EASTERN
[LOGO]
Eastern Group plc
Wherstead Park
PO Box 40
Wherstead
Ipswich
Suffolk IP92AQ
To: Barclays Bank PLC as Agent under the Guarantee and Indemnity.
Copied to: the Banks (as defined in the Guarantee and Indemnity (as defined
below)
17 July 1998
Dear Sirs
EASTERN MERCHANT PROPERTIES LIMITED ("EMPL") RENT FACTORING TRANSACTION (THE
"RFT") DATED 28 OCTOBER 1996
We refer to the Guarantee and Indemnity dated 28 October 1996 (the "Guarantee
and Indemnity") relating to the RFT, and we are requesting the consent of the
Banks and the Participants to certain changes to the terms of the Guarantee and
Indemnity.
Eastern Group plc, EMPL, Eastern Electricity plc and Eastern Generation Limited
as signatories to this letter.
(a) confirm their agreement to the terms of this letter; and
(b) make the representations and warranties referred to in paragraph 4.
Capitalised terms not otherwise defined in this letter shall where the context
so permits have the meanings given to them in the Guarantee and Indemnity. In
this letter
"EFFECTIVE DATE" means the date on which the Agent confirms to each Bank
and EMPL that
(a) the Banks and Participants have agreed to the matters referred to in
this letter (after taking into account any proposed transfers between
Banks and/or between Participants); and
(b) the condition precedent under paragraph 3 below has been satisfied.
"RELEVANT PARTICIPANT" means, in the case of each Bank, each Participant
from time to time party to a Participation Agreement with that Bank.
1. In consideration of the fees referred to in paragraph 2 below, we request
your consent to the amendments and waivers of the terms of the Guarantee
and Indemnity set out in Schedule 1 to this letter with effect on and from
the Effective Date.
2. (a) From and including the Effective Date, EMPL shall pay a waiver fee
(the "WAIVER FEE") to the Agent for the account of each Bank and its
Relevant Participants calculated in accordance with sub-paragraphs (b)
and (c) below.
(b) The Waiver Fee shall accrue from day to day from the Effective Date on
the basis of a 365 day year, and the accrued Waiver Fee shall be
payable on each Rent Day falling after the Effective Date.
(c) (i) The Waiver Fee payable on each Rent day shall be calculated
by the Agent at the rate of the Waiver Fee Percentage on the
National Principal (as at the preceding Rent Day) for the
period from (and including) the preceding Rent Day (or, if
later, the Effective Date) to (and excluding) the relevant
Rent Day on which that payment is made. The Waiver Fee
Percentage is defined under, and calculated in accordance
with, subparagraph (ii) below.
(ii) If the ratio of Total Consolidated Net Borrowings (as
defined in the Guarantee and Indemnity as amended by this
letter) to Adjusted Tangible Consolidated Net Worth (as so
defined and, subject to sub-paragraph (iii) below, each as
calculated by the Agent by reference to the accounts or
half-yearly accounts most recently delivered to the Agent
under Clause 4.1(a) and (b) of the Guarantee and Indemnity
on or prior to the Rent Day immediately preceding the Rent
Day on which the waiver fee is payable) is within a range
set out in column I below, the Waiver Fee Percentage shall
be the rate per annum set out in column II below opposite
that range:
I II
Greater than 125% 0.50 per cent
Greater than 100% but less than or 0.375 per cent
equal to 125%
100% or less 0.25 per cent
(iii) For the purposes of calculating the Waiver Fee, the ratio of
Total Consolidated Net Borrowings to Adjusted Tangible
Consolidated Net Worth shall be deemed to be greater than
100% at all times for a period of 6 months following the
Effective Date.
(iv) The Waiver Fee is exclusive of Value Added Tax or any other
tax which might be chargeable in connection with that fee.
If any Value Added Tax or other similar tax is so
chargeable, it shall (subject to receipt of a valid Value
Added Tax Invoice) be paid by EMPL at the same time as it
pays the relevant fee.
