EXHIBIT 2.1
CONFORMED COPY
DATED 19 NOVEMBER 2001
----------------------------------
EASTERN ELECTRICITY HOLDINGS LIMITED (1)
TXU EUROPE GROUP PLC (2)
AND
LONDON ELECTRICITY GROUP PLC (3)
----------------------------------
SALE AND PURCHASE
AGREEMENT
RELATING TO
EASTERN ELECTRICITY LIMITED
----------------------------------
[▇▇▇▇▇▇ ▇▇▇▇ LOGO]
CONTENTS
CLAUSE PAGE
1 Definitions and interpretation........................................1
2 Conditions precedent..................................................5
3 Sale of the Sale Shares...............................................7
4 Consideration.........................................................7
5 Completion............................................................7
6 Purchase Price Adjustment and other post-completion matters...........9
7 EE Holdco's and the Buyer's Warranties and Indemnity.................10
8 Buyer's remedies; EE Holdco protections..............................12
9 Pensions.............................................................12
10 Conduct of Business..................................................12
11 Confidentiality......................................................14
12 EE Holdco Guarantee..................................................14
13 Assignability........................................................14
14 Remedies to be cumulative............................................15
15 Costs................................................................15
16 Further assurance....................................................15
17 Announcements........................................................15
18 Entire agreement.....................................................15
19 Miscellaneous........................................................16
20 Notices..............................................................16
21 Choice of law and submission to jurisdiction.........................17
Schedule 1 Warranties.......................................................18
Part A - Definitions.................................................18
Part B - General Warranties..........................................21
Part C - EE Warranties...............................................23
Schedule 2 Limitations on EE Holdco's liability.............................32
Schedule 3 Purchase Price Adjustment Mechanism..............................37
Schedule 4 Basic information about EE.......................................42
Schedule 5 Pensions.........................................................43
Schedule 6 Clawback Sum.....................................................62
AGREED FORM DOCUMENTS
Option Agreement
Tax Deed
Trademark Licence Variation Deed
24 Seven S&P
TXUE Guarantee
THIS AGREEMENT is dated 19 November 2001 and is made BETWEEN:
(1) EASTERN ELECTRICITY HOLDINGS LIMITED (No. 4191756) (a company
incorporated under the laws of England and Wales) whose registered office
is at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ("EE HOLDCO");
(2) TXU EUROPE GROUP PLC (No. 3247622) (a company incorporated under the laws
of England and Wales) whose registered office is at The Adelphi, ▇-▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ (the "GUARANTOR"); and
(3) LONDON ELECTRICITY GROUP PLC (No. 2366852) (a company incorporated under
the laws of England) whose registered office is at ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇-▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ (the "BUYER").
WHEREAS:
(A) EE has an authorised share capital of (pound)200,000,000 divided into
400,000,000 ordinary shares of 50p each, of which 251,513,142 such shares
have been issued and are fully paid and are legally and beneficially
owned by EE Holdco.
(B) Subject to satisfaction of the conditions set out in this Agreement, this
Agreement provides for EE Holdco to sell, and the Buyer to purchase, all
the issued ordinary shares in EE.
(C) The Guarantor has agreed to guarantee the obligations of EE Holdco, in
the manner set out in this Agreement.
(D) This Agreement is being entered into simultaneously with the 24 Seven S&P
(as defined below) and completion of the 24 Seven S&P is conditional only
on completion of this Agreement.
NOW IT IS HEREBY AGREED as follows:
1 DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, the following
expressions have the following meanings:
"BUSINESS ASSETS" has the meaning given to it in part A of schedule 1;
"BUSINESS DAY" means a day on which banks are open for a full range of
domestic transactions in the City of London (excluding Saturdays) and
"BUSINESS DAYS" shall be construed accordingly;
"CA 1985" means the Companies ▇▇▇ ▇▇▇▇;
"COMPETENT AUTHORITY" means and includes (whether having a distinct legal
personality or not):
(a) OFGEM;
(b) the Department of Trade & Industry;
(c) the Secretary of State for Trade and Industry;
(d) the Financial Services Authority;
(e) the London Stock Exchange;
(f) the Office of Fair Trading;
(g) the Competition Commission;
1
(h) the United States Securities and Exchange Commission;
(i) the Texas Public Utilities Commission;
(j) any other supra-national, national or local government authority
commission, department or organ of the United Kingdom or the
European Union or the United States of America or any sub-division
of it; or
(k) any association, organisation or institution of which any of (a)
to (h) above (inclusive) is a member,
in each case as may be replaced from time to time by statute;
"COMPLETION" means completion of the transactions contemplated by
clause 5.1 of this Agreement;
"COMPLETION DATE" means the date of Completion;
"DISCLOSURE LETTER" has the meaning given to it in part A of schedule 1;
"DISTRIBUTION BUSINESS" has the meaning given to it in part A of
schedule 1;
"DISTRIBUTION LICENCE" means the electricity distribution licence that
has come into effect in relation to EE pursuant to section 6.1(c) of the
Electricity ▇▇▇ ▇▇▇▇ as amended by the Utilities ▇▇▇ ▇▇▇▇;
"EE" means Eastern Electricity Limited (No. 2366906) (a company
incorporated under the laws of England and Wales) whose registered office
is at ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ (basic
information about EE being set out in schedule 4);
"EE WARRANTIES" means the warranties set out in part C of schedule 1;
"EUROPEAN COMMISSION" means the Commission of the European Communities;
"GENERAL WARRANTIES" means the warranties set out in Part B of
schedule 1;
"GROUP" means, in relation to any company, that company and any company
which is a holding company or subsidiary of that company and any
subsidiary of such holding company; and for the purposes of this
Agreement "SUBSIDIARY" and "HOLDING COMPANY" have the meanings ascribed
thereto by sections ▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇;
"ICTA 1988" means the Income and Corporation Taxes ▇▇▇ ▇▇▇▇;
"OFGEM" means the Office of Gas and Electricity Markets or, as the case
may be, the Gas and Electricity Markets Authority or such replacement
entity from time to time;
"OPTION AGREEMENT" means the property option agreement between the
Guarantor and 24 Seven in the agreed form;
"PES LICENCE" means the Public Electricity Supply licence dated 26 March
1990 granted to EE by the Secretary of State under Section 6 of the
Electricity ▇▇▇ ▇▇▇▇, as amended, modified, or substituted from time to
time;
"PRE-CONTRACTUAL STATEMENT" means any agreement, undertaking,
representation, warranty, statement, promise, assurance or arrangement of
any nature whatsoever (whether or not in writing, whether express or
implied and whether or not in draft form) made or given by any person at
any time prior to the execution of this Agreement in connection with EE,
EE Holdco or any of the matters contemplated by the Transaction Documents
(or any of them);
"PURCHASE PRICE" means (pound)460,000,000;
2
"REGULATION" means Council Regulation (EEC) No 4064/89 (as amended by
Council Regulation (EEC) No 1310/97);
"REGULATORY DIRECTIVE" means any present or future directive, request,
requirement, instruction, instrument, order, direction or rule of any
Competent Authority or any present or future term or condition of, or
limitation in, the Distribution Licence and any provision of any present
or future document with which any of the foregoing requires compliance
(but, if not having the force of law, only if compliance with any of the
foregoing is in accordance with the general practice of the majority of
persons to whom any of the foregoing is addressed) and includes any
proposal to modify the Distribution Licence contained in any notice
served under section 11 of the Electricity ▇▇▇ ▇▇▇▇ and any modification,
extension or replacement of any of the above from time to time in force;
"SALE SHARES" means the 251,513,142 ordinary shares of EE to be purchased
by the Buyer under this Agreement;
"24 SEVEN" means 24 Seven Utility Services Limited, a company registered
in England under no. 3870728 whose registered office is at ▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇ ▇▇▇;
"24 SEVEN S&P" means the agreement to be dated the date of this Agreement
made between the Guarantor and the Buyer relating to the sale by the
Guarantor of its shares in 24 Seven in the agreed form;
"24 SEVEN UNDERTAKING" means the deed executed by the Guarantor in favour
of EE dated 28 March 2000;
"TAX" or "TAXATION" shall have the meaning set out in the Tax Deed;
"TAXATION LIABILITY" shall have the meaning set out in the Tax Deed;
"TAX DEED" means a deed in the agreed form to be entered into between EE
Holdco and the Buyer pursuant to clause 5.1.4;
"TRADEMARK LICENCE AGREEMENT" means the trademark licence agreement dated
1 October 2001 between TUK and EE;
"TRADEMARK LICENCE VARIATION DEED" means the deed of variation of the
Trademark Licence Agreement in the agreed form;
"TRANSACTION DOCUMENTS" means this Agreement, the Disclosure Letter, the
Tax Deed, the 24 Seven S&P, the Option Agreement, the Trademark Licence
Variation Deed and all other agreements and documents from time to time
delivered by any Party under them;
"TRANSFER SCHEME" means the scheme made by EE pursuant to Part 1 of
Schedule 7 of the Utilities ▇▇▇ ▇▇▇▇ and approved by the Secretary of
State that took effect (without amendment) on 1 October 2001;
"TUK" means TXU UK Limited (No. 2937796) (a company incorporated under
the laws of England and Wales) whose registered office is at ▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇;
"TXU CORP" means TXU Corp. whose principal place of business is at
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇;
"TXU CORP UNDERTAKING" means the undertaking given by TXU Corp. to the
Secretary of State dated 15 April 1998;
"TXUE" means TXU Europe Limited (No. 3505836) (a company incorporated
under the laws of England and Wales) whose registered office is at The
Adelphi, ▇-▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇;
3
"TXUE GUARANTEE" means the guarantee given by TXUE in favour of the Buyer
in the agreed form;
"TXU INTERCOMPANY" means any amount standing on inter-company account
between, on the one hand, EE, and, on the other hand, EE Holdco, the
Guarantor or any other member of the Guarantor's Group (excluding the
amount owing by EE in respect of the dividend referred to in
clause 5.1.6(b) or the funding of it);
"WARRANTIES" means the General Warranties and the EE Warranties;
"2005 NOTES" means the EUR 500,000,000 Secured 7.00 per cent Notes due
2005 of TXU Europe Funding Limited; and
"2035 NOTES" means the (pound)301,000,000 35 Put 5 Resettable Securities
due 2035 of TXU Eastern Funding Company guaranteed by TXU Europe Limited.
1.2 In this Agreement:
(a) any document expressed to be "in the agreed form" means a
document in a form approved by (and for the purpose of
identification signed by or on behalf of) each of the Parties;
(b) references to clauses and schedules are unless otherwise stated
to clauses of and the schedules to this Agreement;
(c) subject to paragraph (d) below, references to "this Agreement"
shall be to this Agreement including the schedules hereto and
references to "the Parties" shall be to the parties to this
Agreement;
(d) where the context requires, references to (or to any specified
provision of) this Agreement or any other document shall be
construed as references to this Agreement, that provision or that
document as in force for the time being and as from time to time
amended, novated or supplemented in accordance with its terms,
or, as the case may be, with the agreement of the relevant
parties;
(e) references to any enactment (meaning any statute or statutory
provision, whether of the United Kingdom or elsewhere,
subordinate legislation (as defined by section 2(1)
Interpretation Act 1978) and any other subordinate legislation
made under any such statute or statutory provision) shall be
construed as references to:
(i) any enactment which that enactment has directly or
indirectly replaced (whether with or without notification);
and
(ii) that enactment as re-enacted, replaced or modified from time
to time, whether before, on or after the date hereof;
(f) words importing the singular include the plural and vice versa,
words importing a gender include every gender and references to
persons include bodies corporate or unincorporate;
(g) the headings to the clauses and the schedules are for convenience
only and shall not affect the construction or interpretation of
this Agreement;
(h) the Interpretation ▇▇▇ ▇▇▇▇ shall apply in the same way as it
applies to an enactment; and
(i) unless specified to the contrary, "material" shall mean material
in the context of the Distribution Business taken as a whole and
"material adverse affect" shall be construed as a material
adverse effect on the Distribution Business as a whole, and
cognate expressions shall be construed accordingly in each case.
4
2 CONDITIONS PRECEDENT
2.1 Each Party agrees that this Agreement (save for this clause 2 and (save
to the extent specified therein) clause 5.2 and clauses 11 to 21
inclusive) is conditional upon the conditions set out in clause 2.2
having been fulfilled or waived in accordance with that clause 2.2.
2.2 The conditions referred to in clause 2.1 are:
(a) that the Secretary of State has agreed to release the Guarantor
from the 24 Seven Undertaking and TXU Corp from the TXU Corp
Undertaking and any other relevant person has released EE Holdco
and/or any other member of TXU's Group from any other existing
regulatory undertakings relating to the Distribution Business;
(b) either (i) a decision is issued under Article 9 of the Regulation
referring the whole of the transaction contemplated by the
Transaction Documents to the competent authorities of the United
Kingdom, or (ii) the European Commission issues a decision under
Article 6(1)(b) (or, if EE Holdco elects not to exercise its
termination right under clause 2.6, under Article 8(2)) of the
Regulation declaring in terms reasonably satisfactory to the
Buyer that such transaction, or any part of such transaction not
referred to the competent authorities of the United Kingdom, is
compatible with the common market;
(c) the passing of an extraordinary resolution by the holders of the
2005 Notes to direct TXU Europe Funding Limited to take all
requisite steps to agree to and implement all appropriate
modifications to the 2035 Notes so that the transactions
contemplated by this Agreement will not result in a breach of, or
an event of default under, the terms of the 2035 Notes and the
implementation of such direction;
(d) that the Distribution Licence has neither been revoked nor has
been subject to a suspension (provided that this condition may be
satisfied if any such suspension is lifted prior to Completion
without further obligation on EE) and that neither EE nor any
other member of the Guarantor's Group has received from OFGEM
notice (or a threat to serve such a notice) of any enforcement
order (in accordance with the Electricity Act 1989) for breach of
the Distribution Licence which has not been complied with; and
(e) TXUE has either (i) obtained any consent or waiver required under
the terms of its existing syndicated and bilateral banking
facilities (which are listed in Appendix 30 to the Disclosure
Letter) in relation to the transaction contemplated by the
Transaction Documents or (ii) obtained committed financing on
terms satisfactory to it for the refinancing of such existing
syndicated and bilateral banking facilities.
EE Holdco may waive in its sole discretion (to the extent thought fit by
EE Holdco) all or any of the conditions set out in (a), (c) or (e) above
or any part of them. The Buyer may waive in its sole discretion (to the
extent thought fit by the Buyer) the condition set out in (d) above or
any part of it.
2.3 EE Holdco shall issue to the Buyer a notice (the "EFFECTIVE TIME NOTICE")
as soon as reasonably practicable after all the conditions set out in
clause 2.2 shall have been fulfilled or waived in accordance with that
clause 2.2.
2.4 If the Effective Time Notice has not been issued (otherwise than as a
result of breach by EE Holdco of clause 2.3) by 30 June 2002 (or such
later date as the Parties may agree) then the provisions of this
Agreement (with the exception of those set out in clauses 2.6, 5.2 and 11
to 21 inclusive) shall forthwith terminate and cease to be of effect and,
save as aforesaid, no Party shall have any claim against the others.
5
2.5 The Buyer shall, where and to the extent required to do so in order to
procure the satisfaction of the conditions in clause 2.2 (subject always
to the Buyer's right to confidentiality of information belonging to it),
do the following:
(a) provide information which is reasonably requested or required by
any Competent Authority;
(b) notify EE Holdco, and provide copies, of any communications from
any Competent Authority in relation to obtaining any consent or
approval where such communications have not been independently or
simultaneously supplied to EE Holdco including without limitation
any regulatory undertakings;
(c) where reasonably requested by EE Holdco, provide EE Holdco (or
advisers nominated by EE Holdco) with draft copies of all
submissions and communications to any Competent Authority in
relation to obtaining any consent or approval at such time as
will allow EE Holdco a reasonable opportunity to provide comments
on such submissions and communications before they are submitted
or sent and amend all such submissions or communications in
accordance with the reasonable requirements of EE Holdco (or such
nominated advisers);
(d) where reasonably required by EE Holdco and where permitted by the
Competent Authority concerned, allow persons nominated by EE
Holdco to attend all meetings with such Competent Authority or
other persons and, where appropriate, to make oral submissions at
such meetings; and
(e) comply with all reasonable requests of EE Holdco in relation to
the conduct of meetings referred to in clause 2.5(d).
2.6 If the European Commission initiates proceedings under Article 6.1(c)
of the Regulation, EE Holdco shall be entitled to:
(a) terminate this Agreement within seven Business Days of
notification thereof by the Buyer (save for this clause 2.6 and
clauses 11 to 21 inclusive) in which event the Buyer shall,
notwithstanding the non-satisfaction of any of the conditions set
out in clause 2.2, pay to EE Holdco the sum of (pound)5,000,000
Provided that if at the time of termination the condition set out
in clause 2.2(c) shall not have been fulfilled, the Buyer shall
not be obliged to make such payment unless and until EE Holdco
notifies the Buyer that such condition shall have been fulfilled
or that the 2005 Notes have been purchased or redeemed, in which
case such (pound)5,000,000 payment shall be payable forthwith
Provided further that the Buyer shall have no obligation to make
any such payment if such notification has not been given within
18 months from the date EE Holdco exercises its right of
termination under this clause; or
(b) elect not to exercise such termination right, in which event, if
the European Commission does not, at the close of proceedings
initiated pursuant to Article 6.1(c), issue a decision under
Article 8(2) which is in terms reasonably satisfactory to the
Buyer, the Buyer shall, upon satisfaction or waiver (but not, in
the case of the condition set out in clause 2.2(e), waiver, and
not, in the case of the condition set out in clause 2.2(c),
waiver (unless the 2005 Notes have been purchased or redeemed
prior to such waiver)) of all other conditions set out in clause
2.2, pay to EE Holdco the sum of (pound)15,000,000.
2.7 The Guarantor undertakes to (i) procure that TXU Eastern Funding Company
shall issue a consent solicitation in relation to the 2005 Notes as soon
as reasonable practicable after, but in any event within 10 Business Days
of, the date of this Agreement, (ii) without prejudice to its rights to
waive such condition, use all reasonable endeavours to procure that the
extraordinary resolution referred to in clause 2.2(c) is passed, and
(iii) use all reasonable endeavours to procure that the condition set out
in clause 2.2(e) is satisfied and (iv) keep the Buyer informed of
progress in relation to satisfaction of the conditions set out in
clause 2.2(c) and (e) and give the Buyer as much advance notice as is
practicable of the likely date of satisfaction of such condition.
6
3 SALE OF THE SALE SHARES
3.1 EE Holdco shall sell, and the Buyer shall purchase, the Sale Shares with
effect from Completion.
3.2 EE Holdco shall sell and transfer the Sale Shares free from all
encumbrances and with full title guarantee with effect from Completion.
4 CONSIDERATION
Subject to clause 6.1, the consideration for the Sale Shares shall be the
payment on Completion by the Buyer to EE Holdco of the Purchase Price in
cash.
5 COMPLETION
5.1 Subject to clause 5.2, Completion shall take place at the office of
▇▇▇▇▇▇ ▇▇▇▇ at ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇ or such
other place as the Parties may agree as soon as reasonably practicable
and in any event at or before 12 noon on the first Business Day after the
issue of the Effective Time Notice when all (but not part only save as
contemplated by clause 5.3(b)) of the following business shall be
transacted:
5.1.1 the Buyer shall pay the Purchase Price by electronic funds transfer
for value on the day of Completion to a bank account nominated by EE
Holdco and payment of such amount into such account shall constitute
a good discharge of such obligation of the Buyer;
5.1.2 EE Holdco shall deliver, or make available, to the Buyer:
(a) transfers in respect of the Sale Shares duly executed and
completed in favour of the Buyer or as it may direct or have
directed, together with the certificates representing such Sale
Shares and the duly executed powers of attorney or other
authorities under which any of the transfers have been executed;
(b) (as agent for EE) all EE's statutory and minute books written up
to the Business Day immediately preceding Completion) and its
Certificate of Incorporation, any Certificate or Certificates of
Incorporation on Change of Name and copies of its Memorandum and
Articles of Association;
(c) a duly executed copy of the Option Agreement;
(d) a duly executed copy of the Trademark Licence Variation Deed;
(e) a duly executed letter from the Guarantor to the Buyer confirming
that it has (i) requested the relevant third parties to destroy
or return confidential information relating to EE, 24 Seven or
any part of the Distribution Business in accordance with any
confidentiality undertakings with third parties entered into on
or after 1 January 2001 to which the Guarantor, any other member
of the Guarantor's Group or any adviser on behalf of any member
of the Guarantor's Group is a party in connection with the sale
and/or investment process in relation to the Distribution
Business and (ii) reminded all such third parties of their
obligations under any such confidentiality undertakings and of
the confidential nature of that confidential information;
(f) copies of transfers evidencing that EE has transferred its
shareholdings in EcoPower Trust and ESN Holdings Limited; and
(g) the TXUE Guarantee duly executed by TXUE;
7
5.1.3 the Parties shall:
(a) cause the transfers mentioned in clause 5.1.2(a) to be resolved
to be registered (subject only to their being duly stamped);
(b) cause such persons as the Buyer shall direct to be validly
appointed or, in the case of existing Directors and Secretary of
EE, removed as Directors and Secretary of EE;
(c) procure that Deloitte & Touche shall resign their office as
auditors of EE by depositing their written notice of resignation
at its registered office in accordance with section 392 CA 1985
along with a statement under section 394 CA 1985 that there are
no circumstances connected with their ceasing to hold office
which they consider should be brought to the attention of the
members or creditors of EE;
(d) approve Messrs Ernst & Young as auditors of EE;
(e) change the accounting reference date of EE for any accounting
reference period ending on such date as the Buyer shall specify
but not before 31 December 2001; and
(f) to change the registered office of EE to ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇-▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇,
Provided that if, on the Completion Date, the 10K for TXU Corp's
Group for 31 December 2001 has not been completed, the actions
referred to in clauses 5.1.3(c) and (d) shall be deferred until after
such completion.
