance Party to arrange its Tax
and other affairs in whatever manner it thinks fit and, in
particular, no Finance Party shall be under any obligation to
claim relief from Tax on its corporate profits or from any
similar liability for Taxes in respect of the Indemnified Taxes
or Other Taxes, or to claim relief in priority to any other
claims, reliefs, credits or deductions available to it or to
disclose details of its Tax affairs.
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48
SECTION 2.21. Assignment of Commitments Under Certain
Circumstances; Duty to Mitigate. (a) In the event (i) any
Lender or the Issuing Bank delivers a certificate requesting
compensation pursuant to Section 2.14, (ii) any Lender or the
Issuing Bank delivers a notice described in Section 2.15 or (iii)
any Loan Party is required to pay any additional amount to any
Lender or the Issuing Bank or any Governmental Authority on
account of any Lender or the Issuing Bank pursuant to Section
2.20, the Borrower may, at its sole expense and effort (including
with respect to the processing and recordation fee referred to in
Section 9.04(b)), upon notice to such Lender or the Issuing Bank
and the Paying Agent, require such Lender or the Issuing Bank to
transfer and assign, without recourse (in accordance with and
subject to the restrictions contained in Section 9.04), all of
its interests, rights and obligations under this Agreement to an
assignee that shall assume such assigned obligations (which
assignee may be another Lender, if a Lender accepts such
assignment); provided that (x) such assignment shall not conflict
with any law, rule or regulation or order of any court or other
Governmental Authority having jurisdiction, (y) the Borrower
shall have received the prior written consent of the Paying Agent
(and, if a Revolving Credit Commitment is being assigned, of the
Issuing Bank), which consent shall not unreasonably be withheld,
and (z) the Borrower or such assignee shall have paid to the
affected Lender or the Issuing Bank in immediately available
funds an amount equal to the sum of the principal of and interest
accrued to the date of such payment on the outstanding Loans or
L/C Disbursements of such Lender or the Issuing Bank,
respectively, plus all Fees and other amounts accrued for the
account of such Lender or the Issuing Bank hereunder (including
any amounts under Section 2.14 and Section 2.16); provided
further that, if prior to any such transfer and assignment the
circumstances or event that resulted in such Lender's or the
Issuing Bank's claim for compensation under Section 2.14 or
notice under Section 2.15 or the amounts paid pursuant to Section
2.20, as the case may be, cease to cause such Lender or the
Issuing Bank to suffer increased costs or reductions in amounts
received or receivable or reduction in return on capital, or
cease to have the consequences specified in Section 2.15 or cease
to result in amounts being payable under Section 2.20, as the
case may be (including as a result of any action taken by such
Lender or the Issuing Bank pursuant to paragraph (b) below), or
if such Lender or the Issuing Bank shall waive its right to claim
further compensation under Section 2.14 in respect of such
circumstances or event or shall withdraw its notice under
Section 2.15 or shall waive its right to further payments under
Section 2.20 in respect of such circumstances or event, as the
case may be, then such Lender or the Issuing Bank shall not
thereafter be required to make any such transfer and assignment
hereunder.
(b) If (i) any Lender or the Issuing Bank shall request
compensation under Section 2.14, (ii) any Lender or the Issuing
Bank delivers a notice described in Section 2.15 or (iii) the
Borrower is required to pay any additional amount to any Lender
or the Issuing Bank or any Governmental Authority on account of
any Lender or the Issuing Bank pursuant to Section 2.20, then
such Lender or the Issuing Bank shall use reasonable efforts
(which shall not require such Lender or the Issuing Bank to incur
an unreimbursed loss or unreimbursed cost or expense or otherwise
take any action inconsistent with its internal policies or legal
or regulatory restrictions or suffer any disadvantage or burden
deemed by it to be significant) (x) to file any certificate or
document reasonably requested in writing by the Borrower or
(y) to assign its rights and delegate and transfer its
obligations hereunder to another of its offices, branches or
affiliates, if such filing or assignment would reduce its claims
for compensation under Section 2.14 or enable it to withdraw its
notice pursuant to Section 2.15 or would reduce the amounts
payable pursuant to Section 2.20, as the case may be, in the
future. The Borrower hereby agrees to pay all reasonable costs
and expenses incurred by any Lender or the Issuing Bank in
connection with any such filing or assignment, delegation and
transfer.
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49
SECTION 2.22. Letters of Credit. (a) General. The
Borrower may request the issuance of a Letter of Credit for its
own account, for the account of PGH or for the account of any of
their respective subsidiaries (provided that the Borrower shall
be a co-applicant and co-obligor with respect to each Letter of
Credit issued for the account of or in favor of PGH or any of
their respective subsidiaries), in a form reasonably acceptable
to the Paying Agent and the Issuing Bank, at any time and from
time to time while the Revolving Credit Commitments remain in
effect. This Section shall not be construed to impose an
obligation upon the Issuing Bank to issue any Letter of Credit
that is inconsistent with the terms and conditions of this
Agreement.
(b) Notice of Issuance, Amendment, Renewal, Extension;
Certain Conditions. In order to request the issuance of a Letter
of Credit (or to amend, renew or extend an existing Letter of
Credit), the Borrower shall hand deliver or telecopy to the
Issuing Bank and the Paying Agent (reasonably in advance of the
requested date of issuance, amendment, renewal or extension) a
notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or
extended, the date of issuance, amendment, renewal or extension,
the date on which such Letter of Credit is to expire (which shall
comply with paragraph (c) below), the amount and currency of such
Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare such
Letter of Credit. A Letter of Credit shall be issued, amended,
renewed or extended only if, and upon issuance, amendment,
renewal or extension of each Letter of Credit, the Borrower shall
be deemed to represent and warrant that, after giving effect to
such issuance, amendment, renewal or extension (A) the L/C
Exposure shall not exceed $350,000,000 and (B) the Aggregate
Revolving Credit Exposure shall not exceed the Total Revolving
Credit Commitment.
(c) Expiration Date. Each Letter of Credit shall expire at
the close of business on the earlier of the date one year after
the date of the issuance, renewal or extension, as applicable, of
such Letter of Credit and the date that is five Business Days
prior to the Revolving Credit Maturity Date, unless such Letter
of Credit expires by its terms on an earlier date. Each Letter
of Credit may, upon the request of the Borrower, include a
provision whereby such Letter of Credit shall be renewed
automatically for additional consecutive periods of 12 months or
less (but not beyond the date that is five Business Days prior to
the Revolving Credit Maturity Date) unless the Issuing Bank
notifies the beneficiary thereof at least 30 days prior to the
then-applicable expiration date that such Letter of Credit will
not be renewed.
(d) Participations. By the issuance of a Letter of Credit
and without any further action on the part of the Issuing Bank or
the Lenders, the Issuing Bank hereby grants to each Revolving
Credit Lender, and each such Lender hereby acquires from the
applicable Issuing Bank, a participation in such Letter of Credit
equal to such Lender's Pro Rata Percentage of the aggregate
amount available to be drawn under such Letter of Credit,
effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Revolving
Credit Lender hereby absolutely and unconditionally agrees to pay
to the Paying Agent, for the account of the Issuing Bank, such
Lender's Pro Rata Percentage of each L/C Disbursement made by the
Issuing Bank and not reimbursed by the Borrower (or, if
applicable, another party pursuant to its obligations under any
other Loan Document) forthwith on the date due as provided in
Section 2.02(g). Each Revolving Credit Lender acknowledges and
agrees that its obligation to acquire participations pursuant to
this paragraph in respect of Letters of Credit is absolute and
unconditional and shall not be affected by any circumstance
whatsoever, including the occurrence and continuance of a Default
or an Event of
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50
Default or the fact that, as a result of fluctuations in exchange
rates, such Revolving Credit Lender's Revolving Credit Exposure
at any time might exceed its Revolving Credit Commitment at such
time (in which case Section 2.13(a) would apply), and that each
such payment shall be made without any offset, abatement,
withholding or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit denominated in
Dollars, the Borrower shall pay to the Paying Agent an amount
equal to such L/C Disbursement not later than 2:00 p.m., New York
City time, on the day that the Borrower shall have received
notice from the Issuing Bank of such L/C Disbursement, or, if the
Borrower shall have received such notice later than 10:00 a.m.,
New York City time, on any Business Day, not later than
10:00 a.m., New York City time, on the immediately following
Business Day. If the Issuing Bank shall make any L/C
Disbursement in respect of a Letter of Credit denominated in
Sterling, the Borrower shall pay to the Paying Agent an amount
equal to such L/C Disbursement not later than 2:00 p.m., London
time, on the day that the Borrower shall have received notice
from the Issuing Bank of such L/C Disbursement, or, if the
Borrower shall have received such notice later than 10:00 a.m.,
London time, on any Business Day, not later than 10:00 a.m.,
London time, on the immediately following Business Day.
(f) Obligations Absolute. The Borrower's obligations to
reimburse L/C Disbursements as provided in paragraph (e) above
shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this
Agreement, under any and all circumstances whatsoever, and
irrespective of:
(i) any lack of validity or enforceability of any
Letter of Credit or any Loan Document, or any term or
provision therein;
(ii) any amendment or waiver of or any consent to
departure from all or any of the provisions of any Letter of
Credit or any Loan Document;
(iii)the existence of any claim, setoff, defense or
other right that the Borrower, any other party guaranteeing,
or otherwise obligated with, the Borrower, any subsidiary or
other Affiliate thereof or any other person may at any time
have against the beneficiary under any Letter of Credit, the
Issuing Bank, the Paying Agent or any Lender or any other
person, whether in connection with this Agreement, any other
Loan Document or any other related or unrelated agreement or
transaction;
(iv) any draft or other document presented under a
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;
(v) payment by the Issuing Bank under a Letter of
Credit against presentation of a draft or other document
that does not comply with the terms of such Letter of
Credit; and
(vi) any other act or omission to act or delay of any
kind of the Issuing Bank, the Lenders, the Paying Agent or
any other person or any other event or circumstance
whatsoever, whether or not similar to any of the foregoing,
that might, but for the provisions
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51
of this Section, constitute a legal or equitable discharge
of the Borrower's obligations hereunder.
Without limiting the generality of the foregoing, it is
expressly understood and agreed that the absolute and
unconditional obligation of the Borrower hereunder to reimburse
L/C Disbursements will not be excused by the gross negligence or
wilful misconduct of the Issuing Bank. However, the foregoing
shall not be construed to excuse the Issuing Bank from liability
to the Borrower to the extent of any direct damages (as opposed
to consequential damages, claims in respect of which are hereby
waived by the Borrower to the extent permitted by applicable law)
suffered by the Borrower that are caused by the Issuing Bank's
gross negligence or wilful misconduct in determining whether
drafts and other documents presented under a Letter of Credit
comply with the terms thereof; it is understood that the Issuing
Bank may accept documents that appear on their face to be in
order, without responsibility for further investigation,
regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) the Issuing
Bank's exclusive reliance on the documents presented to it under
such Letter of Credit as to any and all matters set forth
therein, including reliance on the amount of any draft presented
under such Letter of Credit, whether or not the amount due to the
beneficiary thereunder equals the amount of such draft and
whether or not any document presented pursuant to such Letter of
Credit proves to be insufficient in any respect, if such document
on its face appears to be in order, and whether or not any other
statement or any other document presented pursuant to such Letter
of Credit proves to be forged or invalid or any statement therein
proves to be inaccurate or untrue in any respect whatsoever and
(ii) any noncompliance in any immaterial respect of the documents
presented under such Letter of Credit with the terms thereof
shall, in each case, be deemed not to constitute wilful
misconduct or gross negligence of the Issuing Bank.
(g) Disbursement Procedures. The Issuing Bank shall,
promptly following its receipt thereof, examine all documents
purporting to represent a demand for payment under a Letter of
Credit. The Issuing Bank shall as promptly as possible give
telephonic notification, confirmed by telecopy, to the Paying
Agent and the Borrower of such demand for payment and whether the
Issuing Bank has made or will make an L/C Disbursement
thereunder; provided that any failure to give or delay in giving
such notice shall not relieve the Borrower of its obligation to
reimburse the Issuing Bank and the Revolving Credit Lenders with
respect to any such L/C Disbursement in accordance with
paragraph (e) above. The Paying Agent shall promptly give each
Revolving Credit Lender notice thereof.
(h) Interim Interest. If the Issuing Bank shall make any
L/C Disbursement in respect of a Letter of Credit, then, unless
the Borrower shall reimburse such L/C Disbursement in full on
such date, the unpaid amount thereof shall bear interest for the
account of the Issuing Bank, for each day from and including the
date of such L/C Disbursement, to but excluding the earlier of
the date of payment by the Borrower or the date on which interest
shall commence to accrue thereon as provided in Section 2.02(g),
at the rate per annum that would apply to such amount if such
amount were (i) in the case of a Dollar Loan, a Base Rate Loan
and (ii) in the case of a Sterling Loan, a Eurocurrency Loan with
an Interest Period of one month's duration.
(i) Resignation or Removal of the Issuing Bank. The
Issuing Bank may resign at any time by giving 180 days' prior
written notice to the Paying Agent, the Lenders and the Borrower,
and may be removed at any time by the Borrower by notice to the
Issuing Bank, the Paying Agent and the
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52
Lenders. Upon the acceptance of any appointment as the Issuing
Bank hereunder by a Lender that shall agree to serve as successor
Issuing Bank, such successor shall succeed to and become vested
with all the interests, rights and obligations of the retiring
Issuing Bank and the retiring Issuing Bank shall be discharged
from its obligations to issue additional Letters of Credit
hereunder. At the time such removal or resignation shall become
effective, the Borrower shall pay all accrued and unpaid fees
pursuant to Section 2.05(b)(ii). The acceptance of any
appointment as the Issuing Bank hereunder by a successor Lender
shall be evidenced by an agreement entered into by such
successor, in a form satisfactory to the Borrower and the Paying
Agent, and, from and after the effective date of such agreement,
(i) such successor Lender shall have all the rights and
obligations of the previous Issuing Bank under this Agreement and
the other Loan Documents and (ii) references herein and in the
other Loan Documents to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to
such successor and all previous Issuing Banks, as the context
shall require. After the resignation or removal of the Issuing
Bank hereunder, the retiring Issuing Bank shall remain a party
hereto and shall continue to have all the rights and obligations
of an Issuing Bank under this Agreement and the other Loan
Documents with respect to Letters of Credit issued by it prior to
such resignation or removal, but shall not be required to issue
additional Letters of Credit.
(j) Cash Collateralization. If (i) any Event of Default
shall occur and be continuing or (ii) to the extent and so long
as the L/C Exposure exceeds the Total Revolving Credit
Commitment, the Borrower shall, on the Business Day it receives
notice from the Paying Agent or the Required Lenders (or, if the
maturity of the Loans has been accelerated, Revolving Credit
Lenders holding participations in outstanding Letters of Credit
representing greater than 50% of the aggregate undrawn amount of
all outstanding Letters of Credit) thereof and of the amount to
be deposited, deposit in an account with the Collateral Agent,
for the benefit of the Revolving Credit Lenders, an amount in
cash equal to the L/C Exposure (or in the case of clause (ii) of
this sentence, the excess of the L/C Exposure over the Total
Revolving Credit Commitment) as of such date. Such deposit shall
be held by the Collateral Agent as collateral for the payment and
performance of the Obligations. The Collateral Agent shall have
exclusive dominion and control, including the exclusive right of
withdrawal, over such account. Other than any interest earned on
the investment of such deposits in Permitted Investments, which
investments shall be made as selected by the Collateral Agent,
such deposits shall not bear interest. Interest or profits, if
any, on such investments shall accumulate in such account.
Moneys in such account shall (i) automatically be applied by the
Paying Agent to reimburse the Issuing Bank for L/C Disbursements
for which it has not been reimbursed, (ii) be held for the
satisfaction of the reimbursement obligations of the Borrower for
the L/C Exposure at such time and (iii) if the maturity of the
Loans has been accelerated (but subject to the consent of
Revolving Credit Lenders holding participations in outstanding
Letters of Credit representing greater than 50% of the aggregate
undrawn amount of all outstanding Letters of Credit), be applied
to satisfy the Obligations. If the Borrower is required to
provide an amount of cash collateral pursuant to clause (i) of
the first sentence of this paragraph (j), such amount (to the
extent not applied as aforesaid) shall be returned to the
Borrower within three Business Days after all Events of Default
have been cured or waived. If the Borrower is required to
provide an amount of cash collateral pursuant to clause (ii) of
the first sentence of this paragraph (j), such amount shall be
returned to the Borrower from time to time to the extent that the
amount of such cash collateral held by the Collateral Agent
exceeds the excess, if any, of the L/C Exposure over the Total
Revolving Credit Commitment so long as no Event of Default shall
have occurred and be continuing.
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53
SECTION 2.23. Extension of Revolving Credit Commitments.
Upon prior written notice (an "Extension Notice") to the Paying
Agent delivered not less than 30 nor more than 60 days prior to
the date that is 18 months after the date of the initial
Acquisition Borrowing (the "Original Revolving Credit Maturity
Date"), the Borrower may elect to extend the Original Revolving
Credit Maturity Date to the date that is 30 months after the date
of the initial Acquisition Borrowing, without the consent of the
Paying Agent or any Lender, if all of the following conditions
are satisfied:
(a) No Default or Event of Default shall have occurred
and be continuing on the date of the Extension Notice or on
the Original Revolving Credit Maturity Date;
(b) All the Term Loans and FRNs shall have been paid
in full on or prior to the Original Revolving Credit
Maturity Date;
(c) Each of Standard & Poor's Ratings Services and
Moody's Investors Service, Inc. shall have in place a credit
rating for the facilities under this Agreement that shall be
at least as high as the rating such rating agency had for
such facilities on the date of the initial Acquisition
Borrowing; and
(d) The Borrower shall have paid to the Paying Agent
on the Original Revolving Credit Maturity Date, for the
account of each Revolving Credit Lender, a fee (an
"Extension Fee") equal to 0.50% of the Revolving Credit
Commitment of such Lender as in effect on the Original
Revolving Credit Maturity Date (after giving effect to any
reduction in such Revolving Credit Commitment effective on
the Original Revolving Credit Maturity Date).
ARTICLE III
Representations and Warranties
Each Loan Party represents and warrants to the Paying Agent,
the Collateral Agent, the Issuing Bank and each of the Lenders
that:
SECTION 3.01. Organization. Each of PGH and its
subsidiaries is duly incorporated or organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation or organization, as the case may be, and has all
organizational powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business as now conducted, except, in each case, where the
failure to satisfy any of the above could not reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.02. Corporate and Governmental Authorization; No
Contravention. The execution and delivery by each Loan Party of
this Agreement and by each Loan Party of the Transaction
Documents to which it is or will be a party and the performance
by each Loan Party of its obligations hereunder and thereunder
are within such Loan Party's organizational powers and have been
duly authorized by all necessary organizational action. This
Agreement has been duly executed and delivered by each Loan Party
and each other Transaction Document has (as of the date of
execution thereof by the relevant Loan Party) been duly executed
and delivered by the Loan Parties party thereto. No
registration, recordation or filing with or consent, approval or
other action (other
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54
than the registration of the charge created by the Collateral
Assignment pursuant to Section 395 of the U.K. Companies Act
1985) by any regulatory or other governmental body, agency or
official is required in connection with the execution or delivery
of this Agreement and the other Loan Documents by the Loan
Parties party thereto, except where the failure to register,
record or file could not reasonably be expected to result in a
Material Adverse Effect, or is necessary for the validity or
enforceability hereof or thereof, and the execution, delivery,
performance and enforcement of the Loan Documents by the Loan
Parties thereto do not and will not contravene, or constitute a
default under, any provision of applicable law or regulation, or
of the certificate or articles of incorporation or by-laws of the
Loan Parties, or any of their respective subsidiaries, except
where such contravention or default could not reasonably be
expected to result in a Material Adverse Effect, or of any
agreement, judgment, injunction, order, decree or other
instrument binding upon any Loan Party or result in the creation
or imposition of any material Lien upon any asset of any Loan
Party or any of their respective subsidiaries (other than any
Lien created under the Transaction Documents).
SECTION 3.03. Enforceability. Each of the Transaction
Documents that has been executed and delivered constitutes (and,
upon execution and delivery thereof as contemplated thereby, the
other Transaction Documents will constitute) a valid and binding
agreement of each Loan Party and each of its subsidiaries party
thereto, in each case enforceable against such person in
accordance with its terms, except as the foregoing may be limited
by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium, or other similar laws affecting the rights of
creditors generally and by general principles of equity,
including those limiting the availability of specific
performance, injunctive relief, and other equitable remedies and
those providing for defenses based on fairness and
reasonableness, regardless of whether considered in a proceeding
in equity or at law.
SECTION 3.04. Financial Statements. (a) The Loan Parties
have heretofore furnished to the Lenders the consolidated balance
sheet and statements of income and retained earnings and (except
in the case of Peabody Holding for the period ended September 30,
1997) cash flows of each of (i) PGH and its subsidiaries,
(ii) PALLC and its subsidiaries, (iii) Peabody Holding and its
subsidiaries and (iv) TEG and its subsidiaries, as the case may
be, (A) as of and for the most recent fiscal year for which
audited financial statements are available, in each case audited
by and accompanied by the opinion of Deloitte & Touche LLP,
independent public accountants, or such other independent public
accountants of recognized standing in the United States, the
United Kingdom or Australia, as applicable, and (B) as of and for
the applicable interim period ended September 30, 1997, certified
(in the case of the financial statements of PGH and PALLC) by a
Financial Officer of each of PGH and PALLC, as the case may be.
Such financial statements present (or, in the case of persons not
under the control of PGH on the date hereof, present, to the
knowledge of the Loan Parties) fairly (in the case of persons
organized in the United States), or present a true and fair view
of (in the case of all other persons), in accordance with
applicable GAAP the financial position (in the case of persons
organized in the United States) or financial condition (in the
case of all other persons) and results of operations and cash
flows (except as noted above in the case of Peabody Holding) of
(w) PGH and its subsidiaries, (x) PALLC and its subsidiaries,
(y) Peabody Holding and its subsidiaries and (z) TEG and its
subsidiaries, in each case, as of such dates and for such
periods. Such balance sheets and the notes thereto (if any)
disclose (or, in the case of persons not under the control of PGH
on the date hereof, disclose to the knowledge of the Loan
Parties) all material liabilities, direct or contingent, of each
of (I) PGH and its subsidiaries, (II) PALLC and its
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55
subsidiaries, (III) Peabody Holding and its subsidiaries and
(IV) TEG and its subsidiaries, in each case, as of the dates
thereof, as required in accordance with GAAP.
(b) The Loan Parties have heretofore delivered to the
Lenders unaudited pro forma consolidating balance sheets of each
of (i) PGH and its subsidiaries and (ii) the Borrower and its
subsidiaries as of December 31, 1996 and September 30, 1997 (the
"Pro Forma Financial Statements"), prepared to give effect to the
Transactions as if they had occurred on such dates and the Loan
Parties have delivered to the Lenders unaudited pro forma
consolidating statements of income of each of (A) PGH and its
subsidiaries and (B) the Borrower and its subsidiaries for the
fiscal year ended December 31, 1996 and for the twelve months
ended September 30, 1997, assuming the Transactions had actually
occurred on January 1, 1996 and October 1, 1996, respectively.
Such pro forma balance sheets and income statements have been
prepared in good faith by the Loan Parties based on reasonable
assumptions, are based on the best information available to the
Loan Parties as of the date of delivery thereof, accurately
reflect all material adjustments required to be made to give
effect to the Transactions and present fairly, or present a true
and fair view, as applicable, on a pro forma basis the estimated
consolidated financial position or financial condition, as
applicable, of (x) PGH and its subsidiaries and (y) the Borrower
and its subsidiaries as of December 31, 1996 and September 30,
1997, assuming that the Transactions had actually occurred on
such dates, and present fairly, or present a true and fair view,
as applicable, on a pro forma basis the estimated consolidated
results of operations of (I) PGH and its subsidiaries and (II)
the Borrower and its subsidiaries for the fiscal year ended
December 31, 1996 and the twelve months ended September 30, 1997,
assuming that the Transactions had actually occurred on
January 1, 1996 and October 1, 1996, respectively.
SECTION 3.05. No Material Adverse Change. There has been
no material adverse change in the business, assets, operations,
condition, financial or otherwise, or material agreements of PGH
and its subsidiaries, taken as a whole, from the position
reflected in the Pro Forma Financial Statements.
SECTION 3.06. Title to Properties; Possession Under Leases.
(a) PGH and its subsidiaries have good and marketable title to,
or valid leasehold interests on, all their material properties
and assets, except for defects that could not reasonably be
expected to result in a Material Adverse Effect. All such
material properties and assets are free and clear of Liens, other
than Liens permitted by Section 6.02.
(b) Except as set forth on Schedule 3.06(b), PGH and its
subsidiaries have complied with all obligations under all
material leases to which it is a party and all such leases are in
full force and effect, except where such noncompliance or failure
to be in full force and effect, individually or in the aggregate,
could not reasonably be expected to result in a Material Adverse
Effect. PGH and its subsidiaries enjoy peaceful and undisturbed
possession under all such leases, other than Liens permitted by
Section 6.02.
SECTION 3.07. Subsidiaries. (a) Except for changes with
respect to Excluded Assets permitted by this Agreement,
Schedule 3.07(a) sets forth as of the Closing Date a list of all
direct and indirect subsidiaries of PGH and the percentage
ownership interest of PGH therein. The shares of capital stock
or other ownership interests of PGH so indicated on
Schedule 3.07(a) are fully paid and
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56
non-assessable and are owned by PGH, directly or indirectly, free
and clear of all Liens, other than Liens permitted by
Section 6.02.
(b) Except for changes with respect to Excluded Assets
permitted by this Agreement, Schedule 3.07(b) sets forth as of
the date of the initial Borrowing hereunder a list of all direct
and indirect subsidiaries of PGH and the percentage ownership
interest of PGH therein, after giving effect to the TPC
Contribution. On and after the date of the initial Borrowing
hereunder, the shares of capital stock or other ownership
interests so indicated on Schedule 3.07(b) will be fully paid and
non-assessable and will be owned by PGH, directly or indirectly,
free and clear of all Liens, other than Liens permitted by
Section 6.02.
SECTION 3.08. Litigation; Compliance with Laws.
(a) Except as set forth on Schedule 3.08, there are not any
actions, suits or proceedings at law or in equity or by or before
any Governmental Authority now pending or, to the knowledge of
any Loan Party, threatened against or affecting PGH or any of its
subsidiaries or any business, property or rights of any such
person (i) that expressly involve any Transaction Document or the
Transactions or (ii) as to which there is a reasonable
possibility of an adverse determination and that, in either case,
could reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Effect.
(b) None of PGH or any of its subsidiaries or any of its
respective material properties or assets is in violation of, nor
will the continued operation of their material properties and
assets as currently conducted violate, any law, rule or
regulation, or is in default with respect to any judgment, writ,
injunction, decree or order of any Governmental Authority, where
such violation or default could reasonably be expected to result
in a Material Adverse Effect.
SECTION 3.09. Agreements. (a) Neither PGH nor any of its
subsidiaries is a party to any agreement or instrument or subject
to any corporate or other organizational restriction that has
resulted or could reasonably be expected to result in a Material
Adverse Effect.
(b) Neither PGH nor any of its subsidiaries is in default
in any manner under any provision of any indenture or other
agreement or instrument evidencing Indebtedness, or any other
material agreement or instrument to which it is a party or by
which it or any of its properties or assets are or may be bound,
where such default could reasonably be expected to result in a
Material Adverse Effect.
(c) Each of the Spring Creek Loan Agreement, the Spring
Creek Note and the Spring Creek Participation Agreement is a
valid and binding agreement or obligation of the parties thereto
and is in full force and effect. The execution, delivery and
performance of the Spring Creek Loan Agreement, the Spring Creek
Note and the Spring Creek Participation Agreement did not and
will not contravene, or constitute a default under, any provision
of the Spring Creek Coal Supply Contract.
SECTION 3.10. Federal Reserve Regulations. No part of the
proceeds of any Loan or any Letter of Credit will be used,
whether directly or indirectly, and whether immediately,
incidentally or ultimately, for any purpose that entails a
violation of, or that is inconsistent with, the provisions of the
Regulations of the Board, including Regulation G (as an effect
before April 1, 1998), T, U or X.
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57
SECTION 3.11. Investment Company Act; Public Utility
Holding Company Act. Neither PGH nor any of its subsidiaries is
subject to regulation under the Public Utility Holding Company
Act of 1935, the Investment Company Act of 1940, the Interstate
Commerce Act or any other law or regulation which limits the
incurrence by PGH or the Borrower of Indebtedness, including laws
relating to common or contract carriers or the sale of
electricity, gas, steam, water or other public utility services.
SECTION 3.12. Tax Matters. (a) Each of PGH and its
subsidiaries, and any other affiliate with joint and several
liability for taxes, has filed or caused to be filed all Federal,
state, local and other tax returns or materials required to have
been filed by it and has paid or caused to be paid all taxes due
and payable by it pursuant thereto and all assessments received
by it, except where the failure to do any of the foregoing could
not reasonably be expected to result in a Material Adverse
Effect.
(b) The Borrower is not, and will not be during the period
the U.K. Tax Sharing Agreement is in effect, a dual resident
investing corporation within the meaning of Section 404 of the
Income and Corporation Taxes Act 1988.
SECTION 3.13. No Material Misstatements. None of (a) the
Confidential Information Memorandum or (b) any other information,
report, financial statement, exhibit or schedule furnished by or
on behalf of PGH or any of its subsidiaries to the Paying Agent
or any Lender in connection with the negotiation of any
Transaction Document or included therein or delivered pursuant
thereto, when taken as a whole, contained, contains or will
contain any material misstatement of fact or omitted, omits or
will omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which
they were, are or will be made, not misleading; provided that to
the extent any such information report, financial statement,
exhibit or schedule was based upon or constitutes a forecast or
projection, each of PGH or any its subsidiaries represents only
that it acted in good faith and utilized reasonable assumptions
and due care in the preparation of such information, report,
financial statement, exhibit or schedule.
SECTION 3.14. Employee Benefit Plans. (a) Each of PGH and
its ERISA Affiliates is in compliance in all material respects
with the applicable provisions of ERISA and the Code and the
regulations and published interpretations thereunder, except
where the failure to comply could not reasonably be expected to
result in a Material Adverse Effect. Neither PGH nor any ERISA
Affiliate has (a) sought a waiver of the minimum funding standard
under Section 412 of the Code in respect of any Plan, (b) failed
to make any contribution or payment to any Plan or Multiemployer
Plan or made any amendment to any Plan which has resulted or
could result in the imposition of a Lien or the posting of a bond
or other security under ERISA or the Code or (c) incurred any
material liability under Title IV of ERISA other than a liability
to the PBGC for premiums under Section 4007 of ERISA.
(b) Each Foreign Pension Plan is in compliance in all
material respects with all requirements of law applicable thereto
and the respective requirements of the governing documents for
such plan except to the extent such non-compliance could not
reasonably be expected to result in a Material Adverse Effect.
With respect to each Foreign Pension Plan, none of PGH, its
Affiliates or any of its directors, officers, employees or agents
has engaged in a transaction which would subject PGH or
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58
any of its subsidiaries, directly or indirectly, to a material
tax or civil penalty. With respect to each Foreign Pension Plan,
adequate reserves have been established in the financial
statements furnished to Lenders in respect of any unfunded
liabilities in accordance with applicable law and prudent
business practice or, where required, in accordance with ordinary
accounting practices in the jurisdiction in which such Foreign
Pension Plan is maintained. The aggregate unfunded liabilities,
after giving effect to any such reserves for such liabilities,
with respect to such Foreign Pension Plans could not reasonably
be expected to result in a Material Adverse Effect. There are no
material actions, suits or claims (other than routine claims for
benefits) pending or threatened against PGH or any of its
Affiliates with respect to any Foreign Pension Plan which could
reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect.
SECTION 3.15. Environmental Matters. Except as set forth
on Schedule 3.15:
(a) The properties owned, leased or operated by PGH
and its subsidiaries (the "Properties") do not contain any
Hazardous Materials in amounts or concentrations which
(i) constitute a violation of, (ii) require Remedial Action
under, or (iii) could give rise to liability under,
Environmental Laws, which violations, Remedial Actions and
liabilities, in the aggregate, could reasonably be expected
to result in a Material Adverse Effect;
(b) The Properties and all operations of PGH and its
subsidiaries are in compliance with all Environmental Laws
and all Environmental Permits with respect to such
Properties and operations have been obtained and are in
effect, except to the extent that such non-compliance or
failure to obtain any such permits, in the aggregate, could
not reasonably be expected to result in a Material Adverse
Effect;
(c) There have been no Releases or threatened Releases
at, from or under the Properties or otherwise in connection
with the operations of PGH or any of its subsidiaries which
Releases or threatened Releases, in the aggregate, could
reasonably be expected to result in a Material Adverse
Effect;
(d) There are no existing or enacted but not yet
effective Environmental Laws that require expenditures in
connection with the Properties or operations of PGH or any
of its subsidiaries which, in the aggregate, could
reasonably be expected to result in a Material Adverse
Effect;
(e) Neither PGH nor any of its subsidiaries has
received any notice of an Environmental Claim in connection
with the Properties or the operations of PGH or such
subsidiaries or with regard to any person whose liabilities
for environmental, health or safety matters PGH or such
subsidiaries has retained or assumed, in whole or in part,
contractually, by operation of law or otherwise, which, in
the aggregate, could reasonably be expected to result in a
Material Adverse Effect, nor do PGH or such subsidiaries
have reason to believe that any such notice will be received
or is being threatened; and
(f) Hazardous Materials have not been transported from
the Properties, nor have Hazardous Materials been generated,
treated, stored or disposed of at, on or under any of the
Properties in a manner that could give rise to liability
under any Environmental Law, nor have PGH or such
subsidiaries retained or assumed any liability,
contractually, by operation
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59
of law or otherwise, with respect to the generation,
treatment, storage or disposal of Hazardous Materials, which
transportation, generation, treatment, storage or disposal,
or retained or assumed liabilities, in the aggregate, could
reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.16. Insurance. Schedule 3.16 sets forth a true,
complete and correct description of all material insurance
maintained by each Loan Party or by each Loan Party for its
subsidiaries as of the Closing Date and the date of the initial
Borrowing hereunder. As of each such date, such insurance is in
full force and effect and all premiums have been duly paid. PGH
and its subsidiaries (after giving effect to the Transactions)
have (or will have, as the case may be) insurance in such amounts
and covering such risks and liabilities as are in accordance with
normal industry practice.
SECTION 3.17. Security Documents. (a) The Pledge
Agreement is effective to create in favor of the Collateral
Agent, for the ratable benefit of the Secured Parties, a legal,
valid and enforceable security interest in the Collateral (as
defined in the Pledge Agreement) and, when such Collateral is
delivered to the Collateral Agent, the Pledge Agreement shall
constitute a duly perfected first priority Lien on, and security
interest in, all right, title and interest of the pledgors
thereunder in such Collateral, in each case prior and superior in
right to any other person, other than with respect to Liens
expressly permitted by Section 6.02.
(b) The Collateral Assignment is effective to create in
favor of the Collateral Agent, for the ratable benefit of the
Secured Parties, a legal, valid and enforceable security interest
in the Collateral (as defined in the Collateral Assignment) and,
when financing statements in appropriate form are filed in
appropriate filing offices, the Collateral Assignment shall
constitute (to the extent such security interest can be perfected
by filing under applicable uniform commercial codes) a duly
perfected first priority Lien on, and security interest in, all
right, title and interest of the Loan Parties in such Collateral,
in each case prior and superior in right to any other person,
other than with respect to Liens expressly permitted by
Section 6.02.
SECTION 3.18. Solvency. Immediately after the consummation
of the Transactions and immediately following the making of each
Loan and after giving effect to the application of the proceeds
of such Loans, (a) the fair value of the assets of each Loan
Party, at a fair valuation, will exceed its debts and
liabilities, subordinated, contingent or otherwise; (b) the
present fair saleable value of the property of each Loan Party
will be greater than the amount that will be required to pay the
probable liability of its debts and other liabilities,
subordinated, contingent or otherwise, as such debts and other
liabilities become absolute and matured; (c) each Loan Party will
be able to pay its debts and liabilities, subordinated,
contingent or otherwise, as such debts and liabilities become
absolute and matured; and (d) each Loan Party will not have
unreasonably small capital with which to conduct the business in
which it is engaged as such business is now conducted and is
proposed to be conducted following the Closing Date.
SECTION 3.19. Labor Matters. There are no strikes,
lockouts or slowdowns against PGH or any of its subsidiaries
pending or, to the knowledge of any Loan Party, threatened,
except where any such strike, lockout or slowdown could not
reasonably be expected to result in a Material Adverse Effect.
The hours worked by and payments made to employees of PGH and its
subsidiaries have not been in material violation of the Fair
Labor Standards Act or any other applicable Federal,
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60
state, local or foreign law dealing with such matters. All
payments due from PGH or any such subsidiary, or for which any
claim may be made against PGH or any such subsidiary, on account
of wages and employee health and welfare insurance and other
benefits, have been paid or accrued as a liability on the books
of PGH or such subsidiary. The consummation of the Transactions
will not give rise to any right of termination or right of
renegotiation on the part of any union under any collective
bargaining agreement to which PGH or any such subsidiary is
bound.
ARTICLE IV
Conditions
SECTION 4.01. Effective Date. The effectiveness of this
Agreement shall be subject to the satisfaction of each of the
following conditions:
(a) The Paying Agent shall have received, on behalf of
itself and the Lenders and the Issuing Bank, a favorable
written opinion of each of (i) Stoel Rives LLP, special
United States counsel for the Loan Parties, substantially to
the effect set forth in Exhibit I-1, (ii) Davis Polk &
Wardwell, special United States counsel for the Loan
Parties, substantially to the effect set forth in
Exhibit I-2, (iii) Linklaters & Paines, special United
Kingdom counsel for the Loan Parties, substantially to the
effect set forth in Exhibit I-3 and (iv) Clifford Chance,
special United Kingdom counsel for the Initial Lenders,
substantially to the effect set forth in Exhibit I-4.
(b) The Paying Agent shall have received (i) a copy of
the certificate or articles of incorporation, including all
amendments thereto, of PGH, certified as of a recent date by
the Secretary of State of the State of Delaware, and a
certificate as to the good standing of PGH as of a recent
date, from such Secretary of State; (ii) a certificate of
the Secretary or Assistant Secretary of each Loan Party
dated the Closing Date and certifying (A) that attached
thereto is a true and complete copy of the articles or
certificate of incorporation, the by-laws or memorandum and
articles of association and other organizational documents
of such Loan Party as in effect on the Closing Date and at
all times since the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and
complete copy of resolutions duly adopted by the Board of
Directors and a Committee of the Board of Directors of such
Loan Party, as applicable, authorizing the execution,
delivery and performance of the Transaction Documents to
which such person is a party (including in the case of the
Borrower, the borrowings hereunder and in the case of PGH,
the Guarantee of the borrowings hereunder), and that such
resolutions have not been modified, rescinded or amended and
are in full force and effect, (C) that the certificate or
articles of incorporation of PGH have not been amended since
the date of the last amendment thereto shown on the
certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen
signature of each officer authorized, to the extent
applicable, to act with respect to the Loan Documents and
each of the other Transaction Documents; and (iii) a
certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to clause (ii) above.
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(c) The Paying Agent shall have received a
certificate, signed by a Financial Officer of each Loan
Party, dated the Closing Date and confirming that the
representations and warranties set forth in Article III
hereof are true and correct in all material respects, except
to the extent any such representation and warranty relates
to an earlier or later date.
(d) Each of the Guarantee Agreement and the Pledge
Agreement shall have been duly executed by the parties
thereto and delivered to the Collateral Agent and shall be
in full force and effect in accordance with their respective
terms.
SECTION 4.02. Borrowings. (a) The obligation of any Lender
to make a Loan or of the Issuing Bank to issue, extend, renew or
amend a Letter of Credit (each, a "Credit Event") on the occasion
of any Credit Event, the proceeds of which are to be used,
directly or indirectly, to finance the Offer or to pay costs and
expenses related thereto or for any other purpose set forth in
Clause 3.1(a)(i) of the PA Facility Agreement or to repay
Refinanced Indebtedness, is subject to the satisfaction of the
following conditions:
(i) The Paying Agent shall have received a notice of
such Credit Event as required by Section 2.03 or, in the
case of the issuance of a Letter of Credit, the Issuing Bank
and the Paying Agent shall have received a notice requesting
the issuance of such Letter of Credit as required by
Section 2.22(b).
(ii) At the time of and immediately after such Credit
Event, no Event of Default described in clause (g) or (h) of
Article VII shall have occurred and be continuing with
respect to any Loan Party.
(iii)The representations and warranties set forth in
Sections 3.01, 3.02 and 3.03, as they relate to the Loan
Parties, shall be true and correct in all material respects
on the date of any such Credit Event with the same effect as
though made on such date.
(iv) Each Loan Party shall have repaid in full (or
shall have made provision for the repayment in full of) the
principal of all loans outstanding, interest thereon and
other amounts due and payable in respect of the Refinanced
Indebtedness, and the Paying Agent shall have received
evidence thereof.
(v) Each of the Offer Conditions Precedent, unless
waived in writing by the Required Lenders (such waiver being
conclusively evidenced by written notice from the Paying
Agent to the Borrower and, in the case of paragraph 1 of
such Offer Conditions Precedent, not to be unreasonably
withheld or delayed), shall have been satisfied.
(vi) Each of the TPC Contribution and the PGH Equity
Contribution shall have been completed.
(vii)Each of the applicable conditions precedent with
respect to a borrowing to finance the Offer set forth in the
Powercoal Credit Agreement and the PA Facility Agreement
(other than any condition in any such agreement requiring
that borrowings shall have been made under this or any other
such agreement and/or the proceeds of such borrowings have
been made available directly or indirectly to PA) shall have
been satisfied
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62
or waived in accordance with the terms thereof, and each of
such agreements and the Eastern Facility Letter shall be in
full force and effect.
Each Credit Event hereunder of the type described in this
Section 4.02(a) shall be deemed to be a representation and
warranty by each Loan Party on the date of such Credit Event as
to the facts specified in clauses (ii), (iii), (iv), (v), (vi),
and (vii) of this Section 4.02(a).
(b) The obligation of any Lender or of the Issuing Bank on
the occasion of any Credit Event other than (i) a Credit Event of
the type described in Section 4.02(a) or (ii) a continuation or
conversion of a Borrowing of the type described in Section 2.10,
is subject to the satisfaction of the following conditions:
(i) The Paying Agent shall have received a notice of
such Credit Event as required by Section 2.03 (or such
notice shall have been deemed given in accordance with
Section 2.03) or, in the case of the issuance of a Letter of
Credit, the Issuing Bank and the Paying Agent shall have
received a notice requesting the issuance of such Letter of
Credit as required by Section 2.22(b).
(ii) The representations and warranties set forth in
Article III hereof shall be true and correct in all material
respects on and as of the date of such Credit Event with the
same effect as though made on and as of such date, except to
the extent such representations and warranties expressly
relate to an earlier or later date.
(iii)At the time of and immediately after such Credit
Event, no Event of Default or Default shall have occurred
and be continuing.
Each Credit Event of the type described in this Section 4.02(b)
shall be deemed to constitute a representation and warranty by
each Loan Party on the date of such Credit Event as to the
matters specified in paragraphs (ii) and (iii) of this
Section 4.02(b).
ARTICLE V
Affirmative Covenants
Each Loan Party covenants and agrees with each Lender that
so long as this Agreement shall remain in effect and until the
Commitments have been terminated and the principal of and
interest on each Loan, all Fees and all other expenses or amounts
then due and payable under any Loan Document shall have been paid
in full and all Letters of Credit have been canceled or have
expired and all amounts drawn thereunder have been reimbursed in
full, unless the Required Lenders shall otherwise consent in
writing, each Loan Party will, and will cause each of its
subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties.
(a) Do or cause to be done all things necessary to preserve,
renew and keep in full force and effect the legal existence of
each Loan Party, except as otherwise expressly permitted under
Section 6.05.
(b) (i) In the case of each Significant Subsidiary, do, or
cause to be done all things necessary to preserve, renew and keep
in full force and effect its legal existence, except as otherwise
expressly
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63
permitted under Section 6.05, and (ii) in the case of each Loan
Party and each Significant Subsidiary, do or cause to be done all
things necessary to obtain, preserve, renew, extend and keep in
full force and effect the rights, licenses, permits, franchises,
authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; except as contemplated
by this Agreement, maintain and operate such business in
substantially the manner in which it is presently conducted and
operated; and at all times maintain and preserve all property
material to the conduct of such business and keep such property
in good repair, working order and condition and from time to time
make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto
necessary in order that the business carried on in connection
therewith may be properly conducted in all material respects at
all times, in each case, where the failure to do so could
reasonably be expected to have a Material Adverse Effect.
SECTION 5.02. Insurance. Keep its insurable properties
adequately insured at all times by financially sound and
reputable insurers; maintain such other insurance (including self
insurance), to such extent and against such risks, including fire
and other risks insured against by extended coverage, as is
customary with companies in the same or similar businesses
operating in the same or similar locations, including public
liability insurance against claims for personal injury or death
or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by
it; and maintain such other insurance as may be required by law.
SECTION 5.03. Obligations and Taxes. Pay its Indebtedness
and other material obligations promptly and in accordance with
their terms and pay and discharge promptly when due all taxes,
assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property, before
the same shall become delinquent or in default, as well as all
material lawful claims for labor, materials and supplies or
otherwise that, if unpaid, might give rise to a Lien upon such
properties or any part thereof; provided, however, that such
payment and discharge shall not be required with respect to any
such tax, assessment, charge, levy or claim so long as the
validity or amount thereof shall be contested in good faith by
appropriate proceedings and the applicable Loan Party shall have
set aside on its books adequate reserves with respect thereto in
accordance with GAAP and such contest operates to suspend
collection of the contested obligation, tax, assessment or charge
and enforcement of a Lien.
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SECTION 5.04. Financial Statements, Reports, etc. In the case of the
Loan Parties, furnish to the Paying Agent and each Lender:
(a) as soon as available and in any event within 120 days after the
end of each fiscal year, a consolidated balance sheet and related
statement of income and retained earnings and cash flows showing the
financial condition (in the case of persons organized in the United
States) or financial position (in the case of all other persons) of each
of (i) PGH and its subsidiaries, (ii) the Borrower and its subsidiaries,
(iii) Powercoal and its subsidiaries, (iv) prior to the Peabody Transfer,
Peabody Holding and its subsidiaries, (v) PALLC and its subsidiaries and
(vi) PA and its subsidiaries as of the close of and during such fiscal
year, in each case audited by Deloitte & Touche LLP or other independent
public accountants of recognized standing in the United States, the United
Kingdom or Australia, as applicable, and accompanied by an opinion of such
accountants (which shall not be qualified in any material respect) to the
effect that such consolidated financial statements fairly present (in the
case of persons organized in the United States), or present a true and
fair view of (in the case of all other persons), the financial condition
or financial position, as applicable, and results of operations of (A) PGH
and its subsidiaries, (B) the Borrower and its subsidiaries, (C) Powercoal
and its subsidiaries, (D) Peabody Holding and its subsidiaries, (E) PALLC
and its subsidiaries and (F) PA and its subsidiaries, as the case may be,
on a consolidated basis in accordance with GAAP consistently applied
(except as otherwise disclosed in the notes thereto);
(b) within 75 days after the end of the first fiscal quarter ending
after the initial Acquisition Borrowing and within 60 days after the end
of each of the first three fiscal quarters of each fiscal year thereafter
(provided that prior to such date, PGH and the Borrower shall furnish to
the Paying Agent and each Lender any information made publicly available
relating to PGH and its subsidiaries), a consolidated balance sheet and
related statement of income and retained earnings and cash flows showing
the financial condition or financial position, as applicable, of each of
(i) PGH and its subsidiaries, (ii) the Borrower and its subsidiaries,
(iii) Powercoal and its subsidiaries, (iv) prior to the Peabody Transfer,
Peabody Holding and its subsidiaries, (v) PALLC and its subsidiaries and
(vi) PA and its subsidiaries as of the close of and during such fiscal
quarter and the then elapsed portion of the fiscal year, in each case
certified by a Financial Officer of each such person as fairly presenting,
or presenting a true and fair view of, as applicable, the financial
condition or financial position, as applicable, and results of operations
of (A) PGH and its subsidiaries, (B) the Borrower and its subsidiaries,
(C) Powercoal and its subsidiaries, (D) Peabody Holding and its
subsidiaries, (E) PALLC and its subsidiaries and (F) PA and its
subsidiaries, as the case may be, on a consolidated basis in accordance
with GAAP consistently applied (except as otherwise disclosed in the
certificate of a Financial Officer and except for the absence of footnote
disclosure), subject to normal year-end audit adjustments;
(c) as soon as available and in any event within 120 days after the
end of each fiscal year, an unaudited consolidating balance sheet and
related statement of income for each of (i) PGH and its subsidiaries and
(ii) the Borrower and its subsidiaries for the four quarter period ending
as of the close of such fiscal year;
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(d) concurrently with any delivery of financial statements under
paragraph (a), (b) or (c) above, (i) a certificate of the Financial
Officer certifying such statements to the effect that no Event of Default
has occurred and that no Default has occurred and is continuing or, if
such an Event of Default has occurred or a Default has occurred and is
continuing, specifying the nature and extent thereof and any corrective
action taken or proposed to be taken with respect thereto and (ii) a
certificate of a Financial Officer of PGH setting forth the Net
Termination Value as of the date of such financial statements; provided
that, in addition to the certificate required by clause (i) above,
concurrently with the delivery of financial statements under paragraph (a)
above, the applicable accounting firm will deliver a certificate (which
certificate may be limited to accounting matters and disclaim
responsibility for legal interpretations) to the effect that no Event of
Default has occurred and that no Default has occurred and is continuing,
unless at such time it is the practice and policy of such accounting firm
not to deliver such certificates;
(e) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by
PGH, the Borrower, Powercoal, PA and PALLC or any of their respective
subsidiaries with the Securities and Exchange Commission, or any
Governmental Authority succeeding to any or all of the functions of said
Commission, or with any national securities exchange, or distributed to
its public shareholders, as the case may be; and
(f) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of PGH, the
Borrower, Powercoal, PA and PALLC or any of their respective subsidiaries,
or compliance with the terms of any Loan Document, as the Paying Agent or
any Lender may reasonably request.
SECTION 5.05. Litigation and Other Notices. Furnish to the Paying
Agent, the Issuing Bank and each Lender prompt written notice of the following:
(a) any Event of Default or Default of which a Responsible Officer of
such Loan Party is aware, specifying the nature and extent thereof and the
corrective action (if any) taken or proposed to be taken with respect
thereto;
(b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or
proceeding, whether at law or in equity or by or before any Governmental
Authority, against any Loan Party or any Affiliate thereof that could
reasonably be expected to result in a Material Adverse Effect; and
(c) any development of which a Responsible Officer is aware that has
resulted in, or which such Responsible Officer has reasonably concluded
will result in, a Material Adverse Effect.
SECTION 5.06. Maintaining Records; Access to Properties and Inspections.
Keep proper books of record and account in which full, true and correct
entries in conformity with GAAP and all requirements of law are made of all
dealings and transactions in relation to its business and activities. PGH
will, and will cause each of its subsidiaries to, permit any representatives
designated by the Paying Agent or any Lender to visit and inspect (at such
Lender's expense, except in the case of visits
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66
and inspections made by the Paying Agent) the financial records and the
properties of PGH or any such subsidiary at reasonable times and as often as
reasonably requested and to make extracts from and copies of such financial
records, and permit any representatives designated by the Paying Agent or any
Lender to discuss (in the presence of PGH or such subsidiary, as applicable,
unless a Default or Event of Default shall have occurred and is continuing)
the affairs, finances and condition of PGH or any such subsidiary with the
officers thereof and independent accountants therefor.
SECTION 5.07. Use of Proceeds. Use the proceeds of the Loans and request
the issuance of Letters of Credit only for the purposes set forth in the
preamble to this Agreement.
SECTION 5.08. Compliance with Laws. Comply in all respects with all
applicable laws, ordinances, rules, regulations and requirements of
Governmental Authorities (including Environmental Laws and ERISA and the
rules and regulations thereunder), except where the necessity of compliance
therewith is contested in good faith by appropriate proceedings or where
non-compliance therewith could not reasonably be expected to have a Material
Adverse Effect.
SECTION 5.09. Further Assurances. As soon as practicable after the
execution by TEG and its subsidiaries of the U.K. Tax Sharing Agreement,
execute the Collateral Assignment and deliver it to the Collateral Agent,
together with legal opinions reasonably satisfactory to the Collateral Agent,
and give notice of the execution of such Collateral Assignment to the other
parties to the U.K. Tax Sharing Agreement in order to grant, preserve,
protect and perfect the validity and first priority of the security interests
created or intended to be created by such Collateral Assignment. Execute any
and all further documents, financing statements, agreements and instruments,
and take all further action (including filing Uniform Commercial Code and
other financing statements) that may reasonably be required under applicable
law, or that the Required Lenders, the Paying Agent or the Collateral Agent
may reasonably request, in order to effectuate the transactions contemplated
by the Loan Documents and in order to grant, preserve, protect and perfect
the validity and first priority of the security interests created or intended
to be created by the Security Documents. Each Loan Party agrees to provide
such evidence as the Collateral Agent shall reasonably request as to the
perfection and priority status of each such security interest and Lien.
SECTION 5.10. Interest Rate Protection Agreements. As promptly as
practicable after the Unconditional Date and in any event within 180 days
after the date of the initial Borrowing hereunder, enter into, and thereafter
maintain in full force and effect through the Term Loan Maturity Date, one or
more Interest Rate Protection Agreements in form reasonably satisfactory to
the Paying Agent, the effect of which shall be to limit or cap the interest
cost to PGH and its subsidiaries with respect to a notional amount at least
equal to 50% of the Consolidated Total Debt of PGH and its subsidiaries and
deliver evidence of the execution and delivery thereof to the Paying Agent.
SECTION 5.11. Tax Sharing Accounts. In the case of the Loan Parties,
cause each Tax Sharing Payment to be made to or by such Loan Party to be made
to or from an account maintained with Citibank.
SECTION 5.12. Tax Sharing Agreements. (a) As soon as practicable, but in
any event not later than 270 days after the initial Acquisition Borrowing,
cause TEG and certain of its subsidiaries resident in the United Kingdom for
purposes of United Kingdom tax to enter into the U.K. Tax Sharing Agreement
and (b) maintain the U.S. Tax Sharing Policy in full force and effect and
cause
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to be bound thereby each of their subsidiaries that is included in the
affiliated group for U.S. income tax purposes of which PacifiCorp is the
common parent.
SECTION 5.13. Peabody Transfer; PPM Contribution; Citizens Transfer. As
soon as practicable, but in any event not later than 270 days after the
initial Acquisition Borrowing, effect (a) the Peabody Transfer, (b) the PPM
Contribution and (c) the Citizens Transfer.
SECTION 5.14. Open Market Shares. On or prior to the date of the initial
Acquisition Borrowing pursuant to Section 4.02(a), transfer or cause to be
transferred all the Open Market Shares to PA.
ARTICLE VI
Negative Covenants
Each Loan Party covenants and agrees with each Lender that, so long as
this Agreement shall remain in effect and until the Commitments have been
terminated and the principal of and interest on each Loan, all Fees and all
other expenses or amounts then due and payable under any Loan Document have
been paid in full and all Letters of Credit have been canceled or have
expired and all amounts drawn thereunder have been reimbursed in full, unless
the Required Lenders shall otherwise consent in writing, none of the Loan
Parties will, or will cause or permit any of its subsidiaries to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness outstanding on the Closing Date, or available under
debt instruments existing on the Closing Date, and set forth on Schedule
6.01(a);
(b) Indebtedness created hereunder and under the other Loan Documents;
(c) Indebtedness of Services, PA, Powercoal, PALLC, Eastern and their
respective subsidiaries created under or permitted (or not prohibited) by
the Credit Facilities;
(d) Indebtedness of PGH or any of its wholly owned subsidiaries to any
other wholly owned subsidiary of PGH or PGH;
(e) Indebtedness in respect of surety or appeal bonds, performance
bonds, reclamation bonds and other obligations of a like nature incurred
in the ordinary course of business;
(f) Indebtedness (including tax exempt financings and Capital Lease
Obligations) used to purchase, construct, develop or improve assets in the
ordinary course of business after the Closing Date or incurred in the
ordinary course of business after the Closing Date to finance capital
expenditures; provided that at no time shall the aggregate outstanding
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principal amount of any such Indebtedness incurred pursuant to this
paragraph (f) exceed $25,000,000;
(g) extensions, renewals or refinancings of Indebtedness under
paragraphs (a) and (c) so long as (i) such Indebtedness (the "Refinancing
Indebtedness") is in an aggregate principal amount not greater than the
aggregate principal amount of the Indebtedness being extended, renewed or
refinanced plus the amount of any interest or premiums required to be paid
thereon and fees and expenses associated therewith, (ii) such Refinancing
Indebtedness has a later or equal final maturity and a longer or equal
weighted average life than the Indebtedness being extended, renewed or
refinanced, (iii) the interest rate applicable to such Refinancing
Indebtedness shall be a market interest rate (as determined in good faith
by the Board of Directors of PGH or the Borrower) as of the time of such
extension, renewal or refinancing, (iv) if the Indebtedness being
extended, renewed or refinanced is subordinated to the Obligations, such
Refinancing Indebtedness is subordinated to the Obligations to the extent
of the Indebtedness being extended, renewed or refinanced, (v) the
covenants, events of default and other provisions thereof (including any
Guarantees thereof), taken as a whole, shall be no less favorable to the
Lenders than those contained in the Indebtedness being refinanced and (vi)
at the time of and after giving effect to such extension, renewal or
refinancing, no Default or Event of Default shall have occurred and be
continuing;
(h) extensions, renewals or refinancings of Indebtedness under
paragraph (b) so long as (i) such Indebtedness (the "EnergyCo Refinancing
Indebtedness") is in an aggregate principal amount not greater than the
aggregate principal amount of the Indebtedness being extended, renewed or
refinanced plus the amount of any interest required to be paid thereon and
fees and expenses associated therewith, (ii) such EnergyCo Refinancing
Indebtedness matures at least 24 months after the Term Loan Maturity
Date, (iii) the interest rate applicable to such EnergyCo Refinancing
Indebtedness shall be a market interest rate (as determined in good faith
by the Board of Directors of PGH or the Borrower) as of the time of such
extension, renewal or refinancing, (iv) such EnergyCo Refinancing
Indebtedness shall be either (x) unsecured or (y) secured by all of any
portion of the Collateral pursuant to the Collateral Trust and
Intercreditor Agreement, (v) such EnergyCo Refinancing Indebtedness shall
not require any scheduled payments of principal prior to the maturity
thereof, (vi) the agreements governing such EnergyCo Refinancing
Indebtedness shall not require the Loan Parties or their respective
subsidiaries to maintain any specified financial condition (other than as
a condition to the taking of specified actions by the Loan Parties or
their respective subsidiaries), (vii) the Net Cash Proceeds of such
EnergyCo Refinancing Indebtedness are used as required by Sections 2.13(d)
and (e) and (viii) at the time of and after giving effect to such
extension, renewal or refinancing, no Default or Event of Default shall
have occurred and be continuing;
(i) Indebtedness issued under an FRN Purchase Agreement so long as (i)
such Indebtedness (the "FRNs") matures no earlier than the Term Loan
Maturity Date, (ii) such FRNs shall be either (x) unsecured or (y) secured
by all or any portion of the Collateral pursuant to the Collateral Trust
and Intercreditor Agreement, (iii) such FRNs shall not require any
scheduled payments of principal prior to the maturity thereof and (iv) the
Net Cash Proceeds of such FRNs are used as required by Sections 2.13(d)
and (e);
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(j) Non-Recourse Indebtedness of any Single Purpose Entity; and
(k) unsecured Indebtedness of PGH or the Borrower in addition to that
permitted by paragraphs (a) through (j) above in an aggregate principal
amount outstanding not to exceed at any time $50,000,000.
SECTION 6.02. Liens. In the case of each Loan Party, create, incur,
assume or permit to exist any Lien on any property or assets (including stock or
other securities of any person) now owned or hereafter acquired by it or on any
income or revenues or rights in respect of any thereof, except:
(a) Liens on property or assets of the Loan Parties existing on the
Closing Date and set forth on Schedule 6.02(a); provided that such Liens
shall secure only those obligations which they secure on the Closing Date;
(b) any Lien created under the Loan Documents;
(c) any Lien existing on any property or asset prior to the
acquisition thereof by either Loan Party; provided that (i) such Lien is
not created in contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or assets of either
Loan Party;
(d) Liens for taxes not yet due or which are being contested in
compliance with Section 5.03;
(e) carriers', warehousemen's, mechanics', materialmen's, repairmen's,
landlord's or other like Liens arising in the ordinary course of business
and securing obligations that are not due and payable or which are being
contested in compliance with Section 5.03;
(f) pledges and deposits made in the ordinary course of business in
compliance with workmen's compensation, unemployment insurance and other
social security laws or regulations;
(g) deposits to secure the performance of bids, trade contracts (other
than for Indebtedness), leases (other than Capital Lease Obligations),
statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(h) Liens created by or relating to any legal proceeding which at the
time is being contested in good faith by appropriate proceedings; provided
that, in the case of a Lien consisting of an attachment or judgment Lien,
the judgment it secures shall, within 60 days of entry thereof, have been
discharged or execution thereof stayed pending appeal, or discharged
within 60 days after the expiration of any such stay;
(i) any Lien on (i) the proceeds of sale of commercial paper issued by
a Loan Party or (ii) a Loan Party's right to receive such proceeds,
securing such Loan Party's obligation
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to reimburse the issuer of a letter of credit for drawings to repay
commercial paper previously issued by such Loan Party;
(j) zoning restrictions, easements, rights-of-way, restrictions on use
of real property and other similar encumbrances incurred in the ordinary
course of business which, in the aggregate, are not substantial in amount
and do not materially detract from the value of the property subject
thereto or interfere with the ordinary conduct of the business of either
Loan Party;
(k) purchase money security interests in real property, improvements
thereto, equipment or other fixed assets hereafter acquired (or, in the
case of improvements, equipment or other fixed assets, constructed) by the
Borrower or any Subsidiary; provided that (i) such security interests
secure Indebtedness permitted by Section 6.01(f), (ii) such security
interests are incurred, and the Indebtedness secured thereby is created,
no later than 90 days after such acquisition (or completion of such
construction), (iii) the Indebtedness secured thereby does not exceed the
cost of such real property, improvements or equipment at the time of such
acquisition (or construction) and (iv) such security interests do not
apply to any other property or assets of the Borrower or any Subsidiary
(other than the proceeds of the real property, improvements, equipment or
other fixed assets subject to such Lien);
(l) Liens securing Refinancing Indebtedness, to the extent that the
Indebtedness being refinanced was originally secured in accordance with
this Section 6.02; provided that such Lien does not apply to any
additional property or assets of either Loan Party (other than the
proceeds of the property or asset subject to such Lien);
(m) Liens in the Collateral securing FRNs or EnergyCo Refinancing
Indebtedness, in each case subject to the terms of the Collateral Trust
and Intercreditor Agreement;
(n) Liens on cash and cash equivalents in an aggregate amount not to
exceed $10,000,000 at any time to secure obligations of the Loan Parties
under Hedging Agreements;
(o) Liens on cash and cash equivalents to secure obligations of the
Loan Parties in respect of Exchange Rate Protection Agreements entered
into with a Lender (or an Affiliate of a Lender) at the time of issuance
of any EnergyCo Refinancing Indebtedness; provided, however, that the
aggregate amount of cash and cash equivalents that may be subject to a
Lien pursuant to this clause (o) on any date shall not exceed an amount
equal to 10% of the aggregate amount by which the Term Loans and FRNs have
been prepaid on or prior to such date (excluding any prepayment of Term
Loans with the proceeds of FRNs);
(p) Liens on cash and cash equivalents to secure a Loan Party's
reimbursement obligations to the issuer of a letter of credit that is a
Lender (or an Affiliate of a Lender); and
(q) Liens in addition to those permitted by paragraphs (a) through
(p); provided, however, that the aggregate principal amount of
Indebtedness and amount of other liabilities of the Loan Parties that is
secured by such Liens do not exceed at any time $10,000,000.
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SECTION 6.03. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby it shall sell or
transfer any property, real or personal, used or useful in its business, whether
now owned or hereafter acquired, and thereafter rent or lease such property or
other property which it intends to use for substantially the same purpose or
purposes as the property being sold or transferred; provided that Services, PA,
Powercoal, PALLC, Eastern and their respective subsidiaries may enter into any
such transaction to the extent permitted or not prohibited by the applicable
Credit Facilities.
