Execution Copy
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
dated as of December 6, 1998,
as amended as of January 29, 1999 and February 9, 1999,
and amended and restated as of February 23, 1999,
by and among
NEW SCOTTISH POWER PLC,
SCOTTISH POWER PLC,
NA GENERAL PARTNERSHIP
and
PACIFICORP
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to
which it is attached but is inserted for convenience only.
Page
No.
----
ARTICLE I THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.01 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.02 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.03 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.04 Governing Instrument . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.05 Directors and Officers of the Surviving Corporation. . . . . . . . . . . .3
1.06 Effects of the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.07 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
ARTICLE II CONVERSION OF SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.01 Conversion of Capital Stock. . . . . . . . . . . . . . . . . . . . . . . .4
2.02 Procedure for Election . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.03 Exchange of Certificates.. . . . . . . . . . . . . . . . . . . . . . . . .7
2.04 Withholding Rights.. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . . . . . . . . . 10
3.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . 10
3.02 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.03 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . 13
3.04 Non-Contravention; Approvals and Consents. . . . . . . . . . . . . . . . 13
3.05 SEC Reports, Financial Statements and Utility Reports. . . . . . . . . . 15
3.06 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . 15
3.07 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 16
3.08 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.09 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.10 Permits; Compliance with Laws and Orders . . . . . . . . . . . . . . . . 17
3.11 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . 18
3.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Employee Benefit Plans; ERISA. . . . . . . . . . . . . . . . . . . . . . 19
3.14 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 22
3.16 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . 25
3.17 Regulation as a Utility. . . . . . . . . . . . . . . . . . . . . . . . . 25
3.18 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.19 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.20 [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . . . . 26
3.21 Ownership of HoldCo or ScottishPower Stock . . . . . . . . . . . . . . . 26
i
3.22 Article VII of the Company's Articles of Incorporation and Sections
60.825-60.845 of the BCA Not Applicable. . . . . . . . . . . . . . . . . 26
3.23 Certain Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.24 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.25 Joint Venture Representations. . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF HOLDCO, SCOTTISHPOWER and the
partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.01 Organization and Qualification . . . . . . . . . . . . . . . . . . . . . 27
4.02 Capital Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.03 Authority Relative to this Agreement . . . . . . . . . . . . . . . . . . 30
4.04 Non-Contravention; Approvals and Consents. . . . . . . . . . . . . . . . 30
4.05 SEC Reports and Financial Statements . . . . . . . . . . . . . . . . . . 32
4.06 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . 32
4.07 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . 33
4.08 Legal Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.09 Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.10 Permits; Compliance with Laws and Orders . . . . . . . . . . . . . . . . 34
4.11 Compliance with Agreements . . . . . . . . . . . . . . . . . . . . . . . 35
4.12 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.13 ScottishPower Employee Benefit Plans . . . . . . . . . . . . . . . . . . 36
4.14 Labor Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.15 Environmental Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 38
4.16 Intellectual Property Rights . . . . . . . . . . . . . . . . . . . . . . 40
4.17 Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.18 [Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.19 Ownership of Company Common Stock. . . . . . . . . . . . . . . . . . . . 41
4.20 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.21 Year 2000. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
4.22 Joint Venture Representations. . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE V COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
5.01 Covenants of the Company . . . . . . . . . . . . . . . . . . . . . . . . 42
5.02 Covenants of HoldCo and ScottishPower. . . . . . . . . . . . . . . . . . 47
5.03 Joint Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . 52
5.04 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
5.05 Discharge of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . 52
5.06 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.07 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
5.08 Conduct of Business of Merger Sub. . . . . . . . . . . . . . . . . . . . 54
5.09 Third Party Standstill Agreements. . . . . . . . . . . . . . . . . . . . 54
5.10 Control of Other Party's Business. . . . . . . . . . . . . . . . . . . . 54
ARTICLE VI ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.01 Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . 55
6.02 Preparation of Registration Statement and Proxy Statement. . . . . . . . 55
ii
6.03 Approval of Shareholders.. . . . . . . . . . . . . . . . . . . . . . . . 56
6.04 Company Affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
6.05 Auditors' Letters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
6.06 Stock Exchange Listing; Deposit Agreement. . . . . . . . . . . . . . . . 58
6.07 Restructuring of Merger. . . . . . . . . . . . . . . . . . . . . . . . . 58
6.08 Regulatory and Other Approvals . . . . . . . . . . . . . . . . . . . . . 59
6.09 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . 59
6.10 Company Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
6.11 Directors' and Officers' Indemnification and Insurance . . . . . . . . . 61
6.12 HoldCo Governance; Additional Matters. . . . . . . . . . . . . . . . . . 61
6.13 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.14 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
6.15 Takeover Statutes. . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.16 Conveyance Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.17 Rate Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.18 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
6.19 Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE VII CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
7.01 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . 65
7.02 Conditions to Obligation of HoldCo, ScottishPower and Merger Sub to
Effect the Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
7.03 Conditions to Obligation of the Company to Effect the Merger . . . . . . 69
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . 70
8.01 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
8.02 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 72
8.03 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
8.04 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
ARTICLE IX GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 73
9.01 Non-Survival of Representations, Warranties, Covenants and Agreements. . 73
9.02 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
9.03 Entire Agreement; Incorporation of Exhibits. . . . . . . . . . . . . . . 75
9.04 [Intentionally Omitted.] . . . . . . . . . . . . . . . . . . . . . . . . 75
9.05 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . 75
9.06 No Third Party Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 76
9.07 No Assignment; Binding Effect. . . . . . . . . . . . . . . . . . . . . . 76
9.08 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.09 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.10 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
9.11 Submission to Jurisdiction; Waivers. . . . . . . . . . . . . . . . . . . 76
9.12 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . 77
9.13 Certain Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
9.14 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
9.15 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . . . . . . . . . 79
iii
SCHEDULES
SCHEDULE I Scheme Consents
SCHEDULE II Articles of Association of Holdco
EXHIBITS
EXHIBIT A Scheme of Arrangement
EXHIBIT B Allotment of Shares
EXHIBIT C Form of Affiliate Agreement
iv
GLOSSARY OF DEFINED TERMS
The following terms, when used in this Agreement, have the meanings
ascribed to them in the corresponding Sections of this Agreement listed below:
"1935 Act" -- Section 3.02(c)
"ADR Depositary" -- Section 2.01(e)
"ADR Holder Proposal -- Section 6.03(c)
"ADS Consideration" -- Section 2.01(c)(i)
"Advisory Board" -- Section 6.12(b)
"affiliate" -- Section 9.12 (a)
"Affiliate Agreement" -- Section 6.04
"Agreement" -- Preamble
"Alternative Proposal" -- Section 5.08
"Antitrust Division" -- Section 6.08
"Articles of Merger" -- Section 1.03
"BCA" -- Section 1.01
"beneficially" -- Section 9.12(b)
"business day" -- Section 9.12(c)
"Certificates" -- Section 2.03(b)
"Circular" -- Section 3.09(b)
"Closing" -- Section 1.02
"Closing Date" -- Section 1.02
"Code" -- Preamble
"Companies Act" -- Section 4.02(a)
"Company" -- Preamble
"Company Affiliates" -- Section 6.04
"Company Budget" -- Section 5.01(e)
"Company Common Stock" -- Preamble
"Company Disclosure Letter" -- Section 3.01(a)
"Company Employee Benefit Plan" -- Section 3.13(b)(i)
"Company Financial Statements" -- Section 3.05(a)
"Company Joint Venture" -- Section 3.01(b)(ii)
"Company Option" -- Section 2.01(f)
"Company Option Plan" -- Section 2.01(f)
"Company Permits" -- Section 3.10
"Company Preferred Stock" -- Section 3.02(a)
"Company SEC Reports" -- Section 3.05(a)
"Company Stock Option" -- Section 6.10(a)
"Company Stockholders' Approval" -- Section 6.03(b)
"Company Stockholders' Meeting" -- Section 6.03(b)
"Confidentiality Agreement" -- Section 6.01
"Constituent Corporations" -- Section 1.01
"Contracts" -- Section 3.04(a)
"control," "controlling," "controlled
by" and "under common control with" -- Section 9.12(a)
v
"Converted Shares" -- Section 2.01(c)(i)
"DOE" -- Section 3.05(b)
"Effective Time" -- Section 1.03
"Election Date" -- Section 2.02(a)
"Environmental Claims" -- Section 3.15(g)(i)
"Environmental Laws" -- Section 3.15(g)(ii)
"Environmental Permits" -- Section 3.15(b)
"ERISA" -- Section 3.13(b)(i)
"ERISA Affiliate" -- Section 3.13(b)(iii)
"Exchange Act" -- Section 3.04(b)
"Exchange Agent" -- Section 2.03(a)
"Exchange Fund" -- Section 2.03(a)
"FERC" -- Section 3.05(b)
"FSA" -- Section 3.09(b)
"FTA" -- Section 7.01(k)
"FTC" -- Section 6.08
"Governmental or Regulatory Authority" -- Section 3.04(a)
"group" -- Section 9.12(f)
"Hazardous Materials" -- Section 3.15(g)(iii)
"HoldCo ADRs" -- Preamble
"HoldCo ADSs" -- Preamble
"HoldCo Employee Benefit Plans -- Section 4.13(b)
"HoldCo Group" -- Section 5.02(k)
"HoldCo Ordinary Shares" Preamble
"HoldCo Share Schemes" -- Section 4.02(a)
"HoldCo Special Share" -- Schedule II
"HSR Act" -- Section 3.04(b)
"Intellectual Property" -- Section 3.16
"Joint Executive Committee" -- Section 5.03(a)
"Joint Venture" -- Section 301(b)(i)
"knowledge" -- Section 9.13(d)
"laws" -- Section 3.04(a)
"Lien" -- Section 3.02(b)
"Listing Particulars" -- Section 3.09(b)
"LSE" -- Section 2.03(e)
"material adverse effect" -- Section 9.12(e)
"Merger" -- Preamble
"Merger Consideration" -- Section 2.01(c)(i)
"Merger Ordinary Shares" -- Preamble
"Merger Sub" -- Preamble
"Merger Sub Common Stock" -- Section 2.01
"MMC" -- Section 7.01(k)
"New Facilities" -- Section 9.13(f)
"NYSE" -- Section 2.03(e)
"OFFER" -- Section 7.01(l)
"OFT" -- Section 7.01(k)
vi
"OFWAT" -- Section 7.01(l)
"Options" -- Section 3.02(a)
"orders" -- Section 3.04(a)
"Ordinary Share Consideration" -- Section 2.01(c)(i)
"Ordinary Share Election" -- Section 2.02
"Ordinary Share Election Form" -- Section 2.02
"Original Agreement" -- Preamble
"Partnership" -- Preamble
"Partnership Agreement" -- Section 4.01(a)
"Partnership Loan Note" -- Section 2.01(e)
"person" -- Section 9.13(g)
"Plan" -- Section 3.12(b)(ii)
"Policies" -- Section 4.14(b)
"Power Act" -- Section 3.05(b)
"Proxy Statement" -- Section 3.09(a)
"qualified stock options" -- Section 6.10(a)
"RCF" -- Section 9.13(h)
"Registration Statement" -- Section 4.09
"Release" -- Section 3.15(g)(iv)
"Representatives" -- Section 9.13(i)
"Review Material" -- Section 6.01
"Sales Price" -- Section 2.03(e)
"Scheme of Arrangement" -- Preamble
"Scheme Consents" -- Section 9.13(k)
"Scheme Date" -- Section 2.01(c)
"Scheme Document" -- Section 9.13(l)
"ScottishPower" -- Preamble
"ScottishPower ADRs" -- Preamble
"ScottishPower ADSs" -- Preamble
"ScottishPower Budget" -- Section 5.02(e)
"ScottishPower Disclosure Documents" -- Section 3.09(b)
"ScottishPower Disclosure Letter" -- Section 4.01(a)
"ScottishPower Employee Benefit Plans" -- Section 4.13
"ScottishPower Financial Statements" -- Section 4.05
"ScottishPower Joint Venture" -- Section 3.01(b)(iii)
"ScottishPower Ordinary Shares" -- Preamble
"ScottishPower Permits" -- Section 4.10
"ScottishPower SEC Reports" -- Section 4.05
"ScottishPower Share Schemes" -- Section 4.02(a)
"ScottishPower Shareholders' Approval" -- Section 6.03(a)
"ScottishPower Shareholders' Meeting" -- Section 6.03(a)
"ScottishPower Special Share" -- Section 4.02(a)
"SEC" -- Section 3.04(b)
"Secretary of State" -- Section 1.03
"Securities Act" -- Section 3.04(b)
"Share Transfer" -- Preamble
vii
"SOS" -- Section 7.01(k)
"Subsidiary" -- Section 9.13(j)
"Surviving Corporation" -- Section 1.01
"Surviving Corporation Common Stock" -- Section 2.01
"taxes" -- Section 3.12(g)
"Trading Day" -- Section 2.03(e)
"UK Code" -- Section 6.03(a)
viii
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of
December 6, 1998 and amended as of January 29, 1999 and February 9, 1999, and
amended and restated as of February 23, 1999 (this "AGREEMENT"), is made and
entered into by and among NEW SCOTTISH POWER PLC, a public limited company
incorporated under the laws of Scotland ("HOLDCO"), SCOTTISH POWER PLC, a
public limited company incorporated under the laws of Scotland
("SCOTTISHPOWER"), NA GENERAL PARTNERSHIP, a Nevada general partnership
indirectly wholly owned by ScottishPower (the "PARTNERSHIP"), and PACIFICORP,
an Oregon corporation (the "COMPANY"), and, with respect to SECTION 2.01
hereof only, Scottish Power NA 1 Limited, a limited liability company
incorporated under the laws of Scotland ("UKSUB1") and Scottish Power NA 2
Limited, a limited liability company incorporated under the laws of Scotland
("UKSUB2").
WHEREAS, ScottishPower, the Partnership, UKSub1, UKSub2 and the
Company entered into an Agreement and Plan of Merger dated as of December 6,
1998 and amended as of January 29, 1999 and February 9, 1999 (the "ORIGINAL
AGREEMENT");
WHEREAS, HoldCo, ScottishPower, the Partnership, UKSub1, UKSub2 and
the Company wish to amend and restate the Original Agreement in its entirety,
effective as of the date set forth in SECTION 9.03(c);
WHEREAS, the Board of Directors of ScottishPower intends to
recommend to its shareholders a proposal to introduce HoldCo as a new holding
company for the ScottishPower group pursuant to a scheme of arrangement
sanctioned by the Court of Session, Edinburgh (the "SCHEME OF ARRANGEMENT"),
substantially in the form of the draft Scheme of Arrangement attached hereto
as Exhibit A subject to such amendments as ScottishPower may reasonably deem
necessary or desirable; PROVIDED, that if such amendments would have a
material adverse effect on the benefits of the Merger for the holders of
Company Common Stock, such amendments may only be effected with the prior
written consent of the Company;
WHEREAS, pursuant to the Scheme of Arrangement, (A) all ordinary
shares of 50 pence each of ScottishPower ("SCOTTISHPOWER ORDINARY SHARES")
will be cancelled and the holders thereof will receive in place of the
ScottishPower Ordinary Shares then held by them an identical number of
ordinary shares of 50 pence each of HoldCo ("HOLDCO ORDINARY SHARES"), and
(B) all ScottishPower Ordinary Shares represented by American Depositary
Shares of ScottishPower ("SCOTTISHPOWER ADSS"), each representing four (4)
ScottishPower Ordinary Shares and evidenced by American Depositary Receipts
("SCOTTISHPOWER ADRS"), will be cancelled and the holders thereof will
receive in place of the ScottishPower ADSs then held by them an identical
number of American Depositary Shares of HoldCo ("HOLDCO ADSS"), each
representing four (4) HoldCo Ordinary Shares and evidenced by American
Depositary Receipts ("HOLDCO ADRS");
WHEREAS, after the Scheme Date (as defined in SECTION 2.01) and
prior to the Closing Date (as defined in SECTION 1.02) ScottishPower shall
transfer to HoldCo all of the outstanding shares of UKSub 1 and UKSub 2
("SHARE TRANSFER");
WHEREAS, the Boards of Directors of HoldCo, ScottishPower and the
Company and the partners of the Partnership, have each determined that it is
advisable and in the best
interests of their respective stockholders and partners, as the case may be,
to consummate, and have approved, the business combination transaction
provided for herein in which Merger Sub (as defined below) would merge with
and into the Company and the Company would become an indirect, wholly-owned
subsidiary of HoldCo (the "MERGER") pursuant to the terms of this Agreement,
whereby each issued and outstanding share of common stock of the Company (the
"COMPANY COMMON STOCK"), other than shares owned directly or indirectly by
HoldCo, ScottishPower, the Partnership, Merger Sub or the Company, will be
converted into the right to receive either (i) HoldCo ADSs evidenced by
HoldCo ADRs or (ii) HoldCo Ordinary Shares (the "MERGER ORDINARY SHARES");
WHEREAS, immediately prior to the Closing Date (as defined in
SECTION 1.02), an Oregon corporation wholly-owned by the Partnership ("MERGER
SUB") will be formed for the purpose of effectuating the Merger;
WHEREAS, the respective Boards of Directors of HoldCo,
ScottishPower and the Company, and the partners of the Partnership, have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective shareholders and stockholders, each of HoldCo
and ScottishPower has approved this Agreement and the Merger, UKSub 1 and
UKSub 2 in their capacity as general partners of the Partnership and as
parties to SECTION 2.01 have approved this Agreement and the Merger, and the
Partnership has agreed that, immediately following the formation of Merger
Sub, it will approve this Agreement and the Merger as the sole stockholder of
Merger Sub;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, HoldCo, ScottishPower, the Partnership and the Company
desire to make certain representations, warranties and agreements in
connection with the Merger and also to prescribe various conditions to the
Merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 THE MERGER. Upon the terms and subject to the conditions of
this Agreement, at the Effective Time (as defined in SECTION 1.03), Merger
Sub shall be merged with and into the Company in accordance with the Business
Corporation Act of the State of Oregon (the "BCA"). At the Effective Time,
the separate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"). Merger Sub and the Company are sometimes referred to herein
as the "CONSTITUENT CORPORATIONS". As a result of the Merger, the
outstanding shares of capital stock of
2
the Constituent Corporations shall be converted and cancelled in the manner
provided in Article II.
1.02 CLOSING. Unless this Agreement shall have been terminated and
the transactions herein contemplated shall have been abandoned pursuant to
SECTION 8.01, and subject to the satisfaction or waiver (where applicable) of
the conditions set forth in ARTICLE VII, the consummation of the Merger (the
"CLOSING") will take place at the offices of Milbank, Tweed, Hadley & McCloy,
1 Chase Manhattan Plaza, New York, New York 10005, at 10:00 a.m., local
time, on the fifth business day following satisfaction or waiver (where
applicable) of the conditions set forth in ARTICLE VII, unless another date,
time or place is agreed to in writing by the parties hereto (the "CLOSING
DATE"). At the Closing there shall be delivered to HoldCo, ScottishPower,
the Partnership, Merger Sub and the Company the certificates and other
documents and instruments required to be delivered under ARTICLE VII.
1.03 EFFECTIVE TIME. At the Closing, the parties shall cause to be
duly prepared and executed by the Company as the Surviving Corporation and
Merger Sub articles of merger (the "ARTICLES OF MERGER") for filing on, or as
soon as practicable after, the Closing Date with the Secretary of State of
the State of Oregon (the "SECRETARY OF STATE"), as provided in Section 60.494
of the BCA. The Merger shall become effective at the time of the filing of
the Articles of Merger with the Secretary of State (such date and time being
referred to herein as the "EFFECTIVE TIME").
1.04 GOVERNING INSTRUMENT. At the Effective Time, (i) the Articles
of Incorporation of the Company as in effect immediately prior to the
Effective Time shall be the Articles of Incorporation of the Surviving
Corporation until thereafter amended as provided by law and such Articles of
Incorporation, and (ii) the Bylaws of the Company as in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law, the Articles of Incorporation of
the Surviving Corporation and such Bylaws.
1.05 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
individuals listed on SCHEDULE I shall, from and after the Effective Time, be
the directors and executive officers, respectively, of the Company as the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Articles of Incorporation and
Bylaws.
1.06 EFFECTS OF THE MERGER. Subject to the foregoing, the effects
of the Merger shall be as provided in the applicable provisions of the BCA.
1.07 FURTHER ASSURANCES. Each party hereto will, either prior to
or after the Effective Time, execute such further documents, instruments,
deeds, bills of sale, assignments and assurances and take such further
actions as may reasonably be requested by one or more of the other parties
hereto to consummate the Merger, to vest the Surviving Corporation with full
title to all assets, properties, privileges, rights, approvals, immunities
and franchises of either of the Constituent Corporations or to effect the
other purposes of this Agreement.
3
ARTICLE II
CONVERSION OF SHARES
2.01 CONVERSION OF CAPITAL STOCK. At the Effective Time, by virtue
of the Merger and, with respect to clauses (a)-(c), (f) and (g) hereof,
without any action on the part of the holder thereof:
(a) CAPITAL STOCK OF MERGER SUB. Each issued and outstanding
share of the common stock of Merger Sub ("MERGER SUB COMMON STOCK")
outstanding immediately prior to the Effective Time shall be cancelled and
the Surviving Corporation shall issue to the Partnership at the Effective
Time such number of shares of common stock as is equal to the number of
shares of Merger Sub Common Stock, with the same rights, powers and
privileges as the Merger Sub Common Stock, and shall constitute the only
outstanding shares of common stock of the Surviving Corporation ("SURVIVING
CORPORATION COMMON STOCK").
(b) CANCELLATION OF TREASURY STOCK AND STOCK OWNED BY HOLDCO,
SCOTTISHPOWER AND SUBSIDIARIES. All shares of Company Common Stock that are
owned by the Company as treasury stock and any shares of Company Common Stock
owned by HoldCo, ScottishPower, the Partnership, Merger Sub or any other
wholly-owned Subsidiary (as defined in SECTION 9.12) of HoldCo or
ScottishPower, shall be canceled and retired and shall cease to exist and no
stock of HoldCo or other consideration shall be delivered in exchange
therefor.
(c) CONVERSION OF COMPANY COMMON STOCK. (i) Each issued and
outstanding share of Company Common Stock (other than shares to be cancelled
in accordance with SECTION 2.01(b)), shall be converted into the right to
receive (A) .58 HoldCo ADSs (the "ADS CONSIDERATION"), or (B) if a properly
completed Ordinary Share Election Form (as defined in SECTION 2.02) shall
have been submitted to the Exchange Agent (as defined in SECTION 2.02) on a
timely basis with respect to such share of Company Common Stock, 2.32 fully
paid and nonassessable Merger Ordinary Shares (the "ORDINARY SHARE
CONSIDERATION"; the Ordinary Share Consideration and the ADS Consideration
are each sometimes referred to herein as the "MERGER CONSIDERATION"). All
shares of Company Common Stock to be converted into shares of HoldCo ADSs or
Merger Ordinary Shares pursuant to this SECTION 2.01(c) are hereinafter
referred to as "CONVERTED SHARES."
(ii) If, (A) prior to the time at which the Scheme of Arrangement
becomes effective (the "SCHEME DATE"), ScottishPower shall pay a dividend in,
subdivide, consolidate or, except pursuant to the Scheme of Arrangement,
issue by capitalization of its reserves, any ScottishPower Ordinary Shares or
(B) following the Scheme Date and prior to the Effective Time, HoldCo shall
pay a dividend in, subdivide, consolidate or issue by capitalization of its
reserves, any HoldCo Ordinary Shares, as applicable, the Merger Consideration
shall be multiplied by a fraction, the numerator of which shall be the number
of ScottishPower Ordinary Shares or HoldCo Ordinary Shares, as applicable,
outstanding immediately after, and the denominator of which shall be the
number of such shares outstanding immediately before, the occurrence of such
event, and the resulting product shall from and after the date of such event
be the Merger Consideration subject to further adjustment in accordance with
this sentence.
4
(iii) All shares of Company Common Stock converted in
accordance with paragraph (i) of this SECTION 2.01(c) shall no longer be
outstanding and shall, as part of the consideration for the allotment and
issue by HoldCo referred to in SECTION 2.01(e) below, automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect thereto, except the right to receive the Merger Consideration and any
cash in lieu of fractional HoldCo ADSs or Merger Ordinary Shares (determined
in accordance with SECTION 2.03(e)), upon the surrender of such certificate
in accordance with SECTION 2.03, without interest.
(d) UKSub 1 shall continue to be the owner of a 90% general
partnership interest in the Partnership, and UKSub 2 shall continue to be the
owner of a 10% general partnership interest in the Partnership.
(e) As consideration for the acquisition by the Partnership of the
Surviving Corporation Common Stock in accordance with SECTION 2.01(a): (i)
the Partnership agrees to issue a loan note to HoldCo in the form and in an
amount to be mutually agreed upon by HoldCo and the Partnership (the
"PARTNERSHIP LOAN NOTE"), (ii) UKSub 1 agrees to allot and issue to HoldCo
fully paid ordinary shares of L1 each and (iii) UKSub 2 agrees to allot and
issue to HoldCo fully paid ordinary shares of L1 each. In consideration of
the other steps referred to in this SECTION 2.01 (including, to the extent
set out in column A of EXHIBIT B attached hereto, the issue of the
Partnership Loan Note by the Partnership), HoldCo shall allot and issue (i)
the number of HoldCo Ordinary Shares represented by HoldCo ADSs to be issued
in the Merger to HoldCo's United States Depositary (the "ADR DEPOSITARY") on
behalf of the holders of Company Common Stock entitled thereto for the
purposes of giving effect to the conversion and exchange referred to in this
Article II, and (ii) the number of Merger Ordinary Shares to be issued in the
Merger. In consideration of the other steps referred to in this SECTION 2.01
(including, to the extent set out in column B of EXHIBIT B, the issues of
ordinary shares by UKSub 1 and UKSub 2 referred to above), HoldCo shall allot
and issue (i) the number of HoldCo Ordinary Shares represented by HoldCo ADSs
to be issued in the Merger to the ADR Depositary on behalf of the holders of
Company Common Stock entitled thereto for the purposes of giving effect to
the conversion and exchange referred to in this Article II, and (ii) the
number of Merger Ordinary Shares to be issued in the Merger.
(f) Subject to the terms and conditions of the Company's Stock
Incentive Plan (the "COMPANY OPTION PLAN") and the stock option agreements
executed pursuant thereto, each option to purchase Company Common Stock
granted thereunder that is outstanding at the Effective Time (a "COMPANY
OPTION") shall be converted into an option to acquire, on the same terms and
conditions as were applicable under the Company Option Plan at the Effective
Time, a number of (i) HoldCo ADSs equal to the ADS Consideration, or (ii)
Merger Ordinary Shares equal to the Ordinary Share Consideration, in each
case multiplied by the number of shares of Company Common Stock subject to
such option immediately prior to the Effective Time, on the basis described
in SECTION 6.10. The Company as the Surviving Corporation and HoldCo shall
take all action necessary to ensure that HoldCo has control of the operation
of the Company Option Plan and the Company Restricted Stock Plans.
5
(g) Subject to SECTION 5.01 (c)(iv)(C), the Company Preferred
Stock (as defined below) shall not be affected by the Merger and shall
continue to have the same rights and preferences as were in effect prior to
consummation of the Merger.
2.02 PROCEDURE FOR ELECTION. At such time as shall be sufficient
to permit the holders of Company Common Stock to exercise their right to make
an election pursuant to this SECTION 2.02, HoldCo will make available to all
holders of Company Common Stock of record a letter of transmittal and
election form and other appropriate materials (collectively, the "ORDINARY
SHARE ELECTION FORM") providing for such holder to elect to receive the
Ordinary Share Consideration with respect to all or any portion of such
holder's shares of Company Common Stock ("ORDINARY SHARE ELECTION"). As of
the Election Date (as hereinafter defined), any share of Company Common Stock
with respect to which there shall not have been effected such election by
submission to the Exchange Agent (as defined in SECTION 2.03) of an
effective, properly completed Ordinary Share Election Form shall be converted
in the Merger into the right to receive the ADS Consideration.
(a) Any election to receive the Ordinary Share Consideration shall
have been validly made only if the Exchange Agent shall have received by 5:00
p.m., New York City time, on or prior to the Election Date, an Ordinary Share
Election Form properly completed and executed (with the signature or
signatures thereon guaranteed if required by the Ordinary Share Election
Form) by such holder of shares of Company Common Stock. As used herein,
"ELECTION DATE" means a date announced by HoldCo, in a news release delivered
to the Dow Jones News Service, as the last day on which an Ordinary Share
Election Form will be accepted; PROVIDED, HOWEVER, that such date shall be a
business day no earlier than five (5) business days prior to the date on
which the Effective Time occurs and shall be at least five (5), and not more
than 20, business days following the date of such news release; PROVIDED
FURTHER, that, subsequent to such announcement, HoldCo shall have the right
to change such Election Date to a later date so long as such later date is
(i) at least five (5) business days following the date of notice of such
change and (ii) not later than the date on which the Effective Time occurs.
HoldCo shall have the right to make reasonable determinations and to
establish reasonable procedures (not inconsistent with the terms of this
Agreement) in guiding the Exchange Agent in its determination as to the
validity of Ordinary Share Election Forms and of any revision, revocation or
withdrawal thereof.
(b) Two or more holders of shares of Company Common Stock who are
determined to constructively own such shares owned by each other by virtue of
Section 318(a) of the Code and who so certify to HoldCo's reasonable
satisfaction, and any single holder of shares of Company Common Stock who
holds such shares in two or more different names and who so certifies to
HoldCo's reasonable satisfaction, may submit a joint Ordinary Share Election
Form covering the aggregate shares of Company Common Stock owned by all such
holders or by such single holder, as the case may be. For all purposes of
this Agreement, each such group of holders which, and each such single holder
who, submits a joint Ordinary Share Election Form shall be treated as a
single holder of shares of Company Common Stock.
(c) Record holders of shares of Company Common Stock who are
nominees only may submit a separate Ordinary Share Election Form for each
beneficial owner for whom such record holder is a nominee; PROVIDED, HOWEVER,
that, at the request of HoldCo, such record
6
holder shall certify to the reasonable satisfaction of HoldCo that such
record holder holds such shares as nominee for the beneficial owner thereof.
For purposes of this Agreement, each beneficial owner for which an Ordinary
Share Election Form is submitted will be treated as a separate holder of
shares of Company Common Stock subject, however, to SECTION 2.02(b).
(d) Any holder of shares of Company Common Stock may at any time
prior to 5:00 p.m. New York City time, on the Election Date revoke such
holder's election by written notice to the Exchange Agent received at any
time prior to 5:00 p.m., New York City time, on the Election Date.