5.1.4 EE Holdco and the Buyer shall each execute two copies of, and shall
deliver to the other one copy executed by EE Holdco and the Buyer,
of the Tax Deed;
5.1.5 each of the Guarantor and the Buyer shall do what is required on its
part to complete the 24 Seven S&P ; and
5.1.6 the Buyer shall procure that:
(a) EE repays to EE Holdco up to (pound)3,000,000 in respect of TXU
Intercompany owing by EE (and, to the extent less than
(pound)3,000,000 is so owing, an amount equal to the difference
shall be added to the Purchase Price and paid under
clause 5.1.1); and
(b) EE pays to EE Holdco an amount of (pound)60,000,000 in respect of
a dividend of that amount declared by EE in favour of EE Holdco
on 17 November 2001.
The amounts referred to in (a) and (b) above shall be paid in the
same manner as is referred to in clause 5.1.1.
5.2 If, following a decision of the European Commission under Article 9 of
the Regulation to refer the whole or part of the transaction contemplated
by the Transaction Documents to the competent authorities of the United
Kingdom, or following any decision of the competent authorities of the
United Kingdom pursuant to Article 21(3) of the Regulation, the Parties
have been obliged by law to suspend Completion, EE Holdco shall be
entitled to:
(a) terminate this Agreement within seven Business Days of
notification thereof by the Buyer (save for this clause 5.2 and
clauses 11 to 21 inclusive) upon the imposition of such
obligation to suspend, in which event the Buyer shall,
notwithstanding the non-satisfaction of any of the conditions set
out in clause 2.2, pay to EE Holdco the sum of (pound)5,000,000
Provided that if at the time of termination the condition set out
in clause 2.2(c) shall not have been fulfilled, the Buyer shall
not be obliged to make such payment unless and until EE Holdco
notifies the Buyer that such condition shall have been fulfilled
or that the 2005 Notes have been purchased or redeemed, in which
case such (pound)5,000,000 payment shall be payable forthwith
Provided further that the Buyer shall have no obligation to make
any such payment if such notification has not been given within
8
18 months from the date EE Holdco exercises its right of
termination under this clause; or
(b) elect not to exercise such termination right, in which event:
(i) subject to (ii) below and satisfaction or waiver of all the
conditions set out in clause 2.2, Completion shall take
place as soon as reasonably practicable after such
obligation to suspend Completion has been removed, and in
any event at or before 12 noon on the first Business Day
after removal of such obligation, at the office specified in
clause 5.1 or such other place as the Parties may agree,
when all (but not part only) of the business set out in
clauses 5.1.1 to 5.1.5 above shall be transacted; or
(ii) if such obligation to suspend Completion has not been
removed within six months after the date of its imposition
or if a decision has been made by any competent authority in
the United Kingdom having the effect that Completion is or
will be in any event prohibited by law, this Agreement shall
(save for this clause 5.2 and clauses 11 to 21 inclusive)
terminate and the Buyer shall, upon satisfaction or waiver
(but not, in the case of the condition set out in
clause 2.2(e), waiver, and not, in the case of the condition
set out in clause 2.2(c), waiver (unless the 2005 Notes have
been purchased or redeemed prior to such waiver)) of all
other conditions set out in clause 2.2, pay to EE Holdco the
sum of (pound)15,000,000.
Provided that no payment shall be made under this clause if any payment
has been made by the Buyer under clause 2.6, and vice versa.
5.3 If the Buyer fails or is unable to comply with any of its obligations
under the preceding provisions of this clause 5 on the Completion Date,
EE Holdco may:
(a) defer Completion to a date not more than 28 days after that date
(in which case the provisions of this clause 5 shall apply to
Completion as so deferred); or
(b) proceed to Completion so far as practicable but without prejudice
to EE Holdco's rights (whether under this Agreement generally or
under this clause) to the extent that the Buyer shall not have
complied with its obligations under this Agreement; or
(c) treat such failure or inability to comply as a repudiatory breach
of this Agreement, acceptance of which shall discharge EE Holdco
from its undischarged obligations under this Agreement (without
prejudice to any other remedy which EE Holdco may have, whether
in damages or otherwise).
5.4 The Guarantor shall, as soon as reasonably practicable following
Completion, use its reasonable endeavours to make available to the Buyer
any title deeds or documents relating to any freehold or leasehold
property comprising part of the Business Assets which are in the
possession or under the control of the Guarantor or any member of its
Group, to the extent that the same were not made available to the Buyer
at Completion.
6 PURCHASE PRICE ADJUSTMENT AND OTHER POST-COMPLETION MATTERS
6.1 The Parties shall implement all the matters set out in schedule 3 at
the times and in the manner set out in that schedule.
6.2 EE Holdco hereby declares that for so long as it remains the
registered holder of any of the Sale Shares after Completion it will:
6.2.1 hold the Sale Shares and the dividends and other distributions of
profits or surplus or other assets declared, paid or made in respect
of them after Completion and all rights arising out of or in
connection with them in trust for the Buyer and its successors in
title;
9
6.2.2 deal with and dispose of the Sale Shares and all such dividends,
distributions and rights as are described in clause 6.2.1 as the
Buyer or any such successor may direct; and
6.2.3 if so requested by the Buyer or any such successor:
(a) vote at all meetings which it shall be entitled to attend as the
registered holder of the Sale Shares in such manner as the Buyer
or any such successor may direct; and
(b) execute all instruments of proxy or other documents which the
Buyer may reasonably require and which may be necessary or
desirable or convenient to enable the Buyer or any such successor
to attend and vote at any such meeting.
6.3 The Buyer shall:
(a) procure that EE will comply with its obligations under the
Trademark Licence Variation Deed;
(b) procure that as soon as practicable after Completion and in any
event not more than 3 months after the Completion Date, the
corporate name and trading name of EE will be changed to a name
not incorporating the name "Eastern Electricity" or "TXU Europe
Distribution" respectively or, in each case, any other name
including the words "TXU" or "Eastern" or any like words which
may infer a connection with TXU Corp or any of its affiliates;
(c) not use the corporate and/or trading name of EE (before any
change pursuant to clause 6.3(b) above) for any purpose other
than for the existing business of EE at the Completion Date nor
shall the Buyer represent that EE is a member of the Guarantor's
Group or associated with "TXU Energi" brand; and
(d) in the event that the Buyer or EE Holdco after the Completion
Date become aware that any person believes that EE is still a
member of the Guarantor's Group, the Buyer shall take all
reasonable steps necessary to clarify the position.
6.4 The Guarantor shall:
(a) procure that TUK will comply with its obligations under the
Trademark Licence Variation Deed; and
(b) not itself take, and procure that no member of its Group shall
take, any action against the Buyer or EE in relation to EE's use
of the name "TXU Europe Distribution" until the change of
corporate and trading name under clause 6.3(b) of this Agreement
(other than in respect of a breach by the Buyer in respect of its
obligations under 6.3(b) or (c)).
7 EE HOLDCO'S AND THE BUYER'S WARRANTIES AND INDEMNITY
7.1 In consideration of the Buyer entering into this Agreement, EE Holdco
warrants to the Buyer (subject to clause 8) that each of the Warranties
is true and accurate in all material respects and not misleading in any
material respect at the date of this Agreement.
7.2 EE Holdco acknowledges that, in entering into this Agreement, the Buyer
has relied on the Warranties.
7.3 Each of the Warranties shall be construed as being separate and
independent and (except where expressly provided to the contrary) shall
not be limited or restricted by reference to or inference from the terms
of any other Warranty or any other term of this Agreement.
7.4 The Buyer warrants at the date of this Agreement to EE Holdco:
(a) that it is not aware of any matter which constitutes a breach of
the Warranties;
10
(b) in the same terms as EE Holdco warrants to it in paragraphs 1.1,
1.2, 1.3 and 1.4(a) and (b) of Part B of schedule 1 as if
references therein to EE Holdco were references to the Buyer; and
(c) that there has been no material adverse change in the financial
condition of the Buyer from that disclosed in its audited
accounts for the year ending 31 December 2000.
7.5 INDEMNITY
7.5.1 EE Holdco shall (subject to clause 7.5.3) indemnify the Buyer on
demand for any loss or expenses suffered or incurred by the Buyer as
a result of EE having Disposed of, or Relinquished Operational
Control over, any Asset in such a way which causes OFGEM at any time,
but not later than the date falling six months after the finalisation
of the next Distribution Price Control Review to reduce the
Regulatory Asset Value of EE or to otherwise require of EE payment,
repayment or the giving of credit to customers of (or of an amount
equal to) any proportion of any gain made on such Disposal or
Relinquishment of Operational Control.
7.5.2 In this clause 7.5:
"ASSETS" means the properties listed in Appendix 31 to the Disclosure
Letter together with any other property which formed part of and
contributed to the Regulatory Asset Value of EE at the time of the
last Distribution Price Control Review and all rights disposed of
under the NTL Agreements and "ASSET" shall mean any one of them;
"DISPOSAL" has the same meaning as in Standard Condition 29 of the
Distribution Licence and "DISPOSED" shall be construed accordingly;
"DISTRIBUTION PRICE CONTROL REVIEW" means a price control review to
be undertaken in relation to the Distribution Business pursuant to
the Distribution Licence.
"NTL AGREEMENTS" means the lease made between EE and Eastern Group
Telecoms Limited (the "MASTER Lease"), the Asset Usage Agreement
between EE and Eastern Group Telecoms Limited, the Sale and Purchase
Agreement made between Energy Holdings (No. 2) Limited, Eastern Group
Plc and NTL Incorporated, and the Site Management Contract made
between National Trans Communications Limited and EE, all of which
are dated 22 December 1998, and any agreements referred to in or
ancillary to any thereof and any leases or licences granted pursuant
to the Master Lease;
"REGULATORY ASSET VALUE" means the value of the assets included in
the calculation of price control revenue as part of a Distribution
Price Control Review;
"RELINQUISHMENT OF OPERATIONAL CONTROL" shall have the same meaning
as used in Standard Condition 29 of the Distribution Licence and
"RELINQUISHED OPERATIONAL CONTROL" shall be construed accordingly.
7.5.3 In relation to any claim or potential claim under clause 7.5.1 the
Buyer shall allow EE Holdco to make representations and
communications with OFGEM in respect of the same and the provisions
of paragraphs 4 (other than 4.4), 7 and 11 of schedule 2 shall apply
in relation to any claim under this clause 7.5, mutatis mutandis, as
if any such claim was, for the purpose of such paragraphs, a claim
under the Warranties.
7.5.4 If, at the time an amount is payable under clause 7.5.1, a Clawback
Sum (as defined in, and agreed or determined in accordance with,
schedule 6) has already been realised by the Buyer, the amount
payable under clause 7.5.1 shall be reduced by an amount equal to 50
per cent. of the Clawback Sum.
7.5.5 If at the time a Clawback Sum is realised by the Buyer a payment has
already been made under clause 7.5.1, the Buyer shall pay to EE
Holdco an amount equal to the lesser of (x) 50 per cent. of such
Clawback Sum and (y) such payment.
11
8 BUYER'S REMEDIES; EE HOLDCO PROTECTIONS
8.1 If, whether before or after Completion, the Buyer becomes aware that any
of the Warranties was untrue, inaccurate or misleading or there has been
any breach of the Warranties or any other term of this Agreement, the
Buyer shall not be entitled to treat this Agreement as rescinded or
terminated but shall (for the avoidance of doubt) be entitled to claim
damages or exercise any other right, power or remedy under, and subject
to, this Agreement.
8.2 No liability shall attach to EE Holdco in respect of claims under the
Warranties if and to the extent that the limitations in schedule 2 apply
to such liability.
8.3 The Buyer shall not be entitled to claim that any fact causes any of the
Warranties to be breached if fairly disclosed in the Disclosure Letter or
in any document thereby disclosed and for this purpose "fairly disclosed"
means disclosed in such manner and such detail as to provide a reasonable
purchaser with notice of the matter in question.
9 PENSIONS
The Parties shall implement all the matters set out in schedule 5 at the
times and in the manner set out in that schedule.
10 CONDUCT OF BUSINESS
10.1 For the period commencing on the date of this Agreement and ending on the
earlier of the Completion Date and the date of termination of this
Agreement:
(a) EE Holdco shall procure that the Distribution Business shall be
operated in the usual and ordinary course of business, in a
manner consistent with past practices and in accordance with the
standard of a reasonable and prudent operator of similar
businesses;
(b) EE Holdco shall use its reasonable endeavours not to, and so far
as EE Holdco is reasonably able to procure that EE shall not,
allow or procure any act or omission which would render any of
the Warranties materially untrue, inaccurate or misleading if
repeated at any time before or at Completion by reference to the
circumstances then subsisting; and
(c) EE Holdco shall procure that EE shall not declare or pay any
dividend save for that referred to in clause 5.1.6(b).
10.2 BUYER'S ACCESS
Subject to any restrictions contained in the Distribution Licence, or
otherwise required by any Regulatory Directive, EE Holdco shall procure
that from the date of this Agreement until Completion:
(a) the Buyer and its representatives shall, subject to reasonable
advance notice being given, be given reasonable access during
normal working hours to the premises and assets of the
Distribution Business and (subject always to EE Holdco's right to
protect the confidentiality of information which does not relate
to the Distribution Business) to all books, records, accounts,
and documents of whatsoever kind controlled or used by the
Distribution Business (including computer programs) and shall be
permitted to take copies of the foregoing; and
(b) the directors and employees of the Distribution Business shall be
instructed to give fully and promptly all such information and
explanations relating exclusively to the Distribution Business to
the Buyer and its representatives as may be reasonably requested.
12
10.3 MEETINGS
Subject to any restrictions contained in the Distribution Licence, or
otherwise required by any Regulatory Directive, EE Holdco shall procure
that, from the date of this Agreement until Completion, such person as
the Buyer may from time to time nominate shall be given the same notices
and information as if he were a director and shareholder of EE.
10.4 INSURANCE COSTS RECLAIM
10.4.1 If, as at 1 February 2002, this Agreement has been neither Completed
nor terminated, the Parties shall consult in respect of their
intentions in respect of the replacement of the Policies (as defined
in paragraph 19.2 of Part C of schedule 1).
10.4.2 Unless otherwise agreed between the Parties, EE Holdco shall be
entitled (in accordance with clause 10.4.3) to invite proposals
("PROPOSALS") for insurance cover to be reserved or placed in
anticipation of the expiry of the Policies.
10.4.3 In renewing or replacing the Policies, EE may seek Proposals and then
obtain insurances on such terms, against such risks and for such
duration as EE may consider appropriate having regard to its normal
practices, industry requirements and commercial advantage. In seeking
such Proposals, EE Holdco shall use its reasonable endeavours to
procure that such Proposals are open for acceptance for as long a
period as the issue of the Proposal may accept. As soon as EE Holdco
receives a Proposal which is acceptable to it (and in any event prior
to placing such insurances) EE Holdco will notify the Buyer of the
terms and costs of such insurances ("TXU INSURANCES") and the Buyer
may as soon as reasonably practicable in any case and at least one
clear Business Day prior to the expiry of the period for which the
Proposal is open for acceptance, either approve the TXU Insurances or
deliver details of alternative insurances (the "ALTERNATIVE
INSURANCES") that it wishes EE to enter into. Provided that the
Alternative Insurance covers EE against the same risks as, and is not
subject to less favourable commercial terms (including deductibles
but excluding grounds of cost or duration) than, the TXU Insurances
and is available from underwriters approved by EE Holdco (such
approval not to be unreasonably withheld or delayed), EE Holdco will
procure that EE accepts the proposal relating to the Alternative
Insurances.
10.4.4 The Buyer shall on Completion, pay to EE Holdco an amount equal to
the cost to EE (or where such cost is incurred by a member of the
Guarantor's Group, the amount recharged internally to EE) of placing
such renewal or replacement insurances in accordance with
clause 10.4.3.
10.4.5 If EE takes out Alternative Insurances and Completion does not occur,
the Buyer will indemnify EE Holdco (for itself and on behalf of EE)
against all cost, loss and expense suffered or incurred by EE Holdco
or EE as a result of having taken the Alternative Insurances rather
than the TXU Insurances
10.5 NEW BORROWING
EE Holdco shall procure that EE shall not enter into (or, as the case may
be, issue) any loan arrangement, lease, sale and leaseback arrangement,
debt instrument, bonds or other similar arrangement as a result of which
its aggregate indebtedness for borrowed money is increased beyond that
stated in the Exchange Balance Sheet except (i) Inter-company Debt, or
(ii) with the prior written consent of the Buyer (not to be unreasonably
withheld or delayed).
10.6 DISPOSALS
EE Holdco shall procure that EE shall not (save in order to implement the
Transfer Scheme):
(a) dispose of any asset of EE to another member of the Guarantor's
Group; or
(b) dispose of any asset of EE with a value in excess of
(pound) 5,000,000 to any person, without the prior written
13
consent of the Buyer (such consent not to be unreasonably
withheld or delayed) and shall further procure that, in relation
to any disposal of any asset of EE, EE shall retain, and on
Completion, make available to the Buyer, full records of both
such disposal and the consideration for such disposal, and the
relevant documentation which enables the Buyer to trace the
proceeds of such disposal.
11 CONFIDENTIALITY
11.1 The Buyer shall (and shall ensure that its and EE's directors, officers,
employees, agents and advisers shall) safeguard, treat as confidential,
and not use for the purposes of its own business, all information,
documents and materials which it has acquired or acquires in connection
with the Transaction Documents and which relate to the business of EE
Holdco and other past or present members of the Guarantor's Group other
than (i) EE (but only insofar as such information and material relates to
the Distribution Business; all such information and materials obtained
(whether or not in respect of the audit of EE) which relate to any
businesses of EE other than the Distribution Business shall be kept
confidential as aforesaid and (ii) 24 Seven) except:
(a) as may be required by law or by any relevant national or
supranational regulatory authority or by the rules of any
recognised stock exchange, in which case the Buyer shall, if
practicable, supply a copy of the required disclosure to the
other Parties before it is disclosed and comply with the
reasonable requests of the other Parties regarding the extent of
such disclosure;
(b) where it has come into the public domain otherwise than through
breach of this clause 11; and
(c) to the Buyer's professional and financial advisers who are
required to know the same to carry out their duties.
12 EE HOLDCO GUARANTEE
12.1 In consideration of the Buyer entering into this Agreement, the Guarantor
hereby unconditionally and irrevocably guarantees to the Buyer the due
and punctual performance by EE Holdco of all the obligations expressed to
be incurred by EE Holdco under or pursuant to this Agreement and the Tax
Deed (including, without limitation, to enter and complete the same) and
undertakes to indemnify and keep indemnified the Buyer against all
losses, damages, costs and expenses of whatsoever nature which it may
suffer or incur by reason of any default or unreasonable delay on the
part of EE Holdco in the performance of the said obligations.
12.2 The liability of the Guarantor shall be as primary obligor and not merely
as surety and shall not be affected, impaired or discharged by reason of
any act, omission, matter or thing which, but for this clause, might
operate to release or otherwise exonerate the Guarantor from its
obligations under this clause including, without limitation, any
arrangement made between the other Parties or any alteration in the
obligations on the part of EE Holdco under this Agreement and the Tax
Deed or by time or other indulgence granted by the Buyer.