SECTION 6.04. Investments, Loans and Advances. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in, any other person, except:
(a) existing investments by PGH or the Borrower in the capital stock,
share capital or other equity interests, as the case may be, of its
subsidiaries;
(b) investments, loans and advances of PGH and its subsidiaries
existing on the Closing Date and set forth on Schedule 6.04(b) or pursuant
to commitments set forth on Schedule 6.04(b);
(c) Permitted Investments;
(d) investments in Qualified NUG Hedging Agreements and Hedging
Agreements permitted under this Agreement, including Funding Exchange Rate
Protection Agreements;
(e) investments constituting non-cash consideration received in
connection with a sale of assets not prohibited by Section 6.05;
(f) investments, loans or advances made from the proceeds of equity
contributions made by PacifiCorp to PGH or the Borrower;
(g) investments that are sale and leaseback transactions permitted by
Section 6.03;
(h) investments, loans or advances permitted or not prohibited under
the applicable Credit Facilities, made by Services, PA, Powercoal, PALLC,
Eastern and their respective subsidiaries;
(i) the investment by PGH in Interco in connection with the Interco
Transactions; provided that Interco shall become a party to the Guarantee
Agreement as a guarantor and shall become a party to the Pledge Agreement
as a pledgor with respect to its interests in the Borrower and the
corporations that are members of PALLC; and
(j) investments in energy-related businesses; provided that it shall be
a condition to any such investment that (i) no Default or Event of Default
shall have occurred and be continuing, (ii) after giving effect to such
investment, including the proposed financing thereof, the Borrower shall
be in pro forma compliance with all the covenants contained in this
Agreement and (iii) if such investment is in an aggregate amount in excess
of $25,000,000, the Borrower shall have delivered to the Paying Agent a
certificate of a
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Financial Officer confirming compliance with clauses (i) and (ii) and
setting forth calculations, in form and substance reasonably satisfactory
to the Paying Agent, showing pro forma compliance with the covenants set
forth in Sections 6.10, 6.11 and 6.12.
SECTION 6.05. Mergers, Consolidations, Sales of Assets and Acquisitions.
(a) In the case of PGH and the Borrower, (i) merge into or consolidate with any
other person, or permit any other person to merge into or consolidate with it,
or sell, convey, transfer, lease, liquidate or otherwise dispose of (in one
transaction or in a series of related transactions) all or substantially all the
assets of any Loan Party, or assign any of its respective Obligations under the
Loan Documents to any other person; or (ii) permit PALLC, Powercoal, PA or
Services to sell, transfer, lease, liquidate or otherwise dispose of, directly
or indirectly, (by merger or otherwise) all or substantially all their
respective assets to any person other than a Loan Party or a wholly owned
subsidiary of a Loan Party, in each case except:
(A) PGH and any subsidiary may purchase and sell inventory in the
ordinary course of business;
(B) if at the time thereof and immediately after giving effect thereto
no Event of Default or Default shall have occurred and be continuing, any
wholly owned subsidiary of PGH (other than the Borrower) may merge into or
consolidate with or sell, convey, transfer, lease, liquidate or otherwise
dispose of all its assets to PGH or the Borrower or any other wholly owned
subsidiary in a transaction in which no person other than PGH, the
Borrower or a wholly owned subsidiary of PGH receives any consideration;
(C) PGH or any of its subsidiaries may effect the PPM Contribution, the
TPC Contribution, the Citizens Transfer, the Peabody Transfer, the Lee
Ranch Transfer and the Interco Transactions;
(D) PGH may sell, transfer or otherwise dispose of all the capital
stock of PFS or the Spring Creek Note so long as (I) at the time thereof
and immediately after giving effect thereto, no Event of Default shall
have occurred and be continuing and (II) PGH complies with Section 2.13
with respect to the Net Cash Proceeds received from any such sale,
transfer or other disposition;
(E) acquisitions constituting investments permitted by Section 6.04; and
(F) PGH may sell, transfer or otherwise dispose of the Excluded Assets
to PacifiCorp or any subsidiary of PacifiCorp.
(b) Notwithstanding Section 6.05(a), no Asset Sale by PGH or the Borrower
shall be permitted under this Agreement unless (i) the consideration to be
received in connection therewith shall be at least equal to the fair market
value of the assets or property sold, transferred or otherwise disposed of
(as determined in good faith by the board of directors of PGH or the
Borrower, as the case may be), (ii) such Asset Sale shall be for
consideration at least 80% of which is cash (except to the extent that the
purchase price or payment thereof is contingent on performance of the assets
or property sold) and (iii) to the extent required, the Net Cash Proceeds
therefrom are applied in accordance with Section 2.13(b).
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(c) Notwithstanding Section 6.05(a), no Asset Sale by any of Powercoal,
PA, PALLC, Eastern or any of their respective subsidiaries shall be permitted
under this Agreement unless (i) such Asset Sale is permitted or not
prohibited by the terms of the relevant Credit Facility, and (ii) in each
case, any Net Cash Proceeds received by such person as consideration in
connection with such Asset Sale are retained or applied (A) in the manner
required by, permitted under or not otherwise prohibited by the relevant
Credit Facility or (B) to prepay Loans in accordance with Section 2.13 of
this Agreement.
SECTION 6.06. Dividends and Distributions; Restrictions on Ability of
Subsidiaries to Pay Dividends. (a) Declare or pay, directly or indirectly,
any dividend or make any other distribution (by reduction of capital or
otherwise), whether in cash, property, securities or a combination thereof,
with respect to any shares of its capital stock or directly or indirectly
redeem, purchase, retire or otherwise acquire for value (or permit any
subsidiary to purchase or acquire) any shares of any class of its capital
stock or set aside any amount for any such purpose; provided, however, that
(i) any subsidiary (including any Hybrid Preferred Securities Subsidiary) may
declare and pay dividends or make other distributions ratably to its
shareholders or redeem, purchase, retire or otherwise acquire for value any
shares of any class of its capital stock (including Hybrid Preferred
Securities) or set aside any amount for any such purpose and (ii) if no
Default or Event of Default shall have occurred and be continuing or would
occur as a consequence thereof, (A) PGH and its subsidiaries may make
payments required to be made under the Tax Sharing Agreements so long as the
payment thereunder by PGH and its subsidiaries shall not exceed the amount
PGH and its subsidiaries would be required to pay under such arrangement as
in effect on the Closing Date, (B) PGH may pay dividends to PacifiCorp to the
extent PGH receives a substantially contemporaneous cash equity contribution
from PacifiCorp at least equal in amount and (C) after the Term Loans and
FRNs have been paid in full, PGH may pay dividends to PacifiCorp in an
aggregate amount not to exceed $25,000,000.
(b) Permit the subsidiaries of PGH to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any subsidiary of PGH to (i) (A) pay any
dividends or make any other distributions to PGH or any of its subsidiaries
on its capital stock or any other interest or (ii) make or repay any loans or
advances to PGH or the parent of such subsidiary (subclauses (i) and (ii) are
collectively referred to as an "Upstream Payment"); provided, however, that
the foregoing shall not restrict any encumbrances or restrictions:
(i) existing on the Closing Date under Indebtedness permitted by
Sections 6.01(a) and (c);
(ii) contained in any debt or preferred stock instrument relating to a
person acquired after the Closing Date; provided that (A) such encumbrances
and restrictions are not applicable to any person other than such person or
property or assets acquired, (B) such instrument was in existence at the
time of such acquisition and was not created in contemplation of or in
connection with such acquisition, and (C) the Borrower reasonably believes
at the time of such acquisition that the terms of such instrument will not
encumber or restrict the ability of such acquired person to make an
Upstream Payment in a manner that would adversely affect the Borrower's
ability to perform its obligations under the Loan Documents when due;
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(iii) incurred in connection with any Indebtedness permitted pursuant
to Section 6.01 (including any extension, refinancing, renewal or
replacement of Indebtedness contemplated by clauses (i) and (ii) above);
provided that (A) the Borrower reasonably believes at the time such
Indebtedness is incurred that the terms of such Indebtedness will not
restrict the ability of the person incurring such Indebtedness to make an
Upstream Payment in a manner that would adversely affect the Borrower's
ability to perform its obligations under the Loan Documents when due, and
(B) such Indebtedness contains no express encumbrances or restrictions on
the ability of such person to make an Upstream Payment; provided that any
Indebtedness that extends, refinances, renews or replaces Indebtedness
permitted hereunder may contain express encumbrances or restrictions on
Upstream Payments that are not materially more onerous than those contained
in the Indebtedness being extended, refinanced, renewed or replaced;
(iv) imposed on any Single Purpose Entity;
(v) existing under, or by reason of, applicable law, or as required by
or pursuant to agreements with any Governmental Authority; and
(vi) any encumbrance or restriction on the transfer of any property or
asset in an agreement relating to the acquisition or creation or
disposition of such property or asset or any Lien on such property or asset
that is otherwise permitted by the terms of this Agreement.
SECTION 6.07. Transactions with Affiliates. Make any material payment to,
or sell, lease, transfer or otherwise dispose of any material properties or
assets to, or purchase any material property or assets from, or enter into or
make or amend any material transaction, contract, agreement, understanding,
loan, advance or guarantee with, or for the benefit of, any Affiliate of any
such person (each of the foregoing, an "Affiliate Transaction"), unless such
Affiliate Transaction is on terms that are no less favorable to PGH, the
Borrower or the relevant subsidiary than those that would have been obtained in
a comparable transaction by PGH, the Borrower or such subsidiary with an
unrelated person; provided that (a) any payments or transfers that are permitted
by Section 6.01, 6.04, 6.05(a)(C), 6.05(a)(F) or 6.06(a) shall not be deemed to
be Affiliate Transactions and (b) the foregoing restriction shall not apply to
(i) transactions among the Loan Parties, (ii) transactions between or among
subsidiaries of the Borrower and (iii) transactions pursuant to agreements
entered into or in effect on the Closing Date (including the Tax Sharing
Agreements).
SECTION 6.08. Business of PGH and Subsidiaries. Engage to any material
extent in any business or business activity other than the energy business and
business activities reasonably incidental thereto.
SECTION 6.09. Other Indebtedness and Agreements. (a) In the case of the
Loan Parties, permit any waiver, supplement, modification, amendment,
termination (other than in connection with a refinancing permitted by Section
6.01(h)) or release of any indenture, note or any other instrument or
agreement evidencing Indebtedness for money borrowed (other than the
Intercompany Loan Agreements) or preferred or preference stock or pursuant to
which any Indebtedness for money borrowed or such stock was issued or issue
any securities in exchange for any Indebtedness for money borrowed or any
preferred or preference stock; provided, however, that such person may
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amend, modify or grant a waiver with respect to any such indenture, note or
other instrument or agreement if such amendment, modification or waiver does
not have the effect of (i) increasing the amounts due in respect of any such
indenture, note or other instrument or agreement or any interest rate
thereunder, (ii) subjecting any property of PGH or the Borrower to any Lien
to which it was not so subject immediately prior to any such amendment,
modification or waiver, (iii) shortening the maturity or average life of any
such Indebtedness for borrowed money (provided that the maturity of any such
Indebtedness for borrowed money may be shortened to a date that is not less
than six months later than the latest final maturity date of any outstanding
Term Loans) or (iv) creating or changing any covenant or similar restriction
or event of default having application to such person to make any such
covenant or similar restriction more restrictive on such person than the
covenants contained in this Agreement.
(b) In the case of the Loan Parties, make any payment or distribution,
whether in cash, property, securities or a combination thereof, other than
scheduled payments of principal and interest as and when due (to the extent
not prohibited by applicable subordination provisions), in respect of, or
pay, or offer or commit to pay, or directly or indirectly redeem, repurchase,
retire or otherwise acquire for consideration (or set apart any funds for the
aforesaid purposes) any Indebtedness for borrowed money, except for (i) the
Loans and (ii) Indebtedness that is refinanced by Refinancing Indebtedness.
(c) In the case of the Loan Parties, cause or suffer to exist any
amendment or modification to or supplement of the charter or by-laws of a
Loan Party or any other agreement (including the Tax Sharing Agreements) that
is material to the conduct of the operations of a Loan Party without the
prior written consent of the Required Lenders, unless such amendment,
modification or supplement is not adverse to the interests of the Lenders.
SECTION 6.10. Fixed Charge Coverage Ratio. Permit the ratio of (a) Cash
Available for Fixed Charges to (b) Fixed Charges for any four fiscal quarter
period ending after the Unconditional Date to be less than 1.10 to 1.00.
SECTION 6.11. Leverage Ratio. Permit the Leverage Ratio as at the end of
any fiscal quarter listed below to be in excess of the ratio set forth below
for such quarter:
Quarter Ending Ratio
-------------- -----
December 31, 1998 7.000 to 1.00
March 31, 1999 6.875 to 1.00
June 30, 1999 6.750 to 1.00
September 30, 1999 6.625 to 1.00
December 31, 1999 6.500 to 1.00
March 31, 2000 6.375 to 1.00
June 30, 2000 6.250 to 1.00
September 30, 2000 6.125 to 1.00
December 31, 2000 6.000 to 1.00
and thereafter
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SECTION 6.12. Consolidated EBITDA. Permit Consolidated EBITDA for
(a) each full quarter ending after the Unconditional Date and on or prior to
December 31, 1999, to be less than $325,000,000 and (b) any four fiscal quarter
period ending on any date or during any period set forth below to be less than
the amount set forth below opposite such period:
Date or Period Amount
-------------- ------
From and including March 31, $1,300,000,000
1999 to and including
December 31, 1999
March 31, 2000 1,325,000,000
June 30, 2000 1,350,000,000
September 30, 2000 1,375,000,000
December 31, 2000 and 1,400,000,000
thereafter
SECTION 6.13. Fiscal Year. In the case of each Loan Party, change the end
of its fiscal year from December 31 to any other date.
ARTICLE VII
Events of Default
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in or in
connection with any Loan Document or the borrowings or issuances of Letters
of Credit hereunder, or any representation, warranty, statement or
information contained in any report, certificate, financial statement or
other instrument furnished in connection with or pursuant to any Loan
Document, shall prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or any Fee or any other amount (other than an amount referred to in
paragraph (b) of this Article) due under any Loan Document, when and as the
same shall become due and payable, and such default shall continue
unremedied for a period of three Business Days;
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77
(d) default shall be made in the due observance or performance by PGH
or any of its subsidiaries of any covenant, condition or agreement
contained in Section 5.01(a), 5.05(a) or 5.07 or in Article VI;
(e) default shall be made in the due observance or performance by PGH
or any of its subsidiaries (to the extent applicable) of any covenant,
condition or agreement contained in any Loan Document (other than those
specified in paragraph (b), (c) or (d) of this Article) and such default
shall continue unremedied for a period of 30 days after notice thereof from
the Paying Agent or any Lender to the Borrower;
(f) PGH or any subsidiary shall (i) fail to pay any principal or
interest, regardless of amount, due in respect of any Indebtedness (other
than Non-Recourse Indebtedness) in a principal amount in excess of
$50,000,000, when and as the same shall become due and payable, (ii) fail
to observe or perform any other term, covenant, condition or agreement
contained in any agreement or instrument evidencing or governing any such
Indebtedness if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf to cause, such
Indebtedness to become due prior to its stated maturity or (iii) fail to
make any payment in respect of any Material Hedging Obligations when due;
provided that this paragraph (f) shall not apply with respect to any
Indebtedness owed by PGH or any of its subsidiaries to PGH or any of its
subsidiaries, except to the extent that such Indebtedness has been
accelerated by the holder thereof;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of PGH, the Borrower or any Significant Subsidiary
(or any group of subsidiaries of PGH, which, if considered in the aggregate
as a single subsidiary, would constitute a Significant Subsidiary), or of a
substantial part of the property or assets of PGH, the Borrower, such
Significant Subsidiary or such group of subsidiaries of PGH, under Title 11
of the United States Code, as now constituted or hereafter amended, or any
other Federal, state or foreign bankruptcy, insolvency, receivership or
similar law, (ii) the appointment of an administrator (as such term is
defined in the U.K. Insolvency Act of 1986), a liquidator, provisional
liquidator, receiver, administrative receiver, trustee, custodian,
sequestrator, conservator or similar official for PGH, the Borrower or any
Significant Subsidiary (or any group of subsidiaries of PGH which, if
considered in the aggregate as a single subsidiary, would constitute a
Significant Subsidiary) or for a substantial part of the property or assets
of PGH, the Borrower, a Significant Subsidiary or any such group of
subsidiaries of PGH or (iii) the winding-up or liquidation of PGH, the
Borrower or any Significant Subsidiary (or any group of subsidiaries of PGH
which, if considered in the aggregate as a single subsidiary, would
constitute a Significant Subsidiary); and such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) PGH, the Borrower or any Significant Subsidiary (or any group of
subsidiaries of PGH which, if considered in the aggregate as a single
subsidiary, would constitute a Significant Subsidiary) shall
(i) voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy, insolvency,
receivership or
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similar law, (ii) consent to the institution of, or fail to contest
in a timely and appropriate manner, any proceeding or the filing of
any petition described in paragraph (g) above, (iii) apply for or consent
to the appointment of an administrator (as such term is defined in the U.K.
Insolvency Act of 1986), a liquidator, provisional liquidator, receiver,
administrative receiver, trustee, custodian, sequestrator, conservator or
similar official for PGH, the Borrower, any Significant Subsidiary or any
such group of subsidiaries of PGH or for a substantial part of the property
or assets of PGH, the Borrower, any Significant Subsidiary or any such
group of subsidiaries of PGH, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make
a general assignment for the benefit of creditors, (vi) become unable,
admit in writing its inability or fail generally to pay its debts as they
become due or (vii) take any action for the purpose of effecting any of the
foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $50,000,000 shall be rendered against PGH, any
subsidiary (other than a Single Purpose Entity) or any combination thereof
and the same shall remain undischarged for a period of 30 consecutive days
during which execution shall not be effectively stayed, or any action shall
be legally taken by a judgment creditor to levy upon assets or properties
of PGH, or any subsidiary (other than a Single Purpose Entity) to enforce
any such judgment;
(j) an ERISA Event shall have occurred that, in the opinion of the
Required Lenders, when taken together with all other such ERISA Events,
could reasonably be expected to have a Material Adverse Effect;
(k) prior to a Collateral Release Event, any security interest
purported to be created by any Security Document shall cease to be, or
shall be asserted by any Loan Party not to be, a valid, perfected, first
priority (except as otherwise expressly provided in this Agreement or such
Security Document) security interest in the securities or properties
covered thereby with respect to a material portion of the Collateral,
except to the extent that any such loss of perfection or priority results
from an act or failure to act by the Collateral Agent to maintain
possession of certificates representing securities pledged under the Pledge
Agreement;
(l) any Loan Document shall not for any reason be, or shall be
asserted by any Loan Party not to be, in full force and effect and
enforceable in all material respects accordance with its terms;
(m) all or any material part of the assets of PGH or the Borrower, or
all or substantially all of the assets of any of their respective
Significant Subsidiaries, is seized, nationalized, expropriated or
compulsorily acquired by, or by the order of, any Governmental Authority;
(n) (i) the Secretary of State gives notice in writing of the
revocation of a License for any reason or a Licence ceases to be in full
force and effect in any material respect, in each case except where a
similar license(s) is/are granted to PA and/or any of its subsidiaries in
its place or where such License is no longer required (by law or
regulation) to be held by
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any Licenseholder in order that it may carry on any business carried on by
such Licenseholder on the date hereof;
(ii) without prejudice to clause (i) of this paragraph (n), any
legislation (whether primary or subordinate) removing, reducing or
qualifying the duties of the Secretary of State and/or the
Director General with regard to the creditors or the ability of
the Licenseholder to raise finance under a Licence or of
generators of electricity or public electricity suppliers
generally is enacted and the enactment has a Material Adverse
Effect with respect to PA and its subsidiaries;
(iii) any amendment is made to the terms and conditions of a
License and the amendment has a Material Adverse Effect with
respect to PA and its subsidiaries and, if the amendment is
required pursuant to a law or regulation applying to the United
Kingdom electricity distribution, supply or generation industry as
a whole, within 30 days Services and the PA Agent have not agreed
new terms for the PA Facility Agreement acceptable to the Majority
Banks (as defined in the PA Facility Agreement); or
(iv) PA or any of its subsidiaries 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 such Section)
which has been confirmed under such Section (and not since been
revoked) or any provisions of the Electricity Act 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 has (or is likely to have) a Material Adverse
Effect; or
(o) there shall have occurred a Change in Control;
then, at any time during the continuance of such event (other than an event
described in paragraph (g) or (h) above with respect to PGH or the Borrower),
the Paying Agent may, and at the request of the Required Lenders shall, by
notice to the Borrower, take either or both of the following actions, at the
same or different times: (i) terminate forthwith the Commitments and
(ii) declare the Loans then outstanding to be forthwith due and payable in whole
or in part, whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid accrued Fees and
all other liabilities of the Borrower accrued hereunder and under any other Loan
Document, shall become forthwith due and payable, without presentment, demand,
protest or any other notice of any kind, all of which are hereby expressly
waived by the Borrower, anything contained herein or in any other Loan Document
to the contrary notwithstanding; provided that (A) in any event described in
paragraph (g) or (h) above with respect to PGH or the Borrower, the Commitments
shall automatically terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and any unpaid accrued Fees and all other
liabilities of the Borrower accrued hereunder and under any other Loan Document,
shall automatically become due and payable, without presentment, demand, protest
or any other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding and (B) except as described in the immediately
preceding clause (A), during the period commencing with the Closing Date and
ending on the Offer Termination Date, the Paying Agent and the Lenders shall not
be entitled to terminate the Commitments, rescind this Agreement
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or prevent any funding of the Offer nor to declare the Loans due and payable
in whole or in part or exercise any other right or remedy under any Loan
Document or exercise any set off or similar right arising on the basis of
misrepresentation or Event of Default or otherwise if to do so would prevent
the funding of the Offer in accordance with Section 4.02(a) unless (i) an
Event of Default described in clause (g) or (h) of Article VII shall have
occurred and be continuing; (ii) any of the representations and warranties
set forth in Section 3.01, 3.02 and 3.03, as they relate to the Loan Parties,
shall not be true and correct in all material respects on the date of any
Credit Event of the type described in Section 4.02 with the same effect as
though made on such date or (iii) any of the Offer Conditions Precedent,
unless waived in writing by the Required Lenders (such waiver being
conclusively evidenced by written notice from the Paying Agent to the
Borrower and, in the case of paragraph 1 of such Offer Conditions Precedent,
not to be unreasonably withheld or delayed) shall not have been satisfied on
the date of any such Credit Event.
Notwithstanding anything to the contrary in the preceding paragraph, during
the Clean-up Period, none of the Paying Agent, the Collateral Agent or any
Lender may declare that an Event of Default has occurred, or terminate the
Commitments or declare the Loans to be due and payable as a result solely of one
or more Defaults described in paragraph (a), (d) (except for a Default in
respect of Section 5.07, 6.10, 6.11 or 6.12) or (e) of this Article VII, or
paragraph (f)(ii) of this Article VII insofar as it involves Indebtedness of TEG
or any of its subsidiaries to the extent such Indebtedness is repaid or
refinanced before the end of the Clean-up Period and the lenders thereunder have
not accelerated the obligations thereunder and commenced proceedings to enforce
the same; provided that the event or circumstance giving rise to such Default,
or the result of such Default, (i) directly relates to TEG or any of its
subsidiaries (or any of their businesses, assets or liabilities), (ii) is
capable of being cured or remedied during the Clean-up Period and (iii) except
to the extent it involves Indebtedness of TEG or any of its subsidiaries is
repaid or refinanced before the end of the Clean-up Period, was not known by a
Responsible Officer of PGH or the Borrower prior to the Closing Date; provided,
further, that the Paying Agent, the Collateral Agent and the Lenders shall be
entitled to exercise any and all rights and remedies granted to them hereunder
and under the Loan Documents with respect to an occurrence or continuation of
any such Default or Event of Default after the expiration of the Clean-up
Period.
ARTICLE VIII
The Paying Agent and the Collateral Agent
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In order to expedite the transactions contemplated by this Agreement,
Citibank is hereby appointed to act as Paying Agent on behalf of the Lenders and
as the Issuing Bank, and Citicorp USA is hereby appointed to act as Collateral
Agent on behalf of the Lenders (for purposes of this Article VIII, the Paying
Agent and the Collateral Agent are referred to collectively as the "Agents").
Each of the Lenders and each assignee of any such Lender and the Issuing Bank,
hereby irrevocably authorizes the Agents to take such actions on behalf of such
Lender or assignee or the Issuing Bank and to exercise such powers as are
specifically delegated to the Agents by the terms and provisions hereof and of
the other Loan Documents, together with such actions and powers as are
reasonably incidental thereto. The Paying Agent is hereby expressly authorized
by the Lenders and the Issuing Bank, without hereby limiting any implied
authority, (a) to receive on behalf of the Lenders and the Issuing Bank all
payments of principal of and interest on the Loans, all payments in respect of
L/C Disbursements and all other amounts due to the Lenders hereunder, and
promptly to distribute to each Lender or the Issuing Bank its proper share of
each payment so received; (b) to give notice on behalf of each of the Lenders to
the Loan Parties of any Event of Default specified in this Agreement of which
the Paying Agent has actual knowledge acquired in connection with its agency
hereunder; and (c) to distribute to each Lender copies of all notices, financial
statements and other materials delivered by each Loan Party pursuant to this
Agreement or the other Loan Documents as received by the Paying Agent. Without
limiting the generality of the foregoing, the Agents are hereby expressly
authorized to execute any and all documents (including releases) with respect to
the Collateral and the rights of the Secured Parties with respect thereto, as
contemplated by and in accordance with the provisions of this Agreement and the
Security Documents.
Neither the Agents nor any of their respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them except for its or his own gross negligence or wilful misconduct, or
be responsible for any statement, warranty or representation herein or the
contents of any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or observance by any
Loan Party of any of the terms, conditions, covenants or agreements contained in
any Loan Document. The Agents shall not be responsible to the Lenders for the
due execution, genuineness, validity, enforceability or effectiveness of this
Agreement or any other Loan Documents, instruments or agreements. The Agents
shall in all cases be fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required Lenders and, except
as otherwise specifically provided herein, such instructions and any action or
inaction pursuant thereto shall be binding on all the Lenders. Each Agent
shall, in the absence of knowledge to the contrary, be entitled to rely on any
instrument or document believed by it in good faith to be genuine and correct
and to have been signed or sent by the proper person or persons. Neither the
Agents nor any of their respective directors, officers, employees or agents
shall have any responsibility to any Loan Party on account of the failure of or
delay in performance or breach by any Lender or the Issuing Bank of any of their
respective obligations hereunder or to any Lender or the Issuing Bank on account
of the failure of or delay in performance or breach by any other Lender or the
Issuing Bank or any Loan Party of any of their respective obligations hereunder
or under any other Loan Document or in connection herewith or therewith. Each
of the Agents may execute any and all duties hereunder by or through agents or
employees and shall be entitled to rely upon the advice of legal counsel
selected by it with respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
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The Lenders hereby acknowledge that neither Agent shall be under any duty
to take any discretionary action permitted to be taken by it pursuant to the
provisions of this Agreement unless it shall be requested in writing to do so by
the Required Lenders.
Subject to the appointment and acceptance of a successor Agent as provided
below, either Agent may resign at any time by notifying the Lenders and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor, subject to the prior consent of the Borrower (not to be
unreasonably withheld). If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders, appoint a successor Agent, subject to the prior
consent of the Borrower (not to be unreasonably withheld), which shall be a bank
with an office in New York, New York, having a combined capital and surplus of
at least $500,000,000 or an Affiliate of any such bank. Upon the acceptance of
any appointment as Agent hereunder by a successor bank, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent and the retiring Agent shall be discharged from its duties
and obligations hereunder. After the Agent's resignation hereunder, the
provisions of this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Agent.
With respect to the Loans made by it hereunder, each Agent in its
individual capacity and not as Agent shall have the same rights and powers as
any other Lender and may exercise the same as though it were not an Agent, and
the Agents and their Affiliates may accept deposits from, lend money to and
generally engage in any kind of business with PGH or any subsidiary or other
Affiliate thereof as if it were not an Agent.
Each Lender agrees (a) to reimburse the Agents, on demand, in the amount of
its pro rata share (based on its Commitments hereunder) of any expenses incurred
for the benefit of the Lenders by the Agents, including counsel fees and
compensation of agents and employees paid for services rendered on behalf of the
Lenders, that shall not have been reimbursed by the Borrower and (b) to
indemnify and hold harmless each Agent and any of its directors, officers,
employees or agents, on demand, in the amount of such pro rata share, from and
against any and all liabilities, taxes, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against it in
its capacity as Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or omitted by it
or any of them under this Agreement or any other Loan Document, to the extent
the same shall not have been reimbursed by the Loan Party; provided that no
Lender shall be liable to an Agent or any such other indemnified person for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or wilful misconduct of such Agent or any of its directors,
officers, employees or agents. Each Revolving Credit Lender agrees to reimburse
the Issuing Bank and its directors, employees and agents to the same extent and
subject to the same limitations as provided above for the Agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Agents or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon the Agents or any other Lender
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83
and based on such documents and information as it shall from time to time
deem appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement or any other Loan Document, any
related agreement or any document furnished hereunder or thereunder.
ARTICLE IX
Miscellaneous
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed by certified or registered mail or sent by telecopy, as follows:
(a) if to any Loan Party, to it at 700 NE Multnomah, Suite 1600,
Portland, Oregon 97232, Attention of William E. Peressini-Vice President
and Treasurer (Telecopy No. (503) 731-2017), with a copy to Stoel Rives
LLP at 700 NE Multnomah, Suite 950, Portland, Oregon 97232, Attention of
John M. Schweitzer, Esq. (Telecopy No. (503) 230-1907);
(b) if to the Paying Agent at its offices in New York, to Citibank,
N.A., 399 Park Avenue, New York, New York 10043, Attention of Sandip Sen
(Telecopy No. (212) 793-6130);
(c) if to the Paying Agent at its offices in London, to Citibank
International plc, Cottons Center, 5th Floor, Hays Lane, London SE1 2QT,
England, Attention of Niels Kirk (Telecopy No. (44-171) 500-2990); and
(d) if to a Lender, to it at its address (or telecopy number) set
forth on Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telecopy or on the date five Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by each Loan Party herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders and the Issuing Bank and shall survive the
making by the Lenders of the Loans and the issuance of Letters of Credit by the
Issuing Bank, regardless of any investigation made by the Lenders or the Issuing
Bank or on their behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee or any other
amount payable under this Agreement or any other Loan Document is outstanding
and unpaid or any Letter of Credit is outstanding and so long as the Commitments
have not been
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terminated. The provisions of Sections 2.14, 2.16, 2.20 and 9.05 shall
remain operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions contemplated
hereby, the repayment of any of the Loans, the expiration of the Commitments,
the expiration of any Letter of Credit, the invalidity or unenforceability of
any term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Paying Agent, the Collateral Agent
or any Lender or the Issuing Bank.
SECTION 9.03. Binding Effect. This Agreement shall become effective
(a) when it shall have been executed by each Loan Party and the Paying Agent and
when the Paying Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and (b) when
each of the conditions set forth in Section 4.01 shall have been satisfied or
waived in writing, and thereafter shall be binding upon and inure to the benefit
of the parties hereto and their respective permitted successors and assigns.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement any
of the parties hereto is referred to, such reference shall be deemed to include
the permitted successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Loan Parties, the Paying Agent, the
Issuing Bank or the Lenders that are contained in this Agreement shall bind and
inure to the benefit of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it); provided,
however, that (i) except in the case of an assignment to a Lender or an
Affiliate of such Lender, (x) the Borrower (unless an Event of Default shall
have occurred and is continuing) and the Paying Agent (and, in the case of any
assignment of a Revolving Credit Commitment, the Issuing Bank) must give their
prior written consent to such assignment (which consent shall not be
unreasonably withheld and, in the case of the Borrower, the Issuing Bank and the
Swingline Lender, shall be deemed given by such person if the assigning Lender
does not receive notice to the contrary within five Business Days after receipt
by such person of an executed Assignment and Acceptance) and (y) the amount of
the Commitment of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Paying Agent) shall not be less than $5,000,000
(or, if less, the entire remaining amount of such Lender's Commitment), (ii) the
parties to each such assignment shall execute and deliver to the Paying Agent an
Assignment and Acceptance, together with a processing and recordation fee of
$3,500 (except for assignments by any Initial Lender or as otherwise agreed to
by the Paying Agent) and (iii) the assignee, if it shall not be a Lender, shall
deliver to the Paying Agent an Administrative Questionnaire. Upon acceptance
and recording pursuant to paragraph (e) of this Section 9.04, from and after the
effective date specified in each Assignment and Acceptance, which effective date
shall be at least five Business Days after the execution thereof, (A) the
assignee thereunder shall be a party hereto and, to the extent of the interest
assigned by such Assignment and Acceptance, have the rights and obligations of a
Lender under this Agreement and (B) the assigning Lender thereunder shall, to
the extent of the interest assigned by such Assignment and Acceptance, be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto but shall continue to be entitled to the benefits of
Sections 2.14, 2.16, 2.20 and 9.05, as well as to any Fees accrued for its
account and not yet paid).
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(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as
follows: (i) such assigning Lender warrants that it is the legal and beneficial
owner of the interest being assigned thereby free and clear of any adverse claim
and that its Term Loan Commitment and Revolving Credit Commitment, and the
outstanding balances of its Term Loans and Revolving Loans, in each case without
giving effect to assignments thereof which have not become effective, are as set
forth in such Assignment and Acceptance, (ii) except as set forth in (i) above,
such assigning Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with this Agreement, or the execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement,
any other Loan Document or any other instrument or document furnished pursuant
hereto, or the financial condition of PGH or any subsidiary or the performance
or observance by PGH or any subsidiary of any of its obligations under this
Agreement, any other Loan Document or any other instrument or document furnished
pursuant hereto; (iii) such assignee represents and warrants that it is legally
authorized to enter into such Assignment and Acceptance; (iv) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the most recent financial statements referred to in Section 3.04 or delivered
pursuant to Section 5.04 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Paying Agent, the Collateral Agent, such assigning Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (vi) such assignee appoints and
authorizes the Paying Agent and the Collateral Agent to take such action as
agent on its behalf and to exercise such powers under this Agreement as are
delegated to the Paying Agent and the Collateral Agent, respectively, by the
terms hereof, together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all the obligations which by the terms of this Agreement are required to
be performed by it as a Lender.
(d) The Paying Agent, acting for this purpose as an agent of the
Borrower, shall maintain at one of its offices in The City of New York and in
London a copy of each Assignment and Acceptance delivered to it and a
register for the recordation of the names and addresses of the Lenders, and
the Commitment of, and principal amount of the Loans owing to, each Lender
pursuant to the terms hereof from time to time (the "Register"). The entries
in the Register shall be conclusive and the Borrower, the Paying Agent, the
Issuing Bank, the Collateral Agent and the Lenders may treat each person
whose name is recorded in the Register pursuant to the terms hereof as a
Lender hereunder for all purposes of this Agreement, notwithstanding notice
to the contrary. The Register shall be available for inspection by the
Borrower, the Issuing Bank, the Collateral Agent and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, an Administrative Questionnaire
completed in respect of the assignee (unless the assignee shall already be a
Lender hereunder), the processing and recordation fee referred to in
paragraph (b) above and, if required, the written consent of the Borrower, the
Paying Agent and the Issuing Bank to such assignment, the Paying Agent shall
(i) accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and
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(iii) give prompt notice thereof to the Lenders and the Issuing Bank. No
assignment shall be effective unless it has been recorded in the Register as
provided in this paragraph (e).
(f) Each Lender may without the consent of the Borrower, the Issuing Bank
or the Paying Agent sell participations to one or more banks or other entities
in all or a portion of its rights and obligations under this Agreement
(including all or a portion of its Commitment and the Loans owing to it);
provided, however, that (i) such Lender's obligations under this Agreement shall
remain unchanged, (ii) such Lender shall remain solely responsible to the other
parties hereto for the performance of such obligations, (iii) the participating
banks or other entities shall be entitled to the benefit of the cost protection
provisions contained in Sections 2.14, 2.16 and 2.20 to the same extent as if
they were Lenders (provided that a participant shall not be entitled to receive
any greater payment under Sections 2.14, 2.16 and 2.20 than the applicable
Lender would have been entitled to receive with respect to the participation
sold to such participant, unless the sale of such participation is made with the
Borrower's prior written consent) and (iv) the Borrower, the Paying Agent, the
Issuing Bank and the Lenders shall continue to deal solely and directly with
such Lender in connection with such Lender's rights and obligations under this
Agreement, and such Lender shall retain the sole right to enforce the
obligations of Loan Parties relating to the Loans or L/C Disbursements and to
approve any amendment, modification or waiver of any provision of this Agreement
(other than amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which interest is payable
on the Loans, extending any scheduled principal payment date or date fixed for
the payment of interest on the Loans or increasing or extending the
Commitments).
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this
Section 9.04, disclose to the assignee or participant or proposed assignee or
participant any information relating to any Loan Party furnished to such Lender
by or on behalf of such Loan Party; provided that, prior to any such disclosure
of information designated by such Loan Party as confidential, each such assignee
or participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree (subject to customary
exceptions) to preserve the confidentiality of such confidential information on
terms no less restrictive than those applicable to the Lenders pursuant to
Section 9.16.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement to a Federal Reserve Bank to secure extensions of credit by
such Federal Reserve Bank to such Lender; provided that no such assignment shall
release a Lender from any of its obligations hereunder or substitute any such
Bank for such Lender as a party hereto. In order to facilitate such an
assignment to a Federal Reserve Bank, the Borrower shall, at the request of the
assigning Lender, duly execute and deliver to the assigning Lender a promissory
note or notes evidencing the Loans made to the Borrower by the assigning Lender
hereunder.
(i) None of the Loan Parties shall assign or delegate any of its rights
or duties hereunder without the prior written consent of the Paying Agent, the
Issuing Bank and each Lender, and any attempted assignment without such consent
shall be null and void.
SECTION 9.05. Expenses; Indemnity. (a) PGH and the Borrower agree,
jointly and severally, to pay all reasonable out-of-pocket expenses incurred by
the Initial Lenders, the Paying Agent, the Collateral Agent and the Issuing Bank
in connection with the arrangement of the credit
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facilities provided for herein and the preparation and administration of this
Agreement and the other Loan Documents and in connection with any amendments,
modifications or waivers of the provisions hereof or thereof (whether or not
the transactions hereby or thereby contemplated shall be consummated) or
incurred by the Initial Lenders, the Paying Agent, the Collateral Agent or
(after the occurrence and during the continuance of an Event of Default) any
other Lender in connection with the enforcement of its rights in connection
with this Agreement and the other Loan Documents or in connection with the
Loans made or Letters of Credit issued hereunder, including the reasonable
fees, charges and disbursements of Cravath, Swaine & Moore, counsel for the
Paying Agent and the Collateral Agent, and, in connection with any such
enforcement, the reasonable fees, charges and disbursements of any other
counsel for the Paying Agent, the Collateral Agent or any Lender.
(b) PGH and the Borrower agree, jointly and severally, to indemnify the
Initial Lenders, the Paying Agent, the Collateral Agent, each other Lender and
the Issuing Bank, each Affiliate of any of the foregoing persons and each of
their respective directors, officers, partners, employees and agents (each such
person being called an "Indemnitee") against, and to hold each Indemnitee
harmless from, any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel fees, charges and disbursements, incurred
by or asserted against any Indemnitee arising out of, in any way connected with,
or as a result of any claim, litigation, investigation or proceeding (whether or
not an Indemnitee is a party thereto) relating to (i) the execution or delivery
of this Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their respective
obligations thereunder or the consummation of the Transactions and the other
transactions contemplated thereby, the use of the proceeds of the Loans or
issuance of Letters of Credit, whether or not any Indemnitee is a party thereto,
or (ii) any actual or alleged presence or Release of Hazardous Materials on any
property owned or operated by PGH or any of its subsidiaries, or any
Environmental Claim related in any way to PGH or its subsidiaries; provided that
such indemnity shall not, as to any Indemnitee, be available (x) to the extent
that such losses, claims, damages, liabilities or related expenses are
determined by a court of competent jurisdiction by final and nonappealable
judgment to have resulted from the gross negligence or wilful misconduct of such
Indemnitee and (y) in respect of stamp or other documentary taxes in connection
with any Assignment and Acceptance.
(c) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the expiration of the Commitments, the
expiration of any Letter of Credit, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Paying Agent, the Collateral Agent,
any Lender or the Issuing Bank. All amounts due under this Section 9.05
shall be payable upon written demand therefor.
SECTION 9.06. Right of Setoff. If an Event of Default shall have occurred
and be continuing, each Lender is hereby authorized at any time and from time to
time, except to the extent prohibited by law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final) at any time
held and other indebtedness at any time owing by such Lender to or for the
credit or the account of PGH or the Borrower against any of and all the
obligations of PGH or the Borrower now or hereafter existing under this
Agreement and other Loan Documents held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or such other
Loan Document and although such obligations may be unmatured.
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Promptly after exercising its rights under this Section 9.06, the applicable
Lender shall notify the Paying Agent, PGH and the Borrower of the exercise of
such rights. The rights of each Lender under this Section 9.06 are in
addition to other rights and remedies (including other rights of setoff)
which such Lender may have.
SECTION 9.07. APPLICABLE LAW. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS
(OTHER THAN LETTERS OF CREDIT AND AS EXPRESSLY SET FORTH IN OTHER LOAN
DOCUMENTS) SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF
THE STATE OF NEW YORK. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF
CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND
PRACTICE FOR DOCUMENTARY CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF
COMMERCE, PUBLICATION NO. 500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT
GOVERNED BY THE UNIFORM CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the Paying
Agent, the Collateral Agent, any Lender or the Issuing Bank in exercising any
power or right hereunder or under any other Loan Document shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any
other right or power. The rights and remedies of the Paying Agent, the
Collateral Agent, the Issuing Bank and the Lenders hereunder and under the other
Loan Documents are cumulative and are not exclusive of any rights or remedies
that they would otherwise have. No waiver of any provision of this Agreement or
any other Loan Document or consent to any departure by any Loan Party therefrom
shall in any event be effective unless the same shall be permitted by
paragraph (b) below, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice or demand
on any Loan Party in any case shall entitle any Loan Party to any other or
further notice or demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by PGH, the Borrower and the Required Lenders; provided,
however, that no such agreement shall (i) decrease the principal amount of,
or extend the maturity of or any scheduled principal payment date or date for
the payment of any interest on any Loan or any date for reimbursement of an
L/C Disbursement, or waive or excuse any such payment or any part thereof, or
decrease the rate of interest on any Loan or L/C Disbursement, without the
prior written consent of each Lender affected thereby, (ii) change or extend
the Commitment or decrease or extend the date for payment of the Commitment
Fees of any Lender without the prior written consent of such Lender, (iii)
amend or modify the pro rata requirements of the provisions of Section 2.17,
amend or modify the provisions of Section 9.04(i), the provisions of this
Section, the definition of the term "Required Lenders" or release the
Guarantor or all or any substantial part of the Collateral (except for any
release expressly permitted by the Loan Documents), without the prior written
consent of each Lender or (iv) change any provisions of any Loan Document in
a manner that by its terms adversely affects the rights in respect of
payments due to Lenders holding Loans of any Class differently than those
holding Loans of any other Class, without the written consent of Lenders
holding a majority in interest of the outstanding Loans and
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unused Commitments of each affected Class; provided further that no such
agreement shall amend, modify or otherwise affect the rights or duties of the
Paying Agent, the Collateral Agent or the Issuing Bank hereunder or under any
other Loan Document without the prior written consent of the Paying Agent,
the Collateral Agent or the Issuing Bank, as the case may be.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the interest rate applicable to any Loan or
participation in any L/C Disbursement, together with all Fees, charges and other
amounts which are treated as interest on such Loan or participation in such L/C
Disbursement under applicable law (collectively the "Charges"), shall exceed the
maximum lawful rate (the "Maximum Rate") which may be contracted for, charged,
taken, received or reserved by the Lender holding such Loan or participation in
accordance with applicable law, the rate of interest payable in respect of such
Loan or participation hereunder, together with all Charges payable in respect
thereof, shall be limited to the Maximum Rate and, to the extent lawful, the
interest and Charges that would have been payable in respect of such Loan or
participation but were not payable as a result of the operation of this
Section 9.09 shall be cumulated and the interest and Charges payable to such
Lender in respect of other Loans or participation or periods shall be increased
(but not above the Maximum Rate therefor) until such cumulated amount, together
with interest thereon at the Federal Funds Effective Rate to the date of
repayment, shall have been received by such Lender.
SECTION 9.10. Entire Agreement. This Agreement and the other Loan
Documents constitute the entire contract between the parties relative to the
subject matter hereof. Any other previous agreement among the parties with
respect to the subject matter hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement or in the other Loan Documents,
expressed or implied, is intended to confer upon any party other than the
parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.
SECTION 9.11. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby (it being understood that
the invalidity of a particular provision in a particular jurisdiction shall not
in and of itself affect the validity of such provision in any other
jurisdiction). The parties shall endeavor in good-faith negotiations to replace
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the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which when taken together shall
constitute a single contract, and shall become effective as provided in
Section 9.03. Delivery of an executed signature page to this Agreement by
facsimile transmission shall be as effective as delivery of a manually signed
counterpart of this Agreement.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each Loan
Party hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties hereto agrees that
a final judgment in any such action or proceedings shall be conclusive and may
be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law. Nothing in this Agreement shall affect any right that
the Paying Agent, the Collateral Agent, the Issuing Bank or any Lender may
otherwise have to bring any action or proceeding relating to this Agreement or
the other Loan Documents against any Loan Party or any of its properties in the
courts of any jurisdiction.
(b) Each Loan Party hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection which it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to this Agreement or the other Loan Documents in any
New York State or Federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Conversion of Currencies. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum owing
hereunder in one currency into another currency, each party hereto agrees, to
the fullest extent that it may effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures in the
relevant jurisdiction the first currency could be purchased with such other
currency on the Business Day immediately preceding the day on which final
judgment is given.
(b) The obligations of each party in respect of any sum due to any other
party hereto or any holder of the obligations owing hereunder (the "Applicable
Creditor") shall, notwithstanding any
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judgment in a currency (the "Judgment Currency") other than the currency in
which such sum is stated to be due hereunder (the "Agreement Currency"), be
discharged only to the extent that, on the Business Day following receipt by
the Applicable Creditor of any sum adjudged to be so due in the Judgment
Currency, the Applicable Creditor may in accordance with normal banking
procedures in the relevant jurisdiction purchase the Agreement Currency with
the Judgment Currency; if the amount of the Agreement Currency so purchased
is less than the sum originally due to the Applicable Creditor in the
Agreement Currency, such party agrees, as a separate obligation and
notwithstanding any such judgment, to indemnify the Applicable Creditor
against such loss. The obligations of the Loan Parties contained in this
Section 9.16 shall survive the termination of this Agreement and the payment
of all other amounts owing hereunder.
SECTION 9.17. Confidentiality. The Paying Agent, the Collateral Agent,
the Issuing Bank and each of the Lenders agrees to keep confidential (and to use
its best efforts to cause its respective agents and representatives to keep
confidential) the Information (as defined below) and all copies thereof,
extracts therefrom and analyses or other materials based thereon, except that
the Paying Agent, the Collateral Agent, the Issuing Bank or any Lender shall be
permitted to disclose Information (a) to such of its respective officers,
directors, employees, agents, affiliates and representatives as need to know
such Information, (b) to the extent requested by any regulatory authority,
(c) to the extent otherwise required by applicable laws and regulations or by
any subpoena or similar legal process (and, in the case of any such subpoena or
legal process after notice to the Borrower, if permitted by applicable law or
process), (d) in connection with any suit, action or proceeding relating to the
enforcement of its rights hereunder or under the other Loan Documents or (e) to
the extent such Information (i) becomes publicly available other than as a
result of a breach of this Section 9.17 or (ii) becomes available to the Paying
Agent, any Lender, the Issuing Bank or the Collateral Agent on a nonconfidential
basis from a source other than PGH or the Borrower. For the purposes of this
Section, "Information" shall mean all financial statements, certificates,
reports, agreements and information (including all analyses, compilations and
studies prepared by the Paying Agent, the Collateral Agent, the Issuing Bank or
any Lender based on any of the foregoing) that are received from PGH or the
Borrower and related to PGH or the Borrower, any shareholder of PGH or the
Borrower or any employee, customer or supplier of PGH or the Borrower other
than any of the foregoing that were available to the Paying Agent, the
Collateral Agent, the Issuing Bank or any Lender on a nonconfidential basis
prior to its disclosure thereto by PGH or the Borrower, and which are in the
case of Information provided after the Closing Date, clearly identified at the
time of delivery as confidential. The provisions of this Section 9.17 shall
remain operative and in full force and effect regardless of the expiration of
this Agreement.
SECTION 9.18. Margin Regulations. Notwithstanding any other provision
contained in this Agreement or the other Loan Documents, including
Section 2.13(b), Section 6.02 and Section 6.05, the pledge or sale of the Shares
by PA shall be permitted hereunder until the Depositary Shares have been
delisted from the New York Stock Exchange (and the Shares shall not otherwise be
"margin stock" as defined in Regulations G and U of the Board); provided that
until such time PGH shall use its reasonable efforts to cause PA not to:
(i) incur any Indebtedness other than (A) its obligations under the
Offer, (B) its obligations under the Powercoal/PA Loans, (C) its
obligations under or permitted under the PA Facility Agreement and
(D) intercompany loans between or among PGH and its subsidiaries, in each
case to the extent permitted hereby;
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(ii) engage in any business other than (A) acquiring and holding the
Shares and (B) engaging in activities reasonably related to the Offer; or
(iii) sell or otherwise dispose of the Shares, unless (A) such Shares
are sold for cash, (B) fair value is received for such Shares and (C) the
proceeds of such sale are either held as cash or invested in certificates
of deposit, U.S. government securities, commercial paper, other money
market instruments that are exempted securities under the United States
federal securities laws or Cash Equivalent Investments (as defined in the
PA Facility Agreement).
SECTION 9.19. European Monetary Union. If, as a result of the
implementation of European monetary union, (a) any currency ceases to be lawful
currency of the nation issuing the same and is replaced by a European common
currency, then any amount payable hereunder by any party hereto in such currency
shall instead be payable in the European common currency and the amount so
payable shall be determined by translating the amount payable in such currency
to such European common currency at the exchange rate recognized by the European
Central Bank for the purpose of implementing European monetary union, or (b) any
currency and a European common currency are at the same time recognized by the
central bank or comparable authority of the nation issuing such currency as
lawful currency of such nation, then (i) any Loan made at such time shall be
made in such European common currency and (ii) any other amount payable by any
party hereto in such currency shall be payable in such currency or in such
European common currency (in an amount determined as set forth in clause (a)),
at the election of the obligor. Prior to the occurrence of the event or events
described in clause (a) or (b) of the preceding sentence, each amount payable
hereunder in any currency will continue to be payable only in that currency.
The Borrower agrees, at the request of the Required Lenders, at the time of or
at any time following the implementation of European monetary union, to enter
into an agreement amending this Agreement in such manner as the Required Lenders
shall reasonably request in order to avoid any unfair burden or disadvantage
resulting from the implementation of such monetary union and to place the
parties hereto in the position they would have been in had such monetary union
not been implemented, the intent being that neither party will be adversely
affected economically as a result of such implementation and that reasonable
provisions may be adopted to govern the borrowing, maintenance and repayment of
Loans denominated in Sterling or a European common currency after the occurrence
of the event or events described in clause (a) or (b) of the preceding sentence.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
PACIFICORP GROUP HOLDINGS COMPANY,
by
/s/ William E. Peressini
--------------------------------
Name: William E. Peressini
Title: Treasurer
<PAGE>
93
PACIFICORP ENERGYCO,
by
/s/ William E. Peressini
---------------------------------
Name: William E. Peressini
Title: Director and Deputy
Chief Financial
Officer
CITIBANK, N.A., individually as an
Initial Lender and as Paying Agent,
by
/s/ Thomas W. Ng
---------------------------------
Name: Thomas W. Ng
Title: Attorney-in-Fact
CITICORP USA, INC., as Collateral Agent,
by
/s/ Thomas W. Ng
---------------------------------
Name: Thomas W. Ng
Title: Attorney-in-Fact
GOLDMAN SACHS CREDIT PARTNERS L.P.,
individually as an Initial Lender,
by
/s/ John Winkelried
---------------------------------
Name: John Winkelried
Title: Authorized Signatory
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, individually as an
Initial Lender,
by
/s/ Kathryn Sayko-Yanes
---------------------------------
Name: Kathryn Sayko-Yanes
Title: Vice President
<PAGE>
EXHIBIT 99(b)(3)
EXECUTION COPY
FACILITY AGREEMENT
DATED 3 FEBRUARY 1998
L2,275,000,000
TERM LOAN FACILITY
L450,000,000
REVOLVING CREDIT FACILITY
between
PACIFICORP SERVICES LIMITED
PACIFICORP FINANCE (UK) LIMITED
PACIFICORP ACQUISITIONS
as Guarantors
PACIFICORP ACQUISITIONS
as Borrower
CITIBANK, N.A.
GOLDMAN SACHS INTERNATIONAL
J.P. MORGAN SECURITIES LTD.
as Arrangers
CITIBANK, N.A.
GOLDMAN SACHS CREDIT PARTNERS, L.P.
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
as Original Banks
CITIBANK INTERNATIONAL PLC
as Facility Agent
CITIBANK, N.A.
as Security Agent
CITIBANK, N.A.
as LC Bank
THIS FACILITY AGREEMENT IS ENTERED INTO WITH THE BENEFIT AND SUBJECT TO THE
TERMS OF AN INTERCREDITOR AGREEMENT AS REFERRED TO HEREIN
Clifford Chance
London
<PAGE>
<TABLE>
<CAPTION>
CONTENTS
CLAUSE PAGE NO.
<S> <C>
1. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Facilities and Related Matters. . . . . . . . . . . . . . . . . . . . . . . . 32
3. Purpose and Responsibility. . . . . . . . . . . . . . . . . . . . . . . . . . 36
4. Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
5. Advances and Documentary Credits. . . . . . . . . . . . . . . . . . . . . . . 39
6. Optional Currencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
7. Cancellation of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . 45
8. Repayment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9. Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
10. Interest Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
12. Payments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
13. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
14. Market Disruption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
15. Increased Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
17. Mitigation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
18. Guarantee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
19. Additional Borrowers, Guarantors and Security . . . . . . . . . . . . . . . . 65
20. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . 68
21. Undertakings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
22. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
23. Financial Ratios. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
24. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .100
25. Indemnities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109
26. Agents, Arrangers and Banks . . . . . . . . . . . . . . . . . . . . . . . . .111
27. Fees, Expenses and Stamp Taxes. . . . . . . . . . . . . . . . . . . . . . . .117
28. Waivers, Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . .119
29. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .120
30. Assignments, Transfers and Substitutions. . . . . . . . . . . . . . . . . . .120
31. Set-Off and Redistribution. . . . . . . . . . . . . . . . . . . . . . . . . .125
32. Governing Law and Jurisdiction. . . . . . . . . . . . . . . . . . . . . . . .127
33. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .127
34. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .128
THE FIRST SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
Part I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
Borrowers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .130
Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131
Guarantors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .131
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
Part III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132
Facility Agent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .132
THE SECOND SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .133
Banks' Commitments and Notice Details . . . . . . . . . . . . . . . . . . . .133
THE THIRD SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134
Forms of Request. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .134
THE FOURTH SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .135
Substitution Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . .135
THE FIFTH SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .138
Calculation of Additional Cost. . . . . . . . . . . . . . . . . . . . . . . .138
THE SIXTH SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Part I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .140
Borrower Accession Agreement . . . . . . . . . . . . . . . . . . . . . . . .140
Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .143
Guarantor Accession Agreement . . . . . . . . . . . . . . . . . . . . . . . .143
THE SEVENTH SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146
Part I. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .146
Documentary Conditions Precedent. . . . . . . . . . . . . . . . . . . . . . .146
Part II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147
Additional Borrower/Guarantor Documentary Conditions Precedent. . . . . . . .147
Part III. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .147
Additional Guarantors and Chargors. . . . . . . . . . . . . . . . . . . . . .147
THE EIGHTH SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .148
Terms of Banks' Indemnity to LC Bank. . . . . . . . . . . . . . . . . . . . .148
THE NINTH SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150
Reservations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150
THE TENTH SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152
Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .152
THE ELEVENTH SCHEDULE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .153
Economic and Monetary Union . . . . . . . . . . . . . . . . . . . . . . . . .153
THE TWELFTH SCHEDULE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .154
Required Distributions Schedule . . . . . . . . . . . . . . . . . . . . .154
</TABLE>
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<PAGE>
THIS FACILITY AGREEMENT dated 3 February 1998
BETWEEN:
(1) PACIFICORP SERVICES LIMITED, a company incorporated in England and Wales
(No. 3366016) ("SERVICES");
(2) PACIFICORP ACQUISITIONS, a company incorporated in England and Wales (No.
3386442) ("PA");
(3) PACIFICORP FINANCE (UK) LIMITED, a company incorporated in England and
Wales (No. 3365681) ("FINANCE");
(4) CITIBANK, N.A., GOLDMAN SACHS INTERNATIONAL and J.P. MORGAN SECURITIES LTD.
as Arrangers (in this capacity the "ARRANGERS");
(5) CITIBANK, N.A., GOLDMAN SACHS CREDIT PARTNERS, L.P. and MORGAN GUARANTY
TRUST COMPANY OF NEW YORK as original lenders (in this capacity the
"ORIGINAL BANKS");
(6) CITIBANK INTERNATIONAL PLC as facility agent for the Banks (in this
capacity the "FACILITY AGENT");
(7) CITIBANK, N.A. as security agent and trustee for the Banks (in this
capacity the "SECURITY AGENT"); and
(8) CITIBANK, N.A. as LC Bank (as defined below).
WHEREAS pursuant to arrangements made by the Arrangers and upon and subject to
the terms of this Agreement, the Original Banks (as defined above) have agreed
to make available a term loan facility aggregating L2,275,000,000 to PA and,
upon their accession hereto as Additional Borrowers, TEG and certain of its
Subsidiaries and a revolving credit facility of L450,000,000 to the Borrowers.
IT IS AGREED as follows:
1. INTERPRETATION
1.1 DEFINED TERMS In this Agreement:-
"ACCOUNTING DATE" means each 30th June, 30th September, 31st December and 31st
March, falling after the date of this Agreement, save as any such date may be
adjusted to avoid an Accounting Date falling on a day which is not a Business
Day and/or to ensure that all Accounting Dates fall on the same day of the
relevant weeks.
"ACCOUNTING PERIOD" means any period of approximately three months or one year
ending on an
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<PAGE>
Accounting Date for which Accounts are required to be prepared for the purposes
of this Agreement.
"ACCOUNTS" means from time to time:-
(a) the latest audited consolidated annual accounts of the PA Group together
with a Reconciliation Statement in relation thereto;
(b) the latest unaudited consolidated quarterly accounts of the PA Group
together with a Reconciliation Statement in relation thereto;
(c) the consolidated unaudited accounts of the PA Group prepared on a pro forma
basis which are referred to in Clause 21.2(a)(vi);
(d) any other audited or unaudited consolidated or unconsolidated accounts (if
any) of the PA Group or any Material Subsidiary,
delivered or required to be delivered to the Facility Agent pursuant to this
Agreement, or such of the foregoing as the context requires.
"ACT" means the Electricity Act 1989 and, unless the context otherwise requires,
all subordinate legislation made pursuant thereto.
"ADDITIONAL BORROWER" means TEG and any wholly owned subsidiary of TEG, in each
case upon it becoming, and any other entity which becomes, party to this
Agreement as a Borrower pursuant to a Borrower Accession Agreement.
"ADDITIONAL COST" in relation to each Advance or overdue amount denominated in
Sterling means, for the Interest Period relating to that Advance or overdue
amount the cost as calculated by the Facility Agent in accordance with the Fifth
Schedule imputed to each Bank participating in such Advance or overdue amount of
compliance with the mandatory liquid assets requirements of the Bank of England
during that Interest Period, expressed as a percentage rate per annum.
"ADDITIONAL GUARANTOR" means any member of the PA Group which becomes party to
this Agreement as a Guarantor pursuant to a Guarantor Accession Agreement.
"ADJUSTED CAPITAL AND RESERVES" means the amount (including any share premium)
for the time being paid up or credited as paid up on the issued share capital of
PA,
PLUS the outstanding principal amount of any Subordinated Debt which is
owed by a member of the PA Group to one of its Affiliates;
PLUS the outstanding principal, capital, nominal or similar amount of any
issue of Hybrid Preferred Securities made by a member of the PA Group;
PLUS the amount standing to the credit (or, as the case may be, MINUS the
amount standing to the
-2-
<PAGE>
debit) of the capital and revenue reserves of the PA Group and (to the
extent created as a consequence of and consistent with an evaluation of any
assets of the PA Group or the TEG Group made by the Director General and as
such evaluation is adjusted from time to time) the revaluation reserves of
the TEG Group or the PA Group;
PLUS any amount standing to the credit or MINUS any amount standing to the
debit of the consolidated profit and loss account of the PA Group;
PLUS the amount of goodwill arising upon and in respect of the acquisition
of the Shares and/or Offer Costs;
MINUS any Distributions or other distribution declared or made by PA or any
of its Subsidiaries (other than to another member of the PA Group), to the
extent only that those reserves have not been reduced on account thereof
and PLUS any repayment or refund of any Distribution or other distribution
effectively deducted (whether by reason of the preceding minus item or by
reduction in reserves), to the extent only that reserves have not been
increased on account of such repayment or refund;
MINUS amounts attributable to the interests (if any) of outside holders of
issued share capital (other than Hybrid Preferred Securities) in any member
of the PA Group other than PA itself;
and for the purposes of the foregoing, no item shall be effectively deducted or
added more than once, all items shall be calculated on a consolidated basis and
(subject only as may be required in order to reflect the express inclusion or
exclusion of items as specified in this definition) in accordance with the
Applicable Accounting Principles and, where the calculation is being made as at
the end of any Accounting Period, shall be determined from the balance sheet
forming part of the Accounts for that Accounting Period and Hybrid Preferred
Securities shall be ignored to the extent that were they not ignored they would
constitute more than 10% of Adjusted Capital and Reserves.
"ADJUSTED NET INCOME" for any quarterly Accounting Period of PA means the sum of
(i) the net profit (after tax) of the PA Group for such period, determined on a
consolidated basis and in accordance with the Applicable Accounting Principles
and as determined from the consolidated Accounts of the PA Group for such
quarterly Accounting Period and (ii) any interest in respect of Subordinated
Debt taken into account in the net profit (after tax) of the PA Group for such
quarterly Accounting Period adjusted for the amount by which the tax payable by
the PA Group has been reduced by virtue of such interest.
"ADVANCE" means the principal amount of each borrowing under this Agreement from
the Tranche 1 Commitments (a "TRANCHE 1 ADVANCE" and, if from the Tranche 1A
Commitments, a "TRANCHE 1A ADVANCE" and, if from the Tranche 1B Commitments, a
"TRANCHE 1B ADVANCE") or the Tranche 2 Commitments (a "TRANCHE 2 ADVANCE") and
any amount resulting from the splitting thereof pursuant to Clause 10.2 or, in
each case, the principal amount of such borrowing outstanding from time to time.
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<PAGE>
"AFFILIATE" for the purposes of this Agreement:
(a) means a Subsidiary or a holding company (as defined in Section 736 of
the Companies Act 1985) of a person and any other Subsidiary of that
holding company; and
(b) Goldman Sachs International Bank and Goldman Sachs Credit Partners,
L.P. will be treated as Affiliates of each other.
"AGENT" means:
(a) when designated "FACILITY", Citibank International plc or any of its
successors pursuant to Clause 26.14;
(b) when designated "SECURITY", Citibank, N.A. or any of its successors
pursuant to Clause 26.14 and any corresponding provision of any Security
Document; and
(c) without any such designation, the Facility Agent or the Security Agent, as
the context requires.
"AGENT'S SPOT RATE OF EXCHANGE" with respect to any Optional Currency on any day
means the spot rate of exchange of the Facility Agent (as determined by the
Facility Agent) for the purchase of the appropriate amount of such Optional
Currency with Sterling in the London Foreign Exchange Market in the ordinary
course of business at or about 10.00 a.m. on the day in question for delivery
three Business Days thereafter.
"ANNOUNCEMENT DATE" means the date on which the Press Release is issued.
"APPLICABLE ACCOUNTING PRINCIPLES" means, subject to Clause 21.2(e), accounting
principles and practices, which at the date hereof are generally accepted in the
United States of America and consistently applied and consistent in all material
respects (other than the absence from the Model of notes) with the accounting
principles and practices applied in the preparation of the Model, and any
variation to such accounting principles and practices which is not material or,
if material, has been agreed in accordance with Clause 21.2(e).
"APPLICABLE TAXES" has the meaning given to it in Clause 13.1.
"ASSET SPLIT" means together:
(a) the transfer by Peabody Investments to PA of the entire issued share
capital of Peabody Holdings in exchange for payments by PA and the transfer
thereof by PA to Powercoal in exchange for the extinguishment of the PA
Note; and
(b) the accession by Peabody Investments as Subordinated Creditor to the
Intercreditor Agreement with respect to the PA/Peabody Note,
-4-
<PAGE>
as contemplated in the Structure Memorandum.
"AUDITORS" means such firm of independent public accountants of international
standing recognised and authorised by the Institute of Chartered Accountants of
England and Wales which is appointed by PA to audit the consolidated annual
accounts of PA.
"AUSTRALIAN DOLLARS" means the lawful currency for the time being of Australia.