(d) Each Guarantor, jointly end severally, as principal obligor guarantees
to each Bank that EMPL, shall make each payment of the Waiver Fee when
due. Each Guarantor, jointly and severally, as principal obligor
irrevocably and unconditionally indemnifies each Bank and each
Participant against any loss or liability suffered by it if that
payment obligation guaranteed by a Guarantor is or becomes
unenforceable, invalid or illegal. The provisions of Schedule 3 shall
apply to this paragraph 2(d).
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3. The obligaions of each Bank under this letter are subject to the condition
precedent that the Agent has confirmed to the Banks that it has received
all of the documents set out in Schedule 2 to this letter in form and
substance satisfactory to it.
4. EMPL represents and warrants to each Bank in the terms set out in clauses
7(a) to (c) of the Assignment (mutatis mutandis) but as if a reference in
those clauses to the Deed was a reference to this letter. Each Guarantor
represents and warrants jointly and severally to each Bank in the Terms and
subject to the limitations set out in clauses 3.1 and 3.2 of the Guarantee
and Indemnity (mutatis mutandis) but as if a reference in those clauses to
any Transaction Document were a reference to this letter.
5. This letter is supplemental to the Guarantee and Indemnity and on and from
the Effective Date the terms of this 1etter and the terms of the Guarantee
and Indemnity shall be read and construed as one document. Except as
expressly amended or waived by this letter, the Guarantee and Indemnity and
each of the other Transaction Documents shall continue in full force and
effect.
6. Each of the Guarantors as principal obligor hereby jointly and severally
agrees irrevocably and unconditionally to indemnify the Agent and each Bank
and each of their Affiliates in full on receipt of a demand served upon
each of them in writing, on an after tax basis against a11 liability,
losses or claims which are suffered or properly incurred by it or a
Relevant Participant or any of their Affiliates (a "loss") and any costs,
charges and expenses to which it may be subject or which it may properly
incur (a "charge") as a consequence of the operation of, or the
transactions contemplated by, this letter including, without limitation,
any loss or charge on account of funds borrowed, contracted for or utilised
to fund any amount payable under any Transaction Document or Participation
Agreement and any loss or charge incurred as a result of the termination,
novation, or replacement of all or any part of its interest rate swaps or
other hedging arrangements relating to the transactions contemplated by the
Transaction Documents or Participation Agreements.
7. The provisions of Clauses 21, 23, 25, 29, 30, 31, 32, 34, 35, 36, 37, 38
and 41 of the Guarantee and Indemnity and Clause 2 of the Assignment shall
apply to this letter as if set out in full in this letter (mutatis
mutandis) but as if references in those provisions to any Transaction
Document were references to this letter.
8. EMPL undertakes to deliver the executed original of this letter and its
counterparts to the Custodian for retention in accordance with the terms of
the Custody Deed.
9. This letter and the attached consent forms may be executed in any number of
counterparts and this shall have the same effect as if all of the
signatures were on a single copy of this letter.
10. This letter is governed by English law.
If you agree to the above, please sign this letter and return a copy of it to
us.
Yours faithfully
/s/ E. J. Lean
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Eastern Group plc
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/s/ E. J. Lean
- -----------------------------------
Eastern Merchant Properties Limited
/s/ E. J. Lean
- -----------------------------------
Eastern Certification Limited
/s/ E. J. Lean
- -----------------------------------
Eastern Electricity plc
We accept the amendments and waivers set out in this letter (subject to the
terms and conditions set out in this letter) and confirm that we are authorised
to sign this letter as Agent on behalf of, and have received to requisite
approvals from, the Banks and the Participants in accordance with Clause 31.1 of
the Guarantee and Indemnity.