12.3 This Guarantee shall remain in force (regardless of any change in
shareholding or control of EE Holdco) for so long as EE Holdco shall have
any liability or obligation to the Buyer under this Agreement or the Tax
Deed and until all such liabilities and obligations have been discharged
in full.
13 ASSIGNABILITY
13.1 This Agreement shall be binding on and shall enure for the benefit of
each Party's successors and permitted assigns.
13.2 No Party may, without the written consent of the other Parties, assign
any of its respective rights or obligations under this Agreement.
14
14 REMEDIES TO BE CUMULATIVE
No remedy conferred by any of the provisions of this Agreement is
intended to be exclusive of any other remedy available at law, in equity,
by statute or otherwise. Each and every other remedy shall be cumulative
and shall be in addition to every remedy given hereunder or now or
hereafter existing at law in equity, by statute or otherwise. The
election by any Party to pursue one or more of such remedies shall not
constitute a waiver by such Party of the right to pursue any other
available remedy.
15 COSTS
Each of the Parties shall be responsible for its respective legal and
other costs incurred in relation to the preparation and Completion of
this Agreement.
16 FURTHER ASSURANCE
Each Party shall, and shall use its respective reasonable endeavours to
procure that any necessary third parties shall, execute and deliver to
the other Parties such other instruments and documents and take such
other action as may be required to carry out, evidence and confirm the
provisions of this Agreement.
17 ANNOUNCEMENTS
17.1 Subject as required by law or by any recognised stock exchange or any
relevant national or supra-national regulatory authority, all
announcements by or on behalf of any of the Parties and relating to the
subject matter of this Agreement shall be in terms to be agreed between
the Parties in advance of issue.
17.2 If a Party is required by law or by any recognised stock exchange or any
relevant national or supra-national authority to make an announcement,
that Party shall to the extent practicable and permitted by the relevant
law, rule, order, exchange or body:
(a) provide the other Parties with advance notice of the requirement
and a copy of the announcement to be made; and
(b) permit the other Parties to make representations in relation to
it with a view to avoiding the requirement for an announcement to
be made.
18 ENTIRE AGREEMENT
18.1 Each of the Parties on behalf of itself and as agent for each member of
its respective Group acknowledges and agrees that:
(a) the Transaction Documents constitute the whole and only agreement
and understanding between the Parties in connection with EE and
24 Seven and the matters described in them;
(b) it has not entered into the Transaction Documents in reliance on
any Pre-contractual Statement which is not expressly set out in
the Transaction Documents (or any of them) and, to the extent
that any Pre-contractual Statement was made or given and is not
expressly set out in the Transaction Documents (or any of them),
it irrevocably and unconditionally waives any claims, rights or
remedies which it may otherwise have in relation thereto; and
(c) it has no right of action or other remedy whatsoever against any
other Party arising out of or in connection with any
Pre-contractual Statement not expressly set out in the
Transaction Documents and the only rights and remedies available
to it in connection with the Transaction Documents (save as
otherwise provided) are damages for breach of contract and, for
15
the avoidance of doubt, no Party has any right to rescind all or
any of the Transaction Documents for negligent or innocent
misrepresentation or otherwise,
provided always that this clause 18.1 shall not exclude or limit any
liability or any right which any Party may have in respect of
Pre-contractual Statements made or given fraudulently or dishonestly or
in circumstances where there has been wilful concealment.
18.2 No purported variation of the Transaction Documents shall be effective
unless made in writing.
19 MISCELLANEOUS
19.1 If any term or provision in this Agreement shall be held to be illegal or
unenforceable, in whole or in part, under any enactment or rule of law,
such term or provision or part shall to that extent be deemed not to form
part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected.
19.2 A Party's failure to insist on strict performance of any provision of
this Agreement shall not be deemed to be a waiver thereof or of any right
or remedy for breach of a like or different nature.
19.3 No waiver shall be effective unless specifically made in writing and
signed by a duly authorised officer of the Party granting such waiver.
19.4 This Agreement may be entered into in any number of counterparts and by
the Parties to it on separate counterparts, each of which when executed
and delivered shall be an original, but all the counterparts shall
together constitute one and the same instrument.
19.5 No term of this Agreement is enforceable under the Contracts (Rights of
Third Parties) ▇▇▇ ▇▇▇▇ by a person who is not a Party.
19.6 If Completion is delayed because of the default of the Buyer and EE
Holdco is willing and able to perform its obligations on Completion or if
the Buyer fails to pay the Purchase Price or any of the amounts referred
to in clauses 2.6 and/or 5.2, the Buyer shall, in addition to the payment
due under clause 2.6, 5.2 and/or 5.1.1 (as the case may be) pay to EE
Holdco interest on the payment due under clauses 2.6, 5.2 and/or 5.1.1
(as the case may be) at a rate determined by EE Holdco to be three per
cent. above the London Inter-Bank Offered Rate which appears on Telerate
Page 3750 for overnight sterling deposits over the period from (and
including) the date the payment became due (being in the case of 5.1.1
the Completion Date) to (but excluding) the date of actual making of the
relevant payment, such interest to accrue from day to day.
20 NOTICES
20.1 Any notice or other document to be given under this Agreement shall be in
writing and shall be deemed:
(a) duly given, if left at or sent by (i) first class post or airmail
or express or other fast postal service or (ii) registered post
or (iii) the recorded delivery service or (iv) facsimile
transmission, in each case using the relevant notice details set
out in clause 20.2 or to such other address and/or number as such
Party may, by notice given in accordance with this clause to all
other Parties, expressly substitute for such details; and
(b) to have been received by the recipient if it is:
(i) delivered by hand, on delivery;
(ii) duly posted or transmitted in accordance with clause 20.1(a)
by any of the methods there specified, on the second (or
where sent airmail, fifth) business day after the day of
posting or (in the case of a notice transmitted by facsimile
transmission) upon receipt by the sender of the correct
transmission report,
16
provided that if, in accordance with the above provisions, any
such notice or other document would otherwise be deemed to be
given or made after 5.00 p.m. on any Business Day, such notice
or document shall be deemed to be given or made at 9.00 a.m. on
the next following Business Day.
20.2 The notice details of the Parties are as follows:
(a) EE Holdco:
Address ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention Company Secretary
Facsimile no. 01473 554003
(b) the Guarantor:
Address The Adelphi, ▇-▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention Company Secretary
Facsimile no. 01473 554003
(c) the Buyer:
Address ▇▇-▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇
Attention Company Secretary
Facsimile no. 020 7331 3624
20.3 In proving the giving of a notice it shall be sufficient to prove that
the notice was left or that the envelope containing such notice was
properly addressed and posted or that the correct transmission report was
received by the sender (as the case may be).
21 CHOICE OF LAW AND SUBMISSION TO JURISDICTION
21.1 This Agreement shall be governed by and interpreted in accordance with
English law.
21.2 The Parties hereby submit to the exclusive jurisdiction of the High Court
of Justice in England.
IN WITNESS whereof this Agreement has been executed the day and year first
above written.
17
SCHEDULE 1
WARRANTIES
PART A - DEFINITIONS
1 In this schedule and in schedule 2, the following expressions shall have
the following meanings:
"ACCOUNTS" means the audited financial statements for EE for the
financial year ended on the Accounts Date including the notes thereto;
"ACCOUNTS DATE" means 31 December 2000;
"ASSUMED EMPLOYEES" means those individuals employed by EE in the
Distribution Business whose names are set out in the list attached to the
Disclosure Letter;
"BALANCE SHEET" means the certified balance sheet of the Distribution
Business as at 1 October 2001 which is attached as Part A to Appendix 10
to the Disclosure Letter;
"BUSINESS ASSETS" means all the properties (real or personal) and assets
(including, without limitation to the generality of the foregoing, all
the rights and property relating to such assets, the Business Equipment,
the Business Intellectual Property and the Business Information
Technology) which are material to the operation of the Distribution
Business;
"BUSINESS EQUIPMENT" means all the plant, machinery and other equipment
including furniture, vehicles, spares, loose tools, fittings,
partitioning and other items either owned by EE or which EE is entitled
to use, which are material to the operation of the Distribution Business;
"BUSINESS INFORMATION" means all information, know-how and techniques
relating exclusively to the Distribution Business (whether or not
confidential and in whatever form held) including, without limitation
all:
(a) formulae, designs, specifications, drawings, data, manuals and
instructions;
(b) customer lists and data, sales, marketing and promotional
information; and
(c) business plans and forecasts;
"BUSINESS INFORMATION TECHNOLOGY" means the material bespoke computer
software applications used exclusively in the Distribution Business and
listed in paragraph 5.2 of the Disclosure Letter;
"BUSINESS INTELLECTUAL PROPERTY" means Intellectual Property owned by or
licensed to EE and which is used in or relates exclusively to the
Distribution Business but excluding the Business Information Technology;
"BUSINESS NAMES" means "Eastern Electricity", "TXU Distribution" and "TXU
Europe Distribution";
"BUSINESS PROPERTIES" means the properties listed in Appendix 24 of the
Disclosure Letter;
"BUSINESS RECORDS" means all books and records containing or relating to
Business Information or on which the Business Information is recorded
(including, without limitation, all documents and other material
(including all forms of computer or machine readable material));
"DATA PROTECTION LEGISLATION" means all statutes, enacting instruments,
common law, regulations, directives or codes of practice having the force
of law (whether in the United Kingdom, the European Union or elsewhere)
18
concerning the protection and/or processing of personal data including
without limitation the Data Protection Acts 1984 and 1998;
"DATA ROOM" means the data room at the offices of ▇▇▇▇▇▇ ▇▇▇▇, the
contents of which are listed in the Data Room Index;
"DATA ROOM INDEX" means the index to the Data Room attached to the
Disclosure Letter;
"DISCLOSURE LETTER" means the letter from EE Holdco addressed to the
Buyer dated the date of this Agreement;
"DISTRIBUTION BUSINESS" means all that part of the business of EE carried
on as at the date of this Agreement pursuant to the Distribution Licence
which comprises, or is ancillary to, the distribution of electricity
through EE's distribution system (and includes providing connections to
it), being all the business which is the "Distribution Business" as
defined in the Distribution Licence;
"ENVIRONMENT" means any and all living organisms (including man),
ecosystems, property and the media of air (including air in buildings,
natural or man-made structures, below or above ground) water, (as defined
in section 104 of the Water Resources ▇▇▇ ▇▇▇▇ and within drains and
sewers) and land (including under any water as described above and
whether above or below surface);
"ENVIRONMENTAL CLAIM" means any civil, criminal, regulatory, arbitration
or administrative proceeding, claim, suit, action or notice relating in
any such case to Environmental Matters;
"ENVIRONMENTAL CONSENT" means any consent, approval, permit, licence,
order, filing, authorisation, exemption, registration, permission,
reporting or notice requirement and any related agreement required under
any Environmental Law;
"ENVIRONMENTAL LAWS" means all international, EU, national or local
statutes (which, for the avoidance of doubt, shall include section 57 and
schedule 22 of the Environment ▇▇▇ ▇▇▇▇ and the statutory guidance and
regulations adopted under those provisions), by-laws, orders, regulations
or other law or subordinate legislation or common law, all orders,
ordinances, decrees or regulatory codes of practice, circulars, guidance
notes and equivalent controls insofar as they relate to the protection of
human health or the protection or prevention of harm or pollution to the
Environment or health and safety which are binding in relation to the
properties or Business Assets of EE and/or upon EE in the relevant
jurisdiction in which EE has been or is operating (including by the
export of its products, or its waste thereto) on or before Completion;
"ENVIRONMENTAL MATTERS" means:
(a) pollution or contamination of the Environment;
(b) the generation, manufacture, processing, handling, storage,
distribution, use, treatment, removal, transport, disposal,
emission, release, spillage, deposit or discharge of
Environmentally Hazardous Substances to the extent that they are
regulated by Environmental Law;
(c) the exposure of any person (including employees) to
Environmentally Hazardous Substances;
(d) the creation of any noise, vibration, ionising or electromagnetic
radiation, common law or statutory nuisance or other material
adverse impact on the Environment;
"ENVIRONMENTALLY HAZARDOUS SUBSTANCE" means any substance which is
capable (whether alone or in combination with any other) of causing
pollution or contamination, harm or damage to property or to the
Environment, including any waste, or which is otherwise regulated by
Environmental Laws;
19
"EXCHANGE BALANCE SHEET" means the balance sheet of EE relating to the
Distribution Business as at 31 October 2001, a copy of which is attached
as Part C of Appendix 10 to the Disclosure Letter.
"INFORMATION TECHNOLOGY" means computer hardware, software, networks
and/or other information technology and any aspect or asset of a business
which relies on computer hardware, software, networks and/or other
information technology (whether embedded or otherwise);
"INTELLECTUAL PROPERTY" means patents, trade marks, signs and service
marks, rights in designs, trade or business names or signs, copyrights
(including rights in computer software), database rights, topography
rights, knowhow, confidential information and domain names (whether or
not any of these is registered and including applications for
registration of any such thing) and all rights or forms of protection of
a similar nature or having equivalent or similar effect to any of these
which may subsist anywhere in the world;
"REGULATORY ACCOUNTS" means the regulatory accounts of EE relating to the
Distribution Business for the period of twelve months ended 31 March 2001
as submitted to OFGEM;
"SECURITY INTEREST" means a mortgage, charge, pledge or other security
interest or encumbrance (save for a lien or retention of title or similar
arrangement arising in the ordinary course of business); and
"TCGA" means Taxation of Chargeable Gains ▇▇▇ ▇▇▇▇.
2 Terms defined in the Tax Deed shall have the same meaning when used in
this schedule and in schedule 2 unless otherwise stated or unless the
context otherwise requires.
3 References to the awareness or knowledge of EE Holdco shall be to the
actual knowledge of:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ Lean
▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
having made reasonable enquiries of:
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ Marjoram
▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
20
PART B - GENERAL WARRANTIES
1 CAPACITY
In respect of each of EE Holdco and the Guarantor:
1.1 It is a company duly incorporated and validly existing under the laws of
England and Wales.
1.2 It has the requisite power and authority to enter into and perform this
Agreement.
1.3 This Agreement constitutes its valid and binding obligations in
accordance with its terms.
1.4 The execution and delivery of this Agreement by it and the performance by
it of its obligations under this Agreement, will not:
(a) result in a breach of any provision of its memorandum or articles
of association; or
(b) result in a breach of any agreement, licence or other instrument
or order, judgement or decree of any court, governmental agency
or regulatory body to which it is a party or by which it is
bound; or
(c) relieve any other party to a Material Contract with EE in
relation to the Distribution Business of its obligations or
enable it to vary or terminate its obligations under that
Material Contract and for the purpose of this sub-clause a
"Material Contract" shall mean a contract involving expenditure
by or revenue for EE in excess of (pound)2,500,000 per annum.
2 INSOLVENCY
In respect of each of EE Holdco, the Guarantor and EE:
2.1 No order has been made or petition presented, meeting convened or
resolution passed for its winding up or for a provisional liquidator to
be appointed in respect of it.
2.2 No administration order has been made and no petition for such an order
has been presented in respect of it.
2.3 It is not insolvent, or unable to pay its debts within the meaning of
section 123 of the Insolvency ▇▇▇ ▇▇▇▇, nor has stopped paying its debts
as they fall due.
2.4 No voluntary arrangement has been proposed under section 1 of the
Insolvency ▇▇▇ ▇▇▇▇ in respect of it.
2.5 No receiver (which expression shall include an administrative receiver)
has been appointed in respect of any of its assets or undertaking.
2.6 No unsatisfied judgement, order or award is outstanding against it and no
written demand under s. 123(1)(a) of the Insolvency ▇▇▇ ▇▇▇▇ has been
made against it and no distress or execution has been levied on, or other
process commenced against, any part of the Business Assets which could
have a material adverse effect on the Distribution Business.
2.7 It is not aware of any circumstances which have arisen which entitle any
person to take any action, appoint any person, commence proceedings or
obtain any order of the type mentioned in paragraphs 2.1 to 2.6 above
which could have an material adverse effect on the Distribution Business.
21
3 SALE SHARES
3.1 The particulars relating to the Sale Shares set out in the Recitals and
schedule 4 of this Agreement are true and accurate.
3.2 There is no option, right to acquire, mortgage, charge, pledge, lien or
other form of security or encumbrance on, over or affecting the Sale
Shares, there is no agreement or commitment to give or create any of the
foregoing and no person has made any claim to be entitled to any of the
foregoing.
3.3 EE Holdco is entitled to sell and transfer or procure the sale and
transfer of the full legal and beneficial ownership in the Sale Shares to
the Buyer on the terms set out in this Agreement.
4 WARRANTIES IN RESPECT OF EE
4.1 All documents required by the CA 1985 (as amended by the Companies Act
1989) to be filed at Companies House in respect of EE have been duly
filed.
4.2 EE's statutory books have been properly written up and EE has not
received any application or request for rectification of any of the
statutory registers.
4.3 A true and up-to-date copy of the Memorandum and Articles of Association
of EE (together with copies of all resolutions required by law to be
annexed thereto) is attached as Appendix 26 to the Disclosure Letter.
22
PART C - EE WARRANTIES
1 OWNERSHIP OF BUSINESS ASSETS AND CONSENTS
1.1 EE either owns, or is entitled to the benefit of arrangements which
confer upon EE the right to use, the Business Assets.
1.2 There is no Security Interest on, over or affecting the whole or any part
of the Business Assets owned by EE.
1.3 The Business Assets comprise all material assets necessary for the
operation by EE of the Distribution Business.
1.4 The assets which are owned by EE are assets required to operate the
Distribution Business and there are no assets owned by EE which are not
used in the Distribution Business nor any liabilities of EE which are not
related to the Distribution Business (other than in relation to
Taxation).
1.5 EE has no subsidiaries other than as disclosed in the Disclosure Letter.
2 BUSINESS EQUIPMENT
2.1 Business Equipment is maintained in accordance with EE's usual practice
and the operation of the Distribution Business and in such manner as a
reasonably prudent operator of the Business Equipment would maintain the
same.
3 CONTRACTS AND COMMITMENTS
3.1 EE is not party to any contract under which the aggregate payments made
to it or by it in any twelve month period are in excess of
(pound)1,500,000 (a "CONTRACT") which is not either specified in the
Disclosure Letter or on display in the Data Room.
3.2 EE is not a party to any contract, arrangement or obligation relating to
the Distribution Business which whether by reason of its nature, term,
scope, price or otherwise, is or is likely to be of material importance
to the Distribution Business or the profitability of the Distribution
Business, and which:
(a) is not in the ordinary course in relation to the Distribution
Business; or
(b) is expected to result in a material loss on completion; or
(c) is for the provision of management or similar services and is not
terminable on 12 months' notice or less; or
(d) is a quotation or tender for a contract involving expenditure or
revenue in excess of (pound)1,500,000 which has been submitted
and which is currently outstanding.
3.3 EE is not a party to any contract or arrangement with any member of the
EE Holdco Group which is necessary to operate the Distribution Business
in accordance with the Distribution Licence.
3.4 EE has not sold, charged, transferred, assigned or otherwise disposed of
any of its rights under the Contracts or agreed to a novation of any of
the Contracts other than as disclosed in the Disclosure Letter.
3.5 EE Holdco has no knowledge of the invalidity of, or any ground for
termination, avoidance or repudiation of, a Contract. No party to a
Contract has given notice of its intention to terminate a Contract.
23
4 INTELLECTUAL PROPERTY
4.1 At Completion, EE will have no registered Business Intellectual Property.
4.2 EE has not received written notice in the last 12 months that any of the
rights comprised in the Business Intellectual Property are the subject of
any dispute, litigation, opposition, arbitration, mediation or
administrative or criminal proceedings by or against EE in respect of the
Businesses, or any part thereof.
4.3 So far as EE Holdco is aware, the business conducted by EE in connection
with the Distribution Business does not infringe the Intellectual
Property rights of any other person nor so far as EE Holdco is aware does
it involve or has it involved the unauthorised use of confidential
information in circumstances which would entitle a third party to make a
claim.
4.4 EE Holdco is not aware of any material infringement by any person of any
Business Intellectual Property.
4.5 All of the Business Intellectual Property is either owned by or validly
licensed to EE.