"AUTHORISED SIGNATORY" in relation to any Obligor and any communication to be
made or document to be executed or certified by that Obligor means, at any time,
any person:
(a) who is at such time duly authorised by a resolution of the board of
directors of that Obligor or a committee thereof or by virtue of his
appointment by that Obligor to a particular office to make that
communication or to execute or certify that document on behalf of that
Obligor and in respect of whom the Facility Agent has received a
certificate of a director or the secretary or an assistant secretary of
that Obligor setting out the name and signature of that person and
confirming that person's authority so to act; and
(b) in respect of whom no notice has been received by the Facility Agent from
that Obligor to the effect that such person is no longer an Authorised
Signatory for that Obligor.
"AVAILABLE FACILITY AMOUNT" means, at any time, the amount of the Tranche 2
Commitments, less the Original Sterling Amount of the outstanding Tranche 2
Utilisations at such time taking into account any Tranche 2 Utilisations
scheduled to be made, repaid or prepaid by assuming that the same occurs when
due.
"AVAILABILITY PERIOD" means the period from opening of business in London on the
date of this Agreement to:
(a) when designated "TRANCHE 1", close of business in London on whichever is
the earlier of (i) the date 200 days after the Announcement Date, (ii) the
later of (A) the date three months after the Unconditional Date and (B) the
date falling forty nine days after the date on which PA is obliged pursuant
to Clause 21.10(n) to implement the procedures referred to therein, and
(iii) the date 200 days after the date hereof;
(b) when designated "TRANCHE 2", close of business in London on whichever is
the earlier of (i) (if no Tranche 1 Advance is drawn at all) the expiry of
the Tranche 1 Availability Period, and (ii) the fifth anniversary of the
date hereof;
or in either case such later date as all the Banks may agree in writing on or
after the date hereof, provided that the Tranche 1 Availability Period and the
Tranche 2 Availability Period, if not already terminated, shall terminate on the
date on which the Offer lapses or is withdrawn.
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<PAGE>
"BANK" means each of the following:
(a) each party whose name is set out in the Second Schedule;
(b) each bank to which rights and/or obligations under this Agreement are
assigned or transferred pursuant to Clause 30 or which assumes rights and
obligations pursuant to a Substitution Certificate; and
(c) any successor or successors in title to any of the foregoing;
provided that upon (i) termination in full of all the Commitments of any Bank,
and (ii) irrevocable payment in full of all amounts of principal, interest, fees
and all amounts arising pursuant to Clause 5.5 and 25.2(c) which may be or
become payable to such Bank under the Finance Documents, such Bank shall not be
regarded as being a Bank for the purposes of determining whether any provision
of any of the Finance Documents requiring consultation with or the consent or
approval of or instructions from the Banks or any of them or the Majority Banks
or the Majority Offer Banks has been complied with unless the Commitments of all
other Banks have been terminated in full on the date on which such Bank's
Commitments terminated.
"BASE FINANCIAL STATEMENTS" means the audited annual consolidated accounts of
TEG for and as at the end of the financial year of TEG ended 31 March 1997.
"BORROWER" means PA and each Additional Borrower.
"BORROWER ACCESSION AGREEMENT" means an agreement substantially in the form of
Part I of the Sixth Schedule made pursuant to Clause 19.1.
"BORROWING" means any indebtedness for, or for interest or other charges
relating to, or otherwise in respect of or pursuant to:
(a) moneys borrowed or raised, including, without limitation, (i) monies raised
by the sale of receivables or other financial assets on terms and to the
extent that recourse may be had to the vendor (or any other member of the
Group) in the event of non-payment of such receivables or financial assets
when due (other than recourse as to title and any requirement to repurchase
receivables which do not meet the eligibility criteria for inclusion in the
disposal or securitisation (other than on grounds of non-payment or
insolvency)), and (ii) monies raised under acceptance credit facilities and
through the issue of bonds, notes, debentures, bills, loan stocks and other
debt securities (including any debt security convertible, but not at the
relevant time converted, into share capital);
(b) the outstanding acquisition cost of assets or services to the extent
payable on deferred payment terms after the time of acquisition or
possession thereof by the party liable (whether or not evidenced by any
bond, note, debenture, loan stock or other debt security), excluding
retentions or trade credit (whether in respect of assets or services) which
are customary in the trade
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<PAGE>
concerned carried on in the normal course and not entered into primarily as
a means of raising finance;
(c) moneys received in consideration for the supply of goods and/or services to
the extent received more than six months before the due date for such
supply (but excluding any liability in respect of bona fide advance
payments and deposits received from customers unless so received pursuant
to a transaction entered into primarily as a means of raising finance);
(d) leases, agreements or instruments which are treated as finance leases in
accordance with the Applicable Accounting Principles (other than the
amounts payable in respect of either of the generation lease arrangements
in force as at the date hereof between National Power plc and any member of
the TEG Group and Powergen plc and any member of the TEG Group if at any
time they should be treated as a finance lease);
(e) (i) any guarantee, indemnity, letter of credit or other similar legally
binding instrument to assure payment of, or against loss in respect of
non-payment of, any of the indebtedness specified in this definition
(other than in (f) below) and any counter-indemnity in respect of any
thereof; and/or
(ii) any legally binding agreement or other instrument not falling within
paragraph (i) above entered into in connection with any of the
indebtedness specified in this definition (other than in (f) below)
requiring, or giving any person the right (contingently or otherwise)
to require, that any other person invest in, make advances to,
purchase assets of or maintain the solvency or financial condition of
any other person;
(f) for the purpose of Clause 24.1(e), any Derivative Transaction; and
(g) transactions which involve or have the commercial effect of the borrowing
of commodities as part of an arrangement for or in substitution for the
raising of finance, the value of indebtedness concerned for this purpose
being the sum which must be paid and/or the value in money terms of the
commodities which may be delivered by the "borrower" to, or to the order
of, the "lender";
provided that in computing an amount of Borrowings of any person or persons for
the purposes of Clause 21.4(b) and the definitions of Consolidated Net Total
Borrowings and Consolidated Total Net Interest Payable in Clause 1.1 double
counting shall be avoided and:
(i) any interest, dividends, commission, fees or other like financing
charges, shall be excluded, save in each case to the extent capitalised;
(ii) the outstanding amount of (A) any Subordinated Debt owed to an Affiliate
of the borrower thereof, (B) any Hybrid Preferred Securities (to the
extent included in Adjusted Capital and Reserves), and (C) any Project
Finance Borrowings, shall be excluded;
(iii) (in the case of paragraph (d)) only the capitalised value (as determined
in accordance with the Applicable Accounting Principles) of any items
falling thereunder shall be included;
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(iv) any item falling within paragraph (e) which is in respect of any sum
excluded by item (i) of this proviso shall be excluded;
(v) any item falling within paragraph (e)(ii) shall be included only to the
extent that the same has been or (in accordance with the Applicable
Accounting Principles) ought to be given a value in the latest or next
Accounts;
(vi) any Borrowing issued at a discount shall be valued for the purposes of
this definition by reference to the issue price together with any
applicable discount required under the Applicable Accounting Principles
to be reflected in the relevant person's most recently published
financial statements; and
(vii) all obligations and liabilities in respect of Derivative Transactions
(other than any Hedging Documents and any form of energy related
Derivative Transactions and any hedging agreement that is designed and
used solely to protect the Borrower against fluctuations in currency
exchange rates and not for speculation) shall be included to the extent
the Net Termination Value of such Derivative Transactions at any time
exceeds L100,000,000.
"BORROWINGS LIST" means a list delivered to the Facility Agent as a condition
precedent hereto initialled on behalf of Services and the Facility Agent for the
purposes of identification, identifying (a) all facilities (whether committed or
uncommitted and whether or not utilised by the company or companies entitled so
to do) estimated to be in place as at 31st March 1998 and in respect of which
any utilisation thereunder constitutes or would constitute a Borrowing or
obligation of any member of the TEG Group, (b) which of those facilities are
expected to have been utilised as at such date and the approximate extent of
such utilisations and indicating any such Borrowings or obligations which, to
the extent outstanding on the Unconditional Date would be in default on the
Unconditional Date or thereafter as a result of the consummation of those
matters and things contemplated by the Transaction Documents (or any of them),
(c) the Refinancing Debt, and (d) the member of the Group which (or, where more
than one member is identified in respect of any particular Refinancing Debt,
whichever of those members is selected by PA to be the member which), subject to
becoming a Borrower hereunder, is to be the Borrower of any funds borrowed under
the Facility for the refinancing of the Refinancing Debt.
"BUSINESS DAY" means:
(a) a day (other than a Saturday or Sunday) on which banks are open for
business in London; and
(b) (in respect of a day on which a payment or other transaction in an
Optional Currency is required under this Agreement) a day (not being a
Saturday or Sunday) on which banks and foreign exchange markets are open
for business in:
(i) London;
(ii) the principal financial centre of the country of that currency,
or, if there is more than one relevant country, the countries
designated by the Facility Agent; and
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(iii) the principal financial centre of the country of the place of
payment of the transaction of that Optional Currency, or, if more
than one relevant country, the countries designated by the
Facility Agent.
"CASH" means any credit balances on any deposit, savings, current or other
account and any cash in hand.
"CASH EQUIVALENT INVESTMENTS" means:
(a) debt securities denominated in Sterling or US Dollars or Australian Dollars
issued by the Government of the United Kingdom or the United States of
America or Australia (as the case may be) where such debt securities have
not more than 12 months to final maturity and are not convertible into any
other form of security;
(b) debt securities denominated in Sterling or US Dollars or Australian Dollars
which have not more than 12 months to final maturity, are not convertible
into any other form of security, are rated P2 or higher by Moody's Investor
Services Inc. or A2 or higher by Standard & Poor's Ratings Group and are
not issued or guaranteed by any member of the Group; and
(c) certificates of deposit denominated in Sterling or US Dollars or Australian
Dollars having not more than 12 months to final maturity issued by a bank
incorporated in or having a branch in the United Kingdom or the United
States of America or Australia (as the case may be) and rated P2 or higher
by Moody's Investor Services Inc. or A2 or higher by Standard & Poor's
Ratings Group.
"CHIEF FINANCIAL OFFICER" means the finance director or chief financial officer
of PA from time to time or in his absence his deputy (being an Authorised
Signatory of PA).
"CITIZENS" means Citizens Power LLC and/or any or all of its Subsidiaries and/or
any or all of their respective assets.
"CODE" means The City Code on Takeovers and Mergers.
"COMMITMENT" in relation to a Bank means an amount appearing and designated as
such against that Bank's name in the Second Schedule or in the Substitution
Certificate or other document by which it became party to or acquired rights
under this Agreement (being a "TRANCHE 1 COMMITMENT" or a "TRANCHE 2 COMMITMENT"
as therein indicated and, if designated "1A" the amount so designated and, if
designated "1B", the amount so designated), in each case as reduced or increased
by substitution or transfer pursuant to Clause 30 and any Substitution
Certificates to which such Bank is party, and to the extent not cancelled,
reduced or terminated under this Agreement.
"CONSOLIDATED EBITDA" for any period comprising an annual Accounting Period or
four (taking into account the provisions of Clause 23.2) consecutive quarterly
Accounting Periods of PA (taken together as one period) means the profit of the
PA Group for such period:
BEFORE DEDUCTING all depreciation and other amortisation (including,
without limitation,
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amortisation of goodwill arising from and upon the acquisition of the
Shares and amortisation of Offer Costs and amortisation of any prepayment
made of lease rentals arising pursuant to the generation lease arrangements
in force as at the date hereof between National Power plc and a member of
the TEG Group and between Powergen Plc and a member of the TEG Group);
BEFORE TAKING INTO ACCOUNT all extraordinary items (whether positive or
negative);
BEFORE DEDUCTING advance corporation tax, mainstream corporation tax,
windfall, occasional or non-recurring or recurring taxes and taxes imposed
on the income, gains or turnover of a company by virtue of it being a
company which falls within a specified class and their equivalents in any
relevant jurisdiction;
BEFORE TAKING INTO ACCOUNT Consolidated Total Net Interest Payable for such
period;
BEFORE DEDUCTING any Offer Costs;
AFTER DEDUCTING any gain over and ADDING back any loss by reference to book
value of the PA Group arising on the sale, lease or other disposal of any
asset (other than on the sale of trading stock) during such period and any
gain or loss arising on revaluation of any asset during such period, in
each case to the extent that it would otherwise be taken into account,
and for the purposes of the foregoing no item shall be effectively deducted,
credited or otherwise taken into account more than once in this calculation, all
items shall be determined on a consolidated basis and (subject only as may be
required in order to reflect the express inclusion or exclusion of items as
specified in this definition) in accordance with the Applicable Accounting
Principles and as determined from the consolidated Accounts of the PA Group for
such annual Accounting Period or for the relevant Accounting Periods falling
within such period.
"CONSOLIDATED NET TOTAL BORROWINGS" at any time means the aggregate at that time
of the Borrowings of the members of the PA Group from sources external to the PA
Group (giving effect to the proviso to the definition of Borrowings in Clause
1.1),
LESS the PA Group's Cash (excluding the cash referred to in item 2 of the
Tenth Schedule) and Cash Equivalent Investments except to the extent that
such Cash or Cash Equivalent Investments cannot be legally remitted at that
time to a member of the PA Group in the United Kingdom, the United States
of America or Australia;
calculated on a consolidated basis and (subject only as may be required in order
to reflect the express inclusion or exclusion of items as specified herein
and/or in the definition of Borrowings in Clause 1.1) in accordance with the
Applicable Accounting Principles and, where the calculation is being made as at
the end of any Accounting Period for which a consolidated balance sheet of the
PA Group has been delivered to the Facility Agent, as determined from that
balance sheet together with a Reconciliation Statement in relation thereto.
"CONSOLIDATED TOTAL NET INTEREST PAYABLE" for any period comprising an annual
Accounting Period or
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four (taking into account the provisions of Clause 23.2) consecutive quarterly
Accounting Periods (taken together as one period) of PA means the Interest
accrued during such period on Borrowings of any member or members of the PA
Group from sources external to the PA Group (giving effect to the proviso to the
definition of Borrowings in Clause 1.1) (whether or not paid during or deferred
for payment after such period but excluding interest capitalised in accordance
with the Applicable Accounting Principles) adjusted to take account of any
amount constituting Interest receivable by any member or members of the PA Group
under interest rate and/or currency hedging agreements or instruments, LESS
Interest (other than Interest under interest rate and/or currency hedging
agreements or instruments already taken into account as aforesaid) accrued
during such period in favour of members of the PA Group from external sources,
all determined on a consolidated basis and (subject only as may be required in
order to reflect the express inclusion or exclusion of items as specified in
this definition) in accordance with the Applicable Accounting Principles and as
shown in the consolidated Accounts of the PA Group for such annual Accounting
Period or for the Accounting Periods falling within such period.
"DANGEROUS SUBSTANCE" means any radioactive emissions, noise, any natural or
artificial substance (whether in the form of a solid, liquid, gas or vapour) the
generation, transportation, storage, treatment, use or disposal of which
(whether alone or in combination with any other substance) including (without
limitation) any controlled, special, hazardous, toxic, radioactive or dangerous
substance or waste, gives rise to a risk of causing harm to man or any other
living organism or damaging the Environment or public health or welfare.
"DEBENTURE" means the mortgage debenture of even date herewith made between
Services, Finance, PA and the Security Agent as supplemented by any deeds of
accession or other instrument supplemental thereto.
"DEFAULT" means (a) any Event of Default or (b) any event which, with the giving
of notice and/or the expiry of any grace or cure period stated in any Finance
Document would be or become an Event of Default, provided that any such event
which by reason of express provisions in any Finance Document requires the
satisfaction of a condition as to materiality (including, without limitation,
the existence or absence of an opinion or determination as to materiality)
before it may become an Event of Default shall not be a Default unless that
condition is satisfied.
"DERIVATIVE TRANSACTIONS" means any rate swap transactions, basis swap, forward
rate transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"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
purpose of the Act.
"DIRECTOR GENERAL OF GAS SUPPLY" means the person appointed from time to time by
the Secretary of State to hold office as the Director General of Gas Supply for
the purpose of the Gas Act.
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"DISTRIBUTIONS" bears the meaning given to that term in Clause 21.6.
"DISTRIBUTION BUSINESS" means the business of EE, or any successor undertaking
to that business within the PA Group, in or ancillary to the distribution
(whether for its own account or that of any other party) of electricity through
the distribution system of EE or, as the case may be, such successor and
includes any business providing connections to such distribution system.
"DOCUMENTARY CREDIT" means any letter of credit, guarantee or bond issued or to
be issued pursuant to Clause 5.4, in each case as varied from time to time.
"EE" means Eastern Electricity plc.
"ENCUMBRANCE" means any mortgage, pledge, lien, charge, assignment for the
purpose of providing security, hypothecation, security interest or other
arrangement having the effect of providing security (including, without
limitation, the deposit of monies or property with a person with the primary
intention of affording such person a right of set-off or lien as a form of
security).
"ENERGYCO" means PacifiCorp Energyco an unlimited company incorporated under the
laws of England and Wales (No. 3335442).
"ENERGYCO FACILITY AGREEMENT" means a credit agreement dated on or around the
date hereof between PacifiCorp Group Holdings Company, EnergyCo, the Lenders
named therein, Citibank, N.A. as paying agent, Citicorp USA, Inc. as collateral
agent and Citicorp Securities, Inc., Goldman Sachs Credit Partners, L.P. and
J.P. Morgan Securities Inc. as arrangers.
"ENERGYCO LENDERS" means the Lenders (as defined in the EnergyCo Facility
Agreement) from time to time.
"ENERGYCO/SERVICES LOAN AGREEMENT" means the loan arrangements entered into or
to be entered into between Services and EnergyCo pursuant to which EnergyCo
shall lend to Services an amount as more fully described in the Structure
Memorandum.
"ENVIRONMENT" means all, or any of, the following media, the air (including,
without limitation, the air within buildings and the air within other natural or
man-made structures above or below ground), water (including, without
limitation, ground and surface water) and land (including, without limitation,
surface and sub-surface soil).
"ENVIRONMENTAL CLAIM" means any claim by any person:
(a) in respect of any loss or liability suffered or incurred by that person as
a result of or in connection with any violation of Environmental Law; or
(b) that arises as a result of or in connection with Environmental
Contamination and that could give rise to any remedy or penalty (whether
interim or final) that may be enforced or assessed by private or public
legal action or administrative order or proceedings, including without
limitation
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any such claim arising from injury to persons, property or natural
resources.
"ENVIRONMENTAL CONTAMINATION" means each of the following and their
consequences:
(a) any release, emission, leakage or spillage of any Dangerous Substance at or
from any site owned, occupied or used by any member of the Services Group
into any part of the Environment; or
(b) any accident, fire, explosion or sudden event at any site owned, occupied
or used by any member of the Services Group which is directly or indirectly
caused by or attributable to any Dangerous Substance; or
(c) any other pollution of the Environment.
"ENVIRONMENTAL LAW" means all applicable laws (including, without limitation,
common law), regulations, directing codes of practice, circulars, guidance
notices and the like having legal effect (whether in the United Kingdom or
elsewhere) concerning pollution or the protection of human health, the
Environment, the conditions of the work place or the generation, transportation,
storage, treatment or disposal of Dangerous Substances.
"ENVIRONMENTAL LICENCE" means any permit, licence, authorisation, consent or
other approval required by any Environmental Law.
"EVENT OF DEFAULT" means, subject to Clause 24.3, any of the events specified in
Clause 24.1.
"FACILITY" means:
(a) when designated "TRANCHE 1", the term loan facilities referred to in
Clauses 2.1(a) and (b), being divided into the Tranche 1A Facility
(referred in Clause 2.1(a)) and the Tranche 1B Facility (referred in Clause
2.1(b)), as indicated therein;
(b) when designated "TRANCHE 2", the revolving credit facility referred to in
Clause 2.1(c);
(c) without any such designation, the Tranche 1 Facility or the Tranche 2
Facility, as the context requires,
and "FACILITIES" means all of them.
"FACILITY OFFICE" in relation to a Bank means:
(a) the office of that Bank whose address appears under its name in the Second
Schedule or is specified for this purpose in the schedule to the
Substitution Certificate or in any other document by which such Bank became
party to or acquired rights under this Agreement; and/or
(b) any (and each) other office notified by that Bank to the Facility Agent in
accordance with Clause 30.6 as the office through which that Bank will
participate in the Facilities or any of them.
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"FEE LETTERS" means the letters referred to in Clause 27.2.
"FINAL REPAYMENT DATE" means the fifth anniversary of the date hereof.
"FINANCE DOCUMENTS" means this Agreement and any Documentary Credit issued
hereunder, the Fee Letters, the Substitution Certificates, the Borrower
Accession Agreements, the Guarantor Accession Agreements, the Debenture, the
Hedging Documents, the Intercreditor Agreement, the EnergyCo/Services Loan
Agreement, the Services/Finance Loan Agreement, the PA Note and any other
document designated as such by the Facility Agent and Services.
"FINANCE PARTY" means each Arranger, each Bank, the LC Bank, the Security Agent
and the Facility Agent (together the "FINANCE PARTIES").
"FIXED DOLLAR EQUIVALENT" in relation to any amount denominated in Sterling
means the equivalent hereof in Dollars at an exchange rate as set out in a
letter between the Facility Agent and Services of even date.
"FIXED STERLING EQUIVALENT" in relation to any amount denominated in Dollars
means the equivalent thereof in Sterling at an exchange rate as set out in a
letter between the Facility Agent and Services of even date.
"GAS ACT" means the Gas Act 1986 (as amended by the Gas Act 1995).
"GAS FRAMEWORK AGREEMENT" means an agreement dated 1st March, 1996 and entered
into between British Gas Transco and Eastern Natural Gas (Retail) Limited.
"GENERATION BUSINESS" means the business of TEG and its Subsidiaries in or
ancillary to the generation (whether for its own account or that of any other
party) of electricity.
"GROUP" means:
(a) when designated "SERVICES", Services and its Subsidiaries from time to
time;
(b) when designated "PA", PA and its Subsidiaries from time to time;
(c) without such designation, the PA Group or the Services Group, as the
context so requires; and
(d) when designated "TEG", TEG and its Subsidiaries from time to time.
"GUARANTOR" means each of Services, Finance, PA and each Additional Guarantor.
"GUARANTOR ACCESSION AGREEMENT" means an agreement substantially in the form of
Part II of the Sixth Schedule made pursuant to Clause 19.2.
"HEDGING DOCUMENTS" means any and all interest rate swap and/or interest rate
cap and/or other interest
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rate hedging agreements entered into or committed to be entered into by any
member of the PA Group in relation to the risk management of PA Group's floating
rate interest exposure as have been heretofore (and/or as may hereafter be)
agreed in writing between Services and the Facility Agent to constitute the
Hedging Documents, including without limitation, and whether or not so further
agreed in writing those contemplated by Clause 4.1(d).
"HOLDING COMPANY" means, in relation to a body corporate, any other body
corporate of which it is a Subsidiary.
"HYBRID PREFERRED SECURITIES" means any securities, permanent debt obligations
or similar instruments or arrangements (each in this definition referred to as
"preferred securities") issued by a Hybrid Preferred Securities Subsidiary,
where such preferred securities have the following characteristics:
(i) such Hybrid Preferred Securities Subsidiary lends substantially all of
the proceeds from the issuance of such preferred securities to a
member of the Services Group in exchange for Subordinated Debt issued
by a member of the Services Group;
(ii) such preferred securities contain terms providing for the deferral of
payments corresponding to provisions providing for the deferral of
interest payments on such Subordinated Debt; and
(iii) the relevant member of the Services Group makes periodic interest
payments on such Subordinated Debt, which interest payments are
in turn used by the Hybrid Preferred Securities Subsidiary to
make corresponding payments to the holders of the preferred
securities.
"HYBRID PREFERRED SECURITIES SUBSIDIARY" means any person (i) all of the common
equity interest of which is owned (either directly or indirectly) through one or
more wholly-owned members of the Services Group at all times, (ii) that has been
formed for the purpose of issuing Hybrid Preferred Securities, and (iii)
substantially all of the assets of which consist at all times of Subordinated
Debt issued by members of the Services Group and payments made from time to time
on such Subordinated Debt.
"INFORMATION MEMORANDUM" means an information memorandum relating to the
Services Group as, when and if agreed between Services and the Arrangers for use
in the syndication of the Facility.
"INTERCREDITOR AGREEMENT" means an agreement in the agreed form made or to be
made between Services, Finance, PA, the Subordinated Creditors, the Senior
Creditors, the Hedging Banks, the Facility Agent and the Security Agent (in each
case as defined therein).
"INTEREST" means:
(a) interest and amounts in the nature of interest accrued (including, without
limitation, the interest elements of finance leases and interest and
dividend payments accrued and any other regular payment, other than in
respect of principal or capital, accrued in respect of any Borrowing);
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(b) prepayment penalties or premiums incurred in repaying or prepaying any
Borrowing;
(c) discount fees and acceptance fees payable or deducted in respect of any
Borrowing (including all fees payable in connection with any letter of
credit, guarantee or acceptance); and
(d) any other costs, expenses and deductions of the like effect and any net
payment (or, if appropriate in the context, minus any net receipt) under
any interest rate hedging agreement or instrument, taking into account any
premiums payable for the same and the interest element of any net payment
(or, if appropriate in the context, minus the interest element of any
receipt) under any currency hedging instrument or arrangement (plus or
minus any accrued exchange gains or losses with respect to such interest
element).
For the avoidance of doubt, "INTEREST" includes commitment, utilisation and non-
utilisation fees (including, without limitation, those payable hereunder) but
excludes agent's and front-end, management, arrangement and participation fees
with respect to any Borrowing (including, without limitation, those payable
hereunder) and includes any up-front premium or front-end fee payable pursuant
to any interest rate hedging agreement or instrument.
"INTEREST DATE" means, in relation to any Advance or any overdue amount, the
last day of an Interest Period relating thereto.
"INTEREST PERIOD" means, in relation to any Advance, each (or the) period
determined in accordance with Clause 10 or Clause 5.2(f) respectively, and, in
relation to any overdue amount, each period determined in accordance with Clause
11.3.
"LC BANK" means Citibank, N.A. and/or any other bank which becomes an LC Bank
pursuant to Clause 5.8.
"LIBOR" in relation to any Advance or overdue amount for any Interest Period
relative thereto, means:
(i) the annual rate of interest which appears on Telerate page 3750 or any
equivalent successor to such page, as appropriate (as determined by the
Facility Agent) (the "TELERATE SCREEN") at or about 11.00 a.m. (London
time) on (in the case of an Advance in Sterling) the first Business Day of
or (in the case of an Advance in an Optional Currency) the second Business
Day prior to the commencement of, such Interest Period, as being the
interest rate offered in the London Interbank Market (in the case of
Sterling) or London Interbank Eurocurrency Market (in the case of an
Optional Currency) for Sterling or such Optional Currency (as appropriate)
deposits for delivery on the first day of such Interest Period and for a
period comparable to such Interest Period; and
(ii) (if the relevant rate does not appear on the Telerate Screen for the
purposes of paragraph (i) or the Facility Agent determines that no rate for
a period of comparable duration to the relevant Interest Period appears on
the Telerate Screen), the arithmetic mean (rounded upwards, if necessary,
to four decimal places) of the respective rates, as supplied to the
Facility Agent at its request, quoted by the Reference Banks (or if there
is then only one Reference Bank, the rate quoted by that Reference Bank) to
leading banks in the ordinary course of business in the London Interbank
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Market (in the case of an Advance denominated in Sterling) or London
Interbank Eurocurrency Market (in the case of an Advance denominated in an
Optional Currency) at or about 11.00 a.m. on (in the case of Sterling) the
first Business Day of or (in the case of an Advance denominated in an
Optional Currency) the second Business Day prior to the commencement of,
such Interest Period for the offering of deposits in Sterling or such
Optional Currency (as applicable) for a period comparable to its Interest
Period and in an amount comparable to the amount of such Advance, provided
that if any of the Reference Banks shall be unable or otherwise fails so to
supply such offered rate by 1.00 p.m. on the required date, "LIBOR" for the
relevant Interest Period shall be determined on the basis of the quotations
of the remaining Reference Banks.
"LICENCE" means any Public Electricity Supply Licence or Electricity Generation
Licence issued pursuant to Section 6(1) of the Act to a member of the Services
Group as modified or supplemented from time to time and if any such Licence is
split by or with the consent of the Director General into more than one new
licence, each of such new licences.
"LICENCEHOLDER"means at any time a member of the Services Group which then holds
a Licence.
"LICENCE UNDERTAKING" means any and each written undertaking or assurance given
in connection with the Offer by any one or more of Services, PA or TEG or any
Affiliate of any of them to the Director General or the Director General of Gas
Supply or the Secretary of State concerning the management and/or ownership of
and/or other matters concerning TEG or any other member of the TEG Group once it
has become a Subsidiary of Services.
"MAJORITY BANKS" means at any time:
(a) whilst no Utilisation is outstanding, a Bank or Banks the aggregate amount
of whose Commitments at the relevant time represents by value more than
sixty-six and two-thirds per cent. (662/3%) of the Total Commitments at
such time;
(b) if a Utilisation is then outstanding, a Bank or Banks the aggregate of
whose participations in the Utilisations and aggregate potential liability
under Utilisations outstanding at such time represents by value more than
sixty-six and two-thirds per cent. (662/3%) of the aggregate of all the
Utilisations and all the Outstanding Liability Amounts of all Utilisations
outstanding at such time;
provided that whilst the Original Banks are the only Banks, the term "MAJORITY
BANKS" shall mean all of the Banks together.
"MAJORITY OFFER BANKS" means at any time Banks the aggregate amount of whose
Commitments at the relevant time represents by value more than fifty per cent.
(50%) of the Total Commitments at such time, provided that such Banks include
all of the Original Banks.
"MARGIN" means one point three per cent (1.30%) per annum, provided that if at
any time after the date falling six months after the date of the first
Utilisation Date, the consolidated Accounts of the PA Group most recently
delivered to the Facility Agent (whether before or after that date) pursuant to
Clauses 21.2(a)(i) or 21.2(a)(ii) as the case may be, and the reports and
certificates relating thereto delivered
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pursuant to Clause 21.2(a)(iii) or 21.2(a)(iv) (as the case may be) disclose
that the percentage of Consolidated Net Total Borrowings to the sum of Adjusted
Capital and Reserves and Consolidated Net Total Borrowings of the PA Group as at
the last day of the Accounting Period in respect of which such Accounts were
delivered is within the ratios set out in column 1 below:
(1) (2)
% Margin (p.a.)
(a) Greater than 75% 1.30%
(b) Equal to or less than 75% but
greater than 70% 1.10%
(c) Equal to or less than 70% but
greater than 65% 0.90%
(d) Equal to or less than 65% but
greater than 60% 0.70%
(e) Equal to or less than 60% 0.50%
then (subject as mentioned below), the Margin shall be the percentage per annum
set out in Column 2 above opposite such ratio, in each case during (but only
during) the period from (and including) the date on which the Facility Agent has
received the relevant Accounts pursuant to Clause 21.2(a)(i) and the reports and
certificates relating thereto pursuant to Clause 21.2(a)(iii) or has received
Accounts pursuant to Clause 21.2(a)(ii) and the certificates relating thereto
pursuant to Clause 21.2(a)(iv), as the case may be, until (but excluding) the
earlier of the following dates:
(a) the date on which the Facility Agent next receives the relevant Accounts
for an annual Accounting Period pursuant to Clause 21.2(a)(i) and a report
and certificates relating thereto pursuant to Clause 21.2(a)(iii);
(b) the date on which the Facility Agent receives the relevant Accounts for the
next succeeding quarterly Accounting Period of the PA Group pursuant to
Clause 21.2(a)(ii) and a certificate relating thereto pursuant to Clause
21.2(a)(iv);
(c) the latest date (the "LATEST DATE") by which the Facility Agent should have
received any such Accounts and certificates in accordance with the terms of
such Clauses where the Facility Agent has not received the same by such
date; and
(d) the date (falling on or after the first day of such period) on which the
Facility Agent gives notice pursuant to Clause 24.2 declaring that an Event
of Default has occurred,
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Provided that:
(i) if the Margin has been reduced in reliance on unaudited Accounts (and
corresponding certificate) for the quarterly Accounting Periods in any
annual Accounting Period and the audited Accounts (and corresponding report
and certificate) do not justify that reduction, such reduction shall be
reversed with retrospective effect so that subject as provided in this
definition the Margin shall be that justified by the audited Accounts and
amounts calculated by reference to the reduced Margin (whether or not
already paid) shall be recalculated by reference to the Margin justified by
such audited Account; and
(ii) if the Margin has been increased as a result of the occurrence of (c) or
(d) above then upon the Facility Agent confirming in writing to the Banks
and Services that such Event of Default has been cured to the satisfaction
of the Banks (acting reasonably) then as at the date of such confirmation
the Margin shall be recalculated by reference to the Accounts and
certificate received in respect of the last quarterly Accounting Period
pursuant to Clauses 21.2(a)(ii) and 21.2(a)(iv), but such recalculation
shall not have any retrospective effect.
"MATCHING AMOUNT" means, with respect to any Tranche 1A Advance requested to be
made hereunder pursuant to a Request, an amount in cash to be lent by Powercoal
to PA on the terms of the PA Note equal to the Fixed Dollar Equivalent of the
Matching Amount Percentage of the Requested Amount for that Tranche 1A Advance.
"MATCHING AMOUNT PERCENTAGE" means, the percentage specified as such in a letter
between the Facility Agent and Services of even date (or such other percentage
as Services and the Facility Agent after consultation with the Banks may agree
in writing, provided that the Facility Agent shall not without the prior consent
of the Majority Banks agree any percentage which differs from that specified in
figures in the letter by more than 0.5).
"MATERIAL ADVERSE EFFECT" means any effect which is or is reasonably likely to
have:
(i) a material adverse effect on the ability of any Obligor which is also a
Material Subsidiary to perform its obligations under the Finance Documents
(taken as a whole); and/or
(ii) (where the context so admits) a material impairment of the ability of the
Obligors to perform their obligations under the Finance Documents to which
they are a party or a material impairment of the rights of or benefits
available to the Finance Parties under the Finance Documents
excluding in each case as a direct result of changes of price levels or pricing
in respect of the supply and/or distribution of electricity pursuant to the
terms of any Licence.
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"MATERIAL SUBSIDIARY" means, at any time, each Obligor (other than Services)
and, on and from the Unconditional Date, each Licenceholder other than a
Licenceholder whose Licence relates solely to the generation of electricity,
together with:
(i) on and from the Unconditional Date until the date from which paragraph (ii)
below applies:
(a) TEG;
(b) EE;
(c) Eastern Merchant Property Limited;
(d) Eastern Power and Energy Trading Limited;
(e) Eastern Group Finance Limited;
(f) Eastern Merchant Generation Limited; or
(ii) (from the date on which the Facility Agent first receives Accounts pursuant
to Clause 21.2(a)(ii) and (vi)), any Subsidiary of PA (other than any
Project Finance Subsidiary):
(I) (A) whose profits before tax (on a consolidated basis if it has
Subsidiaries (excluding any profits from any Project Finance
Subsidiary) and for the latest period comprising an annual Accounting
Period of PA or four consecutive quarterly Accounting Periods of PA
(taken together as one period) for which consolidated Accounts of the
PA Group have been delivered to the Facility Agent) on ordinary
activities or (B) whose gross assets (excluding any attributable to
any Project Finance Subsidiary and excluding goodwill) represent 5% or
more of the consolidated profits before tax (excluding any profits
from any Project Finance Subsidiary) on ordinary activities of the PA
Group for such period or, as the case may be, consolidated gross
assets (excluding any attributable to any Project Finance Subsidiary
and excluding goodwill) of the PA Group, in each case as calculated by
reference to the latest consolidated Accounts of the PA Group
delivered to the Facility Agent adjusted in such manner as the
auditors of PA may determine (which determination shall be conclusive
in the absence of manifest error) to reflect the profits (or losses)
before tax (excluding any profits from any Project Finance Subsidiary)
on ordinary activities and consolidated gross assets (excluding any
attributable to any Project Finance Subsidiary and excluding goodwill)
of any person which has become or ceased to be a member of the PA
Group since the end of the financial period to which the latest
financial statements of the PA Group relate; or
(II) to which is transferred (after the end of the financial period to
which the latest consolidated financial statements of the PA Group
relate) all or substantially all of the business, undertaking or
assets of a Subsidiary which immediately prior to such transfer is a
Material Subsidiary whereupon the transferor Subsidiary shall cease to
be a Material
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Subsidiary under this sub-Clause (ii) upon the completion of such
transfer.
"MODEL" means the economic projections and base assumptions concerning the PA
Group prepared by PacifiCorp in the agreed form.
"NEGATIVE TERMINATION AMOUNT" means, with respect to any arrangement falling
within paragraph (f) of the definition of Borrowing in Clause 1.1., the amount
(if any) that would be required to be paid by the relevant member of the PA
Group if such arrangement were terminated by reason of a default by it or other
termination event relating to the arrangement. The Negative Termination Amount
of any such arrangement at any date shall be determined (a) as of the end of the
most recent quarterly Accounting Period for which accounts have been delivered
pursuant to Clause 21.2 if such arrangement was then outstanding or (b) as at
the date such arrangement is entered into if it is entered into after the end of
such quarterly Accounting Period; Provided, however, that if an agreement
between the member of the PA Group and the relevant counterparty provides that,
upon any such termination by such counterparty, one or more other arrangements
falling within paragraph (f) of the definition of Borrowing in Clause 1.1 (if
any then exist) between such member of the PA Group and such counterparty would
also terminate and the amount (if any) payable by such member of the PA Group
would be a net amount reflecting the termination of all arrangements falling
within paragraph (f) of the definition of Borrowing in Clause 1.1 so terminated,
then the Negative Termination Amount of all such arrangements subject to such
netting shall be, at any date, a single amount equal to such net amount (if any)
payable by the member of the PA Group determined as of the later of (a) the end
of the most recent quarterly Accounting Period for which accounts have been
delivered pursuant to Clause 21.2 or (b) the date on which the most recent
arrangement subject to such netting was entered into.
"NET PROCEEDS" means:
(a) the consideration received by any member of the Services Group (other than
a Project Finance Subsidiary) in respect of the disposal to any person who
is not a member of the Services Group of all or any part of its business,
undertaking or assets (including the amount of any intercompany debt repaid
to continuing members of the Group other than a Project Finance
Subsidiary), net of all Taxes applicable on, or to any gain resulting from,
the disposal and of all reasonable costs, fees and expenses incurred by
members of the Services Group in arranging and effecting that disposal;
(b) the proceeds of any equity subscription in the capital of Services made
after the date hereof and not otherwise contemplated in the Structure
Memorandum (other than any equity subscription made by EnergyCo to the
extent permitted by Clause 21.6(e)); and/or
(c) the proceeds of any claim for loss or destruction of or damage to the
property of a member of the Services Group (other than a Project Finance
Subsidiary) made by a member of the Services Group (other than a Project
Finance Subsidiary) under any insurance policy save where Services notifies
the Facility Agent in writing that such proceeds are to be applied in
reinstating the property concerned or purchasing like replacement property,
Provided that to the extent such consideration is received by the relevant
member of the Services Group
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other than in cash, the Net Proceeds in respect of such consideration shall be
deemed to arise on the date on which that consideration is converted into cash.
"NET TERMINATION VALUE" shall mean with respect to all Derivative Transactions
(other than any Hedging Documents, any form of energy related Derivative
Transaction and any hedging agreement that is designed and used solely to
protect the Borrower against fluctuations in currency exchange rates and not for
speculation), the difference between (a) the aggregate amounts (if any) that
would be required to be paid by any member of the PA Group if such Derivative
Transactions were terminated by reason of a default relating to any member of
the PA Group, and (b) the aggregate amounts (if any) that any member of the PA
Group would be entitled to receive if such Derivative Transactions were
terminated by reason of a default relating to any member of the PA Group. The
Net Termination Value shall be determined (a) as of the end of the most recent
quarterly Accounting Period ended on or prior to such date if such Derivative
Transaction was then outstanding or (b) as of the date such Derivative
Transaction is entered into if it is entered into after the end of such fiscal
quarter.
"NETWORK CODE" means the Network Code Principal Document dated 1st March, 1996
(as modified from time to time).
"OBLIGOR" means each Borrower and each Guarantor.
"OFFER" means the offer for the Shares to be made by Goldman Sachs International
on behalf of PA substantially on the terms and conditions referred to in the
Press Release, as the same may be amended, varied, renewed or waived in
compliance with Clause 22 (other than Clause 22(a)(i)(C), (ii) or (iii) or
22(d)).
"OFFER ACCOUNT" means the account in the name of PA opened with Citibank, N.A.
on or before the Unconditional Date for the purposes of effecting the
acquisition of the Shares.
"OFFER COSTS" means all banking, brokerage, foreign exchange hedging,
accounting, legal, public relations and other fees and commissions,
out-of-pocket costs and expenses and stamp, registration, transfer and similar
taxes incurred by or on behalf of Services or any Subsidiary thereof (including
any member of the TEG Group which becomes such a Subsidiary pursuant to the
Offer) in connection with the negotiation, preparation, execution and
implementation of the Transaction Documents or otherwise in connection with the
Offer (including any refinancing referred to in Clause 3.1(a)(ii)).
"OFFER DOCUMENT" means the document to be delivered to the shareholders of TEG
containing the formal Offer.
"OFFER TERMINATION DATE" means the earliest date (as notified by PA to the
Facility Agent in writing) on which all of the following have occurred:
(a) all payments in respect of acceptances of the cash alternative in the Offer
have been made in full;
(b) no further such acceptances are possible; and
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(c) all procedures pursuant to section 428 et seq. Companies Act 1985 which are
capable of being implemented have been completed and all payments pursuant
thereto to shareholders in TEG have been made in full.
"OPEN MARKET SHARES" means the shares (if any) in the capital of TEG purchased
by PGH (or any Affiliate thereof) prior to the Unconditional Date (including any
such shares represented by TEG's American Depositary Shares).
"OPTIONAL CURRENCY" means any freely available and transferable eurocurrency.
"OPTION SCHEMES" means any employee share save or share option scheme, long term
incentive plan, employee benefit trust, savings plan or other employee share
scheme of TEG or any of its Subsidiaries as in effect at the Unconditional Date.
"OPTIONHOLDERS" means holders for the time being of options issued under or
participants in or beneficiaries under any of the Option Schemes.
"ORIGINAL STERLING AMOUNT" means in relation to any amount:
(a) (if denominated in Sterling) the principal amount which is, or is to be
outstanding, drawn or issued; or
(b) (if denominated in an Optional Currency) the Sterling Equivalent of the
principal amount which is, or is to be outstanding, drawn or issued,
calculated, in the case of an Advance, three Business Days prior to the
Utilisation Date for that Utilisation and in the case of a Documentary
Credit, on the Utilisation Date for that Utilisation.
"OUTSTANDING LIABILITY AMOUNT" in relation to any Documentary Credit at any time
means the maximum amount for which the LC Bank or the Banks, as the case may be,
could be actually and/or contingently liable thereunder less the aggregate of
(i) all amounts thereof repaid or prepaid hereunder and (ii) all amounts (if
any) paid out by the LC Bank (or the Banks) thereunder for which the LC Bank
and/or the Banks have been reimbursed by the Obligors (whether or not out of the
proceeds of a Tranche 2 Advance).
"PA NOTE" means the loan note issued or to be issued by PA to Powercoal in the
agreed form as contemplated by the Structure Memorandum evidencing the
Powercoal/PA Loan.
"PA/PEABODY NOTE" means the loan note evidencing the debt owed by PA to Peabody
Global or Peabody Investments incurred pursuant to the Asset Split.
"PACIFICORP" means PacifiCorp, an Oregon corporation incorporated on 11 August
1987.
"PANEL" means The Panel on Takeovers and Mergers.
"PEABODY GLOBAL" means Peabody Global Investments, Inc., a Delaware corporation.
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"PEABODY HOLDINGS" means Peabody Holding Company Inc., a New York corporation,
and each of its subsidiaries.
"PEABODY INVESTMENTS" means Peabody Investments Inc., a Delaware corporation.
"PEABODY GROUP" means Citizens and Peabody Holdings.
"PGH" means PacifiCorp Group Holdings Company, a Delaware corporation
incorporated on 3 July 1984 (formerly known as PacifiCorp Holdings, Inc.)
"POOLING AND SETTLEMENT AGREEMENT" means an agreement dated 30th March, 1990
made by TEG with 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 (and, while the same has effect, the "INITIAL SETTLEMENT
AGREEMENT" also dated 30th March, 1990 and made between the same parties), as
amended from time to time.
"POWERCOAL" means PacifiCorp Powercoal LLC, a limited liability company
organised on 10 June 1997 under the laws of Oregon.
"POWERCOAL FACILITY AGREEMENT" means a credit agreement dated on or around the
date hereof between Powercoal, the Lenders (as defined therein), Citibank, N.A.
as paying agent, swingline lender and issuing bank and Citicorp USA Inc. as
collateral agent.
"POWERCOAL INTERCREDITOR AGREEMENT" means an agreement in the agreed form
entered into by certain of the parties hereto and certain of the parties to the
Powercoal Facility Agreement.
"POWERCOAL LENDERS" means the Lenders (as defined in the Powercoal Facility
Agreement) from time to time.
"POWERCOAL LOAN" means, at any time, all amounts outstanding at that time upon
and subject to the terms of the Powercoal Facility Agreement.
"POWERCOAL/PA LOAN" means the loan made by Powercoal to PA from funds advanced
to Powercoal under the Powercoal Facility Agreement to assist PA in funding its
purchase of the Shares pursuant to the Offer.
"PRESS RELEASE" means the agreed form of press release by which the Offer is
announced.
"PROJECT FINANCE BORROWINGS" means any indebtedness of a type referred to in any
of paragraphs (a)-(g) of the definition of "Borrowing" in this Clause 1.1 which
finances or otherwise relates to the acquisition, development, ownership and/or
operation of an asset or combination of assets whether directly or indirectly:
(a) which is incurred by a Project Finance Subsidiary; or
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(b) in respect of which the person or persons to whom such Borrowing is or may
be owed by the relevant debtor (whether or not a member of the PA Group)
has or have no recourse whatsoever to any member of the PA Group (other
than to a Project Finance Subsidiary) for the repayment thereof other than:
(i) recourse to such debtor for amounts limited to the cash flow or net
cash flow (other than historic cash flow or historic net cash flow)
from such asset or assets; and/or
(ii) recourse to such debtor for the purpose only of enabling amounts to
be claimed in respect of such Borrowing in an enforcement of any
Encumbrance given by such debtor over such asset or assets or the
income, cash flow or other proceeds deriving therefrom (or given by
any shareholder or the like in the debtor over its shares or like
interest in the capital of the debtor) to secure such Borrowing or
to secure any recourse referred to in (iii) below, Provided that
(I) the extent of such recourse to such debtor is limited solely to
the amount of any recoveries made on any such enforcement, and (II)
such person or persons are not entitled, by virtue of any right or
claim arising out of or in connection with such Borrowing, to
commence proceedings for the winding up or dissolution of the
debtor or to appoint or procure the appointment of any receiver,
trustee or similar person or officer in respect of the debtor or
any of its assets (save only for the assets the subject of such
Encumbrance); and/or
(iii) recourse (I) to such debtor generally, or directly or indirectly to
a member of the PA 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
specific way) for breach of an obligation (not being a payment
obligation or an obligation to procure payment by another or an
indemnity in respect thereof or any obligation to comply or procure
compliance by another with any financial ratios or other tests of
financial condition) by the person against whom such recourse is
available; and/or (II) to shares and/or any other ownership
interest in or loans to and/or the assets of such debtor and/or any
Project Finance Subsidiary owned by a member of the Services Group.
"PROJECT FINANCE SUBSIDIARY" means any person:
(a) whose principal assets and business are constituted by the ownership,
acquisition, development and/or operation of any asset or combination of
assets whether directly or indirectly;
(b) none of whose Borrowings in respect of the financing of the ownership,
acquisition, development and/or operation of any such asset benefits from
any recourse whatsoever to any member of the Services Group (other than
such person or another Project Finance Subsidiary) in respect of the
repayment thereof, except as expressly referred to in paragraph (b)(iii) of
the definition of "Project Finance Borrowings" in this Clause 1.1; and
(c) which has been designated as such by Services or a Subsidiary of Services
by written notice to the Facility Agent provided that Services or a
Subsidiary of Services may give written notice to the
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Facility Agent at any time that any Project Finance Subsidiary is no longer
a Project Finance Subsidiary, whereupon it shall cease to be a Project
Finance Subsidiary.
"RECOGNISED BANK" means at any time a person which:
(a) is a bank as defined in Section 840A of the Income and Corporation Taxes
Act 1988 (or any statutory re-enactment or modification thereof, in
substantially the same form and content as at the date hereof) which is
beneficially entitled to and within the charge to United Kingdom
corporation tax as regards any interest received by it under this
Agreement; or
(b) if at any time Section 349 or Section 840A of the Income and Corporation
Taxes Act 1988 (or a statutory re-enactment or modification thereof, in
substantially the same form and context as at the date hereof) shall not be
in full force and effect, is either (where no amendment to this definition
is agreed with the intention of restoring the economic position of the
parties hereunder as regards the applicability of United Kingdom
withholding taxes) a bank carrying on through its Facility Office a bona
fide banking business in the United Kingdom which is beneficially entitled
to and is within the charge to United Kingdom corporation tax as regards
any interest payable or paid to it under this Agreement or (if such an
amendment is agreed) a bank qualifying for the purposes of any replacement
tax legislation so that interest hereunder may be paid to it without
deduction of United Kingdom income tax; or
(c) is acting from outside the United Kingdom and is resident (as defined in
the appropriate double taxation treaty) in a jurisdiction outside the
United Kingdom with which, at the time it becomes a party to this
Agreement, the United Kingdom has an appropriate double taxation treaty and
at such time such treaty provides under its terms for complete exemption
from United Kingdom income tax on United Kingdom source interest for an
entity such as itself when acting through the branch through which it is
acting for the purposes of this Agreement, and such entity has made at the
date on which it becomes a Bank hereunder the appropriate application to
the appropriate tax authority under such treaty for such exemption (such
entity being referred to herein as a "TREATY BANK").
"RECONCILIATION STATEMENT" in respect of any Accounts, means a statement signed
(in respect of audited consolidated Annual Accounts) by the Auditors or, (in
respect of unaudited consolidated quarterly Accounts) the Chief Financial
Officer describing (a) any changes which would be required to be made to such
Accounts and the treatment of any item therein (including, without limitation
any necessary change in the treatment of goodwill) to conform such Accounts to
the Applicable Accounting Principles and setting out the effects of such changes
(if any) on the items therein, and (b) any departure from the Applicable
Accounting Principles in the preparation of such Accounts and either stating
that such departure has not altered any of the numerical information required
for the purpose of establishing whether or not PA is in compliance with its
obligations under Clause 23.1 or (if it has altered such information) setting
out the effects of such alteration in reasonable detail.
"REFERENCE BANKS" means the principal London offices of Citibank, N.A. and
Morgan Guaranty Trust Company of New York and/or of such other Banks (if any) as
may become Reference Banks pursuant to Clause 30.5.
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"REFINANCING DEBT" means all Borrowings or obligations set out in the Borrowings
List which are indicated on that list as being likely to be in default as at the
Unconditional Date or thereafter as a result of the consummation of those
matters and things contemplated by the Transaction Documents (or any of them)
occurring or which PA has indicated on that list may be refinanced in accordance
with the provisions of Clause 21.9.
"RENT FACTORING AGREEMENT" means the Deed of Assignment of Rents dated 28th
October 1996 made between Eastern Merchant Properties Limited, Eastern Group
Finance Limited, certain banks and Barclays Bank PLC (as agent).
"REQUEST" means a request, substantially in the form of the Third Schedule (as
appropriate), made by a Borrower to the Facility Agent for a Utilisation.
"RESERVATIONS" means the qualifications and reservations set out in the Ninth
Schedule.
"ROLLOVER ADVANCE" bears the meaning given to that term in Clause 4.3(a).
"SECRETARY OF STATE" means the Secretary of State as referred to in the Act.
"SECURITY DOCUMENTS" means the Debenture of even date herewith executed by
Finance, Services and PA, together with such other documents (if any) as may be
required to be entered into by any Obligor pursuant to the terms of any Finance
Documents.
"SENIOR CREDITOR" has the meaning given to it in the Intercreditor Agreement.
"SERVICES/FINANCE LOAN AGREEMENT" means the loan arrangements entered into or to
be entered into between Services and Finance pursuant to which Services shall
lend to Finance Subordinated Debt as more fully referred to in the Structure
Memorandum.
"SHARES" means existing unconditionally allotted or issued and fully paid shares
in TEG and any further shares in TEG which are unconditionally allotted or
issued before the date on which the Offer ceases to be open for acceptances (or
such earlier date as Services and the Banks may, subject to the Code, agree)
upon the exercise of any options granted under the Option Schemes or otherwise
including any such shares represented by TEG's American Depositary Shares.
"STERLING" and "L" means the lawful currency for the time being of the United
Kingdom.
"STERLING EQUIVALENT" means, in relation to an amount expressed or denominated
in an Optional Currency, the equivalent thereof in Sterling converted at the
Agent's Spot Rate of Exchange on the date of the relevant calculation (and if
used in relation to an amount expressed or denominated in Sterling, such
amount).
"STRUCTURE MEMORANDUM" means the memorandum in the agreed form entitled
"Financing the Acquisition of The Energy Group PLC" prepared by Stoel Rives
L.L.P..
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"SUBORDINATED CREDITOR" bears the meaning given to that term in the
Intercreditor Agreement.
"SUBORDINATED DEBT" means:
(i) the PA Note;
(ii) any unsecured loans to Services or Finance or by Services or Finance to PA
which in each case (a) have a maturity falling after the Final Repayment
Date, (b) are not capable of acceleration whilst any amount of principal,
interest, fees or breakage costs may be or become payable by any member of
the PA Group hereunder or any of the Commitments remain in effect and (c)
are subordinated (as regards priority of payment, ranking, rights of
enforcement and all other rights) as to principal, interest and all other
amounts payable on or in respect thereof and any and all claims (including
for damages) related thereto, to all amounts which may be or become payable
by the member of the PA Group to any Finance Party under the Finance
Documents on the terms set out in the Intercreditor Agreement; and
(iii) any unsecured loan to PA, EE or a Hybrid Preferred Securities
Subsidiary that has:
(a) no principal payments due on a date that is earlier than twenty-four
months after the Final Repayment Date,
(b) provisions permitting the borrower thereof to defer the payment of
interest in certain circumstances,
(c) a fixed interest rate which, in the good faith judgment of the Chief
Financial Officer of PA, is consistent with the market at the time of
issuance for similar loans, and
(d) subordination provisions that are reasonably satisfactory to the
Majority Banks,
and any securities (and any guarantee by PA, EE or that Hybrid Preferred
Securities Subsidiary of any securities) issued in connection with that
loan.
"SUBSIDIARY" means:
(a) a subsidiary as defined in Section 736 of the Companies Act 1985, as
amended (and "WHOLLY OWNED SUBSIDIARY" shall have the meaning ascribed
thereto in such Section); and
(b) a subsidiary undertaking as defined in Section 258 of the Companies Act
1985, as amended or, in either case, any statutory re-enactment or
replacement thereof,
but, in each case, shall exclude any member of the Peabody Group.
"SUBSTITUTION CERTIFICATE" has the meaning ascribed to it in Clause 30.4
(together the "SUBSTITUTION CERTIFICATES"), and references to "SUBSTITUTES"
shall be construed as references to persons becoming party
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to this Agreement pursuant to Substitution Certificates.
"SYNDICATION DATE" means the earlier of the date specified by the Facility Agent
as the date on which primary syndication of the Facilities is completed and the
date falling 6 months after the Unconditional Date.
"TAXES" means all income and other taxes and levies, imposts, duties, charges,
deductions and withholdings in the nature or on account of tax together with
interest thereon and penalties with respect thereto, if any, and any payments
made on or in respect thereof, and "TAX" and "TAXATION" shall be construed
accordingly.
"TAX SHARING AGREEMENT" means an Agreement in agreed form made or to be made
between EnergyCo and members of the PA Group relating to the surrender of UK
Corporation tax for group relief purposes.
"TEG" means The Energy Group PLC a company incorporated under the laws of
England and Wales.
"TOTAL COMMITMENTS" means at any time the aggregate amount of the Commitments of
the Banks at such time.
"TRANSACTION DOCUMENTS" means the Finance Documents and when executed the Tax
Sharing Agreement.
"TREATY BANK" is defined in the definition of Recognised Bank.
"UNCONDITIONAL DATE" means the date upon which the Offer becomes or is declared
unconditional in all respects without any breach of Clause 22 (other than Clause
22(a)(i)(C), (ii) or (iii) or 22(d)).
"US DOLLARS" and "$" means the lawful currency for the time being of the United
States of America.
"UTILISATION" means a utilisation of a Facility under this Agreement, being,
when designated "TRANCHE 1", a utilisation of the Tranche 1 Facility and when
designated "TRANCHE 2", a utilisation of the Tranche 2 Facility.
"UTILISATION DATE" means in relation to each Utilisation, the date specified as
such in the relative Request therefor or, on and after the making and/or issue
thereof pursuant to such Request, the date on which it was made and/or issued.
"WAIVER LETTER" means any letter or other document setting out the terms (if
any) upon which (a) compliance with any provision of any Finance Document is
waived, or (b) any amendment to or variation of or departure from the terms of
any Finance Document is approved, or (c) any consent or approval required or
requested to be given is given, in each case by the Facility Agent with the
agreement of the Majority Banks or if so required by the terms of this Agreement
or any other Finance Document, Majority Offer Banks or all of the Banks.
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1.2 CONSTRUCTION In this Agreement, save where the context otherwise requires:
(a) references to documents being in the "AGREED FORM" means documents
either (i) substantially in a form previously agreed in writing by or
on behalf of the Facility Agent and Services, or (ii) substantially in
a form initialled by or on behalf of Services and the Facility Agent
on or prior to the date hereof for the purposes of identification, or
(iii) in a form substantially as set out in any Schedule to any
Finance Document, or (iv) with respect only to the Offer Document, in
a form which reflects and is consistent in all material respects with
the terms of the Press Release, or (v) (if not falling within (i) to
(iv) above) in form and substance satisfactory to the Original Banks
acting reasonably provided that a reference to the Press Release being
in the "AGREED FORM" shall mean the Press Release in form and
substance satisfactory to the Original Banks acting reasonably;
(b) references to "ASSETS" shall include revenues and the right thereto
and property and rights of every kind, present, future and contingent
and whether tangible or intangible (including uncalled share capital)
references to "SHARES" shall include stock;
(c) the expressions "HEREOF", "HEREIN", "HEREUNDER" and similar
expressions shall be construed as references to this Agreement as a
whole (including all Schedules) and shall not be limited to the
particular Clause or provision in which the relevant expression
appears, and references to "THIS AGREEMENT" and all like indications
shall include references to this Agreement as supplemented by the
Borrower Accession Agreements, Guarantor Accession Agreements, the
Substitution Certificates, the Waiver Letters and any other agreement
or instrument supplementing or amending this Agreement;
(d) references to "INDEBTEDNESS" shall be construed so as to include any
obligation or liability (whether present or future, actual or
contingent) for the payment, repayment or redemption of any obligation
expressed by reference to monetary value or quantity or value of
commodities (whether such obligation is performable by the payment of
money or in some other way);
(e) references to a "PERSON" shall be construed as a reference to any
person, firm, company, corporation, government, state or agency of a
state or any association or partnership (whether or not having
separate legal personality) of two or more of the foregoing;
(f) references to any of the Transaction Documents and any other agreement
or instrument shall be construed as a reference to the same as
amended, varied, supplemented or novated from time to time (including,
where relevant, by any Borrower Accession Agreement and/or Guarantor
Accession Agreement and/or Substitution Certificate);
(g) unless otherwise specified, references to Clauses and Schedules are
references to, respectively, clauses of and schedules to this
Agreement;
(h) words importing the singular shall include the plural and vice versa;
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(i) references (by whatever term, including by name) to Services, PA, TEG,
each Obligor, the Arrangers, each Bank, the LC Bank, each Reference
Bank, the Facility Agent, the Security Agent, or any other person
referred to in this Agreement shall, where relevant and subject as
otherwise provided in this Agreement, be deemed to be references to or
to include, as appropriate, their respective successors, replacements
and assigns, transferees and substitutes permitted by the terms of the
relevant Finance Documents (including any person into or with which
any other person is merged or consolidated, whether by winding-up or
otherwise and, where relevant, as permitted by Clause 21.10(b));
(j) reference to a time of day is, unless otherwise stated, a reference to
London time and references to a "MONTH" are references to a period
starting on a particular day in a calendar month and ending on the
numerically corresponding day in the next calendar month provided that
if a period starts on the last day in a calendar month or if there is
no numerically corresponding day in the month in which the relevant
period ends, that period shall, save as otherwise provided in this
Agreement, end on the last day in such later month (and references to
"MONTHS" shall be construed accordingly);
(k) the contents page of, and headings in, this Agreement are for
convenience only and shall be ignored in construing this Agreement;
(l) all references to statutes and other legislation include all
re-enactments and amendments of those statutes and that legislation;
(m) an outstanding Documentary Credit is "REPAID" or "PREPAID" by
providing (in accordance with the terms hereof) cash cover therefor in
the same currency as that in which such Documentary Credit is
denominated or expressed to be payable, by reducing (in accordance
with the terms hereof) the Outstanding Liability Amount of such
Documentary Credit or by cancelling such Documentary Credit and
returning the original to the LC Bank or the Facility Agent on behalf
of the Banks or providing other evidence (in form and substance
satisfactory to the LC Bank or, as the case may be, Facility Agent)
that no further liability exists thereunder; references to
Utilisations being repaid or prepaid are to be construed accordingly
insofar as those Utilisations involve Documentary Credits;
(n) an amount "OUTSTANDING" at any time under or in respect of a
Documentary Credit (or the "PRINCIPAL AMOUNT" thereof at any time) is
the Outstanding Liability Amount of such a Documentary Credit and a
"DRAWING" under the Tranche 2 Facility includes the issue of a
Documentary Credit and each provision of this Agreement which contains
reference to the concepts contained in this paragraph (n) shall be
construed accordingly;
(o) any reference to "CERTIFICATE", "CERTIFICATION" (or any like term) in
relation to an amount shall be a reference to a certificate containing
such detail as is reasonably necessary in order to determine how such
amount was calculated; and
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(p) any reference to a document being "CERTIFIED" means a document
certified by an Authorised Signatory of the party providing the
document, or by lawyers acting on his behalf, as being genuine and in
full force and effect and, if a copy, a true and complete copy of the
original.
1.3 ECONOMIC AND MONETARY UNION DEFINITIONS In the Eleventh Schedule and in
any other provision of this Agreement to which reference is made in the Eleventh
Schedule expressly or impliedly, the following terms have the following
meanings.
"COMMENCEMENT OF THE THIRD STAGE OF EMU" means commencement of the third stage
of EMU as contemplated by the Treaty on European Union or circumstances which
(in the opinion of the Majority Banks, acting reasonably) have substantially
the same effect and result in substantially the same consequences.
"EMU" means Economic and Monetary Union as contemplated in the Treaty on
European Union.
"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 EMU.
"EURO" means the single currency of participating member states of the European
Union.
"EURO UNIT" means the currency unit of the euro.
"NATIONAL CURRENCY UNIT" means the unit of currency (other than a euro unit) of
a participating member state.
"PARTICIPATING MEMBER STATE" means each state so described in any EMU
legislation.
"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) and as
further amended from time to time.
2. FACILITIES AND RELATED MATTERS
2.1 FACILITIES Subject to the terms of this Agreement, and in reliance upon
the representations and warranties set out in Clause 20.1 as repeated from time
to time pursuant to Clause 20.2, the Banks grant to the relevant Borrowers the
following facilities:
(a) TRANCHE 1A FACILITY a term loan facility whereby, subject as
aforesaid, the Banks, when requested by PA and/or (after becoming a
Borrower hereunder pursuant to a Borrower Accession Agreement) TEG or
any of TEG's Subsidiaries pursuant to a Request, will make Tranche 1A
Advances denominated in Sterling to PA, TEG or any of TEG's
Subsidiaries (as the case may be) during the Tranche 1 Availability
Period in an aggregate principal amount not exceeding the aggregate
Tranche 1A Commitments;
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(b) TRANCHE 1B FACILITY a term loan facility whereby, subject as
aforesaid, the Banks, when requested by PA and/or (after becoming a
Borrower hereunder pursuant to a Borrower Accession Agreement) TEG or
any of TEG's Subsidiaries pursuant to a Request will make Tranche 1B
Advances denominated in Sterling to PA, TEG or any of TEG's
Subsidiaries (as the case may be) during the Tranche 1 Availability
Period in an aggregate principal amount not exceeding the aggregate
Tranche 1B Commitments; and
(c) TRANCHE 2 FACILITY a revolving credit facility whereby, subject as
aforesaid, the Banks, when requested by a Borrower pursuant to a
Request, during the Tranche 2 Availability Period will make to the
Borrower specified in or giving such Request Tranche 2 Advances or
issue, or procure the LC Bank to issue for the account of such
Borrower, Documentary Credits denominated in Sterling and/or an
Optional Currency or Optional Currencies up to an aggregate principal
amount not exceeding at any one time the Original Sterling Amount
equal to the aggregate Tranche 2 Commitments at such time.