/s/ L. Kenworthy
- -------------------------------- AS ATTORNEY
Barclays Bank PLC as Agent
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SCHEDULE 1
The following amendments to and waivers of the provisions of the Guarantee and
Indemnity shall come into effect on the Effective Date:
(a) the following new definitions are inserted into Clause 1.1, in
alphabetical order:
(i) "ADJUSTED CONSOLIDATED TANGIBLE NET WORTH" means at any time the
aggregate of:
(a) all amounts paid up or credited as paid up on the issued
share capital of Eastern Group plc (excluding Qualifying
Preference Shares);
(b) any credit balance on profit and loss account; and
(c) any other capital and revenue reserves (including those
resulting from an upward revaluation included in the
Consolidated Management Accounts, dated 31st March, 1998);
less the aggregate of:
(d) any debit balance on profit and loss account;
(e) any amount shown in respect of goodwill (including goodwill
arising only on consolidation) or intangible assets or in
respect of minority interests;
(f) any reserves set aside for World Tax, deferred World Tax or
bad debts;
(g) any indebtedness owned by;
(i) The Energy Group PLC;
(ii) a T.U. Company; or
(iii) Texas Utilities Company or any company,
partnership or person of which a T.U. Company is a
direct or indirect Subsidiary Undertaking or any
other direct or indirect Subsidiary Undertaking of
any such company, partnership or person,
in each case, to any member of the Group; and
(h) the amount of any revaluation or reserve arising from any
upward revaluation occurring after 31st March, 1998
(and so that no amount shall be included or excluded more than
once) all as determined from the most recently published audited
consolidated and
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interim unaudited consolidated financial statements of Eastern
Group plc;";
(ii) ""CASH" means cash at hand or cash at bank, in each case to
the extent free of Encumbrances (other than Encumbrances
which secure only Borrowings) and readily remittable to the
United Kingdom, but excluding the proceeds of any
securitisation of the assets or revenues of any member of
the Group to the extent not included as Borrowings;";
(iii) ""CHANGE IN CONTROL" shall be deemed to have occurred if:
(a) any person or group of related persons (other than Texas
Utilities Company, any Subsidiary of Texas Utilities
Company, or any pension, savings or other employee benefit
plan for the benefit of employees of Texas Utilities Company
and/or any Subsidiary of Texas Utilities Company) shall have
accrued beneficial ownership of more than 30% of the
outstanding Voting Shares (within the meaning of section
13(d) or 14(d) of the Securities Exchange Act of 1934 of the
United States of America, as amended, and the applicable
rules and regulations thereunder); provided that a Change in
Control shall not be deemed to have occurred if such
acquisition has been approved, prior to the Parent
Acquisition Date and the date on which any tender offer for
Voting Shares of Texas Utilities Company was commenced, by a
majority of the Disinterested Directors of Texas Utilities
Company; or
(b) during any period of 12 consecutive months, commencing
before or after 17 July 1998, individuals who on the first
day of such period were directors of Texas Utilities Company
(together with any replacement or additional directors who
were nominated or elected by a majority of directors then in
office) cease to constitute a majority of the board of
directors of Texas Utilities Company;";
(iv) ""DISINTERESTED DIRECTOR" shall mean any member of the Board
of Directors of Texas Utilities Company who:
(a) is not affiliated, directly or indirectly, with, or
appointed by, a person or group of related persons (other
than Texas Utilities Company, any Subsidiary of Texas
Utilities Company or any pension, savings or other employee
benefit plan for the benefit of employees of Texas Utilities
Company and/or any Subsidiary of Texas Utilities Company)
acquiring the beneficial ownership of more than 30% of the
outstanding Voting Shares of Texas Utilities Company (within
the meaning of section 13(d) or 14(d) of the Securities
Exchange Act of 1934 of the United States of America, as
amended, and the applicable rules and regulations
thereunder); and
(b) either was a member of the board of directors of Texas
Utilities Company prior to the Parent Acquisition Date or
was recommended for election by a majority of the
Disinterested Directors in office prior to time Parent