4.6 So far as EE Holdco is aware, EE has at all material times complied in
all material respects with the provisions of all Data Protection
Legislation in relation to the Distribution Business. So far as EE Holdco
is aware, all data that EE has processed in relation to the Distribution
Business has been processed by it in accordance with the Data Protection
Legislation and EE has not received notice from the Data Protection
Commissioner (nor has EE received notice in the two years preceding the
date of this Agreement from the Data Protection Registrar or from any
equivalent authority) stating that EE is or was in breach of any Data
Protection Legislation.
5 INFORMATION TECHNOLOGY
5.1 Details of any domain name registered by or on behalf of EE in connection
with the Distribution Business are disclosed in the Disclosure Letter.
5.2 Details of all material licences of third party software and material
Information Technology outsourcing, maintenance and Information
Technology services agreements used in relation to the Distribution
Business are disclosed in the Disclosure Letter. So far as EE Holdco is
aware all such licences and agreements are valid and in force.
5.3 All Information Technology owned or used by the Distribution Business has
functioned throughout the last 12 months without any disruption or
irrecoverable loss of data which has had a material adverse effect on the
Distribution Business.
5.4 So far as EE Holdco is aware, the businesses conducted by EE in
connection with the Business Information Technology do not infringe the
Intellectual Property rights of any other person.
5.5 So far as EE Holdco is aware, there have been no breaches in the last 12
months of any of the agreements referred to in paragraph 5.2.
5.6 All of the Business Information Technology used in relation to the
Distribution Business is either owned by or validly licensed to EE.
6 EMPLOYEES
6.1 There are no persons employed in the Distribution Business other than the
Assumed Employees. The Assumed Employees are all employed by EE. There
are no persons engaged by EE in the Distribution Business by means of
consultancy, secondment, sub-contracting or arrangement for casual work,
or other similar agreements or arrangements.
6.2 No Assumed Employee has given written notice terminating his contract of
employment or is under notice of dismissal or has made or, so far as EE
Holdco is aware, threatened any litigation, arbitration or mediation,
24
administration or criminal proceeding in connection with or arising from
his employment.
6.3 There is no obligation or amount due to or in respect of any Assumed
Employee in connection with or arising from his employment which is in
arrear or unsatisfied other than:
(a) his normal salary for the pay period current at the date of this
Agreement;
(b) out of pocket expenses which have arisen in the normal course of
business not exceeding an aggregate limit of (pound)50,000 for
all the Assumed Employees.
6.4 There is no dispute with any trade union, works council, staff
association or other employees' representative body pending or threatened
in relation to the Distribution Business.
6.5 There is no outstanding undischarged liability to pay to any governmental
or regulatory authority in any jurisdiction any contribution, Taxation or
other impost arising in connection with the employment or engagement of
personnel in the Distribution Business other than such payments in
respect of the part of the relevant payment period current at the date of
this agreement.
6.6 EE has made no offer to employ any person who is not an Assumed Employee.
6.7 There are no agreements or arrangements or practices in relation to any
Assumed Employees, whether binding or otherwise, for the payment of
compensation on termination of employment or any terms and conditions in
any contract with any Assumed Employee or any other binding agreement
with any such person pursuant to which such person will be entitled to
receive any payment or benefit or such person's rights change as a direct
consequence of the transaction contemplated by this Agreement.
6.8 There are no outstanding liabilities to pay any industrial training levy
or any other statutory or governmental levy or charge.
6.9 EE has, in relation to each of the Assumed Employees, in all material
respects:
(a) complied with all obligations imposed on it under such employees'
terms and conditions of employment and any collective agreements
and arrangements which relate to any such employees;
(b) subject to paragraph 6.5 above, complied with all obligations
imposed on it by, and all orders and awards made under, all
statutes, regulations, codes of conduct and practice and customs
and practices which are relevant to such employees or their terms
and conditions of employment; and
(c) maintained up to date and accurate records as required by EE's
legal obligations towards the Assumed Employees regarding the
service of the Assumed Employees.
6.10 True, up-to-date and complete copies of a representative sample of the
contracts of employment between EE and each grade of the Assumed
Employees and any other documents currently in force relating to the
employment of the Assumed Employees are disclosed in the Data Room or
referred to in the Disclosure Letter together with full particulars of
any consultancy or secondment or other similar agreements or arrangements
and any arrangements with casual workers in relation to the Distribution
Business.
6.11 All contracts with the Assumed Employees are terminable on notice of
three months or less.
6.12 No change and no negotiation or request for any change in the terms of
employment of any Assumed Employee is due or expected.
6.13 Full and up-to-date particulars of all existing and proposed works
councils, collective agreements or other arrangements or understandings
(whether binding or not) with any trade union, staff association or other
25
body representing any Assumed Employee and all documents relating to such
agreements, arrangements are disclosed in the Data Room and specifically
referred to in the Disclosure Letter.
6.14 Full and up-to-date details of all existing and proposed share incentive
schemes, share option schemes or profit sharing, bonus, commission or
other incentive schemes and all company car arrangements, medical
expenses, permanent health and other employee benefit arrangements for
any Assumed Employee are disclosed in the Data Room or referred to in the
Disclosure Letter.
6.15 So far as EE Holdco is aware neither this Agreement nor Completion will
or is likely to cause any Assumed Employee to terminate his engagement or
employment.
6.16 No person currently or previously employed or engaged in the Distribution
Business has, during the period commencing two years before the date of
this Agreement, brought or threatened or, so far as EE Holdco is aware,
is likely to bring, any litigation, arbitration or mediation,
administration or criminal proceedings in connection with or arising from
his employment or its termination, including any claim for unfair
dismissal, sex discrimination, race discrimination, disability
discrimination or equal pay.
6.17 No disciplinary proceedings have been brought or are pending against any
Assumed Employee in respect of which any appeal procedure is not
exhausted.
6.18 There are no investigations by the Commission for Racial Equality, the
Equal Opportunities Commission or the Disability Rights Commission
pending or threatened in relation to the Distribution Business or any of
the Assumed Employees and EE Holdco is not aware of any circumstance
which may give rise to any such investigation.
7 PENSIONS
EE Holdco warrants in respect of pensions in the terms of paragraph 14 of
schedule 5.
8 BALANCE SHEET AND EXCHANGE BALANCE SHEET
8.1 The Balance Sheet:
(a) has been properly prepared in accordance with the accounting
policies set out in Part B of Appendix 10 to the Disclosure
Letter; and
(b) has been prepared on a basis consistent with the bases and
policies set out in the Accounts.
8.2 The Exchange Balance Sheet has been prepared on a basis consistent with
the Balance Sheet.
9 ACCOUNTS AND REGULATORY ACCOUNTS
9.1 The Accounts have been prepared in accordance with and comply with CA
1985, all relevant accounting standards, principles and practices
generally accepted in the United Kingdom as at the Accounts Date and show
a true and fair view of the state of affairs and the financial position
of EE as at and for the financial period ending on the Accounts Date and
of the profits and losses of EE for the period ended on the Accounts
Date.
9.2 The Regulatory Accounts have been delivered to OFGEM under the PES
Licence (as in force at the relevant time).
10 EVENTS SINCE 1 OCTOBER 2001
Since 1 October 2001 and except as contemplated by the Transaction
Documents:
(a) the Distribution Business has been carried on in the ordinary and
usual course;
26
(b) in connection with the Distribution Business EE has not entered
into any material transaction or assumed or incurred any material
liabilities other than in the ordinary course of business;
(c) EE has not declared, made or paid any dividend or other
distribution save in order to implement the Transfer Scheme.
11 GRANTS AND ALLOWANCES
Particulars of all grants, allowances, aids, subsidies, loans or
guarantees paid or made available in relation to the Distribution
Business during the last two years by, and all outstanding claims for any
such grant, allowance, aid, subsidy, loan or guarantee from, any
supranational, national or local authority or government agency are set
out in the Disclosure Letter and so far as EE Holdco is aware the sale of
the Sale Shares will not result in all or any part of any such grant,
allowance, aid, subsidy, loan or guarantee becoming repayable, forfeited
or invalidated.
12 LITIGATION
Save in respect of claims for damages to its cables and other plant and
equipment by other utilities, highway contractors or other persons not
exceeding (pound)75,000 individually and not exceeding (pound)2,000,000
in aggregate:
(a) EE is not involved in any litigation, arbitration or mediation,
administrative or criminal proceedings relating to the
Distribution Business or the Business Assets, whether as
claimant, plaintiff, defendant or otherwise, and no litigation,
arbitration or mediation, administrative or criminal proceedings
by or against EE in respect of the Distribution Business or the
Business Assets is pending, or has been threatened in writing; or
(b) EE Holdco is not aware of any facts or circumstances which are
likely to give rise to any such proceedings.
13 DELINQUENT AND WRONGFUL ACTS
Neither EE nor any of its officers, agents or employees (during the
course of their duties) have committed or are liable for any criminal,
illegal, unlawful or unauthorised act or breach of any obligation or duty
whether imposed by or pursuant to statute, contract or otherwise in
respect of the Distribution Business.
14 REGULATORY CONSENTS AND LICENCES
14.1 EE has all material licences, consents, permissions and approvals
required by any Competent Authority for or in connection with the
carrying on of the Distribution Business in the manner currently carried
on and such licences, consents, permissions and approvals:
(a) are listed in the Disclosure Letter; and
(b) are in full force and effect in all material respects.
14.2 So far as EE Holdco is aware, there is no enforcement action by any
Competent Authority in progress or in contemplation in respect of a
breach of any such licence (including the PES Licence), consent or
permission, nor any facts or circumstances which might reasonably be
expected by EE Holdco to cause any such licence, consent, permission or
approval to be revoked, or not renewed.
15 COMPETITION AND TRADE REGULATION LAW
15.1 EE Holdco is not aware that any competition authority (including, for the
avoidance of doubt, the Office of Fair Trading and the European
Commission) has at any time in the last 3 years carried out or is at
present conducting any formal investigation into the business or affairs
27
of EE in relation to the Distribution Business nor is EE Holdco aware of
anything which is likely to give rise to any such investigation.
15.2 EE is not party to any agreement, arrangement or concerted practice or is
involved in any business practice which:
(a) infringes the prohibition in Chapter I or Chapter II of the
Competition ▇▇▇ ▇▇▇▇; or
(b) infringes Article 81 (formerly Article 85) or Article 82
(formerly Article 86) of the Treaty establishing the European
Community,
where the failure to notify an infringement would be likely to result in
a material loss or liability to the Distribution Business.
15.3 EE is not party to any agreement, arrangement or concerted practice or
involved in any business practice in respect of which an undertaking has
been given or an order made pursuant to any competition legislation where
such undertaking or order is likely to result in a loss or liability
which would be material in the context of the Distribution Business taken
as a whole.
15.4 EE is not party to any agreement, arrangement or concerted practice in
respect of which any request for information or statement of objections
has been received from any court, tribunal or governmental authority
pursuant to any competition legislation.
16 TAX RETURNS, DISPUTES, RECORDS AND CLAIMS ETC.
16.1 EE has made on a timely basis all proper returns required to be made, and
has supplied or caused to be supplied all information required to be
supplied, to any revenue authority, including (but without limitation)
the Inland Revenue and HM Customs & Excise.
16.2 There is no dispute or disagreement outstanding nor is any contemplated
at the date of this agreement with any revenue authority regarding the
Tax affairs of EE or the proper treatment for VAT purposes of any
supplies of goods or services made (or treated as made) by EE. All Tax
returns for periods ended on or before 31 March 1996 have been agreed
with the relevant revenue authority.
16.3 The amount of Tax chargeable on EE to the extent that it relates to the
Distribution Business during any accounting period ending on or within
six years before 31 December 2000 has not, to any material extent,
depended on any concession, agreement or other formal or informal
arrangement with any revenue authority, including (but without
limitation) the Inland Revenue and HM Customs & Excise.
16.4 All Taxation for which EE is liable and which ought to have been paid has
been paid, and, without prejudice to the generality of the foregoing, all
payments made by EE which are required to be paid subject to deduction of
Tax have been so made, and EE has, to the extent required by the law,
accounted to the relevant revenue authority for the Tax so deducted.
16.5 No asset is owned by EE of which there will be a deemed disposal under
Section 179 TCGA on the signature of this Agreement or on Completion or
on this Agreement becoming unconditional.
16.6 No liability in respect of Tax has arisen or will arise in consequence of
or in relation to the Transfer Scheme.
16.7 On a disposal of all of its capital assets taken as a whole by EE for:
(a) in the case of assets owned by EE at the Accounts Date, a
consideration equal to the value attributed to the assets in
preparing the Accounts, the liability to Tax on chargeable gains,
and/or in respect of capital allowance balancing charges (if any)
which would be incurred by EE in aggregate in respect of the
assets (disregarding any statutory right to claim any allowance
or relief) would not exceed the amount taken into account in
28
aggregate in respect of those assets in computing the maximum
liability to deferred Taxation as stated in the Accounts; or
(b) in the case of assets acquired since the Accounts Date, a
consideration equal to the consideration actually given for the
acquisition, no liability to Tax on chargeable gains and/or in
respect of capital allowance balancing charges (disregarding any
statutory right to claim any allowance or relief) would be
incurred by EE in respect of those assets.
16.8 There are no arrangements or agreements under which EE is or may become
liable to make any payments in respect of group relief or surrendered
advance corporation tax.
16.9 EE is not and has not at any time been treated as a member of a group of
companies for the purposes of value added tax and no application for it
to so treated has at any time been made.
16.10 EE has not entered into any transaction in circumstances that the
relevant revenue authority could adjust its profits pursuant to any of
the provisions of section 770A, Schedule 28AA of ICTA 1988 or section 17
of TCGA.
17 STAMP DUTY
All documents relating to the Business Assets are in the United Kingdom
and, where appropriate have been duly stamped.
18 ACCURACY AND ADEQUACY OF INFORMATION
18.1 The copies of each of the Distribution Business Accounts and the
Regulatory Accounts which were in the Data Room are true and complete
copies of the original.
18.2 So far as EE Holdco is aware the documents which were in the Data Room
were true and complete copies of the originals and, where such documents
are drafts or unexecuted copies, are in the final or substantially final
form as executed by the parties thereto.
19 INSURANCE
19.1 EE has (and at all material times has had) the benefit of all insurances
which are required by law to be effected by it in respect of the
Distribution Business.
19.2 Copies of the relevant broker's summary of all insurance policies for the
benefit of EE and protection and indemnity clubs to which EE is party and
currently in force which extend to the Distribution Business (together
the "POLICIES") are attached to or referred to in the Disclosure Letter.
19.3 All premiums due on the Policies have been paid; and so far as EE Holdco
is aware, all the other conditions of the Policies have been performed
and observed and none of the Policies has or may become void or voidable
as a result of an act or omission by EE.
19.4 Copies of the Policies, together with the receipts for the latest
premiums payable in respect thereof, are in the possession of EE Holdco
or its agents but shall be made available to EE for the purpose of making
claims on such terms as to safe custody thereof as EE Holdco and the
Buyer may reasonably agree.
19.5 EE Holdco is not aware of any circumstances which would or might entitle
EE to make a material claim in respect of the Distribution Business under
any of the Policies in respect of which EE has omitted to follow the
normal procedures of the Group in such regard (including in relation to
making notification to the insurers) or which would invalidate EE's
entitlement to make a claim in respect of the Distribution Business under
any of the Policies.
29
19.6 Set out in or attached to the Disclosure Letter is a list of (a) all
outstanding claims by EE in respect of the Distribution Business under
any Policies; and (b) all events and circumstances which EE Holdco is
aware may entitle EE to make any such claim.
20 ENVIRONMENTAL MATTERS
20.1 EE has obtained and maintained in full force and effect all Environmental
Consents required in respect of the Distribution Business, and there are
no conditions, facts or circumstances entitling any such Environmental
Consent to be revoked, suspended, amended, varied, withdrawn or not
renewed or which would prevent compliance with any Environmental Consent.
20.2 There are attached to the Disclosure Letter complete and up-to-date
copies of all material Environmental Consents and all orders, notices,
direction, applications, appeals, amendments and reports and any other
communications relating to or in connection with any such Environmental
Consent.
20.3 No Environmental Claim is pending or has been made or threatened in the
period of 24 months ending on the date of this Agreement against EE or
any of its past or present directors, secretary or senior employees in
their capacity as such or any occupier of any property owned or leased by
EE and EE Holdco does not have any reason to believe that EE or any of
its officers has or is likely to have any liability in relation to
Environmental Matters.
20.4 So far as EE Holdco is aware, EE has obtained and complied with the terms
and conditions of all Environmental Consents and all Environmental
Consents remain in full force and effect. EE has not yet received any
notice of and so far as EE Holdco is aware there are no circumstances
that may lead to the revocation, modification or suspension of, or that
may prejudice or require material expenditure for the renewal extension,
grant or transfer of, any Environmental Consents.
20.5 So far as EE Holdco is aware, for a period of 24 months ending on the
date of this Agreement, EE complied in all material respects with all
Environmental Laws and there are no facts or circumstances which
interfere or prevent compliance with or give rise to any liability under
any Environmental Laws.
20.6 There are no civil, criminal, arbitration or administrative actions,
claims, proceedings, judgements, aware or suits current, or so far as EE
Holdco is aware pending, threatened or outstanding against EE arising
from or relating to Environmental Consents or Environmental Law and so
far as EE Holdco is aware there are no circumstances which may lead to
such actions, claims, proceedings, suits, judgements or awards.
20.7 No notice or communication has been received from any regulatory body or
third party alleging that the Business Assets are contaminated or are
causing contamination, pollution or harm to the Environment and EE Holdco
is not aware of any intention on the part of any relevant authority or
third party to give such notice or communication nor conduct any
investigation audit in connection with such contamination or pollution.
20.8 Copies of all agreements and memoranda of understanding made with any
regulatory body concerning the protection of the Environment, in
particular but not limited to the identification, investigation and
remediation of any Business Assets, land, water source or other property
arising from or connection with the discharge, release, leak or escape of
transformer oil from the Business Assets, have been disclosed.
21 BUSINESS PROPERTIES
21.1 EE has the right to use and occupy the Business Properties without
adverse claim or possession by any third party, and any use or occupation
of the Business Properties by EE is pursuant to an agreement the material
terms of which are in writing.
30
21.2 Each of the freehold and the leasehold Business Properties is free from
any Security Interest granted by EE.
21.3 So far as EE Holdco is aware, there is no covenant, restriction, burden
or stipulation (including, without limitation, any condition attaching to
a planning consent or any agreement under Section 106 of the Town and
Country Planning Act 1990) affecting any of the Business Properties which
is materially inconsistent with the use of the Business Properties by EE
for the purposes of the Distribution Business as presently carried on.
21.4 So far as EE Holdco is aware, none of the Business Properties is subject
to any easement, public right, common right, wayleave, licence, consent
or overriding interest which materially hinders EE from carrying out the
Distribution Business as presently carried on.
21.5 So far as EE Holdco is aware, there is no material breach of any covenant
affecting the Business Properties which is outstanding and which could
materially adversely affect the use and/or enjoyment of the Business
Properties by EE.
21.6 In respect of the freehold Business Properties, EE is the legal and
beneficial owner of each of the same, and no outstanding options for the
sale, lease or other disposal of any of the Business Properties has been
granted by or on behalf of EE and is outstanding.
21.7 In respect of the leasehold Business Properties, EE has paid the rents
and observed and performed the covenants on the part of the Tenant in all
material respects, and has not received from any landlord or superior
landlord notification of any material breach which remains outstanding or
unremedied or, which, if left unremedied, would have a material adverse
effect on the Distribution Business as presently carried on.
21.8 So far as EE Holdco is aware, in respect of the Business Properties EE
has a legal right free from onerous conditions to use all roads and
conducting media (for drainage, water, electricity, gas,
telecommunications and other services) material to each of the Business
Properties in the manner in which they are presently used.
21.9 The current use of the Business Properties is, so far as EE Holdco is
aware, the lawful use for the purposes of the Planning Acts.
31
SCHEDULE 2
LIMITATIONS ON EE HOLDCO'S LIABILITY
1 GENERAL
Notwithstanding anything in this Agreement or this schedule to the
contrary, the provisions of this schedule shall operate to limit the
liability of EE Holdco in respect of any claim by the Buyer for any
breach of or inaccuracy in the Warranties and, except where expressly
stated otherwise, any claim in respect of Taxation or under the Tax Deed
(a "CLAIM" or "CLAIMS").
2 LIMITATIONS ON LIABILITY
2.1 LIMITATION ON AMOUNT
2.1.1 The Buyer shall not be entitled in any event to damages or any other
amount in respect of any Claim or Claims unless and until:
(a) the aggregate amount of all such Claims exceeds (pound)5,000,000
(in which event EE Holdco shall be liable for the whole of such
aggregate amount (subject to the other provisions of this
Agreement) and not only for the excess); and
(b) the amount of any individual Claim shall exceed (pound)100,000.