2.2 LIMITATIONS Subject to the terms of this Agreement unless otherwise agreed
by the Facility Agent and the Banks:
(a) no Utilisation of any Facility may be made before the Unconditional
Date;
(b) Tranche 1A Utilisations may be made only by PA and/or (upon it
becoming a Borrower pursuant to a Borrower Accession Agreement) TEG or
any Subsidiary of TEG;
(c) Tranche 1B Utilisations may be made only by PA and/or (upon it
becoming a Borrower pursuant to a Borrower Accession Agreement) TEG or
any Subsidiary of TEG;
(d) without prejudice to the provisions of Clause 10.4(d), PA will use its
reasonable endeavours to ensure that the number of additional
Utilisations shall be controlled and that no more than 20 Tranche 1A
and 10 Tranche 1B Utilisations are made;
(e) the aggregate Original Sterling Amount of the outstanding Tranche 2
Utilisations at any time may not exceed the Tranche 2 Commitments then
in effect; and
(f) no Tranche 2 Utilisation may be made before there has been (or unless
there is on the same day occurring) a drawing of the Tranche 1
Commitments and no more than 10 Tranche 2 Advances may be outstanding
at any time.
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2.3 NATURE OF THE BANKS' RIGHTS AND OBLIGATIONS HEREUNDER
(a) BANKS' COMMITMENTS No Bank is obliged to participate in the making of
any Utilisation (i) in the case of a Tranche 1 Advance, in an amount
exceeding its undrawn Tranche 1 Commitment, and (ii) in the case of a
Tranche 2 Utilisation, if to do so would cause the aggregate of the
Original Sterling Amounts of its participations in the Tranche 2
Utilisations outstanding under this Agreement to exceed its Tranche 2
Commitment (provided that for the purpose of this Clause 2.3(a) its
participation in an outstanding Documentary Credit issued by the LC
Bank shall be its maximum potential liability under Clause 5.6 in
respect of such Documentary Credit).
(b) OBLIGATIONS SEVERAL The obligations of each Finance Party under the
Finance Documents are several. The failure of a Finance Party to
carry out its obligations under this Agreement shall not relieve any
other party of its obligations under any Finance Document. No Finance
Party shall be responsible for the obligations of any other Finance
Party under the Finance Documents.
(c) AGENTS NOT RESPONSIBLE The Facility Agent and the Security Agent, in
their capacities as such, shall not be responsible for the
non-performance by any Bank of its obligations under this Agreement.
(d) RIGHTS SEVERAL The obligations of each Obligor to the Finance Parties
under the Finance Documents are owed to each of them as separate and
independent obligations. Each Finance Party may, except as otherwise
stated herein, separately enforce its rights hereunder without joining
in any other Finance Party.
2.4 NATURE OF BORROWERS' RIGHTS AND OBLIGATIONS HEREUNDER
(a) RIGHTS AND OBLIGATIONS The obligations of the Borrowers under this
Agreement in their capacities as such shall be separate and
independent and not joint and several, and PA and not the other
Borrowers (save in their capacities as Guarantors) shall be liable
for:
(i) payment of all amounts becoming due under Clause 15 to the extent
that such amounts are not referable to Utilisations made by or to
monies received or receivable from a particular Borrower or are
not otherwise in the reasonable opinion of the Facility Agent
referable to a particular Borrower; and
(ii) payment of all amounts due under Clause 25, to the extent that in
the reasonable opinion of the Facility Agent such amounts are not
referable to a particular Borrower.
(b) FACILITY AGENT'S DETERMINATION The written determination of the
Facility Agent acting reasonably with regard to any matter which,
according to Clause 2.4(a), is to be determined according to its
reasonable opinion shall be conclusive save in the case of
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manifest error. No person shall have any recourse to the Facility
Agent in relation to any such determination if it proves to be the
case that its opinion was incorrect unless the Facility Agent was
grossly negligent or fraudulent in making any such determination.
(c) SERVICES AS OBLIGORS' AGENT Any and each Obligor (other than
Services) by and upon its execution of this Agreement or a Borrower
Accession Agreement or a Guarantor Accession Agreement, irrevocably
appoints Services to act on its behalf as its agent in relation to the
Finance Documents and irrevocably authorises Services on its behalf to
give all notices and instructions (including Requests) to execute on
its behalf any Borrower Accession Agreement or Guarantor Accession
Agreement and to make such agreements capable of being given or made
by such Obligor notwithstanding that they may affect such Obligor,
without further reference to or the consent of such Obligor and such
Obligor shall be bound thereby as though such Obligor itself had given
such notices and instructions (including, without limitation, any
Requests) or executed or made such agreements.
(d) SERVICES' ACTS BINDING Every act, omission, agreement, undertaking,
settlement, waiver, notice or other communication given or made by
Services under this Agreement, or in connection with this Agreement
(whether or not known to any other Obligor and whether occurring
before or after such other Obligor became an Obligor under this
Agreement) shall be binding for all purposes on all the Obligors as if
the Obligors had expressly concurred with the same. In the event of
any conflict between any notices or other communications of Services
and any other Obligor, those of Services shall prevail.
2.5 CHANGE OF CURRENCY AND ECONOMIC AND MONETARY UNION
(a) If more than one currency or currency unit are at the same time
recognised by the central bank of any country as the lawful currency
of that country, then:
(i) any reference in the Finance Documents to, and any obligations
arising under the Finance Documents, in the currency of that
country shall be translated into, or paid in, the currency or
currency unit of that country designated by the Facility Agent
acting reasonably; and
(ii) any translation from one currency or currency unit to another
shall be at the official rate of exchange recognised by the
central bank for the conversion of that currency or currency unit
into the other, rounded up or down by the Facility Agent acting
reasonably.
(b) If a change in any currency of a country occurs, this Agreement will
be amended to the extent the Facility Agent specifies (after
consultation with Services), to be necessary to reflect the change in
currency and to put the Banks and the Obligors in the same position,
so far as possible, that they would have been in if no change in
currency had occurred provided that if, in the reasonable opinion of
the Facility Agent it is possible only to put one or the other (but
not both) of the Banks and the Obligors into such position, the
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Facility Agent shall be entitled to that extent to give priority to
putting the Banks into that position.
(c) The provisions of the Eleventh Schedule shall apply to the terms and
conditions of this Agreement.
2.6 MARGIN STOCK
(a) Clauses 9.3, 21.3(a) and 21.3(c)(i) shall each be disapplied with
respect to the Shares or TEG's American Depositary Shares (or any of
them) and any proceeds arising from a disposal thereof until the
delisting from The New York Stock Exchange of TEG's American
Depositary Shares.
(b) Upon the occurrence of the event set out in paragraph (a) above this
Clause shall be of no effect and the provisions of Clauses 9.3,
21.3(a) and 21.3(c)(i) shall apply to its fullest extent with respect
to the Shares.
(c) Whilst Clause 2.6(a) applies to the terms of this Agreement:
(i) PA shall not be permitted to dispose of the Shares or TEG's
American Depositary Shares (or any of them) other than:
(A) on arm's length terms, for fair market value; and
(B) for cash consideration payable to it on the date of such
disposal; and
(ii) the proceeds arising from any disposal of the Shares or TEG's
American Depositary Shares (or any of them) shall be held by PA
in Cash or Cash Equivalent Investments.
3. PURPOSE AND RESPONSIBILITY
3.1 PURPOSE
(a) The proceeds of each Utilisation shall be applied only in or towards
financing the following:
(i) in the case of Tranche 1A Advances to finance:
(A) the acquisition by PA of Shares (I) pursuant to the Offer
and (II) by way of open market purchases after the
Unconditional Date and whilst the Offer is continuing;
(B) payments by PA, TEG or any of its Subsidiaries to the
Optionholders under proposals with respect to the Option
Schemes put to them in
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connection with the Offer;
(C) the consideration payable pursuant to the operation by PA
with respect to the Shares of the procedures contained in
Sections 428-430 of the Companies Act, 1985; and
(D) to the extent (if at all) permitted pursuant to Clause 3.2,
any of the purposes to which the proceeds of Tranche 1B
Advances may be applied in accordance with Clause
3.1(a)(ii).
(ii) in the case of Tranche 1B Advances, to finance:
(A) the refinancing of the Refinancing Debt by PA, TEG and its
Subsidiaries in accordance with Clause 21.9;
(B) the payment of Offer Costs; and
(C) to the extent (if at all) permitted pursuant to Clause 3.3,
any of the purposes to which the proceeds of Tranche 2
Advances may be applied in accordance with Clause
3.1(a)(iii);
(iii) in the case of Tranche 2 Utilisations to finance:
(A) the general working capital requirements of the Borrowers
and their Subsidiaries (subject always to the other terms of
this Agreement);
(B) other general corporate purposes of the Borrowers and their
Subsidiaries permitted under the terms of this Agreement;
and
(C) the refinancing of the Refinancing Debt by PA, TEG and its
Subsidiaries in accordance with Clause 21.9.
(b) Each Borrower undertakes that the proceeds of each Utilisation by it
shall be used only for the purposes permitted for such Utilisations by
Clause 3.1(a), and that no Utilisation in any event shall be used in
any way which would be illegal under, or would cause the invalidity or
unenforceability (in each case in whole or in part) of any Finance
Document under, any applicable law (including, without limitation,
section 151 of the Companies Act 1985).
3.2 ADDITIONAL PURPOSE - TRANCHE 1A ADVANCES If, at any time after the
Unconditional Date, Services gives written notice to the Facility Agent
requesting that this Clause 3.2 should come into operation and demonstrating to
the reasonable satisfaction of the Majority Offer Banks that, after 100% of the
Shares have been acquired by PA and the consideration therefor has been paid in
full and all payments to be made to the Optionholders have been made in full, an
amount (the "1A SURPLUS") of the Tranche 1A Commitments will remain undrawn,
then from and after the later of (i) the date of such notice; and (ii) the
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date on which the Facility Agent confirms to Services that the Majority Offer
Banks are so satisfied (such confirmation to be given promptly upon their being
so satisfied), the 1A Surplus shall be redesignated, at Services' option, as
part of the Tranche 1B Commitments and/or the Tranche 2 Commitments and may be
utilised accordingly.
3.3 ADDITIONAL PURPOSE - TRANCHE 1B ADVANCES If at any time after the
Unconditional Date, Services gives written notice to the Facility Agent
requesting that this Clause 3.3 should come into operation, any amount of the
Tranche 1B Commitments which then remains undrawn, shall from and after the date
of such notice be redesignated as part of the Tranche 2 Commitments and may be
utilised accordingly.
3.4 RESPONSIBILITY Without prejudice to the foregoing and the remaining
provisions of this Agreement, none of the Finance Parties shall be bound to
enquire as to the use or application of the proceeds of any Utilisation, nor
shall any of them be responsible for or for the consequences of such use or
application.
4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO FIRST UTILISATION The obligations of each Finance
Party to Services and each Borrower under this Agreement with respect to the
making of any Utilisations hereunder are subject to the conditions precedent
that on or before the date of the first Utilisation hereunder:
(a) DOCUMENTS The Facility Agent shall have received all of the documents
listed in Part I of the Seventh Schedule in the agreed form and each
of the documents referred to in Part I of the Seventh Schedule as
being certified shall be certified by or on behalf of the relevant
Obligor as being a true and complete copy, and in full force and
effect as at the date such document is required to be delivered.
(b) EQUITY
(i) the Open Market Shares have been transferred to and are
unconditionally owned by PA;
(ii) an aggregate amount of at least the Sterling amount specified in
the letter between the Facility Agent and Services of even date
(or the Fixed Dollar Equivalent of such amount to the extent not
deposited in Sterling) (less an amount equal to the aggregate of
all sums expended in the purchase of Open Market Shares) has been
deposited into the Offer Account and (save to the extent already
so applied) is standing to the credit of the Offer Account and
available for application in financing the acquisition of Shares
pursuant to the Offer and by way of open market purchase after
the Unconditional Date, and whilst the Offer is continuing.
As to satisfaction of the condition in paragraph (i) above, the
certificate of an Authorised Signatory of Services shall be prima
facie evidence.
(c) OFFER The Offer shall have become or been declared unconditional in
all respects without
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PA having declared the Offer or permitted the Offer to become so
unconditional in circumstances where any provision of Clause 22 (other
than Clause 22(a)(i)(C), (ii) or (iii) or 22(d)) is breached thereby.
(d) HEDGING PA and the Facility Agent shall have agreed in writing (in
the form of a letter) the extent and type of the interest rate hedging
arrangements the terms of which are to be documented by the Hedging
Documents.
4.2 FURTHER CONDITIONS PRECEDENT Subject to the provisions of Clauses 24.3
and 24.4, the obligations of each Finance Party with respect to the making of
any Utilisation the proceeds of which are to be applied for any of the purposes
set out in:
(A) Clause 3.1(a)(i) (other than 3.1(a)(i)(A)(II)); and
(B) 3.1(a)(ii)(A) and 3.1(a)(iii)(C),
are subject to the further conditions precedent that both at the date of the
Request for and at the Utilisation Date for such Utilisation:
(a) (i) no breach of Clause 22 (other than Clause 22(a)(i)(C), (ii) or
(iii) or (d)) shall have occurred and be continuing which has
not been waived by a Waiver Letter; and
(ii) all of the representations and warranties in Clause 20.1 (a),
(b), (c), d(i) and (ii), (n) and (p) are true and correct in
all material respects (as if then made) ignoring any
references to Subsidiaries (other than PA), TEG, its
Subsidiaries and their respective businesses and assets; and
(iii) no Event of Default falling within any of paragraphs (f) to
(l) inclusive of Clause 24.1 (other than (k) or, insofar as it
relates to (k), (l)) has occurred and is continuing with
respect to Services, Finance or PA and has not been waived by
a Waiver Letter; and
(b) the Facility Agent (acting reasonably) is satisfied that with respect
to the making of a Tranche 1A Advance an advance in an amount at least
equal to the Matching Amount with respect thereto has been or will be
advanced by Powercoal to PA on the terms of the PA Note on or prior to
the making of such Tranche 1A Advance.
4.3 FURTHER CONDITIONS PRECEDENT Subject to the provisions of Clause 24.3 and
24.4 the obligations of the Finance Parties in respect of each Utilisation
(other than one to which the conditions in Clause 4.2 apply) are subject to the
further conditions precedent that both at the date of the Request for and at the
Utilisation Date for such Utilisation:
(a) other than in respect of each Utilisation by the drawing of one or
more Tranche 2 Advances by a Borrower to the extent that the Original
Sterling Amount thereof does not
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exceed the Original Sterling Amount of one or more Tranche 2 Advances
made in the same currency to such Borrower which is or are repaid on
such Utilisation Date by such Borrower (a "ROLLOVER ADVANCE"), no
Event of Default shall have occurred and be continuing which has been
declared pursuant to Clause 24.2 and not been waived; and
(b) (other than in respect of a Rollover Advance) (i) no Default shall
have occurred and be continuing or would result from the making of
such Utilisation which has not been waived pursuant to a Waiver
Letter, and (ii) the representations and warranties in Clause 20.1 of
this Agreement to be repeated on those dates are correct in all
material respects and will be correct in all material respects
immediately after the making of such Utilisation except to any extent
waived pursuant to a Waiver Letter.
5. ADVANCES AND DOCUMENTARY CREDITS
5.1 DELIVERY OF REQUEST
(a) Subject to the terms of this Agreement, PA or (upon its accession as a
Borrower pursuant to a Borrower Accession Agreement) any Borrower may
request a Utilisation by delivering to the Facility Agent by facsimile
transmission (provided that the original is sent to the Facility
Agent) or letter, (in the case of a Documentary Credit or an Advance
to be denominated in Sterling) prior to 10.00 a.m. on the Business Day
before the proposed Utilisation Date or (in the case of a Documentary
Credit or an Advance to be denominated in an Optional Currency) prior
to 10.00 a.m. on the third Business Day before the proposed
Utilisation Date (or in any such case at such later time and/or date
as may be agreed by the Facility Agent in writing), a duly completed
Request.
(b) No Request for the issuance of a Documentary Credit may be delivered
to the Facility Agent until the form of that Documentary Credit has
been agreed by the Facility Agent, Services, the beneficiary and
either the LC Bank or (in the case of a Documentary Credit to be
issued severally by the Banks) the Banks. No request for the issuance
of a Documentary Credit without a fixed tenor and fixed amount may be
made. Documentary Credits shall only be issued subject to and in
accordance with all applicable laws and regulations and the Uniform
Customs and Practice as referred to in Clause 5.5(b), as in force from
time to time.
5.2 FORM OF REQUEST Each Request shall specify:
(a) the Borrower in relation thereto (being, in the case of a Tranche 1A
Advance to be applied in financing the acquisition of Shares, PA and,
in the case of any other Tranche 1 Advance, PA, TEG or any of TEG's
Subsidiaries (upon (in the case of TEG or any of its Subsidiaries) it
becoming a Borrower pursuant to a Borrower Accession Agreement) or, in
the case of any Tranche 2 Utilisation, any Borrower);
(b) whether the Utilisation is a Tranche 1A Advance, a Tranche 1B Advance,
a Tranche 2 Advance or a Tranche 2 Utilisation by way of Documentary
Credit (and, if in the case of
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a Utilisation by way of Documentary Credit, the type of Documentary
Credit to be issued);
(c) the proposed Utilisation Date, which shall be a Business Day falling
during the applicable Availability Period and complying with any other
applicable provisions of this Agreement;
(d) in the case of a Tranche 2 Utilisation, the currency of the Advance or
Documentary Credit requested (being, in each case, Sterling or an
Optional Currency);
(e) the principal amount of the Utilisation (the "REQUESTED AMOUNT")
being, in the case of a Tranche 1 Advance or a Tranche 2 Advance to be
denominated in Sterling an amount of not less than L10,000,000 in the
case of a Tranche 1 Advance or L20,000,000 in the case of a Tranche 2
Advance to be denominated in Sterling and in the case of a Tranche 2
Utilisation to be denominated in an Optional Currency, an amount equal
to not less than the Sterling Equivalent of L20,000,000, and in the
case of a Tranche 2 Utilisation by way of Letter of Credit, a Sterling
Equivalent of at least L2,000,000, provided always that no Request
Amount for a Tranche 2 Utilisation may exceed the then Available
Facility Amount;
(f) the duration of its (or, in the case of a Tranche 1 Advance, its
first) Interest Period, in the manner required by and subject to the
terms of Clause 10;
(g) in the case of a Documentary Credit, the name and address of the
beneficiary, the beneficiary's receiving bank account and reasonable
details of the liabilities payment of which is to be assured by the
Documentary Credit, as well as the expiry date of the Documentary
Credit (which shall be less than one year from the Utilisation Date
therefor unless the Facility Agent shall otherwise agree); and
(h) in the case of an Advance (other than a Rollover Advance), unless
previously notified to the Facility Agent in writing and not revoked,
the details of the bank and account to which the proceeds of the
proposed Advance are to be made available.
Subject to the terms of this Agreement, each Request shall be irrevocable
and the Borrower named in the same shall be bound to borrow an Advance in
accordance with such Request. The Facility Agent shall promptly notify
each Bank of each Request.
5.3 PARTICIPATIONS IN ADVANCES Subject to the terms of this Agreement each
Bank shall, on the date specified in any Request for an Advance, make available
to the Facility Agent for the account of the relevant Borrower the amount of its
participation in that Advance in the proportion (applied to the Requested
Amount) which its Commitment bearing the same Tranche designation as such
Advance bears to the aggregate amount of the Commitments having such
designation. All such amounts shall be made available to the Facility Agent in
accordance with Clause 12.1 for disbursement to or to the order of the relevant
Borrower in accordance with the provisions of this Agreement.
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5.4 ISSUE OF DOCUMENTARY CREDITS
(a) Subject to the terms of this Agreement, on the proposed Utilisation
Date, either the LC Bank or the Facility Agent (on behalf of all the
Banks severally in proportion to their Tranche 2 Commitments) will
issue, in the form approved (in accordance with Clause 5.1(b)), a
Documentary Credit as specified in the relevant Request by delivering
the same to or to the order of the beneficiary Provided that where the
Facility Agent is to issue the LC on behalf of all the Banks
severally, Goldman Sachs International Bank (or any Affiliate thereof)
may arrange for another Bank (or any Affiliate of any Bank) to fulfil
its several obligations in respect thereof (and such arrangement shall
constitute a utilisation of the Tranche 2 Commitment of Goldman Sachs
International Bank (or Affiliate) as if it had undertaken the
obligations itself provided further if arrangements cannot be made
with another Bank (or Affiliate), Goldman Sachs International Bank (or
an Affiliate) may make an Advance of a corresponding amount in place
of such several Documentary Credit obligation.
(b) The LC Bank shall not be obliged to issue a Documentary Credit if it
has not approved the identity of any assignee or transferee of or
substitute for any Bank with respect to its Tranche 2 Commitment or
any part thereof, in which case such Documentary Credit will be issued
by the Facility Agent on behalf of the Banks severally in proportion
to their Tranche 2 Commitments.
5.5 COUNTER-INDEMNITY FROM ACCOUNT PARTY
(a) Without prejudice to Clause 5.6, the Borrower for whose account any
Documentary Credit is opened or issued (the "ACCOUNT PARTY") will
indemnify and hold harmless and keep each Finance Party indemnified
and held harmless from and against all liabilities, losses, damages,
claims and costs which such Finance Party may suffer or incur in
connection with such Documentary Credit and any payment made pursuant
to it, except to the extent that any such liability, loss, damage,
claim or cost results from such Finance Party's negligence or wilful
misconduct.
(b) Each Account Party irrevocably directs each Finance Party to pay
without further confirmation or investigation from or by it any demand
appearing or purporting to be validly made pursuant to any Documentary
Credit. Where any Documentary Credit calls for certificates or other
documents each Finance Party may assume, without investigation, that
the certificates or documents tendered are duly signed by the person
by whom they appear to be signed and are genuine and correct. Without
prejudice to the rights under the Uniform Customs and Practice for
Documentary Credits (1993 Revision) (ICC Publication No. 500) (which
shall apply in relation to all Documentary Credits issued under this
Agreement), the relevant Account Party agrees to reimburse each
Finance Party forthwith on written demand for any amounts paid by such
Finance Party pursuant to any such demand in the currency paid by such
Finance Party, together with interest on such amounts at a rate
determined in accordance with Clause 11.3 from the date such
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amounts are paid by such Finance Party until reimbursement as
aforesaid.
(c) The obligations of each Account Party under this Clause 5.5 shall not
be impaired by (a) any waiver or time granted to or by any Finance
Party, (b) any release or dealings with any rights or security by any
Finance Party (including, without limitation, under the Finance
Documents), (c) any invalidity of any Documentary Credit, or (d) any
other circumstances which might impair such obligations.
(d) So long as any amount is or is capable of becoming outstanding by any
Obligor to any of the Finance Parties under any of the Finance
Documents or any Commitment is in force, no Account Party shall by
virtue of any payment made by it pursuant to this Clause 5.5 or by
virtue of any realisation of security made in respect of its
obligations under this Clause 5.5, claim or exercise any right of
subrogation, contribution or indemnity against any member of the
Services Group in competition with any Finance Party.
5.6 BANKS' COUNTER-GUARANTEE
(a) Each Bank as primary obligor guarantees to the LC Bank, on demand by
the LC Bank from time to time, the due performance by each Account
Party in relation to each Documentary Credit issued by the LC Bank, of
its obligations under Clause 5.5, provided that the liability of each
Bank in relation to any particular default in performance of such
obligations by such Account Party shall not exceed such Bank's pro
rata share (being the proportion which its Tranche 2 Commitment bears
to the aggregate of the Tranche 2 Commitments at the date the
Documentary Credit was issued) of the amount in default.
(b) The LC Bank shall promptly notify the Facility Agent and Services of
any demand served on it under any Documentary Credit and each payment
made pursuant thereto and of any failure by any Account Party in
performing its obligations under Clause 5.5.
(c) The guarantees of each of the Banks contained in this Clause 5.6 shall
be as supplemented by the terms set out in the Eighth Schedule. The
provisions of Clauses 12.1, 13.2 and 13.3 shall apply, mutatis
mutandis, in relation to payments to be made by each Bank to the LC
Bank pursuant to this Clause.
(d) Each Obligor agrees that, to the extent that any Bank makes any
payment to the LC Bank pursuant to this Clause 5.6, that Bank will
thereupon be subrogated to any rights the LC Bank may then have
against any Obligor in respect of the amount so paid by that Bank, and
each Account Party will indemnify such Bank in respect of the amount
so paid by that Bank. Each Account Party shall also indemnify that
Bank against all costs and expenses incurred by that Bank in
recovering or attempting to recover any amount pursuant to its rights
of subrogation referred to above.
5.7 LC BANK'S POSITION To the extent not inconsistent with the LC Bank acting
as principal and not as agent in issuing and agreeing to issue any Documentary
Credit under this Agreement, the provisions of Clause 26 excluding or
restricting liability and responsibility shall apply mutatis mutandis for the
benefit
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of the LC Bank in its relations with the Banks and each Account Party.
5.8 CHANGE OF LC BANK
(a) The Facility Agent, with the prior approval of Services and the
Majority Banks, may designate any Bank (with such Bank's consent) as a
replacement LC Bank, but not with respect to Documentary Credits
already issued by an existing LC Bank.
(b) The LC Bank may resign at any time on giving not less than 3 months'
prior written notice to the Facility Agent and Services to expire on
or after the first anniversary of the Unconditional Date if (i)
Services and the Majority Banks consent, or (ii) there is in the
reasonable opinion of the LC Bank an actual or potential conflict of
interest in it continuing to act as LC Bank, or (iii) it ceases to
have a Commitment in effect.
(c) If the LC Bank does so resign and no replacement is so appointed, any
Documentary Credit to be issued in accordance with the terms of this
Agreement will be issued by the Facility Agent on behalf of the Banks
severally in proportion to their respective Tranche 2 Commitments as
in effect at the date of issue.
6. OPTIONAL CURRENCIES
6.1 SELECTION OF OPTIONAL CURRENCY The relevant Borrower shall, in relation to
any Tranche 2 Advance or Documentary Credit in the Request therefor, specify an
Optional Currency in which it wishes that Advance or Documentary Credit to be
denominated and the Facility Agent shall promptly notify the Banks of that
notice.
6.2 NOTIFICATION OF AGENT'S SPOT RATE OF EXCHANGE If a Tranche 2 Advance or
Documentary Credit is to be denominated or issued in an Optional Currency, the
Facility Agent shall promptly notify the relevant Borrower and the Banks of the
applicable Agent's Spot Rate of Exchange, the Optional Currency amount and the
Sterling Equivalent of such Tranche 2 Advance as soon as practicable after they
are ascertained.
6.3 DETERMINATION OF CURRENCY If a Bank (the "DETERMINING BANK") gives notice
to the Agent (which shall promptly notify the relevant Borrower) before 10.00
a.m. at least two Business Days prior to the Utilisation Date relative to any
Tranche 2 Advance to be denominated in an Optional Currency certifying in that
notice that by reason of circumstances affecting the London interbank
eurocurrency market deposits in the currency specified in the relevant Request
of an amount of not less than its participation in such Advance will not be
readily available to it in the London interbank eurocurrency market for the (or
the first) Interest Period relative to such Advance, such certification being
conclusive against the relevant Borrower, then the relevant Borrower may by
notice to the Facility Agent before 11.00 a.m. on the second Business Day prior
to the proposed Utilisation Date specify that the Determining Bank's portion of
such Tranche 2 Advance shall be denominated in Sterling (if not initially
requested) or another Optional Currency, and in the absence of such notice from
the relevant Borrower by such time the Determining Bank's portion of such
Advance shall be denominated in Sterling. Such changes shall be deemed to be
made to the definition of LIBOR as the Facility Agent may reasonably determine
to be
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necessary for the purpose of determining LIBOR to apply to the Determining
Bank's portion of such Advance and notify to the relevant Borrower and the
Banks.
6.4 REVOCATION OF CURRENCY If prior to 10.30 a.m. on the second Business Day
prior to the proposed Utilisation Date there shall occur any changes in national
or international, financial, political or economic conditions, currency
availability, currency exchange rates or exchange controls which, in the
reasonable opinion (which shall be conclusive) of the Facility Agent after
consultation with the Reference Banks, render it impracticable for any Advance
to be denominated in the Optional Currency concerned, the Facility Agent shall
give notice to the relevant Borrower to that effect before 11.00 a.m. two
Business Days prior to the Utilisation Date for the making of that Advance. In
that event the relevant Advance shall be denominated in Sterling unless the
relevant Borrower, the Facility Agent and the Banks agree that it shall be
denominated in another Optional Currency (in which case, for the purpose only of
determining LIBOR to apply to that Advance, such changes shall be deemed to be
made to the definition of LIBOR as the Facility Agent may reasonably determine
and notify to the relevant Borrower and the Banks).
6.5 AMOUNT Subject as otherwise provided in this Agreement if a Tranche 2
Advance is to be made in an Optional Currency, each Bank will make available to
the Facility Agent an amount in that Optional Currency equal to its
participation in such Requested Amount in the proportion which its Commitment
bears to the Total Commitments.
7. CANCELLATION OF COMMITMENTS
7.1 TRANCHE 1 COMMITMENTS Any part of the Tranche 1 Commitments not borrowed
hereunder shall be cancelled automatically at the close of business in London on
the expiry of the Tranche 1 Availability Period.
7.2 TRANCHE 2 COMMITMENTS The Tranche 2 Commitments shall be cancelled at
close of business in London on the last day of the Tranche 2 Availability
Period.
7.3 VOLUNTARY CANCELLATION Services may, on giving not less than three
Business Days' prior written notice to the Facility Agent (which shall promptly
give notice of the same to the Banks) at any time cancel or reduce the Tranche 1
Commitments or the Tranche 2 Commitments in whole or in part (but, if in part,
by a minimum of L20,000,000 and in whole multiples of L2,500,000 in each case)
without incurring any penalty or other cost, provided that such cancellation or
reduction may only be effected to the extent of the amount of the Tranche 1
Commitments or Tranche 2 Commitments (as the case may be) undrawn on the date
therefor taking into account any repayment or prepayment of any Utilisation due
to be made on that date. Any such notice by Services shall be irrevocable and
shall specify the date upon which the reduction is to become effective and the
amount of the reduction.
7.4 REDUCTION CONSEQUENT ON REPAYMENT OR PREPAYMENT
(a) Subject to Clause 7.4(b), the Tranche 1 Commitments shall be reduced
and cancelled (such reduction being applied pro rata as between the
Tranche 1 Commitments of all of the Banks), by the amount of any
repayment or prepayment of any Tranche 1 Advance made pursuant to any
provision of this Agreement.
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(b) Each Bank's Tranche 1 Commitment shall be reduced and cancelled by the
amount of any prepayment of that Bank's participation in any Tranche 1
Advance made pursuant to any of Clauses 13.6, 14.5, 15.2 or 16.
7.5 LIMITATIONS Save as expressly provided in this Agreement any amount of the
Commitments cancelled or otherwise extinguished under this Agreement may not be
reinstated. Save as expressly provided in this Agreement none of the
Commitments may be reduced or cancelled under this Agreement.
8. REPAYMENT
8.1 REPAYMENT OF THE TRANCHE 1 ADVANCES Each Borrower, subject to the
application of Clause 9, shall repay the Tranche 1 Advances made to it in full
on the Final Repayment Date.
8.2 REPAYMENT OF THE TRANCHE 2 UTILISATIONS Each Borrower shall repay the full
amount of each Tranche 2 Advance made to it on the last day of the Interest
Period relating to that Tranche 2 Advance, provided always that each Tranche 2
Utilisation then outstanding shall be repaid in full on the Final Repayment
Date.
9. PREPAYMENT
9.1 PROHIBITION No Borrower may prepay all or any part of any Utilisation
except as expressly provided in this Agreement.
9.2 VOLUNTARY PREPAYMENT
(a) Subject to Clause 9.2(b), Services, on giving not less than five
Business Days' prior written notice to the Facility Agent (which shall
promptly give notice of the same to the Banks) specifying, inter alia,
the amount and date for prepayment and identifying the Utilisation
concerned, may procure that any Utilisation is prepaid at any time in
whole or in part by the Borrower by which it was made, provided that
any prepayment shall be (if in part) in the case of a Tranche 1
Advance or a Tranche 2 Utilisation of an amount which is at least
L20,000,000 (or its equivalent in other currencies, in the case of a
Tranche 2 Utilisation) (and, if more, a whole multiple of L2,500,000).
(b) Any such prepayment and any prepayment pursuant to Clause 9.3 shall be
applied pro rata against the participations of the Banks in the
Utilisation prepaid.
9.3 MANDATORY PREPAYMENT FROM NET PROCEEDS Subject to Clause 9.4 below, if:
(a) any of the assets, business or undertaking of any member of the
Services Group are disposed of; or
(b) any insurance proceeds are recovered by a member of the Group which
represent Net Proceeds,
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(c) any funds are received by Services which represent the proceeds of an
equity subscription in it (other than any equity subscription made by
EnergyCo to the extent permitted by Clause 21.6(e)); or
(d) prior to the Asset Split and if thereafter on the date of receipt of
funds: (i) the amount of the Total Commitments exceeds 75% of the
amount of the Total Commitments as at the date hereof, or (ii) PA does
not have senior long term debt ratings of BBB+ or better (from
Standard & Poors Ratings Group) and Baa1 or better (from Moody's
Investor Services Inc.), any funds are received by any member of the
Services Group which represent the proceeds of any Hybrid Preferred
Securities,
subject to the proviso set out below unless the Majority Banks shall otherwise
consent in writing, Services shall apply, or shall procure that there shall be
applied, promptly an amount equal to the Net Proceeds arising from the disposal
or recovery or subscription in or towards prepayment of the Utilisations in
accordance with this Clause 9, Provided that the foregoing shall not apply:
(i) to Net Proceeds arising from a disposal of trading stock or a
supply of services, gas and/or electricity, in each case in the
ordinary course of trading; or
(ii) to Net Proceeds arising from a disposal of assets not constituting
trading stock which are to be replaced by other assets being
acquired for use for like purposes and are so replaced within three
months of the date of such disposal (save to the extent the Net
Proceeds exceed the acquisition cost of those other assets); or
(iii) to Net Proceeds arising from any disposal permitted by Clause 21.3
(a) or (c)(ii)(A), (D), (E), (G), (I) or (J); or
(iv) to Net Proceeds arising from any insurance recovery where Net
Proceeds arising out of the same or related claims do not exceed
L25,000,000 in the aggregate and/or (with respect only to any
excess) Services confirms such excess Net Proceeds are to be
applied in the reinstatement of the asset in respect of which such
recovery was made or purchasing a like replacement asset; or
(v) to Net Proceeds arising from a transfer or other disposal of assets
by a Licenceholder pursuant to the securitisation of electricity
receivables; or
(vi) to Net Proceeds arising after the Unconditional Date of any
sale-and-leaseback arrangements up to a maximum aggregate amount of
L75,000,000 (or its equivalent in other currencies); or
(vii) to Net Proceeds arising as a result of any disposal referred to in
the Structure Memorandum and carried out as contemplated therein;
or
(viii) to Net Proceeds arising from disposals (other than those falling
within paragraphs (i) to
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(vii) above and (ix) below) made during any annual Accounting
Period the aggregate consideration for which (taken together) does
not exceed an amount equal to ten per cent. (10%) of the
consolidated gross assets of the PA Group shown in the audited
Accounts of the PA Group most recently delivered to the Facility
Agent pursuant to Clause 21.2(a)(i)(I) (or, at any time prior to
the delivery of such Accounts, of the TEG Group shown in the Base
Financial Statements) provided and to the extent that such Net
Proceeds are applied within one year of receipt in or towards
acquiring other assets to be used in the course of the PA Group's
business without any breach of Clause 21.10(a); or
(ix) to 50% of the Net Proceeds arising from any other disposals which
do not fall to be dealt with under paragraphs (i) to (viii) above
provided and to the extent that such 50% portion of the Net
Proceeds is applied within one year of receipt in or towards
acquiring other assets to be used in the course of the PA Group's
business carried on without breaching Clause 21.10(a).
9.4 AVAILABILITY OF NET PROCEEDS Where:
(i) applicable law and/or the terms of a licence of a member of the PA
Group restrict the ability of a member of the PA Group to make Net
Proceeds available;
(ii) a member of the PA Group is prohibited by section 151 et seq.
Companies Act 1985 from applying Net Proceeds; or
(iii) Net Proceeds cannot be remitted to any of Australia, USA or United
Kingdom,
in each case for the purpose of funding any prepayment required pursuant to
Clause 9.3 consequent on the receipt of those Net Proceeds, then such prepayment
shall only be required to be made when and to the extent that those Net Proceeds
can be made available for such purpose without breaking the terms of such
licence or such law. Services will and will procure that the relevant member of
the PA Group will use all reasonable endeavours to obtain as soon as reasonably
practicable any consent or complete any procedure which may be required under
the terms of such licence or such law (as the case may be) in order for such Net
Proceeds to be so made available.
9.5 GENERAL PROVISIONS RELATING TO PREPAYMENT
(a) Any notice of prepayment given under this Agreement shall be
irrevocable, and Services or the Borrower named in such notice shall
be bound to prepay (or, in the case of Services, to procure
prepayment) in accordance with such notice.
(b) Amounts repaid and prepaid in respect of any Tranche 1 Advance under
any provision of this Agreement may not be reborrowed hereunder.
(c) Amounts repaid or prepaid pursuant to Clause 8.2 or 9.2 in respect of
Tranche 2 Utilisations may, prior to the Final Repayment Date but
subject to the terms of this Agreement, be redrawn as Tranche 2
Utilisations. Any amounts repaid or prepaid in
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respect of Tranche 2 Utilisations under any other provision of this
Agreement may not be redrawn.
(d) Any prepayment of any Advance under any provision of this Agreement
shall be made together with interest accrued on the amount prepaid,
but (subject to Clause 25.2(c)), without premium or penalty.
9.6 ORDER OF APPLICATION The amount required to be applied in prepayment
pursuant to Clauses 9.3 and 9.4 shall be applied as follows:
(a) first, in prepayment of the Tranche 1 Utilisations until repaid or
prepaid in full;
(b) second, against the Tranche 2 Advances (pro rata) in prepayment
thereof (and cancellation of the corresponding amount of the Tranche 2
Commitments); and
(c) third, against the Tranche 2 Utilisations not otherwise prepaid in
accordance with (b) above, in prepayment thereof (and cancellation of
the corresponding amount of the Tranche 2 Commitments).
9.7 DATE OF PREPAYMENT
(a) If any Obligor becomes obliged to prepay or procure the prepayment of
any amount under Clauses 9.3 or 9.4 the prepayment shall be made on
the next Interest Date relating to the Advance to be repaid (or
forthwith in the case of an outstanding Documentary Credit) and
pending such application shall be deposited in an interest bearing
blocked account (the "BLOCKED ACCOUNT") in the name of the relevant
Borrower held with the Facility Agent, unless Services by not less
than 5 Business Days' written notice to the Facility Agent has
specified that an immediate prepayment is to be made in which case the
prepayment shall be made on or within 5 Business Days after the date
of such recovery, disposal, claim, sale or subscription, as the case
may be.
(b) So long as any Utilisation remains outstanding or any of the
Commitments are available for utilisation (whether or not subject to
conditions precedent), no amount shall be withdrawn from any Blocked
Account except for immediate application in making any required
prepayment or accelerated repayment or as provided in (c) below.
(c) The Facility Agent or the relevant Obligor shall be entitled (but not
obliged) to apply the whole or any part of the sums standing to the
credit of any Blocked Account in the name of any Obligor in or towards
payment of any unpaid sums at any time due from the Obligor under this
Agreement.
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10. INTEREST PERIODS
10.1 SELECTION AND AGREEMENT The relevant Borrower shall give notice to the
Facility Agent not later than (in the case of any Advance denominated in
Sterling) 10.00 a.m. on the Business Day prior to, or (in the case of any
Advance denominated in an Optional Currency) three Business Days prior to the
commencement of each (or the) Interest Period relative to any Advance made
hereunder (or in the Request therefor in the case of the first Interest Period
relative to any Tranche 1 Advance or the Interest Period in the case of any
Tranche 2 Advance) specifying the duration of such Interest Period, which in the
case of any Tranche 1 Advance or Tranche 2 Advance shall be of one, two, three
or six months, or in each case such other duration as may be agreed (or deemed
agreed in accordance with Clause 10.4(c)) by the Facility Agent after
consultation with the Reference Banks or as may be required in order to comply
with Clause 10.3 (provided that if such duration is over six months then the
Facility Agent may only agree with the unanimous consent of the Banks
participating in such Advance and Provided further that with respect to any
Interest Period commencing prior to the earlier of (i) the date on which the
Facility Agent notifies Services that the general syndication of the Facilities
has been completed (which the Facility Agent shall do promptly upon it being so
completed) and (ii) six months of the Unconditional Date, such Interest Periods
shall, subject to Clause 10.4(c) be of one month's duration unless the Facility
Agent and Services otherwise agree). If the relevant Borrower fails to specify
the duration of an Interest Period for any Advance the duration of that Interest
Period shall be three months subject as otherwise required in order to comply
with any other provision of this Agreement.
10.2 SPLITTING Subject to Clause 10.4(d), the relevant Borrower may, in any
notice given pursuant to Clause 10.1 (or in any Request therefor) split any
Tranche 1 Advance into any number of separate Tranche 1 Advances (each having an
Interest Period of a different duration, separately designated in such notice or
Request), provided that each such separate Advance must be of a minimum amount
of L20,000,000. Each Advance resulting from any such splitting shall continue
as a separate Advance unless and until consolidated with another Advance having
the same Tranche designation.
10.3 RESTRICTIONS ON SELECTION
(a) Each Borrower shall use its reasonable endeavours to ensure the
selection by it of the duration of Interest Periods pursuant to Clause
10.1 so that the Final Repayment Date will also be an Interest Date
relative to all outstanding Advances.
(b) If it appears to the Facility Agent in good faith that the
requirements of paragraph (a) above will not be met by a Borrower's
selection of any Interest Period, the Facility Agent, on behalf of and
after consultation with that Borrower, may (but shall not be obliged
to) select a different duration for such Interest Period (which shall
prevail over that selected by that Borrower) in order to facilitate
the meeting of such requirements.
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10.4 DURATION AND CONSOLIDATION
(a) The first (or the) Interest Period relative to each Advance shall
commence on its Utilisation Date and end on the last day of the period
selected or provided for in accordance with this Clause. Any
subsequent Interest Periods in relation to a Tranche 1 Advance shall
commence on the expiry of the immediately preceding Interest Period
relating thereto and end on the last day of the period so selected or
provided therefor. If any Interest Period for any Advance would
otherwise end on a day which is not a Business Day, such Interest
Period shall end instead on the next Business Day.
(b) If any Interest Period relating to any Tranche 1 Advance expires on an
Interest Date relative to (respectively) another Tranche 1 Advance
then, with effect from such Interest Date, such Tranche 1 Advances,
subject to Clauses 10.1, 10.2 and 10.3, shall be aggregated and
consolidated to form (respectively) a single Tranche 1 Advance.
(c) Any Borrower in its Request for a Tranche 1 Advance shall be entitled
to specify that the first Interest Period in respect of such Tranche 1
Advance shall be of a period (the "SHORT PERIOD") other than one, two,
three or six months (but in any event a period greater than 14 days
but not exceeding six months) and where the last day of the period
selected is an Interest Date relative to another Tranche 1 Advance
then the Facility Agent and the Reference Banks shall be deemed to
have agreed that the first Interest Period in respect of such Advance
shall be the Short Period.
(d) PA shall use its reasonable endeavours to procure (i) that the Tranche
1 Advances shall be aggregated and consolidated to form not more than
20 Tranche 1A Advances and five Tranche 1B Advances outstanding at any
one time; and (ii) that until the earlier of the date 6 months after
the date of the first Utilisation and the conclusion of general
syndication, Interest Periods for all Advances shall be selected so as
to facilitate so far as possible syndication and the effecting of all
transfers pursuant thereto on Interest Dates relative to the
outstanding Advances.
10.5 NOTIFICATION The Facility Agent will notify the relevant Banks and
Services and (if different) the relevant Borrower of the duration of each
Interest Period relating to each Advance promptly after ascertaining the same.
11. INTEREST
11.1 RATE The rate of interest applicable to each Advance for each (or the)
Interest Period relative to it shall be the rate per annum determined by the
Facility Agent to be the aggregate of:
(a) the Margin;
(b) LIBOR relative to such Advance for such Interest Period; and
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(c) the Additional Cost, if any, relative to such Advance from time to
time during such Interest Period.
11.2 DUE DATES Save as otherwise provided herein, interest accrued on each
Advance for each Interest Period relative thereto shall be paid by the Borrower
in respect of such Advance in the currency of the Advance relative thereto in
arrear on the last day of such Interest Period and also, in the case of an
Interest Period of a duration exceeding six months, on the last day of each
consecutive period of six months from the first day of such Interest Period.
11.3 DEFAULT INTEREST If any Obligor fails to pay any amount payable by it
under this Agreement on the due date therefor, such Obligor, on demand by the
Facility Agent from time to time, shall pay interest on such overdue amount
(including overdue default interest) in the currency in which such overdue
amount is for the time being denominated from the due date up to the date of
actual payment, both before and after judgment, at a rate determined by the
Facility Agent to be one per cent. (1%) per annum above that which would be
payable if such overdue amount constituted, during the period of non-payment
thereof, an Advance made to such Obligor in the same currency as the overdue
amount for successive Interest Periods of such duration of up to three months as
the Facility Agent, after consultation with Services to the extent practicable
in the circumstances, may designate from time to time. Such rate shall be
determined or redetermined on the first Business Day of each such Interest
Period. In calculating the amount of default interest due from the Guarantor in
respect of any overdue amount due from any Borrower, the amount of default
interest accrued due from such Borrower and the amount of overdue default
interest accrued due from the Guarantor shall not be double counted.
11.4 BANK BASIS Interest shall accrue from day to day, and be computed on the
basis of a year of 365 days (or, where customary in the relevant financial
market, 360 days in respect of interest on Advances made in an Optional
Currency) for the actual number of days elapsed.
11.5 DETERMINATION CONCLUSIVE; NOTIFICATION Each determination of a rate of
interest by the Facility Agent under this Agreement shall, in the absence of
manifest error, be conclusive and shall be promptly notified to Services, the
relevant Borrower and the Banks.
12. PAYMENTS
12.1 FUNDS, PLACE AND CURRENCY Payment under this Agreement to the Facility
Agent shall be made in freely transferable funds for same day value on the due
date at such times and in such manner as the Facility Agent may specify to the
party concerned as being customary at the time for the settlement of
transactions in the currency in which the amount concerned is denominated to
such account of the Facility Agent at such bank or office as the Facility Agent
shall designate by at least three Business Days' notice to the party liable.
12.2 APPLICATION Each payment received by the Facility Agent for the account of
another person pursuant to Clause 12.1 shall:
(a) in the case of a payment received for the account of any Borrower, be
made available by the Facility Agent to that Borrower by application,
on the date and in the funds of receipt:
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(i) first, in or towards payment of any amounts then due and payable
(and unpaid) by that Borrower under this Agreement; and
(ii) second, in payment to such account as that Borrower shall have
properly designated for the purpose in the relevant Request or
otherwise in writing; and
(b) in the case of any other payment, be made available by the Facility
Agent to the person for whose account the payment was received (in the
case of a Bank, for the account of its Facility Office) on the date
and in the currency and funds of receipt to such account of the person
with the office or bank in the country of the currency concerned as
that person shall have previously notified to the Facility Agent for
the purposes of this Agreement.
The Facility Agent (or the Security Agent in the case of monies received
pursuant to the Security Documents) shall promptly distribute monies received
for the account of the Banks among the Banks pro rata to their respective
entitlements and in the funds and currency of receipt, provided that the
Facility Agent or Security Agent (as the case may be) may deduct therefrom any
amount due to the Facility Agent pursuant to Clause 12.4 or 31.2.
12.3 CURRENCY
(a) Interest accrued under this Agreement shall be payable in the currency
in which the relevant amount in respect of which it has accrued was
denominated during the period of accrual.
(b) The principal of each Advance shall be repaid or prepaid in the
currency in which it is denominated.
12.4 RECOVERY OF PAYMENTS Unless the Facility Agent shall have received notice
from a Bank or Borrower not later than (in the case of any Sterling amount) 3.00
p.m. on the Business Day prior to, or (in the case of any amount denominated in
an Optional Currency) 11.00 a.m. on the second Business Day prior to the date
upon which such Bank or Borrower (the "PARTY LIABLE") is to pay an amount to the
Facility Agent for transfer to any Borrower or any Bank respectively (the
"PAYEE") that the Party Liable does not intend to make that amount available to
the Facility Agent on the due date, the Facility Agent may assume that the Party
Liable has paid that amount to the Facility Agent on that date in accordance
with this Agreement. In reliance upon that assumption, the Facility Agent may
(but shall not be obliged to) make available to the Payee(s) a corresponding
sum. If that amount is not in fact so made available to the Facility Agent, the
Payee(s) shall forthwith on demand repay that sum to the Facility Agent together
with interest on such sum until its repayment at a rate determined by the
Facility Agent to reflect its cost of funds incurred in making available the
corresponding amount to that Payee(s) (any such determination to be conclusive
in the absence of manifest error). The Facility Agent may make a demand on a
Borrower as Payee only if and to the extent that the Facility Agent has demanded
the appropriate funds from the relevant Bank and those funds have not been paid
by that Bank forthwith after the demand. The provisions of this Clause are
without prejudice to any rights the Facility Agent and the Payee may have
against the Party Liable.
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12.5 NON-BUSINESS DAYS Whenever any payment under any Finance Document shall
become due on a day which is not a Business Day, the due date for that payment
shall be extended to the next Business Day. During any such extension of the
due date for payment of any principal, interest shall be payable on such
principal at the rate payable on the original due date.
12.6 APPROPRIATIONS Other than in the case of prepayment to a specific Bank
permitted by the terms of this Agreement, in the case of a partial payment by
any Obligor of amounts due and payable under any Finance Document, the Facility
Agent, or as the case may be, the Security Agent may appropriate such payment
towards such of the amounts due and payable by such Obligor under this Agreement
as the Facility Agent or, as the case may be, the Security Agent may with the
approval of the Majority Banks decide (subject to the requirement that such
payment shall be appropriated first towards those overdue amounts which attract
the higher Margin), and each part of any payment so appropriated towards a
particular amount due and payable under any Finance Document shall be treated as
received by the Facility Agent or, as the case may be, the Security Agent for
the account of the Banks to whom such particular amount is due, in each case pro
rata to the respective amounts thereof due to each of them from such Obligor.
Any such appropriation shall override any appropriation made by any Obligor.
12.7 CERTIFICATIONS Save as otherwise provided herein, any certification or
determination of a rate or amount or other matter as referred to herein and made
by the Facility Agent or a Bank, as the case may be, shall be prima facie
evidence of the same.
13. TAXES
13.1 APPLICABLE TAXES As used in this Agreement, "APPLICABLE TAXES" means all
Taxes imposed by or in the jurisdiction in which the relevant Obligor is
resident or any other country through or out of which the relevant payment is
made or by any federation or organisation of which that country may be a member
or by or through any taxation authority of that country, federation or
organisation on any payment by any Obligor or any Finance Party to any Finance
Party, under any Finance Document, other than Taxes imposed on that payment
which would not have been imposed on that payment if the Finance Party to which
or for whose account that payment was made was a Recognised Bank and had made
(whether as original lender or by novation in accordance with Clause 30.4) the
advance in respect of which the relevant payment of interest is made.
13.2 NO SET-OFF OR DEDUCTIONS All payments to be made by any Obligor to any
Finance Party under any of the Finance Documents shall be made:
(a) without set-off or counterclaim; and
(b) free and clear of all and without deduction for or on account of any
Applicable Taxes, except to the extent that such Obligor is compelled
by law to make payment subject to the Applicable Taxes.
13.3 GROSS-UP If any Applicable Taxes or amounts in respect thereof must be
deducted from any payment by an Obligor to any Finance Party under any Finance
Document or any other deductions must
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be made from any amounts so paid by any Obligor (or from any corresponding
payment by any Finance Party to any other Finance Party under or pursuant to the
terms of any Finance Document), or any such payment shall otherwise be required
to be made subject to any Applicable Tax, such Obligor shall pay such additional
amounts as may be necessary to ensure that each Finance Party receives a net
amount after deduction for and payment of all Applicable Taxes equal to the full
amount which it would have received had payment not been made subject to the
Applicable Tax. All Applicable Taxes required to be deducted from any payment
by any Obligor to any Finance Party under any Finance Document shall be deducted
and paid when due by such Obligor to the applicable Tax authorities. Each
Finance Party shall notify each Obligor through the Facility Agent of the
application of this Clause 13.3 to any payment then due or to become due to it
under any Finance Document promptly upon its becoming aware of the same.
13.4 TAX RECEIPTS As soon as reasonably practicable after each payment by any
Obligor of any Applicable Tax (or any Tax which would be an Applicable Tax save
for the exception contained in Clause 13.1) on any payment by it to any Finance
Party under any Finance Document, such Obligor shall deliver to the Facility
Agent for the relevant payee Finance Party evidence reasonably satisfactory to
the payee (including copies of relevant Tax receipts received by such Obligor,
which such Obligor shall use its reasonable endeavours to obtain) that the
relevant Tax has been duly remitted or accounted for to the appropriate
authority.
13.5 TAX SAVING
(a) In respect of a Bank which is not a Treaty Bank:
(i) In the event that, following the imposition of any Applicable Tax
on any payment by (or on behalf of) any Obligor (or any
corresponding payment by any Finance Party to any other Finance
Party under this Agreement) in consequence of which such Obligor
is required under Clause 13.3 to pay such Applicable Tax or to
pay any additional amount in respect of it, any Finance Party
shall in its sole opinion and based on its own interpretation of
any relevant laws or regulations (but acting in good faith)
receive or be granted a credit against or remission for or
deduction from or in respect of any Applicable Tax payable by it
or for its account (or on its behalf) or shall obtain any other
relief in respect of Applicable Tax on its profits or income,
which in such Finance Party's opinion in good faith is both
reasonably identifiable and quantifiable by it without requiring
such Finance Party or its professional advisers to expend a
material amount of time or incur a material cost in so
identifying or quantifying (any of the foregoing, to the extent
so reasonably identifiable and quantifiable, being referred to as
a "SAVING"), such Finance Party shall, to the extent that it can
do so without prejudice to the retention of the relevant saving
and subject to such Obligor's obligation to repay the amount to
such Finance Party if the relevant saving is subsequently
disallowed or cancelled (which repayment shall be made promptly
on receipt of notice by such Obligor from such Finance Party of
such disallowance or cancellation), reimburse such Obligor
promptly after receipt of such saving by such Finance Party with
such amount as such Finance Party shall in its sole opinion (but
acting in good faith) have concluded to be the amount or value of
the relevant saving.
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(ii) Nothing contained in this Agreement shall interfere with the
right of any such Finance Party to arrange its Tax and other
affairs in whatever manner it thinks fit and, in particular, no
such Finance Party shall be under any obligation to claim relief
from Tax on its corporate profits, or from any similar Tax
liability, in respect of the Applicable Tax, or to claim relief
in priority to any other claims, reliefs, credits or deductions
available to it or to disclose details of its Tax affairs. No
Finance Party shall be required to disclose any confidential
information relating to the organisation of its affairs.
(b) In respect of a Bank which is a Treaty Bank:
(i) In the event that, following the imposition of any Applicable Tax
on any payment by (or on behalf of) any Obligor (or any
corresponding payment by any Finance Party to any other Finance
Party under this Agreement) in consequence of which such Obligor
is required under Clause 13.3 to pay such Applicable Tax or to
pay any additional amount in respect of it, any Finance Party
shall receive or be granted a credit against or remission for or
deduction from or in respect of any Applicable Tax payable by it
or for its account (or on its behalf) or shall obtain any other
relief in respect of Applicable Tax on its profits or income,
which is both reasonably identifiable and quantifiable by it
without requiring such Finance Party or its professional advisers
to expend a material amount of time or incur a material cost in
so identifying or quantifying (any of the foregoing, to the
extent so reasonably identifiable and quantifiable, being
referred to as a "SAVING"), such Finance Party shall, to the
extent that it can do so without prejudice to the retention of
the relevant saving and subject to such Obligor's obligation to
repay the amount to such Finance Party if the relevant saving is
subsequently disallowed or cancelled (which repayment shall be
made promptly on receipt of notice by such Obligor from such
Finance Party of such disallowance or cancellation), reimburse
such Obligor promptly after receipt of such saving by such
Finance Party with such amount as such Finance Party shall have
concluded acting reasonably to be the amount or value of the
relevant saving.
(ii) In compliance with the foregoing paragraph (b)(i), such Finance
Party shall arrange its Tax and other affairs in whatever manner
it thinks fit save that it shall claim relief from Tax on its
corporate profits, or from any similar Tax liability, in respect
of the Applicable Tax, promptly and act reasonably in all such
circumstances to seek to obtain reliefs, credits or deductions
available to it so as to obtain a saving which can be remitted to
the relevant Obligor. No Finance Party shall be required to
disclose any confidential information relating to the
organisation of its affairs.
(c) Each Finance Party will notify the relevant Obligor through the
Facility Agent promptly of the receipt by such Finance Party of any
saving and of such Finance Party's opinion as to the amount or value
of that saving.
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(d) In respect of United States withholding tax:
(i) GENERAL Each Finance Party that is entitled to an exemption
from or reduction of withholding tax with respect to payments under
this Agreement pursuant to the laws of the United States of America or
any treaty (including any protocol thereto or official exchange of
notes by applicable governmental authorities with respect thereto) to
which the United States is a party shall deliver to Services (with a
copy to the Facility Agent) either a properly executed United States
Internal Revenue Service Form W-9, or two copies of either United
States Internal Revenue Service Form 1001 or Form 4224 (or any
subsequent versions thereof or successors thereto) or, in the case of
a Finance Party claiming exemption from U.S. Federal withholding tax
under Section 871(h) or 881(c) of the Internal Revenue Code ("IRC")
with respect to such payments of "portfolio interest", a Form W-8, or
any subsequent versions thereof or successors thereto (and, if such
Finance Party is not a bank for purposes of Section 881(c) of the IRC,
is not a 10-percent shareholder (within the meaning of Section
871(h)(3) of the IRC) of Services and is not a controlled foreign
corporation (within the meaning of Section 864(d)(4) of the IRC)),
properly completed and duly executed by such Finance Party claiming
complete exemption from, or a reduced rate of, U.S. Federal
withholding tax on payments by Services under this Agreement.
(ii) TIME FOR SUBMITTING DOCUMENTATION Each Finance Party shall
deliver to Services the documentation required to be provided under
clause (i) above on or before the date such Finance Party becomes a
party to this Agreement (save that any Finance Party which is a party
hereto on the date hereof shall deliver such documentation to Services
on the Business Day next following the Unconditional Date) and on or
before the date, if any, such Finance Party changes its Office by
designating a different Facility. In addition, each Finance Party
shall deliver such forms promptly upon the obsolescence or inability
of any form previously delivered by such Finance Party.
Notwithstanding any other provision of this Clause, a Finance Party
shall not be required to deliver any form pursuant to this Clause 13.5
that such Finance Party is not legally able to deliver.
(iii) NOTICE OF CHANGE IN DOCUMENTATION If any Finance Party
determines that it is unable to submit any documentation that it is
obligated to submit pursuant to this Clause 13.5, or that such
Finance Party is required to withdraw or cancel any form or
certificate it previously submitted, such Finance Party shall promptly
notify Services and the Facility Agent of that fact.
13.6 RIGHT TO PREPAY In the event that any such Applicable Tax is required to
be deducted from any payment to be made by any Borrower to any Finance Party
under this Agreement (or on any corresponding payment by the Finance Party to
any other Finance Party under this Agreement) and, in consequence, any Borrower
is or would be obliged under Clause 13.3 to pay any additional amounts to such
Finance Party in respect of the Applicable Tax, such Borrower may prepay the
whole (but not part) of the then outstanding amount of such Finance Party's
participation in the Utilisations made by it, together with all interest and
other charges accrued on those participations and all other amounts payable
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to such Finance Party under the Finance Documents, on giving not less than ten
Business Days' prior written notice to such Finance Party (through the Facility
Agent).
13.7 RECOGNISED BANK Each Finance Party (other than Goldman Sachs Credit
Partners, L.P.) confirms to each Obligor that it is a Recognised Bank and agrees
to notify Services promptly if it becomes aware that (a) it is no longer a
Recognised Bank, or (b) Clause 13.3 may for any other reason apply in respect of
payments made to it or to the Facility Agent for its account.
13.8 FILINGS Each Treaty Bank has submitted at the time of becoming a Bank, the
appropriate Inland Revenue form (being at the date hereof Form FD13 in the case
of the United States/United Kingdom double tax treaty) to the relevant tax
authorities and, if such form is returned to such Bank by such tax authority,
such Bank shall then promptly submit such form to the United Kingdom Inland
Revenue (FICO Dept.). If a Treaty Bank is or becomes unable for any reason to
submit such form or a Treaty Bank becomes aware that such a form previously
submitted by it is no longer valid or becomes incorrect for any reason, such
Treaty Bank shall notify Services as promptly as practicable. Each Treaty Bank
shall take such other action (including the filing of any other forms) to claim
exemption from taxation as may be reasonably requested by Services.
14. MARKET DISRUPTION
14.1 DISRUPTION EVENTS If, in relation to any Advance or proposed Advance and
any (or the) Interest Period relative thereto:
(a) no (or where there is more than one Reference Bank, only one)
Reference Bank supplies an interest rate to the Facility Agent as
required by the definition of LIBOR after the Facility Agent has
requested such a rate from the Reference Banks; or
(b) the Facility Agent shall have received notification from a Bank or
Banks whose participations in such Advance constitute at least fifty
per cent. (50%) by value of such Advance that by reason of
circumstances affecting the London interbank eurocurrency market (in
the case of any Optional Currency) or the London interbank market (in
the case of Sterling):
(i) matching deposits for the same period as such Interest Period
will not be readily available to them in the London interbank
eurocurrency market (in the case of any Optional Currency) or the
London interbank market (in the case of Sterling) (as the case
may be) in sufficient amounts in the ordinary course of business
to fund their respective participations in such Advance for such
Interest Period; or
(ii) whilst such deposits are so available, the cost of such deposits
exceeds LIBOR as determined in relation to such Advance for such
Interest Period,
the Facility Agent shall promptly give written notice of such determination or
notification to the relevant Borrower, Services (if different) and each of the
Banks.
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14.2 EFFECT The giving of any notice by the Facility Agent pursuant to Clause
14.1(a) or 14.1(b) shall not relieve any Bank of any obligation it may have
under this Agreement to advance, on the relative Utilisation Date, its
participation in any Advance (including any Advance for which a Request was
given prior to such notice by the Facility Agent).
14.3 NEGOTIATION AND SUBSTITUTE BASIS During the period of 15 days after the
giving of any notice by the Facility Agent pursuant to Clause 14.1, the Facility
Agent (in consultation with the Banks) shall negotiate with the relevant
Borrower and Services in good faith with a view to ascertaining whether a
substitute basis (a "SUBSTITUTE BASIS") may be agreed for the making of further
Advances and/or the maintaining of any existing Advances to which such notice by
the Facility Agent related for the current Interest Period relative to those
Advances. If a Substitute Basis is agreed by all the Banks, the relevant
Borrower and Services it shall apply in accordance with its terms from the
commencement of such Interest Period. The Facility Agent shall not agree any
Substitute Basis on behalf of any Bank without the prior consent of that Bank.
14.4 COST OF FUNDS If a Substitute Basis is not so agreed by the relevant
Borrower, Services and all the Banks by the end of the 15 day period, each
Bank's participation in each then existing Advance to which the notice by the
Facility Agent related shall bear interest during the current Interest Period
relative thereto at the rate certified by such Bank to be its cost of funds
(from such sources as it may reasonably select out of those sources then
available to it) for such Interest Period in relation to such Advance, plus the
applicable Margin.
14.5 RIGHT TO PREPAY Where Clause 14.4 applies the relevant Borrower, upon
giving not less than five Business Days' prior written notice (through the
Facility Agent) to any Bank, may prepay the whole (but not part) of the
participation of that Bank in all (but not some only of) the existing Advances
to which the notice by the Facility Agent related and, if so specified in the
notice, in all (but not some only of) the other outstanding Utilisations of that
Borrower, together with all interest accrued on those Advances and all other
amounts payable under this Agreement in connection with the Utilisations
prepaid.
14.6 REVIEW OF SUBSTITUTE BASIS So long as any Substitute Basis is in force or
Clause 14.4 shall apply in relation to any Advance, the Facility Agent, in
consultation with the relevant Borrower, Services and each Reference Bank shall
from time to time, but not less often than monthly, review whether or not the
circumstances referred to in Clause 14.1 still prevail with a view to returning
to the normal interest provisions of this Agreement.