2.03 EXCHANGE OF CERTIFICATES. (a) EXCHANGE AGENT. Promptly
following the Effective Time, (i) HoldCo shall issue to and deposit with the
ADR Depositary, for the benefit of the holders of shares of Company Common
Stock converted into the ADS Consideration in accordance with Section
2.01(c), HoldCo Ordinary Shares in an amount sufficient to permit the ADR
Depositary to issue HoldCo ADRs representing the number of HoldCo ADSs
issuable pursuant to Section 2.01(c) and (ii) HoldCo shall, for the benefit
of the holders of the shares of Company Common Stock converted into Merger
Ordinary Shares in the Merger, make available to the Surviving Corporation
for deposit with a bank or trust company designated before the Closing Date
by HoldCo and reasonably acceptable to the Company (the "EXCHANGE AGENT"),
(A) certificates representing the number of duly authorized whole Merger
Ordinary Shares issuable in accordance with SECTION 2.01(c), and (B) an
amount of cash equal to the aggregate amount payable in lieu of fractional
HoldCo ADSs and Merger Ordinary Shares in accordance with SECTION 2.03(e)
(such cash, certificates representing Merger Ordinary Shares and HoldCo ADRs
representing HoldCo ADSs, together with any dividends or distributions with
respect thereto being hereinafter referred to as the "EXCHANGE FUND"), to be
held for the benefit of and distributed to the holders of Converted Shares in
accordance with this Section. The Exchange Agent shall agree to hold such
Merger Ordinary Shares and funds for delivery as contemplated by this Section
and upon such additional terms as may be agreed upon by the Exchange Agent,
the Company and HoldCo. HoldCo shall cause the ADR Depositary to issue
through and upon the instructions of the Exchange Agent, for the benefit of
the holders of shares of the Company Common Stock converted into the ADS
Consideration in accordance with SECTION 2.01(c), HoldCo ADRs representing
the number of HoldCo ADSs issuable pursuant to SECTION 2.01(c). Neither
HoldCo, ScottishPower, their respective affiliates nor holders of Converted
Shares shall be responsible for any stamp duty reserve tax payable in
connection with the ADS Consideration. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by the Surviving Corporation
on a daily basis. Any interest and other income resulting from such
investments shall promptly be paid to the Surviving Corporation.
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable after
the Effective Time, the Surviving Corporation shall cause the Exchange Agent
to mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (the "CERTIFICATES") whose shares are converted pursuant
to this ARTICLE II into the right to receive HoldCo ADSs or Merger Ordinary
Shares (i) a letter of transmittal (which shall specify that delivery shall
be effected, and risk of loss and title to the Certificates shall pass, only
upon delivery of the Certificates to the Exchange Agent and shall be in such
form and have such other provisions as the Surviving Corporation or
7
HoldCo may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
HoldCo ADRs which represent HoldCo ADSs, and Merger Ordinary Shares and cash
in lieu of fractional HoldCo ADSs or Merger Ordinary Shares. Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal duly executed and completed in accordance with its
terms, the holder of such Certificate shall be entitled to receive in
exchange therefor (i) one or more HoldCo ADRs representing, in the aggregate,
that whole number of HoldCo ADSs and/or a certificate or certificates
representing that whole number of Merger Ordinary Shares elected to be
received in accordance with SECTION 2.02, (ii) the amount of dividends or
other distributions, if any, with a record date on or after the Effective
Time which theretofore became payable with respect to such HoldCo ADSs and
Merger Ordinary Shares, and (iii) the cash amount payable in lieu of
fractional HoldCo ADSs and Merger Ordinary Shares in accordance with SECTION
2.03(e), in each case which such holder has the right to receive pursuant to
the provisions of this ARTICLE II, and the Certificate so surrendered shall
forthwith be canceled. In no event shall the holder of any Certificate be
entitled to receive interest on any funds to be received in the Merger. In
the event of a transfer of ownership of Company Common Stock which is not
registered in the transfer records of the Company, one or more HoldCo ADRs
representing, in the aggregate, that whole number of HoldCo ADSs and/or a
certificate or certificates representing that whole number of Merger Ordinary
Shares elected to be received in accordance with SECTION 2.02, plus the cash
amount payable in lieu of fractional HoldCo ADSs and Merger Ordinary Shares
in accordance with SECTION 2.03(e), may be issued to a transferee if the
Certificate representing such Company Common Stock is presented to the
Exchange Agent accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this SECTION 2.03(b), each
Certificate shall be deemed at any time after the Effective Time for all
corporate purposes of HoldCo, except as limited by SECTION 2.03(c) below and
subject to applicable law, to represent ownership of the whole number of
HoldCo ADSs and/or Merger Ordinary Shares into which the number of shares of
Company Common Stock shown thereon have been converted as contemplated by
this ARTICLE II. Notwithstanding the foregoing, Certificates representing
Company Common Stock surrendered for exchange by any person constituting an
"AFFILIATE" of the Company for purposes of SECTION 6.04 shall not be
exchanged until HoldCo has received an Affiliate Agreement (as defined in
SECTION 6.04) as provided in SECTION 6.04.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared, made or paid after the Effective
Time with respect to HoldCo Ordinary Shares with a record date on or after
the Effective Time shall be paid to the holder of any unsurrendered
Certificate with respect to the HoldCo ADSs and Merger Ordinary Shares
represented thereby and no cash payment in lieu of fractional HoldCo ADSs and
Merger Ordinary Shares shall be paid to any such holder pursuant to SECTION
2.03(e) until the holder of record of such Certificate shall surrender such
Certificate in accordance with this Section. Subject to the effect of
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing the HoldCo ADRs
which represent HoldCo ADSs and Merger Ordinary Shares issued in exchange
therefor, without interest, (i) at the time of such surrender, the amount of
dividends or other distributions, if any, with a record date on or after the
Effective Time which theretofore became payable, but which were not paid by
reason of the immediately preceding sentence, with respect to such HoldCo
ADSs and Merger
8
Ordinary Shares and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date on or after the Effective
Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such HoldCo ADSs and Merger Ordinary Shares.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All
HoldCo ADSs and Merger Ordinary Shares issued upon the surrender for exchange
of Certificates in accordance with the terms hereof (including any cash paid
pursuant to SECTION 2.03(e)) shall be deemed to have been issued at the
Effective Time in full satisfaction of all rights pertaining to the Converted
Shares represented thereby, subject, however, to the Surviving Corporation's
obligation to pay any dividends which may have been declared by the Company
on the shares of Company Common Stock in accordance with the terms of this
Agreement and which remained unpaid at the Effective Time. From and after
the Effective Time, the stock transfer books of the Company shall be closed
and there shall be no further registration of transfers thereon of the shares
of Company Common Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to
the Surviving Corporation for any reason, they shall be canceled and
exchanged as provided in this Section.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing
fractional HoldCo ADSs or Merger Ordinary Shares will be issued in the Merger
upon the surrender for exchange of Certificates, and such fractional HoldCo
ADS or Merger Ordinary Share interests will not entitle the owner thereof to
vote or to any rights of a holder of HoldCo ADSs or Merger Ordinary Shares.
In lieu of any such fractional HoldCo ADS or Merger Ordinary Share, each
holder of Certificates who would otherwise have been entitled to a fraction
of HoldCo ADS or Merger Ordinary Share in exchange for such Certificates
pursuant to this Section shall receive from the Exchange Agent, as
applicable, (i) a cash payment in lieu of such fractional HoldCo ADS
determined by multiplying (A) the Sales Price (as defined below) of a HoldCo
ADS on the last Trading Day (as defined below) immediately preceding the
Closing Date by (B) the fractional HoldCo ADS interest to which such holder
would otherwise be entitled, and/or (ii) a cash payment in lieu of such
fractional Merger Ordinary Share determined by multiplying (A) the Sales
Price of a HoldCo ADS Ordinary Share on the last Trading Day immediately
preceding the Closing Date by (B) the fractional Merger Ordinary Share
interest to which such holder would otherwise be entitled. The term "SALES
PRICE" shall mean, on any Trading Day, with respect to HoldCo ADSs, the
closing sales price of HoldCo ADSs reported on the New York Stock Exchange,
Inc. ("NYSE") Composite Tape on such day and, with respect to Merger Ordinary
Shares, the closing middle market quotation of a HoldCo Ordinary Share as
reported in the Daily Official List of the London Stock Exchange ("LSE") for
such date. The term "TRADING DAY" shall mean any day on which securities are
traded, with respect to HoldCo ADSs, on the NYSE, and with respect to HoldCo
Ordinary Shares, on the LSE.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the stockholders of the Company for one
(1) year after the Effective Time shall be delivered to HoldCo, upon demand,
and any holders of Certificates who have not theretofore complied with this
Article II shall thereafter look only to HoldCo (subject to abandoned
property, escheat and other similar laws) as general creditors for payment of
their claim for HoldCo ADSs, Merger Ordinary Shares, any cash in lieu of
fractional HoldCo ADSs
9
and Merger Ordinary Shares and any dividends or distributions with respect to
HoldCo ADSs and Merger Ordinary Shares. Neither HoldCo, ScottishPower nor the
Surviving Corporation shall be liable to any holder of any Certificate for
HoldCo ADSs or Merger Ordinary Shares (or dividends or distributions with
respect to either), or cash payable in respect of fractional HoldCo ADSs or
Merger Ordinary Shares, delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or destroyed and, if
required by HoldCo, the posting by such person of a bond in such reasonable
amount as HoldCo may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed Certificate the applicable
Merger Consideration with respect to the shares of Company Common Stock
formerly represented thereby, any cash in lieu of fractional HoldCo ADSs or
Merger Ordinary Shares, and unpaid dividends and distributions in respect of
or on HoldCo ADSs or Merger Ordinary Shares deliverable in respect thereof,
pursuant to this Agreement.
2.04 WITHHOLDING RIGHTS. Each of the Surviving Corporation and
HoldCo shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision
of state, local or foreign tax law, including the tax laws of the United
Kingdom. To the extent that amounts are so withheld by the Surviving
Corporation or HoldCo, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder
of the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or HoldCo, as the case may
be.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to HoldCo, ScottishPower, the
Partnership and Merger Sub, as of December 6, 1998 (except for the
representations and warranties contained in SECTIONS 3.03 AND 3.04, which are
made as of the date hereof), as follows:
3.01 ORGANIZATION AND QUALIFICATION. (a) Each of the Company and
its Subsidiaries is duly organized, validly existing and in good standing
(with respect to jurisdictions which recognize the concept of good standing)
under the laws of its jurisdiction of organization and has full corporate or
partnership, as the case may be, power and authority to conduct its business
as and to the extent now conducted and to own, use and lease its assets and
properties, except for such failures to be so organized, existing and in good
standing (with respect to jurisdictions which recognize the concept of good
standing) or to have such power and authority which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect (as defined in SECTION 9.12) on the Company and its
Subsidiaries
10
taken as a whole. Each of the Company and its Subsidiaries is duly
qualified, licensed or admitted to do business and is in good standing (with
respect to jurisdictions which recognize the concept of good standing) in
each jurisdiction in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary, except for such failures to
be so qualified, licensed or admitted and in good standing (with respect to
jurisdictions that recognize the concept of good standing) which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole. SECTION 3.01 of the letter dated December 6,
1998 and delivered to ScottishPower, the Partnership and Merger Sub by the
Company on such date (the "COMPANY DISCLOSURE LETTER") sets forth (i) the
name and jurisdiction of organization of each Subsidiary of the Company and
(x) with respect to Subsidiaries that are corporations, (a) such Subsidiary's
authorized capital stock, (b) the number of issued and outstanding shares of
such Subsidiary's capital stock and (c) the record owners of such
Subsidiary's shares and, (y) with respect to Subsidiaries that are
partnerships, the names and ownership interests of the partners thereof. The
Company has previously delivered to ScottishPower correct and complete copies
of the certificate or articles of incorporation and bylaws (or other
comparable charter documents) of the Company and its Subsidiaries.
(b) SECTION 3.01 of the Company Disclosure Letter sets forth a
description as of December 6, 1998, of all Company Joint Ventures, including
(i) the name of each such entity and the Company's interest therein, and (ii)
a brief description of the principal line or lines of business conducted by
each such entity. For purposes of this Agreement:
(i) "JOINT VENTURE" of a person or entity shall mean any
corporation or other entity (including partnerships and other business
associations) that is not a Subsidiary of such person or entity, in which
such person or one or more of its Subsidiaries owns directly or indirectly
an equity interest, other than equity interests which are less than 5% of
each class of the outstanding voting securities or equity interests of any
such entity;
(ii) "COMPANY JOINT VENTURE" shall mean any Joint Venture of the
Company or any of its Subsidiaries; and
(iii) "SCOTTISH POWER JOINT VENTURE" shall mean any Joint Venture
of ScottishPower, HoldCo or any of their respective Subsidiaries.
(c) Except for interests in the Subsidiaries of the Company, the
Company Joint Ventures and as disclosed in the Company SEC Reports (as
defined in SECTION 3.05) filed prior to December 6, 1998 or SECTION 3.01 of
the Company Disclosure Letter, the Company does not directly or indirectly
own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any
material corporation, partnership, limited liability company, joint venture
or other business association or entity (other than non-controlling
investments in the ordinary course of business and corporate partnering,
development, cooperative marketing and similar undertakings and arrangements
entered into in the ordinary course of business).
11
3.02 CAPITAL STOCK. (a) The authorized capital stock of the
Company consists of:
(i) 750 million shares of Company Common Stock, of which
297,335,056 shares were issued and outstanding as of November 30, 1998, and
(ii) 126,533 shares of 5% preferred stock, of which 126,533 were
issued and outstanding as of November 30, 1998, 3.5 million shares of
serial preferred stock, of which 288,499 were issued and outstanding as of
November 30, 1998 and of which 2,065 shares were designated the 4.52%
Series, 18,060 shares were designated the 7.00% Series, 5,932 shares were
designated the 6.00% Series, 42,000 were designated the 5.00% Series,
65,960 were designated the 5.40% Series, 69,890 were designated the 4.72%
Series, and 84,592 were designated the 4.56% Series, respectively; and 16
million shares of no par serial preferred stock, of which 2,744,438 were
issued and outstanding as of November 30, 1998 and of which 381,220 shares
were designated the $1.28 Series, 420,116 shares were designated the $1.18
Series, 193,102 shares were designated the $1.16 Series, 1,000,000 shares
were designated the $7.70 Series, and 750,000 shares were designated the
$7.48 Series, respectively (collectively, the "COMPANY PREFERRED STOCK").
As of November 30, 1998, 28,817,971 shares of Company Common Stock
were reserved or held for issuance under the PacifiCorp Stock Incentive Plan,
the PacifiCorp Long Term Incentive Plan, the PacifiCorp K-Plus Employee
Savings and Stock Ownership Plan and the PacifiCorp Dividend Reinvestment and
Stock Purchase Plan. All of the issued and outstanding shares of Company
Common Stock are, and all shares reserved for issuance will be, upon issuance
in accordance with the terms specified in the instruments or agreements
pursuant to which they are issuable, duly authorized, validly issued, fully
paid and nonassessable. Except pursuant to this Agreement and except as
described in SECTION 3.02 of the Company Disclosure Letter, as of December 6,
1998 there were no outstanding subscriptions, options, warrants, rights
(including stock appreciation rights), preemptive rights or other contracts,
commitments, understandings or arrangements, including any right of
conversion or exchange under any outstanding security, instrument or
agreement (together, "OPTIONS"), obligating the Company or any of its
Subsidiaries to issue or sell any shares of capital stock of the Company or
to grant, extend or enter into any Option with respect thereto.
(b) Except as disclosed in the Company SEC Reports filed prior to
December 6, 1998 or SECTION 3.02 of the Company Disclosure Letter, all of the
outstanding shares of capital stock of each Subsidiary of the Company are
duly authorized, validly issued, fully paid and nonassessable and are owned,
beneficially and of record, by the Company or a Subsidiary wholly owned,
directly or indirectly, by the Company, free and clear of any liens, claims,
mortgages, encumbrances, pledges, security interests, equities and charges of
any kind (each a "LIEN"), other than Liens or failures to so own which are
immaterial. Each outstanding share of Company Preferred Stock, other than
shares of the $1.28 Series, $1.18 Series and $1.16 Series of no par serial
preferred stock, is entitled to one vote per share, voting together with the
holders of Company Common Stock as a single class, on all matters generally
submitted to the stockholders of the Company for a vote. Except as disclosed
in the Company SEC Reports filed prior to December 6, 1998 or SECTION 3.02 of
the Company Disclosure Letter, there are no (i) outstanding
12
Options obligating the Company or any of its Subsidiaries to issue or sell
any shares of capital stock of any Subsidiary of the Company or to grant,
extend or enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any
person other than the Company or a Subsidiary wholly owned, directly or
indirectly, by the Company with respect to the voting of or the right to
participate in dividends or other earnings on any capital stock of any
Subsidiary of the Company.
(c) None of the Subsidiaries of the Company or the Company Joint
Ventures is a "PUBLIC UTILITY COMPANY," a "HOLDING COMPANY," a "SUBSIDIARY
COMPANY" or an "AFFILIATE" of any public utility company within the meaning
of SECTION 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility
Holding Company Act of 1935, as amended (the "1935 ACT"), respectively.
(d) Except as disclosed in the Company SEC Reports filed prior to
December 6, 1998 or SECTION 3.02 of the Company Disclosure Letter, there are
no outstanding contractual obligations of the Company or any Subsidiary of
the Company to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or any material capital stock of any Subsidiary of the Company
or to provide any material amount of funds to, or make any material
investment (in the form of a loan, capital contribution or otherwise) in, any
Subsidiary of the Company or any other person.
3.03 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has full
corporate power and authority to enter into this Agreement, and, subject to
obtaining the Company Stockholders' Approval (as defined in SECTION 6.03
(b)), to perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this
Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Company, the Board of Directors of the Company has
recommended approval of this Agreement by the stockholders of the Company and
directed that this Agreement be submitted to the stockholders of the Company
for their consideration, and no other corporate proceedings on the part of
the Company or its stockholders are necessary to authorize the execution,
delivery and performance of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby, other
than obtaining the Company Stockholders' Approval. This Agreement has been
duly and validly executed and delivered by the Company and constitutes a
legal, valid and binding obligation of the Company enforceable against the
Company in accordance with its terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
3.04 NON-CONTRAVENTION; APPROVALS AND CONSENTS. (a) The execution
and delivery of this Agreement by the Company do not, and the performance by
the Company of its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of time
or both) a default under, result in or give to any person any right of
payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien upon any
of the assets or properties of the Company or any of its Subsidiaries or any
13
of the Company Joint Ventures under, any of the terms, conditions or
provisions of (i) the certificates or articles of incorporation or bylaws (or
other comparable charter documents) of the Company or any of its
Subsidiaries, or (ii) subject to the obtaining of the Company Stockholders'
Approval and the taking of the actions described in SECTION 3.04(b), (x) any
statute, law, rule, regulation or ordinance (together, "LAWS"), or any
judgment, decree, order, writ, permit or license (together, "ORDERS"), of any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision (a "GOVERNMENTAL
OR REGULATORY AUTHORITY") applicable to the Company or any of its
Subsidiaries or any of the Company Joint Ventures or any of their respective
assets or properties, or (y) any note, bond, mortgage, security agreement,
indenture, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind (together, "CONTRACTS") to
which the Company or any of its Subsidiaries or any of the Company Joint
Ventures is a party or by which the Company or any of its Subsidiaries or any
of the Company Joint Ventures or any of their respective assets or properties
is bound, excluding from the foregoing clauses (x) and (y) conflicts,
violations, breaches, defaults, rights of payment and reimbursement,
terminations, modifications, accelerations and creations and impositions of
Liens which, individually or in the aggregate, would not reasonably be
expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole or on the ability of the Company to consummate
the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report
by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR ACT"),
(ii) for the filing of the Proxy Statement (as defined in SECTION 3.09) and
the Registration Statement (as defined in Section 4.09) with the Securities
and Exchange Commission (the "SEC") pursuant to the Securities Exchange Act
of 1934, as amended, and the rules and regulations thereunder (the "EXCHANGE
ACT"), and the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "SECURITIES ACT"), the declaration of the
effectiveness of the Registration Statement by the SEC and filings with
various state securities authorities that are required in connection with the
transactions contemplated by this Agreement, (iii) for the filing of an
application under Section 203 and any directly related Section of, or
regulation under, the Power Act (as defined in SECTION 3.05(b)) for the sale
or disposition of jurisdictional facilities of the Company; (iv) for the
filing of the Articles of Merger and other appropriate merger documents
required by the BCA with the Secretary of State and appropriate documents
with the relevant authorities of other states in which the Constituent
Corporations are qualified to do business; and (v) as disclosed in SECTION
3.04 of the Company Disclosure Letter, no consent, approval or action of,
filing with or notice to any Governmental or Regulatory Authority or other
public or private third party is necessary or required under any of the
terms, conditions or provisions of any law or order of any Governmental or
Regulatory Authority or any Contract to which the Company or any of its
Subsidiaries or any of the Company Joint Ventures is a party or by which the
Company or any of its Subsidiaries or any of the Company Joint Ventures or
any of their respective assets or properties is bound for the execution and
delivery of this Agreement by the Company, the performance by the Company of
its obligations hereunder or the consummation of the transactions
contemplated hereby, other than such consents, approvals, actions, filings
and notices which the failure to make or obtain, as the case may be,
individually or in the aggregate, would not reasonably be expected to have a
14
material adverse effect on the Company and its Subsidiaries taken as a whole
or on the ability of the Company to consummate the transactions contemplated
by this Agreement.
3.05 SEC REPORTS, FINANCIAL STATEMENTS AND UTILITY REPORTS. (a)
The Company has delivered to ScottishPower a true and complete copy of each
form, report, schedule, registration statement, registration exemption, if
applicable, definitive proxy statement and other document (together with all
amendments thereof and supplements thereto) filed by the Company or any of
its Subsidiaries with the SEC since December 31, 1995 (as such documents have
since the time of their filing been amended or supplemented, the "COMPANY SEC
REPORTS"), which are all the documents (other than preliminary materials)
that the Company and its Subsidiaries were required to file with the SEC
since such date. As of their respective dates, the Company SEC Reports (i)
complied as to form in all material respects with the requirements of the
Securities Act or the Exchange Act, if applicable, as the case may be, and
(ii) did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case,
the notes, if any, thereto) included in the Company SEC Reports (the "COMPANY
FINANCIAL STATEMENTS") complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, were
prepared in accordance with U.S. generally accepted accounting principles
applied on a consistent basis during the periods involved (except as may be
indicated therein or in the notes thereto and except with respect to
unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited interim financial statements, to
normal, recurring year-end audit adjustments (which are not expected to be,
individually or in the aggregate, materially adverse to the Company and its
Subsidiaries taken as a whole)) the consolidated financial position of the
Company and its consolidated subsidiaries as at the respective dates thereof
and the consolidated results of their operations and cash flows for the
respective periods then ended. Except as set forth in SECTION 3.05 of the
Company Disclosure Letter, each Subsidiary of the Company is treated as a
consolidated subsidiary of the Company in the Company Financial Statements
for all periods covered thereby.
(b) All material filings required to be made by the Company or any
of its Subsidiaries since December 31, 1995, under the Federal Power Act (the
"POWER ACT") and applicable state laws and regulations, have been filed with
the Federal Energy Regulatory Commission (the "FERC"), the Department of
Energy (the "DOE") or any appropriate state public utilities commission
(including, without limitation, the state utility regulatory agencies of
California, Idaho, Montana, Oregon, Utah, Washington and Wyoming), as the
case may be, including all material written forms, statements, reports,
agreements and all material documents, exhibits, amendments and supplements
appertaining thereto, including but not limited to all material rates,
tariffs, franchises, service agreements and related documents, complied, as
of their respective dates, in all material respects with all applicable
requirements of the appropriate statute and the rules and regulations
thereunder.
3.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the Company SEC Reports filed prior to December 6, 1998 or SECTION 3.06 of
the Company Disclosure Letter, (a) between December 31, 1997 and December 6,
1998, there has not been any
15
change, event or development having, or that would reasonably be expected to
have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries taken as a whole (other than those changes,
events or developments occurring as a result of general economic or financial
conditions or which are not unique to the Company and its Subsidiaries but
also affect other entities who participate or are engaged in the lines of
business in which the Company and its Subsidiaries are engaged), and (b)
between December 31, 1997 and December 6, 1998 (i) the Company, its
Subsidiaries and the Company Joint Ventures have conducted their respective
businesses only in the ordinary course substantially consistent with past
practice and (ii) neither the Company nor any of its Subsidiaries nor any of
the Company Joint Ventures has (x) acquired or agreed to acquire (by merging
or consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner) any business or
any corporation, partnership, association or other business organization or
division thereof for a purchase price (including the amount of any
indebtedness assumed in connection therewith) of $25 million or more in any
one transaction or (y) sold, leased or otherwise disposed of any of its
assets or properties (or agreed to do so) other than dispositions in the
ordinary course of business consistent with past practice or having a net
book value of $25 million or less in any one transaction.
3.07 ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected or reserved against in the balance sheet for the period ended
December 31, 1997 included in the Company Financial Statements or as
disclosed in the Company SEC Reports filed prior to December 6, 1998 or in
SECTION 3.07 of the Company Disclosure Letter, neither the Company nor any of
its Subsidiaries had at such date, or has incurred since such date, any
liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be
required by U.S. generally accepted accounting principles to be reflected on
a consolidated balance sheet of the Company and its consolidated subsidiaries
(including the notes thereto), except liabilities or obligations (i) which
were incurred in the ordinary course of business consistent with past
practice or (ii) which are not having, and would not reasonably be expected
to have, individually or in the aggregate, a material adverse effect on the
Company and its Subsidiaries taken as a whole.
3.08 LEGAL PROCEEDINGS. Except as disclosed in the Company SEC
Reports filed prior to December 6, 1998 or in SECTION 3.08 of the Company
Disclosure Letter and except for environmental matters which are governed by
SECTION 3.15, (i) there are no actions, suits, arbitrations or proceedings
pending or, to the knowledge of the Company, threatened against, nor to the
knowledge of the Company are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, the Company or any of
its Subsidiaries or any of the Company Joint Ventures or any of their
respective assets and properties which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of the Company to
consummate the transactions contemplated by this Agreement, and (ii) neither
the Company nor any of its Subsidiaries is subject to any order of any
Governmental or Regulatory Authority which, individually or in the aggregate,
is having or would reasonably be expected to have a material adverse effect
on the Company and its Subsidiaries taken as a whole or on the ability of the
Company to consummate the transactions contemplated by this Agreement.
16
3.09 INFORMATION SUPPLIED. (a) The proxy statement relating to
the Company Stockholders' Meeting (as defined in SECTION 6.03(b)), as amended
or supplemented from time to time (as so amended and supplemented, the "PROXY
STATEMENT"), and any other documents to be filed by the Company with the SEC
(including, without limitation, under the 1935 Act) in connection with the
Merger and the other transactions contemplated hereby will (in the case of
the Proxy Statement and any such other documents filed with the SEC under the
Exchange Act or the Securities Act), comply as to form in all material
respects with the requirements of the Exchange Act and the Securities Act,
respectively, and will not, on the date of its filing or, in the case of the
Proxy Statement, at the date it is mailed to stockholders of the Company and
at the time of the Company Stockholders' Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading, except
that no representation is made by the Company with respect to information
supplied in writing by or on behalf of HoldCo, ScottishPower, the Partnership
or Merger Sub expressly for inclusion therein and information incorporated by
reference therein from documents filed by HoldCo, ScottishPower or any of
their respective Subsidiaries with the SEC.
(b) The information supplied or to be supplied by the Company for
inclusion in any filing by HoldCo or ScottishPower with the LSE in respect of
the Merger (including, without limitation, the Class 1 circular to be issued
to shareholders of ScottishPower (the "CIRCULAR"), and the listing
particulars under Part IV of the Financial Services Act 1986 of the United
Kingdom (the "FSA") relating to HoldCo Ordinary Shares (the "LISTING
PARTICULARS") and the Scheme Document (together with any amendments or
supplements thereto, the "SCOTTISHPOWER DISCLOSURE DOCUMENTS") will, at all
relevant times, include all information relating to the Company, and
information which is within the knowledge of each of the directors of the
Company (or which it would be reasonable for them to obtain by making
inquiries), which, in each case, is required to enable the ScottishPower
Disclosure Documents and the parties hereto to comply in all material
respects with all United Kingdom statutory and other legal and regulatory
provisions (including, without limitation, the Companies Act (as defined in
SECTION 4.02(a), the FSA and the rules and regulations made thereunder, and
the rules and requirements of the LSE) and all such information contained in
such documents will be substantially in accordance with the facts and will
not omit anything material likely to affect the import of such information.
(c) Notwithstanding the foregoing provisions of this Section 3.09,
no representation or warranty is made by the Company with respect to
statements made or incorporated by reference in the Registration Statement,
the Proxy Statement or the ScottishPower Disclosure Documents based on
information supplied by HoldCo, ScottishPower or the Partnership expressly
for inclusion or incorporation by reference therein or based on information
which is not incorporated by reference in such documents but should have been
disclosed pursuant to SECTION 4.09.
3.10 PERMITS; COMPLIANCE WITH LAWS AND ORDERS. The Company, its
Subsidiaries and the Company Joint Ventures hold all permits, licenses,
franchises, variances, exemptions, orders and approvals of all Governmental
and Regulatory Authorities (other than
17
environmental permits which are governed by SECTION 3.15) necessary for the
lawful conduct of their respective businesses (the "COMPANY PERMITS"), except
for failures to hold such Company Permits which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries taken as a whole.
The Company, its Subsidiaries and the Company Joint Ventures are in
compliance with the terms of the Company Permits, except failures so to
comply which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole. Except as disclosed in the Company SEC
Reports filed prior to December 6, 1998 or Section 3.10 of the Company
Disclosure Letter, the Company, its Subsidiaries and the Company Joint
Ventures are not in violation of or default under any law or order of any
Governmental or Regulatory Authority, except for such violations or defaults
which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
3.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
Company SEC Reports filed prior to December 6, 1998 or SECTION 3.11 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries
nor any of the Company Joint Ventures nor, to the knowledge of the Company,
any other party thereto is in breach or violation of, or in default in the
performance or observance of any term or provision of, and no event has
occurred which, with notice or lapse of time or both, would reasonably be
expected to result in a default under, (i) the certificates or articles of
incorporation or bylaws (or other comparable charter documents) of the
Company or any of its Subsidiaries or (ii) any Contract to which the Company
or any of its Subsidiaries or any of the Company Joint Ventures is a party
or by which the Company or any of its Subsidiaries, or any of the Company
Joint Ventures or any of their respective assets or properties is bound,
except in the case of clause (ii) for breaches, violations and defaults
which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole.
3.12 TAXES. Except as disclosed in the Company SEC Reports filed
prior to December 6, 1998 or SECTION 3.12 of the Company Disclosure Letter:
(a) Each of the Company and its Subsidiaries has filed all
material tax returns and reports required to be filed by it, or requests for
extensions to file such returns or reports have been timely filed or granted
and have not expired, and all tax returns and reports are complete and
accurate in all respects, except to the extent that such failures to either
file, to have extensions granted that remain in effect or to file returns
complete and accurate in all respects, as applicable, would not reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on the Company and its Subsidiaries taken as a whole. The Company and each
of its Subsidiaries has paid (or the Company has paid on its behalf) all
taxes shown as due on such tax returns and reports. The most recent
financial statements contained in the Company SEC Reports reflect an adequate
reserve for all taxes payable by the Company and its Subsidiaries for all
taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against the Company or any of its Subsidiaries that are
not adequately reserved for, except for inadequately reserved taxes and
inadequately reserved deficiencies that would not reasonably be expected to,
individually or in the aggregate, have a material adverse effect on the
Company and its
18
Subsidiaries taken as a whole. No requests for waivers of the time to assess
any taxes against the Company or any of its Subsidiaries have been granted or
are pending, except for requests with respect to such taxes that have been
adequately reserved for in the most recent financial statements contained in
the Company SEC Reports, or, to the extent not adequately reserved, the
assessment of which would not reasonably be expected to have, individually or
in the aggregate, a material adverse effect on the Company and its
Subsidiaries taken as a whole.