2.1.2 The total aggregate liability of EE Holdco under the Warranties and
the Tax Deed shall not in any event exceed (pound)500,000,000 and
(subject always thereto) the total aggregate liability of EE Holdco
under the Warranties and the Tax Deed in respect of Claims notice of
which is served after the fifth anniversary of Completion shall not
exceed (pound)300,000,000.
2.1.3 For the purpose of paragraph 2.1.1(b), where a Claim relates to more
than one event, circumstance, act or omission which event,
circumstance, act or omission would separately constitute a breach of
or give rise to a Claim, such Claim shall be treated as a separate
Claim in respect of each such event, circumstance, act or omission
provided that the provisions of this sub-paragraph shall not apply to
any Claims which arise out of substantially similar or connected
events, circumstances, acts or omissions which Claims shall be
aggregated and treated as a single Claim for the purpose of
sub-paragraph 2.1.1(b).
2.2 TIME LIMITS FOR BRINGING CLAIM
No Claim shall be brought against EE Holdco unless the Buyer shall have
given to EE Holdco written notice of such Claim specifying (in reasonable
detail) the matter which gives rise to the Claim, the nature of the Claim
and the Buyer's then best estimate of the amount claimed in respect
thereof (detailing the Buyer's calculation of the loss thereby alleged to
have been suffered by it):
(a) on or before the fifth anniversary of Completion, in respect of
Claims relating to Environmental Matters; or
(b) on or before the earlier of (A) the twelfth anniversary of the
Completion Date and (B) the later of (x) the tenth anniversary of
the Completion Date and (y) the eighth anniversary of the filing
by or on behalf of EE of its tax return for the last accounting
period of EE falling on or before 31 December 2001, in respect of
Claims relating to Taxation or claims under the Tax Deed; or
(c) on or before 30 June 2003, in respect of any other matters,
provided that the liability of EE Holdco in respect of a Claim shall
absolutely determine (if such Claim has not been previously satisfied,
settled or withdrawn) if legal proceedings in respect of such Claim shall
32
not have been commenced within nine months of the service of such notice
(and for this purpose proceedings shall not be deemed to have been
commenced unless they shall have been properly issued and served upon EE
Holdco).
3 CONDUCT OF THIRD PARTY LITIGATION
3.1 Upon the Buyer becoming aware of any claim, action or demand brought or
made by a third party against the Buyer, EE or 24 Seven (whichever of
such parties against whom the same are brought or made being the
"DEFENDANT") or matter which is reasonably likely to give rise to a Claim
(other than a Claim in respect of Taxation or under the Tax Deed, in
which case clause 5 of the Tax Deed shall apply), the Buyer shall (or
shall procure that the relevant Defendant shall):
(a) notify EE Holdco by written notice, as soon as it appears to the
Buyer that EE Holdco is or may become liable under this
Agreement, of any assessment or claim of a third party received
by or coming to the notice of such Buyer which may result in such
a Claim;
(b) at EE Holdco's expense, take such reasonable action and give such
reasonable information and access to personnel, premises,
chattels, documents and records to EE Holdco and its professional
advisers as EE Holdco may reasonably request and EE Holdco shall
be entitled to require the relevant Defendant to take such
reasonable action and give such reasonable information and
assistance in order to avoid, dispute, resist, mitigate, settle,
compromise, defend or appeal any claim in respect thereof or
adjudication with respect thereto (subject always to the relevant
Defendant being indemnified to its reasonable satisfaction and
provided that the relevant Defendant shall not be obliged to do
any act which in its reasonable opinion is prejudicial to the
material commercial interests of the relevant Defendant);
(c) at the reasonable request of EE Holdco (subject to the relevant
Defendant being indemnified to its reasonable satisfaction and
save where the relevant Defendant considers in its reasonable
opinion that the material commercial interests of the relevant
Defendant would be prejudiced), allow EE Holdco to take the sole
conduct of such actions as EE Holdco may deem appropriate in
connection with any such assessment or claim in the name of the
relevant Defendant and in that connection the relevant Defendant
shall give or cause to be given to EE Holdco all such assistance
as EE Holdco may reasonably require in avoiding, disputing,
resisting, settling, compromising, defending or appealing any
such claim and shall instruct such solicitors or other
professional advisers as the EE Holdco and the relevant Defendant
may agree to act on behalf of the relevant Defendant, as
appropriate;
(d) make no admission of liability, agreement, settlement or
compromise with any third party in relation to any such claim or
adjudication without the prior written consent of EE Holdco (such
consent not to be unreasonably withheld or delayed); and
(e) take all reasonable action to mitigate any loss suffered by it in
respect of which such Claim could be made.
3.2 In any event, EE Holdco shall, save where the Buyer considers in its
reasonable opinion that the material commercial interests of the relevant
Defendant would be prejudiced, be entitled at any stage and at its sole
discretion to settle any such third party assessment or claim (provided
that it shall take account of any reasonable requests of the Buyer) and
shall give the Buyer three Business Days prior notice of its decision so
to settle such assessment or claim.
4 NO LIABILITY IF LOSS IS OTHERWISE COMPENSATED FOR
4.1 BUYER CAN ONLY CLAIM ONCE
4.1.1 The Buyer and those deriving title from the Buyer on or after
Completion shall not be entitled to recover damages or otherwise
obtain reimbursement or restitution more than once between them in
respect of any individual Claim.
33
4.1.2 EE Holdco shall not be liable, and the Buyer shall not be entitled to
recover, damages to the extent that the subject of the Claim (other
than a Claim in respect of Taxation to which, together with any claim
under the Tax Deed, clause 4 of the Tax Deed shall apply) has been
made good or is otherwise properly compensated for without cost to the
Buyer.
4.2 TAXATION
In calculating the liability of EE Holdco for any breach of the
Warranties there shall be taken into account the amount (if any) by which
any Taxation for which the Buyer or EE is now or in the future
accountable or liable to be assessed is reduced or extinguished as a
result of the matter giving rise to such liability and the amount of any
liability of the Buyer or EE to Taxation in respect of the receipt of any
payment made under the Warranties.
4.3 INSURANCE
If, in respect of any matter which would give rise to a breach of the
Warranties, EE is entitled (or would have been so entitled had EE
maintained in force, or but for any change in the terms of, the policies
of insurance maintained by or on behalf of EE immediately prior to
Completion or policies providing equivalent cover thereto) to claim under
any policy or insurance, then no such matter shall be the subject of a
Claim unless and until EE has made a claim against its insurers and any
such insurance claim (or any claim which could have been made had such
policies or their equivalents been maintained as aforesaid) shall then
reduce or, if such reduction is greater in amount than the Claim,
extinguish such Claim.
4.4 RECOVERY FROM THIRD PARTIES
4.4.1 Where the Buyer or EE is at any time entitled to recover from some
other person any sum in respect of any matter giving rise to a Claim
(other than a Claim in respect of Taxation or under the Tax Deed in
which case clause 4 of the Tax Deed shall apply) the Buyer or EE shall
undertake, or procure that EE shall undertake, all reasonable steps to
enforce such recovery (subject to the Buyer or EE being indemnified to
its reasonable satisfaction) and, in the event that the Buyer or EE
shall recover any amount from such other person, the amount of such
Claim against EE Holdco shall be reduced by the amount recovered, less
all reasonable costs, charges and expenses or Taxation incurred by the
Buyer or EE recovering that sum from such other person.
4.4.2 If EE Holdco pays at any time to the Buyer an amount pursuant to a
Claim (other than a Claim in respect of Taxation or under the Tax Deed
in which case clause 4 of the Tax Deed shall apply) and the Buyer or
EE subsequently becomes entitled to recover (or does recover) from
some other person any sum in respect of any matter giving rise to such
Claim, the Buyer shall take, or procure that EE shall undertake, all
reasonable steps to enforce such recovery, and shall promptly repay to
EE Holdco so much of the amount paid by EE Holdco to the Buyer as does
not exceed the sum recovered from such other person less all
reasonable costs, charges and expenses or Taxation incurred by the
Buyer or EE recovering that sum from such other person.
4.4.3 If any amount is repaid to EE Holdco by the Buyer pursuant to
paragraph 4.4.2 above, an amount equal to the amount so repaid shall
be deemed never to have been paid by EE Holdco to the Buyer for the
purposes of calculating EE Holdco's total aggregate liability under
paragraph 2.
4.4.4 Where the person from whom the Buyer or EE may be entitled to make a
recovery as is referred to in clauses 4.4.1 or 4.4.2 or 24 Seven, the
Buyer or EE shall, if so requested by EE Holdco (subject to the Buyer
or EE being indemnified to its reasonable satisfaction) allow EE
Holdco to take the sole conduct of such actions as EE Holdco may deem
appropriate in connection with any such recovery in the name of the
Buyer or EE and in that connection the Buyer or EE shall give or cause
to be given to EE Holdco all such assistance as EE Holdco may
reasonably require in making such claim and shall instruct such
solicitors or other professional advisers as the EE Holdco may direct
to act on behalf of the Buyer or EE, as appropriate.
34
5 ACTS OF BUYER
No Claim (other than a Claim in respect of Taxation or under the Tax Deed
in which case clause 3 of the Tax Deed shall apply) shall lie against EE
Holdco to the extent that some or all of the amount claimed would not
have arisen but for:
(a) any voluntary act, omission, transaction or arrangement carried
out by the Buyer or on its behalf or by persons deriving title
from the Buyer on or after Completion; or
(b) any admission of liability made after the date hereof by the
Buyer or on its behalf or by persons deriving title from the
Buyer on or after Completion other than any admission made in
accordance with paragraph 3 of this schedule or clause 5 of the
Tax Deed; or
(c) any default by 24 Seven in performing its obligations under the
network services agreement with EE dated 14 December 1999 (as
amended from time to time) which has occurred prior to Completion
and of which (i) the Buyer was aware and (ii) EE Holdco was not
aware.
6 ALLOWANCE, PROVISION OR RESERVE IN ACCOUNTS OR THE COMPLETION STATEMENT
6.1 No matter shall be the subject of a claim for breach of any of the
Warranties to the extent that allowance, provision or reserve in respect
of such matter has been made in the Balance Sheet, or the Regulatory
Accounts or has been expressly included in calculating creditors or
deducted in calculating debtors in such accounts or has been otherwise
expressly taken account of or reflected in such accounts.
6.2 No Claim (other than a Claim in respect of Taxation or under the Tax Deed
in which case clause 9 of the Tax Deed shall apply) shall be made in
respect of any matter if and to the extent that such matter was taken
into account in the preparation of the Completion Statement (as defined
in schedule 3).
7 FUTURE LEGISLATION
No liability shall arise in respect of any Claim (other than a Claim in
respect of Taxation or under the Tax Deed in which case clause 3 of the
Tax Deed shall apply) to the extent that liability for such breach occurs
or is increased wholly or partly as a result of any legislation or any
modification to the Distribution Licence not in force at the date of this
Agreement.
8 TAXATION/ACCOUNTING
No claim shall arise in respect of any breach of any of the Warranties in
relation to a liability in respect of Taxation arising from circumstances
in relation to which clause 3 of the Tax Deed excludes any liability on
the part of EE Holdco in respect of a Taxation Liability arising from the
same circumstances.
9 NO LIABILITY FOR CONTINGENT OR NON-QUANTIFIABLE CLAIMS
If any breach of the Warranties arises by reason of some liability of EE
which, at the time such breach or claim is notified to EE Holdco, is
contingent only or otherwise not capable of being quantified, then EE
Holdco shall not be under any obligation to make any payment in respect
of such breach or claim unless and until such liability ceases to be
contingent or becomes capable of being quantified, as the case may be. So
long as such claim shall have been notified to EE Holdco in accordance
with paragraph 2.2, as appropriate, then the proviso to paragraph 2.2
shall be amended in relation to such claim so as to require that legal
proceedings be commenced within nine months from the date on which the
said liability ceases to be contingent or becomes capable of being
quantified, as the case may be, in order for the liability of EE Holdco
not to determine.
35
10 INDEPENDENT ADVICE OF THE BUYER
The Buyer acknowledges and agrees with EE Holdco (for itself and for the
benefit of its directors, officers, employees and advisers and as trustee
for such directors, officers, employees and advisers) that the Buyer has
had independent legal and financial advice relating to the purchase of
the Sale Shares and to the terms of this Agreement and the documents to
be executed pursuant to it, including the terms of this paragraph.
11 PAYMENTS UNDER CLAIMS
EE Holdco and the Buyer agree that any payments made in respect of Claims
(other than any Claim under the Tax Deed in which case clause 2.2 of the
Tax Deed shall apply) shall, so far as possible, be treated, for the
purposes of Taxation, as an adjustment to the consideration given for the
Sale Shares.
36
SCHEDULE 3
PURCHASE PRICE ADJUSTMENT MECHANISM
1 DEFINITIONS AND INTERPRETATION
1.1 In this schedule unless the context otherwise requires:
"CAPEX" means capital expenditure, net of customer contributions, of EE;
"CAPEX PERIOD" means each complete calendar month beginning with November
2001 and ending with the month in which Completion falls (and for the
month in which the Completion Date occurs only the relevant part of the
month shall be brought into account on a daily basis);
"2002 CAPEX PERIOD" means the period beginning 1 January 2002 and ending
at the Completion Effective Time (inclusive);
"CAPEX SCHEDULE" means the schedule of anticipated Capex for each Capex
Period until 30 June 2002, in the form set out in Part B of Appendix 25
to the Disclosure Letter;
"CAPEX 2001 STATEMENT" means a statement to be prepared under paragraph
2.1 of this schedule on the Statement Basis as at the Completion
Effective Time showing a computation, for each Capex Period to 31
December 2001 of:
(a) the extent to which EE shall have incurred Capex in aggregate in
excess of the Forecast Capex for that period, or as the case may
be, the extent to which EE shall have incurred Capex in aggregate
less than the Forecast Capex for that period (and so that for any
such period the extent to which Capex is in aggregate in excess of
the relative Forecast Capex is the "CAPEX OVERSPEND" and the
extent to which such Capex is in aggregate less than the relative
Forecast Capex is the "CAPEX UNDERSPEND");
(b) the extent to which any such Capex Overspend falls within any of
the following (such amounts being "ADJUSTABLE CAPEX OVERSPEND"):
(i) it is not more than (pound)1,000,000; and/or
(ii) the Buyer otherwise consents to any such Capex Overspend;
and/or
(iii) the Capex Overspend is incurred pursuant to any applicable
law or regulation, Regulatory Directive or the Distribution
Licence; and/or
(iv) where EE Holdco can demonstrate to the Buyer's reasonable
satisfaction that it was necessary for EE to incur
expenditure without obtaining the prior consent of the
Buyer due to emergency operational requirements which were
likely (in the reasonable opinion of EE Holdco) to cause
significant operational difficulties if not remedied before
it was practicable to obtain the consent of the Buyer; and
(c) the extent to which any such Capex Underspend falls within any of
the following (such amounts being "PERMITTED CAPEX UNDERSPEND"):
(i) EE shall have incurred expenditure originally characterised
in writing by 24 Seven to Capex but subsequently
re-characterised in writing by 24 Seven as operating
expenditure; and/or
(ii) the Buyer consents to any such Capex Underspend, such
consent not to be unreasonably withheld or delayed; and/or
(iii) the Capex Underspend results directly from any applicable
law or regulation, Regulatory Directive or the Distribution
Licence,
37
(and the excess for any Capex Period of total Capex Underspend
over Permitted Capex Underspend being the "ADJUSTABLE CAPEX
UNDERSPEND");
"CAPEX ▇▇▇▇ ▇▇▇▇▇▇" means the aggregate of the amounts of Capex (as shown
in the Capex 2002 Statement) which:
(a) is not in excess of the Forecast Capex for each of the Capex
Periods falling within the period covered by the Capex 2002
Statement (and so that the extent to which Capex for any Capex
Period is in aggregate in excess of the aggregate Forecast Capex
for such Capex Period is the "CAPEX Overspend"); and
(b) is Capex Overspend falling within any of the following:
(i) it is attributable to the carry forward of Capex
Underspends from prior to 1 January 2002; and/or
(ii) it is not more than (pound)2,000,000; and/or
(iii) the Buyer otherwise consents to any such Capex Overspend;
and/or
(iv) the Capex Overspend is incurred pursuant to any applicable
law or regulation, Regulatory Directive or the Distribution
Licence; and/or
(v) where EE Holdco can demonstrate to the Buyer's reasonable
satisfaction that it was necessary for EE to incur
expenditure without obtaining the prior consent of the
Buyer due to emergency operational requirements which were
likely (in the reasonable opinion of EE Holdco) to cause
significant operational difficulties if not remedied before
it was practicable to obtain the consent of the Buyer;
"CAPEX 2002 STATEMENT" means a statement to be prepared under paragraph
2.1 of this schedule of the Capex of EE incurred in the 2002 Capex Period
which states the Capex 2002 Amount;
"COMPLETION DATE" means has the meaning set out in clause 1.1 of this
Agreement;
"COMPLETION EFFECTIVE TIME" means midnight on the Completion Date;
"FORECAST CAPEX" means, for each Capex Period, the aggregate amount of
Capex forecasted to be spent by EE for that period as shown in the Capex
Schedule (and so that for the Capex Period in which this Agreement is
signed or Completion falls, such amount shall be apportioned on a daily
basis);
"STATEMENT BASIS" means the same principles, practices, bases, policies
and methods of valuation, consistently applied and as specified in Part B
of Appendix 10 to the Disclosure Letter (save in relation to provisions,
which shall in all cases be taken as zero);
"WORKING CAPITAL" means, in relation to EE, the aggregate value of
stocks, debtors, short term investments, cash at bank and in hand,
prepayments and accrued income, creditors; amounts falling due within one
year (including the TXU Intercompany but for the avoidance of doubt
excluding the amounts referred to in clause 5.1.6) and creditors; amounts
falling due after one year (but excluding the (pound)350m bond 2004,
(pound)200m bond 2012 and (pound)200m bond 2025, all of EE outstanding at
the date hereof) (in each case including all items appearing under
headings C; D, E and H as set out in the Format 1 balance sheet at
schedule 4 CA 1985);
"WORKING CAPITAL BASE STATEMENT" means the statement prepared on the
Statement Basis, in the form set out in Part A of Appendix 25 to the
Disclosure Letter which shows the assumed Working Capital of EE as at the
Completion Effective Time, assuming it occurs on 31 December 2001; and
38
"WORKING CAPITAL COMPLETION STATEMENT" means the statement in the same
format as the Working Capital Base Statement to be prepared under
paragraph 2.1 of this schedule on the Statement Basis which shows the
actual Working Capital of EE as at the Completion Effective Time.
2 COMPLETION STATEMENT
2.1 The Buyer shall procure that, as soon as reasonably practicable and in
any event within two months following Completion, there shall be prepared
by the Buyer, in conjunction with the Buyer's accountants and submitted
to EE Holdco for approval by EE Holdco and Deloitte & Touche:
(a) the Working Capital Completion Statement;
(b) the Capex 2001 Statement; and
(c) the Capex 2002 Statement,
(together the "STATEMENTS").
2.2 EE Holdco shall review the Statements and shall, on or before the date
(the "NOTIFICATION DATE") falling 21 days after receipt of the Statement
by EE Holdco, inform the Buyer in writing whether or not, in its opinion,
the Statements comply with the requirements of this schedule and, if not,
shall notify the Buyer in writing, specifying so far as is able to do so,
the amount and nature of any dispute. In the event that EE Holdco shall
not have so notified the Buyer by the Notification Date, then the
Statements shall be deemed to have been agreed.
2.3 If, as a result of the notification referred to in paragraph 2.2, there
is any item in dispute in relation to the Statements, EE Holdco and the
Buyer (and their respective accountants) together with, if instructed by
EE Holdco and the Buyer (respectively), EE's Auditors shall hold
discussions in good faith with a view to reaching agreement between them
as to the subject matter of the dispute and if such agreement is reached,
and is confirmed in writing by both parties, it shall in the absence of
manifest error be final and binding.
2.4 Any dispute with respect to the Statements which remains unresolved by
the date falling seven days after the Notification Date shall, at the
request of the Buyer, be referred for final settlement to an independent
firm of chartered accountants nominated jointly by EE Holdco and the
Buyer or, failing such nomination, within 7 days after request by either
party, nominated by the President for the time being of the Institute of
Chartered Accountants in England and Wales or his nominee. Such
independent firm (the "EXPERT") shall act as experts and not as
arbitrators and its decision shall (in the absence of manifest error) be
final and binding on the parties, insofar as any matter relating to the
Statement is concerned.