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15. INCREASED COSTS
15.1 INCREASED COSTS Subject to Clause 15.3, if the result of:
(a) any change after the date hereof in or the introduction after the date
hereof of, or any change after the date hereof in the interpretation,
administration or application by any competent court, authority or
organisation in the relevant jurisdiction of, any law, regulation or
treaty or in or of any official directive or official request from, or
the rules of, any governmental, fiscal, monetary or regulatory
(including self-regulatory) authority, organisation or agency (whether
or not having the force of law but, if not having the force of law,
being a regulation, treaty, official directive, official request or
rule which it is the practice of banks in the relevant jurisdiction to
comply with) after the date hereof which affects banks or financial
institutions of the same type as any Finance Party in that
jurisdiction; or
(b) compliance by any Finance Party (or any Holding Company of such
Finance Party) with any such change or introduction;
including, in each case without limitation, those relating to Taxation, change
in currency of a country, reserves, special deposit, cash ratio, liquidity, cash
margin or capital adequacy requirements or other forms of banking, fiscal,
monetary or regulatory controls, is that:
(i) any Finance Party (or any Holding Company of such Finance Party
which is regulated as a financial institution or as a Holding
Company of a financial institution) incurs an increased cost as a
result of its (or such Finance Party's) having entered into, and/or
performing and/or maintaining and/or funding its (or such Finance
Party's) obligations under, any Finance Document; or
(ii) any Finance Party (or any such Holding Company of such Finance
Party) incurs an increased cost in making, funding or maintaining
all or any advances comprised in a class of advances or acceptances
formed by or including its (or such Finance Party's) participation
in some or all of the Utilisations made or to be made under this
Agreement; or
(iii) any amount receivable by any Finance Party under any Finance
Document is reduced (save to the extent matched by a reduction in
the cost of providing the Facilities) or the effective rate of
return to any Finance Party (or any such Holding Company of such
Finance Party) under any Finance Document or on its (or such
Holding Company's) capital employed for the purposes of this
Agreement is reduced; or
(iv) any Finance Party (or any such Holding Company of such Finance
Party) makes any payment or forgoes any interest or other return on
or calculated by reference to any amount received or receivable by
it (or by such Finance Party) from any Obligor or the Facility
Agent or the Security Agent or any other Finance Party under any
Finance
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Document;
and such increased cost (or the relevant proportion thereof), reduction,
payment, forgone interest or other return is not compensated for by any other
provision of this Agreement (including, without limitation, by any Additional
Cost payable pursuant to Clause 11.1(c)), then and in each such case:
(A) such Finance Party shall notify Services through the Facility Agent in
writing of that event promptly upon its becoming aware of the event
including, in reasonable detail, particulars of the event;
(B) subject as provided below and to Clause 2.4(a), within five Business
Days after receipt by any Borrower (directly or through Services) of a
written demand from time to time by such Finance Party through the
Facility Agent accompanied by a certificate of such Finance Party
specifying the amount of compensation claimed and setting out the
calculation of the amount in reasonable detail, such Borrower shall
pay to the Facility Agent for the account of such Finance Party (or,
as the case may be, Holding Company of such Finance Party) such amount
as shall compensate such Finance Party (or such Holding Company) for
such increased cost (or, in the case of (i) or (ii) above, the portion
of such increased cost as is attributable to its making, funding or
maintaining Advances or maintaining its obligation, if any, to
participate in Utilisations under this Agreement), reduction, payment
or forgone interest or other return. Nothing in this Clause shall
oblige any Finance Party (or any Holding Company of such Finance
Party) or the Facility Agent or the Security Agent to disclose any
confidential information relating to the organisation of its affairs.
Notwithstanding the foregoing, any claim by any Finance Party pursuant
to this Clause 15.1 in respect of any period more than 90 days before
such Finance Party gave notice pursuant to paragraph (A) above of the
relevant event shall be disallowed.
15.2 RIGHT TO PREPAY Where Clause 15.1 applies the relevant Borrower, upon
giving not less than five Business Days' notice to that Finance Party (being a
Bank) may prepay the whole (but not part only) of that Finance Party's
participation in all (and not some only of) the outstanding Utilisations,
together with all interest and other charges on or in respect thereof, and all
other amounts payable by it under the Finance Documents to such Finance Party,
provided always that any such notice by such Borrower is given whilst
circumstances exist entitling such Finance Party to claim compensation under
this Clause 15.
15.3 EXCEPTIONS Clause 15.1 shall not apply so as to oblige Services or any
other Borrower to compensate any Finance Party for Applicable Taxes (to the
extent that the provisions of Clause 13.3 fully and effectively compensate
therefor) or for any Taxes which would have been Applicable Taxes save only for
any failure by the relevant Finance Party to satisfy the exception to Clause
13.1 or for any increased cost, reduction, payment or forgone interest or other
return:
(a) resulting from any change in or the introduction of, or any change in
the interpretation or application of, any law, regulation, treaty,
directive, request or rules relating to, or any change in the rate of,
Taxation on the overall net income of such Bank imposed in the
jurisdiction in which such Finance Party's principal office for the
time being is situate or
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on the overall net income of such Finance Party's Facility Office
imposed in the jurisdiction in which that office is situate; or
(b) resulting from the implementation by the applicable authorities having
jurisdiction over such Finance Party and/or its Facility Office of any
directive of the European Union in existence as at the date hereof
and/or the matters set out in the statement of the Basle Committee on
Banking Regulation and Supervisory Practices dated July, 1988 and
entitled "International Convergence of Capital Measurement and Capital
Standards", in each case to the extent, at the rates and according to
the timetable provided for therein as at the date hereof; or
(c) attributable to such Finance Party after the date of this Agreement
entering into a commitment to lend to a third party which is, at the
time that commitment is entered into, in breach of any law,
regulation, treaty, directive, request or rule relating thereto as
aforesaid.
16. ILLEGALITY
If any change after the date hereof in or the introduction after the date hereof
of any law, regulation, treaty or (whether or not having the force of law but,
if not having the force of law, being one with which it is the practice of banks
in the relevant jurisdiction to comply) official directive or rule of any
governmental, fiscal, monetary or regulatory (including self-regulatory)
authority, organisation or agency, having jurisdiction (together "LAWS"), or any
change after the date hereof in the interpretation, administration or
application of Laws by a competent court or the relevant authority, organisation
or agency or compliance by any Finance Party with any such change or
introduction of Laws or change in interpretation, administration or application
of Laws, shall make it (or make it apparent that it is) unlawful or a breach of
Laws for any Finance Party to make available or fund or maintain the
Utilisations or any part of the Utilisations under this Agreement or to give
effect to its obligations and exercise its rights as contemplated by this
Agreement, that Finance Party may, by notice to Services through the Facility
Agent, declare that to the extent necessary to avoid any such illegality or
breach of Laws its obligations to Services and the other Borrowers under the
Finance Documents shall be terminated forthwith or, if later, on the latest date
to which the obligations may remain in effect without causing the Finance Party
to be in breach of Laws, whereupon:
(a) PREPAY Each Borrower will forthwith, or by such later date as shall
be immediately prior to the illegality or breach in question taking
effect, prepay such part of such Finance Party's participation in the
Utilisations made by such Borrower together with all interest and
other charges accrued thereon to the date of the prepayment and all
other amounts payable to such Finance Party under the Finance
Documents as shall be necessary to avoid any such illegality or breach
by such Finance Party of any Laws; and
(b) COMMITMENTS To the extent necessary to avoid any such illegality or
breach of Laws such Finance Party's Commitments shall be cancelled and
reduced to nil.
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17. MITIGATION
17.1 MITIGATION If circumstances arise in respect of any Finance Party which
would, or upon the giving of notice would, result in the operation of Clause 13,
14, 15 or 16 to the detriment of any Borrower:
(a) such Finance Party shall promptly upon becoming aware of the same
notify the Facility Agent and Services and, upon the written request
of such Borrower, shall enter into discussions with Services and such
Borrower with a view to determining what mitigating action might be
taken by such Finance Party, including discussion of the possibility
of a change in its Facility Office or transfer of its participation in
the Facilities and its Commitments to another bank; and
(b) at the request of Services, the Facility Agent will enter into
discussions with Services with a view to determining what mitigating
action might be taken by the Facility Agent with respect to the
administration of this Agreement by the Facility Agent.
Without limiting or reducing the obligations of the Obligors (or any of them)
under Clauses 13, 14, 15 or 16, the relevant Finance Party, shall upon the
written request of Services take such reasonable steps as may be practical and
open to it to mitigate or remove the effects of such circumstances including,
without limitation, a change in its Facility Office or transfer of its
participation in the Facilities and its Commitments to another bank (or
termination of its Commitments and prepayment of its participation in the
Utilisations coupled with the assumption by another bank of a like participation
and Commitment) reasonably acceptable to or nominated by the relevant Borrower
and Services or the restructuring of its participation in this Agreement in a
manner which will avoid the circumstances in question and on terms acceptable to
the Facility Agent, such Finance Party and the relevant Borrower and Services,
provided that nothing in this Clause shall oblige any Finance Party or the
Facility Agent to take any such step if, in the opinion of such Finance Party or
the Facility Agent (such opinion being conclusive), as the case may be, any such
step might reasonably be expected to have an adverse effect upon its business,
operations or financial condition or the management of its Tax affairs or its
return in relation to its participation in the Utilisations.
17.2 COSTS AND EXPENSES Any costs and expenses reasonably incurred by any
Finance Party pursuant to this Clause 17 shall be paid by the relevant Borrowers
within five Business Days after receipt of a written demand specifying the same
in reasonable detail.
18. GUARANTEE
18.1 GUARANTEE In consideration of the Finance Parties entering into this
Agreement and/or becoming party to this Agreement pursuant to a Substitution
Certificate or otherwise and/or participating or agreeing to participate in any
Utilisation, each Guarantor hereby irrevocably and unconditionally and jointly
and severally:
(a) guarantees to each Finance Party on demand, as principal obligor and
not merely as
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surety (or similar in any applicable jurisdiction), prompt performance
by each other Obligor of all its payment obligations to such Finance
Party under the Finance Documents and the payment of all sums payable
now or in the future to such Finance Party by each other Obligor under
or in connection with the Finance Documents when and as the same shall
become due;
(b) undertakes with each Finance Party that, if and whenever any other
Obligor does not pay any amount when due from it to such Finance Party
under or in connection with any Finance Document, such Guarantor will
on demand pay such amount as if such Guarantor instead of such other
Obligor were expressed to be the primary obligor, together with
interest on that sum at the rate per annum from time to time payable
by that other Obligor on that sum from the date when that sum becomes
payable by such Guarantor under this Agreement until payment of that
sum in full; and
(c) indemnifies each Finance Party on demand against any loss or liability
suffered by it under any Finance Document as a result of any
obligation guaranteed by such Guarantor being or becoming
unenforceable, invalid or illegal.
18.2 CONTINUING GUARANTEE This guarantee is a continuing guarantee and shall
extend to the ultimate balance of all sums payable by the Obligors or any of
them under the Finance Documents.
18.3 REINSTATEMENT Where any discharge (whether in respect of the obligations
of any Obligor, any security for such obligations or otherwise) is made in whole
or in part or any arrangement is made on the faith of any payment, security or
other disposition which is avoided or must be repaid on insolvency,
administration, liquidation or otherwise without limitation, the liability of
each Guarantor under this guarantee shall continue as if there had been no such
discharge or arrangement. Each Finance Party shall be entitled to concede or
compromise any claim that any such payment, security or other disposition is
liable to avoidance or repayment.
18.4 WAIVER OF DEFENCES Except to the extent that such Guarantor is
specifically released in writing or its obligations are specifically waived in a
Waiver Letter, the obligations of each Guarantor under this Agreement shall not
be affected by any circumstance, act, omission, matter or thing which but for
this provision might operate to release or otherwise exonerate such Guarantor
from its obligations hereunder in whole or in part, including without limitation
and whether or not known to any Obligor or any Finance Party:
(a) any time, indulgence or waiver granted to or composition with any
other Obligor or any other person; or
(b) the taking, variation, compromise, exchange, renewal or release of, or
refusal or neglect to perfect or take up or enforce any rights or
remedies against any security or any other Obligor or any other person
or any non-presentment or non-observance of any formality or other
requirements in respect of any instruments or any failure to obtain
the full value of any security; or
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(c) any legal limitation, disability, incapacity, lack of power, authority
or legal personality of, or dissolution or change in the members or
status of, or other circumstance relating to any other Obligor or any
other person; or
(d) any variation (however fundamental and whether or not involving any
increase in the liability of any other Obligor thereunder) or
replacement of any Finance Document or any other document or security
(including without limitation any Substitute Basis agreed pursuant to
Clause 14 and any agreement contemplated by this Agreement) so that
references to such Finance Document or other document or security in
this guarantee shall include each such variation or replacement; or
(e) any unenforceability, illegality, invalidity or frustration of any
obligations of any other Obligor or any other person under any Finance
Document or any other document or security, or any failure of any
other Obligor or proposed additional Obligor to become bound by the
terms of any other Finance Document, in each case whether through any
want of power or authority or otherwise; or
(f) any postponement, discharge, reduction, non-provability or other
similar circumstance affecting any obligation of any other Obligor
under a Finance Document resulting from any insolvency, liquidation or
dissolution proceedings or from any law, regulation or order,
to the intent that such Guarantor's obligations under this Agreement shall
remain in full force and this guarantee be construed accordingly as if there
were no such circumstance, act, omission, matter or thing.
18.5 IMMEDIATE RECOURSE Each Guarantor waives any right it may have of first
requiring any Finance Party to proceed against or enforce any other rights or
security of or claim payment from or file any proof or claim in any insolvency,
administration, winding up, bankruptcy or liquidation proceedings relating to,
any other Obligor or any other person before claiming from such Guarantor under
this Agreement.
18.6 PRESERVATION OF RIGHTS Until all amounts which may be or become payable by
any and all Obligors to such Finance Party under or in connection with the
Finance Documents have been irrevocably paid and discharged in full (whether by
any Borrower or Guarantor or otherwise), after a claim has been made pursuant to
this guarantee each Finance Party may:
(a) refrain from applying or enforcing any other security, monies or
rights held or received by such Finance Party, as the case may be, in
respect of (or capable of being applied in respect of) such amounts or
apply and enforce the same in such manner and order as such Finance
Party sees fit (whether against such amounts or otherwise) and no
Guarantor shall be entitled to the benefit of the same; and
(b) hold in a suspense account (with liability to pay interest on the
monies held therein at the rate payable to its corporate customers for
deposits in the same currency on like terms and in like amounts) any
monies received from any Guarantor or on account of any Guarantor's
liability under this Agreement.
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18.7 NON-COMPETITION Until all amounts which may be or become payable by any
and all Obligors to any Finance Party under or in connection with the Finance
Documents have been irrevocably paid in full (whether by any Borrower or
Guarantor or otherwise), no Guarantor shall, after a claim has been made on it
pursuant to this guarantee:
(a) be subrogated to any rights, security or monies held, received or
receivable by any Finance Party or be entitled to any right of
contribution or indemnity in respect of any payment made or monies
received on account of any Obligor's liability under any Finance
Document and, to the extent that any Guarantor is so subrogated or
entitled by law, such Guarantor hereby (to the fullest extent
permitted by law) waives and agrees not to exercise those rights or
security or that right of contribution or indemnity;
(b) be entitled or claim to rank as a creditor in the insolvency,
administration, winding-up, bankruptcy or liquidation of any Obligor
in competition with any Finance Party unless otherwise required by the
Facility Agent or by law (in which case the proceeds, if any, of any
claim in respect of any rights, security or monies of any Finance
Party to which such Guarantor was subrogated, filed by such Guarantor
with a receiver or other similar official, will be paid by such
Guarantor to the Facility Agent to be applied in accordance with the
provisions of the Finance Documents); or
(c) be entitled to receive, claim or have the benefit of any payment,
distribution or security from or on account of any Obligor or exercise
any right of set-off as against any Obligor (and, without prejudice to
the foregoing, each Guarantor shall forthwith pay to the Facility
Agent for the Finance Parties an amount equal to any such set-off in
fact exercised by it and forthwith pay or transfer, as the case may
be, to the Finance Parties any such payment or distribution or benefit
of security in fact received by it).
18.8 ADDITIONAL SECURITY This guarantee shall be in addition to and shall not in
any way be prejudiced by any other security (including, without limitation, the
Security Documents) now or hereafter held by any Finance Party as security for
or capable of being applied against the obligations of any Obligor.
18.9 CERTIFICATE A certificate of the Facility Agent as to any amount due from
any Borrower under this Agreement shall, in the absence of manifest error, be
prima facie evidence of such amount as against each Guarantor.
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19. ADDITIONAL BORROWERS, GUARANTORS AND SECURITY
19.1 ADDITIONAL BORROWERS
(a) PA shall use reasonable endeavours to ensure that each of the members
of the TEG Group identified in the Borrowings List as intended to
become a Borrower (or, where more than one member of the PA Group is
identified in respect of any particular Refinancing Debt, whichever of
those members is selected by PA to be the borrower of any funds
borrowed to refinance that Refinancing Debt) shall do so as soon as
the procedures set out in Sections 155 - 158 of the Companies Act 1985
have been completed and the Unconditional Date has occurred in order
that the Borrowings identified in the Borrowings List shall be
refinanced (as and to the extent required by Clause 21.9) by Tranche
1B Advances and/or Tranche 2 Advances borrowed by them, and that all
conditions precedent applicable under Part II of the Seventh Schedule
in respect of the making of Utilisations by those members of the TEG
Group shall be satisfied as promptly as practicable.
(b) PA shall use its reasonable endeavours to ensure that any procedures
set out in Sections 155-158 Companies Act 1985 required to be
completed to permit the relevant members of the TEG Group to refinance
the Borrowings identified in the Borrowings List as required by Clause
19.1(a) shall be implemented:
(i) if the requirements of section 429 Companies Act 1985 for the
implementation of the procedures set out therein shall be met
with respect to the Offer, promptly after the completion of those
procedures; or
(ii) if such requirements shall not be met within the period specified
in section 429(3) Companies Act 1985, promptly after the expiry
of such period.
(c) In order for any wholly owned Subsidiary of PA to become a Borrower,
it and Services (for itself and on behalf of the existing Borrowers
and Guarantors) shall execute and deliver to the Facility Agent a duly
completed Borrower Accession Agreement. If all the Banks confirm to
the Facility Agent their agreement to the relevant Subsidiary becoming
a Borrower (which confirmation is deemed given in respect of the
members of the TEG Group referred to in Clause 19.1(a)), the Facility
Agent shall execute such Borrower Accession Agreement for itself and
on behalf of the other Finance Parties.
(d) Subject to Clause 19.1(e), upon execution of such Accession Agreement
by the relevant Subsidiary as Additional Borrower, Services and the
Facility Agent, such Subsidiary shall become an Additional Borrower in
accordance with the terms hereof and thereof. If included in the
Borrower Accession Agreement, the Additional Borrower's right to make
Utilisations hereunder may be limited in accordance with the terms so
included.
(e) The obligations of the Finance Parties to such Additional Borrower
with respect to the
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making of the first Utilisation to it under this Agreement are subject
to the condition precedent that the Facility Agent shall have received
in form and substance satisfactory to it (acting reasonably) each of
the documents listed in Part II of the Seventh Schedule.
19.2 ADDITIONAL GUARANTORS
(a) The Obligors shall procure that, subject to any provision of law
prohibiting the relevant person from becoming an Additional Guarantor,
the companies identified in Part III of the Seventh Schedule shall in
the case of Peabody Investments, Inc., by the date of the Asset Split
and in any other case, as soon as the procedures set out in Sections
155-158 Companies Act 1985 have been completed and the Unconditional
Date has occurred, each become an Additional Guarantor by (i)
executing and delivering to the Facility Agent a Guarantor Accession
Agreement (duly executed by Services for itself and on behalf of the
existing Borrowers and Guarantors) and (ii) delivering to the Facility
Agent each of the documents listed in Part II of the Seventh Schedule,
each in form and substance satisfactory to the Facility Agent (acting
reasonably).
(b) Where any such prohibition as is referred to above exists, each
Obligor shall use its reasonable endeavours lawfully to overcome the
prohibition.
(c) Services shall use its reasonable endeavours to ensure that any
procedures set out in Section 155-158 Companies Act 1985 required to
be completed (I) to permit the companies identified in Part III of the
Seventh Schedule to give such guarantees, (II) to permit the Companies
identified in Part III of the Seventh Schedule to accede to the terms
of the Debenture as Chargors as required by Clause 19.3(a) and
(III) to permit the other parties thereto to enter into the Tax
Sharing Agreement, shall be implemented:
(i) if the requirements of section 429 Companies Act 1985 for the
implementation of the procedures set out therein shall be met
with respect to the Offer, promptly after the completion of those
procedures; or
(ii) if such requirements shall not be met within the period specified
in S.429(3) Companies Act 1985, promptly after the expiry of such
period.
19.3 ADDITIONAL SECURITY
(a) The Obligors shall procure that:
(i) the Debenture is executed and delivered to the Security Agent
by Services, PA and Finance on or before the Unconditional
Date;
(ii) save where and to the extent that (but only for so long as)
the relevant company is subject to any prohibition from doing
so in any agreement to which any member of the TEG Group is a
party as at the date hereof in respect of any Refinancing
Debt, the companies identified in Part III of the Seventh
Schedule other than
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Peabody Investments, Inc. accede to the terms of the Debenture
as Chargors (as defined therein) to secure their own
obligations as Borrowers under the Finance Documents as soon
as reasonably practicable after the date of the first
Utilisation; and
(iii) in the case of Peabody Investments, Inc. by the date of the
Asset Split and in any other case as soon as the procedures
set out in Sections 155-158 Companies Act 1985 have been
completed, the companies identified in Part III of the Seventh
Schedule accede to the terms of the Debenture as Chargors (as
defined therein) to guarantee and secure the obligations under
the Finance Documents of the Obligors from time to time.
(b) Where any such prohibition as is referred to above exists, the
Obligors shall use their reasonable endeavours lawfully to overcome
the prohibition.
(c) The Obligors shall at their own expense and as soon as reasonably
practicable following a request from the Security Agent execute and do
all such assurances, acts and things as the Security Agent may
reasonably require (i) for perfecting or protecting the security
intended to be afforded by the Security Documents (and shall deliver
to the Security Agent such directors and shareholders resolutions,
title documents and other documents as the Security Agent may
reasonably require), or (ii) for facilitating the realisation of all
or any part of the assets which are subject to the Security Documents
and the exercise of all powers, authorities and discretions vested in
the Security Agent or in any receiver of all or any part of those
assets.
20. REPRESENTATIONS AND WARRANTIES
20.1 REPRESENTATIONS AND WARRANTIES ON AND FROM THE DATE HEREOF On and from
the date hereof, each Obligor (or in the case of Clause 20.1(1), Services and PA
only) represents and warrants to each of the Finance Parties (but, in the case
of any Obligor other than Services, only in relation to itself and its
Subsidiaries or Material Subsidiaries for the time being (as the case may be))
that:
(a) STATUS It is (and each of its Material Subsidiaries is) a company,
duly incorporated and validly existing under the laws of the place of
its incorporation and has the power to own its property and assets and
carry on its business as it is now being and will be conducted.
(b) POWERS AND AUTHORITY It has the corporate power to enter into and
perform the Finance Documents and any other Transaction Documents to
which it is a party and the transactions to be implemented pursuant
thereto and has taken all necessary corporate action to authorise its
entry into and performance of those documents and transactions.
(c) LEGAL VALIDITY Subject to the Reservations, this Agreement
constitutes, and any and each other Transaction Document to which it
is or will become a party (when executed by it or on its behalf) will
constitute, its legal, valid and binding obligations and (without
limiting the generality of the foregoing) any Security Document to
which it is a party creates the
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security interests which that Security Document purports to create or,
as the case may be, accurately evidences a security interest which has
been validly created.
(d) NON-CONFLICT The entry into and performance by it of this Agreement
and any and each other Transaction Document to which it is a party and
the transactions to be implemented pursuant to those documents do not
and will not conflict with:
(i) any law or regulation or any official or judicial order
applicable to it or any Licence or any Licence Undertaking;
(ii) its memorandum or articles of association, statutes, by-laws
or other constitutional or governing documents or any of its
resolutions (having current effect); or
(iii) any agreement or instrument to which it or any Subsidiary of
it is a party or which is binding upon any of them or on its
assets or those of any such Subsidiary (other than those
agreements or instruments referred to in the Borrowings List
to the extent that the liability is not materially greater
than that indicated in the Borrowings List) in such a manner
or to such an extent as to have a Material Adverse Effect, nor
will it result in the creation or imposition of any
Encumbrance on any of its assets or those of any Subsidiary
(save for any Encumbrance permitted to exist by the terms of
this Agreement).
(e) NO DEFAULT
(i) no Event of Default has occurred and is continuing which has
not been waived; and
(ii) no event has occurred and is continuing which has not been
waived and which constitutes or which, with the giving of
notice or expiry of any grace or cure period, is reasonably
likely to constitute a default under or in respect of any
other agreement or document to which it or any Material
Subsidiary of it is a party (and any such event which by
reason of express provisions in any such agreement or document
requires satisfaction of a condition as to materiality
(including, without limitation the existence or absence of an
opinion or determination as to materiality) before it may
constitute a default shall not be considered reasonably likely
to constitute a default unless that condition is satisfied) in
such a manner or to such an extent as to have a Material
Adverse Effect.
(f) CONSENTS Any and all authorisations, approvals, consents, licences,
exemptions, filings, registrations and other matters required on the
part of any Obligor or TEG or any Material Subsidiary pursuant to any
law or the terms of the Licence or any Licence Undertaking for or in
consequence of (i) the Offer, and/or (ii) the entry into and
performance by it of and/or the validity of any of the Finance
Documents and/or the Transaction Documents to which it is a party or
the transactions to be implemented
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pursuant thereto and/or (iii) the continued carrying on of the
business of TEG and the Services Group in the ordinary course, have
been obtained or effected or will be obtained or effected prior to the
date required by law, in each case, to the extent that failure to do
so would have a Material Adverse Effect, save (in the case of (ii))
for the filing in the United Kingdom of the prescribed particulars of
the Security Documents pursuant to section 395 of the Companies Act
1985 (as amended), the registration of the transfers of the shares
which are the subject of mortgages and other Encumbrances created by
the Security Documents and other filings and registrations necessary
in connection with the enforcement of the Security Documents.
(g) ACCOUNTS
(i) Its Accounts most recently delivered to the Facility Agent
under Clause 21.2 (a) have been prepared, save as disclosed in
notes to or accompanying those Accounts, in accordance with
the provisions of Clause 21.2(d) and (in the case of audited
annual Accounts) present a true and fair view of or (in the
case of unaudited Accounts) fairly present its and (if
consolidated Accounts) its Subsidiaries' financial position as
at the Accounting Date to which the same were prepared and/or
(as appropriate) the results of operations and (in the case of
annual Accounts) cashflow during the Accounting Period ending
on the relevant Accounting Date, subject, in the case of
quarterly and monthly Accounts, to normal year end adjustments
and to the lack of notes thereto.
(ii) Each of the information, reports and documents delivered to
the Facility Agent under Clause 21.2(b) was true and accurate
in all material respects as of the date thereof and did not
omit any material information required to be included therein.
(iii) (I) The Model was prepared in accordance with the Applicable
Accounting Principles with due care, (II) to the best of
Services's and PA's knowledge and belief (reasonable enquiry
having been made) the Model taken as a whole together with the
assumptions on which it is based is not misleading in any
material respect, and all projections and assumptions used for
the purposes of the Model were arrived at after careful
consideration and to the best of Services's and PA's knowledge
and belief were based on reasonable grounds. All such
projections are illustrative exercises but the actual results
may be materially affected by changes in economic and other
circumstances. The reliance which can be placed on the
projections is a matter of commercial judgment. No
representation or warranty is made that any projection will be
achieved.
(h) LITIGATION No litigation, arbitration or administrative or regulatory
proceedings or investigations for which process or initiation claims
have been served on it or any of its Material Subsidiaries and, to its
knowledge, no litigation, arbitration, administrative or regulatory
proceedings involving it or any of its Material Subsidiaries are
pending or threatened, which are reasonably likely to be determined
adversely to it or to such Subsidiary, and which, if so adversely
determined, would have a Material Adverse
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Effect.
(i) TAX LIABILITIES No claims are being or are reasonably likely to be
asserted against it or any of its Subsidiaries with respect to Taxes
which are reasonably likely to be determined adversely to it or to
such Subsidiary and which, if so adversely determined, would have a
Material Adverse Effect. It and each of its Subsidiaries is not
materially overdue in the filing of any Tax returns required to be
filed where failure to make such filing would have a Material Adverse
Effect, and it and any of its Subsidiaries had paid all Taxes shown to
be due on any Tax returns required to be filed by it or on any
assessments made against it (other than any being contested in good
faith by appropriate process in respect of which adequate reserves are
being maintained) non-payment, or a claim for payment, of which would
in each such case have a Material Adverse Effect.
(j) ENCUMBRANCES No Encumbrance exists over its or any of its
Subsidiaries' assets which would cause a breach of Clause 21.3(a) of
this Agreement.
(k) INFORMATION MEMORANDUM (This representation and warranty is given
only upon issue and approval by Services in writing of an Information
Memorandum). All material factual information in relation to the PA
Group contained in the Information Memorandum was true (or, in the
case of information provided by any person other than Services or PA
or its or their advisors or relating to TEG or any of its
Subsidiaries, was true to the best of Services's or PA's knowledge and
belief) in all material respects at the date (if any) ascribed thereto
in the Information Memorandum. Any and all expressions of opinion or
intention in relation to the PA Group and any projections in relation
to the PA Group contained in the Information Memorandum were arrived
at after careful consideration and to the best of Services's and PA's
knowledge and belief (reasonable enquiry having been made) were based
on reasonable grounds. All such projections are illustrative
exercises but the actual results may be materially affected by changes
in economic and other circumstances. The reliance which can be placed
on the projections is a matter of commercial judgment. No
representation or warranty is made that any projection will be
achieved. In all other respects, the Information Memorandum, taken as
a whole, as of its date (insofar as based on information provided by
any person other than Services or PA or its or their advisors or
relating to TEG or any of its Subsidiaries, to the best of Services's
or PA's knowledge or belief) was not misleading in any material
respect in relation to the PA Group and did not omit to disclose any
matter failure to disclose which would result in any material
information in relation to the PA Group contained in the Information
Memorandum being misleading in any material respect in the context of
this Agreement.
(l) ACQUIRED ASSETS All of the Shares which are acquired by it (whether
pursuant to the Offer, the implementation of the procedures set out in
section 429 et seq. Companies Act 1985 or by transfer from PGH) will
be beneficially owned by PA and PA will be entitled forthwith (but
subject to registration in the shareholders' register of TEG of the
transfer of those Shares, which registration will be completed as soon
as reasonably practicable) to become the legal registered owner of
such Shares free from all Encumbrances, claims and
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competing interests whatsoever save as expressly permitted or created
pursuant to the Finance Documents.
(m) OWNERSHIP OF ASSETS Save to the extent disposed of without breaching
the terms of any of the Finance Documents, it and each of its
Subsidiaries has good title to or valid leases or licences of or is
otherwise entitled to use all material assets necessary properly to
conduct its business the absence of which would have a Material
Adverse Effect.
(n) DOCUMENTS
(i) The documents delivered to the Facility Agent by or on behalf of
any Obligor pursuant to Clause 4.1 and any other provision of the
Finance Documents were genuine and in the case of copy documents,
were true, complete and accurate copies in all material respects,
of originals which had not been amended, varied, supplemented or
superseded in anyway which would be likely to affect materially
and adversely the interests of the Banks under the Finance
Documents (taken as a whole), save as consented to pursuant to a
Waiver Letter.
(ii) The Press Release and Offer Document and any other documents
relating to the Offer furnished to the Facility Agent, contain
all the material terms of the Offer. The terms of the Offer set
out in the Offer Document correspond to the terms of the Offer
set out in the Press Release in all material respects.
(o) ENVIRONMENTAL MATTERS
(i) It and its Subsidiaries have obtained any and all requisite
Environmental Licences required for the carrying on of its
business as currently conducted and have at all times complied
in all material respects with (A) the terms and conditions of
such Environmental Licences and (B) all other applicable
Environmental Law which in each case, if not obtained and
complied with, would have a Material Adverse Effect, and there
are to its knowledge no circumstances which may prevent or
interfere with such compliance to that extent in the future.
(ii) No Dangerous Substance has been used, disposed of, generated,
stored, transported, dumped, released, deposited, buried or
emitted at, on, from or under any site or premises (whether or
not owned, leased, occupied or controlled by any Obligor or
any of its Subsidiaries and including any offsite waste
management or disposal location utilised by any Obligor or any
such Subsidiary) in circumstances where this would be likely
to result in the imposition of a liability on any Obligor
which would have a Material Adverse Effect.
(iii) There is no Environmental Claim (whether in respect of any
site previously or currently owned or occupied by any member
of the Services Group or otherwise) pending or threatened, and
there are no past or present acts, omissions, events or
circumstances that would be likely to form the basis of any
Environmental Claim
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(whether in respect of any site previously or currently owned
or occupied by any member of the Services Group or otherwise),
against that Obligor or any of its Subsidiaries which in each
case is reasonably likely to be determined against that
Obligor or Subsidiary and which if so decided would have a
Material Adverse Effect.
(p) SERVICES AND PA At the first Utilisation Date, save as arises or is
contemplated under or in connection with the Transaction Documents or
the Offer or referred to in the Structure Memorandum and save also for
Offer Costs, neither Services nor PA will have any material
commitments or indebtedness.
(q) LICENCE
(i) Each Licenceholder has been duly authorised by either the
Director General or the Secretary of State under Section 6 of
the Act to generate and/or supply (as appropriate in each
case) electricity and each Licence is in full force and effect
except to the extent a replacement licence(s) is/are to be
granted to a member or members of the TEG Group or (after the
Unconditional Date) the PA Group in its place (if such
replacement licence(s) is/are then required by statute or by
regulation by a company to carry on the business of the
relevant Licenceholder as carried on as at the date hereof),
when such replacement licence(s) is/are to be in full force
and effect;
(ii) no Licenceholder is in contravention of or, as a result of the
implementation of the Offer or the consummation of the
transactions herein or therein contemplated, would be in
contravention of:
(A) any term or condition of any Licence; or
(B) any requirement of the Act or any regulations made
thereunder; or
(C) any other statutory requirement or any final order or
confirmed provisional order made under the Act; or
(D) any undertaking given by it to the Director-General or
the Secretary of State in relation to the conduct of
its business as a generator of electricity or as a
public electricity supplier (as the case may be),
the contravention or consequence of which is reasonably likely
to have a Material Adverse Effect;
(iii) neither the Director-General nor the Secretary of State has
given notice to revoke a Licence except where a replacement
licence(s) is/are to be granted to a member or members of the
TEG Group or (after the Unconditional Date) the PA Group in
its place (if such replacement licence(s) is/are then required
by statute or by
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regulation by a company to carry on the business of the
relevant Licenceholder as carried on as at the date hereof);
(iv) save as described in writing to the Facility Agent no
amendment of any of the terms of a Licence has been made or
proposed which is reasonably likely to have a Material Adverse
Effect; and
(v) there are no Licence Undertakings, other than those copies (or
a reasonable summary) of which have been delivered to the
Facility Agent.
(r) STRUCTURE MEMORANDUM All those matters (including, without
limitation, capitalisations, reorganisations, transfers, debt
repayments and receipts) as described in the Structure Memorandum
which are indicated in the Structure Memorandum to occur prior to or
at or immediately after first Utilisation hereunder have been or will
at or immediately after such Utilisation Date be completed in all
material respects as contemplated thereby. Each flow of funds shown
in the Structure Memorandum as occurring prior to or at or immediately
after first Utilisation hereunder has been or will be completed
substantially as contemplated in the Structure Memorandum.
20.2 REPETITION The representations and warranties set out in Clause 20.1 shall
survive the execution of this Agreement and the making of each Utilisation
hereunder and shall be made on the date hereof and (other than the
representations and warranties set out in Clause 20.1(g)(iii)) shall, subject to
Clause 24.4, be deemed to be repeated on the date of delivery of each Request
hereunder and on each Utilisation Date and on each Interest Date, with reference
to the facts and circumstances then subsisting, as if made at each such time,
provided that:
(a) the representation and warranty set out in Clause 20.1(k) shall be
made only on the date of issue and approval by Services or PA in
writing of any Information Memorandum;
(b) the representations and warranties set out in Clauses 20.1 (h), (i),
(l), (n)(ii), (p) and (r) shall not be repeated after the first
Utilisation Date; and
(c) prior to the Unconditional Date the representation and warranty set
out in Clause 20.1(q)(v) shall be qualified by the actual knowledge of
Services and PA.
21. UNDERTAKINGS
21.1 DURATION The undertakings in this Clause 21 shall remain in force from and
after the date hereof and so long as any amount is or may be outstanding under
this Agreement or any Commitment is in force and, in the case of any Obligor
other than Services, are given only in relation to itself and its Subsidiaries
for the time being.
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21.2 INFORMATION AND ACCOUNTING STANDARDS
(a) ACCOUNTS Services shall furnish or procure that there shall be
furnished to the Facility Agent in sufficient copies for each of the
Banks:
(i) as soon as practicable after the end of each annual Accounting
Period:
(I) (and in any event within 180 days thereof) the audited
consolidated accounts of itself and of the PA Group for
such Accounting Period;
(II) (and in any event within 180 days thereof) the audited
accounts of itself and each Material Subsidiary for such
Accounting Period, to the extent required to be prepared
by law,
in each case comprising at least an audited (in the case of PA,
consolidated) balance sheet and profit and loss account and in
the case of the PA Group, cash flow statement for such Accounting
Period;
(ii) (I) as soon as practicable (and in any event within 90 days)
after the end of the first quarterly Accounting Period to
commence after the Unconditional Date, an unaudited
profit and loss statement, balance sheet and cash flow
statement of the PA Group for such quarterly Accounting
Period in the form customarily prepared by management;
and
(II) as soon as practicable (and in any event within 60 days)
after the end of each quarterly Accounting Period
commencing with the second quarterly Accounting Period to
commence after the Unconditional Date (or, if PA wishes,
any earlier Accounting Period ending after the first
Utilisation Date), the unaudited consolidated accounts of
the PA Group for such quarterly Accounting Period showing
at least the detailed information necessary to determine
PA's compliance with its obligations under Clause 23.1,
and in each case comprising at least a consolidated
balance sheet, profit and loss account and cash flow
statement for such Accounting Period;
(iii) at the same time as the Accounts for any annual
Accounting Period are delivered (or, if not delivered,
required to be delivered) pursuant to paragraph (i)
above:
(I) a report of the Auditors setting out in reasonable detail
computations establishing, as at the date of such
Accounts, whether each of the financial ratios set out in
Clause 23.1 were complied with; and
(II) a certificate signed by the Chief Financial Officer,
stating that, so far as he is aware upon due inquiry, as
at the date of such certificate no Default
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has occurred and is then continuing which has not
previously been waived pursuant to a Waiver Letter or
providing details of any such Default of which he is
aware upon due inquiry and of the remedial action
proposed to be taken; and
(III) a certificate signed by the Chief Financial Officer
identifying the Material Subsidiaries and setting out the
result for each of them of the calculation of the tests
provided for in the definition of Material Subsidiary in
Clause 1.1 to determine the identity of the Material
Subsidiaries and applied by reference to such Accounts;
(iv) at the same time as the Accounts for any quarterly Accounting
Period are delivered (or, if not delivered, required to be
delivered) pursuant to paragraph (ii) above a certificate, signed
by the Chief Financial Officer:
(I) setting out in reasonable detail computations
establishing, as at the date of such Accounts, whether
each of the financial ratios set out in Clause 23.1 was
complied with; and
(II) stating that, so far as he is aware upon due inquiry as
at the date of such certificate no Default has occurred
and is then continuing which has not been previously
waived pursuant to a Waiver Letter or providing details
of any such Default of which he is aware upon due inquiry
and of the remedial action proposed to be taken;
(v) at the same time as delivered to the Director General pursuant to
Condition 2 of Part II of any Licence held by any member of the
Services Group, copies of the accounting statements delivered to
the Director General pursuant thereto after the Unconditional
Date;
(vi) as soon as practicable after the Unconditional Date (and in any
event no later than the date of delivery, or, if not delivered,
the last date for delivery, of Accounts pursuant to Clause
21.2(a)(ii) for the first full quarterly Accounting Period
commencing after the Unconditional Date) consolidated unaudited
accounts of the PA Group prepared on a pro forma basis for the
three consecutive quarterly Accounting Periods last commencing
(on a pro forma basis as described below) before the
Unconditional Date, showing at least the detailed information
necessary to determine the PA Group's compliance with its
obligations under Clause 23.1 and comprising at least a
consolidated balance sheet, profit and loss account and cash flow
statement for such Accounting Periods and all prepared as if:
(I) the Unconditional Date had occurred on the first day of
the first of those three pro forma Accounting Periods
(and as if PA had then been in existence);
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(II) all Utilisations had been made on dates falling at the
same intervals after the Unconditional Date taken to have
occurred as aforesaid as was the case relative to the
actual Unconditional Date (but nevertheless applying the
actual interest rates determined and applicable
hereunder); and
(vii) accounts and other written financial information of EnergyCo
required to be supplied to the EnergyCo Lenders pursuant to
the EnergyCo Facility Agreement at such time as they are
delivered to them.
(b) NOTIFICATIONS Services shall furnish or procure that there shall be
furnished to the Facility Agent in sufficient copies for each of the
Banks:
(i) promptly after becoming aware of the same being instituted or
threatened and that, in the case of (A) below, the same could
reasonably be expected to have a Material Adverse Effect,
details of any material litigation, arbitration or
administrative proceedings involving it or any of its
Subsidiaries which:
(A) could reasonably be expected to have a Material Adverse
Effect; or
(B) involves the Director General, the Secretary of State,
any Licence held by any member of the Services Group or
any Licence Undertaking;
(ii) promptly, such further information regarding its financial
condition, business and assets and that of the Services Group
and/or any member thereof (including any requested explanation
of any item in any Accounts) as the Facility Agent or the
Majority Banks through the Facility Agent may reasonably
request from time to time (subject to any duty of
confidentiality);
(iii) promptly, upon being notified of the same, details of all
transfers of shares (other than pursuant to the Debenture) by
any member of the Services Group in the share capital of any
Obligor, and details of any issue or transfer of shares (other
than pursuant to the Debenture) in the capital of any Material
Subsidiary made by any member of the Services Group after the
date hereof to any person who is not a member of the PA Group;
(iv) written details of any Default promptly after becoming aware
of the same, and of any remedial steps being taken and/or then
proposed to be taken in respect of that Default;
(v) during the period from the date of issue and approval by
Services of the Information Memorandum to the earlier of (A)
the date six months thereafter, and (B) the close of general
syndication of the Facilities as determined and confirmed to
Services by the Facility Agent, Services will notify the
Facility Agent in reasonable detail of any matters (whether
occurring prior to or after the date of
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approval and issue of the Information Memorandum) which (to
the knowledge of the Chief Financial Officer and, after the
Unconditional Date only, of the executive directors of TEG)
cause the Information Memorandum taken as a whole when read
without knowledge of such matters to be inaccurate or
misleading in any material respect;
(vi) promptly upon becoming aware that any modifications to the
Licence are being proposed by the Director-General or the
Secretary of State and/or that any Licence Undertaking is
being requested by the Director General or the Secretary of
State, reasonable details thereof, to be updated from time to
time to reflect any changes, provided that such details shall
be required to be reported to the Facility Agent hereunder,
only to the extent that if such proposed modifications were to
be made to the Licence or any such Licence Undertaking given,
compliance with such modification or undertaking would have a
Material Adverse Effect;
(vii) promptly upon EnergyCo and/or Services making any filing
(which is or will be available for public inspection) with the
Securities and Exchange Commission, a copy thereof;
(viii) or to the English legal advisers to the Facility Agent, the
Offer Document and each draft of the Offer Document produced
on after the date of the Press Release and delivered to TEG;
and
(ix) on the date on which Accounts are first furnished in
accordance with Clause 21.2(a)(ii) and (vi), a certificate
signed by the Chief Financial Officer identifying the Material
Subsidiaries and setting out the result for each of them of
the calculation of the tests provided for in the definition of
Material Subsidiary in Clause 1.1. to determine the identity
of the Material Subsidiaries, applied by reference to such
Accounts.
(c) AUDIT AND ACCOUNTING DATES PA will ensure that:
(i) the annual Accounts to be delivered to the Facility Agent
pursuant to Clause 21.2(a)(i)(I) are audited by the Auditors;
(ii) PA shall at all times have duly appointed Auditors or, in the
event of resignation of the Auditors, shall appoint
replacement Auditors within a reasonable time;
(iii) each financial year and each quarterly Accounting Period of
the PA Group shall end on an Accounting Date; and
(iv) each of its financial years and each financial year of each
Subsidiary (other than any Licenceholder and its Subsidiaries)
shall end on an Accounting Date in December, and no member of
the PA Group will change its financial year end (other than to
an Accounting Date in December) without the prior written
consent
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of the Facility Agent.
(d) ACCOUNTING STANDARDS PA will ensure that all consolidated
Accounts of the PA Group shall be prepared in accordance with the
Applicable Accounting Principles and (except in the case of annual
audited Accounts provided pursuant to Clause 21.2(a)(i)(I)) in
substantially the same format and with substantially the same headings
and other characterisations as in the Base Financial Statements, or
shall indicate in notes to or a letter accompanying such Accounts any
material departures from the Applicable Accounting Principles and/or
such format, headings and characterisations.
(e) DEPARTURES Where any consolidated Accounts of the PA Group have
been prepared in any respect so as to depart materially from the
Applicable Accounting Principles and/or the format, headings and
characterisations as applied and/or set out in the Base Financial
Statements, Services shall provide or procure that there is provided
to the Facility Agent a written explanation of such departure which
the Facility Agent shall forward to the Banks. If the Majority Banks
and PA agree, such departure shall become part of the Applicable
Accounting Principles. If the Majority Banks and PA do not so agree,
the Facility Agent and PA shall negotiate in good faith to agree to
any amendments to this Agreement (including, but not limited to, any
amendment required to be made to the covenants set out in Clause 23.1
(and the related definitions in Clause 1.1)) which would, if such a
departure were to become part of the Applicable Accounting Principles
ensure that the Finance Parties position and the protection afforded
to them pursuant to Clauses 23.1 and 23.2 is maintained. If such
amendments are made to this Agreement then such departures shall
become part of the Applicable Accounting Principles. Unless and until
such agreement or amendment (as the case may be) is made, such
departure shall not become part of the Applicable Accounting
Principles and the Majority Banks may require that PA include in each
Reconciliation Statement a statement that such departure has not
altered any of the numerical information required for the purpose of
establishing whether or not PA is in compliance with its obligations
under Clause 23.1 or (if it has) setting out the effects of such
alteration in reasonable detail.
21.3 SECURITY VALUE
(a) NEGATIVE PLEDGE No Obligor will, and each Obligor will procure that
no other member of the Services Group will, create or permit to
subsist any Encumbrance on the whole or any part of its respective
present or future businesses, assets or undertakings, except for the
following:
(i) Encumbrances constituted or evidenced by the Security
Documents;
(ii) Encumbrances expressly permitted by a Waiver Letter, provided
that, except to the extent permitted by any of the following
exceptions, the principal amount of the indebtedness secured
by such Encumbrances shall not at any time be increased beyond
the amount so permitted, save as permitted by a further Waiver
Letter;
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(iii) Encumbrances arising by operation of law (or by agreement to
the same effect) in the ordinary course of business and not as
a result of any default or omission on the part of any member
of the Services Group, including without limitation (but
subject as aforesaid) (A) any rights of set-off with respect
to demand or time deposits with financial institutions and
bankers' liens with respect to property held by financial
institutions, save in each case where such arrangements are
deliberately established for the purpose of affording security
to the bank or financial institution concerned and (B)
Encumbrances with respect to Taxes;
(iv) Encumbrances over goods and documents of title to goods (and
related insurances) created or arising in the ordinary course
of letter of credit transactions entered into in the ordinary
course of trade;
(v) Encumbrances over assets (other than the Shares) acquired by
members of the PA Group and existing at the date of their
acquisition but not created in contemplation of their
acquisition, provided that the maximum principal amount
secured by any such Encumbrances is not prohibited by Clause
21.4 and shall not be increased beyond the maximum principal
amount secured thereby at the date of such acquisition unless
otherwise permitted pursuant to the other provisions of this
Clause;
(vi) Encumbrances over credit balances on accounts of members of
the PA Group with a bank or financial institution created in
order to facilitate the operation of such accounts and other
accounts of such members of the PA Group with the same bank on
a net balance basis with or without credit balances and debit
balances on the various accounts being netted off for interest
purposes or to comply with any net limit, or for cash
management purposes, or as part of a back-to-back or similar
arrangement;
(vii) any Encumbrance created under or in connection with or arising
out of any pooling and settlement and onshore transportation
arrangements or agreements (including but without limitation
the Pooling and Settlement Agreement (in the case of
electricity) and the Network Code (in the case of gas)) of the
electricity or gas generation, transportation, distribution
and/or supply industry or telecommunications or water industry
or energy or energy- related business or any transactions or
arrangements entered into in a form usual in any such industry
or business;
(viii) any Encumbrance on Cash and Cash Equivalent Investments
deposited in satisfaction of any requirement to place margin
deposits to secure obligations in respect of Derivative
Transactions provided that the aggregate of such deposits
shall not at any time exceed an amount equal to the aggregate
of (i) L10,000,000 or the equivalent in other currencies, and
(ii) an amount (the "SUPPLEMENTAL AMOUNT") equal to ten
percent (10%) of the amount by which the Total
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Commitment at the date hereof exceed the Total Commitments at
the relevant date Provided such Supplemental Amount has been
used to secure obligations in respect of Derivative
Transactions effected in connection with Borrowings or Hybrid
Preferred Securities the net proceeds of which have been used
to repay the Facilities permanently;
(ix) the right of a counterparty to two or more Derivative
Transactions effected with the same member of the PA Group to
close out such Derivative Transactions if applicable margin
and other requirements are not met and apply any proceeds to
any resulting balance due;
(x) any Encumbrance over goods purchased in the ordinary course of
business arising by virtue of retention of title clauses in
suppliers' standard terms of business, (or on terms more
favourable to the PA Group) securing only the unpaid purchase
price of goods supplied;
(xi) any Encumbrance created by or over the shares or any other
ownership interest in or loans to and/or the assets of a
Project Finance Subsidiary;
(xii) any Encumbrance listed in the Tenth Schedule;
(xiii) any Encumbrance created over shares and/or other securities
held in any clearing system or listed on any exchange which
arise as a result of such shares and/or securities being so
held in such clearing system or listed on such exchange as a
result of the rules and regulations of such clearing system or
exchange;
(xiv) any Encumbrance created by or over the shares of or any other
ownership interest in or loans to and/or the assets of any
Subsidiary (incorporated in a country other than the United
Kingdom, other than where the sole or principal activity of
such Subsidiary is to act as the holding company of any other
Subsidiaries as described in this paragraph (xiv)) and whose
sole or principal activity is (or, after the acquisition,
construction or development thereof, is intended to be) the
ownership (whether in whole or in part) and/or operation of a
facility for the production of heat or generation of
electricity and/or a network for the distribution and/or
supply of gas, electricity and/or heat, and/or other
energy-related facility, or activities related thereto in each
such case not within the United Kingdom, or to act as a
holding company for one or more such Subsidiaries.
(xv) any Encumbrance existing on or over the assets of a person
(other than a person which is a member of the TEG Group at the
date of this Agreement) when it becomes a member of the
Services Group after the date of this Agreement, but only if:
(A) the Encumbrance was not created in contemplation of
that person
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becoming a member of the Services Group; and
(B) the maximum principal amount of the indebtedness
secured by the Encumbrance is not subsequently
increased unless otherwise permitted pursuant to any
other provision of this Clause 21.3;
(xvi) any Encumbrance over any asset (other than the Shares)
acquired by a member of the Services Group after the date of
this Agreement as security for, or for indebtedness incurred
to finance or refinance (within 6 months of the acquisition
of that asset), all or part of the consideration for that
acquisition and/or any facility required for working capital
and/or general corporate purposes for the business and/or
persons so acquired and/or any related Derivative
Transactions;
(xvii) any Encumbrance created pursuant to a sale and leaseback,
hire purchase or other similar transaction to secure the
obligations of a member of the Services Group;
(xviii) any Encumbrance arising pursuant to a finance lease as
defined by the Applicable Accounting Principles;
(xix) any Encumbrances over cash deposited with a bank (a)
securing liabilities in respect of a letter of credit issued
by such bank in support of obligations of a member of the PA
Group which obligations are on the Borrowings List or which
obligations do not constitute Borrowings, or (b)
collateralising obligations of any member of the PA Group
incurred in respect of any obligation on the Borrowings
List; and
(xx) Encumbrances (other than over the Shares and shares in the
capital of a member of the Services Group) not otherwise
permitted pursuant to paragraphs (i)-(xix) (inclusive) above
together securing indebtedness in an aggregate principal
amount not exceeding at any time L75,000,000 (or its
equivalent in other currencies),
Provided that, PA may at any time require by not less than 5 Business
Days notice to the Facility Agent that any Borrowing is secured (PARI
PASSU with or on a basis subordinated to the Facilities) by the
Encumbrances constituted or evidenced by the Security Documents where:
(A) all of the net proceeds of that Borrowing are applied in
prepayment in part or in whole of the Facilities;
(B) that Borrowing:
(I) does not have a maturity date,
(II) is not voluntarily prepayable (otherwise than pro rata
with the Facility), and
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(III) does not amortise
before the Final Repayment Date;
(C) the creditors in respect of that Borrowing (or their agent or
trustee) have entered into an intercreditor agreement providing
that, so long as any amounts or commitments remain owed to or
available from any Finance Party, the Banks shall maintain
control of voting rights with respect to the Encumbrances
constituted or evidenced by the Security Documents (except to the
extent otherwise provided in that intercreditor agreement on
terms approved (which approval shall not be unreasonably
withheld) by the Majority Banks); and
(D) immediately after that Borrowing and partial prepayment, no
Default will be continuing.
(b) TRANSACTIONS SIMILAR TO SECURITY No Obligor will, and
each Obligor will procure that no member of the Services
Group will, save as permitted by a Waiver Letter purchase
any asset on terms providing for a retention of title by
the vendor or on conditional sale terms or on terms
having a like substantive effect to any of the foregoing,
except for assets purchased in the ordinary course of
business as provided in Clause 21.3(a)(x) above and any
assets in respect of which, if the same were the subject
of any Encumbrance arising as a result of such
transaction, such Encumbrance would not be prohibited by
the terms of Clause 21.3(a).
(c) DISPOSALS No Obligor will, and each Obligor will procure that no
member of the Services Group will, save as permitted by a Waiver
Letter or by Clause 21.3 (a), either in a single transaction or in a
series of transactions whether related or not and whether voluntarily
or involuntarily, sell, transfer, lease or otherwise dispose of:
(i) any Shares and any shares in EE or in any Holding Company
thereof;
(ii) all or any substantial part of the assets or undertaking of the
Group taken as a whole (not being an asset referred to in
paragraph (i) above), other than:
(A) disposals in the ordinary course of trading;
(B) in any annual Accounting Period, disposals of assets by
any member of the PA Group, (I) the gross value of which
(based, in relation to a disposal occurring before the
first delivery of any Accounts in accordance with Clause
21.2(a)(i)(I), on the Base Financial Statements, and in
relation to disposals occurring thereafter, on the
audited consolidated Accounts of the PA Group most
recently delivered to the Facility Agent) when aggregated
with all other disposals by each member
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of the PA Group during such annual Accounting Period not
permitted by any other paragraph of this Clause
21.3(c)(ii), does not exceed an amount equal to 10% of
the consolidated gross assets of the TEG Group as shown
in the Base Financial Statements or, as the case may be,
the PA Group as shown in such Accounts and (II) in
respect of which the Net Proceeds of such disposal will
be applied (A) within one year of receipt in or towards
acquiring for any member of the PA Group assets of a type
ordinarily employed in the operation of any business
permitted by Clause 21.10(a) or (B) in prepayment of any
Utilisation in accordance with Clause 9.3;
(C) disposals of plant and equipment or other like assets,
not required for the efficient operation of its business;
(D) transfer of cash unless otherwise prohibited by the terms
of the Finance Documents;
(E) the disposal of Cash Equivalent Investments for cash or
in exchange for other Cash Equivalent Investments;
(F) the disposal or securitisation of electricity receivables
of any Licenceholder or gas receivables of members of the
TEG Group;
(G) disposals by one member of the PA Group to another member
of the PA Group save that any such disposal by an Obligor
may only be made to a member of the PA Group which is not
an Obligor if such disposal is (i) expressly permitted
hereby (including any loan pursuant to Clause 21.5 and
any Distributions pursuant to Clause 21.6) or (ii) not
otherwise prohibited hereby and is made on arm's-length
terms;
(H) disposals of assets not otherwise permitted pursuant to
paragraphs (A)-(G) above or (I)-(J) below, the
consideration for which (including any amount of
intercompany debt repaid to any member of the continuing
Group), when aggregated with the consideration for all
other such disposals in the same annual Accounting Period
do not exceed L50,000,000 (or its equivalent in other
currencies);
(I) the Asset Split and all such other matters as are
contemplated by the Structure Memorandum; and
(J) sale and leaseback transactions (subject to Clause 9.3).
All disposals (save those permitted pursuant to paragraph (D), (G),
(I) or (J)) shall be made on arm's-length terms or on terms more
favourable to the PA Group.
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(d) PARI PASSU RANKING Each Obligor undertakes that its obligations under
this Agreement rank and will at all times rank at least PARI PASSU in
right and priority of payment and in point of security (save by reason
of and to the extent of the security afforded thereto by the Security
Documents) with all its other present and future unsecured and
unsubordinated obligations, other than obligations applicable
generally to companies incorporated in its jurisdiction of
incorporation which have priority by operation of law (including,
without prejudice to the generality of the foregoing, in respect of
employees' remuneration, Taxes and like obligations).
21.4 LIABILITIES
(a) THIRD PARTY GUARANTEES No Obligor will incur or permit to be
outstanding from it, save as permitted by a Waiver Letter, any
Borrowing falling within the provisions of paragraph (e) of the
definition of that term in Clause 1.1, with respect to any person
which is not an Obligor other than any such Borrowing arising under:
(i) the Finance Documents, or
(ii) the endorsement of negotiable instruments for the purpose and
in the ordinary course of carrying on the relevant entity's
trade (if and to the extent that the same would fall within
the definition of Borrowings in Clause 1.1), or
(iii) any guarantee, indemnity, letter of credit or similar
assurance against financial loss given under or in connection
with any pooling and settlement or onshore transportation
arrangements or agreements of the electricity or gas
generation, transportation, distribution and/or supply
industry (including (but without limitation) the Pooling and
Settlement Agreement (in the case of electricity) and the
Network Code (in the case of gas)) or telecommunications or
water industry or energy or energy-related business or in
connection with any transactions or arrangements entered into
in a form usual in any such industry or business (if and to
the extent that the same would fall within the definition of
Borrowings in Clause 1.1), or
(iv) the Gas Framework Agreement, or
(v) arrangements created to facilitate the operation of accounts
of members of the PA Group and other accounts of members of
the PA Group with the same bank or financial institution on a
net balance basis with (or without) credit balances and debit
balances on the various accounts being netted off for interest
purposes or to comply with any net limit, or for cash
management purposes, or as part of a back-to-back or similar
arrangement, or
(vi) (to the extent such guarantees are in respect of Borrowings
referred to in paragraph 21 under the heading Citizens Power
LLC in, or in Note 1 to, the Borrowings List) guarantees by
TEG in respect of obligations of Citizens,
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Provided that such guarantees by TEG shall, unless otherwise
agreed by the Majority Banks, be released within 270 days
after the first Utilisation Date, or
(vii) guarantees by the member of the TEG Group existing at the
Unconditional Date in respect of Borrowings identified in the
Borrowings List which remain outstanding without breaching
Clause 21.9, other than any such guarantees and Borrowings
referred to in (vi) above, or
(viii) guarantees of obligations of the nature and type described in
Clause 21.3(a)(xix), or
(ix) guarantees not otherwise permitted pursuant to paragraphs (i)
to (viii) (inclusive) above in aggregate principal amount not
exceeding at any time L50,000,000 (or its equivalent in other
currencies).
(b) SUBSIDIARY BORROWINGS Each Obligor shall procure that, from the date
falling six months after the first Utilisation Date, any Subsidiary
which is not a Guarantor, save for EE and any Subsidiary of EE from
time to time, shall not incur any Borrowings save for:
(i) Borrowings incurred by any Subsidiary of PA which becomes a
Project Finance Subsidiary within 6 months of the date upon
which such Borrowings were incurred;
(ii) obligations specified in the Borrowings List or incurred and
applied to refinance any such obligations;
(iii) Borrowings referred to in paragraph (e) of the definition
thereof;
(iv) Borrowings owed by one member of the PA Group to another
member of the PA Group;
(v) Borrowings owed by any person (other than a person which is a
member of the TEG Group at the Unconditional Date) when it
becomes a member of the Services Group after the Unconditional
Date, but only if:
(A) such Borrowings were not created in contemplation of
that person becoming a member of the Services Group;
and
(B) the maximum principal amount of such Borrowings is not
subsequently increased unless otherwise permitted
pursuant to any other provision of this Clause 21.4;
(vi) Borrowings owed or incurred under overdraft arrangements
available to the Services Group or any member thereof
(provided they are available to the Obligor) as at the
Unconditional Date but only if the maximum available principal
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amount of such Borrowings is not subsequently increased unless
otherwise permitted pursuant to any other provision of this
Clause 21.4;
(vii) Borrowings owed or incurred under facilities available to
Peabody Resources Limited or any of its Subsidiaries as at the
Unconditional Date but only if the maximum available principal
amount of such Borrowings is not subsequently increased unless
otherwise permitted pursuant to any other provision of this
Clause 21.4;
(viii) Borrowings not otherwise permitted pursuant to paragraphs (i)
to (vii) (inclusive) above in aggregate principal amount not
exceeding at any time an amount equal to L50,000,000 (or its
equivalent in other currencies) less the amount of Borrowings
from time to time taking the benefit of Clause 21.4(a)(viii),
21.5 LOANS OUT No Obligor will, and each Obligor will procure that no member of
the Services Group will, be the creditor in respect of any Borrowings, save for:
(a) any Borrowing approved pursuant to a Waiver Letter;
(b) any Borrowing:
(i) under paragraph (b) of the definition of "Borrowing" in Clause
1.1 where trade credit is extended by any member of the Group
on normal commercial terms and in the ordinary course of its
business; and
(ii) under paragraph (c) of the definition of "Borrowing" in Clause
1.1 where moneys are received in the ordinary course of
business;
(c) loans made by one member of the PA Group to another member of the PA
Group the proceeds of which are used in the ordinary course of
business of the borrower carried on in compliance with the terms of
this Agreement;
(d) loans made to trade customers of the PA Group in the ordinary course
of business the purpose of which is to facilitate trade between such
customers and members of the PA Group;
(e) Borrowing not otherwise permitted in an aggregate amount for the PA
Group as a whole at any time outstanding not exceeding L20,000,000 (or
its equivalent in other currencies);
(f) finance leases entered into in the ordinary course of business (which
for the avoidance of doubt, shall include the lease of the Kings Lynn
Power Station, on the terms in all material respects, as at the date
hereof);
(g) any Borrowing between any of Services, Finance, EnergyCo or PA not
otherwise prohibited hereby;
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(h) any Borrowing resulting from Cash or Cash Equivalent Investments;
(i) loans from TEG (in an amount not exceeding L20,000,000) to Regent
Capital Trust Corporation Limited in respect of The Energy Group
Employee Benefit Trust; or
(j) loans made to a Project Finance Subsidiary or any person in which a
member of the PA Group has an interest.
21.6 DISTRIBUTIONS, SUBORDINATED DEBT AND SHARE CAPITAL:
(a) PA will not and will procure that none of its Subsidiaries will, save
as permitted by a Waiver Letter:
(i) pay any Interest in respect of any Subordinated Debt or repay
or prepay any amount of principal (or capitalised interest) of
or in respect of any Subordinated Debt or purchase or enter
into any sub-participation arrangements in respect of any
amount of the Subordinated Debt (collectively "SUBORDINATED
PAYMENTS"); or
(ii) declare, make or pay any dividend (or interest on any unpaid
dividend), charge, fee or other distribution (whether in cash
or in kind) (the "DIVIDENDS") on or in respect of the share
capital of PA (or any class of its share capital) or
distribute any dividend or share premium reserve of PA; or
(iii) pay (other than to a member of the PA Group) any amount (the
"EXCESS AMOUNT") pursuant to the Tax Sharing Agreement in
respect of any period where such amount is in excess of the
amount by which the aggregate of the payments by the PA Group
to the United Kingdom tax authorities in respect of that
period is or will be reduced as a result of the UK tax losses
made or to be made available to the PA Group in consequence of
such payment; or
(iv) make any loans to EnergyCo or any Affiliate thereof which is
not a member of the PA Group; or
(v) redeem, repurchase, defease, retire, return or repay any of
its equity share capital (as defined in Section 744 of the
Companies Act 1985) or resolve to do so other than where such
redemption, repurchase, defeasement, retirement or repayment
occurs between members of the PA Group;
Provided that:
(A) PA, EE or any Hybrid Preferred Securities Subsidiary may pay
in cash Subordinated Payments; and
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(B) PA may declare and pay in cash Dividends; and
(C) PA may make loans to Services or Finance (the "SERVICES
LOANS"); and
(D) PA may pay any Excess Amount; and
(E) PA may redeem, repurchase, defease, retire, return or repay
any of its share capital ("REDEMPTION PAYMENTS"),
(such Subordinated Payments, Dividends, Services Loans, Redemption
Payments and Excess Amounts together being the "DISTRIBUTIONS") in
accordance with Clause 21.6(b) or (e) of this Agreement.