Acquisition Date;";
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(v) ""LICENSEE" means Eastern Electricity plc (company number
2366906) or such other member of the Group which, at any
time, is the licensee under a PES License or Generation
License, any license under section 7 of the Gas Act 1986 or
any replacement of any such licence (or, if there is more
-than one replacement licence, the most recent such
replacement), in each --case as such licence is amended
and/or extended from time to time;";
(vi) ""PARENT ACQUISITION DATE" shall mean the date as of which a
person or group of related persons first acquires more than
30% of the outstanding Voting Share of Texas Utilities
Company (within the meaning of section 13(d) or 14(d) of the
Securities Exchange Act of 1934 of the United Stares of
America, as amended, and `clue applicable rules and
regulations thereunder);":
(vii) ""TOTAL CONSOLIDATED NET BORROWING" means, at any time, the
aggregate principal amount of all Borrowings of the Group
less Cash;";
(viii) ""T.U. COMPANY" means each of T.U. Finance (No. 1) Limited
(company number 3505836), T.U. Finance (No. 2) Limited
(company number 3514100) and T.U. Acquisitions PLC (company
number 3455523);"; and
(ix) ""VOTING SHARES" means outstanding shares of capital stock
of any class of Texas Utilities Company entitled to vote in
the election of directors, excluding shares entitled so to
vote only upon the happening of some contingency;";
(b) Clause 4 1(b) is amended by adding to the end of that clause before
the semicolon:
"and, together with such accounts and the accounts under
paragraph (a) above, a certificate signed by two directors
of Eastern Group plc setting out in reasonable detail
computations establishing compliance with Clauses 4-1(q) and
4.1(t)";
(c) existing Clause 4.1(t) is deleted and replaced with:
"procure that:
(i) the Adjusted Consolidated Tangible Net Worth is not, at any
time, less than (pound)800,000,000; and
(ii) Total Consolidated Net Borrowings do not, at any time,
exceed 150% of Adjusted Consolidated Tangible Net Worth";
(d) Clause 4.1(w) is amended to read:
"not, and shall procure that none of its Subsidiaries shall:
(i) give any guarantee, indemnity or other legally binding
assurance against loss to any person in respect of the
obligations of any Relevant Person; nor
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(ii) enter into any transaction under which (or do anything as a
result of or by which) cash or other assets are transferred
by or from it to any Relevant Person provided that this
sub-paragraph (ii) shall not prohibit:
(aa) the declaration or payment of any lawful dividends
or other distributions or the provision of loans,
deposits or other credits but excluding guarantees
or indemnities entered into in favour of or in
respect of the indebtedness of the indebtedness of
any Relevant Person; or
(bb) anything done pursuant to a transaction entered
into on terms no more onerous to Eastern Group plc
(or the relevant Subsidiary) than a transaction
entered into on an arm's length basis on normal
commercial terms;";
(e) Clause 5(d) is deleted;
(f) the words "any T.U. Company" are inserted into the first line of
Clause 17-1 (f) immediately after the word "Guarantors" and before the
words "the Landlord";
(g) the words ", the Tenant or Eastern Electricity plc (formerly Eastern
Group plc)" in Clause 17.1(p) are replaced by "or the Tenant";
(h) Clause 17.1(r) is deleted and replaced with:
"(i) T.U. Acquisitions PLC ceases to be a wholly owned Subsidiary
of T.U. Finance (No. 2) Limited; or
(ii) T.U. Finance (No. 2) Limited ceased to be a wholly owned
Subsidiary of Texas Utilities Company (other than as
permitted by paragraph (iii) below) and at least a 90% owned
direct subsidiary of T.U. Finance (No. 1) Limited; or
(iii) less than 100% (until 19th May, 1999) or 75% (until 19th
May, 2000) or 60% (thereafter) of the equity share capital
of T.U. Finance (No. 1) Limited is held by Texas Utilities
Company (directly or indirectly) at any time; or
(iv) Eastern Electricity plc (company number 2366906) or any
other Licensee ceases to be a wholly-owned Subsidiary of
Eastern Group plc; or
(v) Eastern Group plc ceases to be a direct or indirect wholly
owned Subsidiary of T.U. Acquisitions PLC or Texas Utilities
Company; or
(vi) there is a Change in Control of Texas Utilities Company";
(i) the outstanding Event of Default arising under Clause 17.1(r) as a
result of the acquisition of The Energy Group PLC by T.U. Acquisitions
PLC is permanently waived.