2.5 If the Expert is nominated by agreement between the parties or by the
President for the time being of the Institute of Chartered Accountants in
England and Wales or his nominee but the formal appointment is delayed
for more than twenty eight days after such nomination by reason of the
failure by the parties to agree the terms required by the Expert for
appointment (excluding Expert's fee but including, without limitation,
the Expert's terms of reference, any indemnity that the Expert may
require in relation to its appointment, any provision that the Expert may
require exempting the Expert from being called as a witness in
proceedings between the Parties in connection with the Expert's decision
and any provision requiring the Expert to give or not give reasons (as
the case may be) for the Expert's decision) such terms may be determined
by the Expert and the terms so determined shall be binding of the
Parties. If such terms are not agreed or determined within 28 days after
the nomination of the Expert (or such longer period as the Parties may
agree in writing) the Parties may agree (or, failing such agreement,
either Party may apply to the President for the time being of the
Institute of Chartered Accountants in England and Wales or his nominee)
to nominate another expert in accordance with paragraph 2.4.
39
2.6 The fees of the Expert shall be payable by EE Holdco on the one hand and
the Buyer on the other in such proportions as the Expert determines or
(failing such determination) in equal proportions.
2.7 The Buyer shall co-operate fully with EE Holdco and its accountants and,
if applicable, with the Expert (including giving all reasonable access to
records, working papers, information and to personnel) and shall procure
that EE and EE's Auditors shall co-operate in the same way with a view to
enabling the Statements to be prepared and subsequently discussed, and,
if applicable, with a view to enabling the Expert to make any
determination required by this schedule.
2.8 Upon the date that the Statements are all agreed or deemed to have been
agreed in accordance with paragraphs 2.2 or 2.3 or has been finally
determined in accordance with paragraph 2.4, the Buyer shall agree or, as
the case may be, the Expert shall certify, and deliver an appropriate
certificate to EE Holdco and the Buyer of the amount (the "COMPLETION
ADJUSTMENT BALANCE") which is equal to the sum of:
(a) the Working Capital of EE at Completion, as shown in the Working
Capital Completion Statement;
(b) plus an amount equal to the aggregate of all Adjustable Capex
Overspends as shown in the Capex 2001 Statement;
(c) less an amount equal to all Adjustable Capex Underspends as shown
in the Capex 2001 Statement;
(d) plus the Capex 2002 Amount as shown by the Capex 2002 Statement;
and
(e) less an amount equal to the proceeds of any disposal of any fixed
asset between the date of the Exchange Balance Sheet and
Completion net of the reasonable costs and expenses of such
disposal
2.9 The Parties agree that this schedule shall be operated, and the terms
used herein shall be interpreted, to avoid or eliminate any double
counting of amounts or movements in amounts.
3 ADJUSTMENT PAYMENTS
If the Completion Adjustment Balance as determined under paragraph 2.8:
(a) exceeds the Working Capital set out in the Working Capital Base
Statement, the Buyer shall pay to EE Holdco on the second
business day following the agreement or the delivery of the
certificate referred to in paragraph 2.8, an amount equal to such
excess by way of additional consideration for the Sale Shares; or
(b) is equal to the Working Capital set out in the Working Capital
Base Statement, no payment shall be due; or
(c) falls short of the Working Capital set out in the Working Capital
Base Statement, EE Holdco shall pay to the Buyer, on the second
business day following the agreement or the delivery of the
certificate referred to in paragraph 2.8, an amount equal to such
shortfall by way of partial refund of the consideration for the
Sale Shares.
4 REPAYMENT OF TXU INTER-COMPANY
4.1 If the TXU Intercompany (excluding for the avoidance of doubt the amounts
referred to in clause 5.1.6) as stated in the Working Capital Completion
Statement is a negative number, the Buyer shall (notwithstanding the
terms on which such TXU Intercompany is outstanding) procure that EE
repays such amount to the relevant members of the Guarantor's Group on
the second Business Day following the delivery of the certificate
referred to in paragraph 2.8.
40
4.2 If the TXU Intercompany (excluding for the avoidance of doubt the amounts
referred to in clause 5.1.6) as stated in the Working Capital Completion
Statement is a positive number, TXUEG shall (notwithstanding the terms on
which such TXU Intercompany is outstanding) procure that the relevant
members of the Guarantor's Group repays such amount to EE on the second
Business Day following the delivery of the certificate referred to in
paragraph 2.8.
41
SCHEDULE 4
BASIC INFORMATION ABOUT EE
1. Registered number : 2366906
2. Date of incorporation : 1 April 1989
3. Place of incorporation : England
4. Address of registered office : ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
5. Class of company : private limited
6. Authorised share capital : 400,000,000 ordinary shares of 50p each
7. Issued share capital : 251,513,142 ordinary shares of 50p each
8. Loan capital : None
9. Sole member :
Full Name Registered Address
--------- ------------------
Eastern Electricity Holdings Wherstead Park,
Limited ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
10. Directors : ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
11. Secretary : ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
12. Accounting reference date : 31st December
13. Auditors : Deloitte & Touche
42
SCHEDULE 5
PENSIONS
1 INTERPRETATION
(A) In addition to the provisions of clause 1 of this agreement, this
Schedule shall be construed as set out in this paragraph.
(B) The following expressions and related expressions have the same meanings
as in the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇: "CASH EQUIVALENT", "CONTRACTED-OUT",
"GUARANTEED MINIMUM PENSION", TRANSFER PREMIUM", "MONEY PURCHASE
BENEFITS" and section 9(2B) rights.
(C) The following expressions have the same meanings as in the Rules of the
ESPS: "SALARY", "PENSIONABLE SALARY", "CONTRIBUTING SERVICE",
"PENSIONABLE SERVICE" and "PARTICIPATING EMPLOYER".
(D) All references to notifications and other communications mean written
ones.
(E) The following expressions have the following meanings:
"24 SEVEN SENIOR MANAGERS" has the meaning set out in the definition of
"Senior Managers" under schedule 3 of the 24 Seven S&P ;
"ACTUAL PAYMENT DATE" means the date on which the Transfer Amount is
actually transferred to the Buyer's Scheme;
"ACTUARY" means a Fellow of the Institute or Faculty of Actuaries or a
firm of those Fellows or a body making available the advice of one of
those Fellows;
"ACTUARY'S LETTER" means the letter dated 16th November, 2001 from
TXUEG's Actuary to the Buyer's Actuary relating to this Schedule, a
copy of which is Appendix B;
"AGREED RATE" means a rate per annum equal to the base rate of Barclays
Bank PLC from time to time compounded half-yearly and references to
interest at the Agreed Rate mean interest accruing daily at the Agreed
Rate;
"ALTERNATIVE SCHEME" is as defined in the Protection Regulations;
"AVCs" means additional voluntary contributions paid by Members to the
Pension Scheme other than those applied to purchase added years of
pensionable service;
"BUYER'S ACTUARY" means an Actuary appointed by the Buyer and notified
to TXUEG for the purpose of this schedule. Until further notice by the
Buyer, the Buyer's Actuary is ▇▇▇ ▇▇▇▇▇▇▇ of Bacon & ▇▇▇▇▇▇▇, Epsom;
"BUYER'S SCHEME" means the scheme described in paragraph 3 below,
namely the London Electricity Group of the ESPS, and, where the context
permits, includes its trustees;
"COMPLETION" means completion of the transactions contemplated by
clause 5 of this agreement and "COMPLETION DATE" means the date of
Completion;
"DUE PAYMENT DATE" means a date agreed between TXUEG and the Buyer
which is no later than one month after all the Transfer Conditions have
been satisfied provided they then remain satisfied;
"EMPLOYEE" means any person who, at the Completion Date, is an employee
of EE and "EMPLOYEES" shall be construed accordingly;
"EXEMPT APPROVED SCHEME" has the same meaning as in section 592 of ICTA
1988 and "EXEMPT APPROVED" and "EXEMPT APPROVAL" shall be construed
accordingly;
43
"TXUEG'S ACTUARY" means an Actuary appointed by TXUEG and notified to
the Buyer for the purpose of this Schedule. Until further notice,
TXUEG's Actuary is ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ of Bacon & ▇▇▇▇▇▇▇, St. Albans;
"INDEX" means an index at the Completion Date comprising as to:
(a) 80 per cent. the FT-Actuaries all-share total return index; and
(b) 20 per cent. the FT-Actuaries index of prices for British
government stocks 5 to 15 years (assuming notional gross interest
is reinvested in the same index at the end of each calendar
month).
If there is any difference between either of the FT-Actuaries indices
as published in the press and the index in accordance with the basis
agreed between the Financial Times, the Institute of Actuaries and the
Faculty of Actuaries, the latter is used for the purposes of this
Schedule;
"INVESTMENT ADJUSTMENT" means the notional investment return, reduced
by 0.1 per cent. per annum to take account of investment expenses, over
the relevant period specified in this Schedule calculated by comparing
the level of the Index at the close of business on the first day of
that period with the level of the Index at close of business on the
last day of that period or, if either of those days is not a day for
which the indices comprising the Index are quoted, the level of the
Index at the close of business on the previous day for which they were
quoted is used;
"JOINING DATE" means (a) 1st April 2002; or (b) such earlier date as
the PSO may require; or (c) another date agreed between TXUEG and the
Buyer, such agreement not to be unreasonably withheld or delayed, in
any case unless the Buyer materially defaults on any obligation under
paragraph 2 below and TXUEG notifies the Buyer that its participation
is to end on an earlier date, such notice to be given four weeks before
participation shall end in consequence of the Buyer's material default,
in which case the day after the expiry of four weeks from such notice
will be the Joining Date;
"MEMBER" means, at any time or during any period specified in this
schedule, an active member of the Pension Scheme in Pensionable Service
(including a member who is temporarily absent under the Rules on
maternity leave);
"MEMBERS' CONTRIBUTIONS" for use in the Actuary's Letter means all
contributions made by or in respect of Transferring Members with
respect to the Participation Period other than AVCs and those described
in paragraph 2(D)(ii) and (iv) below;
"NON-CONSENTING MEMBER" means a person who is an Employee and a Member
at any time during the Participation Period other than a Transferring
Member;
"OPTION FORM" means a form to be completed by Members and delivered to
the Pension Scheme, to be in a form agreed by TXUEG and the Buyer, such
agreement not to be unreasonably withheld or delayed, and including
words substantially in the form set out in Appendix A;
"PARTICIPATION PERIOD" means the period from and including the
Completion Date up to but excluding the Joining Date.
"PENSION SCHEME" means, and this Schedule applies to, the Eastern Group
of the Electricity Supply Pension Scheme (the "ESPS") established by a
resolution of the Electricity Council dated 28th January 1983, as
amended. Where the context requires, the "PENSION SCHEME" includes its
trustees;
"PROTECTION REGULATIONS" means the Electricity (Protected Persons)
(England and Wales) Pension Regulations 1990 (S1 1990 No. 346);
44
"PROTECTED PERSON" is as defined in the Protection Regulations;
"PSO" means the Pension Schemes Office of the Inland Revenue or its
successor in function;
"RETAINED COSTS" for use in the Actuary's Letter means a sum equal to 2
1/4 per cent. per annum of the total Salaries of Employees who are
Transferring Members during the Participation Period (pro rated to the
period of participation);
"RULES" means, in relation to the Pension Scheme, the trust deeds,
rules and other documents governing the Pension Scheme as identified to
the Buyer;
"SENIOR MANAGER" means ▇.▇. ▇▇▇▇▇▇;
"TRANSFER AMOUNT" means the amount that is calculated as specified in
the Actuary's Letter. In calculating the Transfer Amount any benefits
under the Pension Scheme which are attributable to AVCs paid by the
Transferring Members and in respect of which the Transferring Members
are not entitled to benefits based on their final pensionable earnings
are disregarded;
"TRANSFER CONDITIONS" means all of the following:
(a) in all material respects (except in relation to paragraph (f) of
this definition, where the Buyer shall comply absolutely) the
Buyer has complied with the requirements of paragraphs 2 and 3
below and the Buyer's Scheme is as described in, and complies
with, paragraph 3 below or TXUEG has, at its absolute discretion,
waived such compliance;
(b) neither the Buyer, any member of the Buyer's Group nor the
Buyer's Scheme has made any statement to the effect that any
benefit which is required to be provided under paragraph 3 below
will be reduced or discontinued;
(c) the Board of Inland Revenue has given written approval to the
transfer of assets from the Pension Scheme to the Buyer's Scheme
in respect of the Transferring Members and any condition to which
that approval is subject is satisfied;
(d) the Pension Scheme has received the Option Forms completed and
signed by the Transferring Members;
(e) the calculation of the Transfer Amount has become final and
binding as set out in this schedule; and
(f) the Buyer's Scheme complies with the minimum funding requirement
(within the meaning of section 56, Pensions Act 1995) (the
"MFR"), such that the value of the Buyer's Scheme's assets
exceeds 100 per cent. of its liabilities as certified by the
Buyer's Actuary to TXUEG's Actuary and there is a certified
schedule of contributions in support of such valuation.
"TRANSFERRING MEMBER" means a person:
(a) who is a Member at the Completion Date and an Employee;
(b) who is a Member immediately before the Joining Date;
(c) who begins to accrue retirement benefits as stated in paragraph
3(B) below under the Buyer's Scheme as of the Joining Date; and
(d) in respect of whom the Pension Scheme receives a signed Option
Form with transfer payment selected, by the date specified in the
form for its return, and who does not, before the Joining Date,
withdraw his selection of that option, die or become entitled to
the payment of immediate benefits under the Pension Scheme.
45
"TXUEG" means the Guarantor.
2 EE'S PARTICIPATION IN THE PENSION SCHEME
(A) Subject to the treatment of the Pension Scheme as an Exempt Approved
Scheme not being prejudiced and to the Buyer and EE complying with the
terms of this Schedule, the Rules and all applicable statutory
requirements, TXUEG will, subject to Inland Revenue approval, procure the
continued participation of EE in the Pension Scheme during the
Participation Period in respect of those Employees who are Members at the
Completion Date in particular (but without prejudice to the generality of
the foregoing) where those Members are Protected Persons.
(B) The Buyer (with such assistance from TXUEG as the Buyer may reasonably
require) will make all necessary arrangements to obtain its own
contracting-out certificate in relation to EE and will cause the
Employees who are Members to be in contracted-out employment by reference
to the Pension Scheme throughout the Participation Period and promptly
after the end of the Participation Period will make all necessary
arrangements to surrender that certificate as of the end of the
Participation Period.
(C) The Buyer undertakes that it shall not, and undertakes to procure that EE
and any member of the Buyer's Group shall not:
(a) do or omit to do during or in respect of the Participation Period
any act or thing which would or might adversely affect the Exempt
Approval of the Pension Scheme or its status as a contracted-out
scheme or cause the Pension Scheme to be in breach of any
statutory requirement;
(b) exercise any power or discretion of a participating employer under
the Pension Scheme except on terms (whether as to payment of
additional contributions or otherwise) which TXUEG agrees in
writing (such agreement not to be unreasonably withheld).
(D) The Buyer will procure the prompt payment of the following in respect of
those Employees who are Members during and in respect of the
Participation Period from time to time:
(i) employer's contributions for Members at the rate of 13 per
cent. of their respective Salaries;
(ii) 1 per cent. of Salary in respect of administration
expenses;
(iii) Member's contributions and Member's AVCs in accordance with
the Rules; and
(iv) an amount equal to the additional capital cost to the
Pension Scheme of providing benefits on the termination of
employment, early retirement or redundancy of Employees who
do not become Transferring Members as calculated and
advised as appropriate by the Pension Scheme's actuary in
accordance with clause 13(1)(e) and rule 16 or 17 of the
ESPS Rules.
(E) The Buyer shall procure that payment of the employer's and Members'
contributions and other payments as stated in paragraph 2(D) above are
made in cleared funds on the twelfth day of each month and will pay
interest at the Agreed Rate on any amount due and unpaid from time to
time. Payment under paragraph 2(D)(ii) shall be made to or to the order
of TXUEG. Payments under paragraphs 2(D)(i)(iii), and (iv) shall be made
to the Pension Scheme.
(F) (a) In this sub-paragraph (F):
"LIMITED EARNINGS INCREASE" means, in relation to a Non-Consenting
Member entitled to or accruing defined benefits other than just
lump sum death in service benefits, an increase in earnings after
46
the Completion Date that has the effect of increasing Pensionable
Salary, compared to what Pensionable Salary would have been if his
Contributing Service had ended at the Completion Date, by no more
than a percentage equal to the assumption used for salary
increases in the Actuary's Letter if the period between the
Completion Date and the termination of his Contributing Service is
one year and so in proportion for a period other than a year. This
paragraph (F) applies separately in respect of each Non-Consenting
Member.
(b) The Buyer will pay to the Pension Scheme (or as it may direct) on
demand an amount in cash equal to:
(i) the amount by which the capital value of the benefits
payable under the Pension Scheme to or in respect of any
Non-Consenting Member is increased by an increase in
earnings in excess of a Limited Earnings Increase by the
Buyer (or by EE or any member of the Buyer's Group); plus
(ii) interest at the Agreed Rate on the amount in sub-paragraph
(i) above in respect of the period from (and including) the
date on which the Non- Consenting Member ceases to be in
Contributing Service by reference to the Pension Scheme up
to (but excluding) the date on which final payment is made
in accordance with this sub-paragraph.
For the purposes of this sub-paragraph (F):
(iii) the amount by which the capital value of the benefits is so
increased is taken to be the amount by which A exceeds B
where "A" is the capital value of the benefits payable
under the Pension Scheme (whether immediately,
prospectively or contingently) to or in respect of the
Non-Consenting Member on and after the date on which the
Non-Consenting Member ceases to be in Contributing Service
and "B" is the capital value of the benefits which would
have been so payable had earnings been increased by a
Limited Earnings Increase;
(iv) the amount by which the capital value of the benefits is so
increased is calculated as at the date on which the
Non-Consenting Member ceases to be in Contributing Service
and on the basis of the assumptions and method set out in
the Actuary's Letter in the same way as the unadjusted
Transfer Amount is calculated;
(v) paragraph 5 applies to the calculation referred to in
sub-paragraph (iv) above mutatis mutandis; and
(vi) payment in accordance with this sub-paragraph must be made
within a period of 14 days after the calculation of the
amount by which the capital value has been increased as
mentioned in sub-paragraphs (iii) and (iv) above has become
final and binding in accordance with sub-paragraph (v)
above.
(G) The Buyer shall nominate, and shall procure that EE shall nominate, such
person as TXUEG may direct for the purpose of any provision of or
regulations made under the ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇ or the Pensions ▇▇▇
▇▇▇▇ which allow employers in multi-employer schemes to nominate a person
to act for them for any purpose and that the Buyer will exercise, and
shall procure that EE exercises any power and executes any document as
TXUEG may reasonably require to implement the relevant provision and will
not exercise any such power without TXUEG's consent, such consent not to
be unreasonably delayed or refused.
(H) If any actuarial valuation of the Pension Scheme discloses an actuarial
surplus, the principal employer of the Pension Scheme shall have no
obligation to make arrangements to deal with any such surplus such that
any part thereof shall be used for the benefit of the Buyer, EE and any
member of the Buyer's Group or any Employee who is a Member. If any
47
actuarial valuation of the Pension Scheme prepared under the terms of the
ESPS discloses an actuarial deficit, the Buyer and EE shall have no
obligation to fund or contribute towards such deficit.
(I) TXUEG shall provide on the Buyer's reasonable demand to the Buyer, on the
expiry of the Participation Period, all relevant pensions data in respect
of Transferring Members' participation in the Pension Scheme.
(J) The Buyer shall provide on reasonable demand to TXUEG accurate and
complete payroll details to enable TXUEG efficiently to administer the
Pension Scheme during the Participation Period in accordance with this
schedule and in compliance with all legal requirements and regulations.
(K) The Buyer shall indemnify and keep indemnified TXUEG and any of TXUEG's
Group in respect of any of the obligations of the Buyer under this
paragraph 2.
(L) During the Participation Period, TXUEG will procure that no alterations
are made to the benefits or contributions of any Employee who is a Member
nor make any amendment which would reduce the Transfer Amount without the
prior written consent of the Buyer and will not terminate contributions
to the Pension Scheme.