(b) Neither the Company nor any of its Subsidiaries has taken any
action or has any knowledge of any fact or circumstance that is reasonably
likely to prevent the Merger from qualifying as a tax-free reorganization
within the meaning of Code Section 368(a).
(c) Neither the Company nor any of its Subsidiaries has filed a
consent under Code Section 341(f) concerning collapsible corporations,
neither the Company nor any of its Subsidiaries has made any payments, is
obligated to make any payment, or is a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Section 280G.
(d) Each of the Company and its Subsidiaries has disclosed on its
federal income tax returns all positions taken therein that could give rise
to a substantial understatement of United States federal income tax within
the meaning of Code Section 6662.
(e) Neither the Company nor any of its Subsidiaries is a party to
any tax allocation or sharing agreement. Neither the Company nor any of its
Subsidiaries (i) has been a member of an affiliated group filing a
consolidated federal income tax return (other than a group the common parent
of which was the Company) or (ii) has any material liability for the taxes of
any person (other than any of the Company and its Subsidiaries) under United
States Treasury Regulation Section 1.1502-6 (or any similar provision or
state, local, or foreign law), as a transferee or successor, by contract, or
otherwise.
(f) As used in this SECTION 3.12 and in SECTION 4.12, "taxes"
shall include all federal, state, local and foreign income, franchise, gross
receipts, property, sales, use, excise, alternative-minimum, estimated and
other taxes and duties of any jurisdiction, including obligations for
withholding taxes from payments due or made to any other person and any
interest, penalties or additions to tax.
3.13 EMPLOYEE BENEFIT PLANS; ERISA. (a) Except as disclosed in
the Company SEC Reports filed prior to December 6, 1998 or SECTION 3.13 of
the Company Disclosure Letter or as would not reasonably be expected to have
a material adverse effect on the Company and its Subsidiaries taken as a
whole, (i) all Company Employee Benefit Plans (as defined below) are in
compliance with all applicable requirements of law, including without
limitation ERISA (as defined below) and the Code, and (ii) neither the
Company nor any of its Subsidiaries has any liabilities or obligations with
respect to any such Company Employee Benefit Plans, whether accrued,
contingent or otherwise, nor to the knowledge of the Company are any such
liabilities or obligations expected to be incurred. Except as specifically
set forth in SECTION 3.13 of the Company Disclosure Letter, the execution of,
and performance of the transactions contemplated in, this Agreement will not
(either alone or upon the occurrence of any
19
additional or subsequent events) constitute an event under any Company
Employee Benefit Plan that will or would reasonably be expected to result in
any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any employee. The only severance
agreements or severance policies applicable to the Company or any of its
Subsidiaries are the agreements and policies specifically referred to in
SECTION 3.13 of the Company Disclosure Letter.
(b) As used herein:
(i) "COMPANY EMPLOYEE BENEFIT PLAN" means any Plan (other than any
"multiemployer plan," as that term is defined in Section 4001 of ERISA)
entered into, established, maintained, sponsored, contributed to or required
to be contributed to by the Company or any of its Subsidiaries for the
benefit of the current or former employees or directors of the Company or any
of its Subsidiaries and existing on December 6, 1998 or at any time
subsequent thereto and on or prior to the Effective Time and, in the case of
a Plan which is subject to Part 3 of Title I of the Employee Retirement
Income Security Act of 1974, as amended, and the rules and regulations
thereunder ("ERISA"), Section 412 of the Code or Title IV of ERISA, at any
time during the five-year period immediately preceding December 6, 1998; and
(ii) "PLAN" means any employment, bonus, incentive compensation,
deferred compensation, long term incentive, pension, profit sharing,
retirement, stock purchase, stock option, stock ownership, stock appreciation
rights, phantom stock, leave of absence, layoff, vacation, day or dependent
care, legal services, cafeteria, life, health, medical, accident, disability,
severance, separation, termination, change of control or other benefit plan,
agreement, practice, policy, program, scheme or arrangement, whether written
or oral, and whether applicable to only one individual or a group of
individuals, including, but not limited to any "employee benefit plan" within
the meaning of Section 3(3) of ERISA.
(iii) "ERISA AFFILIATE" means any person, who on or before the
Effective Time, is under common control with the Company within the meaning
of Section 414 of the Code.
(c) Complete and correct copies of the following documents have
been made available to ScottishPower, as of December 6, 1998: (i) all
material Company Employee Benefit Plans and any related trust agreements or
related insurance contracts and pro forma option agreements, (ii) the most
current summary plan descriptions of each Company Employee Benefit Plan
subject to the requirement to give a summary plan description under ERISA,
(iii) the most recent Form 5500 and Schedules thereto for each Company
Employee Benefit Plan subject to such reporting, (iv) the most recent
determination of the Internal Revenue Service with respect to the qualified
status of each Company Employee Benefit Plan that is intended to qualify
under Section 401(a) of the Code, (v) the most recent accountings with
respect to each Company Employee Benefit Plan funded through a trust, (vi)
the most recent actuarial report of the qualified actuary of each Company
Employee Benefit Plan with respect to which actuarial valuations are
conducted.
20
(d) Except as disclosed in the Company SEC Reports filed prior to
December 6, 1998 or SECTION 3.13 of the Company Disclosure Letter, neither
the Company nor any Subsidiary maintains or is obligated to provide benefits
under any life, medical or health Plan (other than as an incidental benefit
under a Plan qualified under Section 401(a) of the Code) which provides
benefits to retirees or other terminated employees other than benefit
continuations rights under the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended.
(e) Except as set forth in SECTION 3.13 of the Company Disclosure
Letter, each Company Employee Benefit Plan covers only employees who are
employed by the Company or a Subsidiary (or former employees or beneficiaries
with respect to service with the Company or a Subsidiary), so that the
transactions contemplated by this Agreement will require no spin-off of
assets and liabilities or other division or transfer of rights with respect
to any such plan.
(f) Except as disclosed in the Company SEC Reports filed prior to
December 6, 1998 or SECTION 3.13 of the Company Disclosure Letter, neither
the Company, any Subsidiary, any ERISA Affiliate nor any other corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA has at any time during the five
(5) year period preceding December 6, 1998 contributed to any "multiemployer
plan", as that term is defined in Section 4001 of ERISA. With respect to
each "multiemployer plan", as defined above, in which the Company, any
Subsidiary or any ERISA Affiliate participates or has participated, (i)
neither the Company, any Subsidiary nor any ERISA Affiliate has incurred, any
material withdrawal liability, (ii) neither the Company, any Subsidiary nor
any ERISA Affiliate has received any notice that (A) any such plan is being
reorganized in a manner that will result, or would reasonably be expected to
result, in material liability, (B) increased contributions of a material
amount may be required to avoid a reduction in plan benefits or the
imposition of an excise tax, or (C) any such plan is, or would reasonably be
expected to become, insolvent, and (iii) to the knowledge of the Company,
there are no PBGC (as defined below) proceedings against any such plan.
(g) Except as disclosed in the Company SEC Reports filed prior to
December 6, 1998 or SECTION 3.13 of the Company Disclosure Letter, no event
has occurred, and there exists no condition or set of circumstances in
connection with any Company Employee Benefit Plan, under which the Company or
any Subsidiary, directly or indirectly (through any indemnification agreement
or otherwise), could reasonably be expected to be subject to any risk of
material liability under Section 409 of ERISA, Section 502(i) of ERISA, Title
IV of ERISA or Section 4975 of the Code.
(h) No transaction contemplated by this Agreement will result in
liability to the Pension Benefit Guaranty Corporation ("PBGC") under Section
302(c)(11), 4062, 4063, 4064 or 4069 of ERISA, or otherwise, with respect to
the Company, any Subsidiary, HoldCo, ScottishPower or any corporation or
organization controlled by or under common control with any of the foregoing
within the meaning of Section 4001 of ERISA, and, to the knowledge of the
Company, no event or condition exists or has existed which would reasonably
be expected to result in any material liability to the PBGC with respect to
HoldCo, ScottishPower, the Company, any Subsidiary or any such corporation or
organization. Except as set forth in SECTION
21
3.13 of the Company Disclosure Schedule, no "reportable event" within the
meaning of Section 4043 of ERISA has occurred with respect to any Company
Employee Benefit Plan that is a defined benefit plan under Section 3(35) of
ERISA other than "reportable events" as to which the requirement of notice to
the PBGC within thirty days has been waived.
(i) Except as set forth in SECTION 3.13 of the Company Disclosure
Schedule, no employer securities, employer real property or other employer
property is included in the assets of any Company Employee Benefit Plan.
(j) No stock appreciation rights are outstanding under the Company
Stock Incentive Plan or any other plan or arrangement maintained by the
Company or any affiliate of the Company.
3.14 LABOR MATTERS. (a) Except as set forth in SECTION 3.14 of
the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is a party to any collective bargaining agreement or other labor
agreement with any union or labor organization. Except as disclosed in the
Company SEC Reports filed prior to December 6, 1998 or in SECTION 3.14 of the
Company Disclosure Letter, there are no disputes pending or, to the knowledge
of the Company, threatened between the Company or any of its Subsidiaries or
any of the Company Joint Ventures and any trade union or other
representatives of its employees, except as would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
Company and its Subsidiaries taken as a whole, and, to the knowledge of the
Company, except as set forth in SECTION 3.14 of the Company Disclosure
Letter, there are no material organizational efforts presently being made
involving any of the now unorganized employees of the Company or any of its
Subsidiaries or any of the Company Joint Ventures. Since December 31, 1995,
there has been no work stoppage, or strike by employees of the Company or any
of its Subsidiaries or any of the Company Joint Ventures except as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
(b) To the knowledge of the Company, neither the Company nor any
of its Subsidiaries nor any of the Company Joint Ventures is in material
violation of any labor laws in any country (or political subdivision thereof)
in which they transact business except for such violations as would not,
individually or in the aggregate, reasonably be expected to have a material
adverse effect on the Company and its Subsidiaries taken as a whole.
3.15 ENVIRONMENTAL MATTERS. Except as disclosed in the Company SEC
Reports filed prior to December 6, 1998 or in SECTION 3.15 of the Company
Disclosure Letter and except as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on the Company and
its Subsidiaries taken as a whole:
(a) (i) Each of the Company, its Subsidiaries and the Company
Joint Ventures is in compliance with all applicable Environmental Laws
(as hereinafter defined); and
(ii) Neither the Company nor any of its Subsidiaries nor any of
the Company Joint Ventures has received any written communication from any
person or
22
Governmental or Regulatory Authority that alleges that the Company or any
of its Subsidiaries or any of the Company Joint Ventures is not in such
compliance with applicable Environmental Laws.
(b) Each of the Company, its Subsidiaries and the Company Joint
Ventures has obtained all environmental, health and safety permits and
governmental authorizations (collectively, the "ENVIRONMENTAL PERMITS")
necessary for the construction of its facilities and the conduct of its
operations, as applicable, and all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed
and is pending agency approval, and the Company, its Subsidiaries and the
Company Joint Ventures are in compliance with all terms and conditions of the
Environmental Permits.
(c) There is no Environmental Claim (as hereinafter defined)
pending
(i) against the Company or any of its Subsidiaries or any of the
Company Joint Ventures;
(ii) to the knowledge of the Company, against any person or entity
whose liability for any such Environmental Claim the Company or any of its
Subsidiaries or any of the Company Joint Ventures has or may have retained or
assumed either contractually or by operation of law; or
(iii) against any real or personal property or operations which the
Company or any of its Subsidiaries or any of the Company Joint Ventures owns,
leases or manages, in whole or in part.
(d) To the knowledge of the Company, there have not been any
Releases (as hereinafter defined) of any Hazardous Material (as hereinafter
defined) that would be reasonably likely to form the basis of any material
Environmental Claim against the Company or any of its Subsidiaries or any of
the Company Joint Ventures, or against any person or entity whose liability
for any Environmental Claim the Company or any of its Subsidiaries or any of
the Company Joint Ventures has or may have been retained or assumed either
contractually or by operation of law.
(e) To the knowledge of the Company, with respect to any
predecessor of the Company or any of its Subsidiaries, there is no
Environmental Claim pending or threatened in writing, and there has been no
Release of Hazardous Materials that would be reasonably likely to form the
basis of any Environmental Claim.
(f) There are no material facts specific to the Company that have
not been disclosed to ScottishPower which the Company reasonably believes are
likely to form the basis of a Environmental Claim against the Company or any
of its Subsidiaries or any of the Company Joint Ventures arising from (x)
current environmental remediation or mining reclamation costs of the Company,
its Subsidiaries and the Company Joint Ventures or such remediation or
reclamation costs known to be required in the future, or (y) any other
environmental matter affecting the Company or its Subsidiaries or any of the
Company Joint Ventures.
23
(g) As used in this Section 3.15:
(i) "ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or written notices of
noncompliance, liability or violation by any person or entity (including any
Governmental or Regulatory Authority) alleging potential liability
(including, without limitation, potential responsibility or liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
(A) the presence, or Release or threatened Release
into the environment, of any Hazardous Materials at any
location, whether or not owned, operated, leased or managed by
the Company or any of its Subsidiaries or any of the Company
Joint Ventures; or
(B) circumstances forming the basis of any violation,
or alleged violation, of any Environmental Law; or
(C) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or
Release of any Hazardous Materials;
(ii) "ENVIRONMENTAL LAWS" means all Federal, state and local laws,
rules and regulations relating to pollution, the environment (including,
without limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates to the
environment including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials, or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials;
(iii) "HAZARDOUS MATERIALS" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls;
and (b) any chemicals, materials or substances which are now defined as or
included in the definition of "HAZARDOUS SUBSTANCES", "HAZARDOUS WASTES",
"HAZARDOUS MATERIALS", "EXTREMELY HAZARDOUS WASTES", "RESTRICTED HAZARDOUS
WASTES", "TOXIC SUBSTANCES", "TOXIC POLLUTANTS", or words of similar import,
under any Environmental Law; and (c) any other chemical, material, substance
or waste, exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which the Company or any of its
Subsidiaries or any of the Company Joint Ventures operates or any
jurisdiction which has received such chemical, material, substance or waste
from the Company or its Subsidiaries; and
(iv) "RELEASE" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
24
3.16 INTELLECTUAL PROPERTY RIGHTS. The Company and its
Subsidiaries have all right, title and interest in, or a valid and binding
license to use, all Intellectual Property (as defined below) individually or
in the aggregate material to the conduct of the businesses of the Company and
its Subsidiaries taken as a whole. Neither the Company nor any Subsidiary of
the Company is in default (or with the giving of notice or lapse of time or
both, would be in default) under any license to use such Intellectual
Property and, to the knowledge of the Company, such Intellectual Property is
not being infringed by any third party, and neither the Company nor any
Subsidiary of the Company is infringing any Intellectual Property of any
third party, except for such defaults and infringements which, individually
or in the aggregate, are not having and would not reasonably be expected to
have a material adverse effect on the Company and its Subsidiaries taken as a
whole. For purposes of this Agreement, "INTELLECTUAL PROPERTY" means patents
and patent rights, trademarks and trademark rights, trade names and trade
name rights, service marks and service mark rights, service names and service
name rights, copyrights and copyright rights and other proprietary
intellectual property rights and all pending applications for and
registrations of any of the foregoing.
3.17 REGULATION AS A UTILITY. (a) The Company is not regulated as
a public utility by any state other than the States of California, Idaho,
Montana, Oregon, Utah, Washington and Wyoming. SECTION 3.17 of the Company
Disclosure Letter lists each Subsidiary of the Company which is a public
utility or is otherwise engaged in the regulated supply (including
generation, transmission or distribution) of electricity, natural gas and/or
telecommunications. Except as set forth in SECTION 3.17 of the Company
Disclosure Letter, neither the Company nor any "SUBSIDIARY COMPANY" or
"AFFILIATE" of the Company is subject to regulation as a public utility or
public service company (or similar designation) by any state in the United
States or any foreign country. The Company is not a public utility holding
company under the 1935 Act.
(b) As used in this Section 3.17, the terms "SUBSIDIARY COMPANY"
and "AFFILIATE" shall have the respective meanings ascribed to them in the
1935 Act.
3.18 INSURANCE. Except as set forth in SECTION 3.18 of the Company
Disclosure Letter, each of the Company and its Subsidiaries is, and has been
continuously since January 1, 1994, insured with financially responsible
insurers in such amounts and against such risks and losses as are customary
in all material respects for companies conducting the business conducted by
the Company and its Subsidiaries during such time period. Except as set forth
in SECTION 3.18 of the Company Disclosure Letter, neither the Company nor any
of its Subsidiaries has received any notice of cancellation or termination
with respect to any material insurance policy of the Company or any of its
Subsidiaries. The material insurance policies of the Company and each of its
Subsidiaries are valid and enforceable policies.
3.19 VOTE REQUIRED. Assuming the accuracy of the representation
and warranty contained in SECTION 4.19, the affirmative vote of the holders
of record of at least (i) a majority of voting power of the outstanding
shares of Company Common Stock and Company Preferred Stock voting together
and (ii) a majority of the voting power of the Company Preferred Stock voting
separately from the Company Common Stock as a single class with respect to
the approval of this Agreement are the only votes of the holders of any class
or series of the capital
25
stock of the Company or its Subsidiaries required to approve this Agreement
and approve the Merger and the other transactions contemplated hereby.
3.20 [Intentionally Omitted]
3.21 OWNERSHIP OF HOLDCO OR SCOTTISHPOWER STOCK. Neither the
Company nor any of its Subsidiaries beneficially owns any ScottishPower
Ordinary Shares, ScottishPower ADSs, HoldCo Ordinary Shares or HoldCo ADSs.
3.22 ARTICLE VII OF THE COMPANY'S ARTICLES OF INCORPORATION AND
SECTIONS 60.825-60.845 OF THE BCA NOT APPLICABLE. The Company has taken all
necessary actions so that neither the provisions of Article VII of the
Company's Articles of Incorporation nor the provisions of Sections
60.825-60.845 of the BCA (i.e., affiliated transactions and fair price
provisions) will, before the termination of this Agreement, apply to this
Agreement or the Merger or the other transactions contemplated hereby.
3.23 CERTAIN CONTRACTS. Except as set forth in Section 3.23 of the
Company Disclosure Letter, neither the Company nor any of its Subsidiaries or
Joint Ventures is a party to, or bound by, any Contract containing any
provision or covenant prohibiting or materially limiting the ability of the
Company or any Company Subsidiary to engage in any business activity or
compete with any person.
3.24 YEAR 2000. The Company and its Subsidiaries have put into
effect practices and programs which the Company reasonably believes will
enable all material software, hardware and equipment (including
microprocessors) that is owned or utilized by the Company or any of its
Subsidiaries in the operations of its or their respective business to be
capable, by December 31, 1999, of accounting for all calculations using a
century and date sensitive algorithm for the year 2000 and the fact that the
year 2000 is a leap year and to otherwise continue to function without any
material interruption caused by the occurrence of the year 2000.
3.25 JOINT VENTURE REPRESENTATIONS. Each representation or
warranty made by the Company in this Article III relating to a Company Joint
Venture that is neither operated nor managed by the Company or a Subsidiary
of the Company shall be deemed to be made only to the Company's knowledge.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HOLDCO, SCOTTISHPOWER AND THE PARTNERSHIP
ScottishPower and HoldCo (each on behalf of itself and on behalf of
Merger Sub) and the Partnership represent and warrant to the Company as
follows (which representations and warranties (i) in respect of ScottishPower
and its Subsidiaries are made as of December 6, 1998 (except for the
representations and warranties contained in SECTIONS 4.03 AND 4.04, which are
made as of the date hereof), (ii) in respect of HoldCo and its Subsidiaries
are made as of the date of this Agreement and (iii) of ScottishPower and
HoldCo on behalf of Merger Sub shall only be
26
true and correct as of the Closing Date), it being agreed that HoldCo and
ScottishPower shall not be in breach or deemed to be in breach of any
representation or warranty contained in this Article IV by virtue of the fact
that any Scheme Consent (as defined in Section 9.13(k)) has not been obtained
by the date of this Agreement:
4.01 ORGANIZATION AND QUALIFICATION. (a) Each of HoldCo,
ScottishPower and their respective Subsidiaries (other than the Partnership)
is a corporation duly incorporated, validly existing and in good standing
(with respect to jurisdictions which recognize the concept of good standing)
under the laws of its jurisdiction of incorporation and has full corporate
power and authority to conduct its business as and to the extent now
conducted and to own, use and lease its assets and properties, except for
such failures to be so incorporated, existing and in good standing (with
respect to jurisdictions which recognize the concept of good standing) or to
have such power and authority which, individually or in the aggregate, are
not having and would not reasonably be expected to have a material adverse
effect on HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole. The Partnership is a general partnership validly existing under the
laws of the State of Nevada. Each of the Partnership and Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement (other than, with respect to the Partnership, in connection
with the investment of the initial partnership capital pursuant to or in
accordance with the Partnership Agreement, dated December 3, 1998, by and
between UKSub 1 and UKSub 2 (the "PARTNERSHIP AGREEMENT")), has engaged in no
other business activities and has conducted its operations only as
contemplated hereby (or, with respect to the Partnership, as contemplated by
the Partnership Agreement). HoldCo was formed solely for the purpose
contemplated by the Scheme of Arrangement and this Agreement and has
conducted its operations only as contemplated by the Scheme of Arrangement
and this Agreement. Except as disclosed in SECTION 4.01 of the ScottishPower
Disclosure Letter (as defined below), each of UKSub 1 and UKSub 2 was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated hereby. Each of ScottishPower, HoldCo and
their respective Subsidiaries is duly qualified, licensed or admitted to do
business and is in good standing (with respect to jurisdictions which
recognize the concept of good standing) in each jurisdiction in which the
ownership, use or leasing of its assets and properties, or the conduct or
nature of its business, makes such qualification, licensing, admission or
good standing necessary, except for such failures to be so qualified,
licensed or admitted and in good standing (with respect to jurisdictions
which recognize the concept of good standing) which, individually or in the
aggregate, are not having and would not reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. SECTION 4.01 of the letter dated December 6,
1998 and delivered by ScottishPower and Merger Sub to the Company on such
date (the "SCOTTISHPOWER DISCLOSURE LETTER") sets forth (i) the name and
jurisdiction of incorporation of each Subsidiary of ScottishPower, (ii) its
authorized capital stock, (iii) the number of issued and outstanding shares
of its capital stock and (iv) the record owners of such shares.
ScottishPower has previously delivered to the Company correct and complete
copies of the memorandum and articles of association and bylaws (or other
comparable charter documents) of ScottishPower and each of its Subsidiaries,
and the Partnership Agreement. As of the Scheme Date, the articles of
association and bylaws (or other comparable charter documents) of HoldCo
shall substantially reflect the principles set out in Schedule II, subject to
amendments required to comply with applicable law
27
or the rules of the LSE and subject to such other amendments as ScottishPower
may reasonably deem necessary or desirable, PROVIDED, that to the extent such
other amendments deemed necessary or desirable by ScottishPower would
materially adversely affect the benefits of the Merger for the holders of
Company Common Stock, ScottishPower shall have received the prior written
consent of the Company.
(b) SECTION 4.01 of the ScottishPower Disclosure Letter sets forth
a description as of December 6, 1998, of all ScottishPower Joint Ventures,
including (i) the name of each such party and ScottishPower's interest
therein, and (ii) a brief description of the principal line or lines of
business conducted by each such entity.
(c) Except for interests in the Subsidiaries of ScottishPower and
HoldCo and as disclosed in SECTION 4.01 of the ScottishPower Disclosure
Letter, neither HoldCo nor ScottishPower directly or indirectly owns any
equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, (i) any
material corporation, partnership, joint venture or other business
association or entity (other than non-controlling investments in the ordinary
course of business and corporate partnering, development, cooperative
marketing and similar undertakings and arrangements entered into in the
ordinary course of business) or (ii) any other business association or entity
the effect of which is having or could reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole.
4.02 CAPITAL STOCK. (a) The authorized share capital of
ScottishPower consists solely of (i) 1,700,000,000 ScottishPower Ordinary
Shares, of which 1,198,629,102 shares were issued as of November 30, 1998,
and (ii) one Special Rights Non-Voting Redeemable Preference Share of L1 (the
"SPECIAL SHARE") which was issued as of such date. The authorized share
capital of HoldCo consists solely of (i) 50,000 HoldCo ordinary shares of L1
each (to be subdivided into HoldCo Ordinary Shares of 50p each prior to the
Scheme Date), of which 2 were issued as of the date of this Agreement, and
(ii) 49,998 non-voting redeemable ordinary shares of L1 each, all of which
were issued as of the date of this Agreement, are held by ScottishPower and
shall be redeemed by HoldCo prior to the Effective Time. Since November 30,
1998, except as disclosed in the ScottishPower SEC Reports filed prior to
December 6, 1998, SECTION 4.02 of the ScottishPower Disclosure Letter or
pursuant to the Scheme of Arrangement, there has been no change in the number
of issued ScottishPower Ordinary Shares other than the issuance of
ScottishPower Ordinary Shares pursuant to options or rights outstanding as of
such date to subscribe or purchase ScottishPower Ordinary Shares, which
options or rights are described in SECTION 4.02 of the ScottishPower
Disclosure Letter. All of the issued ScottishPower Ordinary Shares and
HoldCo Ordinary Shares are, and all Merger Ordinary Shares and all HoldCo
Ordinary Shares to be issued to the ADR Depositary pursuant to Section 2.01
will be, upon issuance, duly authorized, validly issued and fully paid and
voting, and no class of shares is entitled to preemptive rights, except as
provided in Section 89 of the Companies Act of 1985 of the United Kingdom
(the "COMPANIES ACT"). Except pursuant to this Agreement, the ScottishPower
employee share schemes listed in SECTION 4.02 of the ScottishPower Disclosure
Letter (the "SCOTTISHPOWER SHARE SCHEMES"), the HoldCo employee share schemes
established in connection with the Scheme of Arrangement to replace the
ScottishPower Share Schemes and which are in all material respects similar to
the ScottishPower
28
Share Schemes (the "HOLDCO SHARE SCHEMES"), and except as disclosed in the
ScottishPower SEC Reports filed prior to December 6, 1998 or SECTION 4.02 of
the ScottishPower Disclosure Letter, as of December 6, 1998 there were no
outstanding Options obligating HoldCo, ScottishPower or any of their
respective Subsidiaries to issue or sell any capital or other shares of
ScottishPower or HoldCo or to grant, extend or enter into any Option with
respect thereto.
(b) Except as disclosed in the ScottishPower SEC Reports filed
prior to December 6, 1998 or SECTION 4.02 of the ScottishPower Disclosure
Letter, all of the outstanding shares of each Subsidiary of HoldCo and
ScottishPower are duly authorized, validly issued, fully paid and
nonassessable and are owned, beneficially and of record, by HoldCo or
ScottishPower or a Subsidiary wholly owned, directly or indirectly, by HoldCo
or ScottishPower, free and clear of any Liens. Immediately following the
Scheme Date, all of the outstanding shares of ScottishPower will be duly
authorized, validly issued, fully paid and nonassessable and owned,
beneficially and of record, by HoldCo or its nominees. Except as disclosed
in the ScottishPower SEC Reports filed prior to December 6, 1998 or SECTION
4.02 of the ScottishPower Disclosure Letter, and except for the Share
Transfer, there are no (i) outstanding Options obligating HoldCo,
ScottishPower or any of their respective Subsidiaries to issue or sell any
shares of any Subsidiary of HoldCo or ScottishPower or to grant, extend or
enter into any such Option or (ii) voting trusts, proxies or other
commitments, understandings, restrictions or arrangements in favor of any
person other than HoldCo or ScottishPower or a Subsidiary wholly owned,
directly or indirectly, by HoldCo or ScottishPower with respect to the voting
of or the right to participate in dividends or other earnings in respect of
any shares of any Subsidiary of HoldCo or ScottishPower.
(c) Other than (i) as disclosed in the ScottishPower SEC Reports
filed prior to December 6, 1998 or SECTION 4.02 of the ScottishPower
Disclosure Letter, (ii) the right of Holdco to redeem the 49,998 non-voting
redeemable shares held by ScottishPower and referred to in SECTION 4.02(a),
(iii) the right of the holder of the ScottishPower Special Share to require
ScottishPower to redeem the ScottishPower Special Share pursuant to the
Articles of Association of ScottishPower or, following the Scheme Date, the
right of the holder of the HoldCo Special Share (as defined in Schedule II)
to require HoldCo to redeem the HoldCo Special Share pursuant to the Articles
of Association of HoldCo, and (iv) pursuant to the Scheme of Arrangement or
pursuant to a proposed amendment to ScottishPower's Articles of Association
which will provide for shares in ScottishPower to be issued to an
optionholder under the ScottishPower Share Schemes to be transferred to
HoldCo in consideration for HoldCo issuing to the optionholder the same
number of HoldCo Ordinary Shares as the number of ScottishPower shares so
issued under the ScottishPower Schemes, there are no outstanding contractual
obligations of HoldCo or ScottishPower or any Subsidiary of HoldCo or
ScottishPower to repurchase, redeem or otherwise acquire any HoldCo Ordinary
Shares or ScottishPower Ordinary Shares or any shares of any Subsidiary of
HoldCo or ScottishPower or to provide funds to, or make any investment (in
the form of a loan, capital contribution or otherwise) in, any Subsidiary of
HoldCo or ScottishPower or any other person.
(d) As of December 6, 1998, no bonds, debentures, notes or other
indebtedness of HoldCo or ScottishPower having the right to vote on any
matters on which shareholders may vote are issued or outstanding.