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SCHEDULE 2
(a) Memoranda and Articles of Association of each Guarantor and EMPL in
each case certified by the company secretary of such party to be a
true copy of the original;
(b) a legal opinion from Allen & Overy addressed to the Agent, the Banks,
the Participation Agent and the Participants;
(c) a certificate copy of an appropriate resolution of the board of
directors of each Guarantor and EMPL;
(d) payment of all fees in connection with this letter which are required
to be paid by EMPL or its Affiliates on or before the Effective Date;
(e) a certificate of a director of Eastern Group plc confirming:
(i) that no Event of Default is outstanding as at the Effective
Date (except as waived by this letter);
(ii) as at 3l March 1998:
(A) that Adjusted Consolidated Tangible Net Worth is
not less than (pound)800,000,000; and
(B) the ratio of Total Consolidated Net Borrowings to
Adjusted Consolidated Tangible Net Worth; and
(C) the ratio of Consolidated Profits Before Interest
and Tax to Consolidated Interest for the period
from 1st April, 1996 to 30th September, 1997,
together with calculations in reasonable detail;
(iii) that since 30th September, 1997 there has been no change in
the business, assets or condition of itself or any other
member of the Group having a Material Adverse Effect; and
(f) certified copies of specimen Guarantor and EMPL signatures of duly
authorised signatories for each Guarantor and EMPL.
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SCHEDULE 3
(a) The guarantee set out in paragraph 2(d) (the "Guarantee") is a
continuing guarantee and will extend to the ultimate balance of all
sums payable by EMPL under this letter, regardless of any intermediate
payment or discharge in whole or in part.
(b) (i) Where any discharge (whether in respect of the obligations
of EMPL, or any security for those obligations or otherwise)
is made in whole or in part or any -arrangement is made on
the faith of any payment, security or other disposition
which is avoided or must be restored on insolvency,
liquidation or otherwise without limitation, the liability
of the Guarantors under the Guarantee shall continue as if
the discharge or arrangement had not occurred.
(ii) Each Bank and the Agent may concede or compromise any claim
that any payment, security or other disposition is liable to
avoidance or restoration.
(c) The obligations of each Guarantor under the Guarantee will not be
affected by any act, omission, matter or thing which, but for this
provision, would reduce, release or prejudice any of their obligations
under the Guarantee or prejudice or diminish those obligations in
whole or in part, including (whether or not known to it or any Bank,
the Agent or any other person):
(i) any time or waiver granted to, or composition with, EMPL or
any other person;
(ii) the taking, variation, compromise, exchange, renewal or
release of, or refusal or neglect to perfect, take up or
enforce, any rights against, or security over assets of,
EMPL or any other person or any non-presentation or
non-observance of any formality or other requirement in
respect of any instrument or any failure to realise the full
value of any security;
(iii) any incapacity or lack of powers, authority or legal
personality of or dissolution or change in the members or
status of EMPL or any other person;
(iv) any variation (however fundamental) or replacement of this
letter or any other document or security so that references
to that document in this Guarantee shall include each
variation or replacement;
(v) any unenforceability, illegality or invalidity of any
obligation of any person under any document or security, to
the intent that each Guarantor's obligations under this
Guarantee shall remain in full force and its guarantee shall
be construed accordingly, as if there were no
unenforceability, illegality or invalidity;
(vi) any postponement, discharge, reduction, non-provability or
other similar circumstance affecting any obligation of EMPL
under this letter resulting from any insolvency, liquidation
or dissolution proceedings or from any law, regulation or
order so that each such obligation shall for the purposes of
each Guarantor's obligations under this Guarantee be
construed as if there were no such circumstance.
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