(b) In addition to Distributions permitted or not prohibited by Clause
21.6(e)(ii)(bb) and (cc) and (e)(iv), PA shall be entitled, subject to
the proviso below, to pay a Distribution in respect of any quarterly
Accounting Period at any time after the tenth Business Day after
delivery to the Facility Agent pursuant to Clause 21.2(a)(i) or (ii)
of the consolidated Accounts of PA for the quarterly Accounting Period
(accompanied by a certificate as referred to in Clause 21.2(a)(iv)) in
an amount equal to:
(i) if PA has on the proposed payment date senior long term debt
ratings of BBB+ or better (from Standard & Poor's Rating
Group) and Baal or better (from Moody's Investor Services
Group) (both ratings being required contemporaneously), the
greater of (i) L10,000,000, and (ii) one hundred per cent
(100%) of Adjusted Net Income for that quarterly Accounting
Period; or
(ii) if PA has on the proposed payment date senior long term debt
ratings of BBB- or better (from Standard & Poor's Rating
Group) and Baa3 or better (from Moody's Investor Services
Group) (both ratings being required contemporaneously), the
greater of (i) L10,000,000, and (ii) fifty per cent (50%) of
Adjusted Net Income for that quarterly Accounting Period; or
(iii) if it has neither of such debt ratings on the proposed payment
date the greater of (i) L10,000,000, and (ii) twenty-five per
cent (25%) of Adjusted Net Income for that quarterly
Accounting Period;
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Provided that notwithstanding the foregoing:
(I) if on the last Accounting Date (for which Accounts have
been delivered to the Facility Agent pursuant to Clause
21.2(a)(ii)) prior to the proposed date for payment of
the Distribution, Consolidated Net Total Borrowings
exceeded 68% of the sum of (i) Adjusted Capital and
Reserves and (ii) Consolidated Net Total Borrowings
(both as calculated by reference to the quarterly
Accounts delivered pursuant to Clause 21.2(a)(ii) in
respect of the quarterly Accounting Period ended on
that Accounting Date and the certificate relating
thereto delivered pursuant to Clause 21.2(a)(iv)), the
amount payable by way of Distribution as aforesaid
shall be limited so that the aggregate Distributions
paid by PA during the quarterly Accounting Period in
which such Distribution is paid and the three
immediately preceding quarterly Accounting Periods
shall not exceed the Fixed Sterling Equivalent of
$100,000,000 unless PA delivers to the Facility Agent a
certificate substantially in the form of the Twelfth
Schedule confirming INTER ALIA that such Distributions
are required to meet contractual obligations of
EnergyCo; and
(II) no Distribution may be paid if any Event of Default or
any Default falling within Clause 24.1(a) has occurred
and is continuing at the time for payment or would
occur or be continuing immediately after the payment
(whether or not caused by such payment) or as a result
of the payment.
(c) CERTIFICATION OF PAYMENT AMOUNTS Where any payment of Distributions
is proposed to be made in accordance with paragraph (b)(ii) or (iii)
of this Clause but only where such proposed Distribution is an amount
greater than L10,000,000, then, PA shall, prior to making such
payment, provide to the Facility Agent not less than 5 Business Days
before the proposed date for payment a certificate signed by the Chief
Financial Officer in a form reasonably satisfactory to the Facility
Agent showing (i) the date and amount of such proposed payment and
(ii) such calculations in reasonable detail as are necessary to show
that such payment is justified in terms of Clause 21.6(b).
(d) TIMING OF CERTAIN DISTRIBUTIONS Without prejudice to the
restrictions set out in the foregoing provisions of this Clause 21.6
relating to Distributions, Services shall ensure that payments (other
than to any member of the PA Group) pursuant to the Tax Sharing
Agreement are not made earlier than is provided for in the Tax Sharing
Agreement.
(e) SHARE CAPITAL AND DEBT Services will not, and no Obligor will, and
each Obligor will procure that no other member of the Services Group
will, save as permitted by a Waiver Letter and save for the conversion
and payments which are permitted in (and subject to the proviso of)
Clause 7.2 of the Intercreditor Agreement:
(i) save as contemplated by the Structure Memorandum, issue any
new share capital
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or grant any option to any person to subscribe for any shares
in its capital:
(aa) save that Finance may issue to Services and/or PA may
issue to Finance share capital of a type carrying no
mandatory redemption rights and no fixed dividend
(provided always that such shares are charged
immediately upon their issue to the Security Agent
pursuant to the terms of the Debenture and, if required
by the Security Agent, registered in its name in the
books of Finance or PA (as the case may be)) and save
also that Services may issue shares to EnergyCo or
(provided that the Net Proceeds of the issue are used
to prepay outstandings under the Facilities in
accordance with the terms of Clause 9.3) effect an IPO
of shares representing less than 25% of the issued
share capital of Services; and
(bb) save that any member of the PA Group may issue share
capital to another member of the PA Group (provided
that if the Security Agent or the Banks already have
security over the shares of the issuer of any such new
shares then Services will procure that the member of
the Group to whom such new shares are issued promptly
provides security over such shares to the Security
Agent and the Banks to the reasonable satisfaction of
the Security Agent); or
(ii) repay or prepay any amount of principal, capitalised interest
or interest pursuant to the EnergyCo/Services Loan Agreement
and/or Services/PA Loan Agreement and/or the PA Note and/or in
respect of any Subordinated Debt other than (aa) as permitted
pursuant to this Clause 21.6 and the terms of the
Intercreditor Agreement, (bb) under the PA Note or (cc) with
respect to the PA/Peabody Note, interest may be paid to the
extent that Peabody Global or, as the case may be, Peabody
Investments has declared or will promptly declare a dividend
payment at least equal to the proceeds of such interest
payment; or
(iii) redeem, repurchase, defease, retire, return or repay any
shares where a Default is continuing or will occur as a result
thereof; or
(iv) make any payment in respect of Hybrid Preferred Securities or
any Subordinated Debt incurred in connection therewith where a
Default is continuing or will occur as a result thereof.
21.7 ENVIRONMENTAL MATTERS Each Obligor will and will procure that each member
of the Group will:
(a) obtain all requisite Environmental Licences and comply in all material
respects with (i) the terms and conditions of all Environmental
Licences applicable to it and (ii) all other applicable Environmental
Law in each case where failure to do so would have a Material Adverse
Effect;
(b) promptly upon receipt of the same, notify the Facility Agent and the
Security Agent of
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any claim, notice or other communication served on it in respect of
any alleged breach of or corrective or remedial obligation or
liability under any Environmental Law which it is aware would, if
substantiated, have a Material Adverse Effect.
21.8 INSURANCE Each Obligor will, and will procure that each member of the
Services Group will, insure and keep insured all its property and assets
(including those taken in lease) of an insurable nature and which are
customarily insured (either generally or by companies carrying on a similar
business) against loss or damage by fire and other risks normally insured
against by persons carrying on the same class of business as that carried on by
it in a similar location and in a sum or sums and with deductibles and other
terms consistent with prudent market practice for companies carrying on a
similar business in a similar location. Each Obligor will, and will procure
that each member of the Services Group will, with reasonable promptness after
becoming aware of the relevant requirement effect and maintain all insurances
required by any applicable law or by the Licence.
21.9 REFINANCING DEBT The members of the PA Group indicated in the Borrowings
List as being the debtors in respect of Refinancing Debt which is to be
refinanced (or, where more than one member is indicated in respect of any
particular Refinancing Debt, whichever of those members is selected by PA to be
the borrower of any funds borrowed to refinance that Refinancing Debt) shall
accede as Borrowers hereunder in order to enable the relevant member to borrow
hereunder to refinance the relevant Refinancing Debt.
Services shall procure that:
(a) within three months of the Unconditional Date the Refinancing Debt
(other than that which is identified in the Borrowings List as being
permitted to remain outstanding on its existing terms or terms
negotiated in compliance with the terms hereof) shall be repaid or
prepaid in full save to the extent that to do so would breach the
prohibition set out in Section 151 of the Companies Act 1985; and
(b) as soon as the procedures set out in Section 155 et seq. of the
Companies Act 1985 required to be implemented to permit the repayment
of Refinancing Debt not required to be repaid or prepaid in accordance
with paragraph (a) above by reason of the exception relating to
Section 151 of the Companies Act 1985 have been completed all such
Refinancing Debt shall be repaid or prepaid (other than that which is
identified in the Borrowings List as being permitted to remain
outstanding as aforesaid).
Services shall ensure that any renegotiated terms applicable to any Refinancing
Debt (other than (A) that denominated according to the Borrowings List in the
currency of the Czech Republic or (B) that incurred pursuant to the Rent
Factoring Agreement) which is identified in the Borrowings List as being
permitted to remain outstanding shall not be more favourable in terms of all-in
return in any material respect to the creditors therefor than the terms of this
Agreement applicable to Utilisations by PA or on terms satisfactory to the
Majority Banks (acting reasonably).
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21.10 GENERAL UNDERTAKINGS
(a) CHANGE OF BUSINESS No Obligor will, and each Obligor will procure
that no other member of the Services Group will, save as permitted by
a Waiver Letter, carry on any business other than those which are
usual for energy companies (including, without limitation, electricity
distribution, supply, generation and trading, and business activities
related to the gas, telecommunications and water industries or the
energy or energy related business) or reasonably incidental or
ancillary to any such business provided that any member of the
Services Group may continue to carry on any business which it carries
on as at the date hereof.
(b) MERGERS No member of the Services Group shall enter into any merger
or consolidation with any other person, save that (i) members of the
PA Group may do so (whether by winding-up or otherwise) with other
members of the PA Group provided that the security provided for in
the Security Documents (taken as a whole) will not be materially
prejudiced thereby, and (ii) Finance may do so (whether by winding-up
or otherwise) with Services.
(c) HOLDING COMPANY Save as permitted by a Waiver Letter, none of
Services, Finance or PA shall carry on any business (other than the
provision of administrative services to members of the Services Group
and the holding of shares and making of loans as provided for below)
or acquire any assets other than Cash, Cash Equivalent Investments or
shares or loans which (i) in the case of Services, are shares in
Finance or a share in PA held as nominee for Finance or loans to
Finance or PA or (to the extent permitted by Clauses 21.5 and 21.6)
EnergyCo, or (ii) in the case of Finance, are shares in PA or loans to
PA or Services, or (iii) and subject to Clause 2.6 in the case of PA,
are Shares acquired in TEG by PA or loans to any member of the PA
Group or (subject to Clause 21.6) to Services or Finance, and in the
case of (i), (ii) and (iii) are or become on acquisition mortgaged,
pledged or otherwise charged to the Security Agent pursuant to the
Security Documents, provided that the foregoing restriction shall
cease to apply to PA immediately upon any merger of it and TEG
(whether by liquidation of TEG or otherwise).
(d) ARM'S-LENGTH TERMS No Obligor will, and each Obligor will procure
that no other member of the Services Group will, enter into any
material transaction with any person otherwise than on arm's length
terms, save as permitted by a Waiver Letter, and save for (i) loans
made by one member of the Services Group to a member of the PA Group
or by PA to Services or Finance, (ii) disposals by one member of the
Services Group to a member of the PA Group permitted by Clause
21.3(c), (iii) transactions entered into on terms more favourable to a
member of the PA Group than would have been the case had the
transaction been entered into on arm's length terms, (iv) transactions
expressly permitted by this Agreement, and (v) other transactions
between members of the PA Group not otherwise prohibited by the terms
of this Agreement.
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(e) AMENDMENTS TO DOCUMENTS No Obligor will, and each Obligor will
procure that no other member of the Services Group, save as permitted
by a Waiver Letter, will or will agree to amend, supplement, supersede
or waive any term of the Transaction Documents in any manner which
would materially and adversely affect the interests of the Banks under
the Finance Documents taken as a whole without the prior written
consent of the Majority Banks.
(f) CONSTITUTIONAL DOCUMENTS No Obligor will, and each Obligor will
procure that no other member of the Services Group will, save as
permitted by a Waiver Letter or as required by law, amend or seek or
agree to amend or replace the memorandum or articles of association or
other constitutional documents or by-laws of any member of the
Services Group in any way which would materially and adversely affect
the interests of the Banks under the Finance Documents (taken as a
whole), provided that if any such undertaking would not be enforceable
(having regard to the rule in RUSSELL V. NORTHERN BANK DEVELOPMENT
CORPORATION LIMITED & ORS) against any Obligor it shall not be given
by that Obligor.
(g) COMPLIANCE WITH LAWS Each Obligor will, and will procure that each
other member of the Services Group will, comply in all material
respects with all applicable laws, rules, regulations and orders of
any governmental authority, whether domestic or foreign, having
jurisdiction over it or any of its assets, failure to comply with
which would have a Material Adverse Effect.
(h) CONSENTS Each Obligor will, and will procure that each other member
of the Services Group will, obtain, promptly renew from time to time
and maintain in full force and effect, and if so requested promptly
furnish certified copies to the Facility Agent of all such material
authorisations, approvals, consents, licences and exemptions as may be
required under any applicable law or regulation or under any Licence
or any Licence Undertaking:
(i) to enable each Obligor to perform its respective material
obligations under the Finance Documents to which it is a party or
required for the validity or enforceability of such Finance
Documents or of any security provided for thereby; and/or
(ii) to carry on its business as it is being conducted from time to
time where failure to obtain, renew or maintain any such
authorisation, approval, consent, licence or exemption or
non-compliance with the terms of the same would have a Material
Adverse Effect.
(i) PENSION SCHEMES Services shall procure that all pension schemes
maintained by or for the benefit of any member of the Services Group
and/or any of its employees are maintained and operated in all
material respects in accordance with all applicable laws from time to
time and will ensure that all such pension schemes are funded
substantially in accordance with the governing provisions of such
schemes with any shortfall in funding advised by
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actuaries of recognised standing, being rectified in accordance with
such governing provisions.
(j) SYNDICATION Services shall ensure that such members of the Services
Group as the Facility Agent may reasonably require shall provide
reasonable assistance to the Facility Agent and the Arrangers in the
preparation of the Information Memorandum for syndication of the
Facilities and comply with all reasonable requests for information
from potential syndicate members made through the Facility Agent or an
Arranger in each case until the earlier of conclusion of the general
syndication (as notified to Services by the Facility Agent) or the
date falling six months after the Unconditional Date.
(k) LICENCE UNDERTAKINGS Services shall procure that on and from the
Unconditional Date the relevant Licenceholder will:
(i) take all appropriate steps efficiently to perform and
discharge the duties and functions of a generator of
electricity or, as the case may be, public electricity
supplier in accordance with the provisions of the Act and, in
particular, to comply with:
(A) the terms and conditions of the Licence;
(B) the provisions of any final order or confirmed
provisional order made under the Act; and
(C) all undertakings given by it to the Director-General
and/or the Secretary of State in respect of the matters
referred to in Section 25(5) of the Act,
where failure to take all appropriate steps would have or
would be reasonably likely to have a Material Adverse Effect;
(ii) not consent to any material amendment to the terms and
conditions of the Licence or to the giving of or amendment to
any Licence Undertaking if that amendment or Licence
Undertaking would have (whether immediately or in the course
of time prior to the Final Repayment Date) a Material Adverse
Effect and, if the amendment is required pursuant to a law or
regulation applying to the United Kingdom electricity
distribution, supply or generation industry as a whole, within
30 days Services and the Facility Agent (on behalf of the
Banks), have not agreed new terms for this Agreement
acceptable to the Majority Banks;
(iii) not consent to any revocation of any Licence except where a
replacement licence(s) is/are to be granted to a member or
members of the PA Group in its place (if such replacement
licence(s) is/are then required by statute or by regulation by
a company to carry on the business of a Licenceholder as
carried on as at the date hereof);
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(iv) promptly and in any event not less than 10 Business Days prior
to it so doing, where such is practicable having regard to the
period of notice given to such Licenceholder, inform the
Facility Agent of any Licence Undertaking to be given by it to
the Director General and/or the Secretary of State and of any
material amendment to be made by it to the terms and
conditions of the Licence;
(v) promptly supply to the Facility Agent:
(A) certified copies of all notices or orders served on it
by the Director General or the Secretary of State in
exercise of the powers conferred on him by the Act;
(B) details of any references relating to it to the
Monopolies and Mergers Commission after the signing of
this Agreement ; and
(C) details of the exercise or purported exercise by the
Secretary of State or the Director General of the
powers conferred on them by the Fair Trading Act 1973,
the Competition Act 1980 and/or Section 12 of the Act
relating to it or any business carried on by it and
regulated thereby;
(vi) ensure that at all times the Licenceholder has sufficient
working capital to finance the performance and discharge of
its duties as a generator of electricity or, as the case may
be, public electricity supplier, in accordance with the
provisions of the Act and the terms and conditions of its
Licence; and
(vii) not permit any person other than a member of the PA Group to
perform or manage on its behalf any of its functions as a
public electricity supplier as set out in the relevant Licence
and the Act.
(l) OFFER DOCUMENT Upon reasonable notice being given by the Facility
Agent and at its reasonable request, Services shall procure that PA
shall explain or give details of any item in any draft of the Offer
Document and discuss with the Arrangers the contents thereof (such
explanation and/or details being to the best of its knowledge and
belief, in respect of any item relating to TEG and/or the TEG Group).
(m) OFFER TERMINATION DATE Promptly upon the occurrence of the Offer
Termination Date, PA shall give notice to the Facility Agent (who
shall notify the Banks of the same) that the same has occurred.
(n) SECTION 428 Promptly upon acquisition by it of 90% in value of the
share capital in TEG to which the Offer relates, PA shall implement
the procedures set out in Section 429 of the Companies Act 1985 and
use its reasonable endeavours to acquire 100% of the issued share
capital of TEG within 6 weeks of its implementation of such procedure.
(o) HEDGING DOCUMENTS PA will effect the interest rate hedging
transactions described in the
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letter referred to in Clause 4.1(d) in amounts, and by the times
contemplated in such letter.
(p) STRUCTURE MEMORANDUM As soon as permitted by relevant law after the
Unconditional Date, Services shall procure that:
(i) the American Depositary Shares in the capital of TEG shall be
delisted from the New York Stock Exchange; and
(ii) those steps contemplated by the Structure Memorandum, not
completed as at the date hereof, shall be completed substantially
in accordance with and as set out in the Structure Memorandum.
(q) ASSET SPLIT Services will procure that within 270 days of the first
Utilisation Date the Asset Split shall have occurred.
(r) 2000 COMPLIANCE PA shall ensure that all computers and other systems
used by the members of the PA Group, whose failure (individually or
collectively) to be year 2000 compliant would have a material adverse
effect on the Borrowers' and Guarantors' ability to perform their
respective payment obligations under this Agreement will be year 2000
compliant by 30 September 1999.
(s) GENERATION SHARES Services will ensure that for so long as Eastern
Generation Limited remains a member of the Services Group (other than
as a direct Subsidiary of EE) it shall be a direct Subsidiary of
Eastern Group plc or a chargor under the Debenture.
22. THE OFFER
(a) Each of Services and PA undertakes that:
(i) without the prior agreement of the Majority Offer Banks (such
agreement being conclusively evidenced by a written notice
from the Facility Agent to Services and, in the case of
sub-paragraphs (A) and (C), not to be unreasonably withheld or
delayed) neither PA nor, in respect of sub-paragraph (C) only,
Services will:
(A) amend or vary in any material respect any material term
or condition of the Offer, other than by virtue of any
extension of the time for acceptance of the Offer;
(B) take or permit to be taken any step as a result of
which the offer price stated in the Offer is, or may be
required to be, increased beyond the level agreed
between PA and the Banks from time to time;
(C) issue or allow to be issued on its behalf any press
release or other publicity, the text of which has not
been previously agreed with the
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Arrangers, which makes reference to the Facilities or
to some or all of the Finance Parties unless the
publicity is required by law, a court, the Code or any
stock exchange (in which case Services or PA (as the
case may be) shall notify the Facility Agent and the
Banks as soon as practicable upon becoming aware that
the publicity is required);
(ii) in all material respects relevant in the context of the Offer,
it will comply with the Code (subject to any applicable
waivers by the Panel), the Financial Services Act 1986, the
Companies Act 1985 and all other applicable statutes, laws and
regulations;
(iii) it will keep the Facility Agent informed as to the status and
progress of the Offer and, in particular, will from time to
time and promptly on request give to the Facility Agent
reasonable details as to the current level of acceptances of
the Offer (including a copy of every certificate delivered by
the receiving agent to PA and/or its advisers pursuant to the
Code) and such other matters relevant to the Offer as the
Facility Agent may reasonably request.
(b) PA undertakes that, without the prior agreement of the Majority Offer
Banks, PA will not decide, declare or accept that valid acceptances in
respect of less than 90 per cent. in nominal value of TEG securities
to which the Offer relates shall be required for fulfilment of the
condition set out in paragraph (a) of Appendix 1 to the Press Release,
Provided that the Majority Offer Banks shall not unreasonably withhold
or delay giving its agreement if it is shown to their reasonable
satisfaction that PA will achieve acceptances sufficient to enable it
to give notice under section 429 of the Companies Act 1985 in relation
to the shares to which the Offer relates.
(c) PA shall keep the Facility Agent informed and consult with it as to:
(i) the terms of any undertaking or assurance proposed to be given
by it, any of its Affiliates or any member of the TEG Group to
the Director General of Electricity Supply, the Director
General of Gas Supply or the Secretary of State for Trade and
Industry in connection with the Offer;
(ii) the terms of any modification to any of the Licences proposed
in connection with the Offer;
(iii) any terms proposed in connection with any authorisation or
determination necessary or appropriate in connection with the
Offer, including those from the Secretary of State for Trade
and Industry and the Foreign Investment Review Board of
Australia.
If any of such proposed undertakings, assurances, modifications or
terms are, where applicable, of a type materially more onerous than
those already agreed in principle between PacifiCorp and the Office of
the Electricity Regulator or, as the case may be,
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any other relevant regulatory authority, and the Majority Offer Banks
(acting reasonably) state that in their opinion such proposed
undertaking(s), assurance(s), modification(s) and/or term(s), or
compliance therewith, would materially and adversely affect the
ability of the PA Group to comply with its material obligations under
the Finance Documents, PA shall promptly request the Panel to confirm
(and shall use its reasonable endeavours to ensure that the Panel does
confirm) that the Panel will not object to the lapsing of the Offer as
a result of the non-satisfaction of whichever of conditions (b) to (f)
in Appendix 1 to the Press Release is relevant. If the Panel gives a
confirmation substantially in those terms, PA shall at the earliest
opportunity declare the Offer lapsed by reason of the non-fulfilment
of such condition(s).
(d) If PA becomes aware (whether through notice from the Agent or any Bank
or otherwise) of a circumstance or event which is or could reasonably
be construed to be covered by any condition of the Offer (other than
those contained in paragraphs (a) to (j) of Appendix 1 to the Press
Release) which, if not waived, would entitle PA (with the Panel's
consent, if needed) to lapse the Offer, PA shall promptly notify the
Facility Agent.
(e) If a circumstance or event occurs of the nature referred to in (d)
above and the Majority Offer Banks, acting reasonably, state that in
their opinion such circumstance or event would materially and
adversely affect the ability of the PA Group to comply with its
material obligations under the Finance Documents, PA shall promptly
request the Panel to confirm (and shall use its reasonable endeavours
to ensure that the Panel does confirm) that the Panel will not object
to the lapsing of the Offer as a result of the non-satisfaction of
that condition. If the Panel gives a confirmation substantially in
those terms, PA shall not waive, that condition or treat it as
fulfilled and shall declare the Offer lapsed at the earliest
opportunity.
23. FINANCIAL RATIOS
23.1 FINANCIAL UNDERTAKINGS Services and PA will procure that:
(a) CONSOLIDATED NET TOTAL BORROWINGS TO THE SUM OF ADJUSTED CAPITAL AND
RESERVES AND CONSOLIDATED NET TOTAL BORROWINGS: Consolidated Net Total
Borrowings at all times during the periods set out below shall not be
more than Y per cent. of the sum of Adjusted Capital and Reserves and
Consolidated Net Total Borrowings on such Accounting Date, where Y has
the value indicated for such Accounting Date in such table:
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PERIOD
(TO 31 DECEMBER) Y%
1998 76
1999 74
2000 72
2001 70
2002 68
(b) CONSOLIDATED EBITDA TO CONSOLIDATED TOTAL NET INTEREST PAYABLE
Consolidated EBITDA for any period comprising an annual Accounting
Period of PA or four (taking into account the provisions of Clause
23.2) consecutive quarterly Accounting Periods of PA (taken together
as one period) ending on any Accounting Date falling closest to the
date specified in the table below, shall not be less than Y times
Consolidated Total Net Interest Payable for such period, where Y has
the value indicated for such Accounting Date in such table:
ACCOUNTING DATE Y
(BEFORE ANY ADJUSTMENT)
(TO 31 DECEMBER)
1998 1.9x
1999 2.1x
2000 2.25x
2001 2.5x
2002 2.75x
23.2 INITIAL CONSOLIDATED EBITDA TO CONSOLIDATED TOTAL NET INTEREST PAYABLE
TESTS The first test of the covenant set out in Clause 23.1(b) shall be made in
respect of a period ending on the expiry of the quarterly Accounting Period
commencing on, or (if none) on the expiry of the first quarterly Accounting
Period commencing after, the Unconditional Date. The first three tests of such
covenant shall be made in respect of periods which shall include such number of
pro forma Accounting Periods commencing before the Unconditional Date as shall
be required in order that each test is made for a period comprising four
quarterly Accounting Periods and on the basis of pro forma Accounts for those
pro forma Accounting Periods delivered to the Facility Agent pursuant to Clause
21.2(a)(vi) and Accounts delivered to the Facility Agent pursuant to Clause
21.2(a)(ii).
24. DEFAULT
24.1 EVENTS OF DEFAULT Each of the events set out below is an Event of Default
(whether or not caused by any reason outside the control of any or all of the
Obligors or of any other person):
(a) NON-PAYMENT Any Obligor does not pay on the due date any amount
payable by it to any Finance Party under any Finance Document at the
place, in the currency and in the funds
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expressed to be payable, provided that this sub-clause shall not apply
(i) to unpaid amounts which are paid in full within three Business
Days of the due date where the failure to pay such amount on its due
date is due solely to technical or administrative error, failure or
delay in the transmission of funds; or (ii) to unpaid amounts (other
than of principal of or interest or fee on any Utilisation) which are
paid in full within five Business Days of the due receipt by the
relevant Obligor of written notice from the Facility Agent requiring
the failure to be remedied; or
(b) BREACH OF OBLIGATION
(i) Any Obligor fails to comply with any provision of Clause 23;
or
(ii) Any Obligor fails to comply with any other provision of this
Agreement (irrespective of whether or not such provision is
valid and enforceable against such Obligor) and/or any other
provision of any other Finance Document in respect of which
any Finance Party has the benefit and, if such failure is
capable of remedy within such period, such Obligor shall have
failed to remedy such failure within 21 days after the receipt
by the relevant Obligor of written notice from the Facility
Agent to such Obligor requiring the failure to be remedied; or
(iii) Any Obligor shall do any of the things prohibited in Clauses
21.6(a) or 21.6(e), or any of the things prohibited in Clause
21.10(g) shall be done to or by any Obligor, whether or not
(having regarding to the rule in RUSSELL V. NORTHERN BANK
DEVELOPMENT CORPORATION LIMITED & ORS.) such undertaking is
enforceable against that Obligor, and, in each case, the
thing, if remediable, shall not have been remedied within 21
days after the receipt by the relevant Obligors of written
notice from the Facility Agent to such Obligor requiring the
thing to be remedied; or
(c) MISREPRESENTATION/BREACH OF WARRANTY Any representation, warranty or
statement made or repeated by or on behalf of any Obligor to any
Finance Party, in any Finance Document or in any certificate or
statement delivered to any Finance Party by or on behalf of any
Obligor or other member of the Services Group under or in connection
with any Finance Document, is incorrect or misleading in any respect
which is material when made or deemed to be made or repeated by
reference to the facts and circumstances then subsisting and, if the
circumstances causing such misrepresentation are capable of remedy
within such period, such Obligor shall have failed to remedy such
circumstances within 21 days after the receipt by the relevant
Obligors of written notice from the Facility Agent to such Obligor
requiring the circumstances causing such misrepresentation to be
remedied; or
(d) INVALIDITY Any of the Finance Documents (other than any Documentary
Credit or Substitution Certificate) shall cease to be in full force
and effect in any material respect or shall cease to (or be alleged by
any Obligor not to) constitute the legal, valid and binding obligation
of any Obligor party to it or, in the case of any Security Document,
fail to (or
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be alleged by any Obligor not to) provide effective security in favour
of the Security Agent and the Banks over the assets over which
security is intended to be given by that Security Document, in each
case in a manner and to an extent materially adverse to the interests
of the Banks under the Finance Documents (taken as a whole) or it
shall be unlawful for any Obligor to perform any of its material
obligations under any of the Finance Documents, provided that where
the relevant Finance Documents are re-executed by the relevant
Obligors in the same form in all material respects and none of the
circumstances described in this paragraph apply in respect of those
Finance Documents as so re-executed by the relevant Obligors and the
interests of the Banks under the Finance Documents are not continuing
to be materially and adversely affected as a result of any of the
foregoing circumstances having occurred, the relevant Event of Default
under this paragraph shall be treated as having been cured; or
(e) CROSS-DEFAULT
(i) Any Borrowings (other than Project Finance Borrowings and any
Borrowings made by one member of the Services Group from
another such member) of any member or members of the Services
Group (taken together) aggregating L30,000,000 (or its
equivalent in other currencies) or more at any one time
outstanding become (or become capable of being declared) due
and payable or due for redemption before their normal maturity
date or are placed on demand, in each case by reason of the
occurrence of an event of default (howsoever characterised);
(ii) Any Borrowings (other than Project Finance Borrowings and any
Borrowings made by one member of the Services Group from
another such member) of any member or members of the Services
Group (taken together) aggregating L30,000,000 (or its
equivalent in other currencies) or more are not paid when due
(whether falling due by demand, at scheduled maturity or
otherwise) nor within any applicable grace period provided for
in the document evidencing or constituting those Borrowings
unless being disputed in good faith; or
(iii) If funds aggregating L30,000,000 (or its equivalent in other
currencies) are outstanding in respect thereof, any commitment
for or underwriting of any facility for Borrowings (other than
Project Finance Borrowings and any Borrowings made by one
member of the Services Group from another such member)
aggregating L30,000,000 (or its equivalent in other
currencies) or more of any member or members of the Services
Group (taken together) is cancelled or suspended by the
provider of that facility by reason of the occurrence of an
event of default (howsoever characterised).
For the purpose of this Clause 24.1(e) any amount arising pursuant to
any arrangement falling within paragraph (f) of the definition of
Borrowing in Clause 1.1 which is capable of being declared due and
payable before its normal due date by reason of the occurrence of an
event of default (howsoever characterised) shall be deemed to be the
Negative
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Termination Amount in respect of such arrangement and shall be
aggregated with all other relevant amounts accordingly; or
(f) LIQUIDATION Any order is made or resolution passed or any legal
proceedings are initiated or are consented to by any Obligor or any
Material Subsidiary, or any petition shall be presented or legal
proceedings commenced by any person (and not, where that person is
unconnected with that Obligor or Material Subsidiary save for being a
creditor of such member, discharged or stayed within twenty-one days
in the case of both legal proceedings and such petition), for the
suspension of payments generally or for any process giving protection
against creditors or for the dissolution, termination of existence,
liquidation, winding-up, bankruptcy or other like process, in each
case with respect to the Obligor or any Material Subsidiary save to
the extent any such liquidation is made to effect a merger of two
companies permitted under the terms of Clause 21.10(b); or
(g) MORATORIUM A moratorium in respect of all or any debts of any Obligor
or Material Subsidiary or a composition or an arrangement with
creditors generally of such Obligor or Material Subsidiary or any
other arrangement whereby its affairs and/or assets are submitted to
the control of or are protected from its creditors is applied for,
ordered or declared save where the relevant company is, in good faith,
contesting such application, moratorium, composition or arrangement by
appropriate proceedings diligently pursued and such application,
moratorium, composition or arrangement is discharged within 21 days;
or
(h) ADMINISTRATOR An application is made for the appointment of an
administrator (as such term is used in the Insolvency Act 1986) or
similar official in relation to any Obligor or Material Subsidiary or
an administrator or administrative receiver is appointed in respect of
any Obligor or Material Subsidiary save where the relevant company is,
in good faith, contesting such application or appointment by
appropriate proceedings diligently pursued and such application is not
discharged or appointment rescinded within 21 days or an effective
resolution is passed by the directors or shareholders of any Obligor
or Material Subsidiary for such an application to be made; or
(i) RECEIVER A liquidator or provisional liquidator (save as excepted in
paragraph (f) above) or, a trustee, receiver, administrative receiver,
manager (being a person acting on behalf of all or any creditors) or
similar officer is appointed in respect of any Obligor or Material
Subsidiary or in respect of (or takes possession of) all or any part
of its assets with a value in excess of L30,000,000 (or the equivalent
in other currencies); or
(j) INSOLVENCY Any Obligor or Material Subsidiary is declared or deemed
pursuant to any applicable legislation to be insolvent or is or is
deemed pursuant to any applicable legislation to be unable, or admits
in writing its inability, to pay its debts as they fall due or stops
or threatens to stop payment of its debts generally or becomes
insolvent within the terms of any applicable law excluding Section
123(1)(a) of the Insolvency Act 1986; or
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(k) DISTRESS Any distress, execution, attachment, sequestration or other
like process affects any Obligor or Material Subsidiary save where (i)
(I) the relevant member is, in good faith, contesting the distress,
execution, attachment, sequestration or other like process by
appropriate proceedings diligently pursued, or (II) such process is
discharged within 21 days or (III) such process is being pursued in
respect of an amount due not exceeding L30,000,000 and (ii) the
ability of any Obligor to comply with its obligations under the
Finance Documents will not be materially and adversely affected whilst
such distress, execution, attachment, sequestration or other process
is being so contested; or
(l) ANALOGOUS PROCEEDINGS There occurs, in relation to any Obligor or
Material Subsidiary in any country or territory in which it is
incorporated or carries on business or to the jurisdiction of whose
courts it or any part of its assets is subject, any event which, in
the reasonable opinion of the Majority Banks, corresponds in that
country or territory with any of the events mentioned in paragraphs
(f) to (k) (inclusive) above or any Obligor or Material Subsidiary
otherwise becomes subject, in any of those countries or territories,
to any proceedings relating to insolvency, bankruptcy, liquidation,
reorganisation or dissolution having a similar effect to the events
mentioned in paragraphs (f) to (k) (inclusive) above; or
(m) CESSATION Any Obligor or Material Subsidiary ceases to carry on all
or a substantial part of its business (save in consequence of any
reorganisation, reconstruction, amalgamation or merger permitted under
this Agreement or approved pursuant to a Waiver Letter or save as may
result from any disposal of assets permitted by the terms of this
Agreement or any solvent liquidation, dissolution or winding up of any
Material Subsidiary (not being an Obligor, other than in the event of
such liquidation made to effect a merger of two companies permitted
under the terms of Clause 21.10(b))); or
(n) CONTROL Without the prior written consent of the Majority Banks, any
single person or group of persons acting in concert (as defined in the
City Code on Takeovers and Mergers), other than one or more of
PacifiCorp and any of its Affiliates acquires control (as defined in
Section 416 of the Income and Corporation Taxes Act 1988) of Services;
or
(o) PROCEEDINGS There is current or pending at the Unconditional Date or
there shall occur thereafter any litigation, arbitration,
administrative, regulatory or other proceedings or enquiry including
without limitation any such by the Office of Fair Trading, the
Monopolies and Mergers Commission, the Department of Trade and
Industry, or any equivalent body in any other jurisdiction or the
European Commission or any division of any thereof or authority
deriving power from any thereof) concerning or arising in consequence
of any of the Transaction Documents and/or the implementation of any
matter or transaction provided for in the Transaction Documents or
otherwise concerning or involving any Obligor or Material Subsidiary
and, in each case the same has a Material Adverse Effect; or
(p) EXPROPRIATION The authority or ability of any Obligor or Material
Subsidiary to conduct its business (i) is wholly curtailed by any
seizure, expropriation, intervention,
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renationalisation or other action by or on behalf of any governmental,
regulatory or other authority or (ii) is substantially curtailed by
any seizure, expropriation, intervention, renationalisation, or other
action by or on behalf of any governmental, regulatory or other
authority which is reasonably likely to have a Material Adverse
Effect; or
(q) DISTRIBUTION BUSINESS/GENERATION BUSINESS
(i) The PA Group, ceases, or threatens to cease, to carry on the
Distribution Business; or
(ii) Any change is made in the statutory or regulatory requirements
applicable to the Distribution Business or the Generation
Business, which has, or any new statutory or regulatory
requirements are imposed on it which have, a Material Adverse
Effect and, if the changed or new statutory or regulatory
requirements apply to the United Kingdom electricity
distribution, supply or generation industry as a whole, within
30 days Services and the Facility Agent (on behalf of the
Banks) have not agreed new terms for this Agreement acceptable
to the Majority Banks; or
(r) REVOCATION AND MODIFICATION OF LICENCE
(i) The Secretary of State gives notice in writing of the
revocation of a Licence for any reason or a Licence ceases to
be in full force and effect in any material respect, in each
case except where a similar licence(s) is/are granted to a
member or members of the PA Group in its place or where such
Licence is no longer required (by law or regulation) to be
held by any Licenceholder in order that it may carry on any
business carried on by such Licenceholder on the date hereof.
(ii) Without prejudice to paragraph (i) above, any legislation
(whether primary or subordinate) removing, reducing or
qualifying the duties of the Secretary of State and/or the
Director-General with regard to the creditors or the ability
of the Licenceholder to raise finance under a Licence or of
generators of electricity or public electricity suppliers
generally is enacted and the enactment has a Material Adverse
Effect.
(iii) Any amendment is made to the terms and conditions of a Licence
and the amendment has a Material Adverse Effect and, if the
amendment is required pursuant to a law or regulation applying
to the United Kingdom electricity distribution, supply or
generation industry as a whole, within 30 days Services and
the Facility Agent (on behalf of the Banks) have not agreed
new terms for this Agreement acceptable to the Majority Banks;
or
(s) COMPLIANCE WITH ACT Any member of the PA Group 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 not
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since been revoked) or any provisions of the Act 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 has (or is
likely to have) a Material Adverse Effect; or
(t) POOLING AND SETTLEMENT AGREEMENT Any notice requiring EE to cease to
be a party to the Pooling and Settlement Agreement is given to EE or
any member of the PA Group under Clause 66.1.3 or 66.2.2 of the
Pooling and Settlement Agreement or EE or any member of the PA Group
otherwise ceases to be a party to the Pooling and Settlement Agreement
save where another member of the PA Group becomes a party in its
place; or
(u) INTERCREDITOR AGREEMENT
(i) Any Affiliate of Services (other than a member of the Services
Group) party thereto fails to comply with any provision of the
Intercreditor Agreement or the Powercoal Intercreditor
Agreement and, if such failure is capable of remedy within
such period, such party shall have failed to remedy such
failure within 14 days after the earlier of the relevant party
becoming aware of such default (provided that such 14 day
period shall be suspended from the date on which any such
party notifies the Facility Agent of such failure, to the date
on which the Facility Agent confirms to the relevant party
that such remedy is required) and receipt by the relevant
party of written notice from the Facility Agent to such party
requiring the failure to be remedied; or
(ii) Any representation, warranty or statement made or repeated by
or on behalf of any Affiliate of Services (other than a member
of the Services Group) party thereto, in the Intercreditor
Agreement or in the Powercoal Intercreditor Agreement or in
any certificate or statement delivered by or on behalf of any
Obligor or other member of the Services Group under or in
connection with the Intercreditor Agreement or in the
Powercoal Intercreditor Agreement, is incorrect or misleading
in any respect which is material when made or deemed to be
made or repeated by reference to the facts and circumstances
then subsisting and, if the circumstances causing such
misrepresentation are capable of remedy within such period,
such Obligor shall have failed to remedy such circumstances
within 14 days after the earlier of the relevant Obligor
becoming aware of such misrepresentation (provided that such
14 day period shall be suspended from the date on which any
Obligor notifies the Facility Agent of such misrepresentation,
to the date on which the Facility Agent confirms to the
relevant Obligor such remedy is required) and receipt by the
relevant Obligor of written notice from the Facility Agent to
such Obligor requiring the circumstances causing such
misrepresentation to be remedied; or
(iii) Any of the Intercreditor Agreement or the Powercoal
Intercreditor Agreement is not or ceases to be in full force
and effect in any material respect or shall cease to (or be
alleged by any party not to) constitute the legal, valid and
binding
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obligation of any Affiliate of Services (other than a member
of the Services Group) party thereto, in each case in a manner
and to an extent to be materially adverse to the interests of
the Banks under the Intercreditor Agreement or in the
Powercoal Intercreditor Agreement or it shall be unlawful for
any such Affiliate to perform any of its material obligations
under the Intercreditor Agreement or the Powercoal
Intercreditor Agreement provided that where the relevant
agreement is re-executed by the relevant party in the same
form in all material respects and none of the circumstances
described in this paragraph apply in respect of that agreement
as so re-executed by the relevant party and the interests of
the Banks under that agreement are not continuing to be
materially and adversely affected as a result of any of the
foregoing circumstances having occurred, the relevant Event of
Default under this paragraph shall be treated as having been
cured;
and in each such case in the reasonable opinion of the Majority Banks
the interest of the Banks under the Finance Documents (taken as a
whole) shall be materially prejudiced thereby;
(v) MATERIAL ADVERSE EFFECT Any event or series of events whether related
or not occurs which has a Material Adverse Effect; or
(w) ASSET SPLIT AND CERTAIN GUARANTEES (i) The Asset Split shall not have
occurred and been completed in all material respects as indicated in
the Structure Memorandum within 270 days of the first Utilisation
Date, or (ii) any of the guarantees referred to in Clause 21.4(a)(vi)
shall not be discharged or released within 270 days of the first
Utilisation Date.
24.2 SANCTIONS Subject where applicable, to Clauses 24.4 and 24.3, upon the
occurrence of an Event of Default and at any time thereafter while the same is
continuing and has not been waived pursuant to a Waiver Letter, the Facility
Agent may, and shall if so directed by the Majority Banks, by notice to
Services:
(a) declare than an Event of Default has occurred; and/or
(b) declare that the Total Commitments shall be cancelled or reduced
forthwith to the level specified by the Facility Agent, whereupon the
same shall be so cancelled and all fees payable in relation to the
amount of the Total Commitments so cancelled or reduced shall become
immediately due and payable; and/or
(c) declare that all or part of the Advances to some or all of the
Borrowers be payable on demand, whereupon (to the extent so declared)
they shall immediately become payable by the relevant Borrower on
demand by the Facility Agent (and if and to the extent any such demand
is subsequently made those Advances (to the extent so declared and
demanded), together with accrued interest on and all other amounts
accrued under this Agreement in respect of the Advances so declared
and demanded, shall be immediately due and
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payable); and/or
(d) demand that all or part of the Advances to some or all of the
Borrowers, together with accrued interest, and all other amounts
accrued under this Agreement be immediately due and payable, whereupon
(to the extent so demanded) they shall become immediately due and
payable; and/or
(e) require the payment to the Facility Agent of a sufficient sum to cover
the Outstanding Liability Amounts under some or all outstanding
Documentary Credits issued for the account of some or all of the
Borrowers, whereupon the same shall become immediately due and payable
by the relevant Borrowers and, once paid, shall be held by the
Facility Agent in an interest bearing account for application in
reimbursing the LC Bank or the Banks forthwith for all payments made
or to be made under such outstanding Documentary Credits.
24.3 CLEAN UP PERIOD If during the period ending on the date six (or if it
relates to Citizens, nine) months from the first Utilisation Date any event or
circumstance which (but for this Clause 24.3) would constitute a Default (the
"POTENTIAL EVENT OF DEFAULT") shall exist which consists of, or is a direct
consequence of any event or circumstance which occurred in relation to TEG or
any of its Subsidiaries (or its or any of their business, assets or liabilities)
on or before the Unconditional Date, then the following shall apply:
(a) Services or PA or TEG shall notify the Facility Agent of that fact by
fax promptly after becoming aware thereof, giving a reasonable
description of:
(i) the Potential Event of Default and (so far as known to them) its
causes; and
(ii) any remedial action in relation to that Potential Event of
Default which Services and/or PA and/or TEG propose to take or
procure is taken;
(b) that Potential Event of Default shall not constitute a Default, and
the Facility Agent shall not with respect to that Potential Event of
Default (but, for the avoidance of doubt, not so as to restrict the
Facility Agent's rights to take such action with respect to any other
Event of Default which is not a Potential Event of Default) be
entitled to take any of the actions set out in Clause 24.2, until
(assuming that the Potential Event of Default is then continuing as an
Event of Default) six (or if it relates to Citizens, nine) months
after the first Utilisation Date,
Provided that (A) the foregoing shall not apply with respect to any Potential
Event of Default under any of the Clauses 24.1(a), (d), (e)(i) (in consequence
only of Borrowings being declared due and payable or capable of being declared
due and payable which are not Refinancing Debt), (f), (g), (h), (i), (j), (l)
(only to the extent analogous to (f) to (j) inclusive), (n), (p), (q), (r), (s),
(t) or (v) in each case irrespective of whether or not that Potential Event of
Default occurred in consequence of any event or circumstance which occurred
before the Unconditional Date, and (B) any Potential Event of Default shall
nevertheless constitute a Default for the purposes of Clause 4.3, save (in the
case only of a Potential Event of Default
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consisting of a Default arising under Clause 24.1(b)(ii), (c) or (e) (i) (in
consequence as aforesaid)) where it is demonstrated to the reasonable
satisfaction of Citibank, N.A. that such Potential Event of Default is likely to
be cured within six (or if it relates to Citizens, nine) months after the first
Utilisation Date without any Material Adverse Effect occurring.
24.4 CERTAINTY OF FUNDING
(i) No Finance Party shall be entitled to prevent the funding of the Offer
or exercise any right of rescission or set-off or similar right
(whether on the basis of misrepresentation or Event of Default or
otherwise) until after the Offer Termination Date if to do so would
prevent the funding of the Offer in accordance with Clause 4.2.
(ii) No Finance Party shall be entitled, until after the Offer Termination
Date, to exercise any other right or remedy referred to in Clause
24.2(a) to (e) or under any other Finance Document unless:
(a) a breach of Clause 22 (other than Clause 22(a)(i)(C), (ii) or
(iii) or 22(d)) shall have occurred and be continuing which has
not been waived by a Waiver Letter; or
(b) any of the representations and warranties in Clause 20.1(a), (b),
(c), (d)(i) or (ii), (n) or (p) is incorrect in any material
respect when made or repeated, ignoring any references to
Subsidiaries (other than PA), TEG, its Subsidiaries and their
respective businesses and assets; or
(c) any Event of Default falling within any of paragraphs (f) to (j)
inclusive and (l) (only to the extent analogous to (f) to (j)
inclusive) of Clause 24.1 has occurred and is continuing with
respect to Services, Finance or PA and has not been waived by a
Waiver Letter.
24.5 NO BREACH FROM ASSET SPLIT ARRANGEMENTS The Finance Parties acknowledge
and agree that PA may require certain borrowing facilities on and only for the
day that the Asset Split takes place in order to complete the Asset Split. Such
borrowing and any security granted in respect thereof shall be permitted
hereunder and all necessary consents, waivers or exclusions required under the
Finance Documents are now granted. Save for the purposes of and where necessary
to give effect to this Clause any such borrowings, the interest payable on them
and the security given in connection therewith shall be ignored for all purposes
of the Finance Documents.
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25. INDEMNITIES
25.1 CURRENCY INDEMNITY
(a) If any amount payable by any Obligor under or in connection with any
Finance Document is received by any Finance Party in a currency (the
"PAYMENT CURRENCY") other than that agreed to be payable under that
Finance Document (the "AGREED CURRENCY"), whether as a result of any
judgement or order or the enforcement of the same, the liquidation of
such Obligor or otherwise and the amount produced by converting the
Payment Currency so received into the Agreed Currency at market rates
prevailing at or about the time of receipt of the Payment Currency is
less than the amount of the Agreed Currency due under that Finance
Document, then the Obligors shall, as an independent and additional
obligation, indemnify each Finance Party for the deficiency and any
loss sustained as a result.
(b) The above indemnities shall constitute separate and independent
obligations of each of the Obligors from their other obligations under
the Finance Documents and shall apply irrespective of any indulgence
granted by any Finance Party. The Obligors shall pay the reasonable
costs of making any conversion from the Payment Currency to the Agreed
Currency.
(c) Each Obligor waives any right it may have in any jurisdiction to pay
any amount under this Agreement in a currency other than that in which
it is expressed to be payable under that Finance Document.
25.2 OTHER INDEMNITIES The Obligors shall indemnify each Finance Party against
any losses (excluding loss of the applicable Margin save in the case of
paragraphs (a) and (b) below), charges or expenses which such Finance Party may
sustain or incur as a consequence of:
(a) the occurrence of any Default; or
(b) the operation of Clause 2.5 or 24.2; or
(c) any repayment or prepayment of an Advance or payment of an overdue
amount being made otherwise than on its Interest Date; or
(d) (other than by reason of default by any Finance Party) any Utilisation
not being made (or not being made in full) to any Borrower after a
Request has been given pursuant to Clause 5 or Clause 6 (as the case
may be),
including but not limited to any losses, charged or expenses on account of funds
acquired, contracted for or utilised to fund any amount payable under this
Agreement, any amount repaid or prepaid or any Utilisation (as the case may be).
A certificate of such Finance Party as to the amount of any such loss or expense
shall be prima facie evidence in the absence of manifest error.
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25.3 INDEMNITY RELATING TO FACILITIES
(a) Services agrees to indemnify each Finance Party and any Holding
Company or subsidiary of any Finance Party and each of their
respective directors, officers and employees against any and all
claims, damages, liabilities, costs and expenses (including reasonable
legal fees) which may be incurred by or asserted against such Finance
Party or any such Holding Company or Subsidiary or their respective
directors, officers and employees in connection with or arising out of
any such proceedings, actions or enquiry by any regulatory authority
of a type referred to in Clause 24.1(o) (ignoring the provision as to
materiality contained therein) or any litigation or other proceedings
(other than between Finance Parties) connected with the Offer except
to any extent resulting from the gross negligence or wilful misconduct
of any person otherwise entitled to be indemnified under this
indemnity. It is agreed that:
(i) each Finance Party shall notify Services promptly in
reasonable detail of any potential claim by it or any Holding
Company or Subsidiary of it or any of their respective
directors, officers or employees on Services under this Clause
25.3 promptly upon its becoming aware of that potential claim;
and
(ii) if Services wishes any Finance Party to enter into any
negotiations with a view to settlement of any dispute with any
third party likely to give rise to any claims, damages,
liability, costs and expenses for which a claim may be made
under this Agreement, it shall notify that Finance Party
accordingly, which Finance Party will then enter into such
negotiations in good faith on a without prejudice basis but
shall not be bound so to settle unless such Finance Party is
agreeable so to settle (such agreement not to be unreasonably
withheld); and
(iii) any payments required to be made by reason of this indemnity
shall be in addition to any other amounts provided for in this
Agreement or agreed to be paid in respect of the Facilities.
(b) Each Finance Party shall give promptly to Services such details and
copies of legal opinions and process served concerning (or concerning
the circumstances giving rise to) any claims, damages, liabilities,
costs and expenses which may form the basis of any claim by it on
Services hereunder, as Services may reasonably request.
(c) At the request of Services, from time to time, each Finance Party will
discuss with Services and will give careful consideration in good
faith to the views of Services concerning the appointment of
professional advisers in connection with any such claims, damages,
liabilities, costs and expenses (and in connection with the
circumstances giving rise thereto and any proceedings current, pending
or threatened relating thereto) and the conduct of any proceedings,
and will use reasonable endeavours to procure that (once appointed)
all professional advisers acting for it in relation thereto shall do
likewise and that where possible and where such Finance Party does not
reasonably consider that it is
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against such Finance Party's best interest, one firm of professional
advisers only is appointed to represent all of the Finance Parties.
(d) Notwithstanding the foregoing provisions of this Clause 25.3, no
Finance Party shall be required to disclose to Services or any other
Obligor any matter with regard to which it is under a duty of
non-disclosure. All information which may be disclosed by any Finance
Party pursuant to this Clause 25.3 shall be disclosed on the same
conditions as to confidentiality, as are set out in Clause 33.
26. AGENTS, ARRANGERS AND BANKS
26.1 APPOINTMENT Each Bank hereby appoints the Facility Agent and the Security
Agent to act as its agent hereunder and with respect to the Finance Documents
and irrevocably authorises the Facility Agent on such Bank's behalf to:
(a) enter into any Borrower Accession Agreement, Guarantor Accession
Agreement or Security Agreement (whereupon and by which act such Bank
shall become bound thereby); and
(b) perform such duties and exercise such rights and powers under the
Finance Documents as are specifically delegated to such Agent by the
terms thereof, together with such rights and powers as are reasonably
incidental thereto.
Each Agent shall have only those duties and powers which are expressly specified
in the Finance Documents. Each Agent's duties under the Finance Documents are
intended to be of a mechanical and administrative nature.
26.2 MAJORITY BANK'S DIRECTIONS In the exercise of any right or power granted
and as to any matter not expressly provided for by the Finance Documents, each
Agent shall act in accordance with the instructions of the Majority Banks or as
this Agreement may require and shall be fully protected in so doing. Any such
instructions shall be binding on all the Banks. Subject to Clauses 26.7 and
26.16, in the absence of any such instructions and/or any relevant requirement
contained in any Finance Document, each Agent may act or refrain from acting
with respect to such right or power and as to any such matter as it shall see
fit.
26.3 RELATIONSHIP
(a) The relationship between each Bank and each Agent is that of principal
and agent. Nothing herein (other than in relation to the Security
Agent and the Security Documents as to which the Security Agent shall
be a trustee for the Banks) shall constitute the Facility Agent a
trustee or (save, with regard to any Bank, as necessarily results from
its agency relationship with that Bank) fiduciary for any Bank, any
Obligor or any other person.
(b) No Agent shall be liable to any Obligor for any breach by any Bank of
this Agreement or be liable to any Bank for any breach by any Obligor
of any Finance Document.
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26.4 DELEGATION Without prejudice to its obligations hereunder, each Agent may
act under the Finance Documents through its personnel and through agents
selected by it with reasonable care (who shall be entitled to the same
protections as those given to the Agents under this Clause 26).
26.5 DOCUMENTATION Neither any Agent or any of the Arrangers nor any of its
officers, employees or agents shall be responsible to any Bank or to each other
for:
(a) the execution, genuineness, validity, enforceability or sufficiency of
any Finance Document or any other document in connection therewith; or
(b) the collectability of amounts payable thereunder; or
(c) the accuracy of any statements (whether written or oral) made in or in
connection with any Finance Document or other document in connection
therewith.
26.6 DEFAULT No Agent shall be required to ascertain or inquire as to the
performance or observance by any Obligor of the terms of any Finance Document or
any other document in connection therewith. No Agent shall be deemed to have
knowledge of the occurrence of any Default unless that Agent has received notice
from a party hereto describing such Default and stating that such notice is a
"Notice of Default". If any Agent receives such a notice of default or officers
of any Agent engaged in the performance of that Agent's functions under the
Finance Documents otherwise acquire actual knowledge that a Default has
occurred, that Agent shall give notice thereof promptly to the Banks. Each
Agent shall take or refrain from taking such action with respect to such Default
as shall be directed by the Majority Banks, provided that nothing herein
contained shall oblige any Agent to institute any legal action or proceedings on
behalf of any Bank. Until any Agent shall have received such directions, it may
(but shall not be obliged to) take or refrain from taking such action with
respect to such Default as it shall see fit.
26.7 EXONERATION Neither Agent nor any of its officers, employees or agents
shall be liable to any Bank for any action taken or omitted under or in
connection with any Finance Document unless caused by its or their gross
negligence or wilful misconduct.
26.8 RELIANCE Each Agent may rely on any communication or document reasonably
believed by it to be genuine and correct and may rely on any statement made by a
director or employee of any person regarding any matters which may reasonably be
assumed to be within his knowledge or within his power to verify. Each Agent
may engage, pay for and rely on legal or other professional advisers selected by
it and shall be protected in so relying.
26.9 CREDIT APPROVAL Each of the Banks severally represents and warrants to
each Agent and each of the Arrangers that it has made its own independent
investigation and assessment of the financial condition and affairs of each
Obligor and their related entities and other parties considered by it to be
relevant in connection with its participation in this Agreement and has not
relied exclusively on any information, including the Information Memorandum
provided to such Bank by any Agent or any Arranger in connection herewith. Each
Bank represents, warrants and undertakes to each Agent and each Arranger that it
shall continue to make its own independent appraisal of the creditworthiness of
the Obligors and
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other parties considered by it to be relevant in connection with the Finance
Documents and their related entities while any amount is or may be outstanding
under the Finance Documents.
26.10 INFORMATION
(a) The Facility Agent shall promptly furnish each Bank with a copy of any
documents received by it under Clause 21.2. If so requested by any
Bank, the Facility Agent shall furnish to such Bank (at the expense of
Services) a copy of any of the documents listed in the Seventh
Schedule delivered on or prior to the first Utilisation Date.
(b) The Facility Agent shall, without any liability on its part in the
event of any failure to do so except in the case of its negligence or
wilful default, send to the Banks (at the expense of Services) any
document (or a summary of the material details of such document)
received by it from any Obligor pursuant to this Agreement which
contains any information which the Facility Agent considers to be of
direct and material interest and significance to the Banks and their
interests under this Agreement and which can lawfully be distributed
by the Facility Agent without incurring any liability to any person
whatsoever.
(c) Save as provided in paragraph (a) above neither Agent nor any Arranger
shall have any duty either initially or on a continuing basis to
provide any Bank with any credit or other information with respect to
the financial condition or affairs of any Obligor or any of their
related entities whether coming into its possession or that of any
related entities of the Facility Agent or any Arranger before the
entry into of this Agreement or at any time thereafter.
(d) Unless specifically requested to do so by a Bank, neither Agent shall
have any duty to request any certificates or other documents from any
Obligor under any of the Finance Documents.
(e) No Agent need disclose any information relating to any Obligor or any
of their related entities or any other person if such disclosure would
or might in the reasonable opinion of the Facility Agent constitute a
breach of any law or regulation or be otherwise actionable at the suit
of any person.
26.11 THE FACILITY AGENT AND THE ARRANGERS INDIVIDUALLY
(a) Each Agent and each Arranger shall have the same rights and powers
hereunder as any other Bank and may exercise the same as though it
were not an Agent or an Arranger.
(b) Each Agent and each Arranger may accept deposits from, lend money to
and generally engage in any kind of banking, trust, advisory or other
business whatsoever with any Obligor and their related entities and
accept and retain any fees payable by any Obligors or any related
entities for its own account in connection herewith and/or therewith
without liability to account therefor to any Bank or any Arranger.
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26.12 INDEMNITY Each Bank agrees to indemnify each Agent and each Arranger
on demand (to the extent not reimbursed by any Obligor and without prejudice to
the liability of any Obligor under any Finance Document) for any and all
liabilities, losses, damages, penalties, actions, judgments, costs, expenses or
disbursements of any kind whatsoever which may be imposed on, incurred by or
asserted against such Agent in any way relating to or arising out of its acting
as an Agent under any of the Finance Documents or performing its duties
thereunder or any action taken or omitted by any Agent thereunder (including,
without limitation, the charges and expenses referred to in Clause 27.5 and all
stamp Taxes on or in connection with any of the Finance Documents but excluding
payment of its agency fee pursuant to Clause 27.3 and the normal administrative
costs and expenses incidental to the performance of its agency duties hereunder
save to the extent increased in consequence of a Default). Such indemnification
by each Bank shall be pro rata to its Commitments. Notwithstanding the
foregoing, no Bank shall be liable for any portion of the foregoing resulting
from any Agent's gross negligence or wilful misconduct.
26.13 LEGAL RESTRICTIONS Each Agent may refrain from doing anything which
would or might in its reasonable opinion (a) be contrary to the law of any
applicable jurisdiction or any applicable official directive or regulation or
(b) render it liable to any person, and may do anything which in its reasonable
opinion (acting on legal advice) is necessary to comply with any such law or
directive.
26.14 RESIGNATION Each Agent may (after consultation with Services) resign
by giving notice thereof to the Banks and Services and may be removed by the
Majority Banks giving notice to that effect to such Agent and Services after
prior consultation with Services. In that event the Majority Banks, with the
consent of Services where the relevant Agent has so resigned (such consent not
to be unreasonably withheld or delayed and Services shall be deemed to have
consented if it has not given notice refusing consent within 14 days of
receiving any request for consent) and in any event after consultation with
Services to the extent practicable, may appoint a successor for the relevant
Agent which shall be a reputable and experienced bank, incorporated in or having
a branch in England and acting through such branch. If the Majority Banks have
not, within 30 days after such notice of resignation or removal, so appointed a
successor Agent which shall have accepted such appointment, the retiring Agent,
after consultation with Services, shall have the right to appoint a successor
Agent which shall be a reputable and experienced Bank incorporated or having a
branch in England and acting through such branch. The resignation or removal of
the retiring Agent and the appointment of any successor Facility Agent or
Security Agent shall both become effective upon the successor Facility Agent or
Security Agent notifying all the parties hereto in writing that it accepts such
appointment, whereupon the successor Facility Agent or Security Agent shall
succeed to the position of the retiring Facility Agent or Security Agent and the
terms "FACILITY AGENT" and "SECURITY AGENT" in all of the Finance Documents
shall include such successor Agent where appropriate. This Clause 26 shall
continue to benefit a retiring Agent in respect of any action taken or omitted
by it hereunder while it was an Agent.
26.15 ASSIGNMENTS Each Agent may treat each Bank named as a party hereto as
continuing to be such a party, as entitled to payments hereunder and as acting
hereunder through its Facility Office until it has received notice from such
Bank to the contrary.
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26.16 AMENDMENTS
(a) If authorised by the Majority Banks, the Facility Agent or (in the
case of the Security Documents) the Security Agent may (except where
any other authority is required for the same by the express provisions
of this Agreement) grant waivers or consents or (with the agreement of
Services) vary the terms of the Finance Documents. Any such waiver,
consent or variation so authorised and effected by the Facility Agent
or, as the case may be, the Security Agent shall be binding on all the
Banks and the Facility Agent or, as the case may be, the Security
Agent shall be under no liability whatsoever in respect of any such
waiver, consent or variation, provided always that, except with the
prior written consent of all the Banks and Services, nothing in this
Clause 21.16(a) shall authorise:
(i) the extension of any Availability Period; or
(ii) any variation of the definition of "MAJORITY BANKS" or
"MAJORITY OFFER BANKS" in Clause 1.1; or
(iii) any extension of the date for, or alteration in the amount or
currency of, or waiver of any payment of principal, interest,
Margin, fee, commission or any other amount payable under any
of the Finance Documents; or
(iv) any change to any Bank's Commitment; or
(v) any variation of Clauses 12.2, 13, 31.2, 33 or this Clause
26.16; or
(vi) any variation of any provision wherein (before such variation
) it is provided that certain things may not be done without
or may be done with the consent or approval of all the Banks.
(b) If authorised by the Majority Banks, the Security Agent may grant any
waiver or consent in relation to, or variation of the material
provisions of, any Security Document (but not, for the avoidance of
doubt, so as to release any security). Subject as otherwise provided
for in this Agreement or any Security Document, any release of the
security provided by any Security Document over the Shares requires
the consent of all the Banks. Notwithstanding anything in this
Agreement to the contrary, the Banks consent to the release by the
Security Agent of such security constituted by the Security Documents
to the extent necessary to enable Finance to be merged with or
liquidated into Services and/or (provided that the successor entity
remains bound by the terms hereof as if it were PA) TEG to be merged
with or liquidated into PA and/or any other merger or liquidation set
out in the Structure Memorandum; and the Security Agent shall effect
such release at such time.
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26.17 SECURITY AGENT AS TRUSTEE
(a) The Security Agent in its capacity as trustee or otherwise shall not
be liable for any failure, omission, or defect in perfecting the
security constituted by any Security Document or any security created
thereby including, without limitation, any failure to register the
same in accordance with the provisions of any of the documents of
title of the relevant Obligor to any of the property thereby charged.
(b) The Security Agent in its capacity as trustee or otherwise may accept
without enquiry such title as any Obligor may have to the property
over which security is intended to be created by any Security
Document.
(c) Save where the Security Agent holds a legal mortgage over or over an
interest in, real property or shares, the Security Agent in its
capacity as trustee or otherwise shall not be under any obligation to
hold any title deeds, Security Documents or any other documents in
connection with the property charged by any Security Document or any
other such security in its own possession or to take any steps to
protect or preserve the same. The Security Agent may permit the
relevant Obligor to retain all such title deeds and other documents in
its possession.