29
4.03 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of HoldCo,
ScottishPower, the Partnership and Merger Sub (and, with respect to SECTION
2.01 only, UKSub 1 and UKSub 2) has full power and authority to enter into
this Agreement, and, subject (in the case of this Agreement) to obtaining the
ScottishPower Shareholders' Approval (as defined in SECTION 6.03(a)) and the
Scheme Consents, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of HoldCo, ScottishPower, the Partnership and Merger
Sub (and, with respect to SECTION 2.01 only, UKSub 1 and UKSub 2) and the
consummation by each of HoldCo, ScottishPower, the Partnership and Merger Sub
(and, with respect to SECTION 2.01 only, UKSub 1 and UKSub 2) of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of HoldCo, ScottishPower and Merger Sub (and, with respect
to SECTION 2.01 only, UKSub 1 and UKSub 2) and the general partners of the
Partnership, and by the Partnership in its capacity as sole stockholder of
Merger Sub. The Board of Directors of ScottishPower has passed a resolution
declaring the advisability of the Merger and resolving that the Merger be
submitted for consideration by the shareholders of ScottishPower. The Board
of Directors of HoldCo has passed a resolution approving the Merger. No
other corporate proceedings on the part of HoldCo, ScottishPower or Merger
Sub or their shareholders, or the Partnership or its general partners are
necessary to authorize the execution, delivery and performance of this
Agreement by HoldCo, ScottishPower, the Partnership or Merger Sub (and, with
respect to SECTION 2.01 only, UKSub 1 and UKSub 2) and the consummation by
HoldCo, ScottishPower, the Partnership and Merger Sub (and, with respect to
SECTION 2.01 only, UKSub 1 and UKSub 2) of the transactions contemplated
hereby, other than obtaining the ScottishPower Shareholders' Approval and the
Scheme Consents, and to the Scheme of Arrangement becoming effective. This
Agreement has been duly and validly executed and delivered by each of HoldCo,
ScottishPower, the Partnership and Merger Sub (and, with respect to SECTION
2.01 only, UKSub 1 and UKSub 2) and constitutes a legal, valid and binding
obligation of each of HoldCo, ScottishPower, the Partnership and Merger Sub
(and, with respect to SECTION 2.01 only, UKSub 1 and UKSub 2) enforceable
against each of HoldCo, ScottishPower, the Partnership and Merger Sub (and,
with respect to SECTION 2.01 only, UKSub 1 and UKSub 2) in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
4.04 NON-CONTRAVENTION; APPROVALS AND CONSENTS. (a) Subject to the
requirement to obtain the Scheme Consents, the execution and delivery of this
Agreement by each of HoldCo, ScottishPower, the Partnership and Merger Sub
(and, with respect to SECTION 2.01 only, UKSub 1 and UKSub 2) do not, and the
performance by each of HoldCo, ScottishPower, the Partnership and Merger Sub
(and, with respect to SECTION 2.01 only, UKSub 1 and UKSub 2) of its
obligations hereunder and the consummation of the transactions contemplated
hereby will not, conflict with, result in a violation or breach of,
constitute (with or without notice or lapse of time or both) a default under,
result in or give to any person any right of payment or reimbursement,
termination, cancellation, modification or acceleration of, or result in the
creation or imposition of any Lien upon any of the assets or properties of
HoldCo, ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures under, any of the terms, conditions or
provisions of (i) the memorandum or articles of association or bylaws (or
other comparable charter documents) of HoldCo, ScottishPower or any of their
30
respective Subsidiaries or any of the ScottishPower Joint Ventures, (ii) the
Partnership Agreement, or (iii) subject to the obtaining of the ScottishPower
Shareholders' Approval and the taking of the actions described in paragraph
(b) of this SECTION, (x) any laws or orders of any Governmental or Regulatory
Authority applicable to HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures or any of their
respective assets or properties, or (y) any Contracts to which HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures is a party or by which HoldCo, ScottishPower or
any of their respective Subsidiaries or any of the ScottishPower Joint
Ventures or any of their respective assets or properties is bound, excluding
from the foregoing clauses (x) and (y) conflicts, violations, breaches,
defaults, rights of payment or reimbursement, terminations, modifications,
accelerations and creations and impositions of Liens which, individually or
in the aggregate, would not reasonably be expected to have a material adverse
effect on HoldCo, ScottishPower and their respective Subsidiaries taken as a
whole or on the ability of HoldCo, ScottishPower, the Partnership and Merger
Sub to consummate the transactions contemplated by this Agreement.
(b) Except (i) for the filing of a premerger notification report
by ScottishPower under the HSR Act, (ii) for the filing of the Registration
Statement with the SEC pursuant to the Securities Act, the declaration of the
effectiveness of the Registration Statement by the SEC and filings with
various state securities authorities that are required in connection with the
transactions contemplated by this Agreement, (iii) for the filing of the
Articles of Merger and other appropriate merger documents required by the BCA
with the Secretary of State and appropriate documents with the relevant
authorities of other states in which the Constituent Corporations are
qualified to do business, (iv) for the filings with, notices to, and
approvals of, the LSE and NYSE, (v) the filing of a notice pursuant to
Section 721 of the Defense Production Act of 1950, or any successor thereto
("EXON-FLORIO"), (vi) the approval of the FERC pursuant to the Power Act,
(vii) the approval of any jurisdictional state regulating agencies, (viii)
the giving of indications by the OFT, SOS, OFFER and OFWAT as described in
SECTIONS 7.01(k) and (l), (ix) as disclosed in SECTION 4.04 of the
ScottishPower Disclosure Letter and (x) for the Scheme Consents, no consent,
approval or action of, filing with or notice to any Governmental or
Regulatory Authority or other public or private third party is necessary or
required under any of the terms, conditions or provisions of any law or order
of any Governmental or Regulatory Authority or any Contract to which HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures is a party or by which HoldCo, ScottishPower or
any of their respective Subsidiaries or any of the ScottishPower Joint
Ventures or any of their respective assets or properties is bound for the
execution and delivery of this Agreement by each of HoldCo, ScottishPower,
the Partnership and Merger Sub, the performance by each of HoldCo,
ScottishPower, the Partnership and Merger Sub of its obligations hereunder or
the consummation of the transactions contemplated hereby other than such
consents, approvals, actions, filings and notices which the failure to make
or obtain, as the case may be, individually or in the aggregate, would not
reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole or on the
ability of HoldCo, ScottishPower, the Partnership and Merger Sub to
consummate the transactions contemplated by this Agreement.
31
4.05 SEC REPORTS AND FINANCIAL STATEMENTS. (a) ScottishPower has
delivered to the Company a true and complete copy of each form, report,
schedule, registration statement, definitive proxy statement and other
document (together with all amendments thereof and supplements thereto) filed
by HoldCo, ScottishPower or any of their respective Subsidiaries with the SEC
since December 31, 1995 (as such documents have since the time of their
filing been amended or supplemented, the "SCOTTISHPOWER SEC REPORTS"), which
are all the documents (other than preliminary materials) that HoldCo,
ScottishPower and their respective Subsidiaries were required to file with
the SEC since such date. As of their respective dates, the ScottishPower SEC
Reports (i) complied as to form in all material respects with the
requirements of the Securities Act or the Exchange Act, as the case may be,
and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. The audited consolidated financial statements and
unaudited interim consolidated financial statements (including, in each case,
the notes, if any, thereto) included in the ScottishPower SEC Reports (the
"SCOTTISHPOWER FINANCIAL STATEMENTS") complied as to form in all material
respects with the published rules and regulations of the SEC with respect
thereto, were prepared in accordance with generally accepted accounting
principles in the United Kingdom applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements) and fairly present (subject,
in the case of the unaudited interim financial statements, to normal,
recurring year-end audit adjustments (which are not expected to be,
individually or in the aggregate, materially adverse to HoldCo, ScottishPower
and their respective Subsidiaries taken as a whole)) the consolidated
financial position of ScottishPower and, in respect of periods ending after
the Scheme Date, HoldCo and their respective consolidated subsidiaries as at
the respective dates thereof and the consolidated results of their operations
and cash flows for the respective periods then ended. Except as set forth in
SECTION 4.05 of the ScottishPower Disclosure Letter, each Subsidiary of
ScottishPower and, after the Scheme Date, of Holdco is treated as a
consolidated subsidiary of ScottishPower or HoldCo, as the case may be, in
the ScottishPower Financial Statements for all periods covered thereby.
(b) All material filings required to be made by ScottishPower or
any of its Subsidiaries since December 31, 1995 in the United Kingdom under
the Electricity Act 1989, the Water Industry Act 1991, the Water Resources
Act 1991 and the Telecommunications Act 1984 have been filed with OFFER,
OFWAT and the Office of Telecommunications Services or any other appropriate
Governmental or Regulatory Authority, as the case may be, including all
material forms, statements, reports, agreements and all material documents,
exhibits, amendments and supplements appertaining thereto, including but not
limited to all material rates, tariffs, franchises, service agreements and
related documents, complied, as of their respective dates, in all material
respects with all applicable requirements of the statute and the rules and
regulations thereunder.
4.06 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed in
the ScottishPower SEC Reports filed prior to December 6, 1998 or SECTION 4.06
of the ScottishPower Disclosure Letter, (a) since March 31, 1998 there has
not been any change, event or development having, or that would reasonably be
expected to have, individually or in the aggregate, a material adverse effect
on HoldCo, ScottishPower and their respective Subsidiaries
32
taken as a whole (other than those changes, events, or developments occurring
as a result of general economic or financial conditions or which are not
unique to HoldCo, ScottishPower and their respective Subsidiaries but also
affect other entities who participate or are engaged in the lines of business
in which HoldCo, ScottishPower and their respective Subsidiaries are
engaged), and (b) between March 31, 1998 and December 6, 1998 ScottishPower,
its Subsidiaries and the ScottishPower Joint Ventures have conducted their
respective businesses only in the ordinary course substantially consistent
with past practice.
4.07 ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected or reserved against in the balance sheet for the period ended March
31, 1998 included in the ScottishPower Financial Statements or as disclosed
in SECTION 4.07 of the ScottishPower Disclosure Letter, neither HoldCo,
ScottishPower nor any of their respective Subsidiaries had at such date, or
has incurred since that date, any liabilities or obligations (whether
absolute, accrued, contingent, fixed or otherwise, or whether due or to
become due) of any nature that would be required by generally accepted
accounting principles in the United Kingdom to be reflected on a consolidated
balance sheet of ScottishPower and, in respect of periods ending after the
Scheme Date, HoldCo and their respective consolidated subsidiaries (including
the notes thereto), except liabilities or obligations (i) which were incurred
in the ordinary course of business consistent with past practice or (ii)
which have not been, and would not reasonably be expected to be, individually
or in the aggregate, materially adverse to HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole.
4.08 LEGAL PROCEEDINGS. Except as disclosed in the ScottishPower
SEC Reports filed prior to December 6, 1998 or in SECTION 4.08 of the
ScottishPower Disclosure Letter and except for environmental matters which
are governed by SECTION 4.15, (i) there are no actions, suits, arbitrations
or proceedings pending or, to the knowledge of HoldCo or ScottishPower,
threatened against, nor to the knowledge of HoldCo or ScottishPower are there
any Governmental or Regulatory Authority investigations or audits pending or
threatened against, HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures or any of their
respective assets and properties which, individually or in the aggregate,
would reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole or on the
ability of HoldCo, ScottishPower, the Partnership and Merger Sub to
consummate the transactions contemplated by this Agreement, and (ii) neither
HoldCo, ScottishPower nor any of their respective Subsidiaries nor any of the
ScottishPower Joint Ventures is subject to any order of any Governmental or
Regulatory Authority which, individually or in the aggregate, is having or
would reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole or on the
ability of HoldCo, ScottishPower, the Partnership and Merger Sub to
consummate the transactions contemplated by this Agreement.
4.09 INFORMATION SUPPLIED. (a) The registration statement on Form
F-4 to be filed with the SEC by HoldCo in connection with the issuance of
HoldCo ADSs in the Merger, as amended or supplemented from time to time (as
so amended and supplemented, the "REGISTRATION STATEMENT"), and any other
documents to be filed by HoldCo or ScottishPower with the SEC or any other
Governmental or Regulatory Authority in connection with the Merger and the
other transactions contemplated hereby will (in the case of the Registration
Statement and
33
any such other documents filed with the SEC under the Securities Act or the
Exchange Act) comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act, respectively, and
will not, on the date of its filing or, in the case of the Registration
Statement, at the time it becomes effective under the Securities Act, or at
the date the Proxy Statement is mailed to stockholders of the Company and at
the time of the Company Stockholders' Meeting, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading, except that no
representation is made by HoldCo, ScottishPower, the Partnership or Merger
Sub with respect to information supplied in writing by or on behalf of the
Company expressly for inclusion therein and information incorporated by
reference therein from documents filed by the Company or any of its
Subsidiaries with the SEC.
(b) The ScottishPower Disclosure Documents will, at all relevant
times, include all information relating to ScottishPower and HoldCo and their
respective Subsidiaries, and information which is within the knowledge of
each of the directors of ScottishPower and HoldCo (or which it would be
reasonable for them to obtain by making inquiries), which, in each case, is
required to enable the ScottishPower Disclosure Documents and the parties
hereto to comply in all material respects with all United Kingdom statutory
and other legal and regulatory provisions (including, without limitation, the
Companies Act, the FSA and the rules and regulations made thereunder, and the
rules and requirements of the LSE) and all such information contained in such
documents will be substantially in accordance with the facts and will not
omit anything material likely to affect the import of such information.
(c) Notwithstanding the foregoing provisions of this SECTION 4.09,
no representation or warranty is made by ScottishPower or HoldCo with respect
to statements made or incorporated by reference in the Registration
Statement, the Proxy Statement, the Listing Particulars, the Circular or the
Scheme Document based on information supplied by the Company expressly for
inclusion or incorporation by reference therein or based on information which
is not made in or incorporated by reference in such documents but which
should have been disclosed pursuant to SECTION 3.09.
4.10 PERMITS; COMPLIANCE WITH LAWS AND ORDERS. HoldCo,
ScottishPower, their respective Subsidiaries and the ScottishPower Joint
Ventures hold all permits, licenses, franchises variances, exemptions, orders
and approvals of all Governmental and Regulatory Authorities (other than
environmental permits which are governed by SECTION 4.15) necessary for the
lawful conduct of their respective businesses (the "SCOTTISHPOWER PERMITS"),
except for failures to hold such ScottishPower Permits which, individually or
in the aggregate, are not having and would not reasonably be expected to have
a material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. HoldCo, ScottishPower, their respective
Subsidiaries and the ScottishPower Joint Ventures are in compliance with the
terms of the ScottishPower Permits, except failures so to comply which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole. Except as disclosed in the
ScottishPower SEC Reports filed prior to December 6, 1998, none of HoldCo,
ScottishPower, their respective Subsidiaries or the ScottishPower Joint
34
Ventures are in violation of or default under any law or order of any
Governmental or Regulatory Authority, except for such violations or defaults
which, individually or in the aggregate, are not having and would not
reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole.
4.11 COMPLIANCE WITH AGREEMENTS. Except as disclosed in the
ScottishPower SEC Reports filed prior to December 6, 1998 or SECTION 4.11 of
the ScottishPower Disclosure Letter, none of HoldCo, ScottishPower or any of
their respective Subsidiaries or, to the knowledge of HoldCo or
ScottishPower, any other party thereto is in breach or violation of, or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with notice or lapse of time or both, would
reasonably be expected to result in a default under, (i) the memorandum or
articles of association (or other comparable charter documents) of HoldCo,
ScottishPower or any of their material Subsidiaries or (ii) any Contract to
which HoldCo, ScottishPower or any of their respective Subsidiaries is a
party or by which HoldCo, ScottishPower or any of their respective
Subsidiaries or any of their respective assets or properties is bound, except
in the case of clause (ii) for breaches, violations and defaults which,
individually or in the aggregate, are not having and would not reasonably be
expected to have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole.
4.12 TAXES. (a) Each of HoldCo, ScottishPower and their
respective Subsidiaries has filed all material tax returns and reports
required to be filed by it, or requests for extensions to file such returns
or reports have been timely filed or granted and have not expired and all tax
returns and reports are complete and accurate in all material respects.
HoldCo (if applicable), ScottishPower and each of their respective
Subsidiaries has paid (or HoldCo or ScottishPower has paid on its behalf) all
taxes shown as due on such tax returns and reports. The most recent
financial statements contained in the ScottishPower SEC Reports reflect an
adequate reserve for all taxes payable by ScottishPower and its Subsidiaries
for all taxable periods and portions thereof accrued through the date of such
financial statements, and no deficiencies for any taxes have been proposed,
asserted or assessed against HoldCo, ScottishPower or any of their respective
Subsidiaries that are not adequately reserved for, except for inadequately
reserved taxes and inadequately reserved deficiencies that would not,
individually or in the aggregate, have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole. No
requests for waivers of the time to assess any taxes against HoldCo,
ScottishPower or any of their respective Subsidiaries have been granted or
are pending, except for requests with respect to such taxes that have been
adequately reserved for in the most recent financial statements contained in
the ScottishPower SEC Reports, or, to the extent not adequately reserved, the
assessment of which would not, individually or in the aggregate, have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole.
(b) Neither HoldCo, ScottishPower nor any of their respective
Subsidiaries has taken any action or has any knowledge of any fact or
circumstance that is reasonably likely to prevent the Merger from qualifying
as a tax-free reorganization within the meaning of Code Section 368(a).
35
(c) UKSub 1 and UKSub 2 are not public limited companies.
(d) From the date hereof through the Share Transfer, ScottishPower
will directly own the whole of the issued share capital of UKSub 1 and UKSub
2. Following the Share Transfer and through the Closing Date, HoldCo will
directly own the whole of the issued share capital of UKSub 1 and UKSub 2.
(e) UKSub 1 and UKSub 2 directly own all of the equity interests
in the Partnership.
(f) Prior to the Closing Date, ScottishPower or HoldCo will make
(i) the elections necessary pursuant to Section 301.7701-3 of the U.S.
Treasury regulations promulgated under the Code to treat UKSub 1 and UKSub 2
as entities disregarded as separate from ScottishPower and HoldCo and (ii) an
election under Section 301.7701-3 of the U.S. Treasury regulations to treat
the Partnership as an association taxable as a corporation. Neither
ScottishPower, HoldCo, nor any of their respective Subsidiaries has taken any
action that (or has failed to take any action if such failure) would
reasonably be likely to cause UKSub 1 or UKSub 2 to be characterized as an
association taxable as a corporation for U.S. federal income tax purposes.
(g) Following the Scheme Date, HoldCo will satisfy either directly
or indirectly, through the activities of one or more "qualified
subsidiaries", the active trade or business test specified in Section
1.367(a)-3(c)(3) of the U.S. Treasury regulations for a minimum period of
three years prior to the Closing Date.
(h) None of HoldCo, ScottishPower, UKSub 1, UKSub 2, the
Partnership, nor any other affiliate of HoldCo or ScottishPower has any
intention to redeem, acquire, or to cause the Company or any affiliate of the
Company to acquire, or to arrange for another person to acquire, any of the
ADS Consideration or the Ordinary Share Consideration.
(i) Neither HoldCo, ScottishPower nor any affiliate thereof,
directly or indirectly, has paid any expense incurred by the Company, any
Company affiliate or any Company stockholder in connection with the
transactions contemplated by this Agreement.
(j) Neither HoldCo, ScottishPower nor any affiliate thereof,
directly or indirectly, has loaned any funds to any escrow account, trust or
other fund established to pay any expenses incurred by the Company, any
Company affiliate or any Company stockholder in connection with the
transactions contemplated by this Agreement.
(k) Neither HoldCo, ScottishPower nor any affiliate thereof,
directly or indirectly, owns any stock issued by the Company unless acquired
directly from the Company.
4.13 SCOTTISHPOWER EMPLOYEE BENEFIT PLANS. (a) ScottishPower has
made available to the Company complete and correct copies, as of December 6,
1998, of: (i) the current trust deeds and rules of each of the material
employee benefit plans to which ScottishPower and its Subsidiaries make or
could become liable to make payments for providing retirement, death,
disability or life assurance benefits (the "SCOTTISHPOWER EMPLOYEE BENEFIT
36
PLANS") (including any draft amendments); (ii) the most recently prepared
explanatory booklets and announcements relating to each of the ScottishPower
Employee Benefit Plans; (iii) a copy of the actuary's report on the latest
actuarial valuation of the ScottishPower Employee Benefit Plans, if
applicable; and (iv) the rules of the ScottishPower Share Schemes.
(b) The ScottishPower Employee Benefit Plans are the only
material schemes to which HoldCo, ScottishPower and their respective
Subsidiaries make or could become liable to make payments for providing
retirement, death, disability or life insurance benefits except for any
schemes for providing retirement, death or disability or life insurance
benefits ("HOLDCO EMPLOYEE BENEFIT PLANS") which HoldCo establishes in
connection with the Scheme of Arrangement which are in all material
respects similar to the ScottishPower Employee Benefit Plans.
(c) To the extent such exemption is intended by
ScottishPower, the ScottishPower Employee Benefit Plans are exempt
approved schemes within the meaning of Chapter 1 Part XIV of the Income
and Corporation Taxes Act 1988. Except as specifically set forth in
SECTION 4.13 of the ScottishPower Disclosure Letter, members of the
ScottishPower Employee Benefit Plans are contracted-out of the State
Earnings Related Pension Scheme.
(d) To the knowledge of HoldCo or ScottishPower, there is no
amount which is treated by Section 144 of the Pension Schemes Act 1993
or Section 75 of the Pensions Act 1995 as a debt due to the trustees of
the ScottishPower Employee Benefit Plans or from ScottishPower or any of
its Subsidiaries to the trustees of any other benefit plan except for
such debts which would not reasonably be expected to have a material
adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. The ScottishPower Employee Benefit Plans
have not ceased to admit new members.
(e) Except as set forth in SECTION 4.13 of the ScottishPower
Disclosure Letter and except for disputes which would not reasonably be
expected to have a material adverse effect on HoldCo, ScottishPower and
their respective Subsidiaries taken as a whole, there is no dispute
about the benefits payable under the ScottishPower Employee Benefit
Plans and, to the knowledge of HoldCo or ScottishPower, there are no
circumstances which might give rise to any such dispute.
(f) To the knowledge of HoldCo or ScottishPower, the
actuary's report on the latest actuarial valuation accurately describes
the financial position of each ScottishPower Employee Benefit Plan for
which an actuarial valuation is required by law at its effective date
and in accordance with the assumptions employed for that valuation.
Except as set forth in SECTION 4.13 of the ScottishPower Disclosure
Letter, nothing has happened since that date which would, to a material
extent, affect the level of funding of any ScottishPower Employee
Benefit Plan and, since that date, contributions have been paid to each
ScottishPower Employee Benefit Plan at the rate recommended by the
actuary. Except as set forth in SECTION 4.13 of the ScottishPower
Disclosure Letter, no assets have been withdrawn by HoldCo,
ScottishPower or any of their respective Subsidiaries from any
ScottishPower Employee Benefit Plan (except to pay benefits or by way of
37
reimbursement of expenses) since the effective date of the latest
actuarial valuation of that plan.
(g) Except as set forth in SECTION 4.13 of the ScottishPower
Disclosure Letter or as would not reasonably be expected to have a
material adverse effect on HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole, the ScottishPower Employee Benefit Plans
comply with and have been administered in accordance with all applicable
laws, regulations and requirements. All amounts due to the
ScottishPower Employee Benefit Plans at any time prior to the month in
which this Agreement is signed have been paid.
4.14 LABOR MATTERS. (a) Except as set forth in SECTION 4.14 of
the ScottishPower Disclosure Letter, neither HoldCo, ScottishPower nor any of
their respective Subsidiaries is a party to any collective bargaining
agreement, recognition agreement, European Works Council or other labor
agreement with any union, labor organization or other responsible body.
Except as disclosed in the ScottishPower SEC Reports filed prior to December
6, 1998 or in SECTION 4.14 of the ScottishPower Disclosure Letter, there are
no disputes pending or, to the knowledge of HoldCo or ScottishPower,
threatened between HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures and any trade union
or other representatives of its employees, except as would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect
on HoldCo, ScottishPower and their respective Subsidiaries taken as a whole,
and, to the knowledge of HoldCo or ScottishPower, there are no material
organization efforts presently being made involving any of the now
unorganized employees of HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures. Since December 31,
1995, there has been no work stoppage, strike or other concerted action by
employees of HoldCo, ScottishPower or any of their respective Subsidiaries
except as would not, individually or in the aggregate, reasonably be expected
to have a material adverse effect on HoldCo, ScottishPower and their
respective Subsidiaries taken as a whole.
(b) To the knowledge of HoldCo or ScottishPower, neither HoldCo,
ScottishPower nor any of their respective Subsidiaries nor any of the
ScottishPower Joint Ventures is in violation of any labor laws in any country
(or political subdivision thereof) in which they transact business, except
for such violations as would not, individually or in the aggregate,
reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole.
4.15 ENVIRONMENTAL MATTERS. Except as disclosed in the
ScottishPower SEC Reports filed prior to December 6, 1998 or in SECTION 4.15
of the ScottishPower Disclosure Letter and except as would not, individually
or in the aggregate, reasonably be expected to have a material adverse effect
on HoldCo, ScottishPower and their respective Subsidiaries taken as a whole:
(a) (i) Each of HoldCo, ScottishPower and their respective
Subsidiaries and the ScottishPower Joint Ventures is in compliance with all
applicable Environmental Laws (as hereinafter defined); and
38
(ii) Neither HoldCo, ScottishPower nor any of their respective
Subsidiaries nor any of the ScottishPower Joint Ventures has received
any written communication from any person or Governmental or Regulatory
Authority that alleges that HoldCo, ScottishPower or any of their
respective Subsidiaries or Joint Ventures is not in such compliance with
applicable Environmental Laws.
(b) Each of HoldCo, ScottishPower, their respective Subsidiaries
and the ScottishPower Joint Ventures has obtained all environmental, health
and safety permits and governmental authorizations (collectively, the
"Environmental Permits") necessary for the construction of its facilities and
the conduct of its operations, as applicable, and all such Environmental
Permits are in full force and effect or, where applicable, a renewal
application has been timely filed and is pending agency approval, and HoldCo,
ScottishPower, their respective Subsidiaries and the ScottishPower Joint
Venture are in compliance with all terms and conditions of the Environmental
Permits.
(c) There is no Environmental Claim (as hereinafter defined)
pending
(i) against HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures;
(ii) to the knowledge of HoldCo or ScottishPower, against any
person or entity whose liability for any Environmental Claim HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures has or may have retained or assumed either
contractually or by operation of law; or
(iii) against any real or personal property or operations
which HoldCo, ScottishPower or any of their respective Subsidiaries or any of
the ScottishPower Joint Ventures owns, leases or manages in whole or in part.
(d) To HoldCo's or ScottishPower's knowledge, there have not been
any Releases (as hereinafter defined) of any Hazardous Material (as
hereinafter defined) that would be reasonably likely to form the basis of any
Environmental Claim against HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures, or against any
person or entity whose liability for any Environmental Claim HoldCo,
ScottishPower or any of their respective Subsidiaries or any of the
ScottishPower Joint Ventures has or may have retained or assumed either
contractually or by operation of law.
(e) As used in this SECTION 4.15:
(i) "ENVIRONMENTAL CLAIMS" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, liens, investigations, proceedings or notices of noncompliance,
liability or violation (written or oral) by any person or entity (including
any Governmental or Regulatory Authority) alleging potential liability
(including, without limitation, potential responsibility or liability for
enforcement, investigatory costs, cleanup costs, governmental response costs,
removal costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from
39
(A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location,
whether or not owned, operated, leased or managed by
HoldCo, ScottishPower or any of their respective
Subsidiaries or any of the ScottishPower Joint Ventures; or
(B) circumstances forming the basis of any violation, or
alleged violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from the presence or
Release of any Hazardous Materials;
(ii) "ENVIRONMENTAL LAWS" means all European Union, national,
regional, or local laws, rules and regulations relating to pollution, the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human health
as its relates to the environmental including, without limitation, laws and
regulations relating to Releases or threatened Releases of Hazardous
Materials, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials including, without limitation, Part II and paragraphs 161
and 162 of Schedule 22 of the Environment Act 1995 and the Department of the
Environment Transport and the Regions Consultation Draft Guidance on
Contaminated Land dated October 1998 but not to the extent that any
modification thereof introduced in the final form of this guidance imposes
materially more onerous or stringent requirements in respect of contaminated
land or pollution.
(iii) "HAZARDOUS MATERIALS" means (a) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation, and transformers or other
equipment that contain dielectric fluid containing polychlorinated biphenyls;
and (b) any chemicals, materials or substances which are now defined as or
included in the definition of "HAZARDOUS SUBSTANCES", "HAZARDOUS WASTES",
"HAZARDOUS MATERIALS", "EXTREMELY HAZARDOUS WASTES", "RESTRICTED HAZARDOUS
WASTES", "TOXIC SUBSTANCES", "TOXIC POLLUTANTS", or words of similar import,
under any Environmental Law; and (c) any other chemical, material, substance
or waste, exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which HoldCo, ScottishPower or any of
their respective Subsidiaries or any of the ScottishPower Joint Ventures
operates or any jurisdiction which has received such chemical, material,
substance or waste from HoldCo, ScottishPower or their respective
Subsidiaries; and
(iv) "RELEASE" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
4.16 INTELLECTUAL PROPERTY RIGHTS. HoldCo, ScottishPower and their
respective Subsidiaries have all right, title and interest in, or a valid and
binding license to use,
40
all Intellectual Property individually or in the aggregate material to the
conduct of the businesses of HoldCo, ScottishPower and their respective
Subsidiaries taken as a whole. Neither HoldCo, ScottishPower nor any of
their respective Subsidiaries is in default (or with the giving of notice or
lapse of time or both, would be in default) under any license to use such
Intellectual Property, to the knowledge of HoldCo or ScottishPower, such
Intellectual Property is not being infringed by any third party, and neither
HoldCo, ScottishPower nor any of their respective Subsidiaries is infringing
any Intellectual Property of any third party, except for such defaults and
infringements which, individually or in the aggregate, are not having and
would not reasonably be expected to have a material adverse effect on HoldCo,
ScottishPower and their respective Subsidiaries taken as a whole.
4.17 VOTE REQUIRED. The only votes of the holders of any class of
shares of ScottishPower or, after the Scheme Date, Holdco required to approve
the Merger and the other transactions contemplated hereby (other than those
set forth in paragraphs 1 through 3 of Schedule II and any vote which may be
required in order to give effect to the conversion of the Company Stock
Options in accordance with SECTION 6.10 or to give effect to the amendments
to HoldCo's Articles of Association in accordance with SECTION 6.03(c)) are
the affirmative vote of a majority of such ordinary shareholders of
ScottishPower as (being entitled to do so) are present and vote (or, in the
case of a vote taken on a poll, the affirmative vote by shareholders or their
proxies representing a majority of the ScottishPower Ordinary Shares in
respect of which votes were validly exercised) at the ScottishPower
Shareholders Meeting in relation to the approval of the Merger and the Scheme
of Arrangement.
4.18 [Intentionally Omitted]
4.19 OWNERSHIP OF COMPANY COMMON STOCK. Neither HoldCo,
ScottishPower nor any of their respective Subsidiaries or other affiliates
beneficially owns any shares of Company Common Stock.
4.20 INSURANCE. Except as set forth in SECTION 4.20 of the
ScottishPower Disclosure Letter, each of ScottishPower and its Subsidiaries
is, and has been continuously since January 1, 1994 (and at all times
following the Scheme Date, HoldCo and its Subsidiaries will be), insured with
financially responsible insurers in such amounts and against such risks and
losses as are customary in all material respects for companies conducting the
business conducted by HoldCo, ScottishPower and their respective
Subsidiaries during such time period. Except as set forth in SECTION 4.20 of
the ScottishPower Disclosure Letter, neither HoldCo, ScottishPower nor any of
their respective Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of HoldCo,
ScottishPower or any of their respective Subsidiaries. The insurance
policies of Holdco, ScottishPower and each of their respective Subsidiaries
are valid and enforceable policies.
4.21 YEAR 2000. ScottishPower and its Subsidiaries have (and at
all times following the Scheme Date, to the extent (if at all) then
necessary, HoldCo will have) put into effect practices and programs which
ScottishPower (or HoldCo) reasonably believes will enable all material
software, hardware and equipment (including microprocessors) that are owned
or utilized by ScottishPower (or HoldCo) or any of their respective
Subsidiaries in the
41
operations of its or their respective business to be capable, by December 31,
1999 of accounting for all calculations using a century and date sensitive
algorithm for the year 2000, and the fact that the year 2000 is a leap year
and to otherwise continue to function without material interruption caused by
the occurrence of the year 2000.