(M) If any Member who receives an Option Form (as referred to paragraph 4(A))
does not transfer his past service rights to the Buyer's Scheme pursuant
to the Option Form but does subsequently elect to transfer his past
service benefits to the Buyer's Scheme within the period of two years
following the Completion Date (each subsequent transfer to be referred to
in this paragraph 2 as a delayed transfer) then the transfer payment from
the Pension Scheme to the Buyer's Scheme in respect of that delayed
transfer will be calculated on the same basis as if the Member had
elected to transfer his past service benefits pursuant to the Option
Form.
Paragraph 5 and 8 of this Schedule shall apply to delayed transfers as if
they were transfers pursuant to the Option Form.
(N) During the Participation Period the Buyer will procure the prompt payment
to TXUEG of an amount not exceeding (pound)1,000,000 in relation to the
arrears of contributions by 24 Seven Utility Services Limited or 24 Seven
Contract Services Limited for the period from 1st April 2001 to the
Completion Date and the augmentation value relating to the 24 Seven
Senior Managers' and ▇.▇. ▇▇▇▇▇▇'▇ enhanced benefits for service up to
the Completion Date, in respect of benefits that are approved by the PSO.
In the event that the Completion Date is after 31st December, 2001, the
amount of (pound)1,000,000 shall be increased by such an amount to
reflect this delay as shall be agreed between TXUEG's Actuary and the
Buyer's Actuary.
3 BUYER'S SCHEME
(A) PARTICULARS OF SCHEME
Not later than three months before the Joining Date the Buyer shall:
(a) procure that EE shall participate in the Buyer's Scheme; and
(b) provide to TXUEG particulars of the group of the ESPS that the
Buyer intends to be the Buyer's Scheme for the purposes of this
schedule. For Members entitled to or accruing defined benefits
other than just lump sum death in service benefits, the scheme (or
each such scheme) must be a scheme which as at the Due Payment
Date satisfies the terms of paragraph 3(B) below.
(B)
(a) General conditions
------------------
48
The Buyer will procure that at the Joining Date the Buyer's Scheme:
(i) is established and wholly administered in the United Kingdom;
(ii) is Exempt Approved under chapter 1 of part XIV of ICTA 1988 (or
designed so as to be capable of such approval) as an occupational
defined benefits scheme; and
(iii) is contracted-out and a scheme to which the Pension Scheme is
permitted by law to make a transfer payment in respect of the
entire rights under the Pension Scheme of the Transferring Members
(including rights to guaranteed minimum pensions and section 9(2B)
rights).
(b) Future service benefits
-----------------------
The Buyer will, and will procure that the Buyer's Scheme will, make the
offers described below and provide as at and from the Joining Date the
benefits described below in respect of persons who accept the offers.
Each Employee will be offered, in relation to employment from and after
the Joining Date, membership of the Buyer's Scheme on the following
basis:
(i) with benefits that TXUEG's Actuary and the Buyer's Actuary shall
agree mirror those that would prospectively have been provided
(including where such benefits comprise enhancements granted on an
individual basis for the Senior Manager) by the Pension Scheme to
and in respect of that Member if he had continued in membership
after the Joining Date (assuming that the Pension Scheme and the
Senior Manager's enhanced benefits are not altered after the date
of this agreement except as mentioned in any document disclosed to
the Buyer as part of the transaction in which this agreement was
made) and taking account of the required amounts of Members'
contributions including the current member contribution reduction
until 31st March 2002 but not any member contribution reduction
thereafter. The offer will not be conditional on the Employee
agreeing to transfer to the Buyer's Scheme the value of his
accrued rights in the Pension Scheme;
(ii) the Buyer will procure that Members at the Completion Date can
continue to convert AVCs into benefits on the same terms
applicable in the Pension Scheme at the Completion Date. Where a
Transferring Member was purchasing added years while participating
in the Pension Scheme, the Buyer will make arrangements that
mirror those under the Buyer's Scheme.
(c) Past service benefits
---------------------
(i) The Buyer will, and will procure that the Buyer's Scheme will,
make the offers described below and, in consideration of receipt
of the Transfer Amount, provide the benefits described below in
respect of persons who accept the offers.
(ii) Each person who is an Employee and a Member at the Joining Date in
respect of his Contributing Service in the Pension Scheme will be
offered benefits that TXUEG's Actuary and the Buyer's Actuary
shall agree mirror those applying (including where such benefits
comprise enhancements granted on an individual basis for the
Senior Manager) for and in respect of him under the Pension Scheme
immediately before the Joining Date in relation to his
Contributing Service.
(iii) Each person referred to above who has paid AVCs will, subject to
receipt of assets representing the person's AVCs, be offered
benefits which are at least equal in value to the amount to be
paid by the Pension Scheme to the Buyer's Scheme in respect of
AVCs and provide such benefits (in addition to any others) for and
in respect of each such person who becomes a Transferring Member.
(iv) In respect of additional voluntary contributions to the Pension
Scheme that have been made to buy added years under that scheme,
the Buyer shall offer benefits that mirror the extent permitted by
49
the PSO, those provided in the Pension Scheme with respect to the
same service and contributions. To the extent that benefits of
Protected Persons cannot be mirrored because of PSO limits,
benefits of equal value to those that cannot be mirrored will be
provided in the Buyer's Scheme to the extent possible within PSO
limits.
(v) The Buyer shall procure that the Buyer's Scheme contains a rule
the same as Rule 8(3) of the Rules with respect to the benefits
that Employees who are Members who join the Buyer's Scheme accrue
under the Buyer's Scheme based on the level of Salary that would
have applied for the purpose of the option under that Rule 8(3)
had the Employee continued as a Member.
(vi) The Buyer shall procure that each Transferring Member is given the
same period of (in terms of months and years) Contributing Service
as that which that Transferring Member had under the Pension
Scheme.
4 NOTICES TO EMPLOYEES
(A) Not later than two months before the Joining Date the Buyer will issue a
notice in a form agreed by TXUEG and the Buyer (such agreement not to be
unreasonably withheld or delayed) to the Employees who are Members
inviting them to join the Buyer's Scheme for future service and offering
them the ability to transfer the value of their accrued rights under the
Pension Scheme to the Buyer's Scheme by completing an Option Form, such
Option Form to be returned no later than one week before the Joining
Date. The notice shall explain the options available to the persons
concerned under the Pension Scheme in respect of their accrued rights.
(B) This paragraph 4 shall not apply where the Joining Date is accelerated
because of the Buyer's default. The Buyer shall supply to TXUEG the draft
notice for TXUEG's comments three weeks before the draft notice shall be
issued to Members. TXUEG shall supply its comments on the draft notice to
the Buyer within two weeks of its receipt. The Buyer will then submit a
further draft to TXUEG having considered TXUEG's comments for final
agreement within one week, such agreement not to be unreasonably
withheld. The Buyer will issue the notice and the Option Form to the
relevant Employees as soon as reasonably practicable thereafter.
(C) The parties acknowledge the obligations of the Pension Scheme under
Regulation 27A of the Occupational Pension Schemes (Preservation of
Benefit) Regulations 1991 and will co-operate with each other and the
Pension Scheme with a view to assisting the Pension Scheme in complying
with that Regulation.
5 CALCULATION OF TRANSFER AMOUNT
The Buyer shall provide to TXUEG any documents and information which is
reasonably required for the calculation of the Transfer Amount. TXUEG's
Actuary will calculate the Transfer Amount as soon as reasonably
practicable and in any event within two months following the Joining Date
or two months following receipt of the documents and information required
for the calculation of the Transfer Amount if later. As soon as
reasonably practicable and in any event within 14 days after TXUEG's
Actuary has calculated the Transfer Amount (excluding the amount of the
interest and Investment Adjustment but including particulars of the
manner in which they are to be calculated) TXUEG will notify the Buyer of
the result of that calculation and supply to the Buyer's Actuary
particulars of the calculation and the data on which it is based which he
reasonably requires to enable him to check that the calculation is
mathematically correct and made in accordance with the provisions of this
schedule. The Buyer's Actuary has one month from the date on which those
particulars and data have been supplied to him in which he may raise any
objection that the calculation is incorrect. The calculation will be
final and binding on TXUEG and the Buyer on the later of:
(i) if the Buyer's Actuary raises no objection within the terms
mentioned above, the expiry of the period mentioned above in which
he may raise an objection;
50
(ii) if the Buyer's Actuary raises an objection as mentioned above, the
date of a subsequent written agreement between TXUEG's Actuary and
the Buyer's Actuary that the calculation (or revised calculation)
is correct; or
(iii) if a reference is made to an independent actuary under paragraph
12 below, the date of his determination of the disputed issue.
6 TRANSFER OF TRANSFER AMOUNT AND AVCS
(A) TXUEG will use all reasonable endeavours to procure that on the Due
Payment Date the Pension Scheme transfers to the Buyer's Scheme the
Transfer Amount and the assets representing, as at the date of transfer,
the AVCs paid by the Transferring Members together with the accrued
investment returns on such AVCs.
(B) The Buyer will seek promptly from the Board of Inland Revenue approval to
the transfer of assets from the Pension Scheme to the Buyer's Scheme in
respect of the Transferring Members and, at the Buyer's request, TXUEG
will supply promptly to the Buyer the documents and information which the
Buyer reasonably requires for this purpose.
7 FORM OF TRANSFER
TXUEG and the Buyer will use all reasonable endeavours to secure
agreement between the Pension Scheme and the Buyer's Scheme respectively
as to the particular assets to be transferred representing the Transfer
Amount. If agreement is not reached by the Due Payment Date, a transfer
will be made in cash with a reduction of 1 per cent. Any securities to be
transferred will be valued at the mid-market price at the close of
business on The London Stock Exchange on the day before the date of
transfer.
8 PAYMENTS BY EE HOLDCO AND BUYER
(A) If the Transfer Amount is not transferred in full to the Buyer's Scheme
within one week after the Due Payment Date as provided for in paragraph 6
above, EE Holdco shall, subject to sub-paragraphs (B) and (C) below, not
later than one month after receipt of a written demand from the Buyer,
pay to the Buyer, by way of an adjustment of the Purchase Price, the
following amount:
(a) if some assets have been transferred from the Pension Scheme to
the Buyer's Scheme (whether before or after that written demand is
received) - the amount by which the Transfer Amount (calculated as
at the date on which those assets were transferred) exceeds the
value so transferred but the excess for this purpose shall:
(i) be the excess adjusted by the Investment Adjustment from
(and including) the date of that transfer up to (but
excluding) the date of payment by EE Holdco pursuant to
this sub-paragraph; and
(ii) be reduced (after the adjustment in sub-paragraph (i)
above) if, despite some assets having been transferred to
the Buyer's Scheme, any benefit remains payable to or in
respect of a Transferring Member under the Pension Scheme;
the reduction will be by the aggregate of the cash
equivalents of those benefits; or
(b) if no assets have been transferred - the amount by which the
Transfer Amount (calculated as at the date on which payment is
made to the Buyer in accordance with this sub-paragraph) exceeds
the aggregate of the cash equivalents of the benefits remaining
payable to or in respect of the Transferring Members under the
Pension Scheme when payment is made in accordance with this
sub-paragraph;
less (in either case):
51
(c) any amount due after any Investment Adjustment from the Buyer to
EE Holdco or the Pension Scheme under this schedule.
For the purpose of this sub-paragraph each of the Transferring Members in
respect of whom benefits are so payable shall be deemed to have a right
to a cash equivalent.
The amount derived under sub-paragraphs (a) to (c) above is referred to
below as the "SHORTFALL".
(B) If any of the Transfer Conditions ceases to be fulfilled or effective,
the Buyer shall not demand payment pursuant to sub-paragraph (A) above
and the time limit referred to in sub-paragraph (A) above will not
commence, or (if any of the Transfer Conditions cease to be fulfilled or
effective after the time limit has started to run) will be suspended,
until all those conditions are again fulfilled and effective.
(C) No payment shall be due from EE Holdco pursuant to sub-paragraph (A)
above if the reason for the Transfer Amount (or part of it) not having
been transferred to the Buyer's Scheme by the expiry of the time limit
referred to above is the failure of the Buyer's Scheme for whatever
reason to accept the whole or any part of the Transfer Amount or if the
reason is any other reason outside the control of EE Holdco or the
Pension Scheme but, if no payment is due from EE Holdco because of any
such other reason outside the control of EE Holdco or the Pension Scheme,
payment will become due (subject to the other provisions of this
paragraph) if and when such reason ceases to exist.
(D) If payment is made by EE Holdco in accordance with sub-paragraph (A)
above the amount of that payment will be deducted from the amount
otherwise payable under paragraph 6 of this schedule.
(E) If EE Holdco pays to the Buyer an amount pursuant to this paragraph:
(i) forthwith following EE Holdco making the payment the Buyer shall
procure that an amount equal to the payment shall be contributed
to the Buyer's Scheme; and
(ii) the Buyer, EE and all members of the Buyer's Group shall take all
reasonable steps (including the claiming of any relevant deduction
from profits and any repayment of tax) to maximise the Aggregate
Tax Benefit, and the Buyer shall, 14 days after the earlier of the
date on which the Aggregate Tax Benefit has been finally
determined by the Inland Revenue (allowing for the maximum
permitted spread under accounting principles and ICTA 1988) and
the date which falls 4 years after the Completion Date (in which
case it shall be a best estimate of the Aggregate Tax Benefit
agreed between the Buyer and EE Holdco), pay to EE Holdco, by way
of adjustment to the Purchase Price, an amount equal to the
Aggregate Tax Benefit, adjusted (if payment is not made within the
14 day period) by the Investment Adjustment from (and including)
the earlier of those two dates to (but excluding) the date of
payment.
(F) (a) Subject to paragraph (F)(b), if, for a reason outside TXUEG's
control, the value of the aggregate of the assets transferred by
the Pension Scheme to the Buyer's Scheme and the assets
transferred by EE Holdco to the Buyer under this paragraph (in the
case of non-cash assets based on the value of the assets
transferred as at the date of transfer) exceeds the Transfer
Amount, the Buyer shall, within one month of such an excess having
been transferred, pay to EE Holdco, by way of an adjustment of the
Purchase Price, a sum in cash equal to such excess (less a best
estimate, agreed between the Buyer and EE Holdco, of the Aggregate
Tax Benefit which the TXUEG Group has obtained or could have
obtained as a result of paying the excess into the Pension Scheme
by way of contribution) adjusted by the Investment Adjustment from
(and including) the date of transfer of the excess to the Buyer's
Scheme up to (but excluding) the date of payment of the excess by
the Buyer to EE Holdco.
(b) If the reason for such payment in excess of the Transfer Amount is
one of manifest error, the Buyer and TXUEG will first use all
reasonable endeavours (and subject to any legal and Inland Revenue
52
restrictions) to procure that the trustees of the Buyer's Scheme
return the excess to the trustees of the Pension Scheme and, to
the extent that this is possible and practical, the provisions of
paragraph (a) above shall not then apply.
(G) In this paragraph 8:
"BUYER'S GROUP" means the Buyer and any company which is a member of the
same group of companies as the Buyer for the purposes of Chapter IV of
Part X of ICTA 1988 and "member of the Buyer's Group" means any such
company.
"TXUEG'S GROUP" means TXUEG and any company which is a member of the same
group of companies as TXUEG for the purposes of Chapter IV of Part X of
ICTA 1988 and "member of TXUEG's Group" means any such company.
"TAX BENEFIT" means the aggregate of the amount by which the relevant
company's liability to pay corporation tax is or will be reduced and the
amount of any repayment of corporation tax to which the relevant company
is or will be entitled, which, in either case, arises as a result of the
contribution referred to in paragraph (E)(i) or F(a) above (including any
such reduction or right which is attributable to a surrender by way of
group relief or consortium relief under sections 402 to 413, ICTA 1988 of
a loss which arises as a result of the payment of the contribution); and
"AGGREGATE TAX BENEFIT" means, in (E) above, the aggregate of any Tax
Benefits arising to the Buyer, EE and the Buyer's Group in respect of the
contribution referred to in (E)(i) above and in (F) above the aggregate
of the actual Tax Benefit (or potential Tax Benefit that would have
arisen if the contribution had been paid into the Pension Scheme) arising
to EE Holdco and any member of the TXUEG Group in respect of the
contribution referred to in (F)(a) above.
9 TXUEG'S PROTECTION
(A) In this paragraph:
"CLAIM" means a claim by a Claimant relating to:
(a) any Relevant Benefit; and/or
(b) access to any Relevant Benefit or to a scheme providing any
Relevant Benefit,
attributable to employment from and after Completion and, in the case of
a Transferring Member (or any person claiming through or in respect of
him), attributable to employment before Completion but only in connection
with guaranteed minimum pensions and equalisation of access to any scheme
that comprises any Relevant Benefits), which it is alleged TXUEG or the
Pension Scheme is liable to provide for or in respect of a Transferring
Member.
"CLAIMANT" means an Employee or any person claiming benefit through or in
respect of him.
"LIABILITY" includes any compensation, damage, loss or requirement of any
court, industrial tribunal or Pensions Ombudsman order, award or
direction, and costs and expenses properly incurred.
"LIABILITY AMOUNT" means the amount of any Liability incurred or
sustained by TXUEG or any member of the Pension Scheme or the Pension
Scheme arising out of or in connection with a Claim by a Claimant.
"RELEVANT BENEFIT" is construed in accordance with section 612 of the
Income and Corporation Taxes ▇▇▇ ▇▇▇▇.
53
(B) The Buyer will indemnify, and keep indemnified on an after tax basis,
TXUEG, each member of the TXUEG Group and the Pension Scheme against any
Liability Amount.
(C) To the extent that this indemnity relates to a Claim against a member of
the TXUEG Group (other than TXUEG) or the Pension Scheme, TXUEG holds the
benefit of the indemnity as trustee for that member or the Pension Scheme
(as the case may be). Without prejudice to the ability of that person to
enforce the indemnity, TXUEG as trustee for him may enforce the
indemnity. The consent of any of the TXUEG Group or the Pension Scheme
shall not be necessary for any variation (including any release or
compromise in whole or in part of any liability) or termination of this
paragraph 9.
(D) In quantifying any Liability Amount, the assumptions in the Actuary's
Letter shall be applied as nearly as practicable and, in default of
agreement as to how it should apply, the disagreement shall be resolved
in accordance with paragraph 12.
(E) If TXUEG becomes aware of any claim, action or demand brought or made by
anyone against TXUEG or the Pension Scheme or a matter which is
reasonably likely to give rise to such a claim, action or demand, TXUEG
shall promptly give written notice to the Buyer of such a claim, action
or demand. The Buyer shall be wholly responsible for the conduct of such
a claim and may settle or compromise any such claim if it thinks fit.
TXUEG shall give the Buyer any such information, document and access to
persons as the Buyer may reasonably request to enable the Buyer to deal
with such claims.
10 BUYER'S PROTECTION
(A) If for any reason the transfer scheme made by EE and approved by the
Secretary of State for Trade and Industry which had an effective date of
1st October 2001 under Part I of Schedule 7 to the Utilities ▇▇▇ ▇▇▇▇ did
not effectively transfer to TXU UK Limited all liabilities (including
contingent and future liabilities) to protected persons under or arising
out of Regulation 19 of the Electricity (Protected Persons) England and
Wales Regulations 1990 as a successor company within the meaning of those
Regulations, EE Holdco and TXUEG shall indemnify the Buyer and EE and
keep them indemnified on an after tax basis against all such liabilities.
(B) Other than in respect of the Buyer's payment of employer's contributions
during the Participation Period as set out in this schedule, TXUEG shall
indemnify the Buyer on an after tax basis against all costs, liabilities
and expenses arising or which may arise out of the operation of section
75 of the Pensions ▇▇▇ ▇▇▇▇ in respect of the Participation Period,
except where such cost is attributable to an act or omission of the Buyer
or any of EE, 24 Seven Utility Services Limited and 24 Seven Contract
Services Limited or any of the Buyer's Group.
11 NO ASSISTANCE
The Buyer agrees that it will not, and will procure that the Buyer's
Scheme and the Buyer's Group will not, take any action or provide any
assistance to any person (direct or indirect) which might result in the
Pension Scheme transferring a smaller or a larger amount than the
Transfer Amount and the assets representing Transferring Members' AVCs to
the Buyer's Scheme. This undertaking does not apply to any obligation
that the Buyer or the Buyer's Scheme may have to pay the costs or the
expenses of the trustees or members of the Buyer's Scheme or where the
Buyer or the Buyer's Scheme is under a legal obligation to provide
information to any party.