(d) Save as otherwise provided in the Security Documents, all moneys which
under the trusts herein or therein contained are received by the
Security Agent in its capacity as Trustee or otherwise may be invested
in the name of or under the control of the Security Agent in any
investment for the time being authorised by English law for the
investment by trustees of trust money or in any other investments
which may be selected by the Security Agent with the consent of the
Majority Banks. Additionally, the same may be placed on deposit in
the name of or under the control of the Security Agent at such bank or
institution (including any Agent) and upon such terms as the Security
Agent may think fit. Any and all such monies and all interest thereon
shall be paid over to the Facility Agent forthwith upon demand by the
Facility Agent.
(e) Each Bank hereby confirms its approval of the Finance Documents and
any security created or to be created pursuant thereto and hereby
authorises, empowers and directs the Security Agent (by itself or by
such person(s) as it may nominate) to execute and enforce the same as
trustee or as otherwise provided (and whether or not expressly in the
Banks' names) on its behalf.
26.18 BANKS
(a) Each Bank (other than Goldman Sachs Credit Partners, L.P. or any
Treaty Bank) represents to the Facility Agent that, in the case of a
Bank which is a Bank on the date of this Agreement, on the date of
this Agreement and, in the case of a Bank which becomes a Bank after
the date of this Agreement, on the date it becomes a Bank it is:
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(i) a "bank" as defined in section 840A of the Income and
Corporation Taxes Act 1988 and resident in the United Kingdom;
and
(ii) beneficially entitled to the principal and interest payment by
the Facility Agent to it under this Agreement,
and shall forthwith notify the Agent if either representation ceases
to be correct.
(b) The Facility Agent may at any time, and shall if requested to do so by
the Majority Banks, convene a meeting of the Banks.
27. FEES, EXPENSES AND STAMP TAXES
27.1 COMMITMENT FEE
(a) PA shall pay to the Facility Agent for each Bank a commitment fee
computed at the rate of zero point five zero (0.50%) per annum on that
Bank's Tranche 1 Commitment and Tranche 2 Commitment during the period
from the date of this Agreement up to the Unconditional Date.
(b) PA shall pay to the Facility Agent for each Bank a commitment fee
computed at the rate per annum equal to fifty per cent. (50%) of the
applicable Margin (as set out in Column 2 in the definition of Margin
in Clause 1.1) from time to time on the daily unutilised balance of
that Bank's Tranche 1 Commitment and Tranche 2 Commitment on and from
the Unconditional Date up to and including the last day of the
relevant Availability Period.
(c) Commitment fee shall accrue from day to day and be computed on the
basis of a year of 365 days for the actual number of days elapsed.
Accrued commitment fee is payable to the Facility Agent quarterly in
arrear from the date of this Agreement on (i) the earlier of the first
occurring Utilisation Date hereunder and the expiry of the Tranche 1
Availability Period, (ii) the Final Repayment Date, and (iii) for any
Bank(s) on the cancelled amount of its Commitment(s) at the time the
cancellation takes effect.
27.2 FRONT END AND AGENCY FEES
(a) PA shall pay to the Facility Agent for the account of the Arrangers
front end fees in amounts and on the dates as stated in a letter dated
on or around the date hereof from the Facility Agent to PA and
countersigned by PA, to be distributed in the amounts and manner as
heretofore agreed between the Arrangers.
(b) PA shall pay to the Facility Agent for its own account the agency fees
on the dates and in the amount agreed in the letter of even date
herewith from the Facility Agent to PA and countersigned by PA.
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(c) PA shall pay to the Security Agent for its own account the agency fees
on the dates and in the amount agreed in the letter of even date
herewith for the Security Agent to PA and countersigned by PA.
27.3 DOCUMENTARY CREDIT ISSUANCE FEE Each Borrower shall pay to the Facility
Agent on the Utilisation Date in respect of each Documentary Credit issued at
its request an administration and issuance fee of L1000.
27.4 DOCUMENTARY CREDIT PER ANNUM FEE Each Borrower shall pay to the Facility
Agent for distribution amongst the Banks pro rata to their respective
Commitments between it and the Banks in the case of payments arising under (a)
below, or for distribution to the LC Bank in the case of payments arising under
(b) below a fee equivalent to the aggregate of:
(a) the Margin applied on the Outstanding Liability Amount of each
Documentary Credit issued at its request; and
(b) (in the case of Documentary Credits issued by the LC Bank) an
additional point two zero per cent. (0.20%) per annum applied on that
portion of the face amount of each Documentary Credit for which the LC
Bank is counter-indemnified by the Banks (other than itself where the
LC Bank is also the Bank) pursuant to Clause 5.6,
in each case in respect of the period between the date of issue of the
Documentary Credit and the earlier of its Expiry Date and the date on which its
Outstanding Liability Amount has been reduced to nil.
The fee shall accrue from day to day and be calculated on the basis of a 365 day
year for the actual number of days elapsed and shall be payable quarterly in
arrears and on the Expiry Date of such Documentary Credit.
27.5 INITIAL AND DOCUMENTATION EXPENSES
(a) Subject to Clause 27.5(c) below, on the date of the first Utilisation
if demanded before such date and otherwise promptly on demand by the
Facility Agent after such date, PA shall reimburse the Facility Agent
for the reasonable out-of-pocket charges and expenses incurred by it
in respect of the fees and expenses of its legal advisers incurred in
connection with the negotiation, preparation, printing and execution
of the Finance Documents (including any thereof which may be executed
at any time after the date of this Agreement other than any
Substitution Certificate), together in all cases with all value added
and similar Taxes applicable to the same.
(b) Subject to Clause 27.5(c) below, PA shall reimburse the Facility Agent
within 30 days of demand for the reasonable out-of-pocket charges and
expenses (including, but not limited to, the fees and expenses of
legal advisers) incurred by it or the Arrangers in connection with the
syndications of the Finance Documents and the Commitments and
Utilisations thereunder prior to the Syndication Date and the
execution of any further Finance Documents (other than any
Substitution Certificate) from time to time, together with all
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value added tax and similar Taxes applicable to the same.
(c) Where this Agreement provides that any document or other information
is to be copied or provided by the Facility Agent to all or any of the
Banks or the Security Agent (including, without limitation, as
contemplated in Clause 26.10(a) or (b)) PA will promptly on demand
reimburse the Facility Agent for the reasonable out-of-pocket charges
and expenses incurred by it in so copying or providing such document
or other information, together with all value added and similar Taxes
applicable to the same.
(d) Upon the occurrence of the Unconditional Date the out-of-pocket
charges and expenses referred to in Clause 27.5(b) shall be deemed not
to include internal costs so incurred by the Arrangers.
27.6 EXPENSES OF ADMINISTRATION, ENFORCEMENT, WAIVER AND AMENDMENT Services (or
the relevant Borrower where in the reasonable opinion of the Facility Agent such
amounts are referable to a particular Borrower) shall reimburse each of the
Finance Parties promptly on demand for the out-of-pocket charges and expenses
(including the fees and expenses of legal advisers and notaries and the fees and
expenses of any accountants or other professional advisers (a) incurred by any
of them in connection with the enforcement of, or the preservation of any rights
under, any of the Finance Documents, (b) reasonably incurred by any of them in
connection with any waiver or consent which may at any time be sought by any
Obligor under or in relation to any of the Finance Documents, and (c) reasonably
incurred by any of them in connection with any variation of or supplement to any
of the Finance Documents (other than any Substitution Certificate or a variation
or supplement requested by a Finance Party), together, in each case, with all
value added and similar Taxes applicable to the same.
27.7 STAMP TAXES PA shall pay or indemnify the Finance Parties against any and
all stamp, registration and similar Taxes (excluding such Taxes as are imposed
by a jurisdiction other than the United Kingdom) which may be or become payable
in connection with the entry into, performance or enforcement against any of the
Obligors or any of the Finance Documents (other than any Substitution
Certificate).
28. WAIVERS, REMEDIES CUMULATIVE
28.1 WAIVERS No failure to exercise and no delay in exercising any right, power
or privilege under any Finance Document by any of the Finance Parties shall
operate as a waiver of the same, nor shall any single or partial exercise of any
such right, power or privilege preclude any other or further exercise of the
same, or the exercise of any other right, power or privilege. No waiver by any
of the Finance Parties shall be effective unless it is in writing.
28.2 REMEDIES CUMULATIVE The rights and remedies of each of the Finance Parties
in this Agreement may be exercised as often as necessary and are cumulative and
not exclusive of any rights or remedies provided by law.
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29. NOTICES
29.1 ADDRESS Except as otherwise stated in this Agreement, all notices or other
communications hereunder to any party hereto shall be made by letter or by
facsimile transmission (and, in the case of communications to any Obligor shall
be copied to PacifiCorp by facsimile transmission at such facsimile number as
shall be notified in writing to the Facility Agent by PacifiCorp from time to
time) and shall be deemed to be duly given or made when delivered (in the case
of letter or facsimile transmission) to such party addressed to it at its
address or telex number or facsimile number, and for such attention, specified
in the relevant Part of the First Schedule or the Second Schedule, or at such
other address or telex number or facsimile number as such party may after the
date of this Agreement specify for such purpose to the others by notice.
29.2 NON-WORKING DAYS A notice or other communication received on a non-working
day or after 5.00 p.m. on a working day in the place of receipt shall be deemed
to be served on the next following working day in such place.
30. ASSIGNMENTS, TRANSFERS AND SUBSTITUTIONS
30.1 SUCCESSORS This Agreement shall be binding upon and enure to the benefit
of the Obligors, the Banks, the Facility Agent, the Security Agent and their
respective successors and permitted assigns.
30.2 ASSIGNMENTS AND TRANSFERS BY OBLIGORS Save as expressly provided in this
Agreement, no Obligor may assign or transfer all or any part of its rights or
obligations under this Agreement without the prior written consent of all the
Banks (but this Clause shall be without prejudice to the operation of Clause
21.10(b)).
30.3 TRANSFERS BY BANKS
(a) Subject to Clause 30.9 and as provided below, a Bank (the "EXISTING
BANK") may at any time assign, transfer or novate any of its rights
and/or obligations under this Agreement to a Recognised Bank (the "NEW
BANK") provided that (i) save where the New Bank is a Bank or an
Affiliate of the Existing Bank, the prior consent of Services has been
obtained (such consent not to be unreasonably withheld or delayed) and
(ii) save where the New Bank is a Bank or Affiliate of the Existing
Bank the New Bank takes an assignment, transfer or novation of a
minimum amount of L10,000,000 (or, if less, the whole of its
Commitment).
An Existing Bank shall not assign, transfer or novate in part (but
shall not be prohibited from so doing in whole) any of its rights
and/or obligations under this Agreement unless it will maintain a
Commitment or Commitments aggregating a minimum amount of at least
L10,000,000 as of the date immediately following the date of such
transfer, provided that this sub-paragraph shall not apply to any such
novations made to Goldman Sachs International Bank by Goldman Sachs
Credit Partners, L.P. (or vice versa).
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Notwithstanding any provision of this Agreement to the contrary:
(i) Goldman Sachs Credit Partners, L.P. shall have the right to
novate to Goldman Sachs International Bank in accordance with
Clause 30.4 (the "NOVATION"), but not to assign or otherwise
transfer, any of its rights and/or obligations; and
(ii) Treaty Banks may not assign their rights under any Finance
Document and may only transfer their rights and obligations by
novation in accordance with Clause 30.4 (and not otherwise).
Recognised Banks may not assign their rights under any Finance
Document to a Treaty Bank and may only transfer their rights and
obligations to a Treaty Bank by novation in accordance with
Clause 30.4 (and not otherwise).
(b) Any consent required to be given by Services under paragraph (a) above
shall be deemed to have been given unless Services shall have notified
the requesting party to the contrary within five Business Days after
receiving the request for such consent.
(c) A transfer of obligations will be effective only if either:
(i) the obligations are novated in accordance with Clause 30.4
(Procedure for substitution); or
(ii) the New Bank confirms in writing to the Facility Agent and
Services that it undertakes to be bound by the terms of the
Finance Documents as a Bank in form and substance satisfactory to
the Facility Agent and Services (acting reasonably). On the
transfer becoming effective in this manner the Existing Bank
shall be relieved of its obligations under the Finance Documents
to the extent that they are transferred to the New Bank.
(d) Nothing in this Agreement restricts the ability of a Bank to
sub-participate or sub-contract an obligation if that Bank remains
liable under this Agreement for that obligation.
(e) On each occasion an Existing Bank assigns, transfers or novates any of
its rights and/or obligations under this Agreement (other than where
such assignment, transfer or novation is made on general syndication
or to an Existing Bank or an Affiliate), the New Bank shall, on the
date the assignment, transfer and/or novation takes effect, pay to the
Facility Agent for its own account a fee of L750.
(f) Neither an Existing Bank nor any other Finance Party is responsible to
a New Bank for:
(i) the execution, genuineness, validity, enforceability or
sufficiency of any Finance Document or any other document;
(ii) the collectability of amounts payable under any Finance
Document or the
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financial condition of or the performance of its obligations
under the Finance Documents by any Obligor; or
(iii) the accuracy of any statements or information (whether written
or oral) made in or in connection with or supplied in
connection with any Finance Document.
(g) Each New Bank confirms to the Existing Bank and the other Finance
Parties that it:
(i) has made its own independent investigation and assessment of
the financial condition and affairs of each Obligor and its
related entities in connection with its participation in this
Agreement and has not relied exclusively on any information
provided to it by the Existing Bank or any other Finance Party
in connection with any Finance Document;
(ii) will continue to make its own independent appraisal of the
creditworthiness of each Obligor and its related entities
while any amount is or may be outstanding under this Agreement
or any Commitment is in force; and
(iii) is a bank or financial institution whose ordinary business
includes participation in syndicated facilities of this type.
(h) Nothing in any Finance Document obliges an Existing Bank to:
(i) accept a re-transfer from a New Bank of any of the rights
and/or obligations assigned, transferred or novated under this
Clause 30.3 or Clause 30.4; or
(ii) support any losses incurred by the New Bank by reason of the
non-performance by any Obligor or its obligations under this
Agreement or otherwise.
(i) Any reference in this Agreement to a Bank includes a New Bank, but
excludes a Bank if no amount is or may be owed to or by that Bank
under this Agreement and its Commitment has been cancelled or reduced
to nil.
30.4 PROCEDURE FOR SUBSTITUTION
(a) Subject to satisfaction of the requirements set out in Clause 30.3(a),
a novation is effected if:
(i) the Existing Bank and the New Bank deliver to the Facility
Agent (with a copy to Services) a duly completed certificate
executed by the Existing Bank and the New Bank, substantially
in the form of the Fourth Schedule (a "SUBSTITUTION
CERTIFICATE"); and
(ii) the Facility Agent executes it.
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Promptly upon its receipt (by facsimile transmission or otherwise) the
Facility Agent hereby agrees to execute any Substitution Certificate
delivered to it and which has been duly completed and executed by
Goldman Sachs Credit Partners, L.P. as Existing Bank and Goldman Sachs
International Bank as New Bank or vice versa. The Facility Agent shall
be permitted to rely on a facsimile copy of such Substitution
Certificate.
(b) Each Party (other than the Existing Bank and the New Bank) irrevocably
authorises the Facility Agent to execute any duly completed
Substitution Certificate on its behalf.
(c) To the extent that they are expressed to be the subject of the
novation in the Substitution Certificate:
(i) the Existing Bank and the other Parties (the "EXISTING
PARTIES") will be released from their obligations to each
other under the Finance Documents (the "DISCHARGED
OBLIGATIONS"), except for any obligation which the Existing
Bank has to the LC Bank pursuant to Clause 5.6 in respect of
Documentary Credits issued prior to the date on which such
novation takes effect as determined below unless otherwise
agreed in writing by the LC Bank (provided that the LC Bank
hereby agrees to any novation from Goldman Sachs Credit
Partners, L.P. to Goldman Sachs International Bank (and vice
versa));
(ii) the New Bank and the existing Parties will assume obligations
towards each other under the Finance Documents which differ
from the discharged obligations only insofar as they are owed
to or assumed by the New Bank instead of the Existing Bank;
(iii) the rights of the Existing Bank against the existing Parties
under the Finance Documents and vice versa (the "DISCHARGED
RIGHTS") will be cancelled; and
(iv) the New Bank and the existing Parties will acquire rights
against each other under the Finance Document which differ
from the discharged rights only insofar as they are
exercisable by or against the New Bank instead of the Existing
Bank,
on the date of execution of the Substitution Certificate by the
Facility Agent or, if later, the date specified in the Substitution
Certificate and in each case, if the provisions of this Clause 30.4
are complied with.
The discharged obligations shall not include any obligation under
Clauses 13 and 15 in respect of payments made prior to the effective
date of such Substitution Certificate.
30.5 REFERENCE BANKS The Facility Agent may (subject to Services giving its
consent thereto, such consent not to be unreasonably withheld) nominate
additional Banks or Affiliates thereof to become Reference Banks and such Banks
or Affiliates shall become Reference Banks upon their indicating to the Facility
Agent that they are prepared to act as such. The Facility Agent will give
Services written notice of such Banks or Affiliates having become Reference
Banks as soon as practical thereafter. If a Reference
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Bank (or the Bank of which a Reference Bank is an Affiliate, in the case of any
Reference Bank which is not itself a Bank) transfers the whole of its rights and
obligations under this Agreement as a Bank or ceases to be one of the Banks, the
Facility Agent, subject to agreement by Services (such Agreement not to be
unreasonably withheld or delayed) will appoint another Bank to replace such Bank
or Affiliate as a Reference Bank.
30.6 CHANGE OF FACILITY OFFICE Each Bank shall participate in this Agreement
through its Facility Office(s) (which in the case of a non-Treaty Bank must be
in the United Kingdom), but any Bank may change its Facility Office with respect
to any Utilisation from time to time, on giving not less than four Business Days
prior notice to the Facility Agent, to (a) any other location in the United
Kingdom in the case of a non-Treaty Bank or (b) if it is a Treaty Bank to any
other location in the same jurisdiction or to any other location provided (in
respect of any Bank other than Goldman Sachs Credit Partners, L.P.) it does not
thereby cease to be a Recognised Bank (including as referred to in the
definition thereof in Clause 1.1 the filing of all appropriate applications and
forms).
30.7 TAXES AND INCREASED COSTS
(a) Subject as provided in paragraph (b) below, if any assignment or
transfer of or with respect to all or any part of the rights or
obligations of a Bank under this Agreement pursuant to Clause 30.3 or
30.4 or any change in Facility Office pursuant to Clause 30.6 is made
which results (or would but for this Clause result) at the time
thereof in amounts becoming payable under Clauses 13 or 15.1, then the
assignee, transferee, New Bank or Bank acting through its new Facility
Office shall be entitled to receive such amounts only to the extent
that the assignor, transferor, Existing Bank or Bank acting through
its original Facility Office would have been so entitled had there
been no such assignment, transfer or change in Facility Office. No
such assignment, transfer or change in Facility Office shall be made
if the assignee or transferee or such Bank (in the case of a change in
Facility Office) would be entitled immediately afterwards to give
notice under Clause 16.
(b) The provisions of the first sentence of paragraph (a) above shall not
apply (i) in relation to any assignment or transfer of or with respect
to the rights or obligations of the Original Banks, provided that the
same is effected by the Original Banks prior to the Syndication Date,
or (ii) with respect to any novation from Goldman Sachs Credit
Partners, L.P. to Goldman Sachs International Bank, or (iii) with
respect to any novation by Goldman Sachs Credit Partners, L.P. to the
extent that they would not have applied had such novation been
effected by Goldman Sachs International Bank.
However, the Original Banks (except with respect to novations by
Goldman Sachs Credit Partners, L.P. to Goldman Sachs International
Bank and except, with respect to other novations by Goldman Sachs
Credit Partners, L.P., that the obligations of Goldman Sachs Credit
Partners, L.P. under this paragraph as it applies thereto shall be
limited to those which would apply if such novation were made by
Goldman Sachs International Bank) will use reasonable endeavours (to
the extent not materially prejudicial to their ability successfully to
syndicate the Facilities prior to the Syndication Date) to avoid
making any assignment or transfer to or in favour of any assignee,
transferee or New Bank having an
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entitlement at the time of such assignment, transfer or novation to
receive amounts payable under Clauses 15 or 16.1 in amounts greater
than would have been payable by the Obligors hereunder at that time in
the absence of such assignment or transfer.
30.8 TIMING Each Bank undertakes to the Facility Agent that it will not effect
any assignment or transfer pursuant to Clause 30.3 and will not enter into any
Substitution Certificate pursuant to Clause 30.4 on or within five Business Days
before the due date for any payment to be made under any of the Finance
Documents where it would have the effect of altering the amount to be paid by
the Facility Agent to such Bank consequent on the receipt by the Facility Agent
of such payment under the Finance Documents provided that this Clause 30.8 shall
not apply to any Substitution Certificate entered into between Goldman Sachs
International Bank and Goldman Sachs Credit Partners, L.P.
30.9 RESTRICTION Notwithstanding anything to the contrary contained in this
Agreement, unless otherwise agreed by the Majority Banks and Services in any
particular case (which agreement is hereby given in respect of any novations of
any Utilisations and/or Commitments between Goldman Sachs International Bank and
Goldman Sachs Credit Partners, L.P. and vice versa), each Bank may only effect
an assignment or transfer of, or substitution with respect to, outstanding
Utilisations and/or Commitments where the assignment, transfer or substitution
relates to all Utilisations in which it participates and/or all its Commitments
pro rata as between such Utilisations and/or such Commitments.
30.10 TREATY BANKS Notwithstanding anything to the contrary contained in
this Agreement, no assignment, transfer or novation may be made (a) to a Treaty
Bank on or prior to the Syndication Date or as part of the primary syndication
of the Facilities or (b) to an Affiliate which is a Treaty Bank (save
with the consent of Services).
31. SET-OFF AND REDISTRIBUTION
31.1 SET-OFF Each Bank may (but shall not be obliged to) whilst any Default
shall be continuing set off against any obligations of any Obligor due and
payable by it to or for the account of such Bank under this Agreement and not
paid on the due date any moneys held by such Bank for the account of such
Obligor at any office of such Bank anywhere and in any currency, whether or not
matured. Such Bank may effect such currency exchanges as are appropriate to
implement the set-off and any usual charges and all applicable Taxes in relation
to such currency exchanges shall be paid by such Obligor. Any Bank which has
set off shall give prompt notice of that fact to the relevant Obligor.
31.2 REDISTRIBUTION
(a) If at any time the proportion which any Bank (the "RECEIVING BANK")
has received or recovered (whether by set-off or otherwise) on account
of any sum due from any Obligor under this Agreement is greater (the
amount of the excess being herein referred to as the "EXCESS AMOUNT")
that the proportion received or recovered by the Bank receiving or
recovering the smallest proportion (which shall include a nil receipt)
in relation to the sum then due to the latter Bank from the relevant
Obligor under this Agreement, then the receiving Bank shall promptly
notify the Facility Agent thereof and:
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(i) the receiving Bank shall promptly and in any event within ten
days of receipt or recovery of the excess amount pay to the
Facility Agent an amount equal to the excess amount;
(ii) the excess amount shall be treated as having been paid to or
recovered by the receiving Bank for the account of the
Facility Agent for payment to the Banks as provided in
paragraph (iii) below, and the obligations of the relevant
Borrower and the Guarantors to the receiving Bank shall only
be reduced or discharged by the receipt or recovery by the
receiving Bank of such excess amount to the extent of the
receiving Bank's entitlement to payment by the Facility Agent
pursuant to paragraph (iii) below; and
(iii) the parties to this Agreement shall treat such payment as if
it were a payment by the relevant Borrower or the Guarantors
to the Facility Agent on account of a sum owed to the Banks
and shall pay the same to the Banks (including the receiving
Bank) pro rata to their respective entitlements in such sum;
Provided that where a receiving Bank is subsequently required to repay
to any Obligor any amount received or recovered by it and dealt with
under paragraphs (i), (ii) and (iii) above, each Bank shall promptly
repay to the Facility Agent for the receiving Bank the portion of such
amount distributed to it, together with interest on it at a rate
sufficient to reimburse the receiving Bank for any interest which it
has been required to pay to such Obligor in respect of such portion of
such amount.
(b) Where a receiving Bank has recovered any amount as a consequence of
the satisfaction or enforcement of a judgement obtained in any legal
action or proceedings to which it is a party, this Clause 31.2 shall
not apply so as to benefit any other Bank which (being entitled so to
do) did not join with the receiving Bank in such action or
proceedings, unless the receiving Bank did not give prior notice of
its involvement in such action or proceedings to the Facility Agent
for disclosure to the other Banks.
(c) Each Bank shall promptly give notice to the Facility Agent of:
(i) the institution by such Bank of any legal action or
proceedings under this Agreement or in connection with this
Agreement prior to such institution; and
(ii) the receipt or recovery by such Bank or any amount received or
recovered by it otherwise than through the Facility Agent.
Upon receipt of any such notice, the Facility Agent will as soon as
practicable thereafter notify all the other Banks.
31.3 LOSS SHARING Without prejudice to the foregoing provisions of this Clause
31, if it transpires for any reason that after enforcement in full of the
Finance Documents any of the liabilities of any of the Obligors under the
Finance Documents remain undischarged and for any reason any resulting losses
are
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not being borne by the Banks pro rata to the amount which their respective
aggregate Commitments bore to the aggregate of all the Commitments on the date
on which an Enforcement Event occurred, the Banks shall make such payments inter
se as shall be required to ensure that after taking into account such payments
such losses are borne by the Banks pro rata. For this purpose, "ENFORCEMENT
EVENT" means the Facility Agent first exercising any of its rights under Clause
24.2(b), (d) or (e) or, having exercised its rights under Clause 24.2(c), first
making demand with respect to some or all of the Advances. Any assignment,
transfer or substitution by a Bank pursuant to Clause 30 (whether occurring
before or after an Enforcement Event) shall also be effective to assign,
transfer or effect a substitution pursuant to that Clause with respect to the
rights of such Bank under this Clause 31.3.
32. GOVERNING LAW AND JURISDICTION
32.1 GOVERNING LAW This Agreement shall be governed by and construed in
accordance with English law.
32.2 COURTS OF ENGLAND
(a) For the benefit of each of the Finance Parties, each Obligor hereby
irrevocably agrees that the High Courts of Justice in London, and all
appellate courts therefrom have jurisdiction to settle any disputes
which may arise out of or in connection with any of the Finance
Documents and that any suit, action or proceedings (together
"PROCEEDINGS") in connection with any Finance Document may be brought
in the High Courts of Justice in London and all appellate courts
therefrom and accordingly submits to the jurisdiction of the High
Courts of Justice in London and all appellate courts therefrom.
(b) Each Obligor hereby irrevocably and unconditionally agrees that
nothing in any of the Finance Documents shall affect the right to
serve process in any manner permitted by law.
32.3 NO LIMITATION Nothing in this Clause 32 shall limit the right of any of
the Finance Parties to take Proceedings against any Obligor in any other court
of competent jurisdiction, nor shall the taking of Proceedings in one or more
jurisdiction preclude the taking of Proceedings in any other jurisdiction,
whether concurrently or not.
33. CONFIDENTIALITY
Each Finance Party hereby severally undertakes to each Obligor that it will
keep confidential and that it will not make use of for any purposes
(otherwise than for the purposes of the Finance Documents and otherwise
than in the context of an addition to its general experience, knowledge or
expertise), any of the Transaction Documents or other documents relating to
this Agreement and all of the information distributed on behalf of the
Obligors or any of them during syndication or contained in, received under
or obtained in the course of discussions relating to the Information
Memorandum and/or the Transaction Documents, other than any such document
or information which has become generally available to banks through no
breach by it of this Clause, provided that each Finance Party shall be
entitled to make disclosure of the same:
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<PAGE>
(a) to its auditors, accountants, legal counsel and tax advisers and to
any other professional advisers appointed to act in connection with
the administration of the Finance Documents or the enforcement of, or
realisation of any security provided under, any of the Finance
Documents;
(b) (whether or not the relevant assignment, transfer, substitution,
sub-participation or another arrangement is made) to any proposed
assignee, transferee or substitute of, or proposed party to any
proposed sub-participation (or party to any actual sub-participation)
or other arrangement with, any Bank permitted pursuant to this
Agreement, provided that before any such disclosure such assignee,
transferee, substitute or other party expressly undertakes to Services
and the Facility Agent in writing to be bound by this Clause 33
irrespective of whether such assignment, transfer, substitution or
other arrangement shall proceed;
(c) to any other third party where the relevant Obligor has previously
agreed in writing that disclosure may be made to that third party;
(d) to any banking or other regulatory or examining authorities (whether
governmental or otherwise) where such disclosure is requested by them;
(e) pursuant to subpoena or other legal process, or in connection with any
action, suit or proceeding relating to any of the Finance Documents;
(f) pursuant to any law or regulation having the force of law; and
(g) to PacifiCorp and to any member of the Services Group.
The provisions of this Clause 33 shall supersede any undertakings with respect
to confidentiality previously given by any Finance Party in favour of any
Obligor.
34. MISCELLANEOUS
34.1 SEVERABILITY
(a) If any provision of any Finance Document is prohibited or
unenforceable in any jurisdiction, such prohibition or
unenforceability shall not invalidate the remaining provisions of such
Finance Document or affect the validity or enforceability of such
provision in any other jurisdiction.
(b) If any of the undertakings given in Clause 21.6(a) (DISTRIBUTIONS,
SUBORDINATED DEBT AND SHARE CAPITAL), 21.6(e) (SHARE CAPITAL AND DEBT)
or 21.10(g) (CONSTITUTIONAL DOCUMENTS) are not enforceable against any
Obligor the obligation on each other Obligor to procure compliance
with such undertaking shall remain enforceable.
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<PAGE>
34.2 CERTIFICATIONS Where any person gives any certificates on behalf of any of
the parties to the Finance Documents pursuant to any provision hereof and such
certificate proves to be incorrect, the individual shall incur no personal
liability in consequence of such certificate being so incorrect save where such
individual acted fraudulently, recklessly or negligently in giving such
certificate (in which case any liability of such individual shall be determined
in accordance with applicable law).
34.3 ACCOUNTS AS EVIDENCE Accounts maintained by the Facility Agent or each
Bank in connection herewith shall constitute prima facie evidence of sums owing
to such Bank under this Agreement.
34.4 COUNTERPARTS This Agreement may be executed in any number of counterparts
and all of such counterparts taken together shall be deemed to constitute one
and the same instrument.
IN WITNESS WHEREOF the parties to this Agreement have caused this Agreement to
be duly executed on the date first written above.
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THE FIRST SCHEDULE
PART I
BORROWERS
PACIFICORP
ACQUISITIONS
State of Incorporation: England and Wales
Registered Office: One Silk Street, London EC2Y 8HQ
Registered No.: 3386442
Address for Notices: 700 N.E. Multnomah, Suite 1600, Portland, Oregon
97232
Attention: W.E. Peressini, Vice President and Treasurer
Fax: (503) 731 2027
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<PAGE>
PART II
GUARANTORS
PACIFICORP SERVICES LIMITED
State of Incorporation: England and Wales
Registered Office: One Silk Street, London EC2Y 8HQ
Registered No.: 3366016
Address for Notices: 700 N.E. Multnomah, Suite 1600, Portland, Oregon
97232
Attention: W.E. Peressini, Vice President and Treasurer
Fax: (503) 731 2027
PACIFICORP FINANCE
(UK) LIMITED
State of Incorporation: England and Wales
Registered Office: One Silk Street, London EC2Y 8HQ
Registered No.: 3365681
Address for Notices: 700 N.E. Multnomah, Suite 1600, Portland, Oregon
97232
Attention: W.E. Peressini, Vice President and Treasurer
Fax: (503) 731 2027
PACIFICORP ACQUISITIONS
State of Incorporation: England and Wales
Registered Office: One Silk Street, London EC2Y 8HQ
Registered No.: 3386442
Address for Notices: 700 N.E. Multnomah, Suite 1600, Portland, Oregon
97232
Attention: W.E. Peressini, Vice President and Treasurer
Fax: (503) 731 2027
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<PAGE>
PART III
FACILITY AGENT
Citibank International plc
P.O. Box 242
336 Strand
London WC2R 1HB
Address for notices: as above
Attention: Loans Agency
Tel: 0171 500 4247
Fax: 0171 500 4482
SECURITY AGENT
Citibank, N.A.
P.O. Box 242
336 Strand
London WC2R 1HB
Address for notices: as above
Attention: Loans Agency
Tel: 0171 500 4247
Fax: 0171 500 4482
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<TABLE>
<CAPTION>
THE SECOND SCHEDULE
BANKS' COMMITMENTS AND NOTICE DETAILS
BANK, FACILITY OFFICE AND NOTICE TRANCHE 1A TRANCHE 1B TRANCHE 2
DETAILS COMMITMENT COMMITMENT COMMITMENT
L L L
<S> <C> <C> <C>
CITIBANK, N.A. 606,666,668 151,666,668 150,000,000
P.O. Box 242
336 Strand
London WC2R 1HB
England
Address for notices:
as above
Attention: Loans Administration
Tel: 0171 500 4264
Fax: 0171 500 4482
GOLDMAN SACHS CREDIT 606,666,666 151,666,666 150,000,000
PARTNERS, L.P.
85 Broad Street
New York, New York 10004
Address for notices:
133 Fleet Street
London EC4A 2BB
Attention: Sue
Wolstenholme/Emmanuel Mahe
Tel: 0171 774 2551/
0171 774 2925
Fax: 0171 774 6337
MORGAN GUARANTY TRUST 606,666,666 151,666,666 150,000,000
COMPANY OF NEW YORK
60 Victoria Embankment
London EC4Y OJP
Address for notices:
as above
Attention: Global Credit-Middle
Office
Tel: 0171 325 5245
Fax: 0171 325 8190
----------------------------------------------------------
Total 1,820,000,000 455,000,000 450,000,000
</TABLE>
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THE THIRD SCHEDULE
FORMS OF REQUEST
To: [
]
Attention: [ ]
From: [Services or Borrower] Date: [ ]
REQUEST (ADVANCE)
FACILITY AGREEMENT DATED [ ], 1998
Dear Sirs,
[On behalf of] [As] the Borrower named below, we hereby give you notice pursuant
to Clause 5.1 of the above Facility Agreement that we require an Advance to be
made to the Borrower named below under the Facility Agreement, as follows:
(a) Borrower: [ ]
(b) Utilisation Date: [ ]
(c) Requested Amount: [Currency ] [ ]
(d) Interest Period: [ ]
(e) Tranche Designation: [ ]
(f) Payment Instructions: [ ]/Beneficiary Details [ ]
Terms used in this Request and defined in the Facility Agreement have the same
meaning in this Request as in the Facility Agreement.
We confirm that all of the conditions precedent to the obligations of the Banks
with respect to the making of the proposed Advance provided for in Clause 4 of
the Facility Agreement are satisfied or have been waived pursuant to a Waiver
Letter.
Yours faithfully
[Authorised Signatory]
[for and on behalf of]
[ ]
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<PAGE>
THE FOURTH SCHEDULE
SUBSTITUTION CERTIFICATE
To: [ ] as Facility Agent
From: [The Existing Bank] and [The New Bank] Date: [ ]
PACIFICORP ACQUISITIONS L[ ]
TERM LOAN FACILITY AND REVOLVING CREDIT FACILITY
DATED [ ], 1998 (THE "CREDIT AGREEMENT")
Reference to Clauses are to Clauses of the Credit Agreement.
We refer to Clause 30.4 (Procedure for Substitution).
1. We [ ] (the "EXISTING BANK") and [ ] (the "NEW
BANK") agree to the Existing Bank and the New Bank novating all the
Existing Bank's rights and obligations referred to in the Schedule in
accordance with Clause 30.4 (Procedure for Substitution).
2. From the date specified in paragraph 3 below, the New Bank becomes party to
the Credit Agreement as a Bank and a party to the Intercreditor Agreement
as a Senior Creditor, with the rights and obligations referred to in the
Schedule below.
3. The specified date for the purposes of Clause 30.4(c) is [date of
novation].
4. The Facility Office and address for notices of the New Bank for the
purposes of Clause 29.1 (Address) are set out in the Schedule.
[5. The New Bank undertakes to counter-indemnify the Existing Bank for the New
Bank's pro rata share of all amounts payable by the Existing Bank (whether
pursuant to Clause 5.6 or otherwise) in respect of any outstanding
Documentary Credit.]*
6. The Existing Bank and the New Bank acknowledge and agree that Clause
30.3(d), (e), (f) and (g) apply to this Substitution Certificate and the
novation contemplated hereby as if set out in full herein, mutatis
mutandis.
7. The New Bank confirms that it is a Recognised Bank and the Existing Bank
confirms that any necessary consent of any Obligor required to be obtained
from Services in connection herewith has been obtained.
8. If it is a Treaty Bank, the New Bank hereby confirms that it has made the
appropriate application as referred to in paragraph (c) of the definition
of Recognised Bank.
9. This Substitution Certificate is governed by English law.
__________________
* Not required for transfers between Goldman Sachs Credit Partners L.P. and
Goldman Sachs International Bank
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<PAGE>
THE SCHEDULE
RIGHTS AND OBLIGATIONS TO BE NOVATED
[Details of the rights and obligations of the Existing Bank to be novated].
[NEW BANK]
[Facility Office Address for notices]
[Existing Bank] [New Bank]
By: By:
Date: Date:
[ ]
for and on behalf of itself and as Facility Agent and on behalf of each of the
Obligors
By:
Date:
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<PAGE>
THE FIFTH SCHEDULE
CALCULATION OF ADDITIONAL COST
(1) The Additional Cost relative to each Advance where (and to the extent that)
Banks making such Advance are subject to the Mandatory Liquid Asset
requirements of the Bank of England, will be, subject as hereinafter
provided, for the Interest Period relating to such Advance (or, if longer
than three months, for each consecutive period of three months within such
Interest Period and for any balance of such Interest Period) (which
Interest Period if not longer than three months and each other such period
is herein referred to as a "RELEVANT PERIOD") the percentage rate (or the
arithmetic average of the percentage rates where there is more than one
Reference Bank supplying the same) supplied by the Reference Banks (or such
of them as supply it to the Facility Agent) arrived at by applying the
following formula in relation to each Reference Bank:
Additional Cost = BY + L(Y-X) + S(Y-Z) % PER ANNUM
--------------------------------
100-(B + S)
Where:
B = The percentage of such Reference Bank's eligible liabilities then
required to be held on a non-interest-bearing deposit account
with the Bank of England pursuant to the cash ratio requirements
of the Bank of England.
Y = The rate at which Sterling deposits in an amount approximately
equal to the principal amount of such Advance are offered by such
Reference Bank to leading banks in the London Interbank Market at
or about 11.00 a.m. on the Utilisation Date relative to such
Advance (or the first day of the relevant Interest Period) for a
period comparable to the Relevant Period in relation to such
Advance.
L = The average percentage of eligible liabilities which the Bank of
England from time to time requires each Reference Bank to
maintain as secured money with members of the London Discount
Market Association and/or as secured call money with those money
brokers and gilt-edged market makers recognised by the Bank of
England.
X = The rate at which secured Sterling deposits in an amount
approximately equal to the principal amount of such Advance may
be placed by such Reference Bank with members of the London
Discount Market Association and/or as secured call money with
money brokers and gilt-edged market makers at or about 11.00 a.m.
on such Utilisation Date (or the first day of the relevant
Interest Period) for a period comparable to the Relevant Period
in relation to such Advance.
S = The percentage of such Reference Bank's eligible liabilities then
required to be placed as a special deposit with the Bank of
England.
Z = The percentage interest rate per annum allowed by the Bank of
England on special deposits.
For the purposes of this paragraph "ELIGIBLE LIABILITIES" and "SPECIAL
DEPOSITS" shall bear the meanings ascribed to them from time to time by the
Bank of England.
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(2) In the application of the above formula, B, Y, L, X, S and Z will be
included in the formula as figures and not as percentages, e.g. if B = 0.5%
and Y = 15%, BY will be calculated as 0.5 x 15 and not as 0.5% x 15%.
(3) The Additional Cost computed by the Facility Agent in accordance with this
schedule shall be rounded upward, if necessary, to four decimal places.
(4) The calculation in respect of the Additional Cost for each Advance
denominated in Sterling will be made by the Facility Agent on the first day
of each Relevant Period.
(5) Calculations will be made on the basis of a year of 365 days and the actual
number of days elapsed.
(6) If no Reference Bank furnishes the appropriate information for the purposes
of this Schedule, the Additional Cost shall be determined by the Facility
Agent on the basis of such other information and quotations as the Facility
Agent shall reasonably determine to be appropriate.
(7) In the event of a change in circumstances (including the imposition of
alternative or additional official requirements, excluding capital adequacy
requirements) which renders the above formula inappropriate in the
reasonable opinion of the Facility Agent, the Facility Agent shall promptly
notify Services and the Banks thereof and (after consultation with the
Reference Banks and Services) shall notify the Borrowers of the manner in
which the Additional Cost shall thereafter be determined (which manner
shall be determined in a bona fide manner and provide a fair assessment of
the Additional Cost) and the Obligors and the Banks shall be bound thereby.
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THE SIXTH SCHEDULE
PART I
BORROWER ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT is dated the [ ] day of [ ] and
made BETWEEN [ ] (the "ADDITIONAL BORROWER") (1),
PacifiCorp Services Limited ("SERVICES" and a "GUARANTOR") (2), PacifiCorp
Acquisitions ("PA" and an "EXISTING BORROWER" and a "GUARANTOR") (3), PacifiCorp
Finance (UK) Limited ("FINANCE" and a "GUARANTOR") (4), [ ]
(each also an "EXISTING BORROWER") (5), and [ ] in its
capacity as Facility Agent under the Facility Agreement referred to in Recital
(A) hereof and on behalf of the Arrangers, the Banks, the LC Bank and the
Security Agent parties to and defined as such in such Facility Agreement and on
behalf of each of the parties to the Intercreditor Agreement other than the
Obligors (6).
WHEREAS:
(A) By and upon and subject to the terms of a facility agreement (the "FACILITY
AGREEMENT", which term includes any supplements and amendments thereto
which may at any time be made in relation thereto and also any Substitution
Certificates, Borrower Accession Agreements and Guarantor Accession
Agreements) dated [ ] made between Services and PA as Borrowers and
Guarantors as therein defined, the Arrangers, the several banks parties
thereto as Banks, Citibank International Plc as Facility Agent and
Citibank, N.A. as Security Agent, term loan facilities and a revolving
credit facility were made available to certain of the Borrowers (as defined
in the Facility Agreement).
(B) Each of the entities expressed to be party hereto (other than the
Additional Borrower), whether directly or through signature hereof by the
Facility Agent or Services on its behalf, is a party to the Facility
Agreement and the Intercreditor Agreement either by having been an original
party thereto or pursuant to a Borrower Accession Agreement, a Guarantor
Accession Agreement or a Substitution Certificate to which it is party or
otherwise.
(C) The Additional Borrower wishes to become party to the Facility Agreement as
a Borrower pursuant to the procedure established in Clause 19 of the
Facility Agreement and a party to the Intercreditor Agreement pursuant to
the procedure established in [Clause 24 of the Intercreditor Agreement], by
the execution of this Borrower Accession Agreement.
NOW IT IS HEREBY AGREED as follows:
1. DEFINITIONS
Terms used herein which are defined in or to which a meaning or
construction is assigned by or in the Facility Agreement shall, unless
otherwise defined herein, have the same meaning and construction herein as
therein.
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2. AGREEMENTS, CONFIRMATIONS AND REPRESENTATIONS
(a) The Additional Borrower hereby:
(i) confirms that it has received a copy of the Facility Agreement
and the Intercreditor Agreement, together with such other
documents and information as it has required in connection
herewith and therewith;
(ii) agrees to become, with effect from the date of this Borrower
Accession Agreement a Borrower under the Facility Agreement
and an Obligor under the Intercreditor Agreement and agrees to
be bound in such capacity with effect from such date by the
terms of the Facility Agreement and the Intercreditor
Agreement and undertakes accordingly to perform its
obligations as a Borrower or, as the case may be, Obligor
thereunder;
(iii) confirms the accuracy of the information set out under its
name at the end of this Borrower Accession Agreement;
(iv) represents and warrants as a Borrower to the Arranger, the
Bank, the Security Agent and the Facility Agent in the terms
of Clause 20.1 (other than paragraphs (g)(iii), (k), (l),
(n)(ii) and (p) and (r)), of the Facility Agreement by
reference to the facts and circumstances existing at the date
hereof; and
(v) confirms that it has not relied on any of the Finance Parties,
to assess or inform it as to the legality, validity, effect or
enforceability of the Facility Agreement or the Intercreditor
Agreement or any other document referred to therein or the
accuracy or completeness of any such information as is
referred to in paragraph (i) above or the creditworthiness,
affairs, condition or status of any of the parties to the
Facility Agreement or the Intercreditor Agreement, or any such
other document.
(b) The Existing Borrower(s), the Guarantors and the Finance Parties and
the parties to the Intercreditor Agreement hereby agree amongst
themselves and with the Additional Borrower that the Additional
Borrower shall become party to the Facility Agreement and the
Intercreditor Agreement with effect from the date of this Borrower
Accession Agreement.
3. LAW
This Borrower Accession Agreement shall be governed by and construed in
accordance with English law.
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IN WITNESS WHEREOF the parties hereto have caused this Borrower Accession
Agreement to be duly executed on the date first written above.
ADDITIONAL BORROWER:
SERVICES:
PACIFICORP SERVICES LIMITED
By:
for itself and as agent for and on
behalf of the Existing Borrowers and
the Guarantors
By:
FACILITY AGENT:
[ ]
for itself and as Facility Agent and
for and on behalf of the Arrangers,
the Banks, the LC Bank and the
Security Agent and all parties to the
Intercreditor Agreement other than
the Obligors
By:
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PART II
GUARANTOR ACCESSION AGREEMENT
THIS ACCESSION AGREEMENT is dated the day of , and made
BETWEEN:
(1) [ ] (the "ADDITIONAL GUARANTOR");
(2) PACIFICORP SERVICES LIMITED ("SERVICES" and an "EXISTING GUARANTOR");
(3) PACIFICORP ACQUISITIONS ("PA" and an "EXISTING GUARANTOR" and a
"BORROWER");
(4) PACIFICORP FINANCE (UK) LIMITED ("FINANCE" and "EXISTING GUARANTOR");
(5) [ ] (each also an "EXISTING GUARANTOR"); and
(6) [ ] in its capacity as Facility Agent under
the Facility Agreement referred to in Recital (A) hereof and on behalf of
the Arrangers, the Banks, the LC Bank and the Security Agent parties to and
defined as such in such Facility Agreement and on behalf of each of the
parties to the Intercreditor Agreement other than the Obligors.
WHEREAS:
(A) By and upon and subject to the terms of a facility agreement (the "FACILITY
AGREEMENT", which term includes any supplements and amendments thereto
which may at any time be made in relation thereto and also any Substitution
Certificates, Borrower Accession Agreements and Guarantor Accession
Agreements) dated [ ], made between Services and PA as
Borrowers and Guarantors as therein defined, the Arrangers, the several
banks parties thereto as Banks, Citibank International Plc as Facility
Agent and Citibank, N.A. as Security Agent, term loan facilities and a
revolving credit facility were made available to certain of the Borrowers
(as defined in the Facility Agreement).
(B) Each of the entities expressed to be party hereto (other than the
Additional Guarantor), whether directly or through signature hereof by the
Facility Agent or Services on its behalf, is a party to the Facility
Agreement and the Intercreditor Agreement either by having been an original
party thereto or pursuant to a Borrower Accession Agreement, a Guarantor
Accession Agreement or a Substitution Certificate to which it is party or
otherwise.
(C) The Additional Guarantor wishes to become party to the Facility Agreement
as a Guarantor pursuant to the procedure established in Clause 19 of the
Facility Agreement and a party to the Intercreditor Agreement pursuant to
the procedure established in [Clause 24 of the Intercreditor Agreement,] by
the execution of this Guarantor Accession Agreement.
NOW IT IS HEREBY AGREED as follows:
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1. DEFINITIONS
Terms used herein which are defined in or to which a meaning or
construction is assigned by or in the Facility Agreement shall, unless
otherwise defined herein, have the same meaning and construction herein as
therein.
2. AGREEMENTS, CONFIRMATIONS AND REPRESENTATIONS
(a) The Additional Guarantor hereby:
(i) confirms that it has received a copy of the Facility Agreement
and the Intercreditor Agreement, together with such other
documents and information as it has required in connection
herewith and therewith;
(ii) agrees to become, with effect from the date of this Guarantor
Accession Agreement a Guarantor under the Facility Agreement
and an Obligor under the Intercreditor Agreement and agrees to
be bound in such capacity with effect from such date by the
terms of the Facility Agreement and the Intercreditor
Agreement and undertakes accordingly to perform its
obligations as a Guarantor or, as the case may be, Obligor
thereunder;
(iii) confirms the accuracy of the information set out under its
name at the end of this Guarantor Accession Agreement;
(iv) represents and warrants as a Guarantor to the Arranger, the
Banks, the Security Agent and the Facility Agent in the terms
of Clause 20.1 (other than paragraphs (g)(iii), (k), (l),
(n)(ii) and (p) and (r)) of the Facility Agreement by
reference to the facts and circumstances existing at the date
hereof; and
(v) confirms that it has not relied on any of the Finance Parties,
to assess or inform it as to the legality, validity, effect or
enforceability of the Facility Agreement or the Intercreditor
Agreement or any other document referred to therein or the
accuracy or completeness of any such information as is
referred to in paragraph (i) above or the creditworthiness,
affairs, condition or status of any of the parties to the
Facility Agreement or the Intercreditor Agreement, or any such
other document.
(b) The Existing Borrower(s), the Guarantors and the Finance Parties and
the parties to the Intercreditor Agreement hereby agree amongst
themselves and with the Additional Guarantor that the Additional
Guarantor shall become party to the Facility Agreement and the
Intercreditor Agreement with effect from the date of this Guarantor
Accession Agreement.
3. LAW
This Guarantor Accession Agreement shall be governed by and construed in
accordance with English law.
IN WITNESS WHEREOF the parties hereto have cause this Guarantor Accession
Agreement to be duly executed on the date first written above.
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<PAGE>
ADDITIONAL GUARANTOR:
SERVICES:
PACIFICORP SERVICES LIMITED
for itself and as agent for and on
behalf of the Existing Guarantors and
the Borrowers
By:
FACILITY AGENT
[ ]
for itself and as Facility Agent and
for and on behalf of the Arrangers,
the Banks, the LC Bank and the Security Agent
and all parties to the Intercreditor Agreement
other than the Obligors.
By:
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THE SEVENTH SCHEDULE
PART I
DOCUMENTARY CONDITIONS PRECEDENT
1. A certified copy of the memorandum and articles of association (if any),
statutes or by-laws and of each other constitutional or governing document
of each Obligor.
2. The Fee Letter(s) referred to in Clause 27.2 duly executed by PA.
3. At least two originals of (a) the Debenture, duly executed by Services,
Finance and PA; (b) the Intercreditor Agreement duly executed by Services,
Finance and PA; and (c) the Powercoal Intercreditor Agreement duly executed
by Services, Finance, PA and Powercoal.
4. A certified copy of a resolution of the Directors (or of a duly constituted
and empowered committee of the directors) of each Obligor approving the
transactions and matters contemplated by this Agreement and the other
Finance Documents to which it is a party and authorising an Authorised
Signatory of such Obligor to execute respectively on their behalf all the
Finance Documents to which they are a party and in the case of documents to
be executed under seal or as a deed, authorising the execution thereof as a
deed or the affixation of the seal and the witnessing thereof by the
appropriate officers in accordance with the relevant Obligor's articles of
association, statutes, by-laws or other constitutional documents.
5. A specimen, of the signature of each person (each being an Authorised
Signatory) authorised to execute any of the Finance Documents on behalf of
any Obligor and/or sign all notices, certificates and other documents or
communications to be delivered by such Obligor thereunder.
6. An opinion, addressed to the Facility Agent and the Banks, of English legal
advisers to the Facility Agent and the Banks as to such matters relating to
the Obligors and their obligations under the Finance Documents as the
Facility Agent may reasonably require.
7. The Offer Document, reflecting in all material respects the text of the
Press Release.
8. The Press Release.
9. The Structure Memorandum.
10. The letter referred to in Clause 4.1(d).
11. Model.
12. Borrowings List.
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PART II
ADDITIONAL BORROWER/GUARANTOR DOCUMENTARY CONDITIONS PRECEDENT
1. Each of the documents referred to in paragraphs 1, 4, 5 and 6 (and, in the
case of a company incorporated outside England & Wales such opinion of
overseas counsel as the Facility Agent may reasonably require) of Part I of
this Schedule relating to the Additional Borrower or Additional Guarantor,
in each case in form and substance reasonably satisfactory to the Facility
Agent.
PART III
ADDITIONAL GUARANTORS AND CHARGORS
The Energy Group PLC
Rollalong Limited
Rollalong Hire Limited
Eastern Group PLC
Peabody Investments Inc.
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THE EIGHTH SCHEDULE
TERMS OF BANKS' INDEMNITY TO LC BANK
1. Each Bank ("TRANCHE 2 BANK") having a Tranche 2 Commitment or which had a
Tranche 2 Commitment which it has assigned, transferred or novated without
the written consent of the LC Bank will pay any amount demanded of it by
the LC Bank pursuant to Clause 5.6 on the later of the date that the LC
Bank has itself to make payment under the Documentary Credit (as notified
by the LC Bank to such Tranche 2 Bank in the demand) and 2 Business Days
after receipt by such Tranche 2 Bank of such demand.
2. Where a Tranche 2 Bank makes a payment pursuant to paragraph 1 after the
date on which the LC Bank makes the relevant payment under the Documentary
Credit in question, such Tranche 2 Bank shall pay on demand to the LC Bank
its pro rata share (as calculated in Clause 5.6) of such amount as the LC
Bank certifies (such certification to be conclusive in the absence of
manifest error) 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 LC Bank to recover from
each of the Tranche 2 Bank to the full extent of their obligations under
Clause 5.6 and this Eighth Schedule.
4. The obligations of each Tranche 2 Bank under Clause 5.6 and this Eighth
Schedule shall not be impaired, affected or revoked by any act, omission,
transaction, limitation, matter, thing or circumstance whatsoever which but
for this provision might operate to release or exonerate such Tranche 2
Bank from all or any part of its obligations under Clause 5.6 and this
Eighth Schedule or reduce, impair or affect such obligations or cause all
or any part of such obligations to be
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irrevocable 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 Obligor or any other
person or the forbearance of the LC Bank in enforcing the obligations
of any Obligor or any other person under this Agreement or any of the
other Finance Document or in respect of any other guarantee, security,
obligation, right or remedy;
(b) the recovery of any judgement against any Obligor or any other person
or any action to enforce the same;
(c) the taking of any other security from any Obligor or any other person
or the failure, refusal or neglect to take, perfect or enforce, any
rights, remedies or securities from or against any Obligor or any
other person or all or any part of the security constituted by any of
the Finance Documents;
(d) any alteration in the constitution of any Obligor or any defect in or
irregular exercise of the borrowing or other powers of any Obligor or
any other person or any legal limitation, disability, incapacity or
other circumstance relating to any Obligor or any other person whether
arising in relation to this Agreement, any of the other Finance
Documents or any other guarantee or security or otherwise howsoever;
(e) any amendment or supplement to or variation of any Finance Document;
(f) the insolvency, bankruptcy, liquidation, reconstruction or
reorganisation of, or analogous proceedings relating to any Obligor or
any other person or any composition or arrangement made by any of them
with the LC Bank, any Bank or any other person or any transfer or
extinction of any liabilities of or any Obligor by any law, order,
regulation, decree, court order or similar instrument; or
(g) any irregularity, unenforceability or invalidity of any obligations of
any Obligor or any other person under any security or document (to the
intent that such Tranche 2 Bank's obligations under Clause 5.6 and
this Eighth Schedule shall remain in full force as if there were no
such irregularity, unenforceability or invalidity).
5. The LC Bank shall be entitled to enforce the obligations of each Bank under
Clause 5.6 and this Eighth Schedule without making any demand on or taking
any proceedings against or filing any proof or claim in any insolvency,
winding up or liquidation of any Obligor or any other person or exhausting
any right or remedy against any Obligor or any other 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 Tranche 2 Bank under Clause 5.6 and this Eighth
Schedule shall be continuing obligations and shall extend to the ultimate
balance of the obligations referred to in paragraph (a) thereof. If, for
any reason, such obligations cease to be continuing obligations, the LC
Bank may open a new account with or continue any existing account with any
Obligor or other person and the liability of each Tranche 2 Bank in respect
of amounts guaranteed by it pursuant to Clause 5.6 and this Eighth Schedule
at the date of such cessation shall remain regardless of any payments in or
out of any such account.
7. The LC Bank's rights under Clause 5.6 and this Eighth Schedule shall be in
addition to and shall
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be in no way prejudiced by any other rights of or security held by the LC Bank
in relation to the obligations of any Obligor. The LC Bank's rights under
Clause 5.6 and this Eighth Schedule are in addition to and are not exclusive of
those provided by law.
8. A certificate of the LC Bank as to any amount due to it from any Bank
pursuant to Clause 5.6 and this Eighth Schedule shall be conclusive in the
absence of manifest error.
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THE NINTH SCHEDULE
RESERVATIONS
1. The principle that equitable remedies are remedies which may be granted or
refused at the discretion of the court.
2. The limitation of enforcement by law relating to bankruptcy, insolvency,
liquidation, reorganisation, court schemes, moratoria, administration or
other laws generally affecting the rights of creditors.
3. The time barring of claims under the Limitation Acts.
4. The possibility that following the judgment in the case of IN RE CHARGE
CARD SERVICES LIMITED (1986) it may not be possible for a bank to obtain a
charge to secure obligations owed to it over monies deposited with it.
5. The possibility that an undertaking to assume liability for or to indemnify
a person against non payment of UK stamp duty may be void.
6. Defences of set off or counterclaim and similar principles.
7. Rights and defences under the laws of any foreign jurisdictions in which
relevant obligations may have to be performed.
8. The possibility that penalty interest may not be recoverable.
9. Circumstances in which an English court would not treat as conclusive those
certificates and determinations which the Finance Documents state as to be
so treated.
10. Clause 34.1 and the corresponding clauses of other Finance Documents may
not be effective in certain circumstances depending on the nature of the
prohibition or unenforceability in question.
11. Documents may be amended orally by the parties thereto notwithstanding
provisions therein to the contrary.
12. The effectiveness of the Debenture as regards assets (if any) situated
outside England and Wales will be governed to some extent by laws other
than English.
13. The priority rules for any security created by the Finance Documents.
14. English courts do not necessarily give full effect to an indemnity for the
costs of litigation.
15. Security created by the Debenture over any shares will only constitute an
equitable charge until such shares are registered in the name of the
Security Agent or its nominee.
16. That the Security Documents do and the provisions of Clause 18.7(c) may
constitute a charge which is required to be registered under Section 395
Companies Act 1985 (as amended).
17. That the exercise by a Security Agent of powers and remedies expressed to
be given to it pursuant
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to the terms of the Debenture may be limited.
18. That security which is expressed to be fixed may only be floating.
19. The provisions of Clauses 25.1 (CURRENCY INDEMNITY) and Clause 12.3
(CURRENCY) may be superceded by a judgment, whether given in an English
court or elsewhere.
20. Where any party to the Transaction Documents is vested therein with a
discretion and may determine a matter in its opinion, English law may
require that such discretion is exercised reasonably or that such opinion
is based on reasonable grounds.
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THE TENTH SCHEDULE
ENCUMBRANCES
1. A pledge over 737,195 shares in Teplarny Brno a.s. and 385,000 shares in
S.M.E. a.s. granted to Ceska Sporitelna as security agent against a CZK 3.4
Billion 7 Year Promissory Note Program for Eastern Overseas Finance Ltd.
2. The charges on cash granted by Eastern Merchant Properties Limited to The
Industrial Bank of Japan, The Bank of Nova Scotia and Societe Generale in
respect of deposits in an aggregate principal amount not exceeding
L408,087,073.
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THE ELEVENTH SCHEDULE
ECONOMIC AND MONETARY UNION
1. ALTERNATIVE CURRENCIES DURING TRANSITION PERIOD If and to the extent that
any EMU legislation provides that following the commencement of the third stage
of EMU 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, the Borrower shall be
entitled to pay or repay any such amount either in the euro unit or in such
national currency unit.
2. ADVANCES DURING TRANSITION PERIOD If any Advance made (or to be made) on
or after the commencement of the third stage of EMU would, but for this
provision, be capable of being made either in the euro or in a national currency
unit, such Advance shall be made in the euro.
3. BUSINESS DAYS With effect on and from the commencement of the third stage
of EMU, the definition of Business Day in Clause 1.1 shall be amended by the
addition thereto (at the end) of the following:
"and, if the reference to Business Day relates to a date for the payment or
conversion of a sum denominated in the euro or in a national currency unit,
a day on which (a) such clearing or settlement system as is determined by
the Facility Agent to be suitable for clearing or settlement of the euro is
open for business and (b) banks are generally open for business in such
financial centre as is determined by the Facility Agent to be suitable for
clearing or settlement of such national currency unit.".
4. ROUNDING AND OTHER CONSEQUENTIAL CHANGES With effect on and from the
commencement of the third stage of EMU:
(a) without prejudice and in addition to any method of conversion or
rounding prescribed by any EMU legislation, each reference in this
Agreement to a fixed amount or fixed amounts in a national currency
unit to be paid to or by the Facility Agent shall be replaced by a
reference to such comparable and convenient fixed amount or fixed
amounts in the euro unit as the Facility Agent may from time to time
reasonably specify (after consultation with PA); and
(b) save as expressly provided in this Schedule, this Agreement shall be
subject to such changes of construction as the Facility Agent may from
time to time reasonably specify (after consultation with PA) to be
necessary to reflect the changeover to the euro in participating
member states.
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THE TWELFTH SCHEDULE
REQUIRED DISTRIBUTIONS SCHEDULE
PACIFICORP ACQUISITIONS
(Certificate Pursuant to Clause 21.6)
I, [director of PA], refer to Clause 21.6(b) of the Facility Agreement
dated 3rd February 1998 between PacifiCorp Acquisitions (the "Company"),
Citibank International plc as facility agent and the various other parties
thereto (the "Facility Agreement"). (Terms defined in the Facility Agreement
have the same meanings herein).
During the last three quarters we have pursuant to Clause 21.6(b)(i), (ii)
and/or (iii) of the Facility Agreement paid Distributions of L/$[ ] and
we now intend paying pursuant to Clause 21.6(b)(i), (ii) and/or (iii) of the
Facility Agreement a further amount of L/$[ ].
The Company hereby confirms that those Distributions now to be paid will be
used to meet contractual or other legal obligations of EnergyCo which have
fallen due or will do so within the current or next financial quarter. The
Company further confirms that all other sources of funds reasonably available to
EnergyCo have been (or will within the current or next financial quarter be)
utilised in full.
Signed
_________________________________
for and on behalf of
PACIFICORP ACQUISITIONS
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SIGNATORIES TO FACILITY AGREEMENT
SERVICES
PACIFICORP SERVICES LIMITED
By: /s/ W.E. PERESSINI
FINANCE
PACIFICORP FINANCE (UK) LIMITED
By: /s/ W.E. PERESSINI
PA
PACIFICORP ACQUISITIONS
By: /s/ W.E. PERESSINI
THE ARRANGERS
CITIBANK, N.A.
By: /s/ DAVID F. BASSETT
GOLDMAN SACHS INTERNATIONAL
By: /s/ S. PARRY-WINGFIELD
J.P. MORGAN SECURITIES LTD.
By: /s/ M. HALL
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THE ORIGINAL BANKS
CITIBANK, N.A.
By: /s/ THOMAS W. NG
GOLDMAN SACHS CREDIT PARTNERS, L.P.
By: /s/ S. PARRY-WINGFIELD
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By: /s/ R. POISSON
THE FACILITY AGENT
CITIBANK INTERNATIONAL PLC
By: /s/ DAVID F. BASSETT
THE SECURITY AGENT
CITIBANK, N.A.
By: /s/ DAVID F. BASSETT
THE LC BANK
CITIBANK, N.A.