4.22 JOINT VENTURE REPRESENTATIONS. Each representation and
warranty made by HoldCo or ScottishPower in this Article IV relating to a
ScottishPower Joint Venture that is neither operated nor managed by HoldCo or
ScottishPower or a Subsidiary thereof shall be deemed to be made only to
HoldCo's and ScottishPower's knowledge.
ARTICLE V
COVENANTS
5.01 COVENANTS OF THE COMPANY. At all times from and after
December 6, 1998 until the Effective Time, the Company covenants and agrees
as to itself and its Subsidiaries that (except as expressly contemplated or
permitted by this Agreement, or to the extent that HoldCo or ScottishPower
shall otherwise previously consent in writing, which consent shall not be
unreasonably withheld or delayed):
(a) ORDINARY COURSE. The Company and each of its Subsidiaries
shall conduct their businesses only in, and the Company and each of its
Subsidiaries shall not take any action except in, the ordinary course
substantially consistent with past business practice. Without limiting the
generality of the foregoing, the Company and its Subsidiaries shall use all
commercially reasonable efforts to preserve intact in all material respects
their present business organizations, to maintain in effect all existing
material permits, to keep available the services of their key officers and
employees, to maintain their assets and properties in good working order and
condition, ordinary wear and tear excepted, to maintain insurance on their
tangible assets and businesses in substantially the same amounts and against
substantially the same risks and losses as are currently in effect, to
preserve their relationships with customers and suppliers and others having
significant business dealings with them and to comply in all material
respects with all laws and orders of all Governmental or Regulatory
Authorities applicable to them.
(b) CHARTER DOCUMENTS. The Company shall not, nor shall it permit
any of its Subsidiaries to, amend or propose to amend its certificate or
articles of incorporation or bylaws or its memorandum and articles of
association (or other comparable corporate charter documents).
(c) DIVIDENDS. The Company shall not, nor shall it permit any of
its Subsidiaries to, (i) declare, set aside or pay any dividends on or make
other distributions in respect of any of its capital stock or share capital,
except:
(A) that the Company may continue the declaration and payment
of regular cash dividends (including increases consistent
with past practice) on Company Common Stock and the
Company Preferred Stock, with usual record and payment
dates for such dividends in accordance with past dividend
practice; provided, that no such
42
dividend on the Company Common Stock shall exceed the
amount budgeted therefor in the Company Budget (as
hereinafter defined), and
(B) for the declaration and payment of dividends by (x) a
wholly-owned Subsidiary solely to its parent corporation,
(y) Bridger Coal Company in accordance with past practice
and (z) Subsidiaries of regular cash dividends with usual
record and payment dates (including increases consistent
with past practice) in accordance with past dividend
practice, and
(ii) split, combine, reclassify or take similar action with respect to any of
its capital stock or share capital or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or comprised in its share capital, (iii)
except as disclosed in SECTION 5.01(c) of the Company Disclosure Letter,
adopt a plan of complete or partial liquidation or resolutions providing for
or authorizing such liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization or (iv) except as
disclosed in SECTION 5.01(c) of the Company Disclosure Letter, directly or
indirectly redeem, repurchase or otherwise acquire any shares of its capital
stock or comprised in its share capital or any Option with respect thereto
except:
(A) in connection with intercompany purchases of capital
stock or share capital,
(B) for the purpose of funding employee stock ownership or
dividend reinvestment, stock purchase plans and other
incentive plans disclosed in SECTION 5.01(d) of the
Company Disclosure Letter in accordance with past
practice, and
(C) Prior to the Closing Date, the Company shall redeem all
outstanding shares of its $1.28 Series, $1.18 Series and
$1.16 Series of no par serial preferred stock.
(d) SHARE ISSUANCES. The Company shall not, nor shall it permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose
the issuance, delivery or sale of, any shares of its capital stock or
comprised in its share capital or any Option with respect thereto (other than
(i) the issuance of Company Common Stock upon the exercise of Options issued
pursuant to the Company's Stock Incentive Plan outstanding on December 6,
1998 and in accordance with their present terms, (ii) except as specifically
set forth under the heading "Long-Term Incentive Awards" on the Schedule of
Ongoing Compensation Obligations attached to SECTION 5.01(d) of the Company
Disclosure Letter, the issuance of options or awards pursuant to the
Company's Stock Incentive Plan in accordance with its present terms and only
in connection with the hiring of new employees, and the issuance of shares of
Company Common Stock upon exercise of such options or awards, (iii) the
issuance by a wholly-owned Subsidiary of its capital stock to its parent
corporation, or modify or amend any right of any holder of outstanding shares
43
of capital stock or Options with respect thereto and (iv) shares of Company
Preferred Stock with a stated value of up to an aggregate of $250 million).
(e) ACQUISITIONS. Except as set forth in SECTION 5.01(e) of the
Company Disclosure Letter and other than as provided in the 1999 operating
budget of the Company, a copy of which has been disclosed to and discussed
with ScottishPower, or any other budget of the Company thereafter approved by
HoldCo or ScottishPower, which approval shall not be unreasonably withheld
(collectively, the "COMPANY BUDGET"), the Company shall not, nor shall it
permit any of its Subsidiaries to, acquire (by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner) any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets in excess of $25 million
in any one transaction; PROVIDED, that this SECTION 5.01(e) shall not
prohibit any capital expenditures made in accordance with SECTION 5.01(j).
(f) DISPOSITIONS. Other than as set forth in SECTION 5.01(f) of
the Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries to, sell, lease, grant any security interest in or
otherwise dispose of or encumber any of its assets or properties, other than
dispositions in the ordinary course of its business consistent with past
practice or having an aggregate net book value of $25 million or less in any
one transaction.
(g) INDEBTEDNESS. Other than as expressly provided in the Company
Budget, the Company shall not, nor shall it permit any of its Subsidiaries
to, incur or guarantee any indebtedness (including any debt borrowed or
guaranteed or otherwise assumed, including, without limitation, the issuance
of debt securities or warrants or rights to acquire debt) or enter into any
"keep well" or other agreement to maintain any financial condition of another
person or enter into any arrangement having the economic effect of any of the
foregoing other than (i) short-term indebtedness in the ordinary course of
business consistent with past practice (such as the issuance of commercial
paper or the use of existing credit facilities) in an aggregate amount not
exceeding $500 million; (ii) long-term indebtedness not aggregating more than
$200 million and (iii) indebtedness entered into in connection with the
refinancing of indebtedness outstanding on December 6, 1998 or incurred in
compliance with this SECTION 5.01(g).
(h) EMPLOYEE BENEFITS. Except as set forth on SECTION 5.01(h) of
the Company Disclosure Letter, the Company shall not, nor shall it permit any
of its Subsidiaries to, enter into, adopt, amend (except as may be required
by applicable law) or terminate any Company Employee Benefit Plan, or
increase in any manner the compensation or fringe benefits of any director or
executive officer, or, except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result
in a material increase in benefits or compensation expense to the Company and
its Subsidiaries taken as a whole, increase in any manner the compensation or
fringe benefits of any employee, or pay any benefit not required by any plan
or arrangement in effect as of December 6, 1998 and, in no event shall the
Company or its Subsidiaries be permitted to grant to any employee any rights
that are not in effect on December 6, 1998 to any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or increase in
44
obligations to fund benefits with respect to that employee resulting from a
change in control or change in ownership of the Company or any of its
Subsidiaries.
(i) AFFILIATE CONTRACTS. Except as disclosed in SECTION 5.01(i)
of the Company Disclosure Letter, the Company shall not, nor shall it permit
any of its Subsidiaries or, within the exercise of its reasonable commercial
efforts, its Joint Ventures to, except as otherwise expressly provided for in
this Agreement, enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction outside the ordinary course of
business consistent with past practice or not on an arm's length basis, with
any affiliate of such party or any of its Subsidiaries.
(j) CAPITAL EXPENDITURES. The Company shall not, nor shall it
permit any of its Subsidiaries to, make any capital expenditures or
commitments other than (i) as required by applicable law, (ii) capital
expenditures incurred in connection with the repair or replacement of
facilities destroyed or damaged due to casualty or accident (whether or not
covered by insurance), and (iii) other capital expenditures in excess of 110%
of the aggregate amount provided for such purposes in the Company Budget.
(k) 1935 ACT. The Company shall not, nor shall it permit any of
its Subsidiaries to, engage in any activities which would cause a change in
its status, or that of its Subsidiaries, under the 1935 Act, including any
action or inaction that would cause the prior approval of the SEC under the
1935 Act to be required for the consummation of the transactions contemplated
hereby.
(l) REGULATORY STATUS. The Company shall not, nor shall it permit
any of its Subsidiaries to, agree or consent to any material agreements or
modifications of material existing agreements with any Government or
Regulatory Authority in respect of the operations of their businesses except
where following discussion with the relevant authority such agreements or
modifications are imposed upon the Company.
(m) TRANSMISSION, GENERATION. Except as required pursuant to
tariffs on file with the FERC as of December 6, 1998, or as set forth in
SECTION 5.02(m) of the Company Disclosure Letter, the Company shall not, nor
shall it permit its Subsidiaries to:
(i) commence construction of any additional generating,
transmission or delivery capacity in excess of 500 megawatts, or
(ii) obligate itself to purchase or otherwise acquire, or to
sell or otherwise dispose of, or to share, any additional generating,
transmission or delivery plants or facilities, in an amount in excess of
$25 million in any one transaction, except as set forth in the Company
Budget. Any regulatory order potentially imposing any such obligation
shall be immediately forwarded to HoldCo or ScottishPower.
(n) ACCOUNTING. The Company shall not, nor shall it permit any of
its Subsidiaries to, make any material changes in their accounting methods,
except as required by law, rule, regulation or applicable generally accepted
accounting principles.
45
(o) TAX MATTERS. The Company shall not take any action which (or
fail to take any action if such failure) would cause the Merger to fail to
qualify as a reorganization described in Code Section 368(a).
(p) NO BREACH. The Company shall not, nor shall it permit any of
its Subsidiaries to willfully take or fail to take any action that would or
is reasonably likely to result (i) in a material breach of any provision of
this Agreement, or (ii) in any of its representations and warranties set
forth in this Agreement being untrue on and as of the Closing Date.
(q) NO LITIGATION. The Company shall not, nor shall it permits
any of its Subsidiaries to, initiate any material actions, suits,
arbitrations or proceedings.
(r) TAX-EXEMPT STATUS. The Company shall not, nor shall it permit
any of its Subsidiaries to, except as otherwise expressly provided for in
this Agreement, take any action that would be reasonably likely to jeopardize
the qualification of any material amount of outstanding revenue bonds which
qualify on December 6, 1998 under Section 142(a) of the Code as "exempt
facility bonds" or as tax-exempt industrial development bonds under Section
103(b)(4) of the Internal Revenue Code of 1954, as amended, prior to the
enactment of the Tax Reform Act of 1986.
(s) ADVICE OF CHANGES. The Company shall confer with HoldCo or
ScottishPower on a regular and frequent basis with respect to the Company's
business and operations and other matters relevant to the Merger, and shall
promptly advise HoldCo or ScottishPower, orally and in writing, of any
material change or event, including, without limitation, any complaint,
investigation or hearing by any Governmental or Regulatory Authority (or
communication indicating the same may be contemplated) or the institution or
threat of material litigation; provided that the Company shall not be
required to make any disclosure to the extent such disclosure would
constitute a violation of any applicable law or regulation.
(t) NOTICE AND CURE. The Company will notify HoldCo or
ScottishPower in writing of, and will use all commercially reasonable efforts
to cure before the Closing, any event, transaction or circumstance, as soon
as practical after it becomes known to the Company, that causes or will cause
any covenant or agreement of the Company under this Agreement to be breached
or that renders or will render untrue in any material respect any
representation or warranty of the Company contained in this Agreement. The
Company also will notify HoldCo or ScottishPower in writing of, and will use
all commercially reasonable efforts to cure, before the Closing, any
violation or breach, as soon as practical after it becomes known to the
Company, of any representation, warranty, covenant or agreement made by the
Company. No notice given pursuant to this paragraph shall have any effect on
the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining satisfaction of any condition contained
herein.
(u) FULFILLMENT OF CONDITIONS. Subject to the terms and
conditions of this Agreement, the Company will take or cause to be taken all
commercially reasonable steps necessary or desirable and will proceed
diligently and in good faith to satisfy each condition to its obligations
contained in this Agreement and to consummate and make effective the
46
transactions contemplated by this Agreement, and the Company will not, nor
will it permit any of its Subsidiaries to, take or fail to take any action
that would reasonably be expected to result in the nonfulfillment of any such
condition.
5.02 COVENANTS OF HOLDCO AND SCOTTISHPOWER. Each of HoldCo, at all
times from and after the date hereof until the Effective Time, and
ScottishPower, at all times from December 6, 1998 until the Effective Time,
covenants and agrees as to itself and its Subsidiaries that (except for the
transactions contemplated or permitted by this Agreement or to the extent
that the Company shall otherwise previously consent in writing, which consent
shall not be unreasonably withheld or delayed):
(a) ORDINARY COURSE. Except pursuant to the Scheme of Arrangement
and the establishment of HoldCo Share Schemes and HoldCo Employee Benefit
Plans, HoldCo, ScottishPower and each of their respective Subsidiaries shall
conduct their businesses only in, and HoldCo, ScottishPower and each of their
respective Subsidiaries shall not take any action except in, the ordinary
course consistent with past practice. Without limiting the generality of the
foregoing, HoldCo, ScottishPower and their respective Subsidiaries shall use
all commercially reasonable efforts to preserve intact in all material
respects their present business organizations and reputation, to maintain in
effect all existing permits, to keep available the services of their key
officers and employees, to maintain their assets and properties in good
working order and condition, ordinary wear and tear excepted, to maintain
insurance on their tangible assets and businesses in such amounts and against
such risks and losses as are currently in effect, to preserve their
relationships with customers and suppliers and others having significant
business dealings with them and to comply in all material respects with all
laws and orders of all Governmental or Regulatory Authorities applicable to
them.
(b) CHARTER DOCUMENTS. Other than as contemplated by SECTION
6.03(c) and except to the extent required to comply with applicable law or
the rules of the LSE, HoldCo (after the Scheme Date) and ScottishPower shall
not, nor shall they permit any of their respective Subsidiaries to, amend or
propose to amend their respective certificates or articles of incorporation
or bylaws or their respective memoranda and articles of association (or other
comparable corporate charter documents).
(c) DIVIDENDS. Other than as set forth in the ScottishPower
Budget (as defined in SECTION 5.02(e)), HoldCo and, prior to the Scheme Date,
ScottishPower shall not, nor shall they permit any of their respective
Subsidiaries to,
(i) declare, set aside or pay any dividends on or make other
distributions in respect of any of its capital stock or share capital,
except:
(A) that, ScottishPower may, (I) as regards record dates for
the payment of dividends occurring prior to the Scheme
Date, continue the declaration and payment of regular
cash dividends (including increases consistent with past
practice) on ScottishPower Ordinary Shares, with usual
record and payment dates for such dividends in accordance
with past dividend practice; provided, that no such
47
dividend shall exceed by more than 12% the dividend
payable during the prior fiscal year in respect of the
comparable time period and (II) before, on or after the
Scheme Date, effect the Share Transfer, and
(B) that, as regards record dates for the payment of
dividends occurring after the Scheme Date, HoldCo may
declare and pay regular cash dividends (including
increases consistent with ScottishPower's past practice)
on HoldCo Ordinary Shares, with usual record and payment
dates for such dividends in accordance with
ScottishPower's past dividend practice; provided, that no
such dividend shall, when taken together with any
dividend paid pursuant to clause (A)(I) of this paragraph
(c), exceed more than 12% of the dividend payable by
ScottishPower during the prior fiscal year in respect of
the comparable time period, and
(C) for the declaration and payment of dividends by a
wholly-owned Subsidiary solely to its parent corporation
(including for the avoidance of doubt dividends by
ScottishPower to HoldCo following the Scheme Date), and
(ii) other than pursuant to the Scheme of Arrangement or in connection
with the restructuring of the transactions contemplated hereby pursuant
to SECTION 6.07, split, combine, reclassify or take similar action with
respect to any of its capital stock or share capital or issue or
authorize or propose the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or
comprised in its share capital (except that HoldCo may subdivide its
ordinary shares as referred to in SECTION 4.02(a)), (iii) other than
pursuant to the Scheme of Arrangement, adopt a plan of complete or
partial liquidation or resolutions providing for or authorizing such
liquidation or a dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization or (iv) other than pursuant to
the Scheme of Arrangement or as described in SECTION 5.02(c) of the
ScottishPower Disclosure Letter, directly or indirectly redeem,
repurchase or otherwise acquire any shares of its capital stock or
comprised in its share capital or any Option with respect thereto except:
(A) in connection with intercompany purchases of capital
stock or share capital,
(B) for the purpose of funding employee share ownership,
dividend reinvestment, stock purchase and other incentive
plans disclosed in SECTION 5.02 (c) of the ScottishPower
Disclosure Letter in accordance with past practice,
(C) the redemption of the ScottishPower Special Share or the
HoldCo Special Share in accordance with its terms or
48
(D) the redemption of the 49,998 HoldCo non-voting redeemable
shares referred to in SECTION 4.02.
(d) SHARE ISSUANCES. Other than pursuant to the Scheme of
Arrangement, (i) ScottishPower shall not, nor shall it permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock or comprised
in its share capital or any Option with respect thereto (other than (A) up to
125 million shares of ScottishPower Ordinary Shares for general corporate
purposes, (B) the issuance of ScottishPower Ordinary Shares or stock
appreciation, share awards or similar rights, as the case may be, pursuant to
the ScottishPower Share Schemes, in each case outstanding on December 6, 1998
and in accordance with their present terms, subject to any amendments made in
the ordinary course consistent with past practice or pursuant to any share
scheme of ScottishPower to be adopted in the ordinary course consistent with
past practice, (C) the issuance of options or awards pursuant to
ScottishPower Share Schemes in accordance with their present terms, subject
to any amendments made in the ordinary course of business consistent with
past practice or as reasonably necessary to reflect the Scheme of Arrangement
and, except as set forth in SECTION 5.02(d) of the ScottishPower Disclosure
Letter, only in connection with the hiring of new employees and the issuance
of shares of ScottishPower Ordinary Shares upon exercise of such options or
awards, and (D) the issuance by a wholly-owned Subsidiary of its capital
stock to its parent corporation, or modify or amend any right of any holder
of outstanding shares of capital stock or Options with respect thereto).
(ii) HoldCo shall not, nor shall it permit any of its
Subsidiaries to, issue, deliver or sell, or authorize or propose the
issuance, delivery or sale of, any shares of its capital stock other
than in the amounts and for the purposes set forth in clause (i) of this
paragraph (d) and other than pursuant to the HoldCo Share Schemes or
pursuant to the arrangement referred to in SECTION 4.02(c)(iv) or
pursuant to the ScottishPower Share Schemes as amended as reasonably
necessary to reflect the Scheme of Arrangement.
(e) ACQUISITIONS. Other than as provided in the 1999 operating
budget of ScottishPower, a copy of which has been disclosed to and discussed
with the Company, or any subsequently-adopted budget of ScottishPower
disclosed to the Company (collectively, the "SCOTTISHPOWER BUDGET") or
pursuant to the Scheme of Arrangement, neither HoldCo nor ScottishPower
shall, nor shall they permit any of their respective Subsidiaries to, acquire
(by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other
manner) any business or any corporation, partnership, association or other
business organization or division thereof (i) in excess of 750 million
British pound sterling or (ii) if such acquisition would have a material
adverse affect on HoldCo, ScottishPower and their respective Subsidiaries
taken as a whole, without the prior written consent of the Company.
(f) DISPOSITIONS. Other than as provided in the ScottishPower
Budget, and other than the transfer of all of the outstanding shares of UKSub
1 and UKSub 2 from ScottishPower to HoldCo, neither HoldCo nor ScottishPower
shall, nor shall they permit any of their respective Subsidiaries to, sell,
lease, grant any security interest in or otherwise dispose of or encumber any
of its assets or properties, other than dispositions in the ordinary course
of its business consistent with past practice and having an aggregate value
of less than L750 million.
49
(g) INDEBTEDNESS . Neither HoldCo nor ScottishPower shall, nor
shall they permit any of their respective Subsidiaries to, incur or guarantee
any indebtedness (including any debt borrowed or guaranteed or otherwise
assumed, including, without limitation, the issuance of debt securities or
warrants or rights to acquire debt) or enter into any "keep well" or other
agreement to maintain any financial condition of another Person or enter into
any arrangement having the economic effect of any of the foregoing, other
than indebtedness in an aggregate amount not exceeding 110% of the amount of
indebtedness provided for in the ScottishPower Budget. For purposes of this
paragraph (g), any indebtedness up to L500 million incurred in connection
with the planned buyback of ScottishPower Ordinary Shares and/or HoldCo
Ordinary Shares shall be disregarded.
(h) AFFILIATE CONTRACTS. Neither HoldCo nor ScottishPower shall,
nor shall they permit any of their respective Subsidiaries or, within the
exercise of its reasonable commercial efforts, the ScottishPower Joint
Ventures to, enter into any Contract or amend or modify any existing
Contract, or engage in any new transaction (other than pursuant to the Scheme
of Arrangement) outside the ordinary course of business consistent with past
practice or not on an arm's length basis, with any affiliate of such party or
any of its Subsidiaries.
(i) CAPITAL EXPENDITURES. Except for any payments by HoldCo to
ScottishPower in connection with the acquisition by HoldCo of UKSub 1 and
UKSub 2 or any investment by HoldCo in UKSub 1 and UKSub 2, neither HoldCo
nor ScottishPower shall, nor shall they permit any of their respective
Subsidiaries to, make any capital expenditures or commitments (except as
required by law or regulation) in excess of 110% of the aggregate amount
provided for such purposes in the ScottishPower Budget.
(j) 1935 ACT. Except for the acquisition of ScottishPower by
HoldCo and the filing of Forms U-57 by ScottishPower and HoldCo's other
utility subsidiaries after the acquisition of ScottishPower by HoldCo,
neither HoldCo nor ScottishPower shall, nor shall they permit any of their
respective Subsidiaries to, engage in any activities which would cause a
change in its status, or that of its Subsidiaries, under the 1935 Act,
including any action or inaction that would cause the prior approval of the
SEC under the 1935 Act to be required for the consummation of the
transactions contemplated hereby.
(k) UK LICENSING REGIME. Except pursuant to the Scheme of
Arrangement, neither HoldCo nor ScottishPower shall, nor shall they permit
any of their respective Subsidiaries to, engage in any activities or omit to
do anything which would entitle any Governmental or Regulatory Authority to
revoke in whole or in material part any material license, authorization or
appointment or which would otherwise materially change the status of HoldCo,
ScottishPower or any of their respective Subsidiaries (HoldCo, ScottishPower
and their respective Subsidiaries being referred to as the "HoldCo Group")
thereunder.
(l) TRANSMISSION, GENERATION. Except as set forth in SECTION
5.02(l) of the ScottishPower Disclosure Letter, neither HoldCo nor
ScottishPower shall, nor shall they permit any of their respective
Subsidiaries to:
50
(i) commence construction of any additional generating,
transmission or delivery capacity in excess of 500 megawatts, or
(ii) obligate itself to purchase or otherwise acquire, or to
sell or otherwise dispose of, or to share, any additional generating,
transmission or delivery plants or facilities, in an amount in excess of
$200 million in any one transaction.
(m) ACCOUNTING. Neither HoldCo nor ScottishPower shall nor shall
they permit any of their respective Subsidiaries to, make any changes in
their accounting methods, except as required by law, rule, regulation or
applicable generally accepted accounting principles or, in the case of
HoldCo, adopting accounting methods substantially the same as those of
ScottishPower.
(n) TAX MATTERS. Neither HoldCo nor ScottishPower shall, nor
shall they permit any of their respective Subsidiaries to, take any action
which (or fail to take any action if such failure) would cause the Merger to
fail to qualify as a reorganization described in Section 368(a) of the Code.
(o) NO BREACH. Neither HoldCo nor ScottishPower shall, nor shall
they permit any of their respective Subsidiaries to, willfully take or fail
to take any action that would or is reasonably likely to result (i) in a
material breach of any provision of this Agreement, or (ii) in any of its
representations and warranties set forth in this Agreement being untrue on
and as of the Closing Date.
(p) ADVICE OF CHANGES. HoldCo and ScottishPower shall confer with
the Company on a regular and frequent basis with respect to HoldCo's and
ScottishPower's business and operations and other matters relevant to the
Merger, and shall promptly advise the Company, orally and in writing, of any
material change or event, including, without limitation, any complaint,
investigation or hearing by any Governmental or Regulatory Authority (or
communication indicating the same may be contemplated) or the institution or
threat of litigation, having, or which, insofar as can be reasonably
foreseen, could have, a material adverse effect on HoldCo, ScottishPower and
their respective Subsidiaries taken as a whole or on the ability of HoldCo
and ScottishPower to consummate the transactions contemplated hereby;
provided that HoldCo and ScottishPower shall not be required to make any
disclosure to the extent such disclosure would constitute a violation of any
applicable law or regulation.
(q) NOTICE AND CURE. HoldCo or ScottishPower will notify the
Company in writing of, and will use all commercially reasonable efforts to
cure before the Closing, any event, transaction or circumstance, as soon as
practical after it becomes known to HoldCo or ScottishPower, that causes or
will cause any covenant or agreement of HoldCo or ScottishPower under this
Agreement to be breached or that renders or will render untrue any
representation or warranty of HoldCo or ScottishPower contained in this
Agreement. HoldCo or ScottishPower will also notify the Company in writing
of, and will use all commercially reasonable efforts to cure, before the
Closing, any violation or breach, as soon as practical after it becomes known
to HoldCo or ScottishPower, of any representation, warranty, covenant or
agreement made by HoldCo or ScottishPower. No notice given pursuant to this
paragraph shall have any effect on
51
the representations, warranties, covenants or agreements contained in this
Agreement for purposes of determining the satisfaction of any condition
contained herein.
(r) FULFILLMENT OF CONDITIONS. Subject to the terms and
conditions of this Agreement, HoldCo and ScottishPower will take or cause to
be taken all commercially reasonable steps necessary or desirable and proceed
diligently and in good faith to satisfy each condition to the Company's
obligations contained in this Agreement and to consummate and make effective
the transactions contemplated by this Agreement, and neither HoldCo nor
ScottishPower will, nor will they permit any of their respective Subsidiaries
to, take or fail to take any action that would reasonably be expected to
result in the nonfulfillment of any such condition.
5.03 JOINT EXECUTIVE COMMITTEE. As soon as practicable after the
date hereof, ScottishPower and the Company shall establish a joint executive
committee (the "JOINT EXECUTIVE COMMITTEE") which shall be comprised of three
nominees of ScottishPower (one of whom, in the first instance, shall be Ian
Robinson) and three nominees of the Company (one of whom, in the first
instance, shall be Keith McKennon). The Joint Executive Committee shall be
jointly chaired by Ian Robinson and Keith McKennon and shall have the
objective of facilitating and achieving the Merger contemplated in this
Agreement, integration planning, strategic development, developing
recommendations concerning the future structure and the general operation of
the Company after the Effective Time subject to applicable law. The Joint
Executive Committee shall meet monthly in the United States or upon such
other date or dates, and in such other places, as ScottishPower and the
Company may agree from time to time and may be convened by telephone, video
conference or similar means.
5.04 TAX MATTERS. Except as set forth in their respective
Disclosure Letters, neither HoldCo, ScottishPower nor the Company shall, nor
shall any party permit its Subsidiaries to, make or rescind any material
express or deemed election relating to taxes, or change any of its methods of
reporting income or deductions for tax purposes from those employed in the
preparation of its tax return(s) for the prior taxable year, except as may be
required by applicable law, as agreed to by the other party or, subject to
SECTION 6.18, to the extent reasonably necessary to comply with or implement
the Scheme of Arrangement. The Company shall inform ScottishPower regarding
the progress of any material claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes and shall
consult with ScottishPower before entering into any settlements or
compromises with regard to such matters.
5.05 DISCHARGE OF LIABILITIES. Neither HoldCo, ScottishPower nor
the Company shall, nor shall any party permit its Subsidiaries to, pay,
discharge or satisfy any material claims, liabilities or obligations
(absolute accrued, asserted or unasserted, contingent or otherwise), other
than the entry into of the New Facilities in place of, and/or amending, the
RCF, or other than as contemplated by paragraph 11 of Schedule I or other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice (which includes the payment of final
and unappealable judgments) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of such party
included in such party's reports filed with
52
the SEC or the Registrar of Companies in Edinburgh, or incurred in the
ordinary course of business consistent with past practice.
5.06 CONTRACTS. Neither HoldCo, ScottishPower nor the Company
shall, nor shall any party permit its Subsidiaries or, within the exercise of
its reasonable business efforts, its Joint Ventures to, except the entry into
of the New Facilities in place of, and/or amending, the RCF, or other than as
contemplated by paragraph 11 of Schedule I or as contemplated by this
Agreement or in the ordinary course of business consistent with past
practice, modify, amend, terminate, renew or fail to use reasonable business
efforts to renew any material contract or agreement to which such party or
any Subsidiary of such party is a party or waive, release or assign any
material rights or claims.
5.07 NO SOLICITATIONS. (a) Except as disclosed in SECTION 5.07
of the Company Disclosure Letter, prior to the Effective Time, the Company
agrees (i) that neither it nor any of its Subsidiaries or other affiliates
shall, and it shall use its best efforts to cause their respective
Representatives (as defined in SECTION 9.12) not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a merger,
consolidation or other business combination including the Company or any of
its Subsidiaries or any acquisition or similar transaction (including,
without limitation, a tender or exchange offer) involving the purchase of (A)
all or any significant portion of the assets of the Company and its
Subsidiaries taken as a whole, (B) 5% or more of the outstanding shares of
Company Common Stock or (C) 5% of the outstanding shares of the capital stock
of any Subsidiary of the Company (any such proposal or offer being
hereinafter referred to as an "ALTERNATIVE PROPOSAL"), or engage in any
negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person or group relating to an Alternative
Proposal (excluding the transactions contemplated by this Agreement), or
otherwise facilitate any effort or attempt to make or implement an
Alternative Proposal; (ii) that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties with respect to any of the foregoing, and it will take the necessary
steps to inform such parties of its obligations under this Section; and (iii)
that it will notify ScottishPower or HoldCo promptly if any such inquiries,
proposals or offers are received by, any such information is requested from,
or any such negotiations or discussions are sought to be initiated or
continued with, it or any of such persons; provided, however, that nothing
contained in this SECTION 5.07(a) shall prohibit the Board of Directors of
the Company from (i) furnishing information to (but only pursuant to a
confidentiality agreement in customary form and having terms and conditions
no less favorable to the Company than the Confidentiality Agreement (as
defined in SECTION 6.01)) or entering into discussions or negotiations with
any person or group that makes an unsolicited BONA FIDE Alternative Proposal,
if, and only to the extent that, prior to receipt of the Company
Stockholders' Approval, (A) the Board of Directors of the Company, based upon
the advice of outside counsel, determines in good faith that a failure to
perform such action could reasonably be expected to result in a breach of its
fiduciary duties to stockholders imposed by law, (B) the Board of Directors
has reasonably concluded in good faith (after consultation with its financial
advisors) that the person or group making such Alternative Proposal will have
adequate sources of financing to consummate such Alternative Proposal, (C)
the Board of Directors has reasonably concluded in good faith that such
Alternative Proposal is more favorable to the Company's
53
stockholders than the Merger, (D) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or group, the
Company provides written notice to ScottishPower or HoldCo to the effect that
it is furnishing information to, or entering into discussions or negotiations
with, such person or group, which notice shall identify such person or group
in reasonable detail, and (E) the Company keeps ScottishPower or HoldCo
appropriately informed of the status of any such discussions or negotiations;
and (ii) to the extent required, complying with Rule 14e-2 promulgated under
the Exchange Act with regard to an Alternative Proposal. Nothing in this
SECTION 5.07 shall (x) permit the Company to terminate this Agreement (except
as specifically provided in ARTICLE VIII), (y) permit the Company to enter
into any agreement with respect to an Alternative Proposal for so long as
this Agreement remains in effect (it being agreed that for so long as this
Agreement remains in effect, the Company shall not enter into any agreement
with any person or group that provides for, or in any way facilitates, an
Alternative Proposal (other than a confidentiality agreement under the
circumstances described above)), or (z) affect any other obligation of the
Company under this Agreement.