12 DISPUTES
(A) Any dispute between TXUEG and the Buyer or between TXUEG's Actuary and
the Buyer's Actuary concerning the calculation of the Transfer Amount or
compliance with paragraph 2, 3 and paragraph 9 above as it relates to the
actuarial assumptions described in paragraph 9(D) shall, in the absence
of agreement between them within one month of the party concerned having
notified the other in writing of the dispute, be referred to an
independent actuary chosen by agreement between TXUEG and the Buyer or,
failing agreement, appointed by the President for the time being of the
Institute of Actuaries at the instance of either party. The independent
54
actuary shall determine the disputed matter in accordance with this
schedule (including the Actuary's Letter) acting as an expert and not as
an arbitrator and his decision shall be final and binding. The fees and
expenses of the independent Actuary and of the President shall be borne
equally between TXUEG and the Buyer, except that the independent actuary
shall have power to determine, at the request of either of TXUEG or the
Buyer, that the fees and expenses shall be borne exclusively by TXUEG or
the Buyer or in such proportions as the independent actuary may determine
and any such determination shall be final and binding.
(B) Any dispute between TXUEG and the Buyer concerning the calculation of the
Aggregate Tax Benefit for the purpose of paragraph 8 shall, in the
absence of agreement between them within one month of the party concerned
having notified the other in writing of the dispute, be referred to an
independent accountant chosen by agreement between TXUEG and the Buyer
or, failing agreement, appointed by the President for the time being of
the Institute of Chartered Accountants, at the instance of either party.
The independent accountant shall determine the disputed matter acting as
an expert and not as an arbitrator and his decision shall be final and
binding. The fees and expenses of the independent accountant and of the
President shall be borne equally between TXUEG and the Buyer, except that
the independent accountant shall have power to determine, at the request
of either of TXUEG or the Buyer, that the fees and expenses shall be
borne exclusively by TXUEG or the Buyer or in such proportions as the
independent accountant may determine and any such determination shall be
final and binding.
13 UNDERTAKING
The Buyer shall co-operate with TXUEG in order to enable TXUEG to obtain
a new contracting-out certificate in its name or the name of any member
of the TXUEG Group.
14 WARRANTIES
(A) Except pursuant to the Pension Scheme, EE has not paid, provided or
contributed towards, and EE is not under any obligation and no proposal
has been announced to pay, provide or contribute towards, any relevant
benefit, as defined in section 612, ICTA 1988, for or in respect of any
Employee or any spouse, child or dependant of any Employee.
(B) The documents identified in the Disclosure Letter comprise the documents
governing the Pension Scheme in respect of the Employees including the
written communications to the Employees describing the terms of the
Pension Scheme (other than routine benefit statements) of current effect
and also including the particulars of any enhancements in respect of any
Employee and of any current discretionary practice during the period of
EE's membership of the Guarantor's Group under which the Employee's
benefits may be enhanced.
(C) Membership data relating to Employees who are members of the Pension
Scheme has been supplied to the Purchaser and is materially correct.
(D) So far as EE Holdco is aware, there is no dispute about the benefits
payable under the Pension Scheme in respect of any Employee and so far as
EE Holdco is aware there are no circumstances which would give rise to
any such dispute.
(E) Except in relation to guaranteed minimum pensions, so far as EE Holdco is
aware, the Pension Scheme complies with all applicable laws, regulations
and Inland Revenue requirements which relate to any Employee in respect
of their membership of the Pension Scheme.
(F) The Pension Scheme is approved as an exempt approved scheme (within the
meaning of section 592 Taxes Act 1988) and is contracted out as to the
ESPS on a reference scheme basis. A contracting out certificate (within
the meaning of section 7 of the Pensions Scheme Act 1993) is in force in
respect of the Pension Scheme.
55
APPENDIX A
OPTION FORM
TO BE COMPLETED AND RETURNED TO [ ] BY [ ]
To: The trustees of the Pension Scheme (the "[ ] SCHEME")
I have read and understood the notice dated [ ], in which the [Buyer's Scheme]
(the "[ ] SCHEME") has offered to provide benefits in respect of my Pensionable
Service/Contributing Service under the Pension Scheme up to [Joining Date] and
in which the options available to me in respect of my accrued rights under the
Pension Scheme have been explained.
I have had the opportunity to take independent financial advice before
completing this form.
PLEASE SPECIFY WHICH ONE OF THE OPTIONS YOU SELECT BY TICKING THE BOX ALONGSIDE
IT AND THEN SIGNING AND COMPLETING THIS FORM
OPTION A - TRANSFER TO [BUYER'S] SCHEME
I have applied to become a member of the Buyer's Scheme
with effect on and from the Joining Date. I request the
trustees of the Pension Scheme to transfer the value of
all benefits relating to my membership of the Pension -----
Scheme which have accrued to or in respect of me under the
Pension Scheme to the trustees of the [Buyer's] Scheme to BOX
secure benefits for me as mentioned in the notice referred
to above. I understand and acknowledge that in complying -----
with this request the trustees of the Pension Scheme will
be discharged from any obligation to provide benefits to me
or any person claiming under me or in respect of my membership.
B - OTHER OPTIONS
I do not want to transfer the value of my accrued benefits to
the Buyer's Scheme. I request the Pension Scheme to send me -----
further details of the alternative options which I have.
BOX
-----
IMPORTANT - PLEASE NOTE THAT THE BENEFITS OFFERED IN OPTION A WILL BE AVAILABLE
ONLY IF THIS FORM IS RETURNED, DULY COMPLETED, BY
Signature ...................... Date ................................
Name ........................... )
) block capitals
Address ........................ ) National Insurance No. ..............
56
APPENDIX B
BACON & ▇▇▇▇▇▇▇
Actuaries and Consultants
Ivy House, ▇▇▇ ▇▇. ▇▇▇▇▇'▇ ▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇ ▇▇▇
Tel: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Fax: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇.▇▇▇▇▇-▇▇▇▇▇▇▇.▇▇▇
PRIVATE & CONFIDENTIAL
16 November 2001
▇▇. ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇▇
Parkside House Our ref:CAG/saf/0537-doc
▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇
▇▇▇▇ ▇▇▇
Dear Ian:
Project Wing (EE)
This is the Actuary's Letter referred to in Schedule 5 of the Agreement
relating to Pensions.
Yours sincerely
For Bacon & ▇▇▇▇▇▇▇
/s/C. A. ▇▇▇▇▇▇
-----------------
Mrs. C. A. ▇▇▇▇▇▇
(TXUEG's Actuary)
Countersigned
/s/▇. ▇▇▇▇▇▇▇
----------------
▇▇. ▇. ▇▇▇▇▇▇▇
(Buyer's Actuary)
Enc.
57
BACON & ▇▇▇▇▇▇▇
Actuaries and Consultants
TXU
Actuarial Methods and Assumptions for the calculation of the Transfer Amount
for Pension Scheme members as defined in Schedule 5 Pensions.
1. Actuarial Method
The past service liabilities will be calculated for the Transferring
Members in accordance with the actuarial assumptions set out in section 2
below using pensionable service to and Salary or Pensionable Salary (as
the case requires) over the year to the Completion Date, and adjusted to
the Actual Payment Date in accordance with the provisions in sections 3
and 4 below. The past service liabilities will be based on the benefit
structure applying for and in respect of each Transferring Member
immediately prior to the Completion Date.
For this purpose pensionable service includes any additional service
resulting from a previous transfer in or the accrued part of any added
years secured by additional member contributions. In the event that a
Transferring Member's Salary or Pensionable Salary represents less than a
full year, it should be grossed up to the annual equivalent.
For the avoidance of doubt the past service liabilities shall include the
accrued element of the Transferring Member's ill health pension and death
in service pensions. It shall take no account of benefits for service
after the Completion Date.
2. Actuarial Assumptions
Investment return The annualized gross redemption yield on
the FT-Actuaries 20 Year Gilt Index (at
close of business on the day before the
Completion Date), plus 1.75% pa prior to
retirement/0.75% pa after retirement,
rounded to the nearest 0.01% pa compound
Increases in prices 100 x [[(1+G)/(1+I)-1]% pa where G is the
annualized gross redemption yield on the
FT-Actuaries 20 Year Gilt Index (at close
of business on the day before the
Completion Date), and I is the arithmetic
average of the annualized gross redemption
yields on the FT-Actuaries Over 5 Year
Index-Linked Gilt Index with 0% and 5%
inflation (at close of business on the day
before the Completion Date), respectively.
The figure shall be rounded to the nearest
0.01% pa compound
Salary or Pensionable 1.0% pa (with no averaging at the
Salary increases in annualized date of exit from active
excess of increases in membership) plus an allowance for
prices promotional increases in line with the
attached table
Increases in Section 1.0% pa
148 Orders in excess of
increases in prices
Increases to pensions In line with increases in prices plus 0.2%
once in payment pa on pensions in excess of GMP's
Nil on GMP's accrued before 6 April 1988
In line with increases in prices, less
0.4% pa, on GMP's accrued after 6 April
1988
Increases to pensions In line with increases in prices on
and lump sums in deferment pensions in excess of GMP's
58
BACON & ▇▇▇▇▇▇▇
Actuaries and Consultants
Withdrawals In accordance with attached table
Age basis Age nearest birthday
Death in service and in In accordance with standard tables,
deferment adjusted as follows:
Males 75% of AM92 unrated
Females 75% of AF92 unrated
Retirement in normal Average age at retirement is assumed to be
health 60 for all members
Retirement from At the member's Normal Pension Age
deferment applying under the Rules of the Scheme,
with a 17% reduction for early payment of
pre-17 May 1990 benefits for pre-1 April
1988 male joiners under ESPS
Retirement in ill-health In accordance with attached table
(for ESPS members only)
Death after retirement In accordance with the standard table
PMA92/PFA92 (base year 2020), related up in
age as follows:
Males (normal health) + 1 year
Males (ill-health) + 9 years
Females (normal health) + 2 years
Females (ill-health) + 9 years
Widows + 2 years
Widowers + 2 years
Family Details 90% of members are assumed to be married
at retirement or death before retirement.
A man is assumed to be 2 years older than
his wife.
3. Market Value Adjustment
The liabilities assessed using the above actuarial assumptions shall be
increased to the Actual Payment Date by assuming investment at the
Completion Date in the following indices:
1. 80% in the FT-Actuaries All-Share index
2. 20% in the FT-Actuaries 5-15 Years Fixed Interest Gilt index.
The value shall be increased to the Actual Payment Date by reference to
the published total return indices reduced by 0.1% pa to allow for
investment expenses. More precisely, the total return on the portion in
each of 1 and 2 above before reduction for investment expenses will be
determined as the total return index at close of business on the last
working day before the Actual Payment Date divided by the total return
index at close business on the last working day before the Completion
Date. The market value of the liabilities at the Actual Payment Date is
then the product of a) and b) below reduced by 0.1% pa between Completion
Date and Actual Payment Date.
a) the market value of the liabilities at Completion Date
b) the sum of the ratios of the relevant total return
indices multiplied by the national investment in those
indices at the Completion Date.
59
BACON & ▇▇▇▇▇▇▇
Actuaries and Consultants
4. Transfer Amount
The Transfer Amount at the Actual Payment Date will be:
a) the value of the liabilities at the Actual Payment Date as
calculated under 3 above, plus
b) the Members' Contributions less the Retained Costs having adjusted
each net contribution between the day of receipt by the Pension
Scheme of the relevant contribution to the Actual Payment Date, by
the ratio of the total return index of the FT-Actuaries All-Share
index at close of business on the last working day before the Actual
Payment Date to the total return index of the FT-Actuaries All-Share
index at close of business on the last working day before the day of
receipt by the Pension Scheme of the relevant contribution.
c) the value, if any, at Joining Date calculated using the actuarial
assumptions in 2 above of contributions at the rate of 1% of
Salaries payable monthly in arrears from Completion Date to 31 March
2002 in respect of Transferring Members who were Members of the
Eastern Group of ESPS on 31 March 1999 and who remain as such
immediately before Joining Date and who agree to join the Buyer's
Scheme from the Joining Date. This value shall be adjusted between
Joining Date to the Actual Payment Date by the ratio of the total
return index of the FT-Actuaries All-Share Index at close of
business on the last working day before Actual Payment Date to the
total return index of the FT-Actuaries All-Share index at close of
business on the last working day before Joining Date.
60
BACON & ▇▇▇▇▇▇▇
Actuaries and Consultants
TXU
ACTUARIAL ASSUMPTIONS -- TABLE OF ASSUMED RATES OF ILL-HEALTH
RETIREMENT, WITHDRAWALS AND PROMOTIONAL SALARY INCREASES
ILL-HEALTH(1) WITHDRAWALS(1) PROMOTIONAL
SALARY SCALE
AGE MALES FEMALES MALES FEMALES MALES & FEMALES
20 0 0 7,500 15,000 1,000
21 0 0 7,500 15,000 1,070
22 0 0 7,500 15,000 1,114
23 0 0 7,620 14,678 1,224
24 0 0 7,358 15,188 1,309
25 33 0 6,420 15,345 1,400
26 40 0 5,828 15,728 1,449
27 40 0 5,228 15,833 1,499
28 47 0 4,628 15,645 1,551
29 47 0 4,238 14,948 1,604
30 58 45 3,855 13,905 1,660
31 65 60 3,473 12,555 1,702
32 73 75 3,113 11,235 1,745
33 87 90 2,783 9,960 1,789
34 95 105 2,535 9,195 1,834
35 102 120 2,310 8,490 1,880
36 117 135 2,123 7,845 1,922
37 127 150 1,943 7,290 1,965
38 143 180 1,778 6,818 2,009
39 162 210 1,665 6,270 2,054
40 180 240 1,568 5,813 2,100
41 207 270 1,478 5,415 2,129
42 233 300 1,395 5,048 2,159
43 260 360 1,313 4,688 2,189
44 287 420 1,238 4,320 2,219
45 312 480 1,163 3,968 2,250
46 345 540 1,080 3,630 2,266
47 392 600 1,005 3,308 2,282
48 432 630 923 2,993 2,298
49 497 660 833 2,773 2,314
50 590 690 750 2,498 2,330
51 710 720 0 0 2,330
52 828 750 0 0 2,330
53 968 1,050 0 0 2,330
54 1,148 1,350 0 0 2,330
55 1,347 1,650 0 0 2,330
56 1,598 1,950 0 0 2,330
57 1,877 2,250 0 0 2,330
58 2,235 2,550 0 0 2,330
59 2,672 2,850 0 0 2,330
60 3,235 3,150 0 0 2,330
61 3,925 3,450 0 0 2,330
62 4,687 3,750 0 0 2,330
63 0.00 0.00 0 0 2,330
(Footnote)
1. The figures shown are the number of ill-health retirements and withdrawals
during the year per 100,000 members at the beginning of each year.
61
SCHEDULE 6
CLAWBACK SUM
1 INTERPRETATION
1.1 For the purposes of this schedule
"CLAWBACK ACQUISITION" means each acquisition by a Purchaser of a
Clawback Property under the Option Agreement;
"CLAWBACK COMPLETION" means the actual completion each Clawback
Acquisition;
"CLAWBACK PROPERTY" means any Property which has been acquired by 24
Seven or its nominee pursuant to the provisions of clauses 2 and 3 of the
Option Agreement;
"CLAWBACK SUM" means, in respect of each Clawback Property, which is the
subject of a Disposal, the amount calculated in accordance with paragraph
2.6 of this schedule;
"CONSIDERATION" means (subject to paragraphs 2.3 and 2.4 of this
schedule) the full amount of any consideration including money or money's
worth when received;
"COSTS" means the total of:
(a) reasonable legal and surveyor's costs, stamp duty and Land
Registry fees (as applicable) on each Clawback Acquisition and
each subsequent Disposal of any part; and
(b) the reasonable marketing costs of any part of each Clawback
Property,
but deducting from that amount any income received from such Clawback
Property from Completion until date of the Disposal;
"DISPOSAL" means (subject to paragraph 2.4 of this schedule) disposal by
a Purchaser to a person other than a member of the Buyer's Group of any
interest in each Clawback Property (or any part of it) and includes
(without prejudice to the generality of the foregoing) any sale, lease
(granted at a fine or premium) or sub-lease (granted at a fine or
premium), assignment or transfer, the grant of an option or similar right
or the creation of a trust or other equitable interest in favour of a
third party or entry into an agreement to do any of the foregoing but
shall not include the disposal of any part of a Clawback Property once it
has been (or with provisions for it to be) developed by the Purchaser by
its refurbishment or by the construction by the Purchaser of any new
building or infrastructure works or by the demolition of any buildings on
the relevant part of a Clawback Property (and its disposal subsequent to
that demolition on it) which materially increases its value;
"PURCHASE PRICE" has the meaning given to it in the Option Agreement;
"PURCHASER" means the purchasing entity specified in any Call Option
Exercise Notice and shall include any person in the same Group as such
entity to whom any part of the Clawback Property has been transferred;
and
"RELEVANT PERIOD" means, in respect of each Clawback Property, the period
of five years commencing on the date referred to in clause 7.5.1.
1.2 Unless otherwise defined herein, terms and expressions used in this
schedule shall have the same meanings as set out in the Option Agreement.
2 CALCULATION OF CLAWBACK SUM
2.1 Whenever the Purchaser makes a Disposal in the Relevant Period the Buyer
shall notify EE Holdco of that fact in writing within five Business Days
of such Disposal and the notice shall include details of the Disposal
62
including the amount of the Consideration, the date when the
Consideration is payable the identity of the other party and a certified
copy of all relevant documentation relating to such Disposal.
2.2 Following the service of such a notice the Purchaser shall co-operate
with and answer all reasonable enquiries raised by EE Holdco which relate
to the Disposal which was subject to such notice.
2.3 If any Disposal is made at less than open market value then the
Consideration for the Disposal shall be deemed to be the amount which
would have been received had the transaction been at open market value
(at the date of the Disposal).
2.4 If any Purchaser ceases to be a member of the Buyer's Group at any time
during the Relevant Period applicable to any Clawback Property owned by
that Purchaser:
(a) such cessation shall constitute a Disposal for the purpose of this
schedule;
(b) each Clawback Property owned by such Purchaser shall be deemed to
be the subject of a Disposal; and
(c) the Consideration attributable to the Disposal shall be equal to
the open market value of all Clawback Properties owned by such
Purchaser (at the date of the Disposal).
2.5 The Purchaser shall co-operate with and provide all information to EE
Holdco which EE Holdco reasonably requires in order to ascertain the
Clawback Sum and shall act bona fide in all matters relating thereto.
2.6 EE Holdco and the Purchaser shall agree, on the basis of the foregoing
and not later than 14 days after the date of a Disposal (failing which
paragraph 3 shall apply), the amount (if any, such amount being the
"CLAWBACK SUM") which is equal to (x) the Consideration for the Disposal
less (y) the aggregate of the Purchase Price and Costs.
3 DISPUTES
3.1 Any dispute arising between the parties in relation to the Clawback Sum
(including, without limitation, the open market value of any Clawback
Property) may be referred by either Party to either:
(a) an Independent Valuer; or
(b) so far as any such dispute relates to matters of accounting
(including the calculation of but not the amount of the Clawback
Sum) and otherwise to matters usually and properly within the
knowledge of a chartered accountant or auditor be referred to a
chartered accountant (the "ACCOUNTANT") agreed upon by the parties
hereto but in default of agreement nominated on the application of
either EE Holdco or the Purchaser or both of them jointly by the
President of the Institute of Chartered Accountants in England and
Wales
3.2 The Independent Valuer and/or Accountant (the "ARBITRATOR") shall act as
an arbitrator in accordance with the Arbitration ▇▇▇ ▇▇▇▇ unless EE
Holdco specifies otherwise in writing in which case he shall:
(a) act as an expert; and
(b) allow the parties a reasonable opportunity of making
representations to him; and
(c) take those representations into account; and
(d) if required by either party give written reasons for his
determination.
63
3.3 The award of the Arbitrator shall be binding on the parties and the costs
of the reference to him and of his determination shall lie in his award.
64
EXECUTION PAGE
EE HOLDCO
---------
SIGNED BY )
FOR AND ON BEHALF OF ) ▇▇▇ ▇▇▇▇▇▇
EASTERN ELECTRICITY HOLDINGS LIMITED ) ..................................
Director/Duly authorised
THE GUARANTOR
-------------
SIGNED BY )
FOR AND ON BEHALF OF ) ▇▇▇ ▇▇▇▇▇▇
TXU EUROPE GROUP PLC ) ..................................
Director/Duly authorised
THE BUYER
---------
SIGNED BY )
FOR AND ON BEHALF OF ) ▇▇▇▇▇▇ ▇▇▇▇▇▇
LONDON ELECTRICITY GROUP PLC ) ..................................
Director/Duly authorised
65