By: /s/ DAVID F. BASSETT
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EXHIBIT 99(b)(4)
EXECUTION COPY
DEBENTURE
(Multiple Chargors)
Dated 3 February 1998
BETWEEN
PACIFICORP SERVICES LIMITED
and
PACIFICORP FINANCE (UK) LIMITED
and
PACIFICORP ACQUISITIONS
as Chargors
and
CITIBANK, N.A.
as Security Agent
THIS DEBENTURE IS ENTERED INTO WITH
THE BENEFIT OF AND SUBJECT TO THE TERMS OF AN
INTERCREDITOR AGREEMENT AS REFERRED TO IN THE
FACILITY AGREEMENT REFERRED TO HEREIN
Clifford Chance
London
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TABLE OF CONTENTS
Clause Page
1. Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Covenant to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Charges on Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Floating Charges. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5. Continuing Security, etc. . . . . . . . . . . . . . . . . . . . . . . . 8
6. Representations and Warranties. . . . . . . . . . . . . . . . . . . . . 12
7. Undertakings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. Special Provisions relating to the Security Shares . . . . . . . . . . 14
9. When Security becomes Enforceable . . . . . . . . . . . . . . . . . . . 16
10. Enforcement of Security . . . . . . . . . . . . . . . . . . . . . . . . 16
11. Receiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12. Application of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . 20
13. No Liability as Mortgagee in Possession . . . . . . . . . . . . . . . . 20
14. Protection of Third Parties . . . . . . . . . . . . . . . . . . . . . . 21
15. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
16. Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
17. Delegation by Security Agent. . . . . . . . . . . . . . . . . . . . . . 22
18. Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
19. Redemption of Prior Mortgages . . . . . . . . . . . . . . . . . . . . . 23
20. Power of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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21. New Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
22. Stamp Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
23. Assignments, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
24. Waivers, Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 25
25. Set-Off . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
26. Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
27. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
28. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
29. Covenant to Release . . . . . . . . . . . . . . . . . . . . . . . . . . 27
30. Governing Law and Jurisdiction. . . . . . . . . . . . . . . . . . . . . 27
SCHEDULE 1
The Chargors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SCHEDULE 2
Group Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SCHEDULE 3
Form of Deed of Accession . . . . . . . . . . . . . . . . . . . . . . . 32
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THIS DEBENTURE is dated 3 February 1998 and is made between:
(1) PACIFICORP SERVICES LIMITED a company incorporated under the laws of
England and Wales (No. 3366016) whose registered office is at One Silk
Street, London EC2Y 8HQ ("Services");
(2) THE COMPANIES identified in Schedule 1 (together with each company which
becomes a party hereto by executing a Deed of Accession, each a "Chargor",
together the "Chargors"); and
(3) CITIBANK, N.A., P.O. Box 242, 336 Strand, London WC2R 1HB (the "Security
Agent") as agent and trustee for itself and each of the Lenders (as
defined below).
WHEREAS:
(A) The Banks (as defined in the Facility Agreement referred to below) have
agreed to make available to the Borrowers (as defined in the Facility
Agreement) certain term loan and revolving credit facilities (the
"Facilities") on and subject to the terms of the Facility Agreement.
(B) It is a condition precedent to the Banks making the Facilities available
that the Chargors enter into this Debenture.
(C) It is intended by the parties hereto that this document shall take effect
as a deed notwithstanding the fact that a party may only execute this
document under hand.
NOW IT IS AGREED as follows:
1. Interpretation
1.1 Definitions
In this Debenture:
"Declared Default" means an Event of Default which has resulted in the
Facility Agent serving notice under any provision of Clause 24.2 of the
Facility Agreement and/or an Event of Default (as defined therein) under
the Powercoal Facility Agreement which has resulted in the Paying Agent
(as defined therein) serving notice under any provision of Article VII
of the Powercoal Facility Agreement;
"Deed of Accession" means a deed substantially in the form set out in
Schedule 3 hereto;
"Default Rate" means, until the Discharge Date, at any time, a rate
determined in accordance with Clause 11.3 of the Facility Agreement;
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"Discharge Date" means the date on which all the Secured Liabilities
arising pursuant to or in respect of any of the Finance Agreements and the
PA Note have been unconditionally and irrevocably paid and discharged in
full and all commitments cancelled;
"Facility Agent" means Citibank International plc in its capacity as agent
under the Facility Agreement and its permitted successors and assigns;
"Facility Agreement" means the facility agreement dated 3 February 1998
between Services, Finance, PA, the Arrangers, the Original Banks, the LC
Bank (each as defined therein), the Facility Agent and the Security Agent,
together with each Borrower Accession Agreement, Guarantor Accession
Agreement and Substitution Certificate relating thereto and any and each
other agreement or instrument supplementing or amending it;
"Finance Agreements" means the Finance Documents and any Refinancing
Agreement;
"Group Shares" means all shares specified in Schedule 2, or, when used
in relation to a particular Chargor, such of those shares as are
specified against its name in Schedule 2 together in each case with all
other stocks, shares, debentures, bonds, warrants, coupons or other
securities and investments now or in the future owned by any or (when
used in relation to a particular Chargor) that Chargor from time to time
excluding all Shares now or in the future owned by any Chargor from time
to time until the de-listing on The New York Stock Exchange of TEG's
American Depositary Receipt Shares whereupon all such Shares shall
become Group Shares and be subject to the security created by this
Debenture;
"Lender" means each of the Facility Agent, the LC Banks, the Hedging
Banks, the Security Agent, the Arrangers and the Banks parties to or
having an interest under the Finance Documents from time to time, and
prior to the completion of the Asset Split, in accordance with the
Facility Agreement, Powercoal in its capacity as lender under the PA
Note, and any creditor (or any agent, trustee or arranger) in respect of
Borrowings incurred under a Refinancing Agreement;
"Receiver" means a receiver and manager or (if the Security Agent so
specifies in the relevant appointment) a receiver;
"Refinancing Agreement" means a document providing for Borrowings
satisfying the requirements of the proviso to Clause 21.3(a) (Negative
Pledge) of the Facility Agreement (as in force at the date of this
Debenture) provided that PA in accordance with such proviso has required
such Borrowings to be so secured;
"Related Rights" means, in relation to the Group Shares, all dividends and
other
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distributions paid or payable after the date hereof on all or any of the
Group Shares and all stocks, shares, securities (and the dividends or
interest thereon), rights, money or property accruing or offered at any
time by way of redemption, bonus, preference, option rights or otherwise
to or in respect of any of the Group Shares or in substitution or
exchange for any of the Group Shares;
"Secured Liabilities" means all present and future obligations and
liabilities (whether actual or contingent and whether owed jointly or
severally or in any other capacity whatsoever) of each Obligor to the
Lenders (or any of them) under each or any of the Finance Agreements
together with all costs, charges and expenses incurred by any Lender in
connection with the protection, preservation or enforcement of its
respective rights under the Finance Agreements or any other document
evidencing or securing any such liabilities and, prior to the completion
of the Asset Split in accordance with the terms of the Facility
Agreement and the Structure Memorandum, all present and future
obligations of PA to Powercoal under and in respect of the PA Note (the
"Powercoal/PA Liabilities"), PROVIDED THAT with effect from the
completion of the Asset Split as aforesaid, the Powercoal/PA Liabilities
shall cease to be included within the definition of Secured Liabilities
for all the purposes of this Debenture; and PROVIDED FURTHER THAT no
obligation or liability shall be included in the definition of Secured
Liabilities to the extent that, if it were so included, this Debenture
(or any part thereof) would constitute unlawful financial assistance
within the meaning of Sections 151 and 152 of the Companies Act 1985;
"Security Assets" means all assets, rights and property of the Chargors or
any of them the subject of any security created hereby or pursuant hereto
and includes, for the avoidance of doubt each Chargor's rights to or
interests in any chose in action and the Security Shares;
"Security Documents" means this Debenture and every other document entered
into by the Chargors pursuant to this Debenture;
"Security Period" means the period beginning on the date hereof and ending
on the Discharge Date;
"Security Shares" means the Group Shares and the Related Rights and in the
case of each Chargor means such of the Group Shares as are held by it at
the relevant time together with all Related Rights in respect thereof;
"Shares" has the meaning ascribed thereto in the Facility Agreement; and
"Share Mortgages" means the mortgages and charges created or purported to
be created by Clause 3 hereof.
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1.2 Interpretation
(a) Save as expressly herein defined, capitalised terms defined in the
Facility Agreement shall have the same meaning when used herein.
Terms defined in the recitals to this Debenture have the same meaning
when used in the remainder of this Debenture.
(b) The provisions of Clause 1.2 of the Facility Agreement shall also
apply hereto as if expressly set out herein (mutatis mutandis) with
each reference to the Facility Agreement being deemed to be a
reference to this Debenture.
(c) For the avoidance of doubt, this Debenture (or any part thereof)
shall not constitute unlawful financial assistance for the purposes
of the proviso to the definition of Secured Liabilities in Clause
1.1 to the extent that it constitutes financial assistance within
the meaning of the Sections therein cited but the provisions of
Sections 155-158 of the Companies Act 1985 have been complied with
in respect of the giving of such financial assistance. Each
Chargor confirms that, if and to the extent that it is required by
law to do so, it has complied with the provisions of Section
155-158 of the Companies Act 1985.
(d) If the Security Agent (on the basis of legal advice received by it
for this purpose) reasonably considers that an amount paid by any
Obligor to any Lender under any Finance Agreement or the PA Note,
is capable of being avoided or otherwise set aside on the
liquidation or administration of such Obligor or otherwise, then
such amount shall not be considered to have been irrevocably paid
for the purposes hereof.
1.3 Certificates
A certificate of the Security Agent setting forth the amount of any
Secured Liability due from any Obligor shall in the absence of manifest
error, be prima facie evidence and shall be promptly notified to
Services, the relevant Borrower and the Banks or, in the case of any
amount of any Secured Liability in respect of a Refinancing Agreement,
the creditor under that Refinancing Agreement.
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2. Covenant to Pay
2.1 Covenant
Each Chargor hereby, as primary obligor and not merely as surety,
covenants with the Security Agent (as agent and trustee as aforesaid)
that it will pay or discharge the Secured Liabilities on the due date
therefor in the manner provided in the relevant Finance Agreement or in
the PA Note. Any amount not paid hereunder in respect of or under any
Finance Agreement or the PA Note when due shall bear interest (as well
after, as before, judgment and payable on demand) at the Default Rate
from time to time from the due date until the date such amount is
unconditionally and irrevocably paid and discharged in full, save to the
extent that interest at such rate on such amount for such period is
charged pursuant to the relevant Finance Agreement and itself
constitutes a Secured Liability.
2.2 Right of Appropriation
Upon the occurrence of a Declared Default, and at any time thereafter
while the same is continuing, the Security Agent shall be entitled to
appropriate moneys and/or assets to the Secured Liabilities in such
manner or order as it sees fit (subject to Clause 12) and any such
appropriation shall override any appropriation by any Obligor. This
Clause 2.2 shall not, however, override the principle that (subject to
Clause 12) the Lenders are to share in recoveries on a pro rata basis.
3. Charges on Shares
Each Chargor, as sole beneficial owner and with full title guarantee,
hereby as continuing security for the payment, discharge and performance
of all the Secured Liabilities:
(a) mortgages and charges and agrees to mortgage and charge to the
Security Agent (as agent and trustee as aforesaid) all Group Shares
held now or in the future by it and/or any nominee on its behalf, the
same to be a security by way of a first mortgage; and
(b) mortgages and charges and agrees to mortgage and charge to the
Security Agent (as agent and trustee as aforesaid) all the Related
Rights accruing to all or any of the Group Shares held now or in the
future by it and/or any nominee on its behalf, the same to be a
security by way of a first mortgage or charge,
PROVIDED THAT:
(i) the provisions of this Clause 3, and the security created
thereby, shall not take effect in respect of Group Shares in a
company which is not
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incorporated in any part of the United Kingdom unless and until
the consent of H.M. Treasury under section 765 of the Income and
Corporation Taxes Act 1988 is obtained permitting the giving of
such security over such Group Shares;
(ii) whilst no Declared Default exists, all dividends and other
distributions paid or payable as referred to in paragraph (b)
above may be paid directly to the relevant Chargor free from
the security created hereunder (in which case the Security
Agent or its nominee shall execute any necessary dividend
mandate) and, if paid directly to the Security Agent, shall be
paid promptly by it to the relevant Chargor; and
(iii) subject to Clause 8.2, whilst no Declared Default exists, all
voting rights attaching to the relevant Group Shares may be
exercised by the relevant Chargor or, where the shares have
been registered in the name of the Security Agent or its
nominee, as the relevant Chargor may direct in writing, and
the Security Agent and any nominee of the Security Agent in
whose name such Group Shares are registered shall promptly
execute any form of proxy or other document reasonably
required in order for the relevant Chargor to do so.
4. Floating Charges
4.1 Creation of floating charge
Each Chargor as beneficial owner and with full title guarantee, as
security for the payment, discharge and performance of the Secured
Liabilities, charges in favour of the Security Agent (as agent and
trustee as aforesaid) by way of a first floating charge all its
undertaking and assets whatsoever and wheresoever both present and
future (including, without limitation, any undertaking and assets
situated in Scotland (whether or not the same may be mortgaged or
charged by way of standard security)), subject always to the Share
Mortgages or any other provision of this Debenture, PROVIDED THAT the
provisions of this Clause shall not apply to the Shares owned now or in
the future by PA until such time as such Shares shall be Group Shares,
in accordance with the terms of that definition.
4.2 Restrictions on dealing
Each Chargor undertakes to each Lender that, save as expressly permitted
or not prohibited under the terms of this Debenture and/or the Facility
Agreement, it will not:
(a) create or permit to subsist any Encumbrance over all or any of its
assets, rights or property other than pursuant to this Debenture or
any other Security Document; or
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(b) part with, lease, sell, transfer, assign or otherwise dispose of or
agree to part with, lease, sell, transfer, assign or otherwise dispose
of all or any part of its assets, rights or property or any interest
therein,
PROVIDED THAT the provisions of this Clause shall not apply to the Shares
owned now or in the future by PA until such time as such Shares shall be
Group Shares, in accordance with the terms of that definition.
4.3 Conversion of Floating Charge
(a) The Security Agent may by notice to any Chargor convert the floating
charge hereby created into a specific charge as regards all or any of
such Chargor's assets, rights and property:
(i) if a Declared Default has occurred; or
(ii) if such Chargor fails to comply, or takes or threatens to take
any action which in the reasonable opinion of the Security Agent
is likely to result in it failing to comply with its obligations
under Clause 4.2.
(b) The floating charge hereby created shall (in addition to the
circumstances in which the same will occur under general law)
automatically be converted into a fixed charge over the assets, rights
and property of any Chargor on the convening of any meeting of the
members of such Chargor to consider a resolution to wind such Chargor
up.
(c) The giving by the Security Agent of a notice pursuant to paragraph (a)
above in relation to any class of any Chargor's assets, rights and
property shall not be construed as a waiver or abandonment of the
Security Agent's rights to give other similar notices in respect of
any other class of assets or of any other of the rights of the Lenders
(or any of them) or under any of the other Finance Agreements.
5. Continuing Security, etc.
5.1 Continuing security
The security constituted by this Debenture shall be continuing and will
extend to the ultimate balance of the Secured Liabilities, regardless of
any intermediate payment or discharge in whole or in part.
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5.2 Breaking of accounts
If for any reason the security constituted hereby ceases to be a continuing
security in respect of any Obligor (other than by way of discharge of such
security), the Lenders (and each or any of them) may open a new account
with or continue any existing account with such Obligor and the liability
of each Chargor in respect of the Secured Liabilities relating to such
Obligor at the date of such cessation shall remain regardless of any
payments in or out of any such account.
5.3 Reinstatement
(a) Where any discharge (whether in respect of the obligations of any
Obligor or any security for those obligations or otherwise) is made in
whole or in part or 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 Chargor under this Debenture shall continue as
if the discharge or arrangement had not occurred.
(b) The Security Agent may concede or compromise any claim that any
payment, security or other disposition is liable to avoidance or
restoration.
5.4 Waiver of defences
(a) The liability of each Chargor hereunder will not be affected by any
act, omission, circumstance, matter or thing which, but for this
provision, would release or prejudice any of its obligations
hereunder, or prejudice or diminish such obligations in whole or in
part, including, without limitation, and whether or not known to any
Chargor, any Lender or any other person whatsoever:
(i) any time, indulgence or waiver granted to, or composition with,
any Obligor or any other person; or
(ii) the taking, variation, compromise, exchange, renewal or release
of, or refusal or neglect to perfect or take up or enforce any
rights or remedies against, or any security over assets of, any
Obligor or any other person or any non- presentment or
non-observance of any formality or other requirement in respect
of any instruments or any failure to realise the full value of
any other security; or
(iii) any legal limitation, disability, incapacity or lack of
powers, authority or legal personality of or dissolution or
change in the members or status of or other circumstance
relating to, any Obligor or any other person; or
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(iv) any variation (however fundamental and whether or not involving
any increase in the liability of any Obligor thereunder) or
replacement of a Finance Agreement or the PA Note, or any other
document or security so that references to that Finance Agreement
or the PA Note, or other documents or security in this Debenture
shall include each such variation or replacement; or
(v) any unenforceability, illegality, invalidity or frustration of
any obligation of any Obligor or any other person under any
Finance Agreement or any other document or security, or any
failure of any other Obligor or proposed Obligor to become bound
by the terms of any Finance Agreement, in each case whether
through any want of power or authority or otherwise; or
(vi) any postponement, discharge, reduction, non-provability or other
similar circumstance affecting any obligation of any Obligor
under a Finance Agreement or affecting any obligation of PA under
the PA Note resulting from any insolvency, liquidation or
dissolution proceedings or from any law, regulation or order,
this Debenture be construed as if there were no such
circumstance,
to the intent that each Chargor's obligations under this Debenture
shall remain in full force, and this Debenture be construed
accordingly, as if there were no such circumstance, act, variation,
limitation, omission, unenforceability, illegality, matter or thing.
No Lender shall be concerned to see or investigate the powers or
authorities of any of the Chargors or their respective officers or
agents, and moneys obtained or Secured Liabilities incurred in
purported exercise of such powers or authorities or by any person
purporting to be an Obligor shall be deemed to form a part of the
Secured Liabilities, and Secured Liabilities shall be construed
accordingly.
(b) For the avoidance of doubt, each Chargor shall be bound by this
Debenture notwithstanding the fact that not all of the other members
of the Group may have executed this Debenture and/or any of the other
Security Documents required by the terms of the Finance Agreements to
be entered into by it or that any such document which has been entered
into may be invalid, unenforceable or otherwise ineffective.
5.5 Immediate Recourse
Each Chargor waives any right it may have of first requiring any Lender to
proceed against or enforce any other rights or security before enforcing
the security constituted hereby.
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5.6 Appropriations
Upon and after the occurrence of a Declared Default and until all the
Secured Liabilities have been unconditionally and irrevocably paid and
discharged in full, each Lender may:
(a) refrain from applying or enforcing any other moneys, security or
rights held or received by it in respect of the Secured Liabilities or
apply and enforce the same in such manner and order as it sees fit
(whether against the Secured Liabilities or otherwise) and no Chargor
shall be entitled to the benefit of the same; and
(b) hold in a suspense account any moneys received from any Obligor or on
account of any Obligor's liability in respect of the Secured
Liabilities. Amounts standing to the credit of any such suspense
account shall bear interest at a rate considered by such Lender to be
a fair market rate.
5.7 Non-competition
Until all the Secured Liabilities have been unconditionally and irrevocably
paid and discharged in full, no Chargor shall by virtue of any payment
made, security realised or moneys received or recovered under any of the
Finance Agreements or the PA Note for or on account of the liability of any
other Obligor(s):
(a) be subrogated to any rights, security or moneys held, received or
receivable by any Lender, or be entitled to any right of contribution
or indemnity; or
(b) claim, rank, prove or vote as a creditor of any Obligor or its estate
in competition with any Lender; or
(c) unless the Security Agent directs it to do so after a Declared Default
has occurred and is continuing, receive, claim or have the benefit of
any payment, distribution or security from or on account of any
Obligor, or exercise any right of set-off as against any Obligor.
Each Chargor will hold in trust for and forthwith pay or transfer to the
Security Agent (acting as agent and trustee as aforesaid) any payment or
distribution or benefit of security received by it contrary to the above.
If any Chargor exercises any right of set-off contrary to the above, it
will forthwith pay an amount equal to the amount set-off to the Security
Agent (acting as agent and trustee as aforesaid).
5.8 Additional Security
This Debenture is in addition to and is not in any prejudiced by any way
other security now or hereafter held by any Lender.
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5.9 Security held by the Chargor
No Chargor will without the prior written consent of the Security Agent
hold any security from any other Obligor in respect of such Chargor's
liability hereunder. Each Chargor will hold any security held by it in
breach of this provision on trust for the Security Agent (as agent and
trustee as aforesaid).
6. Representations and Warranties
6.1 To whom made
Each Chargor makes the representations and warranties set out in the balance of
this Clause 6 to each Lender.
6.2 Matters represented
(a) Security Shares
(i) It is and will (save as otherwise permitted by the Facility
Agreement) remain the sole beneficial owner of the Security
Shares and save where the Security Shares have been registered
in the name of the Security Agent or its nominee pursuant
hereto, it and/or its nominee is and will (save as otherwise
permitted by the Facility Agreement) remain the absolute legal
owner of the Security Shares.
(ii) The Share Mortgages constitute first priority security
interests over the Security Shares which are not subject to
any prior or pari passu Encumbrances.
(iii) It will not take any action whereby the rights attaching to
the Security Shares are altered or diluted.
(iv) The Group Shares are fully paid and non-assessable and neither
the Group Shares nor the Related Rights are subject to any
options to purchase or similar rights of any person.
(b) Security
Subject to the Reservations, this Debenture (i) constitutes its
legally binding obligation enforceable in accordance with its terms,
(ii) creates those Encumbrances it purports to create, and (iii) is
not liable to be avoided or otherwise set aside on its liquidation or
administration or otherwise.
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6.3 Times for making representations and warranties
The representations and warranties set out in this Clause 6:
(a) will survive the execution of each Finance Agreement and the making of
each Utilisation under the Facility Agreement or, as the case may be,
a utilisation under a Refinancing Agreement;
(b) are made on the date hereof and are deemed to be repeated on each date
during the Security Period on which any of the representations and
warranties set out in Clause 20.1 of the Facility Agreement are
repeated, with reference to the facts and circumstances then existing.
7. Undertakings
7.1 Duration and with whom made
The undertakings in this Clause 7:
(a) shall remain in force throughout the Security Period; and
(b) are given by each Chargor to each Lender.
7.2 General Undertakings
Covenant to perform Each Chargor shall at all times comply with the terms
(express or implied) of this Debenture and the other Finance Agreements.
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7.3 Undertakings relating to Group Shares
Deposit of securities. Each Chargor shall promptly deposit with the
Security Agent, or as the Security Agent may direct, all bearer
instruments, share certificates and other documents of title or evidence of
ownership in relation to such Group Shares as are owned by it, or in which
it has or acquires an interest, and their Related Rights; and shall execute
and deliver to the Security Agent all such share transfers and other
documents, as may be requested by the Security Agent, in order to enable
the Security Agent or its nominees to be registered as the owner or
otherwise to obtain a legal title to the same and, without limiting the
generality of the foregoing, shall deliver to the Security Agent on or
before the first Utilisation Date executed (and, if required to be stamped,
pre-stamped) share transfers for all Group Shares specified in Schedule 2
in favour of the Security Agent and/or its nominee(s) as transferees or, if
the Security Agent so directs, with the transferee left blank and shall
procure that all such share transfers are at the request of the Security
Agent promptly registered by the relevant company and that share
certificates in the name of the Security Agent and/or such nominee(s) in
respect of all Group Shares are promptly delivered to the Security Agent.
Each Chargor shall provide the Security Agent with certified copies of all
resolutions and authorisations approving the execution of such transfer
forms and registration of such transfers as the Security Agent may
reasonably require.
8. Special Provisions relating to the Security Shares
8.1 Registration on Transfer
Each Chargor hereby authorises the Security Agent (at any time) to arrange
for the Security Shares to the delivered to any nominee for the Security
Agent or any purchaser or transferee (under the powers of realisation
herein conferred) or registered as the Security Agent may feel appropriate
to perfect the security thereover and to transfer, or cause the Security
Shares to be transferred to and registered in the name of any suitably
qualified nominees of the Security Agent (as agent and trustee, as
aforesaid), and each Chargor undertakes from time to time promptly to
execute and sign all transfers, contract notes, powers of attorney and
other documents (and promptly to register any such transfer of the Security
Shares in the shareholders' register of such Chargor) which the Security
Agent may reasonably require for perfecting its title to any of the
Security Shares or for vesting the same in itself or its nominee or in any
purchasers or transferees (under the powers of realisation herein
conferred).
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8.2 Powers
The Security Agent and its nominee may at any time after a Declared Default
has occurred and whilst the same is continuing, exercise or refrain from
exercising (in the name of each Chargor, the registered holder or otherwise
and without any further consent or authority from each Chargor and
irrespective of any direction given by any Chargor) in respect of the
Security Shares, any voting rights and any powers or rights under the terms
thereof or otherwise which may be exercised by the person or persons in
whose name or names the Security Shares are registered or who is the holder
thereof, including, without limitation, all the powers given to trustees by
Section 10(3) and (4) of the Trustee Act 1925 as amended by Section 9 of
the Trustee Investments Act 1961 in respect of securities or property
subject to a trust, PROVIDED THAT in the absence of notice from the
Security Agent, each Chargor may and shall continue to exercise any and all
voting rights with respect to the Group Shares subject always to the terms
hereof. No Chargor shall, without the previous consent in writing of the
Security Agent, exercise the voting rights attached to any of the Group
Shares in favour of resolutions having the effect of changing the terms of
the Group Shares (or any class of them) or any Related Rights or
prejudicing the security hereunder or impairing the value of the Security
Shares. Each Chargor hereby irrevocably appoints the Security Agent or its
nominees its proxy to exercise all voting rights so long as the Group
Shares remain registered in the names of the Chargors and to the extent
that the Security Agent is entitled to exercise such voting rights in
accordance with the terms of this Debenture.
8.3 Calls
Each Chargor during the continuance of this security will make all payments
which may become due in respect of any of the Security Shares and in the
event of default in making any such payment the Security Agent may if it
thinks fit make such payment on behalf of each Chargor. Any sums so paid
by the Security Agent shall be repayable by the relevant Chargor to the
Security Agent on demand together with interest at the Default Rate from
the date of such payment by the Security Agent, and pending such repayment
shall constitute part of the Secured Liabilities.
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8.4 Liability to Perform
It is expressly agreed that, notwithstanding anything to the contrary
herein contained, each Chargor shall remain liable to observe and perform
all of the conditions and obligations assumed by it in respect of the
Security Shares and none of the Security Agent or the Lenders shall be
under any obligation or liability by reason of or arising out of the Share
Mortgages. None of the Lenders shall be required in any manner to perform
or fulfil any obligation of any Chargor in respect of the Security Shares,
or to make any payment, or to receive any enquiry as to the nature or
sufficiency of any payment received by them, or to present or file any
claim or take any other action to collect or enforce the payment of any
amount to which they may have been or to which they may be entitled
hereunder at any time or times.
8.5 Enforcement
Upon the occurrence of a Declared Default and at any time thereafter while
the same is continuing, the Security Agent shall be entitled to put into
force and exercise immediately as and when it may see fit any and every
power possessed by the Security Agent by virtue of the Share Mortgages or
available to a secured creditor (so that Sections 93 and 103 of the Law of
Property Act 1925 shall not apply to this security) and in particular
(without limitation):
(i) to sell all or any of the Security Shares in any manner permitted by
law upon such terms as the Security Agent shall in its absolute
discretion determine;
(ii) to collect, recover or compromise and give a good discharge for any
moneys payable to any Chargor in respect of the Security Shares or
in connection therewith; and
(iii) to act generally in relation to the Security Shares in such
manner as the Security Agent acting reasonably shall determine.
For the avoidance of doubt, each Chargor agrees that the enforceability of
the Share Mortgages is not dependent on the performance or non-performance
by any Lender of its respective obligations under the Finance Agreements.
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9. When Security becomes Enforceable
The security constituted hereby shall become immediately enforceable upon
the occurrence of a Declared Default and at any time thereafter whilst the
same is continuing and the power of sale and other powers conferred by
Section 101 of the Law of Property Act 1925 as varied or amended by this
Debenture shall be immediately exercisable upon the occurrence of a
Declared Default and at any time thereafter whilst the same is continuing.
After the security constituted hereby has become enforceable, the Security
Agent may in its absolute discretion enforce all or any part of such
security in such manner as it sees fit or as the Majority Banks direct.
10. Enforcement of Security
10.1 General
For the purposes of all powers implied by statute the Secured Liabilities
shall be deemed to have become due and payable on the date hereof and
Section 103 of the Law of Property Act 1925 (restricting the power of sale)
and Section 93 of the same Act (restricting the right of consolidation)
shall not apply to this security. The statutory powers of leasing
conferred on the Security Agent shall be extended so as to authorise the
Security Agent to lease, make agreements for leases, accept surrenders of
leases and grant options as the Security Agent shall think fit and without
the need to comply with any of the provisions of sections 99 and 100 of the
Law of Property Act 1925.
10.2 Contingencies
(a) If the Security Agent enforces the security constituted by this
Debenture (whether by the appointment of a Receiver or otherwise) at a
time when no amounts are due under the Finance Agreements or the PA
Note (but at a time when amounts may become so due), the Security
Agent (or such Receiver) may pay the proceeds of any recoveries
effected by it into such number of interest bearing realisations
accounts as it considers appropriate.
(b) The Security Agent (or such Receiver) may (subject to the payment of
any claims having priority to this security) withdraw amounts standing
to the credit of such realisation accounts to:
(i) meet all costs, charges and expenses incurred and payment made
by the Security Agent (or such Receiver) in the course of such
enforcement;
(ii) pay remuneration to the Receiver as and when the same becomes
due and payable; and
(iii) meet amounts due and payable under the Finance Agreements
and the
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PA Note;
in each case, together with interest thereon (as well after as before
judgment and payable on demand) at the Default Rate from the date the
same become due and payable until the date the same are
unconditionally and irrevocably paid and discharged in full (provided
that like interest payable under any of the Finance Agreements should
not be double counted).
(c) No Chargor will be entitled to withdraw all or any moneys (including
interest) standing to the credit of any such realisation account until
the expiry of the Security Period.
11. Receiver
11.1 Appointment of Receiver
(a) At any time after this security becomes enforceable or if any Chargor
so requests the Security Agent in writing at any time, the Security
Agent may without further notice appoint under seal or in writing
under its hand any one or more qualified persons to be a Receiver of
all or any part of the Security Assets in like manner in every respect
as if the Security Agent had become entitled under the Law of Property
Act 1925 to exercise the power of sale thereby conferred.
(b) In this clause "qualified person" means a person who, under the
Insolvency Act 1986, is qualified to act as a receiver of the property
of any company with respect to which he is appointed or (as the case
may require) an administrative receiver of any such company.
11.2 Powers of Receiver
(a) Every Receiver appointed in accordance with Clause 11.1 shall have and
be entitled to exercise all of the powers set out in paragraph (b)
below in addition to those conferred by the Law of Property Act 1925
on any receiver appointed thereunder. A Receiver who is an
administrative receiver of any Chargor shall have all the powers of an
administrative receiver under the Insolvency Act 1986. If at any time
there is more than one Receiver of all or any part of the Security
Assets, each such Receiver may (unless otherwise stated in any
document appointing him) exercise all of the powers conferred on a
Receiver under this Debenture individually and to the exclusion of
each other Receiver:
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(b) The powers referred to in the first sentence of paragraph (a) above
are:
(i) Take possession to take immediate possession of, get in and
collect the Security Assets or any part thereof;
(ii) Carry on business to carry on business of such Chargor as he
may think fit;
(iii) Protection of assets to make and effect all repairs and
insurances and do all other acts which such Chargor might do
in the ordinary conduct of its business as well for the
protection as for the improvement of the Security Assets;
(iv) Employees to appoint and discharge managers, officers, agents,
accountants, servants, workmen and others for the purposes
hereof upon such terms as to remuneration or otherwise as he
may think proper and to discharge any such persons appointed
by any such Chargor;
(v) Borrow Money for the purpose of exercising any of the powers,
authorities and discretions conferred on him by or pursuant to
this Debenture and/or of defraying any costs, charges, losses
or expenses (including his remuneration) which shall be
incurred by him in the exercise thereof or for any other
purpose, to raise and borrow money, either unsecured, or on
the security of the Security Assets or any part thereof, either
in priority to the security constituted by this Debenture,
or otherwise, and generally on such terms and conditions as
he may think fit and no person lending such money shall be
concerned to enquire as to the propriety or purpose of the
exercise of such power or to see to the application of any
money so raised or borrowed;
(vi) Sell assets to sell, exchange, convert into money and realise
all or any part of the Security Assets by public auction or
private contract and generally in such manner and on such
terms as he shall think proper. Without prejudice to the
generality of the foregoing, he may do any of these things
for a consideration consisting of cash, debentures or other
obligations, shares, stock or other valuable consideration and
any such consideration may be payable in a lump sum or by
instalments spread over such period as he may think fit.
All fixtures and fittings (including trade fixtures and
fittings) and fixed plant and machinery, other than
landlords' fixtures, may be severed and sold separately from
the property containing them without the consent of such
Chargor;
(vii) Leases to let all or any part of the Security Assets for
such term and at
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such rent (with or without premium) as he may think proper
and to accept a surrender of any lease or tenancy thereof
on such terms as he may think fit (including the payment of
money to a lessee or tenant on a surrender);
(viii) Compromise to settle, adjust, refer to arbitration,
compromise and arrange any claims, accounts, disputes,
questions and demands with or by any person who is or claims
to be a creditor of such Chargor or relating in any way to
the Security Assets or any part thereof;
(ix) Legal Actions to bring, prosecute, enforce, defend and abandon
all such actions, suits and proceedings in relation to the
Security Assets or any part thereof as may seem to him to be
expedient;
(x) Receipts to give valid receipts for all moneys and execute all
assurances and things which may be proper or desirable for
realising the Security Assets;
(xi) Subsidiaries to form a subsidiary or subsidiaries of such
Chargor and transfer to any such subsidiary all or any part of
the Security Assets; and
(xii) General powers to do all such other acts and things as he
may consider desirable or necessary for realising the
Security Assets or any part thereof or incidental or
conducive to any of the matters, powers or authorities
conferred on a Receiver under or by virtue of this
Debenture, to exercise in relation to the Security Assets or
any part thereof all such powers, authorities and things as
he would be capable of exercising if he were the absolute
beneficial owner of the same and to use the name of such
Chargor for all or any of such purposes.
11.3 Removal and remuneration
The Security Agent may from time to time by writing under its hand (subject
to any requirement for an order of the court in the case of an
administrative receiver) remove any Receiver appointed by it and may,
whenever it may deem it expedient, appoint a new Receiver in the place of
any Receiver whose appointment may for any reason have terminated and may
from time to time fix the remuneration of any Receiver appointed by it.
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11.4 Security Agent may exercise
To the fullest extent permitted by law, all or any of the powers,
authorities and discretions which are conferred by this Debenture (either
expressly or impliedly) upon a Receiver of the Security Assets may be
exercised after the security hereby created becomes enforceable by the
Security Agent in relation to the whole of such Security Assets or any part
thereof without first appointing a Receiver of such property or any part
thereof or notwithstanding the appointment of a Receiver of such property
or any part thereof.
12. Application of Proceeds
Any moneys received by the Security Agent, or by any Receiver appointed by
it pursuant to this Debenture and/or under the powers hereby conferred,
shall, after the security hereby constituted shall have become enforceable,
but subject to the payment of any claims having priority to this security
and to the Security Agent's and such Receiver's rights under Clause 10.2
and 11.2, be applied by the Security Agent for the following purposes and,
unless otherwise determined by the Security Agent or such Receiver, in the
following order or priority (but without prejudice to the right of the
Security Agent or any Lender to recover any shortfall from any Chargor):
(a) in satisfaction of or provision for all costs, charges and expenses
incurred and payments made by the Security Agent or any Receiver
appointed hereunder and of all remuneration due hereunder together
with interest on the foregoing (as well after as before judgment and
payable on demand) at the Default Rate from time to time from the date
the same become due and payable until the date the same are
unconditionally and irrevocably paid and discharged in full;
(b) in or towards repayment to the Security Agent of all amounts repayable
by the Chargors pursuant to Clause 8.3;
(c) in or towards payment of the Secured Liabilities under the Finance
Documents and the Refinancing Agreements pari passu (unless and to the
extent the relevant refinancing under any Refinancing Agreement is
undertaken on a basis subordinate to the Secured Liabilities under the
Finance Documents or, where applicable, such part of them as is then
due and payable in accordance with the terms of the Intercreditor
Agreement or any other intercreditor arrangements;
(d) in or towards payment of the Secured Liabilities under the Refinancing
Agreements to the extent the relevant refinancing under any
Refinancing Agreement is undertaken on a basis subordinate to the
Secured Liabilities under the Finance Agreements or such part of them
as is then due and payable in accordance with the terms of any
intercreditor arrangements entered into pursuant to Clause 18.2(c);
and
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(e) in payment of the surplus (if any) to any Chargor or other person
entitled thereto.
13. No Liability as Mortgagee in Possession
The Security Agent shall not nor shall any Receiver appointed as aforesaid
by reason of it or the Receiver entering into possession of the Security
Assets or any part thereof be liable to account as mortgagee in possession
or be liable for any loss on realisation or for any default or omission
for which a mortgagee in possession might be liable. Every Receiver duly
appointed by the Security Agent under the powers in that behalf herein
contained shall be deemed to be the agent of the relevant Chargor for all
purposes and shall as such agent for all purposes be deemed to be in the
same position as a Receiver duly appointed by a mortgagee under the Law of
Property Act 1925. The relevant Chargor alone shall be responsible for his
contracts, engagements, acts, omissions, defaults and losses and for
liabilities incurred by him and neither the Security Agent nor any Lender
shall incur any liability therefor (either to Services, any other Chargor
or to any other person whatsoever) by reason of the Security Agent's making
his appointment as such Receiver or for any other reason whatsoever. Every
such Receiver and the Security Agent shall be entitled to all the rights,
powers, privileges and immunities by the Law of Property Act 1925 conferred
on mortgagees and receivers when such receivers have been duly appointed
under the said Act but so that Section 103 of the Law of Property Act 1925
shall not apply.
14. Protection of Third Parties
No purchaser, mortgagee or other person or company dealing with the
Security Agent or the Receiver or its or his agents shall be concerned to
enquire whether the Secured Liabilities have become payable or whether any
power which the Receiver is purporting to exercise has become exercisable
or whether any money remains due under this Debenture, the Finance
Agreements or the PA Note or to see to the application of any money paid to
the Security Agent or to such Receiver.
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15. Taxes
All payments by any Chargor under this Debenture to or for the account of
any Lender shall be made without any set off, counterclaim or other
deductions and free and clear of and without deduction for or on account of
any Applicable Taxes (as provided for and subject to the qualifications and
exceptions in Clause 13.1 of the Facility Agreement). If any Applicable
Tax or amounts in respect thereof must be deducted, or any other deductions
must be made, from any amounts payable or paid by such Chargor, or paid or
payable by the Security Agent to another Lender, under this Debenture, or
any such payment shall otherwise be required to be made subject to any
Applicable Tax, such Chargor shall pay such additional amounts as may be
necessary to ensure that the relevant Lender receives a net amount equal to
the full amount which it would have received had payment not been made
subject to the Applicable Tax.
16. Expenses
16.1 Undertaking to pay
All reasonable costs, charges and expenses incurred and all payments made
by the Security Agent or any Receiver appointed hereunder in the lawful
exercise of the powers hereby conferred whether or not occasioned by any
act, neglect or default of any Chargor shall carry interest (as well after
as before judgment) at the Default Rate from time to time from the date on
which demand is made on any Chargor for reimbursement until the date the
same are unconditionally and irrevocably paid and discharged in full. The
amount of all such costs, charges, expenses and payments and all such
interest thereon and all remuneration payable hereunder shall be payable by
the Chargors on demand. All such costs, charges, expenses and payments
shall be paid and charged as between the Security Agent and the Chargors on
the basis of a full indemnity and not on the basis of party and party or
any other kind of taxation.
16.2 Indemnity
The Lenders and every Receiver, attorney, manager, agent or other person
appointed by the Security Agent hereunder shall be entitled to be
indemnified out of the Security Assets in respect of all liabilities and
expenses properly incurred by them in the execution or purported execution
of any of the powers, authorities or discretions vested in them pursuant
hereto and against all actions, proceedings, costs, claims and demands in
respect of any matter or thing done or omitted in any way relating to the
Security Assets and the Lenders and any such Receiver may retain and pay
all sums in respect of the same out of any moneys received under the powers
hereby conferred. Notwithstanding the foregoing no Lender or Receiver and
no person appointed by the Security Agent as aforesaid shall be entitled to
be indemnified in respect of any part of the foregoing which results from
such party's gross negligence or wilful misconduct.
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17. Delegation by Security Agent
The Security Agent or any Receiver appointed hereunder may at any time and
from time to time delegate by power of attorney or in any other manner to
any properly qualified person or persons all or any of the powers,
authorities and discretions which are for the time being exercisable by the
Security Agent or such Receiver under this Debenture in relation to the
Security Assets or any part thereof. Any such delegation may be made upon
such terms (including power to sub-delegate) and subject to such
regulations as the Security Agent or such Receiver may think fit. The
Security Agent or such Receiver shall not be in any way be liable or
responsible to any Chargor for any loss or damage arising from any act,
default, omission or misconduct on the part of any such delegate or
sub-delegate.
18. Further Assurances
18.1 General
Each Chargor shall at its own expense execute and do all such assurances,
acts and things as the Security Agent may reasonably require for perfecting
or protecting the security intended to be created hereby over the Security
Assets or any part thereof or for facilitating (if and when this security
becomes enforceable) the realisation of the Security Assets or any part
thereof and in the exercise of all powers, authorities and discretions
vested in the Security Agent or any Receiver of the Security Assets or any
part thereof or in any such delegate or sub-delegate as aforesaid. To that
intent, each Chargor shall in particular execute all transfers,
conveyances, assignments and assurances of such property whether to the
Security Agent or to its nominees and give all notices, orders and
directions and make all registrations which the Security Agent may
reasonably think expedient.
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18.2 Further Subsidiaries and Intercreditor Arrangements
(a) Each Chargor hereby undertakes to ensure that each company
incorporated in the United Kingdom which becomes a Subsidiary (whether
direct or indirect) of any Chargor after the date hereof shall,
forthwith upon being required to grant security pursuant to Clause
19.3 of the Facility Agreement, execute a Deed of Accession
substantially in the form set out in Schedule 3 and such company shall
on the date on which such Deed of Accession is executed by it become a
party to this Debenture in the capacity of a Chargor and this
Debenture shall be read and construed for all purposes as if such
company had been an original party hereto as a Chargor (but for the
avoidance of doubt the security created by such company shall be
created on the date of the Deed of Accession). The Security Agent is
authorised to agree any amendments or change to the form or manner in
which any such member of the Group gives such a guarantee and security
(including acceptance of a limit on the liability of such member of
the Group) which is in the opinion of the Security Agent necessary in
order that such guarantee or security may lawfully be given.
(b) Services shall procure that all registrations or other steps necessary
to perfect or protect any security created pursuant to any Deed of
Accession is completed as soon as practicable after the date thereof
and in any event within any applicable time limit.
(c) Any company which becomes a party hereto as a Chargor pursuant to any
Deed of Accession shall also become party to and be bound by the terms
of the Intercreditor Agreement as an Obligor, in accordance with the
terms of the Intercreditor Agreement.
(d) Any Lender which is a creditor under a Refinancing Agreement in
respect of Borrowings required by PA to be on a basis subordinate to
the Secured Liabilities under the Finance Documents shall enter into
appropriate intercreditor arrangements to effect such subordination.
19. Redemption of Prior Mortgages
The Security Agent may, at any time after the security hereby constituted
has become enforceable, redeem any prior Encumbrance over or against the
Security Assets or any part thereof or procure the transfer thereof to
itself and may settle and pass the accounts of the prior mortgagee, chargee
or encumbrancer. Any accounts so settled and passed shall be conclusive
and binding on each Chargor. All principal moneys, interest, costs,
charges and expenses of and incidental to such redemption and transfer
shall be paid by the Chargor to the Security Agent on demand.
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20. Power of Attorney
20.1 Appointment
Each Chargor hereby by way of security and in order more fully to secure
the performance of its obligations hereunder irrevocably appoints the
Security Agent and every Receiver of the Security Assets or any part
thereof appointed hereunder and every such delegate or sub-delegate as
aforesaid to be its attorney acting severally, and on its behalf and in its
name or otherwise, after the occurrence of a Default, to execute and do all
such assurances, acts and things which such Chargor is required to do and
fails to do under the covenants and provisions contained in this Debenture
(including, without limitation, to make any demand upon or to give any
notice or receipt to any person owing moneys to such Chargor and to execute
and deliver any charges, legal mortgages, assignments or other security and
any transfers of securities) and generally in its name and on its behalf to
exercise all or any of the powers, authorities and discretions conferred by
or pursuant to this Debenture or by statute on the Security Agent or any
such Receiver, delegate or sub-delegate and (without prejudice to the
generality of the foregoing) to seal and deliver and otherwise perfect any
deed, assurance, agreement, instrument or act which it or he may reasonably
deem proper in or for the purpose of exercising any of such powers,
authorities and discretions.
20.2 Ratification
Each Chargor hereby ratifies and confirms and agrees to ratify and confirm
whatever any such attorney as is mentioned in Clause 20.1 shall do or
purport to do in the exercise or purported exercise of all or any of the
powers, authorities and discretions referred to in such Clause.
21. New Accounts
If the Security Agent or any Lender receives or is deemed to be affected by
notice whether actual or constructive of any subsequent charge or other
interest affecting any part of the Security Assets and/or the proceeds of
sale thereof, the Security Agent or such Lender (as the case may be) may
open a new account or accounts with any Obligor. If the Security Agent or
such Lender (as the case may be) does not open a new account it shall
nevertheless be treated as if it had done so at the time when it received
or was deemed to have received notice and as from that time all payments
made to the Security Agent or such Lender (as the case may be) shall be
credited or be treated as having been credited to the new account and shall
not operate to reduce the amount for which this Debenture is security.
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22. Stamp Taxes
Each Chargor shall pay and, promptly on demand, indemnify the Security
Agent and each Lender against any liability it incurs in respect of any
stamp, registration and similar Tax which is or becomes payable in
connection with the entry into, performance or enforcement of this
Debenture.
23. Assignments, etc.
23.1 The Security Agent
The Security Agent may assign and transfer all of its respective rights and
obligations hereunder to a replacement Security Agent appointed in
accordance with the terms of the Facility Agreement. Upon such assignment
and transfer taking effect, the replacement Security Agent shall be and be
deemed to be acting as agent and trustee for each of the Lenders for the
purposes of this Debenture in place of the old Security Agent.
23.2 Assignments and Transfers
Each Chargor shall be bound by the terms of Clause 30 (Assignments,
Transfers and Substitutions) of the Facility Agreement and, accordingly,
each Chargor, for the purposes of any transfer pursuant to any of such
Clauses, hereby irrevocably authorises the Security Agent to execute on its
behalf (i) Substitution Certificates (without any need for the prior
consent of such Chargor) in accordance with the provisions of the Facility
Agreement, and (ii) any other document required to perfect the security
granted to the Lenders pursuant to the Finance Agreements.
24. Waivers, Remedies Cumulative
(a) The rights of the Security Agent and each Lender under this Debenture:
(i) may be exercised as often as necessary;
(ii) are cumulative and not exclusive of its rights under general
law; and
(iii) may be waived only in writing and specifically.
Delay in exercising or non-exercise of any such right is not a waiver
of that right.
(b) The Security Agent may waive any breach by any Chargor of any of such
Chargor's obligations hereunder if so instructed by the Majority
Banks.
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25. Set-Off
The Security Agent and each Lender, whilst any Default shall be continuing,
may (but shall not be obliged to) set off any obligation which is due and
payable by any Chargor and unpaid (whether under the Finance Agreements or
which has been assigned to the Security Agent by any other Chargor
hereunder) against any obligation (whether or not matured) owed by the
Security Agent or such Lender (as the case may be) to such Chargor,
regardless of the place of payment, booking branch or currency of either
obligation. If the obligations are in different currencies, the Security
Agent or such Lender (as the case may be) may convert either obligation at
a market rate of exchange in its usual course of business for the purpose
of the set-off. The Security Agent or such Lender (as the case may be)
shall notify the relevant Chargor promptly after taking any such action.
26. Severability
26.1 General
If a provision of this Debenture is or becomes illegal, invalid or
unenforceable in any jurisdiction in respect of any Chargor, that shall not
affect:
(a) in respect of such Chargor, the validity or enforceability in that
jurisdiction of any other provision of this Debenture; or
(b) in respect of such Chargor, the validity or enforceability in other
jurisdictions of that or any other provision of this Debenture.
26.2 Deemed separate charges
This Debenture shall, in relation to each Chargor, be read and construed as
if it were a separate Debenture relating to such Chargor to the intent that
if any Encumbrance created by any other Chargor in this Debenture shall be
invalid or liable to be set aside for any reason, this shall not affect any
Encumbrance created hereunder by such first Chargor.
27. Counterparts
This Debenture may be executed in any number of counterparts and this will
have the same effect as if the signatures on the counterparts were on a
single copy of this Debenture.
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28. Notices
28.1 Giving of Notices
All notices under, or in connection with, this Debenture shall be given in
writing or by telex or fax (and, in the case of notices to any Chargor,
shall be copied to PacifiCorp by facsimile transmission at such facsimile
number, and for such attention, as shall be notified in writing to the
Security Agent by PacifiCorp from time to time). Any such notice is deemed
to be given as follows:
(a) if in writing when delivered;
(b) if by telex when despatched, but only if, at the time of transmission,
the correct answerback appears at the start and at the end of the
sender's copy of the notice; and
(c) if by fax when received.
However, a notice given to a Chargor in accordance with the above but
received on a non-working day or after business hours in the place of
receipt is deemed to be given on the next working day in that place.
28.2 Addresses for notices
The address, telex number and facsimile number of the Chargors and the
Security Agent for all notices under, or in connection with, this Debenture
are, in the case of the Chargors, as set out in Schedule 1 and, in the case
of the Security Agent, as set out in the Facility Agreement.
29. Covenant to Release
Upon the expiry of the Security Period (but not otherwise), the Security
Agent and each Lender shall, at the request and cost of the Chargors,
execute and do all such deeds, acts and things as may be necessary to
release the Security Assets from the security constituted hereby.
30. Governing Law and Jurisdiction
30.1 Governing Law
This Debenture shall be governed by and construed in accordance with
English law.
29
<PAGE>
30.2 Courts of England
(a) For the benefit of each of the Lenders, each Chargor agrees that the
High Courts of Justice in London and all appellate courts therefrom
have jurisdiction to settle any disputes which may arise out of or in
connection with this Debenture and that any suit, action or
proceedings (together the "Proceedings") in connection with this
Debenture may be brought in High Courts of Justice in London and all
appellate courts therefrom and accordingly submits to the jurisdiction
of the High Courts of Justice in London and all appellate courts
therefrom.
(b) The Chargors hereby irrevocably and unconditionally agree that nothing
in this Debenture shall affect the right to serve process in any
manner permitted by law.
IN WITNESS whereof this Debenture has been duly executed as a deed on the date
first above written.
30
<PAGE>
SCHEDULE 1
The Chargors
PACIFICORP SERVICES LIMITED
State of Incorporation: England and Wales
Registered Office: One Silk Street
London EC2Y 8HQ
Address for Notices: 700 N.E. Multnomah Street
Suite 1600
Portland
Oregon 97232-4116
Attention: William E. Peressini
Fax: (503) 731 2027
PACIFICORP FINANCE (UK) LIMITED
State of Incorporation: England and Wales
Registered Office: One Silk Street
London EC2Y 8HQ
Address for Notices: 700 N.E. Multnomah Street
Suite 1600
Portland
Oregon 97232-4116
Attention: William E. Peressini
Fax: (503) 731 2027
31
<PAGE>
PACIFICORP ACQUISITIONS
State of Incorporation: England and Wales
Registered Office: One Silk Street
London EC2Y 8HQ
Address for Notices: 700 N.E. Multnomah Street
Suite 1600
Portland
Oregon 97232-4116
Attention: William E. Peressini
Fax: (503) 731 2027
32
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 2
Group Shares
<S> <C> <C> <C> <C>
The Chargor Name of Company in Name of Nominee (if Class of Shares held Number of
which Shares are held any) by whom Shares are held
Shares held
PacifiCorp Services Limited PacifiCorp Finance (UK) Citibank, N.A. Ordinary Two
Limited
PacifiCorp Finance (UK) PacifiCorp Acquisitions None Ordinary One
Limited
PacifiCorp Finance (UK) PacifiCorp Acquisitions PacifiCorp Services Ordinary One
Limited Limited
</TABLE>
33
<PAGE>
SCHEDULE 3
Form of Deed of Accession
THIS DEED OF ACCESSION dated [ ], 19[ ] is made BETWEEN:
(1) [ ] (the "Subsidiary"), a company incorporated in
England or Wales whose registered office is situate at
[ ];
(2) [ ] (the "Company") for itself and as agent for
and on behalf of each of the other Chargors named in the Debenture referred
to below; and
(3) CITIBANK, N.A. as the Security Agent.
WHEREAS
(A) The Subsidiary is a [wholly-owned] Subsidiary of Services.
(B) Services has entered into a debenture dated [ ] 1998 (as supplemented
and amended by Deeds of Accession or otherwise from time to time, the
"Debenture") between Services, each of the companies named therein as
Chargors, and Citibank, N.A. as agent and trustee for certain Lenders
identified therein.
(C) The Subsidiary has at the request of Services and in consideration of the
Lenders making or continuing to make facilities available to PA or any
other member of the PA Group and after giving due consideration to the
terms and conditions of the Finance Agreements, the PA Note and the
Debenture and satisfying itself that there are reasonable grounds for
believing that the entry into this Deed by it will be of benefit to it,
decided in good faith and for the purpose of carrying on its business to
enter into this Deed and thereby become a Chargor under the Debenture. The
Subsidiary will also, by execution of a separate instrument, become a party
to the Intercreditor Agreement as an Obligor.
NOW THIS DEED WITNESSES as follows:
1. Terms defined in the Debenture shall have the same meaning in this Deed.
2. The Subsidiary hereby agrees to become a party to and to be bound by the
terms of the Debenture as a Chargor with immediate effect and so that the
Debenture shall be read and construed for all purposes as if the Subsidiary
had been an original party thereto in the capacity of Chargor (but so that
the security created consequent on such accession shall be created on the
date hereof). The Subsidiary hereby undertakes to be bound by all the
covenants and agreements in the Debenture which are expressed to be binding
on a Chargor. In accordance with the foregoing, the Subsidiary now grants
to the Security Agent as agent
34
<PAGE>
and trustee for the Lenders the assignments, charges, mortgages and other
security described in the Debenture as being granted, created or made by
Chargors thereunder, to the intent that its assignments, charges, mortgages
and other security shall be effective and binding upon it and its property
and assets and shall not in any way be avoided, discharged or released or
otherwise adversely affected by any ineffectiveness or invalidity of the
Debenture or of any other party's execution thereof or any other Deed of
Accession, or by any avoidance, invalidity, discharge or release of any
guarantee, assignment or charge contained in the Debenture or in any other
Deed of Accession. The Debenture and this Deed shall be read as one to
this extent and so that references in the Debenture to "this Debenture",
"herein", and similar phrases shall be deemed to include this Deed and all
references in the Debenture to "Schedule 2" (or any part thereof) shall be
deemed to include a reference to the Schedule to this Deed (or relevant
part thereof).
3. Services, for itself and as agent for and on behalf of all other Chargors
under the Debenture, hereby agrees to all matters provided for herein.
4. Without limiting the generality of the other provisions of this Deed and
the Debenture, pursuant to the terms hereof and of the Debenture, the
Subsidiary as beneficial owner and with full title guarantee, as security
for the payment, discharge and performance of all Secured Liabilities,
hereby and by the Debenture in favour of the Security Agent (as agent and
trustee for itself and each of the Lenders) hereby agrees that the
Subsidiary's estates and other interests in certain Group Shares for the
purposes of Clause 3 of the Debenture, as such provisions apply in relation
to the Subsidiary, are specified in the Schedule to this Deed and (together
with all Related Rights) are hereby mortgaged or charged as provided in
such provisions and the other provisions of the Debenture.
5. This Deed shall be governed by and construed in accordance with English
law.
35
<PAGE>
SCHEDULE
Insert details of Group Shares in which the Subsidiary has an interest
36
<PAGE>
SIGNATORIES
(to Accession Agreement)
The Subsidiary
(For a Company incorporated in the United Kingdom)
EXECUTED as a Deed )
by [ ] )
acting by [ ] )
and [ ] )
Director
Director
Services
[ ] )
)
(for itself and as agent for the other )
Chargors party to the Debenture )
herein referred to) )
EXECUTED as a Deed )
by [ ] )
acting by [ ] )
and [ ] )
Director
Director
The Security Agent
CITIBANK, N.A.
By:
37
<PAGE>
SIGNATORIES
Services
EXECUTED as a Deed by )
PACIFICORP SERVICES ) /s/ W.E. PERESSINI
LIMITED )
acting by )
and ) /s/ RICHARD T. O'BRIEN
The Other Chargors
EXECUTED as a Deed by )
PACIFICORP FINANCE (UK) ) /s/ W.E. PERESSINI
LIMITED )
acting by )
and ) /s/ RICHARD T. O'BRIEN
EXECUTED as a Deed by )
PACIFICORP ACQUISITIONS ) /s/ W.E. PERESSINI
acting by )
and ) /s/ RICHARD T. O'BRIEN
The Security Agent
CITIBANK, N.A.
By: David F. Bassett
38
<PAGE>
Exhibit 99(c)(1)
FORM OF IRREVOCABLE UNDERTAKING
From:
-----------------------
To: PacifiCorp Acquisitions
Barrington House
55-67 Gresham Street
London EC2V 7JA
(the "Offeror")
3 February, 1998
Dear Sirs,
Proposed Offer on behalf of the Offeror for the whole of
the issued share capital of The Energy Group PLC (the "Company")
In consideration of you agreeing to make before 2 March, 1998 or such
later time as may be permitted by the Panel on Takeovers and Mergers (the
"Panel") an offer to acquire the whole of the issued ordinary share capital of
the Company including any such share capital represented by American Depositary
Shares (other than any ordinary shares or American Depositary Shares
representing such share capital currently held by you) substantially on the
terms and subject to the conditions set out in the attached draft press
announcement (the "Press Announcement") (subject to such modification
thereto as may be agreed by a duly authorized committee of the board of
directors of the Company and together with such additional terms and
conditions as may be required to comply with the requirements of the London
Stock Exchange Limited (the "Stock Exchange") or the City Code on Takeovers
and Mergers (the "Code")),
I agree with you as follows:
1. Irrevocable undertakings
1.1 Acceptance of Offer
I undertake to accept the offer mentioned above (the "Offer") in respect
of:
1.1.1 the ordinary shares and American Depositary Shares in the Company
listed in the Schedule to this letter;
1.1.2 any other ordinary shares and American Depositary Shares in the
Company of which I may hereafter and while the Offer remains open
become the registered holder and beneficial owner; and
1.1.3 any other ordinary shares and American Depositary Shares in the
Company deriving from shares falling within either of paragraphs
1.1.1 and 1.1.2 above (such shares together with shares falling
within those paragraphs being referred to below as the "Shares").
<PAGE>
2
I agree to fulfill this undertaking by returning to you, or as you may
direct, not later than 3:00 p.m. on the tenth business day after despatch
to shareholders of the Company of the formal document containing the Offer
(or, in relation to Shares falling within either of paragraphs 1.1.2 and
1.1.3 above, as soon as practicable after I become the registered holder
and beneficial owner of such Shares), duly completed and signed form(s) of
acceptance, letter(s) of transmittal and/or notice of guaranteed delivery
relating to the Offer. I also agree to forward with such form(s) of
acceptance, letter(s) of transmittal and/or notice of guaranteed delivery
or as soon as possible thereafter the share certificate(s) or other
document(s) of title in respect of the relevant Shares.
1.2 Dealings with Shares
I agree:
1.2.1 notwithstanding the provisions of the Code or any terms of the Offer
regarding withdrawal, not to withdraw such acceptances(s);
1.2.2 except pursuant to the Offer, not to dispose of, charge, pledge or
otherwise encumber or grant any option or other right over or
otherwise deal with any of the Shares of any interest therein
(whether conditionally or unconditionally); and
1.2.3 not to acquire any Interest (as defined in Part VI of the Companies
Act 1985) in any shares in the Company other than an interest in
shares deriving from shares falling within either of paragraphs
1.1.1 and 1.1.2 above.
1.3 Action to facilitate the Offer
I agree:
1.3.1 subject to my fiduciary duties as a director, in the announcement of
the Offer and in the offer document containing the formal Offer, to
recommend all members of the Company to accept the Offer;
1.3.2 subject to my fiduciary duties as a director, to co-operate with the
Company in the production of an offer document containing the formal
Offer together with, among other things, the information required by
Rules 24 and 25 of the Code and to take responsibility for the
information in that document concerning the Company, its directors,
their close families and any related companies and trusts in the
terms required or permitted by Rule 19.2 of the Code;
1.3.3 subject to any fiduciary duties as a director, not to solicit any
general offer for the Company's ordinary shares or any other class
of its shares from any third party or any proposal for a merger of
the Company with any other entity; and
<PAGE>
3
1.3.4 subject to my fiduciary duties as a director and to any duties of
confidence (whether contractual or not), to endeavor to procure that
you are notified of the details of any approach by any third party
made with a view to the making of such an offer or such a merger and
also of any such discussions (whether or not in breach of the
obligations set out in this letter) immediately I become aware of
the relevant matter.
1.4 Information
I agree promptly on demand to supply, or to endeavor to procure the supply
to you of:
1.4.1 all information relating to me, my close relatives and any related
companies and trusts required to be contained in any document
relating to the Offer by the rules of any relevant regulatory
authority (and, in particular, Rule 24.3 of the Code); and
1.4.2 any such information relative to the Company and to subsidiaries and
associated companies.
2. Warranties and undertakings
2.1 Warranties etc.
I warrant and undertake to you:
2.1.1 that the Shares include all the ordinary shares and American
Depositary Shares in the Company registered in my name and
beneficially owned by me (as defined in Part VI of the Companies Act
1985);
2.1.2 that the Shares will be transferred pursuant to the Offer free from
all charges, liens and encumbrances and with all rights now or
hereafter attaching thereto, including the right to all dividends
declared, made or paid after the announcement of the Offer and
excluding any dividend which holders of ordinary shares or American
Depositary Shares of the Company may be entitled to retain pursuant
to the terms of the Offer; and
2.1.3 that I have full power and authority to accept the Offer and execute
any document recording acceptance thereof or to undertake the Offer
will be accepted, in respect of all the Shares.
Such warranties and undertaking shall not be extinguished or affected by
completion of the sale of the Shares.
<PAGE>
4
3. Publicity
I consent to the announcement of the Offer containing references to me and
to this letter substantially in the terms set out in the Press
Announcement, to particulars of this letter being set out in the formal
document containing the Offer and to this letter being available for
inspection during all or part of the period for which the Offer remains
open for acceptance.
4. Interpretation
4.1 Revised Offers
In this letter, references to the Offer shall include any revised offer
which, in the opinion of Goldman Sachs International (the "Bank"), is at
least as favorable to shareholders of the Company as the original Offer.
4.2 Obligations to procure
Each undertaking and agreement set out in this letter to do or not to do
certain things shall be construed as including an undertaking or agreement
to procure that those things are done or, as the case may be, not done.
4.3 Time
Time shall be of the essence of the obligations set out in this letter.
4.4 Meaning
References in this letter to "subsidiaries" include subsidiary undertakings
and the expressions "subsidiaries", "subsidiary undertakings" and "wholly-
owned subsidiaries" have the same meanings as in the Companies Act 1985.
5. Conditions and termination
5.1 Unconditional and irrevocable obligations
Except to the extent otherwise specified, the undertakings, agreements,
warranties, appointments, consents and waivers set out in this letter
(collectively "Obligations") are unconditional and irrevocable.
5.2 Making of Offers
Your agreement to make the Offer is conditional upon:
5.2.1 the release of the Press Announcement (with such amendments as you
may approve) being authorized by or pursuant to a resolution of the
board of directors of the Company or a duly authorized committee
<PAGE>
5
thereof, such authorization not being withdrawn prior to the release
and the release occurring on or prior to 6 February, 1998; and
5.2.2 no event or circumstances occurring or becoming known to you
before the time specified in the first paragraph of this letter in
consequence of which the Panel requires or permits you not to make
this Offer (or, in the case of an event or circumstance becoming
known to you prior to the release of the Press Announcement, which
is of such a nature that, had it occurred thereafter, the Panel
would have required or permitted you not make the Offer).
My obligations shall not be affected by the non-fulfillment of any of these
conditions.
5.3 Acceptance of Offer
My Obligations under paragraph 1.1 above are conditional upon the
announcement of the Offer and upon the Offer being publicly recommended by
the board of directors of the Company.
5.4 Lapse
My Obligations shall lapse if:
5.4.1 the Offer is not made (by the posting of an offer document) by the
time specified in the first paragraph of this letter; or
5.4.2 the Offer lapses or is withdrawn without having become wholly
unconditional;
Provided that, the lapsing of my Obligations shall not affect any rights or
liabilities in respect of breaches of contract committed prior to the
lapsing.
6. Enforcement
6.1 Governing law, etc.
This letter shall be governed by and construed in accordance with English
law and I agree that the courts of England are to have exclusive
jurisdiction to settle any disputes which may arise out of or in connection
with this letter and I waive any objection to any suit, action or
proceedings ("Proceedings") in such courts on the ground of venue or on the
ground that such Proceedings are brought in an inconvenient forum.
6.2 Specific performance
I agree that, if I should fail to accept or procure the acceptance of the
Offer in accordance with my Obligations under this letter or should
<PAGE>
6
otherwise be in breach of any of my Obligations, an order of specific
performance may be the only adequate remedy.
7. Customer relationship
I confirm that the Bank has indicated to me that it is not acting for me in
relation to the Offer and will not be responsible to me for providing
protections afforded to customers of the Bank or advising me on any matter
relating to the Offer. I accept this.
EXECUTED as a DEED by )
)
- - ---------------
in the presence of: )