(b) Each of HoldCo and ScottishPower agrees that (i) neither it
nor any of its Subsidiaries or other affiliates shall, and it shall use its
best efforts to cause their respective Representatives (as defined in SECTION
9.12) not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal or offer (including, without
limitation, any proposal or offer to its shareholders) with respect to any
transaction that would constitute a Change of Control (as defined in SECTION
8.01(e)), (ii) it will notify the Company promptly if any such inquiries,
proposals or offers are received by HoldCo or ScottishPower and (iii) will
keep the Company appropriately informed of the status of any such inquiries,
proposals or offers.
5.08 CONDUCT OF BUSINESS OF MERGER SUB. (a) Merger Sub shall not
be formed until immediately prior to the Closing Date.
(b) Prior to the Effective Time, HoldCo shall cause Merger Sub to
(i) perform its obligations under this Agreement in accordance with its
terms, (ii) not incur directly or indirectly any liabilities or obligations
other than those incurred in connection with the Merger, (iii) not engage
directly or indirectly in any business or activities of any type or kind and
not enter into any agreements or arrangements with any person, or be subject
to or bound by any obligation or undertaking, which is not contemplated by
this Agreement and (iv) not create, grant or suffer to exist any Lien upon
its properties or assets which would attach to any properties or assets of
the Surviving Corporation after the Effective Time.
5.09 THIRD PARTY STANDSTILL AGREEMENTS. During the period from
December 6, 1998 through the Effective Time, neither the Company nor any of
its Subsidiaries shall terminate, amend, modify or waive any provision of any
confidentiality or standstill agreement to which it is a party. During such
period, the Company shall enforce, to the fullest extent permitted under
applicable law, the provisions of any such agreement, including, but not
limited to, by obtaining injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in
any court having jurisdiction.
5.10 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this
Agreement shall give the Company, directly or indirectly, the right to
control or direct HoldCo's
54
or ScottishPower's operations prior to the Effective Time. Nothing contained
in this Agreement shall give HoldCo or ScottishPower, directly or indirectly,
the right to control or direct the Company's operations prior to the
Effective Time. Prior to the Effective Time, each of the Company, HoldCo and
ScottishPower shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its respective
operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.01 ACCESS TO INFORMATION. Each of the Company, HoldCo and
ScottishPower shall, and shall cause each of its Subsidiaries and, so long as
consistent with its confidentiality obligations under its Joint Venture
agreements, shall use commercially reasonable efforts to cause its Joint
Ventures to, throughout the period from the date hereof to the Effective
Time, (i) provide the other parties and their respective Representatives with
full access, upon reasonable prior notice and during normal business hours,
to all officers, employees, agents and accountants of the Company, HoldCo and
ScottishPower, as the case may be, and their respective Subsidiaries and
Joint Ventures and their respective assets, properties, books and records,
but only to the extent that such access does not unreasonably interfere with
the business and operations of the Company, HoldCo and ScottishPower, as the
case may be, and its Subsidiaries and Joint Ventures, and (ii) furnish
promptly to such persons (x) a copy of each report, statement, schedule and
other document filed or received by the Company, HoldCo and ScottishPower, as
the case may be, or any of their respective Subsidiaries and Joint Ventures
pursuant to the requirements of federal or state securities laws and each
material report, statement, schedule and other document filed with any other
Governmental or Regulatory Authority, and (y) all other information and data
(including, without limitation, copies of Contracts, Company Employee Benefit
Plans, and other books and records) concerning the business and operations of
the Company, HoldCo and ScottishPower, as the case may be, and its
Subsidiaries and Joint Ventures as any such party or any of such other
persons reasonably may request. No investigation pursuant to this paragraph
or otherwise shall affect any representation or warranty contained in this
Agreement or any condition to the obligations of the parties hereto. Any
such information or material obtained pursuant to this SECTION 6.01 that
constitutes "REVIEW MATERIAL" (as such term is defined in the letter
agreement dated as of October 12, 1998 between the Company and ScottishPower
(the "CONFIDENTIALITY AGREEMENT")) shall be governed by the terms of the
Confidentiality Agreement.
6.02 PREPARATION OF REGISTRATION STATEMENT AND PROXY STATEMENT. As
soon as practicable after the date of this Agreement, the Company shall, in
cooperation with HoldCo and ScottishPower, prepare the Proxy Statement and
HoldCo and ScottishPower shall, in cooperation with the Company, prepare the
Registration Statement, in which the Proxy Statement will be included as the
prospectus. The Company shall, in cooperation with ScottishPower, file the
Proxy Statement with the SEC as its preliminary Proxy Statement and HoldCo
shall, in cooperation with the Company, prepare and file with the SEC the
Registration Statement in which the Proxy Statement will be included as the
prospectus. HoldCo and the Company shall use commercially reasonable efforts
to have the Registration Statement declared effective by the SEC as promptly
as practicable after such filing. HoldCo and the Company shall
55
also take any action (other than qualifying as a foreign corporation or
taking any action which would subject it to service of process in any
jurisdiction where ScottishPower is not now so qualified or subject) required
to be taken under applicable state blue sky or securities laws in connection
with the issuance of HoldCo ADRs or Merger Ordinary Shares in connection with
the Merger. If at any time prior to the Effective Time any event shall occur
that should be set forth in an amendment of or a supplement to the
Registration Statement, HoldCo shall prepare and file with the SEC such
amendment or supplement as soon thereafter as is reasonably practicable.
HoldCo, ScottishPower and the Company shall cooperate with the other parties
in the preparation of the Registration Statement and the Proxy Statement and
any amendment or supplement thereto, and each shall notify the other parties
of the receipt of any comments of the SEC with respect to the Registration
Statement or the Proxy Statement and of any requests by the SEC for any
amendment or supplement thereto or for additional information, and shall
provide to the other parties promptly copies of all correspondence between
HoldCo, ScottishPower or he Company, as the case may be, or any of their
respective Representatives with respect to the Registration Statement or the
Proxy Statement. HoldCo, ScottishPower and the Company shall give the other
parties and their respective counsel the opportunity to review the
Registration Statement and the Proxy Statement and all responses to requests
for additional information by and replies to comments of the SEC before their
being filed with, or sent to, the SEC. Each of the Company and HoldCo agrees
to use commercially reasonable efforts, after consultation with each other,
to respond promptly to all such comments of and requests by the SEC and to
cause (x) the Registration Statement to be declared effective by the SEC at
the earliest practicable time and to be kept effective as long as is
necessary to consummate the Merger, and (y) the Proxy Statement to be mailed
to the holders of Company Common Stock and Company Preferred Stock entitled
to vote at the meeting of the stockholders of the Company at the earliest
practicable time.
6.03 APPROVAL OF SHAREHOLDERS. (a) ScottishPower shall, through
its Board of Directors, duly call, give notice of, convene and hold a general
meeting of its shareholders (the "SCOTTISHPOWER SHAREHOLDERS' MEETING"), for
the purpose of voting on the Merger in accordance with this Agreement (the
"SCOTTISHPOWER SHAREHOLDERS' APPROVAL"). Unless the Board of Directors of
ScottishPower, based upon the advice of outside counsel, determines in good
faith that making such recommendation, or failing to amend, modify or
withdraw any previously made recommendation, could reasonably be expected to
result in a breach of its fiduciary duties to shareholders imposed by law,
ScottishPower shall, through its Board of Directors, include in the Circular
the recommendation of the Board of Directors of ScottishPower that the
shareholders of ScottishPower approve such matters, and shall use its
reasonable best efforts to obtain such approval. In connection with the
ScottishPower Shareholders' Meeting, subject to applicable law, (i)
ScottishPower shall, as soon as practicable after the date of this Agreement
and in accordance with the listing rules of the LSE, prepare and submit to
the LSE for approval the Circular and the Listing Particulars, and shall use
all reasonable efforts to have such documents formally approved by the LSE
and shall thereafter publish the Circular and the Listing Particulars and
dispatch the Circular to its shareholders in compliance with all legal
requirements applicable to the ScottishPower Shareholders' Meeting and the
listing rules of the LSE and (ii) if necessary, after the Circular has been
so dispatched, promptly publish or circulate amended, supplemental or
supplemented materials and, if required in connection therewith, resolicit
votes. In the event that the ScottishPower Shareholders'
56
Approval is not obtained without the vote having been taken on the date on
which the ScottishPower Shareholders' Meeting is initially convened, the
Board of Directors of ScottishPower agrees to use its reasonable best efforts
to adjourn such ScottishPower Shareholders' Meeting for the purpose of
obtaining the ScottishPower Shareholders' Approval and to use commercially
reasonable efforts during any such adjournments to obtain the ScottishPower
Shareholders' Approval.
(b) The Company shall, through its Board of Directors, duly call,
give notice of, convene and hold a meeting of its stockholders (the "COMPANY
STOCKHOLDERS' MEETING") for the purpose of voting on the approval of this
Agreement (the "COMPANY STOCKHOLDERS' APPROVAL") as soon as reasonably
practicable after the date hereof. Unless the Board of Directors of the
Company, based on the advice of outside counsel, determines in good faith
that making such recommendation, or failing to amend, modify or withdraw any
previously made recommendation, could reasonably be expected to result in a
breach of its fiduciary duties to stockholders imposed by law, the Company
shall, through its Board of Directors, include in the Proxy Statement the
recommendation of the Board of Directors of the Company that the stockholders
of the Company approve this Agreement, and shall use its reasonable best
efforts to obtain such approval. The Company shall consult and discuss in
good faith with ScottishPower regarding the alternatives available for
obtaining the Company Stockholders' Approval. In the event that the Company
Stockholders' Approval is not obtained without the vote having been taken on
the date on which the Company Stockholders' Meeting is initially convened,
the Board of Directors of the Company will use its reasonable best efforts to
adjourn such Company Stockholders' Meeting for the purpose of obtaining the
Company Stockholders' Approval and to use commercially reasonable efforts
during any such adjournments to obtain the Company Stockholders' Approval.
(c) HoldCo shall, through its Board of Directors, at the Annual
General Meeting of HoldCo next following the Scheme Date (or earlier, if
agreed), include for consideration by its shareholders and, subject to its
fiduciary duties, recommend the approval of a resolution to approve
amendments to the HoldCo Articles of Association in order to provide, to the
extent reasonably possible, for the holders of HoldCo ADRs substantially the
same rights as holders of HoldCo Ordinary Shares to receive notice of,
attend, speak and vote at general meetings of holders of HoldCo Ordinary
Shares (the "ADR HOLDER PROPOSAL"). In the event the ADR Holder Proposal is
not adopted by HoldCo's shareholders at such Annual General Meeting, HoldCo
shall, through its Board of Directors, include for consideration by its
shareholders and, subject to its fiduciary duties, recommend approval of the
ADR Holder Proposal at HoldCo's next Annual General Meeting. With effect
from and/or following the Scheme Date, ScottishPower's Articles of
Association shall be amended to reflect its status as a subsidiary, PROVIDED,
HOWEVER, that if the effect of such amendments would have a material adverse
effect on the benefits of the Merger for the holders of Company Common Stock,
such amendments may only be effected with the prior written consent of the
Company.
6.04 COMPANY AFFILIATES. At least thirty (30) days prior to the
Closing Date the Company shall deliver a letter to HoldCo identifying all
persons who, at the time of the Company Stockholders' Meeting, may, in the
Company's reasonable judgment, be deemed to be "AFFILIATES" (as such term is
used in Rule 145 under the Securities Act) of the Company
57
("COMPANY AFFILIATES"). The Company shall use its best efforts to cause each
Company Affiliate to deliver to HoldCo on or prior to the Closing Date a
written agreement substantially in the form and to the effect of EXHIBIT C
hereto (an "AFFILIATE AGREEMENT"). HoldCo shall be entitled to place legends
as specified in such Affiliate Agreements on the certificates evidencing any
HoldCo ADSs to be received by such Company Affiliates pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the HoldCo ADSs, consistent with the terms of such
Affiliate Agreements.
6.05 AUDITORS' LETTERS. Each of the Company, HoldCo and
ScottishPower shall use all reasonable efforts to cause to be delivered to
the other parties and such other parties' Boards of Directors a letter of its
independent auditors, dated the date on which the Registration Statement
shall become effective, and addressed to the other parties and such other
parties' Boards of Directors, in form and substance customary for "comfort"
letters delivered by independent public accountants in connection with
registration statements on Form F-4 and Form S-4.
6.06 STOCK EXCHANGE LISTING; DEPOSIT AGREEMENT. (a) HoldCo shall
use its commercially reasonable efforts, and the Company shall cooperate in
respect thereto, to cause (a) the HoldCo ADSs to be issued in the Merger and
under the Company Stock Plans after the Merger in accordance with this
Agreement to be approved for listing on the NYSE, subject to official notice
of issuance, prior to the Closing Date; and (b) each of (i) the HoldCo
Ordinary Shares to be represented by the HoldCo ADSs to be issued in the
Merger to be admitted to the Official List of the London Stock Exchange and
(ii) the Merger Ordinary Shares to be issued in the Merger to be admitted to
the Official List of the London Stock Exchange.
(b) Following the execution of this Agreement, HoldCo shall
promptly prepare and shall use its commercially reasonable efforts to have
executed a deposit agreement, all on terms and conditions reasonably
satisfactory to the Company, that will provide holders of HoldCo ADRs with
the right to (i) participate in rights offerings, (ii) attend HoldCo
shareholder meetings, (iii) speak at HoldCo shareholder meetings, (iv) call
for a poll at HoldCo shareholder meetings, (v) examine documents made
available at HoldCo shareholder meetings, (vi) instruct the Depository to
vote its HoldCo ADSs in a particular fashion, (vii) generally be counted
individually as present and/or voting with respect to resolutions adopted at
HoldCo shareholder meetings, and (viii) decide at HoldCo shareholder meetings
how to vote on particular resolutions, in each case on the same basis as the
holders of HoldCo Ordinary Shares.
6.07 RESTRUCTURING OF MERGER. The parties expressly acknowledge
and agree that, although it is their current intention to effect a business
combination among themselves in the form contemplated by this Agreement, it
may be preferable to effectuate such a business combination by means of an
alternative structure in light of the conditions set forth in SECTIONS
7.01(i), 7.02(d) and 7.03(d). Accordingly, if the only conditions to the
parties' obligations to consummate the Merger which are not satisfied or
waived are receipt of any one or more of those set forth in SECTIONS 7.01(i),
7.02(d) and 7.03(d), and the adoption of an alternative structure (that
otherwise substantially preserves for the parties the economic and other
material benefits of the Merger) would result in such conditions being
satisfied or waived, then the parties shall use their respective reasonable
best efforts to effect a business combination among
58
themselves by means of a mutually agreed upon structure other than the Merger
that so preserves such benefits; PROVIDED THAT, prior to closing any such
restructured transaction, all material third party and Governmental and
Regulatory Authority declarations, filings, registrations, notices,
authorizations, consents or approvals necessary to effect such alternative
business combination shall have been obtained and all other conditions to the
parties' obligations to consummate the Merger, as applied to such alternative
business combination, shall have been satisfied or waived.
6.08 REGULATORY AND OTHER APPROVALS. Subject to the terms and
conditions of this Agreement and without limiting the provisions of SECTIONS
6.02, 6.03 and 6.06, each of the Company, HoldCo and ScottishPower shall
jointly develop a regulatory approval plan and proceed cooperatively and in
good faith to, as promptly as practicable, (i) obtain all consents, approvals
or actions of, make all filings with and give all notices to Governmental or
Regulatory Authorities or any other public or private third parties required
of HoldCo, ScottishPower, the Company or any of their Subsidiaries or Joint
Ventures to consummate the Merger and the other matters contemplated hereby
(including without limitation those set forth on SECTION 3.04 of the Company
Disclosure Letter and SECTION 4.04 of the ScottishPower Disclosure Letter),
and (ii) provide such other information and communications to such
Governmental or Regulatory Authorities or other public or private third
parties as the other parties or such Governmental or Regulatory Authorities
or other public or private third parties may reasonably request in connection
therewith. In addition to and not in limitation of the foregoing, each of
the parties will (w) take promptly all actions necessary to make the filings
required of HoldCo, ScottishPower and the Company or their affiliates under
the HSR Act and to comply with filing and approval requirements of the FERC
and each state Governmental or Regulatory Authority, (x) comply at the
earliest practicable date with any request for additional information
received by any such party or its affiliates from the Federal Trade
Commission (the "FTC") or the Antitrust Division of the Department of Justice
(the "ANTITRUST DIVISION") pursuant to the HSR Act, (y) cooperate with the
other parties in connection with any such party's filings under the HSR Act
and in connection with resolving any investigation or other inquiry
concerning the Merger or the other matters contemplated by this Agreement
commenced by either the FTC or the Antitrust Division or state attorneys
general or by the FERC or any State Governmental or Regulatory Authority
having jurisdiction with respect to the Merger or another transaction
contemplated by this Agreement, and (z) provide to the other parties promptly
copies of all correspondence between any such party and the applicable
Governmental or Regulatory Authority with respect to any filings referred to
in this SECTION 6.08, and shall give the other parties the opportunity to
review such filings and all responses to requests for additional information
by such Governmental or Regulatory Authority prior to their being filed
therewith.
6.09 EMPLOYEE BENEFIT PLANS. HoldCo shall use its reasonable best
efforts to cause the Company Employee Benefit Plans in effect at December 6,
1998 that had been disclosed to ScottishPower prior to such date to remain in
effect until the second anniversary of the Effective Time or, to the extent
such Company Employee Benefit Plans are not continued, HoldCo will maintain
until such date benefit plans which are no less favorable, in the aggregate,
to the employees covered by such Company Employee Benefit Plans PROVIDED,
HOWEVER, that nothing contained herein shall be construed as requiring HoldCo
or the Surviving Corporation to continue any specific plan or as preventing
HoldCo or the Surviving Corporation from (a) establishing and, if necessary,
seeking shareholder approval to establish, any other
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benefit plans in respect of all or any of the employees covered by such
Company Employee Benefit Plans or any other employees, or (b) amending such
Company Employee Benefit Plans (or any replacement benefit plans therefor)
where required by applicable law or where such amendment is with the consent
of the affected employees. From and after the Effective Time, HoldCo shall
honor, and shall cause its Subsidiaries to honor, in accordance with its
express terms, each existing employment, change of control, severance and
termination agreement between the Company or any of its Subsidiaries, and any
officer, director or employee of such company, including without limitation
all legal and contractual obligations pursuant to outstanding restoration
plans, severance plans, bonus deferral plans, vested and accrued benefits and
similar employment and benefit arrangements, policies and agreements that had
been disclosed to ScottishPower prior to December 6, 1998 and other
obligations entered into in accordance with SECTIONS 5.01(d) and (h).
6.10 COMPANY STOCK PLAN. (a) At the Effective Time, each
outstanding option to purchase shares of Company Common Stock (a "COMPANY
STOCK OPTION") under the Company Option Plan, whether vested or unvested,
shall be converted into an option to acquire, on the same terms and
conditions as were applicable under such Company Stock Option, except as
amended by this SECTION 6.10, a number of HoldCo ADSs equal to the product
(rounded down to the nearest whole number) of (i) the number of shares of
Company Common Stock subject to the option immediately prior to the Effective
Time and (ii) the ADS Consideration and the option exercise price per HoldCo
ADS at which such option is exercisable shall be the amount (rounded up to
the nearest whole cent) obtained by dividing (iii) the option exercise price
per share of Company Common Stock at which such option is exercisable
immediately prior to the Effective Time by (iv) the ADS Consideration;
PROVIDED, HOWEVER, that, in the case of any Company Stock Option to which
Section 421 of the Code applies by reason of its qualification under any of
Sections 422-424 of the Code ("QUALIFIED STOCK OPTIONS"), the option exercise
price, the number of shares which may be acquired pursuant to such option and
the terms and conditions of exercise of such option shall be determined in
order to comply with Section 424(a) of the Code; PROVIDED, further, that,
under no circumstances shall the option exercise price per HoldCo ADS be less
than the aggregate par value of the HoldCo Ordinary Shares represented by a
HoldCo ADS.
(b) As soon as practicable after the Effective Time, HoldCo shall
deliver to the participants in the Company Option Plan appropriate notices
setting forth such participants' rights pursuant thereto and the grants
pursuant to the Company Option Plan shall continue in effect on the same
terms and conditions (subject to the adjustments required by this Section
after giving effect to the Merger).
(c) HoldCo shall take all corporate action necessary to have a
sufficient number of shares of HoldCo ADSs available for delivery under the
Company Option Plan as adjusted in accordance with this Section. As soon as
practicable after the Effective Time, HoldCo shall file a registration
statement on Form F-8 promulgated by the SEC under the Securities Act (or any
successor or other appropriate form) with respect to the HoldCo ADSs subject
to such options and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained
therein) for so long as such options remain outstanding.
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(d) For purposes of SECTION 2.01(c), Company Common Stock shall
include shares of restricted Company Common Stock issued under the Company's
Non-Employee Director's Stock Compensation Plan, Stock Incentive Plan and
Long Term Incentive Plan (collectively, the "COMPANY RESTRICTED STOCK
PLANS"). The Company shall take all corporate action necessary and obtain
all relevant consents to ensure that the consideration received under such
SECTION 2.01(c) upon the conversion of each outstanding share of restricted
Company Common Stock will continue to be subject to the same restrictions
that such shares were subject to under the Company Restricted Stock Plans and
the applicable award agreements thereunder, including, without limitation,
any forfeiture restrictions, subject to amendment or modification of such
plans or award agreements to reflect action of the Board of Directors of the
Company taken prior to December 6, 1998 and disclosed to ScottishPower prior
to such date.
6.11 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a)
Except to the extent required by law, until the sixth anniversary of the
Effective Time, HoldCo will not take any action so as to amend, modify or
repeal the provisions for indemnification of directors or officers contained
in the certificate or articles of incorporation or bylaws (or other
comparable charter documents) of the Surviving Corporation and its
Subsidiaries (which after the Effective Time shall be substantially identical
to those of the Company in effect on December 6, 1998) in such a manner as
would adversely affect the rights of any individual who shall have served as
a director or officer of the Company or any of its Subsidiaries prior to the
Effective Time to be indemnified by such corporations in respect of their
serving in such capacities prior to the Effective Time.
(b) HoldCo and the Surviving Corporation shall, until the sixth
anniversary of the Effective Time, cause to be maintained in effect, to the
extent available, the policies of directors' and officers' liability
insurance maintained by the Company and its Subsidiaries as of December 6,
1998 (or policies of at least the same coverage and amounts containing terms
that are no less advantageous to the insured parties) with respect to claims
arising from facts or events that occurred on or prior to the Effective Time;
PROVIDED that in no event shall HoldCo or the Surviving Corporation be
obligated to expend in order to maintain or procure insurance coverage
pursuant to this paragraph any amount per annum in excess of two hundred
percent (200%) of the aggregate premiums payable by the Company and its
Subsidiaries in 1998 (on an annualized basis) for such purpose.
6.12 HOLDCO GOVERNANCE; ADDITIONAL MATTERS. (a) Subject to the
exercise of fiduciary duties and to the extent permitted by applicable law,
HoldCo's Board of Directors shall take action to cause the full Board of
Directors of HoldCo at the Effective Time to include Keith McKennon, as
Deputy Chairman of HoldCo, and two additional non-executive members of the
Company's current Board of Directors to be designated by the Company at least
thirty (30) days prior to the Effective Time.
(b) HoldCo shall, promptly following the Effective Time, cause
certain of the non-executive members of the Company's Board of Directors
immediately prior to the Effective Time who do not become directors of HoldCo
pursuant to SECTION 6.12(a) hereof, and who are willing to so serve, to be
elected or appointed as members of an advisory board (the "ADVISORY BOARD")
established by the Company, the function of which shall be to meet no less
frequently
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than semi-annually in order to advise the Company's Board of Directors with
respect to general business as well as opportunities and activities in the
Company's market area and to maintain and develop customer relationships.
The Advisory Board shall be chaired by Ian Robinson, and shall also include
Duncan Whyte, Richard O'Brien, and such other representatives from the
communities served by the Company (including but not limited to non-executive
members of the Company's Board of Directors immediately prior to the
Effective Time) as shall be mutually agreed by Ian Robinson and Keith
McKennon. The members of the Advisory Board who are willing to so serve
initially shall be elected or appointed for a term of two years. HoldCo
agrees to cause the Company to re-elect or re-appoint each of the initial
members of the Advisory Board to one successive one-year term following the
initial term; PROVIDED, HOWEVER, that HoldCo shall have no obligation to
cause the Company to elect or appoint, or re-elect or re-appoint, and may
cause the Company to remove, any member if HoldCo reasonably determines that
such member has a conflict of interest that compromises such member's ability
to serve effectively as a member of the Advisory Board or any cause exists
that otherwise would allow for removal of such person as a director of the
Company if such person were a member of the Company's Board of Directors.
(c) Immediately following the Effective Time, the Company's United
States headquarters shall continue to be in Portland, Oregon. In recognition
of HoldCo's and ScottishPower's commitment to the communities served by the
Company, following the Effective Time HoldCo or ScottishPower will contribute
to The PacifiCorp Foundation the sum of $5 million.
6.13 EXPENSES. Except as set forth in SECTION 8.02, whether or
not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such cost or expense. The Company shall not be obligated
for any fees or expenses relating to HoldCo's obligation to demonstrate the
existence of adequate working capital in connection with the filing of the
Listing Particulars. Notwithstanding any provision of this Agreement, in no
event shall HoldCo, ScottishPower or any affiliate of HoldCo or ScottishPower
pay any expenses of the Company, any Company affiliate or any Company
stockholder in connection with the transactions contemplated by this
Agreement.
6.14 BROKERS OR FINDERS. Each of HoldCo, ScottishPower and the
Company represents, as to itself and its affiliates, that, except as set
forth on SECTION 6.14 of the Company Disclosure Letter and except for any
reasonable fees and expenses that may be paid by HoldCo or ScottishPower to
Morgan Stanley Dean Witter Discover, Inc. in connection with the Scheme of
Arrangement, no agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's or finder's fee or any
other commission or similar fee in connection with any of the transactions
contemplated by this Agreement except Salomon Smith Barney, whose fees and
expenses will be paid by the Company in accordance with the Company's
agreement with such firm (a true and complete copy of which has been
delivered by the Company to ScottishPower prior to December 6, 1998), and
Morgan Stanley Dean Witter Discover Inc. whose fees and expenses will be paid
by ScottishPower in accordance with ScottishPower's agreement with such firm
(a true and complete copy of which has been delivered by ScottishPower to the
Company prior to December 6, 1998), and each of HoldCo and
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ScottishPower, on the one hand, and the Company, on the other, shall
indemnify and hold the other harmless from and against any and all claims,
liabilities or obligations with respect to any other such fee or commission
or expenses related thereto asserted by any person on the basis of any act or
statement alleged to have been made by such party or its affiliate.
6.15 TAKEOVER STATUTES. If any "FAIR PRICE", "MORATORIUM",
"CONTROL SHARE ACQUISITION" or other form of antitakeover statute or
regulation shall become applicable to the transactions contemplated hereby,
the Company and the members of the Board of Directors of the Company shall
grant such approvals and take such actions as are reasonably necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and thereby and otherwise act to
eliminate or minimize the effects of such statute or regulation on the
transactions contemplated hereby and thereby.
6.16 CONVEYANCE TAXES. The Company, HoldCo and ScottishPower
shall cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer and
stamp taxes and duties, any transfer, recording, registration and other fees,
and any similar taxes which become payable in connection with the
transactions contemplated by this Agreement that are required or permitted to
be filed on or before the Effective Time. The Company shall pay, without
deduction or withholding (except where such deduction or withholding is
required by applicable law) from any amount payable to the holders of Company
Common Stock, any such taxes which become payable in connection with the
transfer of Company Common Stock in exchange for the Ordinary Share
Consideration and the ADS Consideration. The Company shall also pay any
stamp duty or stamp duty reserve tax arising in connection with the issue of
the HoldCo ADSs and HoldCo ADRs.
6.17 RATE MATTERS. During the period commencing on December 6,
1998 and ending on the Effective Date, the Company shall, and shall cause its
Subsidiaries to, obtain HoldCo's and ScottishPower's approval, not to be
unreasonably withheld or delayed, prior to initiating any general rate case
and shall consult with HoldCo and ScottishPower prior to making any material
changes in its or its Subsidiaries' rates or charges, standards of service or
accounting from those in effect on December 6, 1998 and shall further consult
with HoldCo and ScottishPower prior to making any filing (or any amendment
thereto), or effecting any agreement, commitment, arrangement or consent,
whether written or oral, formal or informal, with respect thereto.
6.18 TAX MATTERS. Each of HoldCo and ScottishPower agrees that:
(a) Prior to the Closing Date, ScottishPower and HoldCo (i) will
make the elections necessary pursuant to Section 301.7701-3 of the U.S.
Treasury regulations promulgated under the Code to treat UKSub 1 and UKSub 2
as entities disregarded as separate from ScottishPower and HoldCo and (ii)
will not change such election during the period beginning on the date such
election is effective for U.S. federal income tax purposes and ending on the
date that is three years after the Closing Date.
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(b) Throughout the period beginning on the date the election
described in SECTION 6.18(a) of this Agreement is effective for U.S. federal
income tax purposes and ending on the date that is three years after the
Closing Date: (i) ScottishPower and HoldCo will not make an election under
Section 301.7701-3 of the U.S. Treasury regulations to treat UKSub 1 or UKSub
2 as an association taxable as a corporation; (ii) ScottishPower, before the
Share Transfer, will directly own the whole of the share capital of UKSub 1
and UKSub 2, and HoldCo, after the Share Transfer, will directly own the
whole of the share capital of UKSub 1 and UKSub 2; and (iii) ScottishPower
and HoldCo will cause UKSub 1 and UKSub 2 to directly own all of the equity
interests in the Partnership. Prior to the Closing Date, ScottishPower and
HoldCo shall cause the Share Transfer to occur.
(c) Throughout the period beginning at the Effective Time and
ending on the date that is three years after the Closing Date, the
Partnership will directly own all of the Common Stock of the Surviving
Corporation, except for contribution to a controlled subsidiary described in
Code Section 368(a)(2)(C) and the regulations promulgated thereunder.
(d) Throughout the period beginning at the Effective Time and
ending on the date that is three years after the Closing Date, none of
HoldCo, ScottishPower, UKSub 1, UKSub 2, the Partnership, nor any other
affiliate of HoldCo or ScottishPower will redeem, acquire, convert, exchange,
or cause the Company or any affiliate of the Company to acquire, convert or
exchange or arrange for another person to acquire, convert or exchange any of
the ADS Consideration or the Ordinary Share Consideration, unless HoldCo has
received a written opinion of counsel that such action will not cause those
persons who were stockholders of the Company at the time of the Merger to
recognize gain or loss for US federal income tax purposes either with respect
to the Merger or with respect to a subsequent exchange or conversion;
(e) Neither HoldCo, ScottishPower nor any affiliate of HoldCo or
ScottishPower will, directly or indirectly, pay any expense incurred by (i)
the Company, (ii) any affiliate of the Company or (iii) any Company
stockholder, in each case, in connection with the transactions contemplated
by this Agreement.
(f) For a period of three years following the Closing Date,
without the receipt of a written opinion of counsel that such action will not
affect the tax-free status of the transactions contemplated by this
Agreement, neither HoldCo nor any affiliate of HoldCo, will, directly or
indirectly, (i) make contributions (whether or not in exchange for shares) or
loan additional funds to (x) the Company, (y) any affiliate of the Company or
(z) any escrow account, trust or other fund established to pay any expenses
incurred by the Company, any affiliate of the Company or any Company
stockholder in connection with the transactions contemplated by this
Agreement or (ii) permit the Company or any Company affiliate to incur
additional indebtedness guaranteed by HoldCo or any HoldCo affiliate;
(g) Neither HoldCo nor any affiliate of HoldCo will, directly or
indirectly reimburse (or otherwise pay) any amounts paid to the holders of
$1.28 Series, $1.18 Series or $1.16 Series no par serial preferred stock of
the Company in connection with the redemption of their preferred stock prior
to the Closing Date.
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(h) Neither HoldCo, ScottishPower nor any affiliate of HoldCo or
ScottishPower will, directly or indirectly, acquire any Company stock except
for the Company stock acquired solely in exchange for the ADS Consideration
or the Ordinary Share Consideration unless acquired directly from the Company.
6.19 DIVIDENDS. HoldCo hereby acknowledges its intention,
following the Effective Time, to adopt a practice of paying, with respect to
HoldCo Ordinary Shares and HoldCo ADSs, quarterly dividends on regular
quarterly dividend dates in roughly equal amounts. After the date hereof,
each of HoldCo, ScottishPower and the Company shall coordinate with the other
with respect to the declaration of dividends in respect of HoldCo Ordinary
Shares and Company Common Stock and the record dates and payment dates with
respect thereto prior to the Effective Time, with the intention that the
holders of Company Common Stock receive dividends in respect of the Company
Common Stock for all periods prior to the Effective Time but do not receive
dividends on the ADS Consideration and the Ordinary Share Consideration after
the Effective Time in respect of periods prior to the Effective Time.
ARTICLE VII
CONDITIONS
7.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligation of each party to effect the Merger is subject to
the fulfillment, at or prior to the Closing, of each of the following
conditions:
(a) STOCKHOLDER APPROVAL. This Agreement shall have been approved
by the requisite vote of the stockholders of the Company under the BCA and
the shareholders of ScottishPower shall have approved the Merger.
(b) REGISTRATION STATEMENT; STATE SECURITIES LAWS. The
Registration Statement shall have become effective in accordance with the
provisions of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect and no proceeding
seeking such an order shall be pending or threatened. HoldCo shall have
received all state securities or "Blue Sky" permits and other authorizations
necessary to issue the HoldCo ADSs pursuant to this Agreement and under the
Company Stock Plans after the Merger.
(c) EXCHANGE LISTING. The LSE shall have agreed to admit to the
Official List (subject to allotment) the new HoldCo Ordinary Shares to be
issued in connection with the Merger and such agreement shall not have been
withdrawn and the HoldCo ADSs issuable to the Company stockholders in the
Merger and under the Company Stock Plans after the Merger in accordance with
this Agreement shall have been authorized for listing on the NYSE, upon
official notice of issuance.
(d) HSR ACT. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(e) INJUNCTIONS OR RESTRAINTS. No court of competent jurisdiction
or other competent Governmental or Regulatory Authority shall have enacted,
issued, promulgated,
65
enforced or entered any law or order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making illegal or
otherwise restricting, preventing or prohibiting consummation of the Merger
or the other transactions contemplated by this Agreement.
(f) EXON-FLORIO. The review and investigation under Exon-Florio
shall have been terminated and the President shall have taken no action
authorized thereunder.
(g) POWER ACT; ATOMIC ENERGY ACT. The final approval of (i) the
FERC and (ii) the Nuclear Regulatory Commission under the Atomic Energy Act,
with respect to the Merger and the transactions contemplated by this
Agreement shall have been obtained.
(h) H.M. TREASURY CONSENT. HoldCo or ScottishPower (as required)
shall have received consent from H.M. Treasury pursuant to SECTION 765 of the
U.K. Income and Corporation Taxes Act 1988 in respect of the Merger and any
other matter contemplated hereby, or confirmation that no consent is required.
(i) GOVERNMENTAL AND REGULATORY CONSENTS AND APPROVALS. Other
than the filings provided for by SECTION 1.03 and any filing required in
connection with the registration or exemption of HoldCo under the 1935 Act,
all consents, approvals and actions of, filings with and notices to any
Governmental or Regulatory Authority (including under the HSR Act and
Exon-Florio Act and the approvals by FERC pursuant to the Power Act) required
of HoldCo, ScottishPower, the Company or any of their Subsidiaries to
consummate the Merger and the other matters contemplated hereby shall have
been made or obtained (as the case may be) and become Final Orders (as
defined in this Section below), and such Final Orders shall not, individually
or in the aggregate, contain terms or conditions that would have, or would
reasonably be expected to have, a material adverse effect on the Surviving
Corporation and its Subsidiaries, taken as a whole. A "Final Order" means an
action by the relevant Governmental or Regulatory Authority that has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with respect to
which any waiting period prescribed by applicable law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by applicable
law, regulation or order have been satisfied.
(j) OTHER CONSENTS AND APPROVALS. hTe consent or approval of each
person (other than a Governmental or Regulatory Authority) whose consent or
approval is required of HoldCo, ScottishPower, the Company or any of their
Subsidiaries under any Contract in order to consummate the Merger and the
other transactions contemplated hereby shall have been obtained, except for
those consents and approvals which, if not obtained, would not have, or would
not reasonably be expected to have, a material adverse effect on the Company
and its Subsidiaries taken as a whole or on the ability of HoldCo,
ScottishPower or the Company to consummate the transactions contemplated
hereby.
(k) UK FAIR TRADING ACT. Any of:
(i) the Office of Fair Trading (the "OFT") shall have
indicated in writing that the Secretary of State for Trade and
Industry (the "SOS") in the
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exercise of his powers under the Fair Trading Act 1973 (the "FTA")
does not intend to refer the Merger or any matter relating thereto
to the Monopolies and Mergers Commission ("MMC"); or
(ii) in the event of an MMC reference, the MMC shall have
concluded that the Merger does not or may not be expected to
operate against the public interest; or
(iii) if on a reference the MMC shall have concluded that the
Merger does or may be expected to operate against the public
interest, the SOS shall have indicated in writing that it is his
intention to approve the Merger,
PROVIDED that if any indication by the SOS referred to in (i) or (iii) above
is subject to undertakings, assurances or any other terms or conditions, such
undertakings, assurances, terms or conditions would not have, or would
reasonably be expected not to have, individually or in the aggregate, a
material adverse effect on the HoldCo Group taken as a whole.
(l) UK REGULATORS. Each of the Office of Electricity Regulation
("OFFER") and the Office of Water Services ("OFWAT") shall have indicated:
(i) that it is not its intention to seek any modifications to
any conditions of the licenses or appointments held by any member
of the HoldCo Group under any applicable statute, law, regulation,
order or determination which would have, or would reasonably be
expected to have, individually or in the aggregate, a material
adverse effect on the HoldCo Group taken as a whole; and
(ii) that it will give such consents and/or directions (if
any) as are necessary or appropriate with respect to such licenses
or appointments in connection with the Merger on terms which would
not have, or would reasonably be expected not to have, individually
or in the aggregate, a material adverse effect on the HoldCo Group
taken as a whole.
(m) UK UNDERTAKINGS/ASSURANCES. Neither OFFER nor OFWAT shall
have sought undertakings or assurances from any member of the HoldCo Group
which would have, or would reasonably be expected to have, individually or in
the aggregate, a material adverse effect on the HoldCo Group taken as a whole.
7.02 CONDITIONS TO OBLIGATION OF HOLDCO, SCOTTISHPOWER AND MERGER
SUB TO EFFECT THE MERGER. The obligation of HoldCo, ScottishPower and Merger
Sub to effect the Merger is further subject to the fulfillment, at or prior
to the Closing, of each of the following additional conditions (all or any of
which may be waived in whole or in part by HoldCo, ScottishPower and Merger
Sub in their sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company in this Agreement shall be true and correct,
in all material respects, taken as a whole, as of the Closing Date as though
made on and as of the Closing Date or, in the case of representations and
warranties made as of a specified date earlier than the Closing Date on and
as
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of such earlier date (provided, however, that for purposes of this paragraph
(a), no effect shall be given to the reference to the date December 6, 1998
in the first paragraph of Article III), except as affected by the
transactions contemplated by this Agreement, and the Company shall have
delivered to HoldCo a certificate, dated the Closing Date and executed in the
name and on behalf of the Company by its Chairman of the Board, President or
any Executive or Senior Vice President, to such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have performed
and complied with, in all material respects, the agreements, covenants and
obligations, taken as a whole, which are required by this Agreement to be so
performed or complied with by the Company at or prior to the Closing, and the
Company shall have delivered to HoldCo a certificate, dated the Closing Date
and executed in the name and on behalf of the Company by its Chairman of the
Board, President or any Executive or Senior Vice President, to such effect.
(c) MATERIAL ADVERSE EFFECT. Since December 6, 1998, no material
adverse effect shall have occurred with respect to the Company and its
Subsidiaries taken as a whole and there shall exist no facts or circumstances
arising after December 6, 1998, which in the aggregate would, or insofar as
reasonably can be foreseen, could, when taken together with any breaches or
violations of any representations, warranties, covenants and agreements of
the Company contained herein, have a material adverse effect on the Company
and its Subsidiaries taken as a whole. For purposes of this SECTION 7.02(c),
(i) any tax benefits relating directly to the structure of the transactions
contemplated by this Agreement as of the date hereof which are not realized
by HoldCo or ScottishPower, and (ii) any adverse effects on the Company and
its Subsidiaries resulting from general economic or financial conditions,
shall not be taken into account in determining whether a material adverse
effect has occurred under this SECTION 7.02(c).
(d) TAX OPINION. HoldCo, ScottishPower and the Partnership shall
have received the opinion, based on appropriate representations of the
Company, HoldCo and ScottishPower, of Milbank, Tweed, Hadley & McCloy LLP,
special counsel to HoldCo and ScottishPower, dated on or about the date on
which the Registration Statement (or the last amendment thereto) shall have
become effective, which opinion shall have been confirmed in writing on and
as of the Closing Date, to the effect that the Merger will constitute a
"reorganization" within the meaning of Code Section 368(a) and that no gain
or loss will be recognized for US federal income tax purposes by the
stockholders of the Company who exchange Company Common Stock for HoldCo ADSs
or Merger Ordinary Shares pursuant to the Merger (except with respect to cash
received in lieu of fractional HoldCo ADSs or Merger Ordinary Shares).
(e) PROCEEDINGS. All proceedings to be taken on the part of the
Company in connection with the transactions contemplated by this Agreement
and all documents incident thereto shall be reasonably satisfactory in form
and substance to HoldCo, and HoldCo shall have received copies of all such
documents and other evidences as HoldCo may reasonably request in order to
establish the consummation of such transactions and the taking of all
proceedings in connection therewith.
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7.03 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE MERGER.
The obligation of the Company to effect the Merger is further subject to the
fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by the
Company in its sole discretion):
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by HoldCo, ScottishPower and the Partnership in this
Agreement shall be true and correct, in all material respects, taken as a
whole, as of the Closing Date as though made on and as of the Closing Date
or, in the case of representations and warranties made as of a specified date
earlier than the Closing Date, on and as of such earlier date (provided,
however, that for purposes of this paragraph (a), no effect shall be given to
the reference to the date December 6, 1998 and the date of this Agreement in
the first paragraph of Article IV hereof), except as affected by the
transactions contemplated by this Agreement, and HoldCo, ScottishPower and
Merger Sub shall each have delivered to the Company a certificate, dated the
Closing Date and executed in the name and on behalf of HoldCo by its Chairman
of the Board, President or any Executive or Senior Vice President or any
Executive Director, in the name and on behalf of ScottishPower by its
Chairman of the Board, President or any Executive or Senior Vice President
and in the name and on behalf of Merger Sub by its Chairman of the Board,
President or any Vice President, to such effect.
(b) PERFORMANCE OF OBLIGATIONS. HoldCo, ScottishPower and Merger
Sub shall have performed and complied with, in all material respects, each
agreement, covenant and obligation required by this Agreement to be so
performed or complied with by HoldCo, ScottishPower or Merger Sub at or prior
to the Closing, and HoldCo, ScottishPower and Merger Sub shall each have
delivered to the Company a certificate, dated the Closing Date and executed
in the name and on behalf of HoldCo by its Chairman of the Board, President
or any Executive or Senior Vice President or any Executive Director, in the
name and on behalf of ScottishPower by its Chairman of the Board, President
or any Executive or Senior Vice President and in the name and on behalf of
Merger Sub by its Chairman of the Board, President or any Vice President, to
such effect.
(c) MATERIAL ADVERSE EFFECT. Since December 6, 1998, no material
adverse effect shall have occurred with respect to HoldCo, ScottishPower and
their respective Subsidiaries taken as a whole and there shall exist no facts
or circumstances arising after December 6, 1998 which in the aggregate would,
or insofar as reasonably can be foreseen, could, when taken together with any
breaches or violations of any representations, warranties, covenants and
agreements of HoldCo and ScottishPower contained herein, have a material
adverse effect on HoldCo, ScottishPower and their respective Subsidiaries
taken as a whole. For purposes of this SECTION 7.03(c), any adverse effects
on HoldCo, ScottishPower and their respective Subsidiaries resulting from
general economic or financial conditions shall not be taken into account in
determining whether a material adverse effect has occurred under this SECTION
7.03(c).
(d) TAX OPINION. The Company shall have received the opinion,
based on appropriate representations of the Company, HoldCo and
ScottishPower, of Stoel Rives LLP, counsel to the Company, and LeBoeuf, Lamb,
Greene & MacRae, LLP, special counsel to the
69
Company, dated on or about the date on which the Registration Statement (or
the last amendment thereto) shall have become effective, which opinion shall
have been confirmed in writing on and as of the Closing Date to the effect
that the Merger will constitute a "reorganization" within the meaning of Code
Section 368(a) and that no gain or loss will be recognized for US federal
income tax purposes by the stockholders of the Company who exchange Company
Common Stock for HoldCo ADSs or Merger Ordinary Shares pursuant to the Merger
(except with respect to cash received in lieu of fractional HoldCo ADSs or
Merger Ordinary Shares).
(e) PROCEEDINGS. All proceedings to be taken on the part of
HoldCo, ScottishPower and Merger Sub in connection with the transactions
contemplated by this Agreement and all documents incident thereto (other than
documentation relating to the Scheme of Arrangement) shall be reasonably
satisfactory in form and substance to the Company, and the Company shall have
received copies of all such documents and the documentation relating to the
Scheme of Arrangement and other evidences as the Company may reasonably
request in order to establish the consummation of such transactions and the
taking of all proceedings in connection therewith.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 TERMINATION. This Agreement may be terminated, and the
transactions contemplated hereby may be abandoned, at any time prior to the
Effective Time, whether prior to or after the Company Stockholders' Approval
or the ScottishPower Shareholders' Approval:
(a) By mutual written agreement of the parties hereto duly
authorized by action taken by or on behalf of their respective Boards of
Directors;
(b) By either the Company or HoldCo upon notification to the
non-terminating party by the terminating party:
(i) at any time after the date which is nine (9) months
following December 6, 1998 if the Merger shall not have been consummated
on or prior to such date and such failure to consummate the Merger is not
caused by a breach of this Agreement by the terminating party; PROVIDED,
HOWEVER, that if on such date HoldCo, ScottishPower and the Company and
their respective Subsidiaries have not received all of the approvals
required in order to satisfy the conditions set forth in SECTION 7.01(i)
but all other conditions to effect the Merger shall be fulfilled or shall
be capable of being fulfilled, then, at the option of either HoldCo or the
Company (which shall be exercised by written notice), the term of this
Agreement shall be extended until the expiration of such date which is
eighteen (18) months after December 6, 1998;
(ii) if the Company Stockholders' Approval or the
ScottishPower Shareholders' Approval shall not be obtained by reason of the
failure to obtain the requisite vote upon a vote actually held at a meeting
of such stockholders or shareholders, or any adjournment thereof, called
therefor;
70
(iii) if there has been a material breach of any
representation, warranty, covenant or agreement on the part of the
non-terminating party set forth in this Agreement (determined in all
cases as if the terms "material" or "materially" were not included in
any such representation or warranty), which breach is not curable or, if
curable, has not been cured within thirty (30) days following receipt by
the non-terminating party of notice of such breach from the terminating
party which breach, when taken together with any other breaches of
representations, warranties, covenants and agreements of the
non-terminating party contained in this Agreement, has or would
reasonably be expected to have a material adverse effect on the Company
and its Subsidiaries taken as a whole; or
(iv) if any court of competent jurisdiction or other competent
Governmental or Regulatory Authority shall have issued an order making
illegal or otherwise preventing or prohibiting the Merger and such order
shall have become final and nonappealable;
(c) By the Company upon five (5) days' prior notice to HoldCo if
(i) the Board of Directors of the Company determines in good faith, that a
failure to terminate this Agreement could reasonably be expected to result in
a breach of its fiduciary duties to stockholders imposed by law by reason of
an unsolicited BONA FIDE Alternative Proposal meeting the requirements of
clauses (B) and (C) of SECTION 5.07 having been made; PROVIDED that
(A) The Board of Directors of the Company shall have been
advised by outside counsel, that notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into in
the proper exercise of its applicable fiduciary duties, and
notwithstanding all concessions which may be offered by HoldCo in
negotiations entered into pursuant to clause (B) below, a failure to
reconsider such commitment as a result of such Alternative Proposal
could reasonably be expected to result in a breach of its fiduciary
duties to stockholders imposed by law, and
(B) prior to any such termination, the Company shall, and shall
cause its respective financial and legal advisors to, negotiate with
HoldCo to make such adjustments in the terms and conditions of this
Agreement as would enable the Company to proceed with the transactions
contemplated herein on such adjusted terms;
and PROVIDED FURTHER that the Company's ability to terminate this Agreement
pursuant to this clause (i) is conditioned upon the prior payment by the
Company to HoldCo of any amounts owed by it pursuant to SECTION 8.02(b);
or (ii) the Board of Directors of HoldCo (or any committee thereof) shall
have withdrawn or modified in a manner materially adverse to the Company its
approval or recommendation of this Agreement or the Merger; or
(d) By HoldCo if the Board of Directors of the Company (or any
committee thereof) (i) shall have withdrawn or modified in a manner
materially adverse to HoldCo its approval or recommendation of this Agreement
or the Merger, (ii) shall fail to reaffirm such approval or recommendation
upon HoldCo's request, (iii) shall have approved, recommended or
71
taken no position with respect to an Alternative Proposal to the stockholders
of the Company or (iv) shall resolve to take any of the foregoing actions; or
(e) By the Company if there has been a Change of Control after the
Scheme Date and prior to the Effective Time. A "Change of Control" shall
occur if any of the following applies: (A) Any "Person", as such term is
used in Sections 13(d) and 14(d) of the Exchange Act is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of HoldCo representing 30 percent or
more of the combined voting power of HoldCo's outstanding capital stock; (B)
the shareholders of HoldCo approve a merger or other consolidation of HoldCo
with any other company, other than a merger or consolidation effected to
implement a recapitalization of HoldCo (or similar transaction) in which no
Person acquires more than 30 percent of the combined voting power of HoldCo's
then outstanding securities; (C) a tender or exchange offer is made for the
ordinary shares of HoldCo (or securities convertible into ordinary shares of
HoldCo) and such offer results in a portion of those securities being
purchased and the offeror after the consummation of the offer is the
beneficial owner (as determined pursuant to Section 13(d) of the Exchange
Act), directly or indirectly, of securities representing at least 30 percent
of the voting power of outstanding securities of HoldCo; or (D) HoldCo sells
30 percent or more of its shares of ScottishPower to a buyer that is not a
member of HoldCo controlled group of corporations.
8.02 EFFECT OF TERMINATION. (a) If this Agreement is validly
terminated by either the Company or HoldCo pursuant to SECTION 8.01, this
Agreement will forthwith become null and void and there will be no liability
or obligation on the part of either the Company, HoldCo or ScottishPower (or
any of their respective Representatives or affiliates), except (i) that the
provisions of SECTIONS 6.13, 6.14 and 6.16, this SECTION 8.02, and SECTIONS
9.10 and 9.11 will continue to apply following any such termination, (ii)
that nothing contained herein shall relieve any party hereto from liability
for willful breach of its representations, warranties, covenants or
agreements contained in this Agreement and (iii) as provided in paragraphs
(b) and (c) below.
(b) In the event that any person or group shall have made an
Alternative Proposal and thereafter (i) this Agreement is terminated (x) by
the Company pursuant to Section 8.01(c)(i), (y) by HoldCo pursuant to SECTION
8.01(b)(iii) or SECTION 8.01(d) or (z) by either party pursuant to SECTION
8.01(b)(ii) as a result of the Company Stockholders' Approval not being
obtained or (ii) this Agreement is terminated for any other reason (other
than by reason of the breach of this Agreement by HoldCo or pursuant to
SECTION 8.01(b)(ii) as a result of the ScottishPower Shareholders' Approval
not being obtained or SECTION 8.01(c)(ii)) or 8.01(e) and, in the case of
this clause (ii) only, a definitive agreement with respect to such
Alternative Proposal is executed within one year after such termination, then
the Company shall pay to HoldCo by wire transfer of same day funds, either on
the date contemplated in SECTION 8.01(c) if applicable, or otherwise, within
two (2) business days after such amount becomes due, a termination fee of
$250,000,000.
(c) In the event that this Agreement is terminated by the Company
following a Change of Control, then HoldCo shall pay to the Company, by wire
transfer of same day funds, within two (2) business days following such
termination, a termination fee of $250,000,000.
72
(d) In the event that this Agreement is terminated by either party
pursuant to Section 8.01(b)(ii) in circumstances in which the termination fee
set forth in clause (b) above is not payable, (i) in the case of the Company
Stockholders' Approval not being obtained and the ScottishPower Shareholders'
Approval having been obtained, the Company shall pay to HoldCo (ii) in the
case of the ScottishPower Shareholders' Approval not being obtained and the
Company Stockholders' Approval having been obtained, HoldCo shall pay to the
Company, in each case an amount equal to $10,000,000.
(e) If the Company fails promptly to pay the amount due pursuant
to the preceding paragraphs, and in order to obtain such payment, HoldCo or
Merger Sub commences a suit which results in a judgment against the Company
for the fee set forth in such paragraph, the Company shall pay to HoldCo or
Merger Sub, as the case may be, its cost and expenses (including reasonable
attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of The Chase Manhattan
Bank in effect on the date such payment was required to be made.
8.03 AMENDMENT. This Agreement may be amended, supplemented or
modified by action taken by or on behalf of the respective Boards of
Directors of the parties hereto at any time prior to the Effective Time,
whether prior to or after the Company Stockholders' Approval or the
ScottishPower Shareholders' Approval shall have been obtained, but after such
adoption and approval only to the extent permitted by applicable law. No
such amendment, supplement or modification shall be effective unless set
forth in a written instrument duly executed by or on behalf of each party
hereto.
8.04 WAIVER. At any time prior to the Effective Time any party
hereto, by action taken by or on behalf of its Board of Directors, may to the
extent permitted by applicable law (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties of the other parties
hereto contained herein or in any document delivered pursuant hereto or (iii)
waive compliance with any of the covenants, agreements or conditions of the
other parties hereto contained herein. No such extension or waiver shall be
effective unless set forth in a written instrument duly executed by or on
behalf of the party extending the time of performance or waiving any such
inaccuracy or non-compliance. No waiver by any party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be or construed as a waiver of the same or any other term or condition of
this Agreement on any future occasion.
ARTICLE IX
GENERAL PROVISIONS
9.01 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS. The representations, warranties, covenants and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall not survive the Merger but shall terminate at the Effective
Time, except for the agreements contained in ARTICLE I and ARTICLE II, in
SECTIONS 5.01(o), 5.02(k), 6.09, 6.10, 6.11, 6.12, 6.14, 6.16 and 6.18, this
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ARTICLE IX and the agreements of the "AFFILIATES" of the Company delivered
pursuant to SECTION 6.04, which shall survive the Effective Time.
9.02 NOTICES. All notices, requests and other communications
hereunder must be in writing and will be deemed to have been duly given only
if delivered personally or by facsimile transmission or mailed (first class
postage prepaid) to the parties at the following addresses or facsimile
numbers:
If to HoldCo, ScottishPower, the Partnership or Merger Sub, to:
Scottish Power plc
1 Atlantic Quay
Glasgow G2 8FP
Facsimile No.: 011-44-141-248-8300
Attn: Company Secretary
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, N.Y. 10005
Facsimile No.: (212) 530-5219
Attn: M. Douglas Dunn
and to:
Freshfields
65 Fleet Street
London EC4Y 1HS
Facsimile No.: 011-44-171-832-7001
Attn: Simon Marchant
If to the Company, to:
PacifiCorp
700 N.E. Multnomah
Portland, Oregon 97232-4116
Facsimile No.: (503) 813-7250
Attn: Executive Vice President and Chief Operating Officer
with a copy to:
Stoel Rives LLP
900 S.W. Fifth Avenue
Suite 2300
Portland, Oregon 97232
Facsimile No.: (503) 220-2480
74
Attn: Dexter E. Martin
and to:
LeBoeuf, Lamb, Greene & MacRae, LLP
125 West 55th Street
New York, NY 10019
Facsimile No.: (212) 424-8500
Attn: William S. Lamb
All such notices, requests and other communications will (i) if
delivered personally to the address as provided in this Section, be deemed
given upon delivery, (ii) if delivered by facsimile transmission to the
facsimile number as provided in this Section, be deemed given upon receipt,
and (iii) if delivered by mail in the manner described above to the address
as provided in this Section, be deemed given upon receipt (in each case
regardless of whether such notice, request or other communication is received
by any other person to whom a copy of such notice, request or other
communication is to be delivered pursuant to this Section). Any party from
time to time may change its address, facsimile number or other information
for the purpose of notices to that party by giving notice specifying such
change to the other parties hereto.
9.03 ENTIRE AGREEMENT; INCORPORATION OF EXHIBITS. (a) Subject to
paragraph (c) below, this Agreement supersedes all prior discussions and
agreements among the parties hereto with respect to the subject matter
hereof, other than the Confidentiality Agreement, which shall survive the
execution and delivery of this Agreement in accordance with its terms, and
contains, together with the Confidentiality Agreement, the sole and entire
agreement among the parties hereto with respect to the subject matter hereof.
(b) The Company Disclosure Letter, the ScottishPower Disclosure
Letter and any Exhibit or Schedule attached to this Agreement and referred to
herein are hereby incorporated herein and made a part hereof for all purposes
as if fully set forth herein.
(c) Notwithstanding the execution of this Agreement by the parties
hereto on the date hereof, this Agreement (other than this SECTION 9.03(c)
which shall have immediate effect) shall not take effect until the Scheme
Date; PROVIDED, HOWEVER, that upon the Scheme of Arrangement becoming
effective, this Agreement shall be deemed to have been in full force and
effect since the date hereof. Prior to the Scheme Date, the Original
Agreement shall continue in full force and effect. If ScottishPower gives
written notice to PacifiCorp that the Scheme of Arrangement will not become
effective, the transactions contemplated by the Original Agreement will
proceed as if no notice under Schedule II of the Original Agreement had been
received and this Agreement had not been entered into.
9.04 [Intentionally Omitted.]
9.05 PUBLIC ANNOUNCEMENTS. Except as otherwise required by law or
the rules of any applicable securities exchange or national market system or
any other Regulatory Authority (including the U.K. Takeover Panel), so long
as this Agreement is in effect, HoldCo,
75
ScottishPower and the Company will not, and will not permit any of their
respective Subsidiaries or Representatives to, issue or cause the publication
of any press release or make any other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the
other party, which consent shall not be unreasonably withheld. HoldCo,
ScottishPower and the Company will cooperate with each other in the
development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions
contemplated hereby, and will furnish the other with drafts of any such
releases and announcements as far in advance as practicable.
9.06 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in
SECTIONS 6.09, 6.10, 6.11 and 6.12 (which are intended to be for the benefit
of the persons entitled to therein, and may be enforced by any of such
persons), it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
9.07 NO ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any
right, interest or obligation hereunder may be assigned by any party hereto
without the prior written consent of the other parties hereto and any attempt
to do so will be void, except that HoldCo may cause Merger Sub to assign any
or all of its rights, interests and obligations hereunder to another direct
or indirect wholly-owned Subsidiary of HoldCo, PROVIDED that any such
Subsidiary agrees in writing to be bound by all of the terms, conditions and
provisions contained herein. This Agreement is binding upon, inures to the
benefit of and is enforceable by the parties hereto and their respective
successors and assigns.
9.08 HEADINGS. The headings used in this Agreement have been
inserted for convenience of reference only and do not define, modify or limit
the provisions hereof.
9.09 INVALID PROVISIONS. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law
or order, and if the rights or obligations of any party hereto under this
Agreement will not be materially and adversely affected thereby, (i) such
provision will be fully severable, (ii) this Agreement will be construed and
enforced as if such illegal, invalid or unenforceable provision had never
comprised a part hereof, and (iii) the remaining provisions of this Agreement
will remain in full force and effect and will not be affected by the illegal,
invalid or unenforceable provision or by its severance herefrom.
9.10 GOVERNING LAW. Except to the extent that the BCA is
mandatorily applicable to the Merger and the rights of the stockholders of
the Constituent Corporations, this Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
a contract executed and performed in such State, without giving effect to the
conflicts of laws principles thereof.
9.11 SUBMISSION TO JURISDICTION; WAIVERS. Each of ScottishPower,
HoldCo (on behalf of itself and Merger Sub), the Partnership, UKSub 1, UKSub 2
and the
76
Company irrevocably agree that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by another party hereto or its successors or assigns may be
brought and determined in the Supreme Court of the State of New York in New
York County or in the United States District Court for the Southern District
of New York, and each of ScottishPower, HoldCo (on behalf of itself and
Merger Sub), the Partnership, and the Company hereby irrevocably submits with
regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of
the aforesaid courts. Any service of process to be made in such action or
proceeding may be made by delivery of process in accordance with the notice
provisions contained in SECTION 9.02. Each of ScottishPower, HoldCo, the
Partnership, Merger Sub, and the Company hereby irrevocably waives, and
agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a)
the defense of sovereign immunity, (b) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason other
than the failure to serve process in accordance with this SECTION 9.10, (c)
that it or its property is exempt or immune from jurisdiction of any such
court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of
execution of judgment, execution of judgment or otherwise), and (d) to the
fullest extent permitted by applicable law that (i) the suit, action or
proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
9.12 ENFORCEMENT OF AGREEMENT. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specified terms or
was otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of competent jurisdiction, this being in addition to any other remedy
to which they are entitled at law or in equity.
9.13 CERTAIN DEFINITIONS. As used in this Agreement:
(a) except as used in SECTIONS 2.03(b), 3.02(c), 3.17 and 6.04,
the term "AFFILIATE," as applied to any person, shall mean any other person
directly or indirectly controlling, controlled by, or under common control
with, that person; for purposes of this definition, "CONTROL" (including,
with correlative meanings, the terms "CONTROLLING," "CONTROLLED BY" and
"UNDER COMMON CONTROL WITH"), as applied to any person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that person, whether through the ownership of
voting securities, by contract or otherwise;
(b) a person will be deemed to "BENEFICIALLY" own securities if
such person would be the beneficial owner of such securities under Rule 13d-3
under the Exchange Act, including securities which such person has the right
to acquire (whether such right is exercisable immediately or only after the
passage of time);
77
(c) the term "BUSINESS DAY" means a day other than Saturday,
Sunday or any day on which banks located in the State of Oregon or London,
England are authorized or obligated to close;
(d) the term "KNOWLEDGE" or any similar formulation of "KNOWLEDGE"
shall mean, with respect to ScottishPower or the Company, the actual
knowledge after due inquiry of the executive officers of ScottishPower or the
Company and their Subsidiaries, set forth in SECTION 9.12(d) of the
ScottishPower Disclosure Letter or SECTION 9.12(d) of the Company Disclosure
Letter and, with respect to HoldCo, the actual knowledge after due inquiry of
the Executive Directors of HoldCo immediately prior to the Effective Date;
(e) any reference to any event, change or effect having a
"MATERIAL ADVERSE EFFECT" on or with respect to an entity (or group of
entities taken as a whole) means such event, change or effect is materially
adverse to the business, properties, assets, liabilities, financial condition
or results of operations of such entity (or of such group of entities taken
as a whole);
(f) the term "NEW FACILITIES" means new revolving credit
facilities and/or amendments to existing revolving credit facilities of not
more than L2.6 billion in the aggregate on terms which are not significantly
less favorable taken as a whole than the RCF;
(g) the term "PERSON" shall include individuals, corporations,
partnerships, trusts, other entities and groups (which term shall include a
"GROUP" as such term is defined in Section 13(d)(3) of the Exchange Act);
(h) the term "RCF" means the Revolving Credit Facility dated June
24, 1996 between, INTER ALIA, ScottishPower, the Royal Bank of Scotland plc
and Union Bank of Switzerland (the "RCF");
(i) the "REPRESENTATIVES" of any entity means such entity's
directors, officers, employees, legal, investment banking and financial
advisors, accountants and any other agents and representatives;
(j) except as used in SECTIONS 3.02(d) and 3.17, the term
"SUBSIDIARY" means, with respect to any party, any corporation or other
organization, whether incorporated or unincorporated, of which more than
fifty percent (50%) of either the equity interests in, or the voting control
of, such corporation or other organization is, directly or indirectly through
Subsidiaries or otherwise, beneficially owned by such party.
(k) "SCHEME CONSENTS" means the consents, clearances and approvals
referred to in Schedule I;
(l) "SCHEME DOCUMENT" means the document, including an explanatory
statement, to be sent to the shareholders of ScottishPower in connection with
the Scheme of Arrangement.
(m) any reference to "transactions contemplated hereby,"
"transactions contemplated hereunder," "transactions contemplated by this
Agreement," "transactions
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contemplated under this Agreement" or any similar formulation shall include
the transaction contemplated by the Scheme of Arrangement; PROVIDED, HOWEVER,
that the reference to such phrase appearing in the parenthetical clause in
the introductory paragraph of SECTION 5.02 shall not include the transaction
contemplated by the Scheme of Arrangement.
9.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
9.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTION CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS SECTION.
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IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized as of the
date first above written.
NEW SCOTTISH POWER PLC
By: /s/ I.M. Russell
-----------------------------------
Name: I.M. Russell
Title: Director
SCOTTISH POWER PLC
By: /s/ I.M. Russell
-----------------------------------
Name: I.M. Russell
Title: Director
NA GENERAL PARTNERSHIP
By: Scottish Power NA 2 Limited,
a General Partner
By: /s/ I.M. Russell
-----------------------------------
Name: I.M. Russell
Title: Director
PACIFICORP
By: /s/ Richard T. O'Brien
-----------------------------------
Name: Richard T. O'Brien
Title: EVP & CEO
For purposes of Section 2.01 only:
SCOTTISH POWER NA 1 LIMITED
By: /s/ I.M. Russell
-----------------------------------
Name: I.M. Russell
Title: Director
For purposes of Section 2.01 only:
SCOTTISH POWER NA 2 LIMITED
By: /s/ I.M. Russell
-----------------------------------
Name: I.M. Russell
Title: Director
SCHEDULE I
SCHEME CONSENTS
1. The approval of the Scheme of Arrangement by a majority in number
representing three-fourths in value of the ScottishPower Shareholders
present and voting (either in person or by proxy) at the meeting
convened by the Court.
2. The approval of the Scheme of Arrangement and the reduction in the
capital of ScottishPower, the increase in share capital, the
capitalisation of new ScottishPower Shares and the granting of
authority to the directors of ScottishPower to allot such Shares, in
each case for the purposes of the Scheme of Arrangement by a special
resolution of ScottishPower.
3. The consent in writing of the ScottishPower Special Shareholder to the
Scheme of Arrangement and the proposed amendments to ScottishPower's
Articles of Association, and the approval of such amendments by a
special resolution of ScottishPower.
4. The sanction by the Court of the Scheme of Arrangement (with or
without modification) and the confirmation by the Court of the
reduction in capital by the cancellation of ScottishPower shares
required as part of the Scheme of Arrangement.
5. The approval in writing of the transaction to be effected by the
Scheme of Arrangement by the Secretary of State for Scotland and by
each UK Regulator whose consent is required, or considered by
ScottishPower to be necessary, under the terms of each licence,
appointment or other authorisation held by any member of the
ScottishPower Group.
6. An indication on satisfactory terms by the Secretary of State for
Trade and Industry and by each UK Regulator, as appropriate, that it
is not his intention to seek, as a result of the transaction to be
effected by the Scheme of Arrangement, any revocation of or
modification to any licence, appointment or other authorisation held
by any member of the ScottishPower Group, except on satisfactory
terms.
7. Neither the Secretary of State for Scotland nor any UK Regulator
having sought, as a result of the Scheme of Arrangement, undertakings
or assurances from any member of the ScottishPower Group, except on
satisfactory terms.
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8. The agreement of the LSE to admit the ordinary shares of HoldCo issued
and to be issued pursuant to the Scheme of Arrangement to the Official
List of the LSE (subject only to allotment) and such agreement not
being withdrawn prior to the Scheme Date.
9. The receipt by HoldCo of:
(i) clearances from the Inland Revenue under section 138 of the
Taxation of Chargeable Gains Act 1992 and under section 707 of
the Income and Corporation Taxes Act 1988 in respect of the
transaction to be effected by the Scheme of Arrangement; and
(ii) confirmation as to the application of section 136 of the Taxation
of Chargeable Gains Act 1992 in respect of the transaction to be
effected by the Scheme of Arrangement,
10. The consent under the RCF of the Majority Banks (as defined therein)
to the Scheme of Arrangement, and/or the replacement of the RCF with
the New Facilities under which no such consent is required (or consent
has been given).
11. Confirmation from the European Investment Bank that it will not
require prepayment of any loan to ScottishPower or its subsidiaries as
a result of the change of control of ScottishPower which the Scheme of
Arrangement will result in.
12. The approval of the NYSE listing application in respect of the HoldCo
ADRs issued and to be issued pursuant to the Scheme and the listing
pursuant to such application becoming effective.
13. The execution of the replacement deposit agreement in respect of the
HoldCo ADRs pursuant to Section 6.06(b).
14. [A registration statement to be filed under the Securities Exchange
Act of 1934 shall have been filed by HoldCo and declared effective by
the SEC].
15. The approval of HoldCo's ordinary shareholders (where required, by a
special resolution) (i) to the adoption or amendment of HoldCo's
Articles of Association in accordance with Section 4.01(a) (and to the
proposed changes to HoldCo's Articles of Association referred to in
Section 6.03(c) if the same are to be effective on or prior to the
Scheme Date), (ii) to increase the authorised share capital of HoldCo,
and to give the directors of HoldCo authority to allot shares under
Section 80 of the Companies Act 1985, in respect of the ordinary
shares of HoldCo to be issued pursuant to the Scheme of Arrangement
and the Merger and otherwise for general purposes, (iii) to disapply
statutory pre-emption rights, (iv) to authorise HoldCo to repurchase
its own shares, (v) to change HoldCo's name conditional upon the
Scheme of Arrangement becoming effective, and (vi) to appoint
directors.
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16. Such other approvals, prior to the Scheme Date, of the Shareholders of
HoldCo, the board of HoldCo and the board of ScottishPower as may be
required to implement and give effect to the Scheme of Arrangement and
the terms of this Agreement.
17. The filing of orders, returns and other documents with the Registrar
of Companies in Scotland or with the Court in order to obtain the
sanction of the Court for, and to give effect to, the Scheme of
Arrangement.
18. Such filings and consents as ScottishPower may reasonably consider
necessary or desirable in connection with the Scheme of Arrangement
and/or the Merger with stock exchanges or other Governmental or
Regulatory Authorities in Australia, Canada and Japan.
DEFINITIONS
In this Schedule I, the following definitions apply:
COURT means the Court of session, Edinburgh;
SCOTTISHPOWER SHARES means ordinary shares of 0.50p in the capital of
ScottishPower;
UK REGULATOR means each of the Director General of Electricity Supply. the
Director General of Water Services, the Director General of Gas Supply, and
the Director General of Telecommunications; and
ON SATISFACTORY TERMS means on terms which are satisfactory to HoldCo and
which would not, or would not reasonably be expected to, have, individually
or in the aggregate, a material adverse effect on the HoldCo Group taken as a
whole.
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SCHEDULE II
THE ARTICLES OF ASSOCIATION OF HOLDCO
HoldCo's Articles of Association will have the principal differences from the
current Articles of Association of ScottishPower referred to below. There
will also be some differences of a minor or technical nature which have not
been included below. Holdco's Articles of Association will also include any
changes requested by the ScottishPower Special Shareholder or by the LSE and
agreed to by ScottishPower.
The number identifying each provision of HoldCo's proposed Articles of
Association corresponds (except where otherwise stated) to the numbering of
the current ScottishPower Articles of Association.
(a) ARTICLE 6(E) (THE REDEEMABLE SHARES)
There is no equivalent of this proposed article in ScottishPower's current
Articles of Association. It will set out the rights attaching to non-voting
redeemable shares which it is intended that HoldCo will issue in order to
have the minimum issued capital required to obtain a trading certificate
under section 117 of the Companies Act 1985.
(b) ARTICLE 7 (THE HOLDCO SPECIAL SHARE)
This article, which will set out the rights attaching to the one share of L1
in the capital of HoldCo to be issued to the ScottishPower Special
Shareholder pursuant to the Scheme of Arrangement (the "HoldCo Special
Share"), will be amended from the comparable ScottishPower article so that
each of the following matters will also be deemed to be a variation requiring
prior consent in writing of the HoldCo Special Shareholder:
(i) the giving by HoldCo of any consent or agreement to any amendment to,
deletion of or alteration to the effect of, article 7 of the Articles
of Association of ScottishPower (save as referred to below):
(ii) the giving by HoldCo of any consent or agreement to the creation or
issue of any shares in the capital of ScottishPower other than an
issue of shares upon the issue of which
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HoldCo will own the full legal and beneficial interest in, and
control, shares in the capital of ScottishPower carrying at least
86 per cent. of the voting rights exercisable on a poll at general
meetings of ScottishPower;
(iii) the disposal by HoldCo of any of the shares in ScottishPower or of
any rights or interest therein, or the entering into by HoldCo of any
agreement or arrangement with respect to such shares, or the exercise
of any voting or other rights attaching to such shares, such that
HoldCo would cease to own the full legal and beneficial interest in,
and control, shares in the capital of ScottishPower carrying at least
85 per cent. of the voting rights exercisable on a poll at general
meetings of ScottishPower;
(iv) the giving by HoldCo of any consent or agreement to any abrogation,
variation, waiver or modification of any of the rights or privileges
attaching to any shares in ScottishPower such that HoldCo would cease
to own the full legal and beneficial interest in, and control, shares
in the capital of ScottishPower carrying at least 85 per cent. of the
voting rights exercisable on a poll at general meetings of Scottish
Power; and
(v) any other act or omission to act by HoldCo or the Directors of New
ScottishPower which results in HoldCo ceasing to own the full legal
and beneficial interest in, and control, shares in the capital of
ScottishPower carrying at least 85 per cent. of the voting rights
exercisable on a poll at general meetings of ScottishPower.
The existing article 7 of ScottishPower's Articles is to be deleted and
replaced by an article which ensures that the events set out in paragraphs
(i), (ii) and (iv) above do not occur without the prior written consent of
HoldCo. ScottishPower's Articles of Association will also include any
changes requested by the ScottishPower Special Shareholder and agreed to by
ScottishPower.
(c) ARTICLE 50 (DISCLOSURE OF INTERESTS IN SHARES)
This article, which will relate to the disclosure of interests in shares,
will be amended from the comparable ScottishPower article to remove
references to certain interim arrangements included in ScottishPower's
Articles in connection with the initial floatation of ScottishPower.
(d) ARTICLE 51 (LIMITATIONS ON SHAREHOLDINGS)
This article, which will set out restrictions on persons holding or
controlling the right to cast 15 per cent. or more of the votes at general
meetings, will be amended from the comparable ScottishPower article to remove
references to certain interim arrangements included in ScottishPower's
Articles of Association in connection with the initial flotation of
ScottishPower.
(e) ARTICLE 98 (NUMBER OF DIRECTORS TO RETIRE)
This article, which will relate to the number of directors to retire from
office by rotation, will be amended from the comparable ScottishPower article
in accordance with the new London Stock Exchange requirement that all
directors shall retire by rotation at least every three years.
84
(f) ARTICLE 123 (BORROWING POWERS)
This article will, if considered necessary by ScottishPower, be amended from
the comparable ScottishPower article to reflect the new UK Financial
Reporting Standard FRS10. Any such amendment may include provisions to the
effect that, in calculating the borrowing limit, no goodwill or intangible
assets will be deducted except the amount that has been amortised in
accordance with FRS10.
(g) ARTICLE 130 (INTERIM DIVIDENDS)
The article, which will relate to the ability of the Directors to pay interim
dividends, may, if considered necessary or desirable by ScottishPower, be
amended from the comparable ScottishPower article to clarify that the
Directors may declare and pay any dividends, including final dividends, and
not just interim dividends. This relates to the proposed move to quarterly
dividend payments.
(h) ARTICLE 160 (ADR DEPOSITORIES)
Amendments will be made in accordance with Section 6.03(c) of this Agreement,
although these amendments may not be made prior to the Scheme Date.
85
EXHIBIT A
Scheme of Arrangement
(under section 425 of the Companies Act 1985)
between Scottish Power plc and the Scheme Shareholders (as hereinafter
defined) and the Special Shareholder (as hereinafter defined)
1. Preliminary
(A) In this Scheme of Arrangement, unless inconsistent with the subject
or context, the following expressions shall bear the following meanings:
BUSINESS DAY means any day other than a Saturday or Sunday on which banks are
generally open for business in England and Wales;
COURT means the Court of Session in Edinburgh;
COURT MEETING means the meeting of holders of Scottish Power Shares convened
by interlocutor of the Court pursuant to section 425 of the Companies Act
1985 for __________, 1999 to consider and, if thought fit, approve this
Scheme;
CREST means a relevant system (as defined in the CREST Regulations) in
respect of which CRESTCo is the operator (as defined in the CREST
Regulations);
CRESTCO means CRESTCo Limited;
CREST REGULATIONS means the Uncertificated Securities Regulations 1995 (SI
1995 No. 3272) as from time to time amended;
HOLDER includes any person entitled by transmission;
NEW SCOTTISH POWER SHARES means new ordinary shares of 50 pence each in the
capital of ScottishPower;
NEW SCOTTISHPOWER means New Scottish Power plc;
NEW SCOTTISHPOWER SPECIAL SHARE means the special rights non-voting
redeemable preference share of L1 in the capital of New ScottishPower;
NEW SHARES means ordinary shares of [50 pence] each in the capital of New
ScottishPower;
RECORD DATE means the business day immediately preceding the Scheme Date;
86
SCHEME DATE means the date on which this Scheme becomes effective in
accordance with clause 6 of this Scheme;
SCHEME RECORD DATE means the business day immediately preceding the date of
the hearing of the Court at which the Scheme is sanctioned;
SCHEME SHAREHOLDER means a holder of Scheme Shares as at 5:30 p.m. on the
Record Date;
SCHEME SHARES means:
(a) all ScottishPower Shares in issue at the date of
this Scheme;
(b) all (if any) other ScottishPower Shares in issue
immediately prior to the Court Meeting; and
(c) all (if any) further ScottishPower Shares which
may be in issue at 5:30 p.m. on the Scheme Record
Date;
SCOTTISHPOWER means Scottish Power plc;
SCOTTISHPOWER SHARES means ordinary shares of 50 pence each in the capital of
ScottishPower;
SCOTTISHPOWER SPECIAL SHARE means the special rights non-voting redeemable
preference share of L1 in the capital of ScottishPower.
SPECIAL SHAREHOLDER means the Secretary of State for Scotland, the holder of
the ScottishPower Special Share;
THIS SCHEME means this Scheme of Arrangement in its present form or with any
modification thereof or addition thereto or condition approved or imposed by
the Court; and
UNCERTIFICATED or IN UNCERTIFICATED FORM means recorded on the relevant
register as in uncertificated form, being held in uncertificated form in
CREST and title to the object of which by virtue of the CREST Regulations may
be transferred by means of CREST.
(B) The authorised share capital of ScottishPower as at the date of
this Scheme is L____ divided into _____ ScottishPower Shares, of which _____
have been issued and are fully paid up (and the remainder are unissued), and
one ScottishPower Special Share which has been issued and is fully paid up.
(C) New ScottishPower was incorporated as a public limited company on
_____, 1999 under the name New ScottishPower. The authorised share capital
of New ScottishPower at the date of this Scheme is L_____ divided into _____
New Shares, of which _____ have been issued and are fully paid up (and the
remainder are unissued) and the New ScottishPower Special Share which has not
been issued.
(D) The purpose of this Scheme is to provide for the cancellation of
the Scheme Shares and the ScottishPower Special Share and the issue of new
ScottishPower Shares with an aggregate
87
nominal value equal to that of the shares so cancelled to New ScottishPower
in consideration of the allotment by New ScottishPower of New Shares to the
Scheme Shareholders and the allotment by New ScottishPower of the New
ScottishPower Power Special Share to the Special Shareholder.
(E) New ScottishPower has agreed, and it is proposed that the Special
Shareholder will agree, to appear by Counsel on the hearing of the Petition
for the sanction by the Court of this Scheme, to consent thereto and to
undertake to be bound thereby and to execute or procure to be executed all
such documents, and to do or procure to be done all such acts and things, as
may be necessary or desirable to be executed or done by them respectively for
the purpose of giving effect to this Scheme.
2. The Scheme
SCOTTISHPOWER CANCELLATION
1. (a) The share capital of ScottishPower shall be reduced by cancelling
the Scheme Shares and the ScottishPower Special Share.
(b) Forthwith and contingently upon the said reduction of capital
taking effect:
(i) the share capital of ScottishPower shall be increased to
its former amount by the creation of such number of new
ScottishPower Shares as shall be of an aggregate nominal
amount equal to the aggregate nominal amount of the shares
cancelled pursuant to sub-clause (a) of this clause 1;
(ii) ScottishPower shall apply the credit arising in its books
of account on the reduction of capital pursuant to
sub-clause (a) of this clause 1 in paying up, in full at
par, the new ScottishPower Shares created pursuant to
sub-clause (b)(i) of this clause 1 and shall allot and issue
the same, credited as fully paid, to New ScottishPower
and/or its nominee(s); and
(iii) ScottishPower will become a wholly owned subsidiary of New
ScottishPower.
NEW SHARES
2. (a) In consideration of the cancellation of the Scheme Shares and the
ScottishPower Special Share and the issue of the new
ScottishPower Shares to New ScottishPower and/or its nominee(s)
pursuant to clause 1 of this Scheme, New ScottishPower shall
(subject to the provisions of subclause (c) of this clause 2):
(i) allot and issue (credited as fully paid) New Shares to the
Scheme Shareholders on the following basis:
For each Scheme Share held at 5:30 p.m. on the Record Date, one
New Share
88
save that for any person holding New Shares as at 5:30 p.m. on
the Record Date his entitlement to receive New Shares pursuant
to this clause 2 shall be reduced by the number of New Shares he
holds at that time; and
(ii) allot and issue (credited as fully paid) the New
ScottishPower Special Share to the Special Shareholder.
(b) The New Shares to be issued pursuant to sub-clause (a)(i) of this
clause 2 shall rank pari passu as a single class of shares inter
se and shall rank in full for all dividends or distributions
made, paid or declared after the Scheme Date on the ordinary
share capital of New ScottishPower.
(c) The provisions of sub-clause (a) of this clause 2 shall be
subject to any prohibition or condition imposed by law. Without
prejudice to the generality of the foregoing, if, in respect of
any Scheme Shareholder who is a citizen, resident or national of
any jurisdiction outside the United Kingdom ("overseas
shareholder"), New ScottishPower is advised that the allotment
and issue of New Shares pursuant to this clause 2 would infringe
the laws of any jurisdiction outside the United Kingdom (other
than the US)] or would require New ScottishPower to observe any
governmental or other consent of any registration, filing or
other formality [(other than the US)], then New ScottishPower may
determine that no New Shares shall be allotted or issued to such
overseas shareholder under this clause 2, but shall instead be
allotted to a nominee appointed by New ScottishPower, as a
trustee for such overseas shareholder, on terms that the nominee
shall, as soon as practicable following the Scheme Date, sell the
New Shares so allotted at the best price which can reasonably be
obtained and shall account for the net proceeds of such sale
(after the deduction of all expenses and commissions, including
value added tax payable thereon) by sending a cheque or warrant
to such overseas shareholder in accordance with the provisions of
clause 3 below. None of ScottishPower, New ScottishPower, any
nominee referred to in this subclause (c) or any broker or agent
of any of them shall have any liability for any loss arising as a
result of the timing or terms of any such sale.
CERTIFICATES AND PAYMENT
3. (a) Not later than five (5) business days after the Scheme Date, New
ScottishPower shall send by post to the allottees of the New
Shares and to the allottee of the New ScottishPower Special Share
allotted and issued pursuant to clause 2 of this Scheme
certificates in respect of such shares, save that where Scheme
Shares are held in uncertificated form, New ScottishPower will
procure that CRESTCo is instructed to credit to the appropriate
stock account in CREST of the Scheme Shareholder concerned such
shareholder's entitlement to New Shares.
(b) Not later than five (5) business days following the sale of any
relevant New Shares pursuant to clause 2(c), New ScottishPower
and/or the nominee shall
89
satisfy the cash consideration payable by it by despatching to
the persons respectively entitled thereto cheques and/or warrants
by post.
(c) All certificates required to be sent by ScottishPower pursuant to
sub-clause (a) of this clause 3 and all cheques or warrants
required to be sent by New ScottishPower and/or any nominee
referred to in clause 2(c) of this Scheme shall be sent through
the post in pre-paid envelopes addressed to the persons
respectively entitled thereto at their respective addresses
appearing in the register of members of ScottishPower at the
close of business on the Record Date (or, in the case of joint
holders, to the address of that one of the joint holders whose
name stands first in the register in respect of the joint
holding) or in accordance with any special instructions regarding
communications received at the registered office of ScottishPower
prior to the Record Date.
(d) None of ScottishPower, New ScottishPower, any nominee referred to
in clause 2(c) or any agent of any of them shall be responsible
for any loss or delay in transmission of certificates, cheques or
warrants sent in accordance with this clause 3.
(e) The preceding sub-clauses of this clause 3 shall take effect
subject to any prohibition or condition imposed by law.
CERTIFICATES REPRESENTING SCHEME SHARES AND THE SCOTTISHPOWER SPECIAL SHARE
4. With effect from and including the Scheme Date, all certificates
representing holdings of Scheme Shares and the ScottishPower Special Share
shall cease to be valid in respect of such holdings and the holders of such
shares shall be bound at the request of ScottishPower to deliver such
certificates for cancellation to ScottishPower or to any person appointed by
ScottishPower to receive the same.
MANDATES
5. Each mandate in force at 5:30 p.m. on the Record Date relating to
the payment of dividends on Scheme Shares and each instruction then in force
as to notices and other communications from ScottishPower shall, unless and
until varied or revoked, be deemed as from the Scheme Date to be a valid and
effective mandate or instruction to New ScottishPower in relation to the
corresponding New Shares to be allotted and issued pursuant to this Scheme.
SCHEME DATE
6. This Scheme shall become effective as soon as an office copy of the
interlocutor of the Court sanctioning this Scheme under section 425 of the
Act and confirming under section 137 of the Act the reduction of capital
proposed under this Scheme shall have been duly delivered to the Registrar of
Companies for registration and the interlocutor and relative minute have been
registered by him.
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7. Unless this Scheme shall have become effective on or before _____,
1999 or such later date, if any, as the Court may allow, it shall lapse.
MODIFICATION
8. ScottishPower and New ScottishPower may jointly consent on behalf
of all persons concerned to any modification of or addition to this Scheme or
to any condition which the Court may think fit to approve or impose.
Dated the _____ day of _____, 1999
91
IN WITNESS WHEREOF, each party hereto has caused this
Agreement to be signed by its officer thereunto duly authorized as of the
date first above written.
NEW SCOTTISH POWER PLC
By:
-----------------------------------
Name:
Title:
SCOTTISH POWER PLC
By:
-----------------------------------
Name:
Title:
NA GENERAL PARTNERSHIP
By: Scottish Power NA 2 Limited,
a General Partner
By:
-----------------------------------
Name:
Title:
PACIFICORP
By:
-----------------------------------
Name:
Title:
For purposes of Section 2.01 only:
SCOTTISH POWER NA 1 LIMITED
By:
-----------------------------------
Name:
Title:
For purposes of Section 2.01 only:
SCOTTISH POWER NA 2 LIMITED
By:
-----------------------------------
Name:
Title:
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EXHIBIT B
Column A Column B
-------- --------
Proportion of HoldCo Ordinary Shares
represented by HoldCo ADSs not more than 75% not less than 25%
Proportion of Merger Ordinary Shares not more than 75% not less than 25%
EXHIBIT C
[Form of Affiliate's Agreement]
[Date]
[name]
[address]
Ladies and Gentlemen:
I have been advised that as of the date hereof I may be deemed
to be an "AFFILIATE" of PacifiCorp, an Oregon corporation (the "COMPANY"), as
that term is defined for purposes of paragraphs (c) and (d) of Rule 145 of
the rules and regulations (the "RULES AND REGULATIONS") of the Securities and
Exchange Commission (the "COMMISSION") under the Securities Act of 1933, as
amended (the "ACT"). Neither my entering into this agreement, nor anything
contained herein, shall be deemed an admission on my part that I am such an
"AFFILIATE".
Pursuant to the terms of the Amended and Restated Agreement
and Plan of Merger dated as of December 6, 1998, as amended as of January 29,
1999 and February 9, 1999 and amended and restated as of January 23, 1999
(the "MERGER AGREEMENT"), by and among New Scottish Power plc, a public
limited company incorporated under the laws of Scotland ("HOLDCO"), Scottish
Power plc, a public limited company incorporated under the laws of Scotland,
NA General Partnership, a Nevada general partnership (the "PARTNERSHIP"), and
the Company providing for the merger of a wholly-owned subsidiary of the
Partnership with and into the Company (the "MERGER"), and as a result of the
Merger, I may receive shares of HoldCo's American Depositary Shares, each
representing four HoldCo Ordinary Shares (the "HOLDCO SECURITIES"), in
exchange for the shares of common stock, without par value, of the Company
owned by me at the Effective Time (as defined in the Merger Agreement) of the
Merger.
I represent and warrant to HoldCo that in such event:
A. I shall not make any sale, transfer or other disposition
of the HoldCo Securities in violation of the Act or the Rules and Regulations
B. I have carefully read this letter and the Merger
Agreement and discussed its requirements and other applicable limitations
upon my ability to sell, transfer or otherwise dispose of HoldCo Securities,
to the extent I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of HoldCo
Securities to me pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement on Form F-4. However, I
have also been advised that, since at the time the Merger was submitted for a
vote of the stockholders of the Company I may have been deemed to have been
an affiliate of the Company and a distribution by me of HoldCo Securities has
not been registered under the Act, the HoldCo Securities must be held by me
indefinitely unless (i) a distribution of HoldCo Securities by me has been
registered under the Act, (ii) a sale of HoldCo Securities by me is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act or (iii) in the opinion of counsel reasonably
acceptable to HoldCo, some other exemption from registration is available
with respect to a proposed sale, transfer or other disposition of the HoldCo
Securities by me.
D. I understand that HoldCo is under no obligation to
register the sale, transfer or other disposition of HoldCo Securities by me
or on my behalf or to take any other action necessary in order to make
compliance with an exemption from registration available.
E. I also understand that stop transfer instructions will be
given to HoldCo's transfer agents with respect to the HoldCo Securities and
that there will be placed on the certificates for the HoldCo Securities, or
any substitutions therefor, a legend stating in substance:
"The shares represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of 1933,
as amended, applies. The shares represented by this certificate may only be
transferred in accordance with the terms of an agreement dated ____________,
____, between the registered holder hereof and ___________ (the
"Corporation"), a copy of which agreement is on file at the principal offices
of the Corporation."
F. I also understand that unless the transfer by me of my
HoldCo Securities has been registered under the Act or is a sale made in
conformity with the provisions of Rule 145, HoldCo reserves the right to put
the following legend on the certificates issued to my transferee:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and were acquired
from a person who received such shares in a transaction to which Rule 145
promulgated under such Act applies. The shares have been acquired by the
holder not with a view to, or for resale in connection with, any distribution
thereof within the meaning of such Act and may not be sold, pledged or
otherwise transferred except in accordance with an exemption from the
registration requirements of such Act."
It is understood and agreed that the legends set forth in
paragraph E and F above shall be removed by delivery of substitute
certificates without such legend if the undersigned shall have delivered to
HoldCo a copy of a letter from the staff of the Commission, or an opinion of
counsel reasonably acceptable to HoldCo to the effect that such legend is not
required for purposes of the Act.
Very truly yours,
-----------------------------------
Name:
Accepted this ____ day of
__________, ____, by:
NEW SCOTTISH POWER plc
By:
--------------------------------
Name:
Title: